TaxTMI 
TaxTMI 
2016 (2) TMI 528
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....respondent No.2 - original defendant No.1 - M/s. Electrotherm [India] Ltd. and guarantors in the loan transaction entered into by the respondent No.2 company with respondent No.1 Uco Bank on 04.09.2010 for shortterm loan of Rs. 50 Crores. The respondent No.2 company through its authorized director, has signed and executed security documents viz. demand promissory note, letter of waiver, agreement relating to term loan, guarantee agreement executed by the petitioners / original defendant Nos.2 and 3 and undertaking. 3 That Special Civil Application No.14480 of 2015 is preferred by the petitioners with a prayer to quash and set aside order dated 06.07.2015 passed by the DRTI, Ahmedabad in Original Application No.192 of 2011, which was filed by Syndicate Bank, respondent No.1. The facts of Special Civil Application No.14480 of 2015 being similar to that of earlier Special Civil Application No.13529 of 2015, except the amount of total claim of Rs. 25,51,45,359.34, in this case also, cheque of Rs. 25 crores given by the defendant No.1 i.e. M/s. Electrotherm (India) Limited came to be returned unpaid for which defendant Nos.2 and 3 i.e. petitioners herein stood as guarantors for short....
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....the injunction order passed by the Tribunal dated 12.09.2011 on the personal immovable properties of the defendant Nos.2 and 3 was ordered to remain in force until the specific attachment order is passed by the Recovery Officer in the recovery proceedings qua such properties and certificate of recovery was to be drawn in accordance with law and to realize the amount from the defendants and compliance report to be submitted. 4.2 Thus, the Tribunal held that there is no bar to adjudicate the matter qua the defendants No.2 and 3 i.e. guarantors and the Tribunal was duty bound to adjudicate the original application against the guarantors keeping the original application pending against the defendant No.1 company, till the reference before BIFR or appeal, if any, pending before the AAIFR is disposed off. The Tribunal also held that in terms of Section 128 of the Indian Contract Act, the liability of the guarantors viz. defendant Nos.2 and 3 / original petitioners herein is coextensive with that of principal borrower. 5 Learned counsels Mr. Pranav Desai and Mr. Siddhartha Samal appearing for respondents, Uco Bank and Syndicate bank, respectively, raised a preliminary objection that....
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....ling appeal. Section 22. Procedure and Powers of the Tribunal and the Appellate Tribunal. Section 24. Limitation. Chapter V. Recovery of Debt Determined by Tribunal. Section. 34. Act to have overriding effect. 6.2 Learned Senior Advocate appearing for the petitioners relied on the following decisions of the Apex Court: [1] In the case of Patheja Bros. Forgings & Stamping & Anr. vs. ICICI Limited & Ors. [(2000)6 SCC 545], in the context of bar under Section 22 of SICA, 1985 for enforcement of any guarantee in respect of any loan or advance granted to the industrial company, the Apex Court held that such bar is applicable even to a suit filed against the guarantors. The contention that the bar would apply only when the company itself was the guarantor or was sued by a guarantor on subrogation, was rejected. The learned counsel emphasized that no suit for the enforcement of a guarantee in respect of any loan or advance granted to the industrial company concerned will lie or can be proceeded with, without the consent of the Board or the appellate authority [BIFR or AAIFR]. In the facts of this case, nature of legal action taken by the bank against....
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....bly, the above issue is not yet finally resolved by the Apex Court. [5] In the case of KSL & Industries Limited vs. Arihant Threads Limited & Ors. [(2008)9 SCC 763], the issue before the Apex Court was about two statues employing nonobstante clause having overriding effect viz. Sections 22 and 32 of SICA, 1985 visavis nonobstante clause in Section 34 [1] and [2] of RDDB Act, 1993, as the said act is later in point of time. However, in view of difference of opinions with regard to interpretation of Section 34 of RDDB Act, 1993 about overriding effect, the matter was referred to Larger Bench, in which the controversy came to be finally resolved as per the decision in the case of KSL and Industries Limited vs. Arihant Threads Limited & Ors. [(2015)1 SCC 166] and it was held that both SICA, 1985 and RDDB Act, 1993 are special laws with different purposes. Normally, later enactment with nonobstante clause prevail over former enactment, however, express enactment by Parliament in nonobstante clause in Section 34 of the RDDB Act, does not permit such course and Section 34(2) acts in nature of exception to overriding effect of RDDB Act and harmonious interpretation require that bo....
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.... cancellation of certificate of registration. 6.3 Lastly it is submitted that in Appeal No.94 of 2015 before AAIFR, New Delhi, it is referred in the order dated 06.01.2016 that Rs. 16.69 [approx.] crores will continue to remain appropriated subject to final order of BIFR and Rs. 11.27 [approx.] crores, which has been withheld and not yet appropriated will be kept separately in an `interest bearing no lien account' by the appellant and Rs. 2 crores and odd was recovered by the respondent banks. 7 Mr. Pranav Desai and Mr. Siddhartha Samal appearing for respondents, Uco Bank and Syndicate bank, respectively, in support of their contention of availability of statutory and efficacious remedy, relied on provisions of Section 17 pertaining to jurisdiction, powers and authority of Tribunals, including of the appellate authority under Section 17 of the Act and power of the Tribunal to entertain application for recovery of dues under Section 19 and availability of remedy of appeal to the appellate tribunal under Section 20 and deposit of amount of debt due on filing of appeal under Section 21 with proviso conferring discretion upon the appellate Tribunal for reasons to be recorded ....
