Allowed

Bank of India v. the Official Liquidator , High Court , Bombay as Liquidator of Dynacraft Machine Co. Ltd.

Bombay HC9 Feb 2009CHS/963/2007

Case brief

AI extract

What is this about?

The court held that an assignee of a debt under the RDB Act cannot file an execution application in the High Court. Recovery under the Act is limited to the bank or financial institution, though the assignee may seek a declaration from a civil court.

What did the court decide?

Chamber summons made absolute dismissing the execution application filed by the assignee.

Bank of India Vs the Official Liquidator… — Civil Procedure and Limitation | Bombay HC (2009)

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IN THE HIGH COURT OF JUDICATURE AT BOMBAY

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ORDINARY ORIGINAL CIVIL JURISDICTION

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CHAMBER SUMMONS NO.963 OF 2007
WITH
CHAMBER SUMMONS NO.964 OF 2007
IN
EXECUTION APPLICATION NO.73 OF 2007
IN
RECOVERY PROCEEDING NO.23 OF 2006
IN
ORIGINAL APPLICATION NO.1324 OF 2000
IN
HIGH COURT SUIT NO.1573 OF 1986
Bank of India.. Plaintiff

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Bank of India.. Plaintiff
Versus
The Official Liquidator,
High Court, Bombay & Anr... Defendants
and
Punarvasu Construction Pvt.Ltd. .. Assignee
and
Yasmeen Lukmani and Ors... Applicants

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.. Defendants
.. Applicants

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Mr.J.P.Sen i/b. Mrs.Leena Lokare for Assignee
Ms.Deepa Rahi for O.L.
Mrs.Shamima Tally i/b. S.Mohammedbhai & Co. for
applicants.

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CORAM :S.C.DHARMADHIKARI, J.
DATE:9th February 2009.

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P.C.

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.At the hearing of this chamber summons,

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which is moved in an Application for Execution
filed by a Private Limited Company claiming to be
the assignee the prayer made by the Applicants is
that the Execution Application be dismissed. It
is urged on behalf of the applicants that the
execution application is filed by Respondent No.2
Punarvasu Constructions Pvt.Ltd. It is urged on
their behalf that on 11th March 1993, an order
was passed in Company Petition No.613 of 1984 and
a company Dyna Craft Machine Co.Ltd. was ordered
to be wound up. Respondent No.4 was appointed as
Liquidator for company in Liquidation. Company
defaulted in respect of repayment of amounts
borrowed by of way of Loans/ credit facilities
from several Banks. Applicant No.1 is
shareholder/ contributor of the company in
liquidation whereas applicant Nos. 2 and 3 are
related to her, apart from being joined as
beneficiaries.

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2. It is stated that first respondent bank

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obtained Recovery Certificate No.23 of 2006 dated
16th June 2005 from the D.R.T.III, Mumbai inter
alia against the company in liquidation and one
Jesica Lukmani and it is further alleged that the
recovery certificate is to the tune of
Rs.28,79,65,106/-.

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3.Another recovery certificate has also
been obtained and copies of these two recovery
certificates are annexed as Annexures B and C to
the affidavit in support. It is stated that in
the last week of May 2007, the Applicants
obtained a copy of document styled as Deed of
Assignment or decree dated 14th December 2006 as
between first respondent Bank and the said
Punarvasu as assignee. Respondent No.3 was
confirming party to the same. A copy of the deed
of assignment is annexed as Exh.D. It is stated
in the affidavit in support that a letter was

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addressed for one time settlement proposal.
However, while accepting the proposal, the bank

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has assigned its rights under the recovery
certificate in favour of the said Punarvasu.
Various pleas are raised with regard to the
binding nature of the proposal and its effect
insofar as the debtors and the bank are
concerned.

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4.However, it is not necessary to go into
the same, inasmuch as the principal contention
raised is that the execution application itself
is not maintainable before this Court. It is
urged that the recovery certificate is obtained
by Bank of India. It is a banking company within
the meaning of Banking Companies (Acquisition and
Transfer of Undertakings) Act, 1970. It is
covered by the Recovery of Debts due to Banks and
Financial Institutions Act, 1993 (for short "the
RDB Act"). The assignee is a non banking
company. In fact is is a builder. The assignee
cannot file an execution application to execute
and enforce the alleged debt under the recovery

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certificates in this Court. Various other pleas
are also raised inasmuch as it is contended that
the recovery certificate can be executed in terms
of R.D.B.Act and the machinery thereunder. The
same cannot be displaced or by-passed by any
Bank. Merely because, the recovery certificate
or the debt thereunder is assigned does not mean
that the assignee steps into the shoes of the
Bank so as to enable it to enforce and execute
the decree. Therefore, the subject execution
application filed by the Asignee of the
decree/Recovery Certificate is not maintainable
and must be dismissed.

