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Case Number

GA No. 2404 of 2012, GA No. 2778 of 2012 and CS No. 268 of 2012, decided on April 8, 2014

Attorney(S)

Mr Pratap Chatterjee, Senior Advocate, Mr Reetobrata Mitra, Advocate, Mr Manik Das, Advocate, Mr Rudrajit Sarkar, Advocate, for the Plaintiffs;
Ms Usha Doshi, Advocate, for Defendant 1.
Mr Hirak Mitra, Senior Advocate, Mr Arun Geetesh, Advocate, Ms Nilanjana Adhya, Advocate, Mr Rishav Medora, Advocate, for Defendant 2.
Mr Anuj Singh, Advocate, Mr S.E. Huda, Advocate, Mr Sounak Sengupta, Advocate, Ms Purnima Nath, Advocate, Mr Lucky Mukherjee, Advocate, for Defendant 3.

Judges

Sanjib Banerjee, J.

Acts

RECOVERY OF DEBTS DUE TO BANKS AND FINANCIAL INSTITUTIONS ACT 1993
SECTION 9 CIVIL PROCEDURE CODE
Act of 2002, particularly Section 34
Act of 2002, including Section 34
Section 34 of the 2002 Act
Section 13(4) of such Act,

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Smart Summary

Structured Summary of the Opinion

Factual and Procedural Background

This opinion concerns a civil suit identified as CS No. 268 of 2012 and related applications GA No. 2778 of 2012 and GA No. 2404 of 2012. The plaintiffs sought an injunction restraining the secured creditor (second defendant) from taking any step or further steps to invoke rights said to arise from an alleged deed of assignment dated 30th March, 2011. The second defendant challenged the maintainability of the suit and argued that the civil court lacked jurisdiction to grant interlocutory reliefs because of the operation of Section 34 of the Act of 2002. The court ultimately addressed whether the plaint could be entertained or must be rejected and determined the fate of the related applications and interim orders.

Legal Issues Presented

Whether, in view of Section 34 of the Act of 2002, a civil court has jurisdiction to entertain the suit or to grant interlocutory injunctions in respect of matters which a Debts Recovery Tribunal or Debts Recovery Appellate Tribunal is empowered to determine.
Whether a quia timet action (a suit instituted to prevent a projected or anticipated invasion of rights) in respect of matters capable of being determined by the Debts Recovery Tribunal is maintainable.
Whether a plaint that was instituted prior to any measures taken by a secured creditor under Section 13 of the Act of 2002 remains maintainable after subsequent steps are taken by the secured creditor.
Whether the plaint should be rejected in whole or in part because the reliefs claimed are capable of adjudication by the Debts Recovery Tribunal under Section 17 of the Act of 2002.

Arguments of the Parties

Second Defendant (Secured Creditor) — Arguments

Section 34 of the Act of 2002 ousts the jurisdiction of civil courts to entertain suits or grant injunctions in respect of matters which a Debts Recovery Tribunal (DRT) or Debts Recovery Appellate Tribunal (DRAT) is empowered to determine; accordingly, interlocutory injunctions are not permissible in such matters.
Reliance on Supreme Court decisions (including Standard Chartered Bank v. V. Noble Kumar and Jagdish Singh v. Heeralal) to show that civil courts have little or no choice when their jurisdiction is ousted by Section 34; specifically, an appeal under Section 17 is the remedy and may be available only after certain events occur.
Reference to Mardia Chemicals Ltd v. Union of India for the proposition that Section 34's prohibition covers matters cognizable by a DRT even if no measure has yet been taken by the secured creditor.
Invocation of the legislative history (as discussed in Mardia and Transcore) and public-interest considerations to argue that the statute legitimately abridges private rights to further a financial policy of the Union, and that courts should not displace that legislative policy.
Reliance on a single Bench decision (Authorised Signatories Deutsche Bank v. Sandip Dey) as consistent with the objective that only the tribunal recognised by the Act should adjudicate claims in respect of secured assets covered by the statute.
Submission that the reliefs in the plaint are capable of being pursued under Section 17 before the appropriate tribunal, so the plaint should be rejected or the suit dismissed, leaving plaintiffs free to approach the tribunal.

