Bookmark
PDF
Share
CaseIQ

Icici Bank Limited v. Coventry Coil-O-Matic (Haryana) Limited & Ors.

Calcutta High Court

Dec 7, 2004

Judgment

Subsequent
References

CaseIQ

Important Paras

Please sign up to view Important Paras.

Smart Summary (Beta)

Structured Summary of the Provided Legal Opinion

Factual and Procedural Background

The plaintiff instituted a suit seeking, inter alia: declarations that promoters' shares (which were undertaken to be pledged with the plaintiff) are charged in favour of the plaintiff; declarations that any pledge/charge of the promoters' shares of defendant No. 1 is void; perpetual injunctions restraining defendants from dealing with or creating third-party interests in those shares or other specified assets; mandatory directions to deposit sale proceeds of properties; specific directions to pledge shares as previously undertaken; and specific performance of pledges and related covenants.

The pleaded factual matrix (as alleged by the plaintiff) included that the plaintiff advanced five loans to defendant No. 1 under facility agreements incorporating general conditions. Defendant No. 1 defaulted and the plaintiff recalled loans and invoked guarantees. The company approached the BIFR and, following BIFR directions, the plaintiff granted concessions on March 20, 1998 and March 22, 2000. Promoters and associates executed non-disposal undertakings in favour of the plaintiff. The plaintiff alleges that defendant No. 3 pledged certain shares (subject to the non-disposal undertakings and intended to be pledged to the plaintiff) with Punjab National Bank without informing the plaintiff; the plaintiff asked for withdrawal of that pledge and re-pledging to the plaintiff, but no compliance occurred. Defendant No. 2 had executed a continuing corporate guarantee for defendant No. 1’s liabilities but allegedly began selling assets at Nagpur and Andul, Howrah. The plaintiff also sought a declaration that defendant No. 2 cannot dispose of properties during the existence of the guarantee.

Procedurally, defendant No. 1 appeared and filed an application seeking rejection of the plaint. Counsel for defendant No. 1 argued that, under the Recovery of Debts due to Banks and Financial Institutions Act, 1993 ("the Act of 1993"), this suit is not maintainable before the Civil Court because the Debt Recovery Tribunal (DRT) has exclusive jurisdiction. Defendant No. 2 supported that position and additionally pointed to a pending application by State Bank of India before the DRT in respect of the same securities. The plaintiff contested that the suit is maintainable in the Civil Court, submitting that it is not a suit for recovery of a "debt" within section 2(g) of the Act of 1993.

Legal Issues Presented

Whether, having regard to the Recovery of Debts due to Banks and Financial Institutions Act, 1993 (particularly sections 17 and 18 and the definition of "debt" in section 2(g)), the Civil Court's jurisdiction is ousted so that the claims in this suit must be presented to the Debt Recovery Tribunal.
Whether the suit filed by the plaintiff is essentially a suit for recovery of a "debt" (within the meaning of section 2(g) of the Act of 1993) or whether it is a suit for declaration, injunction and specific performance based on general contract law and thus maintainable in the Civil Court.
Whether the existence of a pending application before the Debt Recovery Tribunal (filed by State Bank of India) regarding similar securities requires returning the plaint to the plaintiff for presentation before the Tribunal to avoid multiplicity or conflicting proceedings.

Arguments of the Parties

Defendant No. 1's Arguments (as advanced by Mr. Jishnu Saha)

The suit is not maintainable in the Civil Court because the Recovery of Debts due to Banks and Financial Institutions Act, 1993 ousts the jurisdiction of Civil Courts in matters covered by section 17; only the Tribunal constituted under the Act can entertain and decide such matters.
Sections 17 and 18 of the Act of 1993 confer exclusive jurisdiction on the Debt Recovery Tribunal for matters related to debts due to banks and financial institutions.
The definition of "debt" in section 2(g) is wide and must be given the fullest amplitude to include any liability claimed as due from any person by a bank, and therefore the present reliefs are essentially in aid of debt recovery and fall within the Tribunal's exclusive jurisdiction.
Authorities relied upon included United Bank of India v. Debts Recovery Tribunal (1999 (4) SCC 69), Hiralall and Sons v. Lakshmi Commercial Bank (2002 (6) SCC 389) and Allahabad Bank v. Canara Bank (2000 (4) SCC 406).

