Sam J. Mathews And Another v. Deputy Tahsildar And Another

1. These cases, though presenting varied facts and nuances, are nevertheless concatenated by a common prayer: in all of them are impugned the action taken by various Banks for recovery of amounts over Rs.10 lakhs (Rupees One Million), allegedly due from the petitioners, under the provisions of the Revenue Recovery Act (hereinafter referred to as the “RR Act” for ease).

2. While the petitioners in these cases, who are all admittedly borrowers and guarantors of loans of more than Rs.10 lakhs availed from the respondent-Banks, assert that on account of the specific provisions under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, now rechristened as Recovery of Debts and Bankruptcy Act, 1993 (hereinafter referred to as the “RDB Act” for short), no requisition for recovery of such amounts can be made by the Banks under the provisions of the RR Act; the Banks on the contrary, maintain that their option to recover amounts from the borrowers/guarantors, through the various channels/methods legally available to them, including under RR Act, is implicit and therefore, that even if other remedies under other statutes are available, they are still at liberty to make a requisition to the Competent Authorities under the RR Act, provided the loans are once that fall within the umbra of Section 71 of the said Act.

3. I have heard Sri.Varghese C.Kuriakose, Sri.S.Easwaran, Sri.V.K.Peermohamed Khan and Sri.M.A.Augustine, the learned counsel appearing for the petitioners in the various writ petitions and Sri.A.S.P.Kurup, Sri.Gopalakrishnan Nair, Sri.M.Gopikrishnan Nambiar, Sri.V.B Harinarayan and Sri.Pauly Mathew Muricken, the learned Standing Counsel for the respondent-Banks.

4. Sri.S.Easwaran, the learned counsel appearing for the petitioners in some of these matters, opened his submissions by showing me that under Section 17 of the RDB Act, only the Tribunal constituted under it, namely, the Debts Recovery Tribunal (hereinafter referred to as “DRT” for short) shall have the jurisdiction to entertain and decide applications from Banks and Financial Institutions for recovery of debts due to them. He then took me to Section 18 of the said Act, to assert that from the appointed day, no Court or Authority shall have any power, jurisdiction or authority, except the Supreme Court and the High Courts, in relation to matters specified under Section 17 of the RDB Act. He asserts that a conjoint reading of these provisions, reinforced by the rigour of Section 34 (2) of the said Act, which mandates that the RDB Act will have an overriding effect notwithstanding anything inconsistent therewith contained in any law for the time being in force, renders it incontestable that only the DRT can decide upon matters as are specified in Section 17 of the RDB Act. After saying so, Sri.S.Easwaran, read to me Section 2 (g) of the RDB Act, which defines debt in the following manner;

“ '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.”

5. He then shows, from Section 1 (4) of the RDB Act, that the provisions of the said Act apply when the debt is more than Rs.10 lakhs or such other figure as the Central Government may notify. He then, points out that there has been an amendment to this provision, as per which, the figure has been enhanced to Rs.20 lakhs, but that the said amendment has been stayed by the High Court of Rajasthan. He then asserts that notwithstanding this, the position in these cases would not be altered, since the amount involved in all them is more than Rs.20 lakhs.

6. He says, therefore, that whenever the amount involved is more than Rs.10 lakhs (or Rs.20 lakhs if the amendment is upheld), whether it be secured or otherwise, the provisions of the RDB Act alone can be called in; particularly because under the RR Act, the Bank does not obtain remedy of adjudication or quantification of the amounts due but can only use it as a method of recovery, as if they are arrears of public revenue. He thus vehemently contends that the action of the Banks in these cases in having made requisitions to the Revenue Authorities for recovery of amounts due from the petitioners are untenable and therefore, unconstitutional. He then submitted that these aspects have already been dealt with by the Hon'ble Supreme Court and emphatically answered against the Banks in Allahabad Bank v. Canara Bank [(2000) 4 SCC 406].

7. Sri.Varghese.C.Kuriakose, learned counsel also appearing for the petitioners in various cases, more or less adopted the submissions of Sri.S.Easwaran, however, fairly pointing out that in another judgment, namely, Lakshmi Enterprises & others v. State of Kerala [2008 (2) KHC 74], a learned Judge of this Court has referred to these provisions and has passingly concluded that the Banks have the option, at their discretion, to use any of the alternative methods for recovery under any of the Acts available to them, which could be the RDB Act, Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (hereinafter referred to as SARFAESI Act for short) or the RR Act. He, however, says that these statements in the said judgment are not really intended for a general application, but were only made in the limited context of the facts of that case because, according to him, it is now indubitable that once the RDB Act came into force, the provisions of the RR Act cannot be invoked, especially when the method of the adjudication under it, namely Section 34(2), would have to yield to Section 17 of the RDB Act. He concluded his submissions citing the judgment of the Hon'ble Supreme Court in Unique Butyle Tube Industries v. U.P. Financial Corporation and others [(2003) 2 SCC 455], which he says has followed Allahabad Bank (Supra) approvingly and has further declared that the Bank cannot invoke Uttar Pradesh Public Moneys (Recovery of Dues) Act, 1972, which is analogous to the RR Act in Kerala to recover any debt more than Rs.10 lakhs and that they must resort only to the RDB Act.

