Union of India & Anr Vs. Delhi High Court Bar Association & Ors  Insc 135 (14 March 2002)
Kirpal, Y.K. Sabharwal & K.G. Balakrishnan
W I T
H T.P. (C) Nos. 400, 406-409, 302-304, 321, 329, 335, 355, 356, 357, 358, 813,
778 of 1996, 659-667 of 1995, C.A. Nos. 3951, 15334 of 1996, 5394 of 1997,
6227-6243, 6245-6246 of 2000, W.P. (C) No. 37 of 2001, T.C. (C) No. 4 of 1998
and C.A. No. 2098 of 2002 in SLP (C) No. 27932 of 1995, C.A. Nos. 2094-2097,
2099-2145 of 2002 in SLP (C) Nos. 9640-9643, 18268-18314 of 1999
transfer petitions are allowed.
challenge to the constitutional validity of The Recovery of Debts Due to Banks
and Financial Institutions Act, 1993 (hereinafter referred to as 'the Act') on
the ground that the Act is unreasonable and is violative of Article 14 of the
Constitution, and that the same is beyond the legislative competence of the
Parliament, arises for consideration in these cases.
banks and financial institutions had been experiencing considerable
difficulties in recovering loans and enforcement of securities charged with
them. The procedure for recovery of debts due to the banks and financial
institutions which was being followed had resulted in a significant portion of
the funds being blocked. In order to remedy the locking up of huge funds, the
Parliament enacted the said Act, which was preceded by an ordinance. The Act,
inter alia, provides for the establishment of Tribunals and Appellate
Tribunals. The Tribunals have been given 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, while the
Appellate Tribunals have the jurisdiction, powers and authority to entertain
appeals. The procedure which is required to be followed is provided and the Act
also has provisions relating to the modes of recovery of debts for which
Recovery Officers are to be appointed.
jurisdiction of the Tribunals is in respect of debts which are in excess of Rs.
10 lacs. In other words, for disputes between the banks and the other parties
it was the Civil Courts which have the jurisdiction to entertain the same if
the claim was less than Rs. 10 lacs. According to Section 18 of the Act, no
Court or other authority is entitled to exercise any jurisdiction, powers or
authority in relation to matters in respect of which such jurisdiction, powers
and authority are vested with the Tribunal. Section 18, however, provides that
the bar of other Courts and authorities to entertain such disputes shall not in
any way oust the jurisdiction of this Court or of the High Courts in exercise
of their jurisdiction under Articles 226 and 227 of the Constitution.
validity of the said Act was successfully challenged before the Delhi High
Court. By it's decision reported in Delhi High Court Bar Association and
Another vs. Union of India and Others, AIR 1995 Delhi 323, against which appeal
No. 4679 of 1995 is filed, the High Court held that though Tribunal could be
constituted by Parliament even though it was not within the purview of Articles
323A and 323B of the Constitution, and that the expression "administration
of justice" as appearing in Entry 11A of List III of the Seventh Schedule
to the Constitution would include Tribunals as well administering justice; the
impugned Act was unconstitutional as it erodes the independence of the
judiciary and was irrational, discriminatory, unreasonable, arbitrary and was
hit by Article 14 of the Constitution. In this judgment, it also quashed the
appointment of a Presiding Officer of the Tribunal but that question no longer
arises for consideration in these appeals.
arriving at the aforesaid conclusion the Delhi High Court, inter alia, held as
The act, in particular, Section 17 did not have a provision for a counter-claim
as provided under the provisions of the Code of Civil Procedure and, therefore,
the Act was irrational and arbitrary.
The Act lowered the authority of the High Court vis-à-vis the Tribunal in view
of the fact that suits for recovery of money exceeding Rs. 10 lacs are to be
filed before the Tribunal while the suits for an amount between Rs. 5 lacs and Rs.
10 lacs was to be filed before the Delhi High Court and for less than Rs. 5 lacs
before the subordinate Courts. This lowered the status of the High Court
inasmuch as the Tribunal, which was presided by an officer who did not have the
status of a High Court Judge would be deciding the suits for recovery of money
exceeding Rs. 10 lacs.
The Act eroded the independence of the judiciary since the jurisdiction of
Civil Courts had been truncated and vested in the Tribunal. It also came to the
conclusion that the independence of the judiciary was eroded as the High Court
had no role to play in the appointment of the presiding officers.
the pendency of this appeal, the Guwahati High Court was also required to
consider the validity of this Act. By judgment dated 16.08.1999 to 20.08.1999,
which is the subject-matter of Civil Appeal Nos. 6227-6246 of 2000, the High
Court came to the conclusion that though the Parliament has legislative
competence to enact the law, but as it had abrogated/negated the power of
judicial review, which had violated the basic feature of the Constitution, the
Act was void. It further held that some of the provisions of the impugned Act
were liable to be struck off. The sections which were struck down were Section
17 which gives jurisdiction, powers and authority to the Tribunal and was held
to be violative of Article 14 as being arbitrary and unreasonable. It also
struck down the appointment of Recovery Officer and held the modes for recovery
of debts under Sections 25 and 28(1) and (2) as being unarbitrary, unreasonable
and without any guidelines, control etc. It further quashed Section 31 which
deals with the transfer of suits/proceedings and Section 34(1) which gives
overriding effect to the Act.
