Central Bank of India v. M/S Kailash Art International

Patna High Court CWJC No.16665 of 2009 dt.11.12.2013 DRT. This Court by order dated 9.2.2009 disposed of the writ application, rejecting the 3rd ground raised aforesaid holding that the said question is settled by the decision of the Apex Court in the case of Punjab National Bank, Dasuya Vs. Chajju Ram and others: 2000(6) SCC 655, which had been followed by this Court in the case of Durga Prasad Sah Vs. State of Bihar and ors. : 2003(2) PLJR 409, holding that it is not in dispute that on the date when the application was made to DRT, the decretal amount along with accrued interest exceeded rupees ten lakhs and thus DRT had jurisdiction aforesaid to entertain the case. So far as the other two objections were concerned, it was stated that they are question of jurisdiction which for the petitioners can be available to raise before the DRT at the first instance, directing the DRT to decide all objections raised by the petitioners within a period of two months from the date such objection is filed before the Presiding Officer, DRT subject to the petitioners cooperating in the matter and observing that the DRT would be well advised to hear the parties and then decide the issue about its own jurisdiction and deal with all the objections as raised by the petitioners. The petitioners thereafter filed their application which was registered as MA No. 7/2009 and by the impugned order dated 31.8.2009, the application has been Patna High Court CWJC No.16665 of 2009 dt.11.12.2013 dismissed with cost. Learned counsel for the petitioners has raised various pleas including the jurisdictional issues before this Court. He has again sought to argue that the jurisdiction of the DRT is only with respect to a claim for Rs. 10/- lacs and more and since the preliminary decree had been granted for Rs. 1,49,628.89, hence, no application could have been filed before the DRT on the basis of such decree. In my view the said issue having been raised earlier by the petitioners in CWJC No. 14720/2008 and this Court having already decided the said issue against the petitioners giving liberty to the petitioners to raise other two questions which were questions of jurisdiction before the DRT along with all other objections, it is not open to the petitioners to raise the said issue again in this writ application as the same would be barred by the principles of res judicata. Learned counsel for the petitioners has sought to rely upon certain provisions of the RDDBFI Act. He refers to the definition of debt as given in Section 2(g) as also Section 31A of the Act and further upon Sections 1,17 and 18 of the Act which are in the following terms. Patna High Court CWJC No.16665 of 2009 dt.11.12.2013 “Section 2(g)- “debt” means any liability inclusive of interest which is claimed as due from any person by a bank or a financial institution or by a consortium of banks or financial institutions during the course of business activity undertaken by the bank or the financial institution or the consortium under any law for the time being in force, in case or otherwise, whether secured or unsecured, or assigned, or whether payable under a decree or order of any civil Court or any arbitration award or otherwise or under a mortgage and subsisting on, and legally recoverable on the date of application.” “31-A. Power of Tribunal to issue certificate of recovery in case of decree or order.- (1) Where a decree or order was passed by any Court before the commencement of the Recovery of Debts Due to Banks and Financial Institutions (Amendment) Act, 2000 and has not yet been executed, then, the decree-holder may apply to the Tribunal to pass an order for recovery of the amount. (2) On receipt of an application under sub-section (1), the Tribunal may issue a certificate for recovery to a Recovery Officer. (3) On receipt of a certificate under sub-section (2), the Recovery Officer shall proceed to recover the amount as if it was a certificate in respect of a Patna High Court CWJC No.16665 of 2009 dt.11.12.2013 debt recoverable under this Act.” “Section 1. Short title, extent, commencement and application.- (1) This Act may be called THE RECOVERY OF DEBTS DUE TO BANKS AND FINANCIAL INSTITUTIONS ACT, 1993. (2) It extends to the whole of India except the State of Jammu and Kashmir (3) It shall be deemed to have come into force on the 25th day of June, 1993 (4) The provisions of this Act shall not apply where the amount of debt due to any bank or financial institution or to a consortium of banks or financial institutions is less than ten lakh rupees or such other amount, being not less than one lakh rupees, as the Central Government may, by notification, specify.” “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 Patna High Court CWJC No.16665 of 2009 dt.11.12.2013 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 multi-State co- operative bank pending before the date of commencement of the Enforcement of Security Interest and Recovery of Debts Laws (Amendment) Act, 2012 under the Multi-State Co-operative Societies Act, 2002 (39 of 2002) shall