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TMI Blog2016 (2) TMI 528X X X X Extracts X X X X X X X X Extracts X X X X ..... - M/s. Electrotherm [India] Ltd. and guarantors in the loan transaction entered into by the respondent No.2 company with respondent No.1 Uco Bank on 04.09.2010 for shortterm loan of Rs. 50 Crores. The respondent No.2 company through its authorized director, has signed and executed security documents viz. demand promissory note, letter of waiver, agreement relating to term loan, guarantee agreement executed by the petitioners / original defendant Nos.2 and 3 and undertaking. 3 That Special Civil Application No.14480 of 2015 is preferred by the petitioners with a prayer to quash and set aside order dated 06.07.2015 passed by the DRTI, Ahmedabad in Original Application No.192 of 2011, which was filed by Syndicate Bank, respondent No.1. The facts of Special Civil Application No.14480 of 2015 being similar to that of earlier Special Civil Application No.13529 of 2015, except the amount of total claim of Rs. 25,51,45,359.34, in this case also, cheque of Rs. 25 crores given by the defendant No.1 i.e. M/s. Electrotherm (India) Limited came to be returned unpaid for which defendant Nos.2 and 3 i.e. petitioners herein stood as guarantors for short term loans. In this Original Application No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 12.09.2011 on the personal immovable properties of the defendant Nos.2 and 3 was ordered to remain in force until the specific attachment order is passed by the Recovery Officer in the recovery proceedings qua such properties and certificate of recovery was to be drawn in accordance with law and to realize the amount from the defendants and compliance report to be submitted. 4.2 Thus, the Tribunal held that there is no bar to adjudicate the matter qua the defendants No.2 and 3 i.e. guarantors and the Tribunal was duty bound to adjudicate the original application against the guarantors keeping the original application pending against the defendant No.1 company, till the reference before BIFR or appeal, if any, pending before the AAIFR is disposed off. The Tribunal also held that in terms of Section 128 of the Indian Contract Act, the liability of the guarantors viz. defendant Nos.2 and 3 / original petitioners herein is coextensive with that of principal borrower. 5 Learned counsels Mr. Pranav Desai and Mr. Siddhartha Samal appearing for respondents, Uco Bank and Syndicate bank, respectively, raised a preliminary objection that in view of statutory and efficacious alternative re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 24. Limitation. Chapter V. Recovery of Debt Determined by Tribunal. Section. 34. Act to have overriding effect. 6.2 Learned Senior Advocate appearing for the petitioners relied on the following decisions of the Apex Court: [1] In the case of Patheja Bros. Forgings & Stamping & Anr. vs. ICICI Limited & Ors. [(2000)6 SCC 545], in the context of bar under Section 22 of SICA, 1985 for enforcement of any guarantee in respect of any loan or advance granted to the industrial company, the Apex Court held that such bar is applicable even to a suit filed against the guarantors. The contention that the bar would apply only when the company itself was the guarantor or was sued by a guarantor on subrogation, was rejected. The learned counsel emphasized that no suit for the enforcement of a guarantee in respect of any loan or advance granted to the industrial company concerned will lie or can be proceeded with, without the consent of the Board or the appellate authority [BIFR or AAIFR]. In the facts of this case, nature of legal action taken by the bank against the petitioners for adjudication of debt and overall scheme of the RDDB Act, 1993 reveal that such action is not simplicitor reco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SCC 763], the issue before the Apex Court was about two statues employing nonobstante clause having overriding effect viz. Sections 22 and 32 of SICA, 1985 visavis nonobstante clause in Section 34 [1] and [2] of RDDB Act, 1993, as the said act is later in point of time. However, in view of difference of opinions with regard to interpretation of Section 34 of RDDB Act, 1993 about overriding effect, the matter was referred to Larger Bench, in which the controversy came to be finally resolved as per the decision in the case of KSL and Industries Limited vs. Arihant Threads Limited & Ors. [(2015)1 SCC 166] and it was held that both SICA, 1985 and RDDB Act, 1993 are special laws with different purposes. Normally, later enactment with nonobstante clause