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TMI Blog2017 (8) TMI 1589X X X X Extracts X X X X X X X X Extracts X X X X ..... received. Ideally, the Master should also undertake the same exercise and, if in doubt, refer the matter to the judge in chambers - If the practice in a particular court is for the action to be routinely filed in the department and not immediately receive the attention of a judge, such practise must be amended and, till such time that the practice continues, it would be the duty of the judge seeing the plaint or the petition or the like for the first time to apply his mind to the bar. In view of the nature of the prohibition imposed on a civil court by the uncompromising wording of Section 34 of the Act of 2002, the approach adopted by the trial court in the instant case cannot be faulted. The contention of the appellants on the first count fails and it is held that a bar of the kind envisaged in Section 34 of the said Act obliges the court to ascertain whether the action brought before it falls foul of such provision and such assessment may be made suo motu and at the earliest stage when any judge in such court has due occasion to look into the same. Whether Section 34 of the said Act prohibited the receipt of the suit in the manner in which it was presented? - HELD THAT:- he pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ference to the respondents since the respondents had no right of audience at the stage that the order impugned was passed on July 24, 2017 in course of the trial court considering the appellants' prayer for granting leave under Clause 12 of the Letters Patent. The leave sought was declined on the ground that the court did not have any jurisdiction to entertain the suit; not on the ground of territoriality but in view of an express prohibition on civil courts by a statute. 2. The appellants or their predecessor-in-interest had obtained credit facilities from a bank or financial institution. Pursuant to a settlement arrived at between the appellants and the concerned financial institution or its successor-in-interest, the respondent Trust, a substantial payment is said to have been made by the appellants to the Trust. According to the case made out in the plaint, in lieu of the balance amount due, the appellants agreed to issue shares in one or more of them in favour of the Trust together with a buy-back agreement simultaneously executed as the issuance of the shares. It is the further case in the plaint that disputes arose between the two sets of parties regarding the modality ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g to the appellants, the consideration may arise at a later stage, whether upon a defendant bringing it to the notice of the court by way of an application or the court noticing it while considering an interlocutory application. The appellants maintain that the only consideration that is relevant at the stage that leave under Clause 12 of the Letters Patent is sought is whether a part of the cause of action of the plaintiff as pleaded in the plaint has arisen with the territorial limits of this court and some part without. 8. On merits, the appellants emphasise that Section 34 of the Act of 2002 was not a bar to this suit being received. They suggest that Section 34 of the said Act would operate only upon it being evident that a Debts Recovery Tribunal or a Debts Recovery Appellate Tribunal would have authority to adjudicate the claim made in the plaint and grant the reliefs sought. The appellants submit that both limbs have to be satisfied for the bar under the first part of Section 34 of the said Act to operate: that a DRT or DRAT has to have the authority at the time of the institution of the suit to adjudicate on the matters covered thereby; and, such DRT or DRAT has also to h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gement thereof in the event of default without waiting for the claim of such banks or financial institutions to be adjudicated upon. The Statement of Objects and Reasons of the Act of 2002 contains the reasons indicated in the Ordinance that preceded the Act and the avowed purpose of the enactment is that it "would enable banks and financial institutions to realise long term assets, manage problems of liquidity, asset liability mismatches and improve recovery by exercising powers to take possession of securities, sell them and reduce non-performing assets by adopting measures for recovery or reconstruction." 14. The vires of the said Act has been upheld in the judgment reported at (2004) 4 SCC 311 (Mardia Chemicals v. Union of India) and the validity of the apparently harsh provisions of such statute cannot be revisited, at least at this level. Section 34 of such Act places an embargo on civil courts to exercise jurisdiction even to receive any suit or proceedings in respect of any matter which a DRT or DRAT is empowered by or under the Act to determine. There are two limbs to Section 34 of the Act and the present discussion is largely confined to the first limb since th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... similarly treated by one being permitted to be filed - and, thus, being entertained - if it is not required to be presented before a judge and other plaints encompassing a similar cause being subjected to judicial scrutiny at the time of leave being sought under Clause 12 of the Letters Patent. The appellants say that the rational approach would be for the judge to confine his consideration to the question of territorial jurisdiction and the desirability of granting leave at the stage when such leave is sought under Clause 12 of the Letters Patent and, not consider other matters as to the maintainability of the action at such stage. The appellants reason that, in any event, a writ of summons would be issued in due course or a copy of the plaint would be necessary to be forwarded to the defendant in case any interlocutory application is made, whereupon, it should be left to the option of the defendant whether to object to the action or the form thereof. In short, the appellants exhort that a court or the judge considering whether leave under Clause 12 of the Letters Patent ought to be granted or not should not suo motu embark on an exercise to assess the maintainability of the actio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by any law. The right of a defendant to apply under Order VII Rule 11 of the Code of Civil Procedure, 1908 does not discharge the civil court's obligation to assess the maintainability of the action at the receiving stage of a suit: it is not a safety-net for the lapse of the court to be corrected; it only gives a defendant an opportunity to demonstrate that the arguable case that the court may have found in favour of the plaintiff on any of the three counts may be illusory. The provision also acts as a default mechanism when a plaint has been filed but it has not received any judicial attention before the service of the writ of summons on the defendant. 18. When a statute commands that a court shall not have jurisdiction to entertain a class of actions, it is obligatory on the part of the court to ensure that it does not act in derogation of such statutory command whenever the matter first receives the attention of any judge of the court. That there is a practice in this court that when leave is not sought under Clause 12 of the Letters Patent, the plaint may be presented before the Master and it may get admitted without any inquiry as to its maintainability, cannot dilute th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... operative part whereof contained both limbs as to the receipt of an action and the power to grant any injunction. 