Defendant No. 2's Arguments (as advanced by Mr. Joy Saha)

Supported defendant No. 1's position on jurisdiction being vested in the DRT.
Pointed out that State Bank of India had filed an application before the Debt Recovery Tribunal on October 11, 2004 concerning the same securities; to avoid conflicting judgments or multiplicity of proceedings, the plaint should be returned for presentation before the Tribunal.

Plaintiff's Arguments (as advanced by Mr. Hirak Mitra)

The suit is maintainable in the Civil Court because it is not a suit for recovery of a "debt" within section 2(g) of the Act of 1993.
The reliefs sought — declaration, injunction and specific performance — arise under the general law of contract and seek enforcement of covenants, and hence do not fall within the exclusive domain of the Tribunal constituted under the Act of 1993.
Relied on P. Kasilingam v. P.S.G College of Technology (AIR 1995 SC 1395) to emphasise that the legislature used the word "means" in the Act's definition of "debt" and that the word "means" indicates a hard-and-fast definition (i.e., confined to the definition provided).

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
United Bank of India v. Debts Recovery Tribunal, 1999 (4) SCC 69	Authority for the proposition that the expression "debt" must be given a wide amplitude and that the Tribunal constituted under the Act may have jurisdiction over claims relating to debts.	The court considered it distinguishable on the facts and noted that the Supreme Court in that case held that the Tribunal's jurisdiction was not ousted; however, the present suit was held to be essentially for declaration/specific performance and not for recovery of debt, so the case did not mandate ouster of Civil Court jurisdiction here.
Hiralall and Sons v. Lakshmi Commercial Bank, 2002 (6) SCC 389	Relied upon regarding the exclusive jurisdiction of the Tribunal and the consequences where proceedings before the Tribunal and other Courts may involve common issues arising from different causes of action.	The court observed the case declined transfer from the Tribunal and involved distinct causes of action; the present court treated it as distinguishable and not authority to hold that suits for declaration/specific performance by banks must be before the Tribunal.
Allahabad Bank v. Canara Bank, 2000 (4) SCC 406	Consideration of the Tiwari Committee's recommendations that the Tribunal's exclusive jurisdiction relate to adjudication of liability and execution proceedings; observed that the Recovery Officer's jurisdiction was exclusive even for execution.	The court noted the case's discussion of exclusive jurisdiction (including execution) but held that none of the cited Supreme Court decisions required that suits for declaration and specific performance by banks be brought before the Tribunal by enlarging the scope of the Act.
P. Kasilingam v. P.S.G. College of Technology, AIR 1995 SC 1395	Principle regarding statutory definitions: the use of the word "means" in a definition indicates a hard-and-fast definition and that no other meaning can be assigned beyond the definition provided.	The court accepted this principle as relied upon by the plaintiff to argue that the Act's definition of "debt" is confined to what the statute expressly states and therefore the Act contemplates only a limited ouster of Civil Court jurisdiction.
Gough v. Gough, 1891 (2) QB 665	Authority cited for the rule that the use of the word "means" in a statutory definition indicates a confined (hard-and-fast) meaning.	Referenced within the court's consideration of P. Kasilingam to support the interpretive rule regarding the word "means"; used to support the view that definitions using "means" are exhaustive.
Punjab Land Development & Reclamation Corpn. Ltd. v. Presiding Officer Labour Court, 1990 (3) SCC 682	Authority supporting the interpretive distinction between "means" and "includes" in statutory definitions.	Quoted in the context of interpreting the Act's definition of "debt" and confirming the plaintiff's submission about limits of the definition where "means" is used.

