2003 (11) TMI 353 - HC - Companies Law

Court upholds jurisdiction over financial institution, rejects dismissal plea on interest calculation discrepancies

The Court dismissed the application for framing additional issues, upheld its jurisdiction regarding the plaintiff's status as a public financial ... Recovery of Debts Due to Banks and Financial Institutions Issues:1. Application for framing additional issues by defendant Nos. 1 to 3.2. Jurisdiction of the Court regarding the plaintiff's status as a public financial institution.3. Impact of the decision in The H.P. State Industrial Development Corpn. Ltd. v. Kesri Roller Flour Mills on the jurisdiction of the Court.4. Suit dismissal plea based on the decision in Central Bank of India v. Ravindra.Analysis:Issue 1:The application was filed by defendant Nos. 1 to 3 seeking to frame additional issues arising from their pleadings. The defendants argued that the plaintiff, being an 'Institution' established by the State Government for financing industrial concerns, should be deemed a public financial institution under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (1993 Act), and section 4A of the Companies Act, 1956. The plaintiff contested these claims, asserting that the jurisdiction of the Court should not be ousted based on the defendants' arguments.Issue 2:The Court examined the notification issued by the Central Government, applying certain provisions of the State Financial Corporations Act, 1951 to the Himachal Pradesh State Industrial and Development Corporation Limited. The notification deemed the plaintiff a Financial Corporation, making relevant provisions applicable. The Court also considered section 4A of the Companies Act, designating certain financial institutions as public financial institutions. The defendants' argument to treat the plaintiff as a public financial institution was rejected, emphasizing that the plaintiff was not specified as such by the Central Government.Issue 3:Reference was made to a previous judgment of the Court in The H.P. State Industrial Development Corpn. Ltd. v. Kesri Roller Flour Mills, where it was held that the plaintiff was not a public financial institution specified under section 4A of the Companies Act. This decision affirmed the Court's jurisdiction to entertain the suit, contrary to the defendants' claims. The defendants' attempt to introduce the impact of section 2(h) of the 1993 Act was dismissed, aligning with the precedent set by the earlier judgment.Issue 4:The defendants raised a plea for suit dismissal based on the Supreme Court's decision in Central Bank of India v. Ravindra, alleging discrepancies in the plaintiff's calculation of interest. The plaintiff clarified that compound interest had been waived, and any discrepancies could be addressed during the evidentiary phase. The Court found no grounds for dismissal based on the Supreme Court's decision, ultimately dismissing the defendants' plea.In conclusion, the Court dismissed the application for additional issues, upheld its jurisdiction to entertain the suit, and rejected the plea for dismissal based on the Supreme Court's decision, emphasizing the plaintiff's compliance with interest calculations.