8. Sri.V.K.Peermohamed Khan and Sri.M.A.Augustine, learned counsel appearing for the other petitioners made more or less similar submissions as recorded above, adding that since Section 17 of the RDB Act postulates that a Bank can only invoke the jurisdiction of that Act for the purpose of recovery of debts due to it, thus taking in every recovery, notwithstanding the method and because the said Act strictly lays down the method for adjudication of the debt, as part of the recovery process under it, the Banks cannot invoke the provisions of any other Statute, except the SARFAESI Act, which is a special Statute, for recovery of their debts; and resultantly that the requisitions made in these cases under the RR Act are wholly without forensic support.

9. In answer to the various assertions made as afore by the petitioners, Sri. Gopalakrishnan Nair, appearing for the Canara Bank, submitted that they cannot be accepted in law, going by the way Section 71 of the RR Act, is endrafted. He says that as is limpid there-from, the Government is authorized, by notification in the Gazette, to declare that the provisions of that Act, shall be made applicable to recover amounts due from any person or class of persons to any specified institution. He asserts that there is nothing in Section 71, which restricts such notification to apply only to debts for a particular figure/amount; and, therefore, that as long as the said Section prescribes no interdiction or prohibition against the Banks in invoking the jurisdiction of the RR Act, they are at liberty to do so. He also relies on an unreported judgment of a learned Judge of this Court in Amrutha Oils v. State of Kerala (W.P. (C).No.19615/2016) to contend that this Court has always allowed the provisions of the Revenue Recovery Act to act in a supplemental manner, along with the RDB Act or the SARFAESI Act.

10. The other learned Standing Counsel for the Banks, Sri. M.GopiKrishan Nambiar and Sri. Pauly Mathew Muricken made analogous submissions as Sri. Gopalakrishnan Nair and I do not, therefore, deem it necessary to record each of their submissions, since they speak in the same voice.

11. To sum up the submissions of the Banks, they contend that there is no prohibition in the RR Act in invoking its provisions even for debts over Rs.10 lakhs and therefore, that the provisions of the RDB Act cannot be imported into it, to cause any interdiction. The various Banks thus maintain that their present action in having approached the Competent Authority under the RR Act is without fault and therefore, cannot be called into question by the petitioners.

12. The issues in these cases being of a general importance, I have been very circumspect in consideration of the rival submissions made by the learned counsel for the parties, since what is involved is the process of recovery of large amounts due to Banks. That said, however, it cannot be lost sight of that such recovery be not done in violation of any applicable law or the mandatory procedural requirements; and, thus my endeavor in these cases will be to ensure that recovery of amounts by the Banks, which is an imperative necessity, is not allowed to be in conflict with any law. Consequently, if there is any legal inhibition against the impugned requisitions made by the Banks under the RR Act, recovery through such cannot be permitted, even if their intentions are bona fide and laudatory.

13. The provisions of the RDB Act, particularly Sections 17, 18, 19 & 34 are indubitable that it creates a frame work for comprehensive adjudication, evaluation and recovery of debts due to Banks and Financial Institutions. The provisions of these three Sections are the foundational elements on which all the allegations and assertions of the parties are involved in these cases, and I, therefore, deem it necessitous to extract all of them as under;

17. Jurisdiction, powers and authority of Tribunals.—(1) A Tribunal shall exercise, on and from the appointed day, the jurisdiction, powers and authority to entertain and decide applications from the banks and financial institutions for recovery of debts due to such banks and financial institutions.

(2)An Appellate Tribunal shall exercise, on and from the appointed day, the jurisdiction, powers and authority to entertain appeals against any order made, or deemed to have been made, by a Tribunal under this Act.

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.

19. Application to the Tribunal.—(1) Where a bank or a financial institution has to recover any debt from any person, it may make an application to the Tribunal within the local limits of whose jurisdiction—

a) the defendant, or each of the defendants where there are more than one, at the time of making the application, actually and voluntarily resides or carries on business or personally works for gain; or

(b) any of the defendants, where there are more than one, at the time of making the application, actually and voluntarily resides or carries on business or personally works for gain; or

c) the cause of action, wholly or in part, arises.

