St. Mary'S Kalamane and Arekal Estates Vs Peter J R Prabhu

ST. MARY'S KALAMANE AND AREKAL ESTATES, PARTNERSHIP FIRM, HAVING OFFICE AT NO.11, HOYES ROAD, BENGALURU-560025. REPRESENTED BY ITS MANAGING PARTNER, SRI. AVINASH PRABHU, S/O PETER J.R PRABHU, AGED ABOUT 54 YEARS.

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…PETITIONER

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Digitally signed by NAGAVENI Location: High Court of Karnataka

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(BY SRI. J.P.DARSHAN, ADVOCATE)

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AND:

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PETER J.R. PRABHU, S/O LATE MR. H.P.RODRIGUES, AGED MAJOR, NO.18, III CROSS, LAVELLE ROAD, BENGALURU-560001.

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STATE BANK OF INDIA, REPRESENTED BY ITS ASSISTANT GENERAL MANAGER,

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HC-KAR

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COMMERCIAL BRANCH, WALAJPET-632513, VELLORE DISTRICT.,

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THE RECOVERY OFFICER, DEBT RECOVERY TRIBUNAL-I, 6^TH FLOOR, DEWA TOWERS, 770-A, ANNA SALAI, CHENNAI-600002.

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…RESPONDENTS

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THIS WRIT PETITION IS FILED UNDER ARTICLE 227 OF THE CONSTITUTION OF INDIA, PRAYING TO SET ASIDE THE ORDER DATED 05/04/2024 PASSED BY THE SENIOR CIVIL JUDGE AND JMFC MUDIGERE, ON IA NO.4 UNDER ORDER I RULE 10 OF CPC IN OS NO.10/2021 PRODUCED AS ANNEXUREA AND CONSEQUENTLY DISMISS THE IA NO.4 UNDER ORDER I RULE 10 OF CPC AND ETC.

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THIS PETITION, COMING ON FOR PRELIMINARY HEARING, THIS DAY, ORDER WAS MADE THEREIN AS UNDER:

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CORAM: HON'BLE MR JUSTICE M.NAGAPRASANNA

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ORAL ORDER

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The petitioner is the plaintiff before this court calling in question an order dated 05.04.2024 passed in O.S.No.10/2021 on allowing an application filed by defendant No.2 seeking deletion of defendant No.3 from the array of parties.

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HC-KAR

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Heard Sri.J.P.Darshan, learned counsel appearing

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for the petitioner and have perused the material on record.

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The petitioner institutes a suit in O.S.No.10/2021,

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seeking relief of declaration and injunction against the defendants therein. One of the defendants is Recovery Officer of the Debt Recovery Tribunal. He is drawn into the proceedings on the score that he had executed Certificate of Recovery with regard to the property of the petitioner which had become the subject matter of proceedings under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. Before the concerned Court, the defendant No.2 files an application under Order I Rule 10 of the Code of Civil Procedure, seeking his deletion as a defendant in the proceedings. The reason for preferring the said application was that the proceedings of the DRT qua the Recovery Officer cannot be brought before the Civil Court. The concerned Court answers the application in favour of the defendant No.3. The application filed by the defendant No.2 is allowed and the plaintiff was directed to delete the name of the defendant No.3-Recovery Officer from

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the cause title and the prayer in the suit. This order has driven the petitioner to this court in the subject petition.

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Learned counsel for the petitioner seeks to contend

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that the Recovery Officer would be a necessary party as the suit is maintainable under sub-rule (6) of Rule 11 of Schedule II of the Income Tax Act to establish that his right in the property was not liable to be auctioned and sold in any recovery proceedings. These are the submissions he had rendered before the concerned Court and he would reiterate the same.

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I have given my anxious consideration to the submissions made by the learned counsel for the petitioner and have perused the material on record.

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The aforesaid facts are not in dispute.

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7. What drives the petitioner to this court is as

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narrated herein above.

