GUJARAT COLOUR CHEM LTD v. CENTRAL BANK OF INDIA & Ors.

Judgment

1. The petitioner has approached this Court with a prayer of writ of mandamus or any many other appropriate order or direction, for setting aside the order passed by the 12th Additional Senior Civil Judge, Vadodara in Special Civil Suit No. 204/2009 below Exh. 21 and below Exh. 36 whereby learned judge

returned the plaint to the petitioner plaintiff on the ground that the suit does not fall within the ambit of Section 9 of Code of Civil Procedure.

2. The petitioner who is the original plaintiff is the company registered under the provisions of the Indian Companies Act, 1956 and is dealing with the business of manufacturing and selling/exporting metal salts and dices intermediates. The company availed the facility of loan from respondent bank which was given under the hypothecation of raw material and finished goods of the company. Such installments were paid by the petitioner company. However there came a stage when the respondent filed O.A No. 471/01 before the Debt Recovery Tribunal against the petitioner company for recovery of the amount of Rs 32,41,479/- and sought for attachment of different properties of the companies, mortgaged to the bank.

3. Pending the petition before the Debt Recovery Tribunal, the respondent bank initiated the proceedings for recovery by invoking the provisions of Securitisation and Reconstruction of SCA/9666/2011 JUDGMENT Financial and Enforcement of Security Interest Act, 2002 (SARFESI ACT) by issuing notice under section 13(2) of the said Ordinance on 12th July 2002 and it took possession of, the entire factory of the petitioner on 11th December 2002. This has stopped entire production process and also the business of the petitioner company. The police complaint to this effect was filed by the petitioner company as an MOU was signed with Israel based foreign company for the sum of Rs 1, 85,00,000/-. The bank authority permitted the petitioner company on 17th September 2004 repairation and reconditioning of the plant and machinery and for painting and white washing of building, godown and laboratory. On the ground that the goods lying in the company premises were not mortgaged, an application was moved before Debt Recovery Tribunal as also before this Court by way of Special Civil Application No.12447 of 2005 wherein the respondent bank gave an undertaking by making statement that bank had no objection to lift the movable goods. However, on 17th April 2006, entire factory premise of the petitioner company caught fire and that burnt the material and furnished goods etc. Nothing remained for the petitioner's use for the purpose of business production. This was alleged to be negligent act on the part of the respondent authority who were custodian of the entire factory. The petitioner decided to claim damages from the respondent bank for such negligence.

4. In aforementioned background Special Civil Suit No. 204 of SCA/9666/2011 JUDGMENT 2009 was preferred for recovery of damages and for recovery of possession of the suit premise ie industrial shed which was not mortgaged. The bank filed an application Exh. 21 raising question of jurisdiction of Civil Court and such applications Exh. 21 was allowed by directing return of the plaint under Order 7 Rule 10 of the Code of Civil Procedure vide order dated 21st June

4.1 The petitioner herein submitted an application vide Exh. 36 for appointing the Court Commissioner for drawing panchnama of the suit property which was heard along with application Exh. 21 and such application of petitioner for drawing panchnama was rejected.

5. An affidavit in reply is filed by the respondent. It is urged that instead of approaching the Debt Recovery Tribunal, the petitioner has chosen to file this petition. It is the say of the respondent that the bare perusal of averments made in the plaint clearly demonstrates that the Civil Suit No. 209 of 2009 was filed by the petitioners for challenging the recovery measures initiated by the bank under the Securitisation Act and ex facie the Civil Court jurisdiction is barred for challenging any such measures and therefore the plaint has been returned for availing appropriate remedies as provided under the Securitisation Act and therefore, the order requires no indulgence. It is the say of the respondent that the bank never SCA/9666/2011 JUDGMENT allowed the petitioners to enter the factory to lift the material. However, on its written request, the petitioner was permitted to visit the factory premise with the officer of the respondent where the petitioner No. 2 inspected and verified the stock of goods. It was also informed that the stock of gunny bags was not in the bank's possession and the same can be lifted immediately. The letter in that respect was also sent and yet the petitioner did not bother to lift the goods in question and therefore, it is a averred that it cannot choose to put blame on the bank. It is also the case of the respondent that OA No. 471 of 2001 preferred by the respondent bank for recovery of Rs 32,41,479/- and the same came to be decreed by Debt Recovery Tribunal (DRT) in favour of respondent No. 1 on 24th December 2004 and against such judgment Misc. Civil Application No. 192 of 2005 was preferred which was also rejected by the Debt Recovery Tribunal on 17th May 2010. The Recovery officer of the Debt Recovery Tribunal initiated recovery proceedings being RP No. 2194 against the petitioner and the present decreetal dues of the petitioners as on 31st October 2011 mounted to Rs 59,27,079/-.