prevail over former enactment, however, express enactment by Parliament in nonobstante clause in Section 34 of the RDDB Act, does not permit such course and Section 34(2) acts in nature of exception to overriding effect of RDDB Act and harmonious interpretation require that both the provisions may coexist and it was held that provisions of SICA, 1985, more particularly Section 22, shall prevail over provisions for recovery of debts in RDD ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 16.69 [approx.] crores will continue to remain appropriated subject to final order of BIFR and Rs. 11.27 [approx.] crores, which has been withheld and not yet appropriated will be kept separately in an `interest bearing no lien account' by the appellant and Rs. 2 crores and odd was recovered by the respondent banks. 7 Mr. Pranav Desai and Mr. Siddhartha Samal appearing for respondents, Uco Bank and Syndicate bank, respectively, in support of their contention of availability of statutory and efficacious remedy, relied on provisions of Section 17 pertaining to jurisdiction, powers and authority of Tribunals, including of the appellate authority under Section 17 of the Act and power of the Tribunal to entertain application for recovery of dues under Section 19 and availability of remedy of appeal to the appellate tribunal under Section 20 and deposit of amount of debt due on filing of appeal under Section 21 with proviso conferring discretion upon the appellate Tribunal for reasons to be recorded in writing, either to waive or reduce the amount to be deposited under the Section. The following decisions are relied on by Mr. Pranav Desai and Mr. Siddhartha Samal, learned counsel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal established under subsection (1) of Section 8; 17. Jurisdiction, powers and authority of Tribunals (1) A Tribunal shall exercise, on and from the appointed day, the jurisdiction, powers and authority to entertain and decide applications from the banks and financial institutions for recovery of debts due to such banks and financial institutions. (2) An Appellate Tribunal shall exercise, on and from the appointed day, the jurisdiction, powers and authority to entertain appeals against any order made, or deemed to have been made, by a Tribunal under this Act. 18. Bar of jurisdiction On and from the appointed day, no court or other authority shall have, or be entitled to exercise, any jurisdiction, powers or authority (except the Supreme Court, and a High Court exercising jurisdiction under Articles 226 and 227 of the Constitution) in relation to the matters specified in section 17. Provided that any proceedings in relation to the recovery of debts due to any multiState cooperative bank pending before the date of commencement of the Enforcement of Security Interest and Recovery of Debts Laws (Amendment) Act, 2012 under the MultiState Cooperative Societies Act, 2002 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tutions, such appeal shall not be entertained by the Appellate Tribunal unless such person has deposited with the Appellate Tribunal seventyfive per cent of the amount of debt so due from him as determined by the Tribunal under section 19: PROVIDED that the Appellate Tribunal may, for reasons to be recorded in writing, waive or reduce the amount to be deposited under this section. 22. Procedure and powers of the Tribunal and the Appellate Tribunal (1) The Tribunal and the Appellate Tribunal shall not be bound by the procedure laid down by the Code of Civil Procedure, 1908 (5 of 1908), but shall be guided by the principles of natural justice and, subject to the other provisions of this Act and of any rules, the Tribunal and the Appellate Tribunal shall have powers to regulate their own procedure including the places at which they shall have their sittings. (2) The Tribunal and the Appellate Tribunal shall have, for the purposes of discharging their functions under this Act, the same powers as are vested in a civil court under the Code of Civil Procedure, 1908 (5 of 1908), while trying a suit, in respect of the following matters, namely,( a) summoning and enforcing the attend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Financial System headed by Shri M. Narasimham has considered the setting up of Special Tribunals with special powers for adjudication of such matters and speedy recovery as critical to the successful implementation of the financial sector reforms. An urgent need was, therefore, fell to work out a suitable mechanism through which the dues to the bank and financial institutions could be realized without delay. In 1981 