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HC-KAR

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The concerned Court allows the application for the

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following reasons:

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"10. Point No.1:- Plaintiff has filed the suit for declaration and for the relief of permanent injunction restraining the 3^rd defendant or any other person acting under him from asserting any right on the suit schedule property. The plaintiff also filed injunction application against defendant No.3 restraining defendant No.3 from attaching or auctioning or selling the plaint schedule property for recovery of the amount due from the defendant No. 1.

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The defendant No.2 has filed the application to delete the name of defendant No.3 from the present suit. Admittedly there is a proceedings under progress before the DRT regarding the property of the plaintiff pertaining to the loan transaction. The plaintiff has filed suit against the defendant No.3 to restraining defendant No.3 from taking any action against the plaint schedule property pertaining to loan transaction. As per Sec.33 of the Recovery of Debts Due to Banks and Financial Institutions Act 1993 there is a bar to file suit against the recovery officer. The section 33 of the above said Acts reads as follows:

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Section 33: "No suit, prosecution or other legal proceeding shall lie against the Central government or against [the presiding officer of a tribunal or the Chairperson of an Appellate Tribunal or against the Recover Officer for anything which is in good faith done or intended to be done in pursuance of this Act or any Rule or Order made there under":

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The above said provision is very clear that suit cannot be filed against the recovery officer. In

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the present case the plaintiff has filed suit against the recovery officer for restraining him from ascertaining or attaching the suit schedule property for the recovery of the loan. According to the plaintiff, there is clerical error in the order of DRT and plaintiff stated that the property of plaintiff has been included in the order of DRT by mistake. If there is clerical error or mistake in the order of DRT the plaintiff has to approach the competent authority to rectify the said mistake. The suit in present nature is not maintainable against defendant No.3. Moreover, there is bar under section 33 of the Recovery of Debts Due to Banks and Financial Institutions Act 1993 to file suit against the recovery officer. It is the statutory power granted to the recovery officer to take necessary steps to recover the loan amount. It is the duty of the recovery officer to act in accordance with law to implement the order of DRT in good faith. If any action taken by the recovery officer in discharging his duty in good faith is protected under section 33 of the Recovery of Debts Due to Banks and Financial Institutions Act 1993. Moreover, the order 1 rule 10 (2) of CPC empowers the court to strike out or add parties to the suit. The court may at any stage of the proceedings either upon or without the application of either party and on such terms as may appear to the court to be just, order that the name of any party improperly joined wither plaintiff or defendant can be strucked out. Since the statute itself protected the action taken by the recovery officer U/Sec 33 and the suit against the recovery officer is not maintainable. Therefore, it is very much necessary to struck out the name of defendant No.3 and it is also necessary to struck out the relief sought against the defendant No.3 from the present suit. Hence I answered point No. 1 in the Negative.

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Point No.2:- For the aforesaid reason and discussion, I proceed pass the following:

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HC-KAR

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ORDER

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IA No. IV filed by defendant No.2 is hereby allowed.

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Plaintiff is directed to delete the name of • defendant No.3 from the cause title and also directed to delete the prayer against defendant No.3 in the suit.

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Plaintiff is directed to file amended plaint by deleting the name of defendant No.3 and by deleting prayer against defendant No.3."

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The reasons rendered by the concerned Court allowing the application filed by the defendant No.2 which sought deletion of defendant No.3-Recovery Officer of the DRT is following the mandate of the law and is on sound reasoning. There is no warrant of interference with the order so passed by the concerned Court. It becomes apposite to refer to the judgment of the Apex Court in ALLAHABAD BANK vs.

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CANARA BANK , reported in (2000) 4 SCC 406 interpreting Section 17 of the Recovery of Debts and Bankruptcy Act, 1993.

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"19. The initial question is as to the jurisdiction of the Tribunal under Sections 17 and 18 of the RDB Act in the matter passing the order of adjudication and to what extent it is exclusive. The next question will be whether the jurisdiction of the Recovery Officer is also exclusive for purposes of execution of the adjudication order passed by the Tribunal.

