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Recovery of Debts Due to Banks and Financial Institutions Act, 1993-Sections 17, 18, 19 and 31. Suit by borrower against bank-Held-Jurisdiction of civil courts is barred only in regard to applications by bank/financial institution for recovery of its debts-It is not barred in regard to any suit filed by a borrower or other person against a Bank-On facts, jurisdiction of civil court held not be barred in a borrower’s suit for damages against bank for non-disbursement of a sanctioned loan-The suit found not be a counter claim to an earlier Original Application (O.A.) of Bank before D.R.T. for recovery of an amount advanced to the borrower under another loan-Subject matter of O.A and suit were not connected and decision in one did not depend on other-Such a suit was not required to be transferred to D.R.T.-It was more so as the suit was filed after establishment of latter and the provisions of the Act did not support transfer of such suit. Counter claim by borrower/defendant in Bank’s Original Application before D.R.T.-Forum for-Held-Counter claim is not the only remedy, but an option available to borrower/defendant-If they have an independent claim against Bank, they cannot be compelled to make their claim against Bank only by counter-claim before D.R.T.-Such a claim made by them by an independent suit in a court having jurisdiction cannot be transferred to D.R.T. against their wishes. Constitution of India, 1950-Article 142-After declaration of law, Supreme Court in operative part of judgment relaxing application of that law under Article 142-In such a case, the precedent value is that of ratio decidendi, and not the relaxation given on special facts-One solution to avoid a situation where relaxation itself comes to be treated as law, is for the Supreme Court to clarify that it was given in exercise of power under Article 142. Appellant-bank sanctioned ad hoc packing credit facilities to the respondent company. According to appellant, respondent utilised the said credit facilities but committed default in repaying the amounts advanced. Therefore, they filed an Original Application (O.A.) before the Debt Recovery Tribunal (D.R.T.) under Section 19 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 seeking a certificate of recovery thereof with interest. During pendency of the O.A. wherein trial was yet to commence, appellant sanctioned another loan and credit facilities to the respondent, but the sanctioned amounts were not released. For this, respondent filed a suit against the appellant in High Court for recovery of damages with interest. Recording of evidence in the suit had been completed and it was ripe for arguments. At this stage, appellant pleaded that the suit could not be tried by the High Court and it should be transferred to the D.R.T. on the ground that it was broadly in the nature of a counter-claim to appellant’s O.A and was integrally connected with it. For this they relied on Sections 19(6) to (11) of the Act. High Court rejected these claims of appellant. Hence the present appeals. On the contentions of the parties, following questions arose for consideration of the Court: (a) Whether the subject-matter of the borrower’s suit before the High Court and Bank’s O.A. before D.R.T. were inextricably linked? (b) Whether the provisions of the Act require the transfer of an independent suit filed by a borrower against a Bank before a civil court to D.R.T. in the event of the Bank filing a recovery application against the borrower before D.R.T. to be tried as a counter-claim in the Bank’s O.A.? Dismissing the appeal, the Court HELD: 1. It is evident from Sections 17 and 18 of the Debts Recovery Act that civil court’s jurisdiction is barred only in regard to applications by a bank or a financial institution for recovery of its debts. The jurisdiction of civil courts is not barred in regard to any suit filed by a borrower or any other person against a bank for any relief. [68-f] 1.2. The Debts Recovery Act, as it orginally stood, did not contain any provision enabling a defendant in application filed by the bank/financial institution to claim any set off or make any counter claim against bank/financial institution. The Act was amended by Act 1 of 2000 to remove the lacuna by providing for set off and counter-claims by defendants in the applications filed by Banks/financial institution before the Tribunal. What is significant is that Sections 17 and 18 have not been amended. Jurisdiction has not been conferred on the Tribunal, even after the amendment, to try independent suits or proceedings initiated by borrowers or others against banks/financial institutions, nor the jurisdiction of civil courts barred in regard to such suits or proceedings. [64-b, c, d, f, g] Union of India v. Delhi High Court Bar Association, [2002] 4 SCC 5, relied on. Delhi High Court Bar Association v. Union of India, AIR (1995) Delhi 323 approved. 2. The issues that arose in the Bank’s application was whether the borrower failed to repay the sums borrowed and whether the Bank was entitled to the amounts claimed. On the other hand, the issues that arose in the borrower’s suit were whether the Bank had promised/agreed to advance certain monies, whether the Bank committed breach in refusing to release such loans in terms of the sanction letter; whether the borrower failed to fulfill the terms and conditions of sanction and therefore the Bank’s refusal to advance, was justified; and even if there was breach, whether the borrower suffered any loss on account of such non-disbursement and if so whether the borrower was entitled to the amounts claimed. While the claim of the Bank was for an ascertained sum due from the borrower, the claim of the borrower was for damages which required firstly a determination by the court as to whether the Bank was liable to pay damages and thereafter assessment of quantum of such damages. Thus there is absolutely no connection between the subject