TaxTMI 
TaxTMI 
2006 (12) TMI 232
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.... the Debts Recovery Appellate Tribunal in Misc. Appeal No. 132 of 2004. The High Court held that the action brought against the appellant company by respondents 1 and 2 herein for recovery of debts due to them, was rightly entertained by the Tribunal constituted under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, which had jurisdiction to entertain the claim. The objection to the jurisdiction of the Debts Recovery Tribunal was taken at the threshold and, therefore, in this appeal we are not concerned with the merit of the claims of respondents 1 and 2. 3. The questions which arise for consideration in this appeal are whether respondents 1 and 2, namely, Administrator of Specified Undertaking of Unit Trust of India and UTI Trustee Company Private Limited are "financial institutions" within the meaning of that term in the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 ('DRT Act'). If the answer is in the affirmative, whether the action brought by them before the Debts Recovery Tribunal is for recovery of debts due to them from the appellant herein, and not due to any other person on whose behalf the aforesaid respondents are suing. ....
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....the appellant was maintainable under section 19 of the DRT Act. 7. The Appellate Order was challenged before the High Court of Bombay in writ petition No. 5758 of 2004 which was also rejected on 10-8-2004. The appellant has preferred this appeal by special leave impugning the judgment and order of the High Court. 8. We may very briefly notice the findings recorded by the High Court. The High Court held that the provisions of section 18 of the UTI Act, 2002 has the effect of substituting in every Act, Rule, Regulation enacted by the Parliament and/or Notification issued thereunder by the Central Government, the names of respondents 1 or 2 in place of the words "Unit Trust of India", as the case may be. In view of the provisions of section 18, no further amendment was required to be effected separately and independently in every Act, Rule, Regulation enacted by the Parliament. The whole purpose of section 18 was to bring about this effect so that it became unnecessary to make numerous amendments in the various Acts, Rules and Regulations etc. The Parliament had the legislative competence to enact such a provision which it has done. Referring to the Companies Act it held that by....
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....m on behalf of its principal which is not a financial institution. The claim must be in its own right and not on behalf of its principal which is not a financial institution. Relying on the provisions of the Act he contended that the Administrator acts as an agent of the Central Government. The legislative scheme of the UTI Act, 2002 disclosed the existence of principal agent relationship and, therefore, as such agent the Administrator could not maintain a claim under the DRT Act. Similarly, a trustee also could not invoke the provisions of the DRT Act. He submitted that the term "vested" may have different meanings depending upon the context, the language, and the object of the statute. It may mean vesting of the assets or it may mean only vesting of the management. The statute must be construed having regard to its purpose with a view to find in whom the assets vests. According to him, the autonomy of the two entities under the scheme envisaged by UTI Act, 2002, has been maintained only for the purpose of accounting so that their performance may be objectively judged. While making payments, the value, assets and the liabilities of the Trust must be taken into account. Section 7 o....
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.... aforesaid two submissions not pressed by Shri Venugopal. 14. Shri R.F. Nariman, senior counsel appearing on behalf of the Administrator, respondent No. 1, submitted that section 7 of the UTI Act, 2002 gives effect only to a part of the scheme which must be understood in the background of the larger scheme envisaged by the Act read as a whole. Under section 3 of the Act the statutory successor is the Central Government and the share capital vests in the Central Government. Refund of the share capital is to be made by the Central Government to the contributors named therein. It is for this reason that the Central Government steps in. Under section 4, the undertaking (excluding the specified undertaking) vests in the Specified Company. The specified undertaking vests in the Administrator under section 5. This is the scheme of transfer and therefore, sections 7 and 18 of the Act must be read harmoniously. He further submitted that even if it is assumed for the sake of argument that the Administrator acts as an agent of the Central Government, that is immaterial because the Administrator and the Specified Company are deemed to be "financial institutions" by reason of section 18 of t....
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....ns 4 and 5 the business, assets and properties are divided and while the specified undertaking of the Trust vests in the administrator, the undertaking vests in the Specified Company. Whatever remains vests in the Central Government. This represents a complete scheme under which the entire assets and liabilities are distributed and stand refunded or vested as the case may be, in accordance with the provisions of sections 3, 4 and 5. 17. He submitted that section 7 no doubt refers to the appointment of administrator of the specified undertaking for the purpose of taking over the administration thereof and to carry on the management for and on behalf of the Central Government. The Central Government has been given powers to issue directions. He submitted that such control is exercised over every Government Corporation. The provisions of the Act vest the power to administer in the Administrator, reserving to the Central Government the right to regulate the exercise of its powers and functions. This does not prevent the administrator from acting on his own. As an administrator he has power to recover dues owing to the specified undertaking. The very wide powers vested in the Adminis....
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....d vesting of the undertaking; (i )specified undertaking' includes all business, assets, liabilities and properties of the Trust representing and relatable to the schemes and Development Reserve Fund specified in the Schedule I; (l)'undertaking' includes all business, assets, liabilities and properties of the Trust representing and relatable to the schemes and plans specified in the Schedule II;" Sections 3 and 4 provide as follows- "3. Transfer of initial capital.-(1) On the appointed day, the initial capital of the Trust, contributed by the Development Bank, the Life Insurance Corporation, the State Bank and the subsidiary banks and other institutions under sections 4 and 4A of the Unit Trust of India Act, 1963, as it stood immediately before the commencement of this Act, shall stand transferred to, and vest in, the Central Government. (2) The initial capital contributed by the Development Bank, the Life Insurance Corporation, the State Bank and the subsidiary banks and other institutions shall be refunded, by the Central Government, to such extent as may be determined by it, having regard to the book value, the assets and liabilities of the Trust. 4. Undertaking....
