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State Bank Of India,... v. The Presiding Office...
Factual and Procedural Background
The petitioner, State Bank of India, Industrial Area Branch, Nacharam, filed an application (O.A Diary No. 432/95) before the Debts Recovery Tribunal at Bangalore (camp at Hyderabad) for recovery of a debt under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993. The petitioner complied with Rule 4 of the Rules framed under the Act by filing the application in the prescribed format and enclosing necessary documents, including a statement of account detailing the claim.
The Registry of the Debts Recovery Tribunal raised an objection without specifying details, requesting a breakup of the principal, interest, and service charges, although these particulars were already included in the statement of account. Upon the petitioner's request, the matter was posted before the Tribunal on 28-06-1995. The Presiding Officer, relying on the Karnataka High Court decision in Gowda, D.S. v. M/S. Corporation Bank, Bangalore-3 (AIR 1983 Kar. 143), insisted that the petitioner provide the requested particulars for numbering the petition.
The petitioner’s counsel argued that the Karnataka High Court decision had been set aside by the Supreme Court in Corporation Bank v. D.S. Gowda (II 1994 Banking Cases 613), but the Tribunal nonetheless returned the application for compliance, relying on Sub-section 4 of Section 19 of the Act. Aggrieved by this, the petitioner filed the present writ petition.
Legal Issues Presented
- Whether the Debts Recovery Tribunal was correct in requiring the petitioner to furnish additional particulars before numbering and registering the application, despite the petitioner having complied with the prescribed format and enclosing necessary documents.
- Whether the Tribunal properly relied on the Karnataka High Court decision in Gowda, D.S. v. M/S. Corporation Bank given that it was set aside by the Supreme Court in Corporation Bank v. D.S. Gowda.
- The correct interpretation and application of Sub-section 4 of Section 19 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, particularly whether the Tribunal can call for particulars before summons are served on the defendant.
Arguments of the Parties
Petitioner’s Arguments
- The petitioner complied fully with Rule 4 of the Rules framed under the Act by submitting the application in the prescribed format along with all necessary documents, including the statement of account detailing principal, interest, and service charges.
- The Tribunal’s reliance on the Karnataka High Court decision in Gowda, D.S. v. M/S. Corporation Bank was misplaced because that decision had been set aside by the Supreme Court in Corporation Bank v. D.S. Gowda.
- The Tribunal erred in invoking Sub-section 4 of Section 19 of the Act to require further particulars before summons were served on the defendant, as the provision only comes into operation after the defendant has appeared and raised objections.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Gowda, D.S. v. M/S. Corporation Bank, Bangalore-3 (AIR 1983 Kar. 143) | The principle that courts cannot re-open bank accounts on the ground of excessive interest if within RBI prescribed limits; Section 21A of the Banking Regulation Act restrains courts from interfering unless interest exceeds RBI guidelines; prohibition on compound interest with quarterly rests on agricultural advances. | The Tribunal relied on this decision to require the petitioner to furnish particulars before numbering the petition; however, the court found this reliance incorrect as the decision was set aside by the Supreme Court. |
| Corporation Bank v. D.S. Gowda (II 1994 Banking Cases 613) | Supreme Court ruling setting aside the Karnataka High Court decision; holding that if the Reserve Bank fixes maximum interest rates, transactions cannot be re-opened on the ground of excessive interest within the ceiling. | The court held this decision overrode the Karnataka High Court ruling and invalidated the Tribunal’s reliance on the latter; it clarified the correct interpretation of interest rate regulation under the Banking Regulation Act. |
Court's Reasoning and Analysis
The court analyzed the procedural requirements under Section 19 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993. It noted that Sub-section (3) mandates the Tribunal to issue summons to the defendant upon receipt of the application, requiring the defendant to show cause within thirty days. Sub-section (4), which empowers the Tribunal to call for particulars and pass orders to meet the ends of justice, applies only after the summons are served and the defendant has appeared and raised objections.
The Tribunal’s insistence on additional particulars before numbering the petition was therefore premature and incorrect. Furthermore, the Tribunal’s reliance on the Karnataka High Court decision in Gowda, D.S. v. M/S. Corporation Bank was misplaced because the Supreme Court had set aside that decision in Corporation Bank v. D.S. Gowda, clarifying that courts cannot re-open bank transactions on the ground of excessive interest if within RBI prescribed limits.
Accordingly, the court found the Tribunal’s order to return the application for compliance was not legally sustainable.
Holding and Implications
The writ petition is allowed and the order dated 28-06-1995 in Diary No. 432/95 is quashed.
The Tribunal is directed to number and register the original application forthwith. No costs were awarded.
The decision directly affects the parties by ensuring the petitioner’s application is accepted without requiring premature additional particulars. No new precedent was set by this ruling.