matter of the two suits and they are no way connected. A decision in one does not depend on the other. Nor could there be any apprehension of different and inconsistent results if the suit and the application are tried and decided separately by different forums. In the circumstances, it cannot be said that the borrower’s suit and Bank’s application were inextricably connected. [61-c, f] 3. It is not disputed that the Calcutta High Court had the jurisdiction to entertain and dispose of suit filed by borrower when it was filed and continues to have jurisdiction to entertain and dispose of the said suit. There is no provision in the Act for transfer of suits and proceedings, except section 31 which relates to suit/proceeding by a Bank or financial institution for recovery of a debt. It is evidence from Section 31 that only those cases and proceedings (for recovery of debts due to bank and financial institutions) which were pending before any Court immediately before the date of establishment of a tribunal under the Debts Recovery Act stood transferred, to the Tribunal. In this case, there is no dispute that the Debts Recovery Tribunal, Calcutta, was established long prior to the company filing suit against the bank. The said suit having been filed long after the date when the tribunal was established and not being a suit or proceeding instituted by a bank or financial institution for recovery of a debt, did not attract section 31. [63-g, h; 64-a] 4. Making counter claim in the Bank’s application before the Tribunal is not the only remedy, but an option available to the borrower/defendant. He can also file a separate suit or proceeding before a civil court or other appropriate forum in respect of his claim against the Bank and pursue the same. Even the Bank, in whose application, the counter-claim is made has the option to apply to the Tribunal to exclude the counter-claim of the defendant while considering its application. When such application is made by the Bank, the Tribunal may either refuse to exclude the counter claim and proceed to consider the Bank’s application and the counter-claim and together or exclude the counter claim as prayed and proceed only with the Bank’s application, in which event the counter claim would become an independent claim against a bank/financial institution. The defendant will then have to approach the civil court in respect of such excluded counter claim as the Tribunal does not have jurisdiction to try and independent claim against a bank/financial institution. A defendant in an application, having an independent claim against the Bank, cannot be compelled to make his claim against the Bank only by way of counter-claim. Nor can his claim by way of independent suit in a court having jurisdiction, be transferred to a Tribunal against his wishes. In this case, the first respondent does not wish his case to be transferred to the Tribunal. [65-a-e] United Bank of India, Calcutta v. Abhijit Tea Co. Pvt. Ltd., [2000] 7 SCC distinguished. 5. Many a time, after declaring the law, this court in the operative part of the judgment, gives some directions which may either relax the application of law or exempt the case on hand from the rigour of the law in view of the peculiar facts or in view of the uncertainty of law till then, to do complete injustice. While doing so, normally it is not stated such determination/order is in exercise of power under Article 142. It is not uncommon to find that courts have followed not the law declared, but the exemption/relaxation made while moulding the relief in exercise of power under Article 142. When the High Courts repeatedly follow a direction issued under Article 142, treating it as the law declared by this court, incongruously the exemption/relaxation granted under Article 142 becomes the law, though at variance with the law declared by this Court. The Courts should therefore be careful to ascertain and follow the ratio decidendi, and not the relief given on the special facts, exercising power under Article 142. One solution to avoid such a situation is for this Court to clarify that a particular direction or portion of the order is in exercise of power under Article 142. [70-d, e, f] L.N. Rao, Himanshu Munshi and Rajesh Kumar Chaurasia, for the Appellant. Jaideep Gupta, Rana Mukherjee, Siddharth Gautam and Goodwill Indeevar, for the Respondent.2006 AIR 1899, 2006(1 )Suppl.SCR52 , 2006(5 )SCC72 , 2006(4 )SCALE423 , 2006(5 )JT281
CASE NO.: Appeal (civil) 10074-10075 of 2003 PETITIONER: Indian Bank RESPONDENT: ABS Marine Products Pvt. Ltd. DATE OF JUDGMENT: 18/04/2006 BENCH: Dr. AR. Lakshmanan & R. V. Raveendran JUDGMENT: J U D G M E N T RAVEENDRAN, J. These appeals by special leave are filed against the judgment dated 10.5.2002 of the Calcutta High … Continue reading
NATIONAL CONSUMER DISPUTES REDRESSAL commission= bank deposits =It also stands to reason that had there been any mala fide action on the part of any employee of the respondent bank in encashing the FDR in question, such a person could have easily encashedthe complainant’s remaining three FDRs also. Further, the action of the petitioner/complainant to claim payment of the four FDRs made in 1961 after nearly 39 years without any enquiry, etc., in the long intervening period is most unusual. 7. In conclusion, therefore, I do not find any jurisdictional error, legal infirmity or material irregularity in the impugned order of the State Commission to warrant action under section 21 (b) of the Consumer Protection Act, 1986. The revision petition is, therefore, dismissed, with the further observation that (as admitted before the Fora below) the Bank shall pay to the petitioner within six weeks the maturity amount of the remaining three FDRs along with interest thereon at the rates applicable from time to time. If the order is not complied with within the stipulated period, the entire amount including regular interest shall carry further interest @ 15% per annum from the date of this order.
NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION NEW DELHI REVISION PETITION NO. 3073 OF 2007 (From the order dated 29.05.2007 of the Punjab Consumer Disputes Redressal Commission, Chandigarh in Appeal. no. 597 of 2002) Dr. Narinder Mohan Wadhera Son of Shri Ram Wadhera Resident of 189 Basant Avenue Petitioner Amritsar versus 1. The State Bank of India Local Head Office, Sector 17, Chandigarh Through its Chief General Manager Respondents 2. State … Continue reading
Limitation Act: Sections 18, 19 and 20–Acknowledgment of debt–When saves limitation. Muslim Personal Law–Liability to discharge debts de- volves on heirs proportionate to their respective Shares in the estate of the deceased. = One Vellappa Rawther, deceased, had incurred debt by means of two promissory notes for Rs.25,000 and Rs.50,000. In the suits filed on the basis of the promissory notes, the Trial Court granted a decree against the estate of Vellappa Rawther in the hands of defendants 2 to 10. The High Court on appeal modified the decree reducing it to one fourth of the decreed sum and focussed the liability on defendant-Respondent No. 2 absolving others of the re- maining liability on the bar of limitation. Such view was taken as the facts established that the liability to dis- charge debts of Vellappa Rawther after his death was indi- vidually on his heirs proportionate to the extent of their share in the estate devolving on them, and since the debt had become time barred, acknowledgment of the same by de- fendant-respondent No. 2 as well as partial payment of the debt by him rendered him alone liable to meet liability to the extent of one fourth related to the share of the estate which as a Muslim heir he received from the deceased. Before this Court, it was claimed on behalf of the appellant that under sections 18 and 19 of the Limitation Act the acknowledgment and partial payment saved limitation against all and thus the entire debt could be recovered from defendant-respondent No. 2, he being in possession of the estate lying joint. Dismissing the appeal, this Court, HELD: (1) The debt of the deceased gets divided in shares by operation of Muslim Personal Law amongst the heirs proportionate to their shares in the estate. The theory of sanctity of the integrity of the 434 debt is apparently foreign in the case of a deceased muslim leaving debt and some estate both being divisible amongst his heirs. [247G] Mohd. Abdul Qadeer v. Azamatullah Khan and 8 Others, [1974] 1 Andhra Weekly Reporter 98; Vasantam Sambasiva Rao v. Sri Krishna Cement and Concrete Works, Tenali 1977 Andhra Law Times Reports at 528; N.K. Mohammad Sulaiman v.N.C. Mohammad Ismail and Others, [1966] 1 SCR 935 at 940, re- ferred to. (2) It would be right to treat it settled that muslim heirs are independent owners of their specific shares simul- taneously in the estate and debts of the deceased, their liability fixed under the personal law proportionate to the extent of their shares. [248H] Jafri Begum v. Amir Muhammad Khan, [1885] Vol. 7 ILR Allahabad series, referred to. (3) The heirs of a muslim are by themselves independent debtors; the debt having been split by operation of law. Inter se, they have no jural relationship as co-debtors or joint debtors so as to fall within the shadow of contrac- tors, partners, executors or mortgagees or in a class akin to them. They succeed to the estate as tenants-in-common in specific shares. [250D] (4) Even a signed written acknowledgment by the princi- pal or through his agent would bind the principal and not anyone else standing in jural relationship with the princi- pal in accordance with section 20(2) of the Limitation Act. The Muslim heirs inter-se have no such relationship. [250E] (5) If the debt is one and indivisible, payment by one will interrupt limitation against all the debtors unless they come within the exception laid down in section 20(2). And if the debt is susceptible of division and though seem- ingly one consists really of several distinct debts each one of which is payable by one of the obligors separately and not by the rest, section 20 keeps alive his part of the debt which has got to be discharged by the person who has made payment of interest. It cannot affect separate shares of the other debtors unless on the principal of agency, express or implied, the payment can be said to be a payment on their behalf also. [250H; 251A] Abheswari Dasya and Another v. Baburali Shaikh and Others, AIR 1937 Cal. 191, referred to. 435 (6) The property of the co-heirs supposedly in posses- sion of defendant-respondent No. 2 cannot be touched direct- ly in his hand unless the co-heirs being parties to the suit are held liable to pay their share of the debt; the debt being recoverable. [251F] =1991 AIR 720, 1990( 1 )Suppl.SCR 433, 1990( 4 )SCC 672, 1990( 2 )SCALE481 , 1991( 5 )JT 420
PETITIONER: P.N. VEETI NARAYANI Vs. RESPONDENT: PATHUMMA BEEVI AND ANOTHER DATE OF JUDGMENT13/09/1990 BENCH: PUNCHHI, M.M. BENCH: PUNCHHI, M.M. AHMADI, A.M. (J) CITATION: 1991 AIR 720 1990 SCR Supl. (1) 433 1990 SCC (4) 672 JT 1991 (5) 420 1990 SCALE (2)481 ACT: Limitation Act: Sections 18, 19 and 20–Acknowledgment of debt–When saves limitation. Muslim … Continue reading
