Dismissed

Hamza.P v. Canara Bank

Kerala HC15 Nov 2017WP(C)/22073/2017

Case brief

AI extract

What is this about?

The Single Judge held that a Lok Adalat under the LSA Act has valid jurisdiction to settle debts due to Banks, as it acts as an alternate dispute resolution mechanism distinct from adjudication on merits. The DRT retains exclusive jurisdiction to enforce such consent-based awards. The writ petition was dismissed, and exemplary costs were imposed.

What did the court decide?

Writ petition dismissed; petitioner mulcted with exemplary costs of Rs.25,000/- payable to the Bank; Bank entitled to recover costs via fresh DRT certificate.

Hamza.P Vs Canara Bank — Banking and Recovery | Kerala HC (2017)

¶1

IN THE HIGH COURT OF KERALA AT ERNAKULAM

¶2

PRESENT:-

¶3

THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN

¶4

WEDNESDAY, THE 15TH DAY OF NOVEMBER 2017/24TH KARTHIKA, 1939

¶5

W.P(C).No.22073 of 2017 (H)

¶6

PETITIONER(S):-

¶7

HAMZA.P., IX 344, AL AKBAR BUILDINGS, CHOORAKODE P.O, VALLAPPUZHA, PALAKKAD, KERALA - 679 336.

¶8

BY ADVS.SRI.S.EASWARAN

¶9

SRI.P.MURALEEDHARAN (IRIMPANAM) SRI.M.A.AUGUSTINE SRI.P.SREEKUMAR (THOTTAKKATTUKARA) SMT.SOUMYA JAMES

¶10

RESPONDENT(S):-

¶11

CANARA BANK, HAVING ITS HEAD OFFICE AT BANGALORE AND BRANCH AMONG OTHER PLACES AT SHORNUR BRANCH, PALAKKAD, KERALA - 670 121.

¶12

BY ADV. SRI.E.M.MURUGAN BY ADV. SMT.THANKOM.G. BY SRI.PAULY MATHEW MURICKEN, SC,CANARA BANK.

¶13

THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 30-10-2017, THE COURT ON 15-11-2017 DELIVERED THE FOLLOWING:-

¶14

W.P(C).No.22073 of 2017 (H)

¶15

APPENDIX

¶16

PETITIO -------	NER(S)' -------	EXHIBITS ---------
EXHIBIT	P1	COPY OF ORDER DATED 28.02.2017 IN S.A NO.385 OF 2012 OF THE DRT, ERNAKULAM.
EXHIBIT	P2	COPY OF PLP NO.861 OF 2015 DATED 24TH JULY, 2015 BEFORE THE DISTRICT LEGAL SERVICES AUTHORITY, OTTAPALAM.
EXHIBIT	P3	COPY OF THE AWARD DATED 8.8.2015 ISSUED BY THE LOK ADALATH, OTTAPALAM.
EXHIBIT	P4	COPY OF ORDER DATED 7TH APRIL, 2017 IN O.A NO.189 OF 2016.
EXHIBIT	P5	COPY OF PETITION DATED 30TH JUNE, 2017 FILED BY THE PETITIONER BEFORE THE DRT FOR SETTING ASIDE THE EX PARTE ORDER.
EXHIBIT	P6	COPY OF RECOVERY CERTIFICATE DATED 14TH JUNE, 2017 ISSUED BY THE DEBTS RECOVERY TRIBUNAL, ERNAKULAM IN DRC NO.112 OF 2017 IN O.A.No.189 of 2016.

¶17

RESPONDENT(S)' EXHIBITS:------------------------NIL.

¶18

Vku/[ true copy ]

¶19

“C.R.”

¶20

K. Vinod Chandran, J

¶21

--------------------------------------W.P.(C).No.22073 of 2017-H

¶22

¶23

Dated this the 15^th day of November, 2017

¶24

JUDGMENT

¶25

The only issue raised is the jurisdiction of the Lok Adalat to

¶26

pass Exhibit P3 award. The award passed is under the Legal Services Authorities Act, 1987 [for brevity “LSA Act”] in the presence of the parties to the anticipated lis, with their consent and on an agreement between the parties.