course of hearing, our attention was invited to a decision of the Karnataka
High Court in the case of D.K. Abdul Khader and Others vs. Union of India and
Others, AIR 2001 Karnataka 176 where a Single Judge of the High Court, while
taking a different view from the one expressed by the Delhi High Court, came to
the conclusion that the Parliament did not have the legislative competence to
enact the Act inasmuch as Entry 11A of List III could not include
"Tribunal" and furthermore that the Parliament could not exercise
power to enact this law under the provisions of Article 323A or 323B of the
Constitution. In other words, a Tribunal could not be constituted for any
matter not specified in Articles 323A and 323B.
will first deal with the question as to whether the Parliament has the
competence to enact a law for establishing such Banking Tribunals. In order to
examine the question of the competence of the Parliament to enact such a law,
it is pertinent to bear in mind the observations of this Court in Navinchandra Mafatlal
vs. The Commissioner of Income-tax, Bombay City,  1 SCR 829 at 836 which
are as follows:
As pointed out by Gwyer C.J. in The United Provinces v. Atiqa Begum 
F.C.R. 110 at page 134 none of the items in the Lists is to be read in a narrow
or restricted sense and that each general word should be held to extend to all
ancillary or subsidiary matters which can fairly and reasonably be said to be
comprehended in it. It is, therefore, clear-and it is acknowledged by Chief
Justice Chagla-that in construing an entry in a List conferring legislative
powers the widest possible construction according to their ordinary meaning
must be put upon the words used therein. The cardinal rule of interpretation,
however, is that words should be read in their ordinary, natural and
grammatical meaning subject to this rider that in construing words in a constitutional
enactment conferring legislative power the most liberal construction should be
put upon the words so that the same may have effect in their widest
amplitude." (Emphasis added) Again in Union of India vs. H. S. Dhillon
 2 SCR 33 at page 51 it was observed as follows:
seems to us that the function of Art. 246(1), read with entries 1-96 List I, is
to give positive power to Parliament to legislate in respect of these entries.
Object is not to debar Parliament from legislating on a matter, even if other
provisions of the Constitution enable it to do so." In Dhillon's decision,
it was held that what one has to ask is whether the matter sought to be
legislated is included in List II or in List III and no question has to be
asked about List I. If the answer is in the negative, then it follows that the
Parliament has power to make laws with respect to that matter or text.
thus been clearly enunciated that the power of the Parliament to enact a law,
which is not covered by an Entry List II and List III, is absolute. While
Articles 323A and 323B specifically enable the legislatures to enact laws for
the establishment of tribunals, in relation to the matters specified therein,
the power of the Parliament to enact a law constituting a Tribunal, like the
Banking Tribunal, which is not covered by any of the matters specified in
Article 323A or 323B, is not taken away. With regard to any of the entries
specified in List I, the exclusive jurisdiction to make laws with respect to
any of the matters enumerated in List I is with the Parliament. The power
conferred by Article 246(1) can be exercised notwithstanding the existence of
Article 323A or 323B of the Constitution.
323A and 323B are enabling provisions which specifically enable the setting up
of tribunals contemplated by the said Articles. These Articles, however, cannot
be interpreted to mean that it prohibits the legislature from establishing
tribunals not covered by these Articles, as long as there is legislative
competence under an appropriate entry in the Seventh Schedule. Articles 323A
and 323B do not take away that legislative competence. The contrary view
expressed by the Karnataka High Court in D.K. Abdul Khader's case does not lay
down the correct law and we expressly disapprove of the same.
Delhi High Court and the Guwahati High Court have held that the source of the
power of the Parliament to enact a law relating to the establishment of the
Debt Recovery Tribunal is entry 11A of List III which pertains to
"administration of justice; Constitution and organisation of all Courts,
except the Supreme Court and the High Courts" In our opinion, entry 45 of
List I would cover the types of legislation now enacted. Entry 45 of List I
relates to "Banking".
operations would, inter alia, include accepting of loans and deposits, granting
of loans and recovery of the debts due to the bank.
can be little doubt that under Entry 45 of List I, it is the Parliament alone
which can enact a law with regard to the conduct of business by the banks.