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....th regard to availability of statutory, alternative and efficacious remedy visavis exercise of jurisdiction under Article 226 of the Constitution of India. "2[a] `Appellate Tribunal' means an Appellate Tribunal established under subsection (1) of Section 8; 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. 18. 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. Provided that any proceedings ....
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....avor shall be made by it to dispose of the appeal finally within six months from the date of receipt of the appeal. 21. Deposit of amount of debt due, on filing appeal Where an appeal is preferred by any person from whom the amount of financial debt is due to a bank or a financial institution or a consortium of banks or financial institutions, such appeal shall not be entertained by the Appellate Tribunal unless such person has deposited with the Appellate Tribunal seventyfive per cent of the amount of debt so due from him as determined by the Tribunal under section 19: PROVIDED that the Appellate Tribunal may, for reasons to be recorded in writing, waive or reduce the amount to be deposited under this section. 22. Procedure and powers of the Tribunal and the Appellate Tribunal (1) The Tribunal and the Appellate Tribunal shall not be bound by the procedure laid down by the Code of Civil Procedure, 1908 (5 of 1908), but shall be guided by the principles of natural justice and, subject to the other provisions of this Act and of any rules, the Tribunal and the Appellate Tribunal shall have powers to regulate their own procedure including th....
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.... and objects and reasons read as under: "Statement of Objects and Reasons Banks and financial institutions at present experience considerable difficulties in recovering loans and enforcement of securities charged with them. The existing procedure for recovery of debts due to the banks and financial institutions has blocked a significant portion of their funds in unproductive assets, the value of which deteriorates with the passage of time. The Committee on the Financial System headed by Shri M. Narasimham has considered the setting up of Special Tribunals with special powers for adjudication of such matters and speedy recovery as critical to the successful implementation of the financial sector reforms. An urgent need was, therefore, fell to work out a suitable mechanism through which the dues to the bank and financial institutions could be realized without delay. In 1981 a Committee under the Chairmanship of Shri T.Tiwari had examined the legal and other difficulties faced by banks and financial institutions and suggested remedial measures of Special Tribunals for recovery of dues of the banks and financial institutions by following a summary procedure. The setti....
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.... (4) Section 20, the appellate Tribunal is empowered to confirm, modify or setting aside the order appealed against after affording an opportunity of hearing to the parties and such appeal is to be disposed of preferably within 6 months from the date of receipt of appeal. 8.3 That Section 21 provides depositing 75% of the amount of due by an aggrieved person, as determined by the Tribunal under Section 19, but proviso thereto empowers and confers discretion upon the appellate Tribunal for reasons to be recorded in writing, waive or reduce the amount to be deposited under this Section. It is pertinent to note that the validity of the above Section was challenged and that condition being onerous and not capable of complying with and takes away right of an aggrieved person to prefer appeal, is negated by the Apex Court in various decisions and one of such decisions is in the case of Mardia Chemicals Ltd. v. Union of India [(2004)4 SCC 311]. The above inbuilt mechanism provided by the RDDB Act, 1993 confers power upon the Appellate Tribunal to consider the appeal on any ground and for any error, either lack of jurisdiction or law or on fact committed by the concerned Tribunal. The c....
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.... Court under Article 226 of the Constitution to issue to any person or authority, including in appropriate cases, any Government, directions, orders or writs including the five prerogative writs for the enforcement of any of the rights conferred by Part III or for any other purpose are very wide and there is no express limitation on exercise of that power but, at the same time we cannot be oblivious of the rules of selfimposed restraint evolved by this Court, which every High Court is bound to keep in view while exercising power under Article 226 of the Constitution. 45. It is true that the rule of exhaustion of alternative remedy is a rule of discretion and not one of compulsion, but it is difficult to fathom any reason why the High Court should entertain a petition filed under Article 226 of the Constitution and pass interim order ignoring the fact that the petitioner can avail effective alternative remedy by filing application, appeal, revision, etc. and the particular legislation contains a detailed mechanism for redressal of his grievance". [emphasis supplied] 8.4 In the above judgment, some of the decisions relied on by the learned counsel for the petitioners w....
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....aper Mills Co. Ltd. [supra] were echoed in the case of CCE v. Dunlop India Ltd. [(1985)1 SCC 260] observing that Article 226 is not meant to shortcut or circumvent statutory procedures and it is only where statutory remedies are entirely illsuited to meet the demands of extraordinary situations, as for instance where the very vires of the statute is in question or where private or public wrongs are so inextricably mixed up and the prevention of public injury and the vindication of public justice require it that recourse may be had to Article 226 of the Constitution of India. So is not the case in the case noticed by us where the petitioners have defrauded the respondent banks to the tune of Rs. 50 crores and Rs. 25 crores, respectively, exclusive of interest and penalty, etc. 9 We are not impressed with the arguments canvassed by learned Senior Counsel for the petitioners that powers under Article 226 of the Constitution of India be exercised as there is bar under Section 22 of the SICA, 1985 and the Tribunal has no jurisdiction or the Tribunal lacks jurisdiction to entertain application filed under Section 19 of the RDDB Act, 1993, for the reason that the very issue and the gro....