¶27

The petitioner herein had availed a loan, with security offered by way of mortgage of immovable properties, from the respondent-Bank and defaulted it. The Bank approached the Lok Adalat constituted at Ottapalam, where the transaction took place and the mortgaged properties are situated, with a petition under Section 19 of the LSA Act. The amounts due from the petitioner at that point of time was Rs.30,11,068/-. It was settled for an amount of Rs.21,00,000/-, to be paid on or before 05.11.2015. On default, it was agreed that the respondent-Bank would be entitled to recover the

¶28

dues of Rs.30,11,068/- with interest at the rate of 12% per annum from the date of the award.

¶29

WP(C) No.22073 of 2017

¶30

¶31

The petitioner having not complied with the award, the respondent-Bank was before the Debts Recovery Tribunal [for brevity “DRT”], Ernakulam, which passed Exhibit P4 order, deeming the award passed by the Lok Adalat to be a decree. By Exhibit P4, the Bank was permitted to recover a sum of Rs.32,00,147/- with interest on the sum of Rs.30,11,068/- at the rate of 12% per annum from 08.08.2015. The liability of the petitioner as per the terms of the agreement, based on which the loan was availed, as on 18.09.2017 was Rs.45,95,957/-. As per the Lok Adalat award, it is Rs.37,73,321/- with future interest only on the amounts as awarded by the Lok Adalat.

¶32

The learned Counsel for the petitioner would submit that a consent would not confer jurisdiction when there is none. Specific reference is made to Section 18 of the Recovery of Debts due to Banks and Financial Institutions Act, 1993 [for brevity “RDDB” Act], which bars the jurisdiction of any Court or other authority from exercising any jurisdiction, power or authority in relation to the matters specified in Section 17 of the RDDB Act. Section 17 confers authority on the Tribunal constituted under the RDDB Act to exercise the jurisdiction, powers and authority to decide on applications from Banks and Financial institutions for recovery of debts due to such Banks or

¶33

WP(C) No.22073 of 2017

¶34

¶35

Financial Institutions, in excess of Rs.10,00,000/- as provided in Section 1(4). Section 34 of the RDDB Act provides for an over-riding effect of the provisions of the RDDB Act notwithstanding anything inconsistent therewith contained in any other law for the time being in force.

¶36

The Lok Adalat, which passed Exhibit P3 award, was held at Ottapalam and was organized by the Taluk Legal Services Committee, Ottapalam under Section 19 of the LSA Act. Under the LSA Act, specifically Section 19(5), a Lok Adalat has jurisdiction to determine and arrive at a compromise or settlement between the parties in a dispute, the subject matter of which is “falling within the jurisdiction of, and is not brought before any Court for which the Lok Adalat is organized or any case so pending”. As per Sections 17, 18 and 34 of the RDDB Act, there is an ouster of jurisdiction of the Civil Courts, at Ottaplam, insofar as adjudicating upon the claim for recovery of money. Hence, there cannot be a consideration by the Lok Adalat of demand made by the creditor-Bank against the debtor-petitioner, is the argument put forth by the learned Counsel for the petitioner.

¶37

¶38

WP(C) No.22073 of 2017

¶39

It is submitted that Allahabad Bank v. Canara Bank

¶40

[(2000) 4 SCC 406] found that the prescription of an exclusive Tribunal both for adjudication and execution is a procedure clearly inconsistent with the realization of the debts in any other manner other than through the Tribunal. The same was followed in Unique Butyle Tube Industries (P) Ltd. v. U.P.Financial Corporation [(2003) 2 SCC 455] . The LSA Act has also a non-obstante clause in Section 25 similar to that available in the RDDB Act as per Section 34. The RDDB Act is a special statute concerned with the recovery of debts due to Banks and Financial Institutions. Even if both are deemed to be special statutes, the RDDB Act is later in time to the LSA Act, enabling over-riding effect to the provisions of the later statute. To support the argument, the learned Counsel relies on the decision in Raghunath Rai Bareja v. Punjab National Bank [(2007) 2 SCC 230] and KSL & Industries Ltd. v. Arihant Threads Ltd. [(2015) 1 SCC 166]. Despite the petitioner having appeared before the Lok Adalat and having consented to a settlement, the lack of jurisdiction of the Lok Adalat releases the petitioner from the settlement. The Bank would have to initiate appropriate proceedings for recovery, is the argument put forth.