Recovery of dues is an essential function of any banking institution. In
exercise of its legislative power relating to banking, the Parliament can
provide the mechanism by which monies due to the Banks and Financial
Institutions can be recovered. The Tribunals have been set up in regard to the
debts due to the banks.
special machinery of a Tribunal which has been constituted as per the Preamble
of the Act, "for expeditious adjudication and recovery of debts due to
banks and financial institutions and for matters connected therewith or
incidental thereto" would squarely fall within the ambit of Entry 45 of
List I. As none of the items in the lists are to be read in a narrow or
restricted sense, the term "Banking" in Entry 45 would mean
legislation regarding all aspects of Banking including ancillary or subsidiary
matters relating to Banking. Setting up of an adjudicatory body like the
Banking Tribunal relating to transactions in which banks and financial
institutions are concerned would clearly fall under entry 45 of List I giving
the Parliament specific power to legislate in relation thereto.
learned counsel has drawn our attention to the provisions of the Act and we are
unable to agree with the Delhi High Court that the Act or any other provision
thereof is in any way arbitrary or bad in law. During the pendency of these
appeals, the Act has been amended and whatever lacunae or infirmities existed have
now been removed by the said Amending Act and with the framing of more Rules.
For example, Rules have been framed in 1998 for the appointment of Presiding
Officers of the Tribunals as well as the Presiding Officers of the Appellate
Tribunals. The Rules contemplate appointments being made by a Selection
Committee. Each of the Selection Committee is to consist of the Chief Justice
of India or a Judge of the Supreme Court as nominated by the Chief Justice of
India along with other members referred to in the said Rules. The Selection
Committee so constituted would ensure fair and impartial selection of competent
persons to act as Presiding Officers of the Tribunal. Furthermore Section 19
after its amendment reads as follows:
Application to the Tribunal.-
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
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
any 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
cause of action, wholly or in part, arises.
Where a bank or a financial institution, which has to recover its debt from any
person, has filed an application to the Tribunal under sub-section (1) and
against the same person another bank or financial institution also has a claim
to recover its debt, then, the later bank or financial institution may join the
applicant bank or financial institution at any stage of the proceedings, before
the final order is passed, by making an application to the Tribunal.
Every application under sub-section (1) or sub-section (2) shall be in such
form and accompanied by such documents or other evidence and by such fee as may
that the fee may be prescribed having regard to the amount of debt to be
further that nothing contained in this sub-section relating to fee shall apply
to cases transferred to the Tribunal under sub-section (1) of Section 31.
receipt of the application under sub-section (1) or sub- section (2), the
Tribunal shall issue summons requiring the defendant to show cause within
thirty days of the service of summons as to why the relief prayed for should
not be granted.
The defendant shall, at or before the first hearing or within such time as the
Tribunal may permit, present a written statement of his defence.
Where the defendant claims to set-off against the applicant's demand any
ascertained sum of money legally recoverable by him from such applicant, the
defendant may, at the first hearing of the application, but not afterwards
unless permitted by the Tribunal, present a written statement containing the
particulars of the debt sought to be set-off.
The written statement shall have the same effect as a plaint in a cross-suit so
as to enable the Tribunal to pass a final order in respect both of the original
claim and of the set-off.
defendant in an application may, in addition to his right of pleading a set-off
under sub-section (6), set up, by way of counter-claim against the claim of the
applicant, any right or claim in respect of a cause of action accruing to the
defendant against the applicant either before or after the filing of the
application but before the defendant has delivered his defence or before the
time limited for delivering his defence has expired, whether such counter-claim
is in the nature of a claim for damages or not.
counter-claim under sub-section (8) shall have the same effect as a cross-suit
so as to enable the Tribunal to pass a final order on the same application,
both on the original claim and on the counter claim.
The applicant shall be at liberty to file a written statement in answer to the
counter-claim of the defendant within such period as may be fixed by the
Where a defendant sets up a counter-claim and the applicant contends that the
claim thereby raised ought not to be disposed of by way of counter-claim but in
an independent action, the applicant may, at any time before issues are settled
in relation to the counter-claim, apply to the Tribunal for an order that such
counter-claim may be excluded, and the Tribunal may, on the hearing of such
application make such order as it thinks fit.
The Tribunal may make an interim order (whether by way of injunction or stay or
attachment) against the defendant to debar him from transferring, alienating or
otherwise dealing with, or disposing of, any property and assets belonging to
him without the prior permission of the Tribunal.
(A) Where, at any stage of the proceedings, the Tribunal is satisfied, by
affidavit or otherwise, that the defendant, with intent to obstruct or delay or
frustrate the execution of any order for the recovery of debt that may be
passed against him,-
about to dispose of the whole or any part of his property; or
about to remove the whole or any part of his property from the local limits of
the jurisdiction of the Tribunal; or
is likely to cause any damage or mischief to the property or affect its value
by misuse or creating third party interest, the Tribunal may direct the
defendant, within a time to be fixed by it, either to furnish security, in such
sum as may be specified in the order, to produce and place at the disposal of
the Tribunal, when required, the said property or the value of the same, or
such portion thereof as may be sufficient to satisfy the certificate for the
recovery of debt, or to appear and show cause why he should not furnish
Where the defendant fails to show cause why he should not furnish security, or
fails to furnish the security required, within the time fixed by the Tribunal,
the Tribunal may order the attachment of the whole or such portion of the
properties claimed by the applicant as the properties secured in his favour or
otherwise owned by the defendant as appears sufficient to satisfy any
certificate for the recovery of debt.