Plaintiffs — Arguments

While conscious that Section 34 and the Act of 2002 have been upheld, the plaintiffs argued the statute's philosophy conflicts with the rule of law and with established indigenous jurisprudence that guarantees access to civil courts.
Submission that if a statutory provision takes away a person's right to approach a civil court, the statute must identify an alternate forum; plaintiffs stress the need to preserve fora where rights may be exercised.
Concern about increasing tribunalisation and the possible abdication of the sovereign judicial function in complex civil matters (inheritance, religious practice, customs, usage) to tribunals with limited judicial oversight or reviewability.
Invocation of Section 9 of the Civil Procedure Code as a fundamental pillar of judicial independence and part of the basic structure; plaintiffs warn against denuding civil jurisdiction by successive legislations that create executive-controlled fora.
Reference to authority recognizing the civil court as the repository of civil grievances (Shiv Kumar Chadha) and to decisions suggesting the need for a line of demarcation of DRT jurisdiction (State Bank of India v. Sagar).
Argument that a suit instituted prior to any measures taken under Section 13 might remain maintainable, and a plaint maintainable at its institution should not be rejected merely because later a secured creditor adopts measures under the Act of 2002.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Standard Chartered Bank v. V. Noble Kumar, (2013) 9 SCC 620	Held that an appeal under Section 17 is available to the borrower against measures taken under Section 13(4); such remedy may be availed only after losing possession of secured assets.	Used by the secured creditor to show the limited role of civil courts when the DRT/DRAT have jurisdiction; court treated it as supporting the ouster of civil jurisdiction.
Jagdish Singh v. Heeralal, (2014) 1 SCC 479	Emphasised that Section 34 curtails the plenary authority of civil courts to receive suits of a civil nature by virtue of Section 35 of the Act of 2002.	Relied upon to support the proposition that civil courts have little latitude where matters fall within tribunal jurisdiction; court regarded it as authoritative on the restrictiveness of Section 34.
Mardia Chemicals Ltd v. Union of India, (2004) 4 SCC 311	Upheld constitutionality of the Act of 2002 and observed that Section 34's prohibition covers even matters cognizable by the DRT though no measure in that direction has yet been taken.	Relied upon to contend that civil courts cannot entertain suits in respect of matters within tribunal competence even before the creditor takes measures; court accepted the force of this authority.
Transcore v. Union of India, (2008) 1 SCC 125	Discussed legislative history relevant to the Act of 2002.	Referred to by the secured creditor to underline the parliamentary and policy context for the statute; court noted the historical treatment.
Authorised Signatories Deutsche Bank v. Sandip Dey, (2012) 2 CHN 149	Single Bench decision where plaint by a tenant was rejected after landlord's secured creditors invoked the Act of 2002.	Relied on by the secured creditor as consistent with the Act's objective; the court recorded it as a supportive precedent.
UCO Bank v. Samar Sarkar, AIR 2008 Cal 9	Earlier view that a secured creditor is not authorised to evict a tenant from mortgaged property during realization.	Secured creditor submitted that this decision is not good law in view of several Supreme Court pronouncements; court referenced this dispute between authorities.
Escoigne Properties Ltd v. Inland Revenue Commissioners, 1958 AC 549 (House of Lords)	Speech quoted on statutory interpretation emphasizing the need to understand legislative context and instances intended to be covered.	Quoted by the secured creditor to support interpretation of statutory provisions in light of legislative purpose; court recorded the submission.
Srinivasa Enterprises v. Union of India, (1980) 4 SCC 507	Quoted for the proposition that when a general evil is sought to be suppressed some individuals may suffer as legislatures proceed by broad categorisation.	Invoked to support public interest rationale for the statute; court noted the secured creditor's reliance on the authority.
United Bank of India v. Satyawati Tondon, (2010) 8 SCC 110	Recognised that High Courts must exercise extreme self-restraint under Article 226 in matters pertaining to claims under the Act of 2002.	Relied on to show limited scope for judicial intervention by High Courts; court treated it as binding context for restraint.
Shiv Kumar Chadha v. Municipal Corporation of Delhi, (1993) 3 SCC 161	Observed that civil courts are the repository of all civil grievances for which no remedy is provided in statutes, while recognising that statutes in public interest may affect common-law rights.	Referred to by plaintiffs to stress civil court primacy; court recorded this but observed it does not directly address the issue plaintiffs pressed.
State Bank of India v. Sagar, (2011) 3 Mh. LJ 71	Observation that a line of demarcation is required to define the compact area of DRT jurisdiction under Section 17.	Referred to by plaintiffs to argue limits on tribunal jurisdiction; court recorded the submission but relied on higher authorities favouring ouster.
Prabir Chatterjee v. ICICI Bank Ltd, (2011) 2 Cal LT 255	Record of a suitor's submission being noted without comment in a prior judgment.	Referenced by the court to indicate prior instances where submissions seeking non-suit were recorded; court observed a similar approach here to the plaintiffs' fundamental premise.