¶41

WP(C) No.22073 of 2017

¶42

¶43

The learned Counsel for the respondent-Bank has filed a counter affidavit refuting the contention raised of lack of jurisdiction and also listing out the facts of the proceedings before the DRT. The Bank relies on a judgment of a Division Bench of this Court in K.Manilal v. Debts Recovery Tribunal [2006 (1) KLT (SN 38) 27]. It is submitted that the properties mortgaged were within the Taluk in which the Lok Adalat was constituted by the jurisdictional Taluk Legal Services Committee. Despite the Civil Courts in the Taluk having no jurisdiction to consider the issue, the DRT constituted for the entire State of Kerala assumes jurisdiction only by reason of the mortgage made within the Taluk. The DRT for all purposes is a Court having jurisdiction to decide the specific issue arising within the Taluk insofar as RDDB Act is concerned. With respect to the contention of the petitioner that he was not aware of the proceedings before the DRT, the daily proceedings has been extracted showing the appearance of the defendant before the DRT.

¶44

There can be absolutely no dispute insofar as the contention with respect to the Civil Court's jurisdiction having been ousted by the RDDB Act. There can also be no dispute that the DRT constituted for the whole of State of Kerala, assumes jurisdiction, in

¶45

WP(C) No.22073 of 2017

¶46

¶47

the subject matter of the lis anticipated between the creditor-Bank and the borrower-petitioner by virtue of the transaction and mortgage made within Ottapalam over which the Lok Adalat as constituted by the Taluk Legal Services Committee exercise jurisdiction as per the LSA Act. An examination of whether the provisions of the LSA Act or the RDDB Act has overriding effect has been considered by the decision of this Court

¶48

in K.Manilal .

¶49

In K.Maninal , the matter was settled between the borrower and the Bank in a Lok Adalat at Ernakulam. The loans were advanced on the basis of hypothecation made within Ernakulam. A similar contention was raised as to Sections 17 and 18 of the RDDB Act ousting the jurisdiction of the Civil Courts and hence by virtue of Section 34, there being no possibility of a settlement in a Lok Adalat. It was found that the Lok Adalats do not resolve disputes on merits and only has jurisdiction to arrive at a compromise or settlement between the parties. The decision, as arrived at by the parties on compromise or settlement is also without any compulsion or coercion. The decision in Allahabad Bank was specifically noticed and it was found that the same has no application to the Lok Adalat constituted under the LSA Act. The Division Bench categorically found that there was no

¶50

WP(C) No.22073 of 2017 - 7 -

¶51

inconsistency in the provisions of the LSA Act and the RDDB Act. The Lok Adalat having been conferred with jurisdiction to determine and arrive at a compromise or settlement between the parties in any case pending before any forum, or an anticipated lis ; shall exercise jurisdiction over matters regulated under the RDDB Act. This was the specific finding arrived at looking at the Objects and Reasons of the LSA Act. Therein, a similar application filed before the DRT was found to be properly filed to enforce the award passed under the LSA Act.

¶52

This should settle the matter; but, however, the learned Counsel has a contention with respect to the special enactment having overriding effect based on the judgments as relied on by him. Unique Butyle Tube Industries was a case in which the Uttar Pradesh Financial Corporation attempted to recover the dues to it under the provisions of the Uttar Pradesh Public Moneys (Recovery of Dues) Act, 1972; which permitted such recovery as arrears of land revenue. The Hon'be Supreme Court found that Allahabad Bank puts the issue in the correct perspective without any pale of doubt. Section 34 of the RDDB Act provides for an overriding effect of the provisions therein and by sub-section (2), saved the provisions inter alia under the State Financial Corporations Act, 1951 which were not in derogation of the

¶53

WP(C) No.22073 of 2017

¶54

¶55

provisions of the RDDB Act. Therein the recovery attempted was not under the SFC Act, but under a State enactment, permitting recovery of certain dues as arrears of land revenue. The Tribunal's jurisdiction with respect to adjudication and recovery for matters as provided under Section 17 was exclusive, saving only the jurisdiction of the Supreme Court or of the High Courts exercising power under Article 226/227. It was held that the recovery attempted under the State Act was not maintainable.