The applicant shall, unless the Tribunal otherwise directs, specify the
property required to be attached and the estimated value thereof.
The Tribunal may also in the order direct the conditional attachment of the
whole or any portion of the property specified under sub-section (14).
If an order of attachment is made without complying with the provisions of
sub-section (13), such attachment shall be void.
In the case of disobedience of an order made by the Tribunal under sub-sections
(12), (13) and (18) or breach of any of the terms on which the order was made,
the Tribunal may order the properties of the person guilty of such disobedience
or breach to be attached and may also order such person to be detained in the
civil prison for a term not exceeding three months, unless in the meantime the
Tribunal directs his release.
Where it appears to the Tribunal to be just and convenient, the Tribunal may,
a receiver of any property, whether before or after grant of certificate for
recovery of debt;
any person from the possession or custody of the property;
the same to the possession, custody or management of the receiver;
confer upon the receiver all such powers, as to bringing and defending suits in
the courts or filing and defending applications before the Tribunal and for the
realization, management, protection, preservation and improvement of the
property, the collection of the rents and profits thereof, the application and
disposal of such rents and profits, and the execution of documents as the owner
himself has, or such of those powers as the Tribunal thinks fit; and
a Commissioner for preparation of an inventory of the properties of the
defendant or for the sale thereof.
Where a certificate of recovery is issued against a company registered under
the Companies Act, 1956 (1 of 1956), the Tribunal may order the sale proceeds
of such company to be distributed among its secured creditors in accordance
with the provisions of Section 529-A of the Companies Act, 1956 (1 of 1956) and
to pay the surplus, if any, to the company.
The Tribunal may, after giving the applicant and the defendant an opportunity
of being heard, pass such interim or final order, including the order for
payment of interest from the date on or before which payment of the amount is
found due up to the date of realisation or actual payment, on the application
as it thinks fit to meet the ends of justice.
The Tribunal shall send a copy of every order passed by it to the applicant and
The Presiding Officer shall issue a certificate under his signature on the
basis of the order of the Tribunal to the Recovery Officer for recovery of the
amount of debt specified in the certificate.
Where the Tribunal, which has issued a certificate of recovery, is satisfied
that the property is situated within the local limits of the jurisdiction of
two or more Tribunals, it may send the copies of the certificate of recovery
for execution to such other Tribunals where the property is situated:
that in a case where the Tribunal to which the certificate of recovery is sent
for execution find that it has no jurisdiction to comply with the certificate
of recovery, it shall return the same to the Tribunal which has issued it.
The application made to the Tribunal under sub-section 9(1) or sub-section (2)
shall be dealt with by it as expeditiously as possible and endeavour shall be
made by it to dispose of the application finally within one hundred and eighty
days from the date of receipt of the application.
The Tribunal may make such orders and give such directions as may be necessary
or expedient to give effect to its orders or to prevent abuse of its process or
to secure the ends of justice."
aforesaid section prescribes the manner in which an application to the Tribunal
filed by a bank or a financial institution is to be dealt with. Section 22
provides that the Tribunal and the Appellate Tribunal shall not be bound by the
procedure laid down by the Code of Civil Procedure, but shall be guided by the
principles of natural justice and, subject to the rules framed. They shall have
powers to regulate their own procedure as given to them. The Tribunal and the
Appellate Tribunal under Section 22(2) are given the same powers as are vested
in a civil court with regard to the matters specified in the said sub-section
which include the power of summoning and enforcing the attendance of any person
and examining him on oath.
very purpose of establishing the Tribunal being to expedite the disposal of the
applications filed by the banks and financial institutions for realisation of
money, the Tribunal and the Appellate Tribunals are required to deal with the
applications in an expeditious manner. It is precisely for this reason that
Section 22(1) stipulates that the Tribunal and the Appellate Tribunal shall not
be bound by the procedure laid down by the Code of Civil Procedure. Therefore
even though the Tribunal can regulate its own procedure, the Act requires that
any procedure laid down by it must be guided by the principles of natural
justice while, at the same time, it should not regard itself as being bound by
the provisions of the Code of Civil Procedure.
behalf of some of the respondents, it was contended that on a correct
interpretation of Rule 12(6) of the Debts Recovery Tribunal (Procedure) Rules,
1993, wherever any party desires the production of a witness for
cross-examination, then his evidence could not be taken by way of affidavit but
it would be mandatory for the Tribunal to require the production of the
witness. It was submitted that this provision is in pari materia with Order 19
Rule 1 of the Code of Civil Procedure, and the view taken by some of the
Tribunals that a party does not have a right to cross-examine a witness, whose
evidence is taken on affidavit, is not correct.
the amendment of the Act in 2000 while a new Section 19 was inserted in place
of the existing one, section 22 has not undergone any change and the same reads
Procedure and powers of the Tribunal and the Appellate Tribunal-
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 the places at which they shall
have their sittings.