Court's Reasoning and Analysis

The court began by identifying Section 34 of the Act of 2002 as the pivotal statutory provision which expressly prohibits civil courts from entertaining suits or granting injunctions in respect of matters that the Debts Recovery Tribunal or the Appellate Tribunal are empowered to determine. The second defendant relied on this provision and on a series of higher court decisions to press that civil jurisdiction in such matters is effectively ousted.

The court reviewed the authorities cited by the secured creditor, including Supreme Court decisions (Standard Chartered Bank v. V. Noble Kumar, Jagdish Singh v. Heeralal and Mardia Chemicals Ltd) and considered the legislative history and public-policy considerations relied upon by the secured creditor (including Transcore and other authorities). The court accepted that these pronouncements and the legislative context demonstrate a restrictive approach to civil court intervention where tribunal jurisdiction under the Act of 2002 exists.

The plaintiffs' submissions were noted at length: they emphasised the constitutional importance of civil jurisdiction under Section 9 of the Civil Procedure Code and the rule of law; they argued for the necessity that if access to the civil forum is taken away statutory alternatives must be clearly identified; and they warned about the consequences of tribunalisation of civil disputes. The court recorded these concerns but observed that the constitutional validity of the Act of 2002, including Section 34, has been upheld by higher courts.

The court explained two significant legal consequences of Section 34 (as recognised in the opinion): first, a plaint may now be rejected on the basis of a circumstance that is not evident from the plaint itself; and second, partial rejection of a plaint may be possible so as to throw out those matters that are capable of adjudication by the Debts Recovery Tribunal and retain those that are not. The court described jurisdiction as an obligation rather than a privilege and noted that, given the judicial pronouncements, there is little latitude for a civil judge to exercise jurisdiction where the Act of 2002 confers authority on the tribunal.

Applying these principles to the matter before it, the court held that all reliefs claimed in the plaint were capable of adjudication by the appropriate Debts Recovery Tribunal under Section 17 of the Act of 2002. Therefore, the civil court could not entertain CS No. 268 of 2012 and the plaint had to be rejected.

Holding and Implications

Core Ruling: It is held that CS No. 268 of 2012 could not have been entertained by the civil court and, accordingly, the plaint is rejected in its entirety because the reliefs claimed are capable of adjudication before the appropriate Debts Recovery Tribunal under the Act of 2002.

Consequences and immediate effects:

GA No. 2778 of 2012 is allowed in consequence of the rejection of the plaint.
GA No. 2404 of 2012 is dismissed as a consequence of the suit going out.
The subsisting interim order (previous injunction or restraint) stands vacated.
There will be no order as to costs.
The plaintiffs remain free to pursue their grievances before the appropriate Debts Recovery Tribunal (for example, under Section 17 of the Act of 2002), as the court observed the tribunal is the competent forum for the matters pleaded.
A subsequent petition seeking stay of the operation of the order was declined by the court.
The court directed that certified website copies of the judgment, if applied for, be made available to the parties subject to formalities.