be continued and nothing contained in this section shall, after such commencement, apply to such proceedings.” It is submitted by learned counsel that the key words in Section 2(g) of the Act are that the liability inclusive of interest which is claimed as due from any person by a bank must be subsisting on and legally recoverable on the date of application. It is urged by learned counsel that the same means that the debt should not be deemed barred on the date of the application and must be legally recoverable, i.e., may be enforced in a Court of law for Patna High Court CWJC No.16665 of 2009 dt.11.12.2013 recovery and there should not be any impediment in such recovery due to its enforceability. It is submitted by learned counsel in elaboration of the aforesaid question that a preliminary decree must become final before it can be executed, as a final decree alone can be executed. Since there is no provision of limitation for filing an application for final decree, the same would be covered by the residuary Article 137 of the Limitation Act, 1963 which provides for any other application for which no period of limitation was provided and in that case the period of limitation would be three years from the date when the right to apply accrued. It is thus submitted by learned counsel that the preliminary decree having been passed on 21.4.1995, the application for final decree could have been made within three years from the said date, i.e., by 21.4.1998 and that having not been done, there is no enforceable decree in existence for which any application under Section 31A of the RDDBFI Act could have been filed. It is contended that what cannot be done directly cannot be permitted to be done indirectly by taking recourse to the provisions of Section 31A of the Act. As a preliminary mortgage decree it was not enforceable and executable and shall not come within the ambit of „debt‟ and therefore cannot be enforced under Patna High Court CWJC No.16665 of 2009 dt.11.12.2013 Section 31A for the purpose of recovery of the amount involved in the decree. In support of the aforesaid propositions, learned counsel for the petitioners relies upon a decision of the Supreme Court in the case of Venkat Reddy Vs. Pethi Reddy: AIR 1963 SC 992, in the relevant part of para-6 it is stated as follows: “6…….It is not clear from the judgment what the contingencies referred to by the High Court are in which a preliminary decree can be modified or amended unless what the learned judges meant was modified or amended in appeal or in review or in revision or in exceptional circumstances by resorting to the powers conferred by Ss. 151 and 152 of the Code of Civil Procedure. If that is what the High Court meant then every decree passed by a court including decrees passed in cases which do not contemplate making of a preliminary decree are liable to be " modified and amended". Therefore, if the reason given by the High Court is accepted it would mean that no finality attaches to decree at all. That is not the law. A decision is said to be final when, so far as the Court rendering is concerned, unalterable except by resort to such provisions of the Code of Civil Procedure as permit its reversal, modification or amendment. Similarly, a final decision would mean a decision which would operate as res judicata between the parties if it is Patna High Court CWJC No.16665 of 2009 dt.11.12.2013 not sought to be modified or reversed by preferring an appeal or a revision or a review application as is permitted by the Code. A preliminary decree passed, whether it is in a mortgage suit or a partition suit, is not a tentative decree but must, in so far as the matters dealt with by it are concerned, be regarded as conclusive. No doubt, in suits which contemplate the making of two decrees a preliminary decree and a final decree - the decree which would be executable would be the final decree. But the finality of a decree or a decision does not necessarily depend upon its being executable. The legislature in its wisdom has thought that suits of certain types should be decided in stages and though the suit in such cases can be regarded as fully and completely decided only after a final decree is made the decision of the court arrived at the earlier stage also has a finality attached to it. It would be relevant to refer to S. 97 of the Code of Civil Procedure which provides that where a party aggrieved by a preliminary decree does not appeal from it, he is precluded from disputing its correctness in any appeal which may be preferred from the final decree. This provision thus clearly indicates that as to the matters covered by it, a preliminary decree is regarded as embodying the final decision of the court passing that decree.” He also relies upon a decision of the Supreme Patna High Court CWJC No.16665 of 2009 dt.11.12.2013 Court in the case of Shankar Balwant Lokhande Vs. Chandrakant Shankar Lokhande : AIR 1995 SC 1211, in para-12 of which it has been held as follows: ” 12. As to Maksudans case (AIR 1983 Patna 105) (supra), we state that it had not been correctly decided. Limitation