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Bhanu Construction Co. Pvt. Ltd. v. Andhra Bank, Hyderabad And Others
Factual and Procedural Background
The appellant-company had entered into three contracts with the National Thermal Power Corporation (NTPC). NTPC terminated those contracts and, on 4-12-1987, encashed a bank guarantee worth Rs 234 lakhs. A learned Single Judge of the Andhra Pradesh High Court later declared NTPC’s action illegal and ordered a refund. On appeal, however, a Division Bench ruled that the dispute was civil in nature and unsuitable for adjudication under Article 226.
Subsequently, the appellant invoked arbitration, claiming about Rs 23 crores from NTPC. Anticipating an award in the appellant’s favour, Andhra Bank and the State Bank of India (respondent-banks) instituted O.S. No. 191 of 1993 on 27-08-1993 in the City Civil Court, Hyderabad, to recover almost Rs 19 crores from the appellant. By an interlocutory application, they obtained an order on 20-09-1994 directing Power Grid Corporation of India not to release any amounts to the appellant until further orders, so that any eventual decree in the banks’ favour could be satisfied.
The appellant challenged the civil court’s 20-09-1994 order through W.P. No. 3329 of 1995. A Single Judge of the High Court quashed the order, holding that, because the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (“the Act”) had come into force on 24-06-1993, the civil court lacked jurisdiction. On appeal, a Division Bench agreed the civil court lacked jurisdiction but dismissed the writ petition on the ground that no decree had yet been passed and the proper forum was the Debt Recovery Tribunal (“DRT”). Special leave was granted, and the present appeals were heard by the Supreme Court.
Legal Issues Presented
- Whether the civil court’s interlocutory order dated 20-09-1994, issued after the Act came into force (24-06-1993) but before the Debt Recovery Tribunal was established (30-11-1994), was without jurisdiction under Section 18 of the Act.
- How the definition of “appointed day” in Section 2(c) influences the bar on civil-court jurisdiction contained in Section 18.
Arguments of the Parties
Appellant's Arguments
- The civil court’s order dated 20-09-1994 was ultra vires because Section 18 of the Act barred ordinary civil courts from exercising jurisdiction in matters concerning recovery of debts due to banks once the Act came into force on 24-06-1993.
Respondent-Banks' Arguments
This information was not available in the provided opinion.
Table of Precedents Cited
No precedents were cited in the provided opinion.
Court's Reasoning and Analysis
The Court focused on the statutory scheme of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993. Section 18 bars the jurisdiction of civil courts “on and from the appointed day.” Section 2(c) defines “appointed day” as the date on which the Tribunal is actually established, not the date on which the Act merely comes into force.
In the instant matter, the DRT for the relevant area was established only on 30-11-1994. The impugned civil-court order was passed earlier, on 20-09-1994. Consequently, at that time the statutory bar in Section 18 had not yet become operative. Both the learned Single Judge and the Division Bench therefore erred in concluding that the civil court lacked jurisdiction.
The Court also referred to Section 31, which automatically transfers pending suits to the Tribunal once it is constituted. Because the banks’ suit stood transferred, any further relief—such as modification or vacating of the 20-09-1994 interim order—must now be sought before the DRT, which can proceed from the stage already reached or any earlier stage it deems fit.
Holding and Implications
The appeals are disposed of. The Supreme Court declared that the civil court’s order dated 20-09-1994 was not without jurisdiction when made. The suit is now before the Debt Recovery Tribunal, where the appellant may apply for modification or vacation of the interim order. No costs were awarded.
The decision clarifies that, for purposes of Section 18 of the 1993 Act, civil-court jurisdiction ceases only from the date the Tribunal is actually established, not from the date of the Act’s commencement. The ruling affects the parties directly but sets no new ratio beyond statutory interpretation of “appointed day.”
Judgment
1. Special leave granted.
2. These appeals are preferred by the appellant against the judgment dated 10-2-1999 of the Division Bench of the High Court of Andhra Pradesh in WA No. 1144 of 1997 and WAMP No. 3941 of 1998. The Bench set aside the judgment of the learned Single Judge and directed parties to approach the Tribunal under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (hereinafter called “the Act”).
3. The brief facts in the appeals are that the appellant Company entered into contracts with National Thermal Power Corporation. It appears that National Thermal Power Corporation terminated the contracts and encashed the bank guarantee for Rs 234 lakhs on 4-12-1987. The action of NTPC was questioned and a learned Single Judge of the High Court had earlier held that action of NTPC was illegal and directed to refund the amount collected under the bank guarantee. The Division Bench of the High Court held that the suit was of a civil nature and could not be adjudicated in proceedings under Article 226 of the Constitution of India.