Court's Reasoning and Analysis

The court proceeded by examining the pleadings, the nature of the reliefs sought and the statutory definition of "debt" in section 2(g) of the Recovery of Debts due to Banks and Financial Institutions Act, 1993. The court noted the following key reasoning steps (as contained in the opinion):

The court first carefully reviewed the plaint and the prayers and concluded that it was not possible to hold that the jurisdiction of the Civil Court was ousted merely because the plaintiff is a bank and the disputes related to financial accommodation.
The statutory definition of "debt" (section 2(g)) was reproduced and considered; the court observed the width of that definition but also considered the interpretive significance of the legislature's use of the word "means" (as argued by the plaintiff and explained in P. Kasilingam).
The court distinguished the authorities cited by the defendant. It summarized the factual and legal holdings of United Bank of India (where the Supreme Court held the Tribunal's jurisdiction was not ousted on the facts), Hiralall and Sons (where issues arising from different causes of action were treated as distinct even if some common issues existed), and Allahabad Bank (which discussed the Tiwari Committee's recommendation and exclusive jurisdiction including execution).
The court observed that none of the cited Supreme Court decisions held that a suit for declaration and specific performance of contract instituted by a bank must be instituted before the Tribunal by enlarging the scope of the Act of 1993.
On the facts of the present case, the court characterized the suit as "essentially a suit for declaration, injunction and specific performance" — a suit that seeks to enforce a covenant (promoters' non-disposal/pledge undertakings) and not a straightforward suit for recovery of a "debt" as defined by the Act.
The court emphasized that the Act contemplates a limited ouster of Civil Court jurisdiction and that matters connected with debt (but arising under general contract law and seeking contractual reliefs like specific performance and injunctions) are not necessarily covered by the Tribunal's exclusive jurisdiction.
Consequently, because the reliefs arise from general contract law and seek enforcement of covenants (not directly the recovery of a defined "debt"), the Civil Court could properly entertain the suit.

Holding and Implications

Holding: The application filed by defendant No. 1 seeking rejection of the plaint was rejected. The court held that the suit is maintainable in the Civil Court because it is essentially for declaration, injunction and specific performance (enforcement of covenants) and not a suit for recovery of a "debt" within the meaning of section 2(g) of the Act of 1993.

Implications:

Direct effect: The plaint remains on the record and the suit may proceed in the Civil Court. The defendant No. 1's jurisdictional objection under the Act of 1993 was dismissed.
No order as to costs was made by the court.
The court indicated that the Act effects a limited ouster of Civil Court jurisdiction but declined to enlarge the Act's scope to require that suits for declaration and specific performance (even where banks are parties) be presented to the Debt Recovery Tribunal. The opinion does not state that it establishes any new, broader precedent beyond the decision in this matter; it confines its holding to the characterisation of the present suit and the limits of the Act as applied here.

Administrative directions contained in the order: All parties are to act on a xerox signed copy of the dictated order on usual undertakings. The order concluded with a note by Subhro Kamal Mukherjee, J., recording "Appeal rejected." The court made no costs order.

Show all summary ...

1. The Court: The plaintiff institutes this suit, inter alia, for declaration that the promoters' shares as undertaken to be pledged with the plaintiff are charged in favour of the plaintiff, for declaration that any pledge and/or charge of shares of the promoters of the defendant No. 1 is void, perpetual injunction restraining the defendants from dealing with, encumbering or creating any third party interest or from creating any charge in respect of the promoters' shares of the defendant No. 1 or any assets or securities as mentioned in the loan documents or owned by the defendants as, also, various units of the defendants, mandatory direction upon the defendants to deposit the sale proceeds of their properties, for mandatory direction upon the defendant to pledge shares in favour of the plaintiff as was undertaken by the defendants, for specific performance of pledge, covenants, promises, assurances given by the defendants to the plaintiff.

2. The said suit was filed, inter alia, with the following allegations:

(a) The plaintiff at the instance of the defendants provided various loans to the defendant No. 1 in accordance with the documents executed and/or securities created therefor. The plaintiff altogether granted five loans/advances to the defendant No. 1. The defendant No. 1 executed agreements from time to time in order to avail the aforesaid loan facilities subject to its compliance with the terms and conditions set out in the agreements as also in the general conditions inasmuch as the general conditions are part of the loan facility agreements. As the defendant No. 1 company failed to pay the dues in time, as agreed upon by and between the parties, the plaintiff recalled the loans and invoked the guarantees. However, the company went before the BIFR and in terms of the directions of the BIFR, the plaintiff granted concessional benefits to the defendant No. 1 firstly on March 20, 1998 and secondly on March 22, 2000.