Provincial Insolvency Act, 1920: Ss. 28, 55 and its Proviso: Insolvency Petition by the debtor/transferor-Bonafide transferee for valuable consideration-Protection to-Held: When transfer of shares to the transferee was for valuable consideration without any notice as to the presentation of the Insolvency Petition by the debtor, requirements of Proviso to Section 55 satisfied-Hence, entitled to protection/claim. Section 218/Proviso to Section 55-Protection to creditor vis-a-vis- Protection to bona fide transferee-Interpretation of-Held, An order of adjudication in an Insolvency Petition relates back to the date of its presentation-No word or Provision of Law could be left redundant/ superfluous-Both must be given effect to by harmoniously construing-On construing so the bonafide transferee could be protected under the provisions when the conditions of Proviso to Section 55 are complied with. The question which arose for consideration and decision in the appeal was as to whether protection under Section 55 of the Provincial Insolvency Act is available to a bonafide transferee for valuable consideration after presentation of the Insolvency Petition by or against the debtor but without notice and before passing an order of adjudication. =Answering the question in the affirmative and allowing the appeal, the Court HELD: 1.1. The object of Section 28 of the Provincial Insolvency Act is to secure unrestricted right to dispose of insolvent’s property after an order of adjudication is made. On making an order of adjudication, the whole of the property of the insolvent shall vest in the Court or in a Receiver, as the case may be. When sub-section (1) is read along with subsection (7) of the Act, the effect would be an order of adjudication relates back to the date of presentation of Insolvency Petition and the order of adjudication takes effect from the date of the presentation of the Insolvency Petition. Consequently, vesting of property under sub-section (2) also relates back to the date of presentation of the Insolvency Petition. Combined reading of sub-sections (1), (2) and (7) makes the position clear that the interest of the creditors is safeguarded, parties are put on notice against attempt to transfer the property after the date of presentation of the Insolvency Petition by the petitioners or others relating to his property and also to warn the intending purchasers or transferees that they are taking the risk of purchasing or getting the property transferred in their names during the pendency of the insolvency proceedings from the date of presentation of the petition itself and even before passing of an order of adjudication. [936- D-G] 1.2. Sections 28 and 55 of the Act are to be read together. Where the transfer has been made by the insolvent after presentation of the Insolvency Petition, the transfer cannot be held as void ab initio but its validity or otherwise depends upon a consideration as to whether the conditions specified under Section 55 are or are not satisfied. [936-H; 937-A] 1.3. It is cardinal rule of construction that normally no word or provision should be considered redundant or superfluous in interpreting the provisions of a statute. The Courts always presume that the legislature inserted every part thereof with a purpose and the legislative intention is that every part of the statute should have effect. It may not be correct to say that a word or words used in a statute are either unnecessary or without any purpose to serve, unless there are compelling reasons to say so looking to the scheme of the statute and having regard to the object and purpose sought to be achieved by it. Once the requirements of Section 55 of the Act are satisfied, the appellant is entitled for the protection of the said Section as a bona fide transferee. A contrary view takes away the very protective umbrella specifically made available to a bona fide transferee covered by Section 55. Protection provided for bona fide transfer in Section 55 is in a way exception to Section 28(7) of the Act. Proviso to Section 55 of the Act protects bona fide transactions mentioned in clauses (a) to (d) of Section 55. [937-C, D, F, H] Jaipur Zila Sahakari Bhoomi Bank Ltd. Vikas v. Shri Ram Gopal Sharma and Ors., JT (2002) 1 SC 182, followed. 1.4. It is clear that the shares were transferred in favour of the appellant before the order of adjudication was made on the Insolvency Petition filed by the respondent and the appellant had no knowledge at the time of purchasing the shares as to the presentation of the Insolvency Petition, the transfer of shares was for valuable consideration and such transfer was bona fide. In this view, the appellants, did satisfy the requirements of proviso to Section 55 of the Act and hence they are entitled for the claim made by them. [938-B-D] 1.5. If the intention of the proviso to Section 55 of the Act was not to protect even a bona fide transferee for valuable consideration without notice of presentation of Insolvency Petition before an order of adjudication was made, the legislature could have simply said any transaction taking place after the date of presentation of any Insolvency Petition by or against the debtor instead of qualifying the transaction that takes place before the date of the order of adjudication. In this situation, the proviso which is intended to serve a definite purpose should be given full meaning and effect It is not possible to ignore a part of the provision, namely, “any such transaction takes place before the date of the order of adjudication”. It stands to reason as well, that a bona fide transferee for valuable consideration without the knowledge of the presentation of Insolvency Petition on the date of transfer of property is to be protected. [938-E-G] CIVIL APPELLATE JURISDICTION : Civil Appeal No. 176 of 1997.
CASE NO.: Appeal (civil) 176 of 1997 PETITIONER: Sankar Ram and Co. RESPONDENT: Vs. Kasi Naicker and others DATE OF JUDGMENT: 30/07/2003 BENCH: Shivaraj V. Patil &[D.M. Dharmadhikari. JUDGMENT: J U D G M E N T Shivaraj V. Patil,J. “Whether protection provided in the proviso to Section 55 of the Provincial Insolvency Act, 1920 … Continue reading
About two years after the dismissal of the insolvency petition, the petitioners herein filed I.A.No.883 of 2005 to release the bank guarantee. Through the impugned order, the Insolvency Court dismissed the same. The petitioners contend that the bank guarantee is liable to be released and that the impugned order is liable to be set aside. when the insolvency petition was dismissed and when the bank guarantee was expired earlier to it, the petitioner can be released from bank guarantee to continue their business.