a Committee under the Chairmanship of Shri T.Tiwari had examined the legal and other difficulties faced by banks and financial institutions and suggested remedial measures of Special Tribunals for recovery of dues of the banks and financial institutions by following a summary procedure. The setting up of Special Tribunals will not only fulfill, a longfelt need, but also will bean important step in the implementation of the Report of Narasimham Committee. Whereas on 30th September, 1990 more than fifteen lakhs of cases filed by the public sector banks and about 304 cases filed by the financial institutions were pending in various courts, recovery of debts involved more than Rs. 5622 crores in dues of Public Sector Banks and about Rs. 391 crores of dues of the financial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r reasons to be recorded in writing, waive or reduce the amount to be deposited under this Section. It is pertinent to note that the validity of the above Section was challenged and that condition being onerous and not capable of complying with and takes away right of an aggrieved person to prefer appeal, is negated by the Apex Court in various decisions and one of such decisions is in the case of Mardia Chemicals Ltd. v. Union of India [(2004)4 SCC 311]. The above inbuilt mechanism provided by the RDDB Act, 1993 confers power upon the Appellate Tribunal to consider the appeal on any ground and for any error, either lack of jurisdiction or law or on fact committed by the concerned Tribunal. The contentions raised by Mr. Mihir Thakore, learned Senior Counsel appearing for the petitioners about lack of jurisdiction by DRTI, Ahmedabad in entertaining proceedings and deciding the application under Section 19 of the Act in view of specific bar contained under Section 22 of SICA, 1985, can very well be gone into by the Appellate forum in exercise of powers under Section 20 as well as Section 21 of the RDDB Act, 1993. The statutory alternative, efficacious remedy, if seen in the context o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ew while exercising power under Article 226 of the Constitution. 45. It is true that the rule of exhaustion of alternative remedy is a rule of discretion and not one of compulsion, but it is difficult to fathom any reason why the High Court should entertain a petition filed under Article 226 of the Constitution and pass interim order ignoring the fact that the petitioner can avail effective alternative remedy by filing application, appeal, revision, etc. and the particular legislation contains a detailed mechanism for redressal of his grievance". [emphasis supplied] 8.4 In the above judgment, some of the decisions relied on by the learned counsel for the petitioners were considered and relying on the decision of the Constitution Bench of the Apex Court in the case of Thansingh Nathmal v. Suptd. Of Taxes [AIR 1964 SC 1491] whereby the question whether the High Court of Assam should have entertained the writ petition filed by the appellant under Article 226 of the Constitution of India questioning the order passed by the Commissioner of Taxes under Assam Sales Tax Act, 1947, the Apex Court in para 7 observed as under: "7. ...... The jurisdiction of the High Court under Article ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e had to Article 226 of the Constitution of India. So is not the case in the case noticed by us where the petitioners have defrauded the respondent banks to the tune of Rs. 50 crores and Rs. 25 crores, respectively, exclusive of interest and penalty, etc. 9 We are not impressed with the arguments canvassed by learned Senior Counsel for the petitioners that powers under Article 226 of the Constitution of India be exercised as there is bar under Section 22 of the SICA, 1985 and the Tribunal has no jurisdiction or the Tribunal lacks jurisdiction to entertain application filed under Section 19 of the RDDB Act, 1993, for the reason that the very issue and the grounds can be raised before the appellate Tribunal, which has jurisdiction, power and discretion to entertain and consider such grounds on merit. Therefore, the decisions relied on by Mr. Mihir Thakore, learned Senior Advocate in the cases of Calcutta Discount Co. Ltd. [supra] and Whirlpool Corporation [supra] in support of the above contention, have no application to the facts of the present case. We are not entering into any other contentions as we are disposing of both these writ petitions on the preliminary issues raised by l ..... X X X X Extracts X X X X X X X X Extracts X X X X
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