6. In the aforementioned background present petition is filed by the petitioner raising various grounds for allowing the present petition where learned advocate for the parties have been heard at length and with their assistance, materials on record have been examined and after thorough scrutiny, this petition is found to have no substance and therefore, is rejected for the SCA/9666/2011 JUDGMENT reasons to be followed hereinafter.

7. Before adverting to the facts of the case it would be necessary to refer to Sections 17, 18 and 34 of the Recovery of Debts due to Banks and Financial Institution Act, 1993 (51 of 1993) (DRT Act). Sections 17, 18 and 34 are reproduced as under :

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.

34. Act to have over-riding effect-(1) Save as provided under sub section (2) the provisions of the Act shall have effect notwithstanding anything in consistent therewith contained in any other law or the time being in force or in any instrument having effect by virtue of any law other than this Act. SCA/9666/2011 JUDGMENT (2) The provisions of this Act or the rules made thereunder shall be in addition to, and not in derogation of, the Industrial Finance Corporation Act, 1948 (15 of 1948, the State Financial Corporation Act, 1951 (63 of 1951) the Unit Trust of India Act, 1963 (52 of 1963), the Industrial Reconstruction Bank of India Act, 1984 (62 of 1984) ( the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986 ) and the Small Industries Development Bank of India Act, 1989 (39 of 1989).

8. This provision clearly indicates that the Civil Court has no jurisdiction to entertain any suit or proceeding in respect of any matter in which Debt Recovery Tribunal or the Appellate Tribunal in empowered by or under this Act to determine and no injunction shall be granted by any Court or other authority in respect of any action taken or to be taken in pursuance of any power conferred by or under DRT Act

8.1 Section 17 specifically refers to the exclusive grievance mechanism of the Debt Recovery Tribunal if any person is aggrieved by any action taken by the secured creditors or authorised officers. Apex Court in the case of Mardia Chemicals Ltd. Etc Vs UOI and others etc reported in 2004(1)ISJ(Banking) 545 held as under : “34 Civil Court not to have jurisdiction- No Civil Court shall have jurisdiction to entertain any suit or proceeding in respect of any matter which a Debts Recovery Tribunal or SCA/9666/2011 JUDGMENT the Appellate Tribunal is empowered by or under this Act to determine and no injunction shall be granted by any Court or other authority in respect of any action take or to be taken in pursuance of any power conferred by or under this Act or under the Recovery of Debts due to banks and Financial Institutions Act, 1993 (51 of 1993).”

9. This provision covers even matters which can be taken cognizance of by the Debt Recovery Tribunal though no measure in that direction has so far been taken under sub-section (4) of Section 13. It is further to be noted that the bar of jurisdiction is in respect of a proceeding of matter which may be taken to the Tribunal. 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 cognizance of which may be taken by the Debt Recovery Tribunal, apart from those matters in which measures have already been taken under sub- section (4) of Section 13.

10. The Supreme Court of course permitted jurisdiction of Civil Court to a very limited extent by holding that the action of the secured creditor if is alleged to be fraudulent or if their claim is so absurd and untenable which does not require any probe, such right to approach Civil Court is recognised. In yet another decision rendered in the case of Oriental Bank of Commerce SCA/9666/2011 JUDGMENT Vs Naresh Khushaldas Gangtani reported in AIR 2007 Gujarat 172, for an enforcement of security interest, Civil suit was filed seeking injunction against, the bank by borrower, preliminary objection was raised with regard to maintainability of suit by bank in view of provisions of Act and this Court held that such preliminary objection as to maintainability of suit by bank in view of provisions of Act is maintainable even without filing written statement since, there is inherent lack of jurisdiction in civil court to entertain such suits.

9.1 Learned advocate for the petitioner of course has relied on the case of Shoklingam Kappuswami Mudliyar Vs Indian Bank and Ors reported in 2008(1) GLH pg. 511 where bank initiated actions under Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 for constructive possession of the property and the same was taken over from the petitioner by the bank pursuant to the order passed by Metropolitan Court. Physical possession could not be taken over by the bank in absence of the original documents establishing the right, title and interest. The petitioner challenged the proceedings by way of petition contending whether a copy of the conveyance deed simplicitor can create any right, title and interest in favour of the bank. Hence, the bank cannot dispossess the petitioner in such circumstances and under the circumstances the Court held that SCA/9666/2011 JUDGMENT the petitioner cannot be relegated to avail alternative remedy as the bank had failed to establish that a secured interest was created in favour of the petitioner. This would not help the cause of petitioner herein as that matter was predominately decided on the basis of peculiar facts existing in that case.