Note: The court also observed that Section 34 produces consequences that alter certain longstanding civil-law axioms (permitting rejection of a plaint based on circumstances outside the plaint and allowing partial rejection insofar as tribunal-competent matters are concerned). The opinion does not purport to set out new principles beyond applying the statutory provision and the extant authorities to the facts before it.

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Sudha Khemka And Another v. Central Bank Of India And Others

assigns be restrained by an order of injunction from taking any step and/or further steps to invoke any right emanated from the alleged deed of assignment dated 30th March, 2011;"

The second defendant asserts that whether or not the suit could have been entertained or the plaint is liable to be rejected, the orders of interlocutory injunction cannot be granted in view of Section 34 of the said Act of 2002. It is such provision that binds the civil court that needs to be seen:

"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 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 taken 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."

The second defendant secured creditor relies on two recent judgments reported at (2013) 9 SCC 620 (Standard Chartered Bank v. V. Noble Kumar) and at (2014) 1 SCC 479 (Jagdish Singh v. Heeralal) to suggest that there is little choice that a civil court has in a matter where its jurisdiction stands ousted not only in respect of any action taken by a secured creditor under the said Act of 2002, but also in respect of any matter that a Debts Recovery Tribunal or a Debts Recovery Appellate Tribunal is empowered to determine under such Act. In V. Noble Kumar the Supreme Court held that an appeal under Section 17 of the Act "is available to the borrower against any measure taken under Section 13(4)" and that such remedy may be availed by the borrower "only after losing possession of the secured assets." In Jagdish Singh the Supreme Court emphasised that the effect of Section 34 of the said Act of 2002 would curtail the plenary authority of civil courts to receive suits of a civil nature by virtue of Section 35 of the said Act of 2002. According to the secured creditor, in view of Section 34 of the said Act of 2002 no quia timet action in respect of matters capable of being determined by the Debts Recovery Tribunal or the Debts Recovery Appellate Tribunal would be maintainable. The secured creditor refers to the decision reported at (2004) 4 SCC 311 (Mardia Chemicals Ltd v. Union of India) where the constitutionality of the said Act of 2002 was upheld with the observation that the prohibition under Section 34 "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 ..." The secured creditor stresses on the history of the legislation as noticed both in Mardia Chemicals Ltd and in the judgment reported at (2008) 1 SCC 125 (Transcore v. Union of India). It is submitted on behalf of the secured creditor that since the said Act of 2002 was brought in in furtherance of the financial policy of the Union, the legitimacy thereof could not be decided by the court. The second defendant insists that if the legislature has the authority to abridge the private rights of individual citizens in the interest of the larger public good, the plaintiffs' argument that a party seeking redressal of a civil wrong has, theoretically, to have a forum available at any time that he wishes to invoke its jurisdiction, should not be countenanced.

The secured creditor relies on a single Bench opinion of this court reported at (2012) 2 CHN 149 (Authorised Signatories Deutsche Bank v. Sandip Dey) where the court rejected a plaint filed by a tenant upon the landlord issuing a notice to the tenant that the secured creditors of the landlord had invoked the provisions of the said Act of 2002 against the landlord. The second defendant here claims that such opinion is consistent with the objective of the said Act of 2002 to allow only the tribunal recognised thereunder to adjudicate upon the claims of any person in respect of a secured asset covered by such statute. The secured creditor submits that a judgment of this court reported at AIR 2008 Cal 9 (Manager, UCO Bank v. Samar Sarkar) that a secured creditor is not authorised to evict a tenant from any mortgaged property in the process of the realisation of the dues of the landlord-borrower is not good law in view of the several Supreme Court pronouncements. The secured creditor has relied on the following observation from a speech in the House of Lords reported at 1958 AC 549 (Escoigne Properties Ltd v. Inland Revenue Commissioners):