IN THE HIGH COURT OF JUDICATURE, ANDHRA PRADESH AT HYDERABAD (Special Original Jurisdiction) PRESENT THE HON’BLE SRI JUSTICE K.G.SHANKAR C.R.P.NO.5131 OF 2006 20-12-2010 Between:- R.Srinivas and others .. Petitioners And Pulamati Bai and others ..Respondents ORDER:- The learned III Additional District Judge, Warangal, … Continue reading
specific performance case, arbitration case , company petition -M/s.Merbanc Financial Services Limited (hereinafter referred to as "the company") is absolute owner of 1853.80 square yards in Plot No.7, Sector 1, HUDA Techno Enclave in Sy. No.64 of Madhapur village, Sherilingampally, Ranga Reddy District. The applicant approached the company for development of the said plot into a multi-storied building complex. They entered into a development agreement-cum-General Power of Attorney on 6.1.1999 (for brevity, "agreement"). Under the said agreement, the applicant was authorized to construct a multi- storied building complex on the said plot. The company has to secure exemption under the provisions of Urban Land (Ceiling and Regulation) Act, 1976. As per Clause 3 of the agreement, the applicant shall invest his capital and construct the building complex as per mutually agreed plan and building specifications ensuring that the design and construction shall be sound and that it should confirm to statistical engineering practices. The applicant has to deposit security amount of Rs.20.00 lakhs. He paid a sum of Rs.5 lakhs towards security deposit at the time of the execution of the agreement. The balance security deposit of Rs.15 lakhs is payable within a fortnight from the intimation of fact of obtaining exemption order from the Urban Land Ceiling Authority by the company. As per Clause (14) of the agreement, the company has to liquidate its liability to Andhra Pradesh Industrial Development Corporation ("APIDC") and obtain original documents of title within five months from the date of the agreement. Some delay occurred in getting clearance from the Urban Land Ceiling Authority by the company. The applicant claims to have spent considerable amount in carrying out the developmental activity pursuant to the said agreement. The company took the stand that the applicant failed to pay balance security deposit amount of Rs.15 lakhs as per Clause 3(d) of the agreement and thereby, it issued letter dated 18.4.2000 terminating the agreement.The Supreme Court after taking into consideration the economic reforms in the country reduced the rate of interest awarded by the arbitrators from 18% to 9%, vide decision of the Supreme Court in=compensation not to be given for any remote or indirect loss or damage sustained by reason of breach of contract. Awarding of damages by Arbitrator on the claim made by contractor that he would have earned more profit if money due to him is paid in time is unsustainable as it is too remote a claim to be allowed.
THE HON’BLE SRI JUSTICE B.SESHASAYANA REDDY C.A.No.480 of 2007 In C.P.No.113 of 2002 12-07-2010 A.Sridhar Lakshman M/s.Merbanc Financial Services Ltd. Rep. by Official Liquidator and others !Counsel for the Applicants: Sri P.Vinayaka Swamy Counsel for the Respondents: Sri M.Anil Kumar for Official Liquidator Sri S.Sriram Reddy for respondent No.5 :ORDER: This application under Section 34 … Continue reading
Estate Duty Act 34 of 1953—Section 10–Gift of fixed deposit receipts –Donor retaining important benefits–If donee can be said to assume immediately bona fide possession and enjoyment within meaning of s. 10.
PETITIONER: SATYANARAYANA MODI Vs. RESPONDENT: THE CONTROLLER OF ESTATE DUTY, DELHI AND RAJASTHAN,NEW DATE OF JUDGMENT: 31/07/1969 BENCH: SHAH, J.C. (CJ) BENCH: SHAH, J.C. (CJ) RAMASWAMI, V. GROVER, A.N. CITATION: 1970 AIR 322 1970 SCR (1) 712 1969 SCC (2) 380 ACT: Estate Duty Act 34 of 1953—Section 10–Gift of fixed deposit receipts –Donor retaining … Continue reading
Sick Industrial Companies (Special Provisions) Act, 1985-s.22-Expression `suit’ whether includes other proceedings before legal forum-Divergent views of co-ordinate Benches-Matter referred to larger Bench-State Financial Corporation Act, 1951-s.31(1)(aa). The first appellant-Company obtained financial assistance amounting to Rs.1.42 lacs from respondent. It created a security for repayment of amount by hypothecating plant and machinery. On the same day, the second appellant executed a personal guarantee for repayment of the loan amount in case of default by the appellant-company. The first appellant company defaulted in repayment of the amount. Inspite of several notices demanding the payment, the first appellant failed to make payment. The respondent issued a notice to second appellant to pay the entire amount by invoking the personal guarantee given by the second appellant. The second appellant also did not make the payment as demanded and consequently respondent filed a petition against the second appellant under s.31(1)(aa) of the State Financial Corporation Act, 1951 for enforcing the personal guarantee given by the said appellant. Single Judge of the High Court held that the liability of the guarantor was independent of that of the principal debtor and accordingly the guarantee could be invoked. On appeal, the Division Bench of the High Court held that the provision of s.22 of SICA, as amended in 1994, did not prohibit any proceeding, other than a suit for enforcement of any security against the guarantor. On such finding and also upon holding that the liability of the guarantor was co-extensive with the principal debtor and that the creditor was not required to exercise his right as a mortgagee before proceeding against the guarantor, the Division Bench dismissed the appeal. In appeal to this Court, appellants contended that