(b) All the promoters and associates executed undertakings for non-disposal of their shareholdings in the defendant No. 1, which were confirmed by the defendant No. 1. The defendant No. 1 on or about May 10, 2003, in reply to the letter of the plaintiff dated April 22, 2003, intimated that the defendant No. 3 had pledged the shares covered by the non-disposal undertaking and meant for being pledged with the plaintiff with Punjab National Bank, Gariahat Branch, without any intimation to the plaintiff. The plaintiff, upon coming to know of such development, immediately took up the matter with the defendant No. 3 and asked the said defendant to immediately withdraw such pledge of shares in favour of Punjab National Bank and to re-pledge the same with the plaintiff in terms of the aforesaid specific undertaking. Till date, however, the defendants did not take any step whatsoever.

(c) The defendant No. 2 executed a corporate guarantee, which has been continuing, and confirmed that in case of default on the part of the defendant No. 1, the defendant No. 2 would be treated as the principal borrower and would pay all the dues of the plaintiff. However, contrary to such guarantee, the defendant No. 2 had started to sell off its assets and securities situated at Nagpur and at Andul, Howrah with an eye to defeat and/or delay the recovery by the plaintiff.

(d) In spite of the fact that such recovery is not a part of the present suit, the plaintiff claims a declaration that the defendant No. 2 cannot dispose of its properties during the existence of such guarantee.

3. The defendant No. 1 appears and files an application, inter alia, praying for rejection of the plaint of this suit.

4. Mr. Jishnu Saha, learned Advocate, appearing in support of this application, argues that in view of the provision of the Recovery of Debts due to Banks and Financial Institutions Act, 1993 (the said Act of 1993 in short), this suit is not maintainable before this Court. Mr. Saha draws my attention to sections 17 and 18 of the said Act of 1993 and submits that presently the Tribunal constituted under the said Act of 1993 can only entertain and decide the prayers from the banks and the financial institutions for recovery of debts due to such banks and financial institutions and no Court is entitled to exercise any jurisdiction, power or authority in relation to the matters specified in section 17 of the said Act of 1993. Mr. Saha draws my attention to the definition of ‘debt’ and submits that the expression ‘debt’ has to be given the widest amplitude to mean any liability, which is claimed as due from any person by a bank during the course of any business activity undertaken by the bank, either in cash or otherwise, whether secured or unsecured, whether payable under a decree or order of any Court or otherwise and legally recoverable. Mr. Saha, therefore, submits that this is essentially a suit in the aid of the recovery of the debt and this proceeding is to be entertained and decided by the Tribunal constituted under the said Act of 1993. Mr. Saha in support of his contentions cites the decisions in the cases of United Bank of India v. Debts Recovery Tribunal, reported in 1999 (4) SCC 69, Hiralall and Sons v. Lakshmi Commercial Bank, reported in 2002 (6) SCC 389 and Allahabad Bank v. Canara Bank, reported in 2000 (4) SCC 406.

5. Mr. Joy Saha, learned Advocate, appears for the defendant No. 2 and he supports the case of the defendant No. 1. Mr. Joy Saha submits that on or about October 11, 2004, State Bank of India has filed an application before the Debt Recovery Tribunal against the defendant No. 2 for recovery of debt concerning the same securities. Therefore, to avoid conflicting judicial opinions and multiplicity of proceedings, the plaint of this suit has to be returned to the plaintiff for presentation before the Debt Recovery Tribunal.

6. Per contra, Mr. Hirak Mitra, learned Senior Advocate, appearing on behalf of the plaintiff, submits that this suit is perfectly maintainable in this Court inasmuch as this is not a suit for recovery of ‘debt’ within the meaning of section 2(g) of the said Act of 1993.

7. I have already indicated the essential averments of the plaint of this suit as also the prayers made by the plaintiff in this suit. I have carefully considered that the entire averments made by the plaintiff in the plaint and it is not possible for me to hold that the jurisdiction of this Court is ousted.