34. Act to have over-riding effect.—(1) Save as provided under sub- section (2), the provisions of this Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in any instrument having effect by virtue of any law other than this Act.

(2) The provisions of this Act or the rules made thereunder shall be in addition to, and not in derogation of, the Industrial Finance Corporation Act, 1948 (15 of 1948), the State Financial Corporations Act, 1951 (63 of 1951), the Unit Trust of India Act, 1963 (52 of 1963), the Industrial Reconstruction Bank of India Act, 1984 (62 of 1984) 4[,the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986) and the Small Industries Development Bank of India Act, 1989 (39 of 1989)].

14. In contra-distinction to the above, the applicable provision of the Revenue Recovery Act, namely, Section 71 thereof, reads as under:

71. Power of Government to declare the Act applicable to any institution.-

The Government may, by notification in the Gazette declare, if they are satisfied that it is necessary to do so in public interest, that the provisions of this Act shall be applicable to the recovery of amounts due from any person or class of persons to any specified institution or any class or classes of institutions, and thereupon all the provisions of this Act shall be applicable to such recovery.

After providing so, the said Act also creates a mechanism for dispute resolution, through Section 34 thereof, which is as below:

34. Demand to be served prior to attachment of land-

(1) Before the Collector or the authorised officer proceeds to attach the immovable property of the defaulter, he shall cause a written demand to be served upon the defaulter specifying the name of the defaulter, the amount of the arrears of public revenue due on land for which the attachment is bing made, the date on which such arrear fell due, the interest on the arrear and the amount of the batta due to the persons who serve the demand and such other particulars as may be prescribed, and the time allowed for the payment which shall not be less than seven days from the date of service of the demand.

(2) If within the time prescribed under sub-section (1), the defaulter objections to the claim of arrears wholly or in part, the Collector or the authorised officer, as the case may be shall inquire into the objection and record a decision before proceeding to attach the immovable property of the defaulter.

15. I have referred to the afore provisions to show that even under the RR Act, an adjudicatory mechanism has been put in place whenever a dispute is raised regarding the quantum covered by the requisition. Under Section 34(2), afore extracted, of the RR Act, when a defaulter objects to the quantum of the alleged arrears, the District Collector or the Authorized Officer, as the case may be, shall inquire into such objection and record a decision. This, no doubt, clearly postulates an adjudication of the claim made by the Bank, but when read adjunctly with Section 17 of the RDB Act, it becomes rather indisputable that such an adjudication becomes untenable when the debt is more than Rs.10 lakhs.

16. This is because, Section 17 of the RDB Act makes it unequivocal that any adjudication, leading to the recovery of a debt, which means an amount of more than Rs.10 lakhs, cannot be done by any other person or institution or entity other than the Tribunal constituted under it, namely the DRT, and this is further cemented through the provisions of Section 18 of the said Act, which bars jurisdiction being exercised in such matters by any other person or Authority. These provisions then get bolstered by the mandate of Section 19 of the RDB Act, afore extracted, where every Bank or Financial Institution, that seeks to recover a debt of more than Rs.10 lakhs from any person, will mandatorily have to make an apposite application to the DRT and no other entity; and finally, Section 34 of the RDB Act expressly excludes the jurisdiction of every other Court except the High Court and Supreme Court.

17. Therefore, viewed from the afore perspective, it is clear that if any dispute is raised with respect to a debts, as defined by the RDB Act, namely, which is more than Rs.10 lakhs, an adjudication on it can only be done by the DRT under the RDB Act and not by the District Collector under the RR Act. Obviously, therefore, the provisions of Section 34(2) of the RR Act would stand in conflict with the afore provisions of the RDB Act and resultantly, cannot be availed of by the Banks. The case of the SARFAESI Act stands on a different pedestal because this is a special Act, brought in subsequent to the RDB Act intended to provide a special mechanism, whereby the Banks can recover debts through the methods specified therein and under the adjudicatory processes that are well defined through its provisions. Thus, even assuming that, in an abstract manner, one views the RR Act to be a mere mechanism for recovery, it would still be of no avail to Banks and Financial Institutions because such recovery, as long as it entails a component of adjudication, would certainly have to yield to the provisions of Sections 17, 18, 19 & 34 of the RDB Act.