The Tribunal and the Appellate Tribunal shall have, for the purposes of
discharging their functions under this Act, the same powers as are vested in a
civil court under the Code of Civil Procedure, 1908 (5 of 1908), while trying a
suit, in respect of the following matters, namely:-
and enforcing the attendance of any person and examining him on oath;
the discovery and production of documents;
evidence on affidavits;
commissions for the examination of witnesses or documents;
an application for default or deciding it ex parte;
aside any order of dismissal of any application for default or any order passed
by it ex parte;
other matter which may be prescribed.
Any proceeding before the Tribunal or the Appellate Tribunal shall be deemed to
be a judicial proceeding within the meaning of Sections 193 and 228, and for
the purposes of Section 196, of the Indian Penal Code and the Tribunal or the
Appellate Tribunal shall be deemed to be civil court for all purposes of
Section 195 and Chapter XXVI of the Code of Criminal Procedure, 1973 (2 of
1974)." By a notification dated 19.6.1997, some of the rules contained in
the Debts Recovery Tribunal (Procedure) Rules, 1993, were amended. It is not
necessary to refer to all the amendments so made, but what is important is to
examine Rule 12 which, after amendment, reads as follows:
Filing of reply and other documents by the respondent
The defendant may file two complete sets containing the reply to the
application along with documents in a paper book form with the registry within
one month of the service of the notice of the filing of the application on him.
The defendant shall also endorse one copy of the reply along with documents as
mentioned in sub-rule (1) to the applicant.
The Tribunal may, in its discretion on application by the defendant, allow the
filing of reply referred to in sub-rule (1), after the expiry of the period
referred to therein.
the defendant fails to file the reply under sub-rule (1) or on the date fixed
for hearing of the application, the Tribunal may proceed forthwith to pass an
order on the application as it thinks fit.
Where a defendant makes an admission of the full or part of the amount of debt
due to a bank or financial institution, the Tribunal shall order such defendant
to pay the amount, to the extent of the admission, by the applicant within a
period of one month from the date of such order failing which the Tribunal may
issue a certificate in accordance with Section 19 of the Act to the extent of
amount of debt due admitted by the defendant.
The Tribunal may at any time for sufficient reason order that any particular
fact or facts may be proved by affidavit, or that the affidavit of any witness
may be read at the hearing, on such conditions as the Tribunal thinks
that where it appears to the Tribunal that either applicant or defendant
desires the production of a witness for cross-examination, and that such
witness can be produced an order shall not be made authorising the evidence of
such witness to be given by affidavit.
the defendant denies his liability to pay the claim made by the applicant, the
Tribunal may act upon the affidavit of the applicant who is acquainted with the
facts of the case or who has on verification of the record sworn the affidavit
in respect of the contents of application and the documents as evidence.
Provisions contained in section 4 of the Bankers' Books Evidence Act, 1891 (18
of 1891) shall apply to a certified copy of an entry in a banker's book
furnished along with the application filed under sub-section (1) of Section 19
by the applicant."
result of the amendments made in the Act and the Rules, the position which
would emerge is that Section 19(1) of the Act requires the filing of an
application by a bank or a financial institution for the recovery of debt to be
made before a Tribunal having territorial jurisdiction. On receipt of the
application, summons are issued to the defendant who has to show cause within
the stipulated period as to why the relief prayed for should not be granted. A
right is now given by sub-section 6 of Section 19 to the defendant to claim a
set-off against the applicant's demand and the said written statement is to
have the same effect as a plaint in a cross-suit.
sub-section 8 of Section 19, the defendant is also entitled to set-up a counter
claim in addition to his right of claiming a set-off.
20 of Section 19 provides that after giving the applicant and the defendant an
opportunity of being heard, the Tribunal may pass such interim or final order
as it thinks fit to meet the ends of justice. It is after this order that a
certificate is issued by the Presiding Officer to the Recovery Officer for
recovery of money.