the decision in *Kailash Nath Agrawal’s case had been rendered by this Court in the context of interpretation of the expressions `suit’ and `proceedings’ used in s. 22(1) of SICA, 1985. In construing the said two expressions, this Court was of the view that while the expression `proceedings’ used in s. 22(1) would have to be confined to companies alone, the expression `suit’ had been introduced by amendment to extend the protective cover of s. 22 to guarantors as well; that the purpose for which such amendment had been effected, namely, to extend the protective cover of s.22 to guarantors also, would be rendered meaningless if coercive action continued to be taken against guarantors who could even be the Directors of the company in question; that the continuing ambiguity was sought to be explained in the **Paramjit Singh Patheja case wherein it was explained that the expression `suit’ would have to be understood in a larger context to include other proceedings as well before a legal forum. =Referring the matter to larger Bench, the Court HELD: In the decisions of this Court two divergent views have been expressed in respect of the same issue involved in this appeal. In *Kailash Nath Agrawal’s case this Court has taken the view that the legislature appears to have knowingly used two different expressions in s.22(1) of SICA, namely, `proceeding’ in the first part and the expression `suit’ in the second part and the protection of s.22 extended to guarantors in respect of suits alone and the use of the expression `proceeding’ could not be extended to include suits as well nor could the expression `suit’ be extended to include the expression `proceeding’ also. On the other hand, in **Paramjeet Singh Patheja’s case it was held that the expression `suit’ which extends the protection of s. 22(1) to guarantors, would have to be interpreted to include `proceeding’ also, in view of the intention of the legislature to protect sick industrial companies where references were pending before the BIFR. It is also evident from the decision in **Paramjeet Singh Patheja’s case that the views expressed in *Kailash Nath Agrawal’s case had not been brought to the notice of the learned Judges who decided the matter. Even if this Court agree with one of the two interpretations, the anomalous situation will continue since the decisions are that of coordinate Benches. [Para 24] [424-A-E] Industrial Corporation of Maharashtra Ltd., [1993] 2 SCC 144; Patheja Bros. Forgings & Stamping and Anr. v. ICICI Ltd. and Ors., [2000] 6 SCC 545; Madalsa International Ltd. v. Central Bank of India, AIR (1998) Bom 247; *Kailash Nath Agrawal & Ors. v. Pradeshiya Industrial & Investment Corporation of U.P. Ltd. & Anr., [2003] 4 SCC 305; **Paramjit Singh Patheja v. ICDS Ltd., JT (2006) 10 SC 41; State Bank of Hyderabad v. Vasudev Anant Bhide etc., [1969] 2 SCC 491; Pandurang Ramchandra Mandlik v. Shantibai Ramchandra Ghatge and Ors., [1989] Supp 2 SCC 627; Secretary of State v. Mask and Company, AIR (1948) PC 105; Dewal Singhal v. State of Maharashtra, (2001) 106 Company Cases 587; BSI Ltd. and Anr. v. Gift Holdings Pvt. Ltd. and Anr., [2000] 2 SCC 737 and Gujarat State Financial Corporation v. M/s. Natson Manufacturing Co.(P) Ltd., [1979] 1 SCR 372, referred to. Shekhar Naphade, Shivaji M. Jadhav, Himanshu Gupta, Brij Kishor Sah and Rahul Joshi for the Appellants. Jay Savla and Meenakshi for the Respondent.
CASE NO.: Appeal (civil) 5347 of 2007 PETITIONER: Zenith Steel Tubes & Industries Ltd & Anr. RESPONDENT: SICOM Limited DATE OF JUDGMENT: 21/11/2007 BENCH: Altamas Kabir & B.Sudershan Reddy JUDGMENT: J U D G M E N T Arising out of S.L.P. (CIVIL) NO.8486 OF 2007 Altamas Kabir, J. 1. Leave granted. 2. The appellant … Continue reading
Employees’ Provident Funds and Miscellaneous Provisions Act, 1952: S.11 – Provident funds dues payable by employer – Held: Would be first charge on assets of establishment – Such dues shall be paid in priority to all other debts – Priority clause enshrined in s.11 operate against statutory as well as non-statutory and secured as well as unsecured debts including a mortgage or pledge – On facts, held, sugar bags pledged by Sugar Mills in favour of appellant-bank as security for repayment of loan together with interest – Deeds of pledge executed did not have effect of transferring of ownership of sugar bags to bank – Sugar bags could be attached and sold for realization of provident fund dues of the workers – Constitution of India, 1950 – Articles 38, 43. Legislative intent behind enactment of the 1952 Act – Explained. Purposive interpretation – The 1952 Act is social welfare legislation – Courts to give purposive interpretation to the provisions contained therein in view of Directive Principles of State Policy – Interpretation of statutes. Contract: Pawn or pledge – Necessary ingredients – Discussed. The question which arose for consideration in these appeals was whether the sugar bags pledged by Sugar Mills in favour of the appellant-bank as security for repayment of the loan together with interest could be attached and sold for realization of the dues of provident funds etc. payable by the employer i.e., the management of the Sugar Mills under the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952. =Dismissing the appeals, the Court HELD: 1. The framers of Indian Constitution were alive to the plight of the working class and particularly the unorganized labour employed in factories and other establishments. They were also conscious of the fact that the goals of justice – social, economic and political and equality of status and of opportunity proposed to be incorporated in the preamble to the Constitution would remain illusory for weaker sections of society unless