¶56

Raghunath Rai Bareja considered the issue of an

¶57

execution filed before the Company Court for execution of a decree passed by the said Court. The decree was passed by the Company Court and the Limitation Act, 1963 provided for 12 years for filing an execution to enforce the decree. The final decree was passed on 15.01.1987 and the limitation for filing an Execution Petition expired on 15.01.1999. Execution Petitions were filed in the years 1990 and 1994 both of which were rejected. In the year 1998, the Bank filed another Company Petition under Section 446 of the Companies Act, 1956 seeking leave of the Company Court to commence execution proceedings before the DRT, which came into existence in 1993 under the RDDB Act. The said petition was allowed by the Company Court;

¶58

WP(C) No.22073 of 2017

¶59

¶60

but, however, permitting an execution petition to be filed in the Company Court itself, on consent of parties. A third execution petition was filed in the year 1999, within the period of limitation; which was disposed of on the submission of the Official Liquidator that there is no property available of the Company which can be proceeded against. Liberty was reserved to file a proper petition against the other judgment debtors. The Bank then, beyond the period of limitation, filed an application to restore the execution petition of 1999 (the third and last one) along with a fresh memo of parties. In the year 2005, an application was filed to transfer the execution petition to the Tribunal, when the judgment debtors took an objection of the Company Court having no jurisdiction to entertain the application. The Hon'ble Supreme Court found that the RDDB Act having been enacted in the year 1993, had also, by Section 31, mandated transfer of pending cases, which proceedings were pending before any Court immediately before the establishment of the Tribunal. It was found that the consent of the parties, based on which an execution petition was directed to be filed before the Company Court, would not confer jurisdiction on the Company Court. It was also held that there could be no transfer of the Execution Petition to the DRT, since the Execution Petition was in

¶61

WP(C) No.22073 of 2017

¶62

10 -

¶63

1998 long after the RDDB Act came into force. An Execution Petition, if at all, had to be filed before the DRT, after 1993. Section 31 only permitted transfer of those proceedings pending at the time of enactment of RDDB Act. The Hon'ble Supreme Court followed Allahabad Bank and found that the Companies Act is a general statute and the RDDB Act a special one, having overriding effect.

¶64

The consent in the present case is not as has been found in the case before the Supreme Court, in Raghunath Rai Bareja , which will be dealt with shortly.

¶65

KSL & Industries considered the provisions of Sick Industrial Companies (Special Provisions) Act, 1985 [for brevity “SICA”] and the RDDB Act. Despite the RDDB Act being later in time, it was found that Section 34(2) specifically saved the provisions of the SICA which are not in derogation of the provisions of the RDDB Act. The SICA was held to have overriding effect despite it being an earlier Act. The Hon'ble Supreme Court enumerated a number of decisions, wherein there was conflict between the provisions of the Act to decide on which had the overriding effect. The general principle laid down was

¶66

that when there are two special laws, both containing provisions conferring overriding effect; then the later statute will prevail. However

¶67

WP(C) No.22073 of 2017

¶68

11 -

¶69

when there are two special statutes, and on interpretation if one by its construction and nature is found to be general on juxtaposition with the other; then the special law would hold sway.

¶70

For better understanding the proposition suffice it to refer to LIC v. D.J.Bahadur [(1981) 1 SCC 315]. The question was of the overriding effect of Industrial Disputes Act, 1947 [for brevity “ID Act”] and the Life Insurance Corporations Act, 1956 (for brevity “LIC Act”]. The Supreme Court held that the LIC Act was “special” as regards nationalization of the life insurance business. But so far as disputes between employer and employees, the ID Act would prevail was the finding, despite it being an earlier statute. The I.D. Act with reference to disputes between employer and employee was held to be a special law and in that context, the LIC Act was directed to be treated as a general law. Various other decisions were also referred to, wherein, in the context of special laws, the later one in point of time was declared to have overriding force.