22 of the Act has not been amended. Therefore, reading Sections 19 and 22 of
the Act together, it appears that the Tribunal and the Appellate Tribunal are
to be guided by the principles of natural justice while trying the matter
before them. Section 22(1) of the Act stipulates that the Tribunal and the
Appellate Tribunal, while being guided by the principles of natural justice, are
to be subject to the other provisions of the Act and the Rules. Rule 12(7)
provides that if a defendant denies his liability to pay the claim made by the
applicant, the Tribunal may act upon the affidavit of the applicant who is
acquainted with the facts of the case. In this Rule, which deals with the
consideration of the applicant's bank application, there is no reference to the
examination of witnesses. This sub-rule refers only to the affidavit of the
applicant. Rule 12(6), on the other hand, provides that the Tribunal may, at
any time, for sufficient reason order a fact to be proved by affidavit or may
pass an order that the affidavit of any witness may be read at the hearing. It
is in the proviso to this sub-rule that a reference is made to the cross-
examination of witnesses.
outset, we find that the Rule 12 is not happily worded.
reason for establishing banking tribunals being to expedite the disposal of the
claims by the banks, the Parliament thought it proper only to require the
principles of natural justice to be the guiding factor for the Tribunals in
deciding the applications, as is evident from Section 22 of the Act. While the
Tribunal has, no doubt, been given the power of summoning and enforcing the
attendance of any witness and examining him on oath, but the Act does not
contain any provision which makes it mandatory for the witness to be examined,
if such a witness could be produced. Rule 12(6) has to be read harmoniously
with the other provisions of the Act and the Rules. As we have already noticed
, Rule 12 (7) gives the Tribunal the power to act upon the affidavit of the
applicant where the defendant denies his liability to pay the claims. Rule
12(6), if paraphrased, would read as follows:
Tribunal may at any time for sufficient reason order that any particular fact
or facts may be proved by affidavit.. on such conditions as the Tribunal thinks
Tribunal may at any time for sufficient reason order.that the affidavit of any
witness may be read at the hearing, on such conditions as the Tribunal thinks
other words, the Tribunal has the power to require any particular fact to be
proved by affidavit, or it may order the affidavit of any witness may be read
at the hearing. While passing such an order, it must record sufficient reasons
for the same. The proviso to Rule 12(6) would certainly apply only where the
Tribunal chooses to issue a direction, on its own, for any particular fact to
be proved by affidavit or the affidavit of a witness being read at the hearing.
The said proviso refers to the desire of an applicant or defendant for the
production of a witness for cross-examination. In the setting in which the said
proviso occurs, it would appear to us that once the parties have filed
affidavits in support of their respective cases, it is only thereafter that the
desire for a witness to be cross-examined can legitimately arise. It is at that
time, if it appears to the Tribunal, that such a witness can be produced and it
is necessary to do so and there is no desire to prolong the case that it shall
require the witness to be present for cross-examination and in the event of his
not appearing, then the affidavit shall not be taken into evidence. When the
High Courts and the Supreme Court in exercise of their jurisdiction under
Article 226 and Article 32 can decide questions of fact as well as law merely
on the basis of documents and affidavits filed before it ordinarily, there
should be no reason as to why a Tribunal, likewise, should not be able to decide
the case merely on the basis of documents and affidavits before it. It is
common knowledge that hardly any transaction with the Bank would be oral and
without proper documentation, whether in the form of letters or formal
such an event the bona fide need for the oral examination of a witness should
rarely arise. There has to be a very good reason to hold that affidavits, in
such a case, would not be sufficient.
manner in which a dispute is to be adjudicated upon is decided by the procedural
laws which are enacted from time to time.
because of the enactment of the Code of Civil Procedure that normally all
disputes between the parties of a civil nature would be adjudicated upon by the
civil courts. There is no absolute right in anyone to demand that his dispute
is to be adjudicated upon only by a civil court. The decision of the Delhi High
Court proceeds on the assumption that there is such a right. As we have already
observed, it is by reason of the provisions of the Code of Civil Procedure that
the civil courts had the right, prior to the enactment of the Debt Recovery
Act, to decide the suits for recovery filed by the banks and financial
institutions. This forum, namely, that of a civil court, now stands replaced by
a banking tribunal in respect of the debts due to the bank.
in the Constitution Articles 323A and 323B contemplate establishment of a
tribunal and that does not erode the independence of the judiciary, there is no
reason to presume that the banking tribunals and the appellate tribunals so
constituted would not be independent, or that justice would be denied to the
defendants or that the independence of the judiciary would stand eroded.
tribunals, whether they pertain to Income-tax or Sales-tax or Excise and Customs
or Administration, have now become an essential part of the judicial system in
this country. Such specialised institutions may not strictly come within the
concept of the judiciary, as envisaged by Article 50, but it cannot be presumed
that such tribunals are not an effective part of the justice delivery system,
like courts of law. It will be seen that for a person to be appointed as a
Presiding Officer of a Tribunal, he should be one who is qualified to be a
District Judge and, in case of appointment of the Presiding Officer of the
Appellate Tribunal he is, or has been, qualified to be a Judge of a High Court
or has been a member of the Indian Legal Service who has held a post in Grade-I
for at least three years or has held office as the Presiding Officer of a
Tribunal for at least three years. Persons who are so appointed as Presiding
Officers of the Tribunal or of the Appellate Tribunal would be well versed in
law to be able to decide cases independently and judiciously. It has to be
borne in mind that the decision of the Appellate Tribunal is not final, in the
sense that the same can be subjected to judicial review by the High Court under
Articles 226 and 227 of the Constitution.