18. I must also record that, I have drawn my opinion as above fully inspired and guided by the unmistakable views of the Hon'ble Supreme Court in Allahabad Bank (Supra), relating to these issues, which, available in paragraph 23 thereof, are extracted below in order to enable a full reading;

“23. Even in regard to “execution”, the jurisdiction of the Recovery Officer is exclusive. Now a procedure has been laid down in the Act for recovery of the debt as per the certificate issued by the Tribunal and this procedure is contained in Chapter V of the Act and is covered by Sections 25 to 30. it is not the intendment of the Act that while the basic liability of the defendant is to be decided by the Tribunal under Section 17, the banks/financial institutions should go to the civil court or the Company Court or some other authority outside the Act for the actual realisation of the amount. The certificate granted under Section 19(22) has, in our opinion, to be executed only by the Recovery Officer. No dual jurisdictions at different stages are contemplated. Further, Section 34 of the Act gives overriding effect to the provisions of the RDB Act. That section reads as follows:

“34.(1) Act to have overriding effect.-(1) save as provided under sub-section (2), the provisions of this Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in any instrument having effect by virtue of any law other than this Act.

(2) The provisions of this Act or the rules made thereunder shall be in addition to, and not in derogation of, the Industrial Finance Corporation Act, 1948 (15 of 1948), the State Financial Corporations Act, 1951 (63 of 1951), the Unit Trust of India Act, 1963 (52 of 1963), the Industrial Reconstruction Bank of India Act, 1984 (62 of 1984) and the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986).

The provisions Section 34 (1) clearly state that the RDB Act overrides other laws to the extent of “inconsistency”. In our opinion, the prescriptions of an exclusive Tribunal both for adjudication and execution is a procedure clearly inconsistent with realisation of these debts in any other manner.

19. These views were again noticed by the Hon'ble Supreme Court in Unique Butyle (supra) and their Lordships had the following to say, specifically with respect to the question if the Uttar Pradesh Public Moneys (Recovery of Dues) Act, 1972, which is a similar, if not identical statute as the RR Act, is protected under the RDB Act and as to if its provisions can be utilised by the Bank to recover debts more than Rs.10 lakhs:

“9. Section 34 of the Act consist of two parts. Sub-section (1) deals with the overriding effect of the Act notwithstanding anything in consistent therewith contained in any other law for the time bing in force or in any instrument having effect by virtue of any law other than the Act. Sub-section (1) itself makes an exception as regards matters covered by sub-section (2). The U.P. Act is not mentioned therein. The mode of recovery of debt under the U.P. Act is not served under the said provision i.e. sub-section (2) which is of considerable importance so far as the present case is concerned. Even a bare reading therein makes it clear that it is intended to be in addition to and not in derogation of certain statutes; one of which is the Financial Act. In other words, a bank or a financial institution as the option or choice to proceed either under the Act or under the modes of recovery permissible under the Financial Act. To that extent, the High Court's conclusions quoted above were correct. Where the High Court went wrong is by holding that the proceeding under the U.P. Act were permissible. The U.P. Act deals with the separate modes of recovery and such proceedings are not relatable to proceedings under the Financial Act.”

20. Thus, cannot be any further cause for speculation on the aspects involved in these cases, since the Hon'ble Supreme Court has, in the above two binding precedents, dispelled it without any trace of doubt.

21. When the law remains established in the afore manner, the axiomatic question is whether the judgments of two other learned Judges of this Court in M/s. Lakshmi Enterprises (supra) and M/s. Amrutha Oils (supra) need to be followed. A reading of M/s. Lakshmi Enterprises (supra), renders it clear that the learned Judge was dealing with a situation where the Bank took the contention that Recovery processes under RDB Act and the RR Act are independent of each other and therefore, that they are entitled to invoke any one of them at their option. The question as to the manner of adjudication of the debt was never considered by the learned Judge and the answer given therein is only with respect to the specific query posed by the Bank in the context of the facts and circumstances involved.

22. Similarly, in M/s. Amrutha Oils (supra), a careful reading of the said judgment would show that there were no disputes on facts therein and the debt was virtually admitted. It is solely in such scenario that the learned Judge delivered judgment without having to enter into any of these issues in detail; and resultantly, therefore, the views in it can only be seen to be confined to the parameters of the specific undisputed facts noticed by the learned Single Judge.

23. Irrefragably, therefore, the seemingly contrary views and conclusions in M/s. Lakshmi Enterprises (supra) or M/s. Amrutha Oils (supra) cannot constrain me in any manner; particularly when they are not in conformity with the declarations in Allahabad Bank (supra) and Unique Butyle (supra).

As the necessary denouement, since in all these cases the respondent-Banks are proceeding for recovery of debts which are more than Rs.10 lakhs, I allow these writ petitions and direct the concerned Authorities under the Revenue Recovery Act to cease all further action as per the impugned requisitions made to them; but leave full liberty to the Banks to invoke and pursue remedies under the RDB Act in terms of the afore observations.

Needless to say, nothing contained in this judgment shall be construed to mean that the Banks cannot invoke the SARFAESI Act, which they certainly are entitled to do, in terms of law.