¶71

In this context, it has to be noticed that the RDDB Act is of the year 1993, while the LSA Act is of the year 1987. It cannot but be observed that Section 19 as it is available in the LSA Act was introduced by Act 59 of 1994. Pertinent too is the object under lying the

¶72

WP(C) No.22073 of 2017

¶73

12 -

¶74

two enactments. The RDDB Act aims at adjudication and recovery of debts due to Banks and Financial Institutions ousting the jurisdiction of the Civil Courts. The LSA Act in pursuance of the object of providing free and competent legal service to the weaker sections of the society and to ensure that opportunities are not denied to any citizen by reason of economic or other disabilities aims at securing an operation of a legal system promoting justice on the basis of equal opportunity by constituting Legal Services Authorities and organizing Lok Adalats. LSA Act provides an alternate dispute resolution where both parties agree to terms and arrive at a compromise. LSA Act strives to bring about settlement and compromise, avoiding the rigor of expenses and delay in litigation and absolving the eventual judgment debtor in a litigation, from the costs and consequences therefor. The RDDB Act placed in juxtaposition with LSA Act is a general statute. The provisions of the LSA Act, have overriding effect.

¶75

Yet another reason is that by the RDDB Act the power to adjudicate and recover the dues to Banks and Financial Institutions are ousted; while the LSA Act promotes settlement and voluntary payment of such dues. The provisions of the LSA Act cannot be held to be in derogation of the provisions of the RDDB Act. Having passed an

¶76

WP(C) No.22073 of 2017

¶77

13 -

¶78

award on consent, the undertaking having not been complied with, the only course available to the Bank is recovery, which can only be through the DRT. The Bank rightly approached the DRT and filed for recovery as per the award.

¶79

In this context, the definition of “Court” under the LSA

¶80

Act is relevant, which is as follows:

¶81

“2(aaa) “court” means a civil, criminal or revenue court and includes any tribunal or any other authority constituted under any law for the time being in force, to exercise judicial or quasi-judicial functions”.

¶82

A Tribunal too is a “Court” coming with the definition of the LSA Act.

¶83

The Tribunal under the RDDB Act had been constituted for the State of Kerala and Lakshadweep and the seat of the Tribunal is at Ernakulam. The Tribunal has jurisdiction over the entire State of Kerala and the jurisdiction conferred on such Tribunal is the jurisdiction conferred to the Civil Courts spread over the State of Kerala; who earlier exercised jurisdiction within their specific areas of operation. In the present case, the transaction occurred and the mortgage was created within the Taluk, over which the Taluk Legal Services Authority had jurisdiction. The RDDB Act ousted the jurisdiction of the Civil Courts having sway over the Taluk and vested it on the Tribunal constituted, which sits at

¶84

WP(C) No.22073 of 2017

¶85

14 -

¶86

Ernakulam. The jurisdictional aspect being decided on the basis of the cause of action which arose within the jurisdiction of the Taluk; the Lok Adalat constituted for the Taluk definitely could pass an award on the basis of the settlement or compromise arrived at between the parties. It cannot depend upon the seat of the Court or Tribunal.

¶87

The consent, as noticed in Raghunath Rai Bareja , is quite different from the consent voluntarily offered by the petitioner before the Lok Adalat. The Company Court ceased to have jurisdiction immediately on the RDDB Act being enacted. In the case before the Supreme Court, permission granted to the respondent-Bank to file an Execution Petition before the Company Court was held to be wrong, since such jurisdiction was ousted by the RDDB Act and conferred on the Tribunal. The consent of the parties, in so far as the Company Court itself dealing with the execution petition, was found to be of no consequence.