the establishment of the Tribunals, Section 31 provides for the transfer of
pending cases from Civil Courts to the Tribunal. We do not find such a
provision being in any way bad in law. Once a Debt Recovery Tribunal has been
established, and the jurisdiction of Courts barred by Section 18 of the Act, it
would be only logical that any matter pending in the civil court should stand
transferred to the Tribunal. This is what happened when the Central
Administrative Tribunal was established. All cases pending in the High Courts
stood transferred. Now that exclusive jurisdiction is vested in the Banking
Tribunal, it is only in that forum that bank cases can be tried and, therefore,
a provision like Section 31 was enacted.
regard to the observations of the Delhi High Court in relation to the pecuniary
jurisdiction of the tribunals and of the Delhi High Court, the Act has been
enacted for the whole of India. In most of the States, the High Courts do not
have original jurisdiction. In order to see that the Tribunal is not flooded
with cases where the amounts involved are not very large, the Act provides that
it is only where the recovery of the money is more than Rs. 10 lacs that the
Tribunal will have the jurisdiction to entertain the application under Section
19. With respect to suits for recovery of money less than Rs. 10 lacs, it is
the subordinate courts which would continue to try them.
other words, for a claim of Rs. 10 lacs or more, exclusive jurisdiction has
been conferred on the tribunal but for any amount less than Rs. 10 lacs, it is
the ordinary civil courts which will have jurisdiction. The bifurcation of
original jurisdiction between the Delhi High Court and the subordinate Courts
is a matter which cannot have any bearing on the validity of the establishment
of the Tribunal. It is only in those High Courts which have original
jurisdiction that an anomalous situation arises where suits for recovery of
money less than Rs. 10 lacs have to be decided by the High Courts while the
tribunals have jurisdiction to decide suits for recovery of more than Rs. 10 lacs.
incongruous situation, which can be remedied by the High Court divesting itself
of the original jurisdiction in regard to such claims and vesting the said
jurisdiction with the subordinate courts or vice versa, cannot be a ground for
holding that the Act is invalid.
time when the Guwahati High Court had rendered its decision there was only one
Appellate Tribunal. It is for that reason that the Guwahati High Court had
observed that the judicial review was illusory. Now, more Appellate Tribunals
have been established and the inconvenience of the litigant in travelling a
long distance to approach a Appellate Tribunal cannot be regarded as making the
judicial review of the Tribunal's decision illusory. Furthermore, with the
pecuniary jurisdiction of the Tribunal being of Rs. 10 lacs and above for a
fairly large number of borrowers of small amounts, the civil courts are not
divested of their jurisdiction.
High Court had held that Sections 25 and 28 are arbitrary and unreasonable,
being without any guidelines or control.
observations were made prior to the amendment of Sections 25 and 28. After
amendment the said provisions read as under:- "25. Modes of recovery of
debts.- The Recovery Officer shall, on receipt of the copy of the certificate
under sub-section (22) of section 19, proceed to recover the amount of debt
specified in the certificate by one or more of the following modes, namely:-
and sale of the movable or immovable property of the defendant;
of the defendant and his detention in prison;
a receiver for the management of the movable or immovable properties of the
Other modes of recovery.-
Where a certificate has been issued to the Recovery Officer under sub-section
(7) of section 19, the Recovery Officer may, without prejudice to the modes of
recovery specified in section 25, recover the amount of debt by any one or more
of the modes provided under this section.
any amount is due from any person to the defendant, the Recovery Officer may
require such person to deduct from the said amount, the amount of debt due from
the defendant under this Act and such person shall comply with any such
requisition and shall pay the sum so deducted to the credit of the Recovery
that nothing in this sub-section shall apply to any part of the amount exempt
from attachment in execution of a decree of a civil court under section 60 of
the Code of Civil Procedure, 1908 (5 of 1908).
The Recovery Officer may at any time or from time to time, by notice in
writing, require any person from whom money is due or may become due to the
defendant or to any person who holds or may subsequently hold money for or on
account of the defendant, to pay to the Recovery Officer either forthwith upon
the money becoming due or being held or within the time specified in the notice
(not being before the money becomes due or is held) so much of the money as is
sufficient to pay the amount of debt due from the defendant or the whole of the
money when it is equal to or less than that amount.
notice under this sub-section may be issued to any person who holds or may
subsequently hold any money for or on account of the defendant jointly with any
other person and for the purposes of this sub-section, the shares of the joint
holders in such amount shall be presumed, until the contrary is proved, to be
A copy of the notice shall be forwarded to the defendant at his last address
known to the Recovery Officer and in the case of a joint account to all the
joint holders at their last addresses known to the Recovery Officer.