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5.Relying upon the reply affidavit it is
contended by Mr.Sen appearing for the assignee
that the proceedings, for execution of the
recovery certificate by taking resort to RDB Act,
could have been initiated only by the Bank of
India. The remedy under that Act and machinery
provided for the execution of a recovery

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certificate is available only to the bank. The
assignee is not a banking company and, therefore,
it can execute the recovery certificate by filing
an execution application in this Court, which is
an ordinary Civil Court. More so, when the suit
by the Bank was originally filed in this Court
and subsequently transferred to D.R.T. and
registered as O.A. 1324 of 2000. The ordinary
decree holder, therefore, on the strength of this
recovery certificate can file the instant
execution application. However, it is also urged
that the R.D.B.Act cannot be interpreted in such
a manner so as to deprive an Assignee under the
recovery certificate/ decree which more than
Rs.10 lakhs. If the claim was under Rs.10 lakhs,
then, the Banking company/ Bank of India could
have laid its claim before an ordinary civil
court. In that event, the decree would have been
enforceable and executable by filing execution
application in this Court. Merely because the
decree is in the sum of Rs.28 Crores and odd,

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i.e. more than Rs.10 lakhs, does not mean that
the decree, after its assignment cannot be
enforced and executed by the assignees/
transferee by filing an execution application in
this Court and an incongruous and contradictory
situation has developed on account of peculiar
and confusing Interpretation of the provisions of
R.D.B.Act. Hence, it is submitted that the
objection to maintainability be overruled.

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6.Having perused the chamber summons and
affidavits in support, reply and rejoinder, it is
not possible to accept the contention of Mr.Sen.
The R.D.B.Act is an Act which has been
promulgated to provide for the establishment of
Tribunals for expeditious adjudication and
recovery of debts due to Banks and Financial
Institutions and for matters connected therewith
or incidental thereto. The term "bank" has been
defined to mean a banking company, corresponding
new bank, State Bank of India, Subsidiary Bank or

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Regional Rural Bank. "Banking Company" is
defined in the same manner as under clause (c) of
Section 5 of Banking Regulation Act, 1949. The
Public Financial Institution is covered by the
term "Financial Institution" which is defined in
the Act. The word "Debt" is defined to mean any
liability inclusive of interest which is claimed
as due from any person by a bank or financial
institution or by a consortium of banks.

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7.It is in this context that Chapter III of
the Act will have to seen which confers
jurisdiction, powers and authority on Tribunal.
Section 19 provides for the procedure of
Tribunals. A bank or financial institution, if
it has to recover any debt from any person, may
make an application to the Tribunal within the
local limits of whose jurisdiction, defendants or
each one of them or where there are more than
one, at the time of making application, actually
and voluntarily reside or carry on business. The

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jurisdiction is thus confined by section 19(1)(a)
to (c). The entire procedure culminating in
passing of an order and recovery certificate
pursuant thereto is set out in section 19 and
thereafter in Chapter V the mode of recovery of
debts has been set out vide section 25 and 28.

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8.It is in this situation, that a bank or
financial institution can enforce its claim and
recover a debt due to it. It is true that the
remedy is available to the bank and the financial
institution. After recovery certificate is
obtained and the debt is assigned to a private
party like the applicant, then, it is not
possible for it to pursue the mode of recovery
stipulated under the RDB Act. However, Asignment
of the Debt by itself does not mean that on the
strength of the deed of assignment in its favour,
the Assignee can file the execution application
in this Court to recover monies from the opposite
party - Judgement debtor. Under the deed of

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assignment as between the bank and the Assignee,
the applicant may have assigned the debt and
right to recover the same but ultimately, that
right must be enforceable and executable in law.
Merely because, R.D.B. Act does not come to the
assistance of the assignee does not mean that an
execution application can be file on the strength
of the recovery certificate claiming it to be in
the sum of Rs.10 lakhs and above. It is for the
bank to have made this claim if at all it wanted
to enforce and execute the recovery certificate.
Since the amount is more than Rs.10 lakhs the
bank could not have by-passed and displaced the
machinery under the R.D.B.Act. Remedies are
available to the bank and financial institutions
but not to the assignee. This is no ground to
entertain the present application.

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9.It is not as if the applicant is without
any remedy, inasmuch as on the strength of the
deed of assignment, it can obtain an appropriate

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declaration in its favour and thereafter recover
the monies from such persons, whose debts have
been assigned to it. Thus, all declarations and
orders based thereon can be obtained from a
competent civil court. However, the execution
application at the instance of the assignee
cannot be entertained.

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10.It is not possible to uphold the
contention of Mr.Sen that an incongruous
situation has developed on account of the
provisions of R.D.B.Act. The R.D.B.Act has been
upheld by the Court. The distinction made by the
R.D.B.Act of a claim less than Rs.10 lakhs and
above is based upon an rational differentia and
has a nexus with the objects sought to be
achieved. The Tribunals were established to
expeditiously recover the sums due and payable to
the bank. Merely because a sum of Rs.10 lakhs
and above is provided as outer limit and for
debts lesser than that, the banks and financial

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institutions can approach a civil court does not
mean that the authority and power of civil court
or its jurisdiction is undermined in any way.
For these reasons, it is not possible to accept
the contentions of Mr.Sen.

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11.Thus, there is merit in the contention of
the applicants that the execution application
itself is not maintainable before this Court.
For the reasons set out above, the chamber
summons succeed and is made absolute in terms of
prayer clause (a). However, it does not prevent
the applicants from pursuing the remedies as are
available to them in law to enforce their rights
under the deed of assignment and all pleas in
that behalf are kept open. No opinion is
expressed on the liability of applicants due and
all pleas of both sides in that behalf, are also
kept open. Chamber Summons dismissed. No costs.

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(S.C.Dharmadhikari, J)

Bank of India v. the Official Liquidator , High Court , Bombay as Liquidator of Dynacraft Machine Co. Ltd.

Case brief

What is this about?

What did the court decide?

Bank of India v. the Official Liquidator , High Court , Bombay as Liquidator of Dynacraft Machine Co. Ltd.

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

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Statutes considered

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