1. The petitioner herein, the State Bank of India. Industrial Area Branch. Nacharam filed an application O.A Diary No. 432,95 on the file of the Debts Recovery Tribunal at Bangalore (camp at Hyderabad) for recovery of a debt under the Recovery of Debts Due to Banks and Financial Institutions Act 1993 (hereinafter referred to as the Act). Rule 4 of the Rules framed under the Act prescribed a format of the application containing the particulars to be given by the applicant and also the details of the requisite documents to be enclosed along with the application. The petitioner in compliance with this rules filed an application in the prescribed format giving all the details and also enclosing the necessary documents including the statement of account based on which the claim is made by the petitioner. The Registry of the Debts Recovery Tribunal raised an objection without giving any details stating that the petitioner should give the break up figures of the principal, interest and the service charges, even though all these particulars were available in the statement of account enclosed to the application filed by the petitioner. On the basis of the request made by the petitioner to post the matter before the court, the same was posted before the Tribunal on 28-6-1995 in the camp court at Hyderabad The Presiding Officer of the Tribunal relying upon the decision of the Karnataka High Court in Gowda, D.S… v. M/S. Corporation Bank, Bangalore-3…. (1) AIR 1983 Kar. 143, insisted that the petitioner should give the necessary particulars called for by the Registry for numbering the petition.
2. Learned counsel for the petitioner submits that even though it was brought to the notice of the Tribunal that the decision reported in Gowda, D.S… v. M/S. Corporation Bank, Bangalore-3…. (1 Supra) has been set aside by the Supreme Court in C.A 4214/82 vide Corporation Bank v. D.S Gowda (2) II 1994 Banking Cases 613, the Presiding Officer of the Tribunal insisted that under Sub-section 4 of Section 19 of the Act the Tribunal has got the power to call for the particulars and accordingly returned the application to the petitioner for compliance.
3. Aggrieved by the same this writ petition is filed.
4. Since this writ petition is filed on the basis of the office objection raised by the Tribunal it is not necessary to order notice to the respondent. Therefore this matter is being disposed of at the stage of admission. As mentioned already the presiding Officer of the Tribunal relied upon D.S Gowda's case and also Sub-section 4 of Section 19 of the Act for furnishing the particulars, by me petitioner. The ratio laid down in D.S Gowda's case is:
“The Courts cannot re-open any account maintained by Banks relating to transaction with its customers on the ground that the rate of interest charged, in the opinion of the Courts, is excessive or unreasonable. Section 21A of the Banking Regulation Act is a restraint on such power of Courts. However, in any case, if it is proved that the interest charged by Banks on loans advanced is not in conformity with the rate prescribed by the Reserve Bank then the Court could disallow such excess interest and give relief to the party notwithstanding the provisions of Section 21A. Banks are bound to follow the directions of Circulars issued by the Reserve Bank prescribing the structure of interest to be charged on loans and any interest charged by Banks in excess of the prescribed limit would be illegal and void Banks cannot charge compound interest with quarterly rests on agricultural advances.”
5. This decision was considered by the Supreme Court in Corporation Bank v. D.S Gowda (2 Supra) and it was held.
“But if the Reserve Bank has fixed the maximum rate of interest in exercise of the powers conferred by Sections 21/35A of the Banking Regulation Act, Section 21A would be attracted and the transaction would not be liable to be re-opened on the ground that the rate of interest fixed is excessive even though not exceeding the ceiling determined by the Reserve Bank.”
6. The Supreme Court in this decisions has set aside the decision rendered by the Karnataka High Court in Gowda, D.S… v. M/S. Corporation Bank, Bangalore-3…. (1 Supra). In the circumstances, the reliance placed upon decision in D.S Gowda's case by the Tribunal is not correct. The Tribunal relied upon Sub-section 4 of Section 19 of the Act Sub-sections 3 and 4 of Section 19 of the Act which are relevant for purpose of this case are in the following terms:
“19. Application to the Tribunal: …. (3) on receipt of the application under Sub-section (1) the Tribunal shall issue summons requiring the defendant to show cause within thirty days of the service of summons as to why the relief prayed for should not be granted (4). The Tribunal may, after giving the applicant and the defendant an opportunity of being heard pass such orders on the application as it thinks fit to meet the ends of justice.”
7. Under Sub-section (3) of Section 19 of the Act the Tribunal should issue summons requiring the defendant to show cause within 30 days of service of the summons as to why the relief prayed for should not be granted Sub-section (4) of Section 19 of the Act will come into operation only after the summons are served on the defendant and after he appear and raises an objection. Based on the objections that may be raised by the defendant, under Sub-section (4) of Section 19 of the Act, the Tribunal may call for any particulars and pass necessary orders thereon. In the circumstances the Tribunal is not correct in placing reliance upon Sub-section (4) of Section 19 of the Act even before the summons are served on the defendant.
8. For the reasons stated above the W.P is allowed and the order dt. 28-6-1995 in Diary No. 432/95 is hereby quashed. The Tribunal shall number and register the O.A No Costs.
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