the State takes affirmative legislative and administrative measures for ameliorating the conditions of those sections including the workers employed in factories etc. Therefore, specific provisions were incorporated in Part IV of the Constitution with the title “Directive Principles of State Policy” casting an obligation upon the State to apply these principles in making laws. Article 38 which has been renumbered as clause (1) thereof by the Constitution (Forty-fourth Amendment) Act, 1978 declares that the State shall strive to promote the welfare of the people by securing and protecting, as effectively as it may, a social order in which justice, social, economic and political, shall inform all the institutions of national life. Clause (2) of Article 38 mandates the State to strive to minimize the inequalities in income, and endeavour to eliminate inequalities in status, facilities and opportunities, not only amongst individuals but also amongst groups of people residing in different areas or engaged in different avocations. Article 43 casts a duty on the State to make efforts to secure by suitable legislation or economic organization or in any other way, to all workers, agricultural, industrial or otherwise, work, a living wage, conditions of work ensuring a decent standard of life and full enjoyment of leisure and social and cultural opportunities, and, in particular, social opportunities. [Para 16] [19-e-h; 20-a-d] Recovery Officer and Assistant Provident Fund Commissioner v. Kerala Financial Corporation (2002) 3 LLJ 643 Kerala; A.P. State Financial Corporation v. Official Liquidator (2000) SCC 291; Central Bank of India v. State of Kerala (2009) 4 SCC 94, referred to. 2.1. With a view to ensure that the employers religiously comply with the mandate of provisions enacted for benefit of the workers, the legislature has not only provided for imposition of penalty and damages but also made comprehensive provisions for recovery of the dues by way of attachment and sale of movable or immovable property of the establishment or the employer, as the case may be. Section 11 of Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 gives statutory priority to the payment of contributions over other debts. Sub-section (1) of Section 11 relates to priority qua an employer who is adjudged insolvent or being a company an order of winding up is made. It lays down that the amount due from the employer in respect of any contribution payable to the Fund or, as the case may be, the Insurance Fund, damages recoverable under Section 14B, accumulations required to be transferred under Section 15(2) or any charges payable by him under any other provision of the Act or the Scheme or the Insurance Scheme shall be paid in priority to all other debts in the distribution of the property of the insolvent or the assets of the company being wound up, as the case may be. Sub-section (2) of Section 11 contains a non obstante clause and lays down that if any amount is due from the employer whether in respect of the employees’ contribution deducted from the wages of the employee or the employer’s contribution, the same shall be deemed to be the first charge on the assets of the establishment and shall, notwithstanding anything contained in any other law for the time being in force, be paid in priority to all other debts. [Para 18] [27-g-h; 28-a-h; 29-a] Organo Chemical Industries v. Union of India (1979) 4 SCC 573: Builders Supply Corporation v. Union of India 1965(2) SCR 289; State Bank of Bikaner and Jaipur v. National Iron and Steel Rolling Corporation (1995) 2 SCC 19; Dena Bank v. Bhikhabhai Prabhudas Parekh & Co. (2000) 5 SCC 694; State of M.P. v. State Bank of Indore (2002) 10 SCC 441, referred to. 2.2. The priority given to the dues of provident fund etc. in Section 11 is not hedged with any limitation or condition. Rather, a bare reading of the section makes it clear that the amount due is required to be paid in priority to all other debts. Any doubt on the width and scope of Section 11 qua other debts is removed by the use of expression `all other debts’ in both the sub-sections. This would mean that the priority clause enshrined in Section 11 will operate against statutory as well as non-statutory and secured as well as unsecured debts including a mortgage or pledge. Sub- section (2) was designedly inserted in the Act for ensuring that the provident fund dues of the workers are not defeated by prior claims of secured or unsecured creditors. This is the reason why the legislature took care to declare that irrespective of time when a debt is created in respect of the assets of the establishment, the dues payable under the Act would always remain first charge and shall be paid first out of the assets of the establishment notwithstanding anything contained in any other law for the time being in force. [Para 20] [31-B] UCO Bank v. Official Liquidator, High Court Bombay and another (1994) 5 SCC 1; Textile Labour Association and another v. Official Liquidator and another (2004) 9 SCC 741; Recovery Officer and Assistant Provident Fund Commissioner v. Kerala Financial Corporation (2002) 2 KLT 723, referred to. 3. Section 11 gives statutory priority to the amount due from the employer vis-
REPORTABLE IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO.6893 OF 2009 (Arising out of S.L.P. (C) No.15243 of 2007) Maharashtra State Co-operative Bank Ltd. … Appellant Versus The Assistant Provident Fund Commissioner … Respondents and others WITH CIVIL APPEAL NO.6894 OF 2009 (Arising out of S.L.P. (C) No.20736 of 2007) Maharashtra … Continue reading