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....all borrowings, liabilities, units issued and obligations of whatever kind within or without India then subsisting of the Trust in relation to such undertaking or the specified undertaking, as the case may be." Sub-sections 1 to 3 of section 7 read as under:- "7. Appointment of Administrator to manage specified undertaking.-(1) The Central Government shall, on and from the appointed day, appoint a person or a body of persons, as the 'Administrator of the specified undertaking of the Unit Trust of India', for the purpose of taking over the administration thereof and the Administrator shall carry on the management of the specified undertaking of the Trust for and on behalf of the Central Government. (2) The Central Government may issue such directions (including directions as to initiating, defending or continuing any legal proceedings before any court, tribunal or other authority) to the Administrator as to his powers and functions as that Government may deem desirable and the Administrator may apply to the Central Government at any time for instructions as to the manner in which he shall conduct the management of the specified undertaking or in relation to any matter arisi....
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.... specify; 23. Section 17 deals with the jurisdiction, powers and authority of the Tribunals constituted under the Act. It reads 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." 24. Sub-sections (1) and (2) of section 19 are also relevant. They read as under : "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,....
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.... or notification the words "Unit Trust of India" are substituted by the "Specified Company" and the "Administrator of the Specified Undertaking" referred to in the UTI Act, 2002. It is, therefore, not necessary to pass a separate amending Act or to amend all the rules, regulations or notifications by adopting an amending procedure. Section 18 of the UTI Act, 2002 operates by its own force to bring about the substitution. Legislative policy adopted by the Parliament to enact a legislation which effects an amendment in other Acts, rules, regulations, notifications etc. is permissible subject to its legislative competence. If the enactment brings about such amendments as is within the legislative competence of the Parliament and the statutes, notifications, etc. in which such amendment is affected are also within the legislative competence of the Parliament, the method adopted by the Parliament cannot be assailed. Rather than enacting several statutes and numerous amendments of rules, regulations, notifications, etc., the Parliament achieved this purpose by a single enactment. 27. Section 4A of the Companies Act provides that each of the financial institutions specified in sub-sect....
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.... to exist and in its place the Specified Company and the Administrator of the specified undertaking of the Trust were created which took charge of all the properties, business assets, rights etc. of the erstwhile Unit Trust of India. The initial capital of the Trust stood transferred to and vested in the Central Government under section 3(1) of the Act. Sub-section (2) however, mandated that the initial capital contributed by the named contributors shall be refunded by the Central Government to such extent as may be determined by it. Section 21 provides for the repeal of the Unit Trust of India Act, 1963 and the dissolution of its Board of Trustees. 32. Having done so UTI Act of 2002 by section 4 thereof vested in the specified company the undertaking of the Trust (excluding the specified undertaking) for such consideration and on such terms and conditions as may be mutually agreed upon between the Central Government and the subscribers to the capital and the specified company. The decision of the Central Government as to whether any business, assets, liabilities or properties represent or relate to the undertaking or specified undertaking is made final. If there remained any bu....
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....section 7 of the Act provides for the appointment of the Administrator of the specified undertaking who is entrusted with the task of taking over the administration thereof and to carry on the management of the specified undertaking of the Trust for and on behalf of the Central Government. Sub-section (2) of section 7 empowers the Central Government to issue such directions to the Administrator as to his powers and functions as the Government may deem desirable. The Administrator may also seek directions from the Central Government as to the manner in which he shall conduct the management of the specified undertaking or in relation to any matter arising in the course of such management. 35. Much was sought to be made of the use of the words "carry on the management of the specified undertaking of the Trust for and on behalf of the Central Government" in section 7 of the UTI Act, 2002. It was also emphasized that under sub-section (2) of section 7 the Central Government has been authorized to issue directions to the Administrator as to his powers and functions and similarly permitted the Administrator to seek directions of the Central Government as to the manner in which he shall....
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....since the undertaking vests in him, and the Act vests in him wide powers of management and administration which include the power to recover dues owing to the specified undertaking. It is, therefore, futile to contend that the Administrator acts as an agent of the Central Government. He acts in exercise of the powers vested in him by the statute and in the manner prescribed by the statute. 36. Even assuming that the Administrator manages the specified undertaking on behalf of the Central Government, that will not make any difference. The amounts sought to be recovered are allegedly owing to the Specified Company and the Administrator, who as we have found are "financial institutions" within the meaning of that term in the DRT Act, 1993. Thus, the Specified Company and the Administrator of the Specified Company are not seeking to recover any dues owing to the Central Government, and therefore, they cannot be held to be acting on behalf of the Central Government. In their own right they are seeking to recover the amounts due to them in exercise of status and power conferred upon them by statute. So viewed, the nature of control of the Central Government over them is wholly irrelev....