does not begin to run from the date when direction is given to pass final decree. Mere giving of direction to supply stamped paper for passing final decree does not amount to passing a final decree. Until the final decree determining the rights of the parties by metes and bounds is drawn up and engrossed on stamped paper (s) supplied by the parties, there is no executable decree. In this behalf, necessary to note that S. 2(a) of the Bombay Stamp Act, 1958, as amended by the local Act, provides that a decree of civil Court is required to be stamped as per Article 46 in Schedule-I. Section 34 thereof lays down that "no instrument chargeable with duty shall be admitted evidence for any purpose by any person having by law or consent of parties authority to receive evidence, or shall be acted upon, registered or authenticated by any such person or by any public officer unless such instrument is duly stamped". Therefore, executing Court cannot receive the preliminary decree unless final decree is passed as envisaged under Order 20 Rule 18(2). After final Patna High Court CWJC No.16665 of 2009 dt.11.12.2013 decree is passed and a direction is issued to pay stamped papers for engrossing final decree thereon and the same is duly engrossed on stamped paper(s), it becomes executable or becomes an instrument duly stamped. Thus, condition precedent is to draw up a final decree and then to engross it on stamped paper(s) of required value. These two acts together constitute final decree, crystallizing the rights of the parties in terms of the preliminary decree. Till then, there is no executable decree as envisaged on Order 20 Rule 18(2), attracting residuary Article 182 of the old Limitation Act. Contrary views of the High Courts are not good law. A division Bench of the Andhra Pradesh High Court in Smt. Kotipalli Mahalakshmamma v. K. Ganeswara Rao, AIR 1960 Andh Pra 54, correctly decided the question of law which held that the limitation begins to run only after a final decree is engrossed on stamped papers.” Learned counsel also cites in support of his stand the decision of the Apex Court in the case of Maharashtra State Financial Corpn. Vs. Ashok Kumar Agarwal: (2006) 9 SCC 617, paras 5 and 6 of which are quoted below: “5. Sections 31 of the Act contains special provisions for enforcement of claims by State Financial Corporations. It is by way of a legal Patna High Court CWJC No.16665 of 2009 dt.11.12.2013 fiction that the procedure akin to execution of decrees under the Code of Civil Procedure has been permitted to be invoked. But one cannot lose sight of the fact that there is no decree or order of a civil court when we are dealing with applications under Section 31 of the Act. The legal fiction at best refers to a procedure to be followed. It does not mean that a decree or order of a civil court is being executed, which is a sine qua non for invoking Article 136. The proposition set out in the case of Gujarat State Financial Corporation (supra) found support in M/s. Everest Industrial Corporation and Others v. Gujarat State Financial Corporation 1987(3) SCC 597. Again in Maganlal etc. vs. Jaiswal Industries Neemach & Ors. 1989 (3) SCR 696 this court noticed that an order under Section 32 is not a decree stricto sensu as defined in Section 2(2) of the Code of Civil Procedure, the financial Corporation could not be said to be a decree holder. This makes it clear that while dealing with an application under Sections 31 and 32 of the Act there is no decree or order of a civil court being executed. It was only on the basis of a legal fiction that the proceedings under Section 31 are treated as akin to execution proceedings. In fact this Court has observed that there is no decree to be executed nor there is any decree holder or judgment debtor and therefore in a strict sense it cannot be said to Patna High Court CWJC No.16665 of 2009 dt.11.12.2013 be a case of execution of a decree. Article 136 of the Limitation Act has no application in the facts of the present case. Article 136 specifically uses the words “decree or order of any civil court”. The application under Sections 31 and 32 of the State Financial Corporation Act is not by way of execution of a decree or order of any civil court.

6. Article 137 of the Limitation Act applies in the facts of the present case. When Article 137 is applied, the application moved by the appellant- Corporation on 2nd January, 1992 for proceeding against the sureties i.e. the respondents herein, was clearly barred by time and the courts below were correct in holding so. To recall the facts of the present case, the notice demanding repayment of the amount of loan was issued against the borrower, that is, M/s. Crystal Marketing Private Limited on 8th March, 1983 and the application under Sections 31 and 32 of the State Financial Corporation was filed against the said borrower on 25th October, 1983. The liability of sureties had crystalised then.” Learned counsel also relies upon a few other decisions to the same effect, namely, W.B.Essential Commodities Supply Corporation LTD. Vs. Swadesh Agro Farming And Storage