Save as otherwise provided in this sub-section, every person to whom a notice
is issued under this sub-section shall be bound to comply with such notice,
and, in particular, where any such notice is issued to a post office, bank,
financial institution, or an insurer, it shall not be necessary for any pass
book, deposit receipt, policy or any other document to be produced for the
purpose of any entry, endorsement or the like to be made before the payment is
made notwithstanding any rule, practice or requirement to the contrary.
Any claim respecting any property in relation to which a notice under this
sub-section has been issued arising after the date of the notice shall be void
as against any demand contained in the notice.
Where a person to whom a notice under this sub-section is sent objects to it by
a statement on oath that the sum demanded or the part thereof is not due to the
defendant or that he does not hold any money for or on account of the
defendant, then, nothing contained in this sub-section shall be deemed to
require such person to pay any such sum or part thereof, as the case may be,
but if it is discovered that such statement was false in any material
particular, such person shall be personally liable to the Recovery Officer to
the extent of his own liability to the defendant on the date of the notice, or
to the extent of the defendant's liability for any sum due under this Act,
whichever is less.
The Recovery Officer may, at any time or from time to time, amend or revoke any
notice under this sub-section or extend the time for making any payment in
pursuance of such notice.
The Recovery Officer shall grant a receipt for any amount paid in compliance
with a notice issued under this sub-section, and the person so paying shall be
fully discharged from his liability to the defendant to the extent of the
amount so paid.
Any person discharging any liability to the defendant after the receipt of a
notice under this sub-section shall be personally liable to the Recovery
Officer to the extent of his own liability to the defendant so discharged or to
the extent of the defendant's liability for any debt due under this Act,
whichever is less.
the person to whom a notice under this sub-section is sent fails to make
payment in pursuance thereof to the Recovery Officer, he shall be deemed to be
a defendant in default in respect of the amount specified in the notice and
further proceedings may be taken against him for the realisation of the amount
as if it were a debt due from him, in the manner provided in sections 25, 26
and 27 and the notice shall have the same effect as an attachment of a debt by
the Recovery Officer in exercise of his powers under section 25.
The Recovery Officer may apply to the court in whose custody there is money
belonging to the defendant for payment to him of the entire amount of such
money, or if it is more than the amount of debt due, an amount sufficient to
discharge the amount of debt so due.
The Recovery Officer may, by order, at any stage of the execution of the
certificate of recovery, require any person, and in case of a company, any of
its officers against whom or which the certificate of recovery is issued, to
declare on affidavit the particulars of his or its assets.
The Recovery Officer may recover any amount of debt due from the defendant by distraint
and sale of his movable property in the manner laid down in the Third Schedule
to the Income-tax Act, 1961 (43 of 1961)." While Section 25 provides for
modes of recovery of debts either by attachment and sale or arrest or
appointment of a receiver, Section 28 provides for modes of recovery in
addition to the ones specified in Section 25. A perusal of the aforesaid
provisions cannot lead one to the conclusion that the same are arbitrary,
unreasonable or without any guidelines. It is quite clear that in order to
recover the debts, the recovery officer has to attach and sell the immovable
property and that for protection and preservation of the same, he has the power
to appoint a Receiver for the management thereof.
virtue of Section 29 of the Act, the provisions of the Second and Third
Schedules to the Income-tax Act, 1961 and the Income-Tax (Certificate
Proceedings) Rules, 1962, have become applicable for the realisation of the
dues by the Recovery Officer. Detailed procedure for recovery is contained in
these schedules to the Income-Tax Act, including provisions relating to arrest
and detention of the defaulter.
cannot, therefore, be said that the recovery officer would act in an arbitrary
manner. Furthermore, Section 30, after amendment by the Amendment Act, 2000,
gives a right to any person aggrieved by an order of the Recovery Officer, to
prefer an appeal to the Tribunal.
now an appellate forum has been provided against any orders of the Recovery
Officer which may not be in accordance with law.
is, therefore, sufficient safeguard which has been provided in the event of the
Recovery Officer acting in an arbitrary or an unreasonable manner. The
provisions of Sections 25 and 28 are, therefore, not bad in law.
the aforesaid reasons, while allowing the appeals of the Union of India and the
Banks, we hold that the Recovery of Debts Due to Banks and Financial
Institutions Act, 1993 is a valid piece of legislation. As a result thereof,
the writ petitions or appeals filed by various parties challenging the validity
of the said Act or some of the provisions thereof, are dismissed. It would be
open to the parties to raise other contentions on the merits of their cases
before the authority constituted under the Act and, only thereafter, should a
High Court entertain a petition under Article 226 and/or 227 of the
Cases stand disposed of accordingly. Parties to bear their own costs.
Kirpal ] ...J.
Sabharwal ] .J.
Balakrishnan ] March