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(i) Adjudication by Tribunal: does the Tribunal have exclusive jurisdiction?

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We shall refer to Sections 17 and 18 in Chapter III of the RDB Act which deal with adjudication of the debt:

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“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.

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(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.

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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.”

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It is clear from Section 17 of the Act that the Tribunal is to decide the applications of the Banks and Financial Institutions for recovery of debts due to them. We have already referred to the definition of "debt" in Section 2(g) as amended by Ordinance 1 of 2000. It includes “claims” by banks and financial institutions and includes the liability incurred and also liability under a decree or otherwise. In this context Section 31 of the Act is

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also relevant. That Section deals with transfer of pending suits or proceedings to the Tribunal. In our view, the word "proceedings" in Section 31 includes an "execution proceedings" pending before a Civil Court before the commencement of the Act. The suits and proceedings so pending on the date of the Act stand transferred to the Tribunal and have to be disposed of “in the same manner” as applications under Section 19.

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In our opinion, the jurisdiction of the Tribunal in regard to adjudication is exclusive. The RDB Act requires the Tribunal alone to decide applications for recovery of debts due to banks or financial institutions. Once the Tribunal passes an order that the debt is due, the Tribunal has to issue a certificate under Section 19(22) [formerly under Section 19(7)] to the Recovery Officer for recovery of the debt specified in the certificate. The question arises as to the meaning of the word "recovery" in Section 17 of the Act. It appears to us that basically the Tribunal is to adjudicate the liability of the defendant and then it has to issue a certificate under Section 19(22). Under Section 18, the jurisdiction of any other court or authority which would otherwise have had jurisdiction but for the provisions of the Act, is ousted and the power to adjudicate upon the liability is exclusively vested in the Tribunal. (This exclusion does not however apply to the jurisdiction of the Supreme Court or of a High Court exercising power under Articles 226 or 227 of the Constitution). This is the effect of Sections 17 and 18 of the Act.

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We hold that the provisions of Sections 17 and 18 of the RDB Act are exclusive so far as the question of adjudication of the liability of the defendant to the appellant Bank is concerned.

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(ii) Execution of certificate by Recovery Officer: is his jurisdiction exclusive

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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:

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“34. (1) Act to have over-riding effect.(1) Save as provided in Sub-Section (2), the provisions of this Act shall 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

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Provisions) Act, 1985 (1 of 1986).”

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

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There is one more reason as to why it must be held that the jurisdiction of the Recovery Officer is exclusive. The Tiwari Committee which recommended the constitution of a Special Tribunal in 1981 for recovery of debts due to banks and financial institutions 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 proceedings. It stated in Annexure XI of its Report that all “execution proceedings” must be taken up only by the Special Tribunal under the Act. In our opinion, in view of the special procedure for recovery prescribed in Chapter V of the Act, and Section 34, execution of the certificate is also within the exclusive jurisdiction of the Recovery Officer.

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Thus, the adjudication of liability and the recovery of the amount by execution of the certificate are respectively within the exclusive jurisdiction of the Tribunal and the Recovery Officer and no other Court or authority much less the civil court or the Company Court can go into the said questions relating to the liability and the recovery except as provided in the Act. Point 1 is decided accordingly."

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HC-KAR

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In the light of the identical bar under Section 34 of

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the SARFAESI Act, the judgment in the case of Allahabad Bank supra, would become applicable in the case at hand.

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Finding no perversity in the order passed by the concerned Court, for this court to entertain the petition under Article 226 of the Constitution of India, the petition stands

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dismissed .

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Sd/(M.NAGAPRASANNA)

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JUDGE

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CBC

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List No.: 1 Sl No.: 6

St. Mary'S Kalamane and Arekal Estates v. Peter J R Prabhu

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St. Mary'S Kalamane and Arekal Estates v. Peter J R Prabhu

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