¶88

As far as the LSA Act is concerned, the principles as noticed by the Division Bench in K.Manilal and the reasoning herein above, settles the jurisdictional aspect. There was no consent required for the Lok Adalat to entertain the petition under Section 19(5) and to issue notice. The consent is only in so far as passing the award. As

¶89

WP(C) No.22073 of 2017

¶90

15 -

¶91

per the provisions of the LSA Act, if the petitioner had not agreed to the settlement, no award could have been passed. There is no adjudication carried out by the Lok Adalat and only on consent of parties could an award be passed. The consent is not to acquiese to the jurisdiction, but to the passing of the award on the basis of the settlement arrived at between the parties.

¶92

The Bank approached the Lok Adalat constituted for the area in which the cause of action arose; which litigation otherwise would have been filed before the DRT based on the cause of action arising in that Taluk. The word “court” used in Section 19(5) of the LSA Act has to be given the meaning as seen from the definition clause extracted herein above and it cannot be confined or restricted to mean only “Civil Court” having jurisdiction. The anticipated defendant in a proceeding before the Tribunal based on the cause of action arising within the Taluk was issued notice by the Lok Adalat. The jurisdictional aspect of the Lok Adalat does not arise from the consent as granted by the petitioner herein, who was the defendant-respondent before the Lok Adalat. The jurisdiction of the Lok Adalat, as has been found herein above, arises from the cause of action, which eventually would have led the Bank to the Tribunal constituted under the RDDB Act at

¶93

WP(C) No.22073 of 2017

¶94

16 -

¶95

Ernakulam. The consent is only with respect to the compromise and settlement arrived at before the Lok Adalat. The defendant appeared and undertook to settle the total dues of Rs.30,11,068/- by payment of Rs.21,00,000/- on or before 05.11.2015. The Bank too had consented, reducing the liability substantially. On failure, the amounts due were directed to be paid with interest at 12% per annum from the date of award. The Bank has, in its counter affidavit, specifically indicated the amounts due as per the settlement award of the Lok Adalat as also the amount as on 18.09.2017. There is still benefit derived by the petitioner-debtor. Of course if the award is set aside, the Bank has to pursue its remedies and in that context the petitioner would also be prejudiced insofar as the recovery being in terms of the original agreement. The period of limitation is not yet over and the petitioner has only been trying to delay the recovery. The jurisdictional aspect raised by the petitioner is found to be a clear abuse of process of Court, looking at the settlement made by the petitioner before the Lok Adalat. The statements made as to the petitioner being unaware of the proceedings before the Tribunal till an ex-parte order was passed has been demonstrated to be a deliberate falsehood by the counteraffidavit of the Bank, which extracts the order sheet of the various

¶96

WP(C) No.22073 of 2017 - 17 -

¶97

posting dates. There is no rebuttal by the petitioner.

¶98

The writ petition would stand dismissed and in the context of the petitioner having turned around after consenting before the Lok

¶99

Adalat to compromise and settle with the Bank and having stated incorrect facts in the memorandum as to the proceedings pending before the Tribunal, the petitioner is mulcted with exemplary cost of Rs.25,000/- [Rupees twenty five thousand only], which would be paid to the respondent-Bank. The respondent-Bank would be entitled to recover the same along with the dues and the DRT is directed to issue a fresh certificate under the RDDB Act for realization of the costs

¶100

ordered by this Court.

¶101

Sd/K.Vinod Chandran Judge.

¶102

vku/-

¶103

[ true copy ]

Hamza.P v. Canara Bank

Case brief

What is this about?

What did the court decide?

Hamza.P v. Canara Bank

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

Issues for consideration

Cases cited

Statutes considered

Parties & counsel

Coram

Case details

Similar cases

Ouseph Thomas @ a.J.Thomas Vs State of Kerala

Somtech Computers Vs the Executive Chairman

Saleem.C. Vs the Chief Coordinator & District Collector, Akshya Project, Kozhikode

Rajan M v Vs Special Deputy Tahsildar(Rr), Ksfe Limited

Krishnendhu B.M.(Minor) Vs Malabar Sahodaya Kalotsav Committee

Ardra a.R.Rathnam Vs Central Boared of Secondary Education (Cbse)