8. The expression ‘debt’ has been defined under sub-section (g) of section 2 of the said Act of 1993, which runs as under:

“(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 any business activity undertaken by the bank or the financial institution or the consortium under any law for the time being in force, in cash 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 the application.”

9. Mr. Mitra submits that the scope of the Act cannot be expanded to indicate complete ouster of jurisdiction of the Civil Courts. Mr. Mitra submits that the legislature consciously used the expression ‘means’ while defining the expression ‘debt’ in the said Act of 1993 and, therefore, the said Act contemplates limited ouster of jurisdiction of the Civil Courts. Mr. Mitra cites the decision in the case of P. Kasilingam v. P.S.G College of Technology, reported in AIR 1995 SC 1395 and draws my attention to the following observation of the Apex Court:

“A particular expression is often defined by the legislature by using the word ‘means’ or the word ‘includes’. Sometimes the words ‘means and includes’ are used. The use of the word ‘means’ indicates that ‘definition is a hard-and-fast definition, and no other meaning can be assigned to the expression than is put down in definition.’ See: Gough v. Gough, 1891 (2) QB 665; Punjab Land Development and Reclamation Corpn. Ltd. v. Presiding Officer Labour Court, 1990 (3) SCC 682 at p. 717. The word ‘includes’ when used, enlarges, the meaning of the expression defined so as to comprehend not only such things as they signify according to their natural import but also those things which the clause declares that they shall include. The words ‘means and includes’, on the other hand, indicate ‘an exhaustive explanation of the meaning which, for the purposes of the Act, must invariably be attached to these words or expressions’.”

10. The decisions cited by Mr. Saha are distinguishable.

In United Bank of India (supra) the bank filed a suit in the High Court against three defendants for recovery of debt from one of them and for certain ancillary and incidental reliefs against the others. Question arose whether the Tribunal constituted under the said Act of 1993 had the jurisdiction to decide such claims. The High Court answered in the negative, inter alia, on the ground that the claim was an undetermined amount and was, therefore, not a debt within the meaning of the said Act of 1993. The Supreme Court of India, in the aforesaid background, observed that the expression ‘debt’ has to be given the widest amplitude and held that the jurisdiction of such Tribunal was not ousted.

In Hiralall and Sons (supra), the Supreme Court of India declined to transfer a proceeding from the Debt Recovery Tribunal, inter alia, on the ground that a suit based on an insurance claim and a claim based on letter of credit arose out of different causes of action though it might be true that in the case pending before the High Court against the insurance company and in the application pending before the Tribunal certain common issues might arise inasmuch as the jurisdiction of the Tribunal has been exclusive and the jurisdictions of other Courts have been barred.

In Allahabad Bank (supra), the Apex Court, inter alia, considered the recommendations of the Tiwari Committee, which recommended constitution of a special Tribunal for recovery of debts due to banks and financial institutions. The said committee stated in its report that the exclusive jurisdiction of the Tribunal must relate not only in regard to the adjudication of the liability, but, also, in regard to the execution proceeding. The Supreme Court of India, inter alia, observed that even in regard to execution, the jurisdiction of the Recovery Officer was exclusive.

11. In none of the cases Supreme Court of India observes that even a suit for declaration and specific performance of contract instituted by the bank or the financial institution against their borrowers has to be instituted before the Tribunal by enlarging the scope of the Act of 1993.

12. This is essentially a suit for declaration, injunction and specific performance and not one for recovery of a debt. The plaintiff wants to enforce specifically a covenant. Under the said Act of 1993 limited ouster of Civil Court is contemplated. It is not possible to enlarge the scope of the said Act of 1993 to hold that even matters arise out of debt are to be entertained and decided by the Tribunal constituted under said Act of 1993; matters connected with the debt are not covered.

13. Here the disputes arise from general law of contract. When the reliefs are claimed on the general law of contract, a suit filed in Civil Court cannot be said to be not maintainable.

14. The application filed by the defendant No. 1 is, therefore, rejected.

15. I make no order as to costs.

16. All parties are to act on xerox signed copy of this dictated order on usual undertakings.

Subhro Kamal Mukherjee, J.:

Appeal rejected.

A.D