22. In view of the nature of the prohibition imposed on a civil court by the uncompromising wording of Section 34 of the Act of 2002, the approach adopted by the trial court in the instant case cannot be faulted. The contention of the appellants on the first count fails and it is held that a bar of the kind envisaged in Section 34 of the said Act obliges the court to ascertain whether the action brought before it falls foul of such provision and such assessment may be made suo motu and at the earliest stage when any judge in such court has due occasion to look into the same. 23. Now, to the second question: whether Section 34 of the said Act prohibited the receipt of the suit in the manner in which it was presented. 24. The extent of the exclusion of the jurisdiction of a civil court would depend not only on the construction of a provision providing for such exclusion, but also on the recognition of a provision that clothes some other authority to entertain that matter which the civil court is prohibited from receiving. It is elementary that a person seeking to asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... two sentences of paragraph 50 of the report in Mardia Chemicals, as relied upon by the trial court, may be seen: "50. Therefore, any matter in respect of which an action may be taken even later on, the civil court shall have no jurisdiction to entertain any proceeding thereof. The bar of civil court thus applies to all such matters which may be taken cognizance of by the Debts Recovery Tribunal, apart from those matters in which measures have already been taken under sub-section (4) of Section 13." 28. According to the appellants, the law as laid down in the above passage from Mardia Chemicals cannot be considered to hold the field in view of a later Supreme Court judgment noticing Mardia Chemicals in Jagdish Singh and restricting the operation of the bar on the civil court for receiving a suit to set in only upon any measure being adopted by a bank or financial institution under Section 13(4) of the Act. 29. A single bench judgment of this court and the judgment in the appeal arising therefrom have also been placed by the appellants for the proposition that merely because a suit appears to be in the form of a defence to the measures taken by a bank or financial insti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... can be granted by a civil court in respect of any action taken or to be taken in pursuance of any power conferred by or under the said Act or the Act of 1993. 31. With respect, the passage from Mardia Chemicals that has weighed with the interlocutory court in not admitting the plaint does not appear to be the correct legal position. Thankfully, the appropriate legal position has been enunciated at paragraph 25 of the decision in Jagdish Singh. As noticed earlier, Section 34 of the Act of 2002 has two parts: the first limb prohibits the receipt of a civil suit in certain cases; and, the second bars the issuance of an injunction by a civil court in certain situations. The sets of situations covered by the two limbs are not identical, though they may be geared towards the same goal. The emphasis in the first limb is on "any matter which a ... Tribunal is empowered by or under this Act to determine", whereas the second part covers "any action taken or to be taken in pursuance of any power conferred by or under" the Acts of 2002 and 1993. A DRT will be empowered by or under the said Act of 2002 to determine any matter once any measure under Section 13(4) of such Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted since the entirety of the subject-matter of such suit may not be capable of determination by a DRT or DRAT; the second limb of Section 34 prohibits any injunction to be issued by the civil court in respect of any action taken or to be taken in pursuance of any power conferred by or under the said Act or under the Act of 1993. 33. As comprehensive as the bar is under the first limb of Section 34 of the Act, the only construction thereof is that the word "is" in the expression "is empowered by or under this act to determine" operates only in presenti. A DRT or DRAT has to have authority to determine the entire-subject-matter of a suit at the time of its institution, for the bar under the first limb of such provision to be attracted. If the authority to determine the subject-matter of the suit vests in a DRT or DRAT after the institution of the suit, the suit cannot be regarded as bad. It is here that the second limb of the provision takes over as it prohibits the interdiction of any action taken or to be taken in pursuance of any power conferred by or under the Act or under the Act of 1993. Thus, a plaint cannot be rejected - and, similarly, refused to be rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ;in respect of any matter' which a DRT or an Appellate Tribunal is empowered by or under the Securitisation Act to determine. The expression 'in respect of any matter' referred to in Section 34 would take in the 'measures' provided under sub-section (4) of Section 13 of the Securitisation Act. Consequently, if any aggrieved person has got any grievance against any 'measures' taken by the borrower (sic, secured creditor) under sub-section (4) of Section 13, the remedy open to him is to approach the DRT or the Appellate Tribunal and not the civil court." 36. It is also evident from paragraph 26 of the report in Jagdish Singh that what fell for consideration before the Supreme Court in that case was whether the High Court was in error in holding that a civil court had the jurisdiction to examine whether the measures taken by a notified secured creditor under Section 13(4) of the Act were legal or not. 37. A line may be added here on the operation and working of the doctrine of precedents. As far as a High Court is concerned, if divergent opinions of two Supreme Court judgments rendered by benches of varying strengths are cited on a legal issue, where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may be altered upon a party to the action having a chance to explain the same or being afforded an opportunity to bring any other authority to bear on the issue. 40. Indeed, the miscarriage of justice that may be occasioned by a judgment referring to judicial authorities without such precedents being brought to the notice of the parties or the party likely to be affected thereby, is evident from the judgment and order impugned. The passage from Mardia Chemicals that was relied upon in the judgment impugned and appears to have weighed heavily with the trial court was clearly not the dictum laid down in Jagdish Singh. Upon Jagdish Singh noticing Mardia Chemicals and interpreting the law to be as evident from paragraph 25 of the report therein, it was the later dictum which was binding on the trial court. If the appellants herein were made aware of these two judgments being cited against them, they may have had the opportunity to point out such aspect of the matter as has been done in course of the present appeal. 41. It is, therefore, held that it is generally undesirable that judicial precedents be referred to or made the basis for any finding in a judgment without the attention o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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