4. Thereafter the appellant raised a dispute with regard to the contracts and sought for arbitration in all the said three contracts. The appellant Company filed its claim to the tune of Rs 23 crores. According to the appellant the two respondent Banks anticipated that the appellant was likely to receive substantial amount from NTPC and therefore, the Banks (namely Andhra Bank and State Bank of India) filed a suit being OS No. 191 of 1993 before the IInd Additional Judge, City Civil Court, Hyderabad on 27-8-1993 seeking recovery of an amount of Rs 19 crores. Along with the application they filed an interlocutory application seeking direction that NTPC deposit the amount that may become payable to the appellant in arbitration proceedings, before the Court. On the said application an order was passed by the civil court on 20-9-1994 directing Power Grid Corporation of India under Order 38 Rule 5 read with Order 21 Rule 46 not to pay the appellant Company, any money until further orders from the civil court. The idea was that the amounts, if any, payable by the said Corporation should be available in the event any decree is passed in favour of the Banks in their suit.
5. The abovesaid order dated 20-9-1994 was challenged by the appellant in the High Court by way of Writ Petition No. 3329 of 1995 and the same was allowed by the High Court on the ground that the abovesaid suit was instituted on 27-8-1993, and the impugned order of the civil court which was passed on 20-9-1994, subsequent to the passing of the Act, i.e, 24-6-1993 therefore the civil court had no jurisdiction. The Tribunal was established on 30-11-1994. The order passed by the civil court was quashed. In the appeal preferred before the Division Bench by the two Banks (Respondents 1 and 2), the Bench agreed with the trial court that the order passed by the civil court was without jurisdiction. But at the same time the Division Bench felt that inasmuch as no decree had been passed it was not the stage at which the writ petition could be entertained. Hence the appeal was allowed and the writ petition was dismissed.
6. It is against the said judgment that these appeals have been preferred by the appellant-defendant contending that the order of the civil court dated 20-9-1994 was without jurisdiction inasmuch as it was passed subsequent to the passing of the Act on 24-6-1993.
7. Section 2 of the Act is relevant for considering whether the order passed by the civil court dated 20-9-1994 subsequent to the passing of the Act on 24-6-1993 but before the establishment of the Tribunal on 30-11-1994 was within the jurisdiction of the civil court. We shall refer to the relevant provisions of the Act.
8. Section 18 of the Act reads as follows:
“18. Bar of jurisdiction.—On and from the appointed day, no court or other authority shall have, or be entitled to exercise, any jurisdiction, powers or authority (except the Supreme Court, and a High Court exercising jurisdiction under Articles 226 and 227 of the Constitution) in relation to the matters specified in Section 17.”
9. In view of the words “appointed day” used in the abovesaid section, it has become necessary to find out what is the definition of “appointed day”. Section 2(c) of the Act defines “appointed day” as follows:
“2. (c) ‘appointed day’, in relation to a Tribunal or an Appellate Tribunal, means the date on which such Tribunal is established under sub-section (1) of Section 3 or, as the case may be, sub-section (1) of Section 8;”
10. It will be noticed that the “appointed day” in the Act in relation to a Tribunal means the day on which the Tribunal is established and not the day on which the Act came into force. In the present case, it is not in dispute that the Tribunal was established on 30-11-1994 subsequent to the passing of the order of the civil court. It is true that the civil court passed an order on 20-9-1994 after the Act had come into force. But for the purpose of Section 18 of the Act what is relevant is not the date of passing of the Act but the date of the establishment of the Tribunal. Therefore 24-6-1993 is not relevant but it is the date of establishment of the Tribunal namely 30-11-1994 that is relevant. The impugned order in the present case was passed by the civil court on 20-9-1994 prior to the establishment of the Tribunal on 30-11-1994. Therefore, the learned Single Judge as well as the Division Bench were wrong in thinking that the order of the Tribunal (sic civil court) was without jurisdiction.
11. It will also be noticed that Section 31 of the Act deals with the transfer of pending cases. According to Section 31(2)(b) the Tribunal may, on receipt of such records, proceed to deal with such suit or other proceedings, so far as may be, in the same manner as in the case of an application made under Section 19 from the stage which was reached before such transfer or from any earlier stage as the Tribunal may deem fit.
12. Therefore, now that the suit has been transferred to the Tribunal, it will be for the appellant to seek appropriate reliefs before the Tribunal. If the appellant wants any modification or vacation of the interim order passed by the civil court on 20-9-1994, it can move the Tribunal.
13. The appeals are disposed of in the light of the above observations. There shall be no order as to costs.
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