Provincial Insolvency Act, 1920: Sections 35, 37, 43,(1)-Annulment of insolvency-Effect of-In suit for insolvency a joint agreement was filed for sale with a clause for re- conveyance within 5 years-Plaintiff declared insolvent-Sale deed executed by official receiver-Plaintiff sent notice for re-purchase-Since creditor refused to re-convey, plaintiff filed suit for specific performance- Subsequently, adjudication as insolvent unconditionally annulled-Held-On annulment, property and rights of plaintiff stand restored to him with retrospective effect-Insolvency gets wiped out togehter-Notice sent and suit filed for re-conveyance when plaintiff was an undischarged insolvent, get retrospectively validated. Contract Act, 1872 : Section 55-Held-Time is of essence where contract is for re-conveyance of immovable property. Section 62-Novation-Plea cannot be raised or accepted for the first time in second appeal under Section 100 CPC. Code of Civil Procedure, 1908-Section 100-Contention of creditor that there was breach of re-conveyance agreement by plaintiff not pressed before trial court-However, in second appeal it was held that there was breach of re- conveyance agreement and sale deed was in pursuance of new contract-On appeal, held: High Court exceeded its jurisdiction u/s 100 C.P.C in giving a finding on an issue not pressed in trial court-Also, plea of novation cannot be accepted for the first time in second appeal. Limitation Act, 1963-Part II of Article 54-Where agreement does not specify period within which vendee is to execute deed of re-purchase- Held-Time of three years starts to run only from the date vedee refuses to execute re- conveyance deed. The Respondent-defendant instituted an insolvency suit on 19.11.1963 against the appellant-Plaintiff since the Plaintiff failed to return Rs. 7,000 owed to him. On the same day, the plaintiff and the defendant filed a joint application before the Insolvency Court, seeking permission for the debtor to transfer his property to the creditor in full satisfaction of his dues, with the condition that the debtor may repurchase the property, within 5 years, for Rs. 7,000. In terms of the settlement, the creditor agreed to withdraw the Insolvency Petition. Accordingly, on 22.11.1963 an Order was passed by the Court permitting the interim receiver to execute the sale deed. However, neither the sale deed was executed by the interim receiver nor were steps taken by the creditor to withdraw the Insolvency Petition and on 29.5. 1964, the plaintiff was adjudicated an insolvent and directed to apply for discharge within one year. The Official Receiver, however, executed a sale deed on 15.7.1964, wherein the plaintiff also joined as vendor, and reported to the insolvency court that the plaintiff had cleared all his debts. The plaintiff moved for discharge and later unsuccessfully moved an application u/s 43(1) of the Insolvency Act for annulment since all creditors had been paid in full. In appeal, the adjudication of the plaintiff as an insolvent was annulled, unconditionally on 22.10.1964. In the meanwhile, before annulment, since the period of 5 years for seeking re-conveyance was going to expire, the plaintiff issued notice on 12.7.1968 to the creditor to reconvey the property to him on payment of Rs. 7,000 However, the creditor refused to re-convey the property. A suit was filed by the Plaintiff seeking specific performance of the re conveyance agreement entered into between the plaintiff and the creditor on 19.11.1963 and filed in the insolvency court. The suit was decreed and the judgement of the trial court was affirmed in first appeal. However, in second appeal the High Court reversed the judgements of the lower courts. The High Court held that the agreement contained in the joint application dated 19.11.1963 was not given effect; the sale deed dated 15.7.1964 executed by the official receiver was not in pursuance of the original agreement dated 19.11.1963 but in pursuance of a “fresh contract” which did not have a re-conveyance clause; the contract dated 19.11.1963 was a conditional contract and since the conditions laid down by Order dated 22.11.1963 had not been fulfilled, there was no enforceable contract of re conveyance. In appeal to this Court the plaintiff-appellant contended that the High Court erred in holding that the order of insolvency court dated 22.11.1963 or sale deed dated 15.7.1964 executed by official receiver did not refer to re-conveyance agreement filed before the court and hence, the same was not enforceable; the High Court under Section 100 CPC, in second appeal, could not give a finding on an issue not pressed before the trial court and hold that the plaintiff had committed a breach of contract; that there was no fresh/new contract consequent to which the sale deed was executed by official receiver in favour of the creditor; that the annulment retrospectively validates the option exercised by the plaintiff vide notice dated 12.7,1968 and the filing of the suit on 6.10.1969, even though he was an undischarged insolvent on that date. The respondent-creditor contended that there was fresh contract at the time of execution of sale deed by official receiver on 15.7.1964 which was not traceable to the agreement dated 19.11.1963 which had a clause for re- conveyance. The Plaintiff did not implement the first agreement by executing the sale deed in favour of the respondent. The suit was not maintainable since the plaintiff was an undischarged insolvent on that date.
PETITIONER: SRI BABU RAM ALIAS PRASAD Vs. RESPONDENT: SRI INDRA PAL SINGH (DEAD) BY LRS. DATE OF JUDGMENT: 13/08/1998 BENCH: S.B. MAJMUDAR, M. JAGANNADHA RAO ACT:HEADNOTE:JUDGMENT: J U D G M E N T M. JAGANNADHA RAO, J. The appellant is the plaintiff in the original suit bearing No.225 of 1969 on the file of … Continue reading
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