"I return, therefore, to the question: What is the true meaning of section 42 as it stands? This cannot be answered by simply looking at the words of the statute and nothing else. A statute is not passed in a vacuum, but in a framework of circumstances, so as to give a remedy for a known state of affairs. To arrive at its true meaning, you should know the circumstances with reference to which the words were used: and what was the object, appearing from those circumstances, which Parliament had in view ... All that the courts can do is to take judicial notice of the previous state of the law and of other matters generally known to well-informed people. Thus one of the best ways, I find, of understanding a statute is to take some specific instances which, by common consent, are intended to be covered by it. This is especially the case with a Finance Act. I often cannot understand it by simply reading it through. But when an instance is given, it becomes plain. I can say at once: "Yes, that is the sort of thing Parliament intended to "cover." The reason is not far to seek. When the draftsman is drawing the Act, he has in mind particular instances which he wishes to cover. He frames a formula which he hopes will embrace them all with precision. But the formula is as unintelligible as a mathematical formula to anyone except the experts: and even they have to know what the symbols mean. To make it intelligible, you must know the sort of thing Parliament had in mind. So you have to resort to particular instances to gather the meaning."

The secured creditor argues that just as Mardia Chemicals Ltd had observed that public interest has always to be considered to be above private interest, a previous opinion of the Supreme Court has also observed in the judgment reported at (1980) 4 SCC 507 (Srinivasa Enterprises v. Union of India) that "when a general evil is sought to be suppressed some martyrs may have to suffer for the legislature cannot easily make meticulous exceptions and has to proceed on broad categorisations, not singular individualisations." Another judgment on the said Act of 2002 reported at (2010) 8 SCC 110 (United Bank of India v. Satyawati Tondon) has also been placed for the recognition therein that extreme self-restraint is required to be exercised by High Courts while wielding their authority under Article 226 of the Constitution in matters pertaining to claims under the said Act of 2002.

On the basis of the judicial pronouncements on the said Act of 2002, the secured creditor concludes that there is hardly any latitude for a civil court to exercise any modicum of judicial authority in respect of any matter which a Debts Recovery Tribunal or a Debts Recovery Appellate Tribunal is empowered by or under the said Act of 2002 to determine. The reliefs claimed in the suit are taken up in seriatim by the secured creditor to suggest that all of them may be canvassed by the plaintiffs at the appropriate stage under Section 17 of the said Act of 2002; and, since the tribunal has been conferred the authority under Section 17 of the said Act of 2002 to receive any complaint in connection with any of the measures taken by a secured creditor under Section 13(4) of such Act, the suit could not have been received by this court and, at any rate, its further progress should immediately be arrested and the plaint rejected or the suit dismissed by leaving the plaintiffs free to carry their grievances to the appropriate forum.

Despite the plaintiffs being conscious of the validity of the said Act of 2002, particularly Section 34 thereof, having been upheld, the primary plank of defence to the secured creditor's application for rejection of the plaint or dismissal of the suit is that the philosophy of the said Act of 2002 goes against the grain of the rule of law that is regarded in this country and the jurisprudence that has been indigenously developed over the last hundred years or so upon initially borrowing foreign juridical concepts. The plaintiffs emphasise on the fundamental: that if a right to approach a civil court inhered in a person and such right was taken away by a statute, the statute had per force to identify the forum where the right could be exercised; and, at a time of choice of such person. Apart from the plaintiffs seeking to question the judiciary's failure to discharge its judicial obligation to adjudicate upon disputes by allowing increasing tribunalisation - often manned by the judicially untrained - it is submitted that a judicial officer authorised to entertain a civil suit may be required to render an advance ruling by gauging from the uncontroverted statements in the plaint as to whether the subject- matter of the suit had the potential to form a lis before the Debts Recovery Tribunal under the said Act of 2002. The plaintiffs assert that since the tribunal is empowered to receive any grievance pertaining to the measures adopted by a secured creditor under Section 13(4) of the said Act of 2002, the exclusive authority of the sovereign function of justicising relating to civil disputes in such complex matters as inheritance, religious practice, customs and usage have to be understood to have been abdicated in favour of a tribunal with scarcely a check on its composition and constitution.