9.2 In the case of Dr. H. Mukherjee vs. S.K Bhargava reported in AIR 1996 Supreme Court 1760 was passed jurisdiction of Tribunal under section 14 of Administrative Tribunals Act (13 of 1985) and it held that if there is suit for damages based on alleged tortious act of Chief Controller of Explosives which caused mental pain and injury, subject matter of the suit does not fall within jurisdiction of Tribunal.

9.3 Considering the scope of DRT, this would have no application. Again, as mentioned hereinabove, this attempt of bringing suit for damages is to overeach the provision of law which do not permit Civil Court to entertain such disputes. Again recollecting ratio laid down by the Apex Court in case of Maradia Chemicals (supra) neither fraud nor apparent absurdity exist on record for this Court to intervene any allow Civil Court to step in.

10. In the light of the provisions of law mentioned hereinabove as also the principles laid down in respect of such provision of SCA/9666/2011 JUDGMENT law, where the order impugned passed below Exh. 21 returning the plaint to the present petitioner requires no interference.

11. The powers of the Court under Article 227 of the Constitution of India needs to be exercised only in the event where there is jurisdictional error. The trial court or any other Courts if passes an order which ex facie and materially is illegal or perverse, this Court can certainly invoke supervisory jurisdiction. The question therefore is as to whether the trial court acted without jurisdiction or passed such order which is materially and palpably illegal and therefore untenable. The answer will have to be in negative.

12. Admittedly, the proceedings has been initiated by the respondent herein before the Debt Recovery Tribunal for the recovery of sum of Rs 32,41,479/-. During the course of such proceedings as mentioned hereinabove, eventuality occurred and parties resorted to different legal proceedings. It further can be noted that the respondent had taken possession of factory premise of the petitioner. The circumstances under which the factory caught fire, burning material portion of goods and buildings, and in such circumstances the Special Civil Suit came to be filed by the petitioner herein, being Special Civil Suit No. 204/2009 with prayers for damages as also possession of suit premises of industrial shed. Though the plaint is couched in a manner as if independent cause of action has arisen to the SCA/9666/2011 JUDGMENT petitioner herein, the subject matter is directly and substantially touchingP the subject and the issue for which jurisdiction of the Civil Court has been barred and exclusive jurisdiction has been given to the Debt Recovery Tribunal by the statue. The trial Court has not committed any error. After a detailed discussion of the issue as also relying on various authorities it is held that the Civil Court has no jurisdiction to entertain the suit or proceedings in respect of subjects for which Debt Recovery Tribunal or Appellate Tribunal is empowered to determine nor can the injunction be granted by the Court or any authority in respect of any action taken by or under this Act.

13. All the contentions raised and the prayers sought for can be adjudicated by the Debt Recovery Tribunal for having arisen out of the very same proceedings initiated by the respondent bank against the petitioner for the recovery of huge amount which is due from the petition. With regard to the imported raw material which was not mortgaged or hypothecated as alleged to the bank and thereby no secured assets within the meaning of Securitisation Act the respondent bank has already communicated to the petitioner that aspect could be prima facie shown from the record.

11.1 It is reiteratively emphasised by learned advocate for the petitioner that the factory premise, the land and building, are not secured assets within the meaning of SARFERSI Act and SCA/9666/2011 JUDGMENT such reliefs according to the petitioner can be granted only by Civil Court and it is therefore urged that the jurisdiction under section 9 of the Civil Court would not be barred. It is a case of clever drafting on the part of the petitioner who is knowing fully well that the entire proceeding arises from recovery of outstanding dues of the petitioner. This appears to be clear attempt on the part of the petitioner to derail the recovery of public money. Even if there is entitlement of the petitioner, what the Civil Court has done by returning the plaint, is to relegate the petitioner to the appropriate forum by returning the plaint it can always pursue that remedy effectively if it proves its case in accordance with law.

12. With the above discussion this Court upholds the order of the trial court in respect of return of plaint passed below the application Exh. 23.

13. With regard to the application Exh. 36 for appointing the Court Commissioner, also the Court has rightly held that when it returned the plaint under Order 7 Rule 11 of the Code of Civil Procedure for want of jurisdiction, there would not arise the question of appointing the Court Commissioner. The petitioner wanted the report of the Court Commissioner under Order 26 Rule 9 of the Code of Civil Procedure, for elucidating of facts. However, when the Court is returning the plaint on the ground of having no jurisdiction there cannot arise the question of SCA/9666/2011 JUDGMENT appointment of Court Commissioner and there would not arise any requirement of any elucidation of facts. The Court therefore, rightly and consequently rejected the application Exh.

36. No error, much less jurisdictional error or illegality could be pointed out by the petitioner. Consequently this petition deserves to be dismissed. (Ms. Sonia Gokani,J.) mary//