The civil court's jurisdiction under Section 9 of the Civil Procedure Code, according to the plaintiffs, is a fundamental pillar of the independence of the judiciary which is a part of the basic structure of the Constitution. If such authority is allowed to be denuded by successive legislations that park judicial matters with fora controlled by the executive, it would go against the constitutional ethos that the country holds so dear, they lament.

The plaintiffs refer, in this context, to the judgment reported at (1993) 3 SCC 161 (Shiv Kumar Chadha v. Municipal Corporation of Delhi) which recognised that the civil court was the repository of all civil grievances for which no remedy may have been provided in different statutes. However, the judgment observed that there could be statutes

which in public interest affect even the common law rights or liability of the citizens, which were in the nature of existing rights

, but does not touch upon the issue of judicial authority being weaned away from the judiciary that the plaintiffs stress on.

The plaintiffs rely on a judgment reported at (2011) 3 Mh. LJ 71 (State Bank of India v. Sagar) for the observation therein that

a line of demarcation ... is required to be drawn to define the compact area of jurisdiction of the Debts Recovery Tribunal under section 17 of the said Act

. The plaintiffs contend that in view of the Supreme Court opinion at paragraph 24 of Jagdish Singh, it cannot be said that a suit instituted prior to a secured creditor adopting any measure under Section 13 of the said Act of 2002 would not be maintainable. The plaintiffs suggest that if a suit was maintainable at the time that it was launched, the plaint cannot be rejected on the ground of any subsequent step taken by a secured creditor under the said Act of 2002.

The judicial wisdom as reflected in the repeated pronouncements of the Supreme Court from Mardia Chemicals Ltd to Jagdish Singh, give no latitude to a civil judge - be he a puisne Judge of a High Court exercising original jurisdiction

- to address the several questions raised by the plaintiffs and the several other matters hinted at. Since the constitutional validity of the said Act of 2002, including Section 34 thereof, has been upheld, it is needless to ponder over the underlying suggestion of the plaintiffs that the judiciary, that was not allowed to develop for want of infrastructure and resources, cannot be made the whipping boy to divest it of its judicial authority in several key areas. Just as the submission of a suitor who was attempted to be non-suited was recorded without comment in the judgment reported at (2011) 2 Cal LT 255 (Prabir Chatterjee v. ICICI Bank Ltd), so must the fundamental premise of the plaintiffs' argument herein be allowed to pass. But so much must be said: jurisdiction is neither a privilege nor a power, it is an obligation; and, an institution may forego its privileges, but its constitutional obligation may not be within its discretion to part with.

The reliefs claimed in the plaint are all capable of being canvassed in course of proceedings under Section 17 of the said Act of 2002 and, as such, the suit has to be arrested. But it must be observed that Section 34 of the 2002 Act demolishes at least two principles that were regarded as axiomatic in civil law. A plaint may now be rejected on the basis of a circumstance that may not be evident from the plaint. And, the partial rejection of a plaint may be possible to throw out such matters which are capable of adjudication by the Debts Recovery Tribunal under the said Act of 2002 and retain such matters that are not.

In view of the express prohibition in Section 34 of the said Act of 2002, it is held that CS No. 268 of 2012 could not have been entertained and, accordingly, the plaint relating thereto is rejected in its entirety as all the reliefs claimed therein are capable of adjudication before the appropriate Debts Recovery Tribunal. GA No. 2778 of 2012 is allowed accordingly. GA No. 2404 of 2012 is dismissed as a consequence of the suit going out. The subsisting interim order stands vacated.

There will be no order as to costs.

Certified website copies of this judgment, if applied for, be urgently made available to the parties, subject to compliance with all requisite formalities.

(Sanjib Banerjee, J.) Later:

The petitioners seek a stay of the operation of this order which is declined.

" (Sanjib Banerjee, J.)"

Sudha Khemka And Another v. Central Bank Of India And Others

Structured Summary of the Opinion

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

Second Defendant (Secured Creditor) — Arguments

Plaintiffs — Arguments

Table of Precedents Cited

Court's Reasoning and Analysis

Holding and Implications

Sudha Khemka And Another v. Central Bank Of India And Others

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