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Thursday, June 28, 2012

Recovery of Debts Due to Banks and Financial Institutions Act, 1993-Sections 17, 18, 19 and 31. Suit by borrower against bank-Held-Jurisdiction of civil courts is barred only in regard to applications by bank/financial institution for recovery of its debts-It is not barred in regard to any suit filed by a borrower or other person against a Bank-On facts, jurisdiction of civil court held not be barred in a borrower's suit for damages against bank for non-disbursement of a sanctioned loan-The suit found not be a counter claim to an earlier Original Application (O.A.) of Bank before D.R.T. for recovery of an amount advanced to the borrower under another loan-Subject matter of O.A and suit were not connected and decision in one did not depend on other-Such a suit was not required to be transferred to D.R.T.-It was more so as the suit was filed after establishment of latter and the provisions of the Act did not support transfer of such suit. Counter claim by borrower/defendant in Bank's Original Application before D.R.T.-Forum for-Held-Counter claim is not the only remedy, but an option available to borrower/defendant-If they have an independent claim against Bank, they cannot be compelled to make their claim against Bank only by counter-claim before D.R.T.-Such a claim made by them by an independent suit in a court having jurisdiction cannot be transferred to D.R.T. against their wishes. Constitution of India, 1950-Article 142-After declaration of law, Supreme Court in operative part of judgment relaxing application of that law under Article 142-In such a case, the precedent value is that of ratio decidendi, and not the relaxation given on special facts-One solution to avoid a situation where relaxation itself comes to be treated as law, is for the Supreme Court to clarify that it was given in exercise of power under Article 142. Appellant-bank sanctioned ad hoc packing credit facilities to the respondent company. According to appellant, respondent utilised the said credit facilities but committed default in repaying the amounts advanced. Therefore, they filed an Original Application (O.A.) before the Debt Recovery Tribunal (D.R.T.) under Section 19 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 seeking a certificate of recovery thereof with interest. During pendency of the O.A. wherein trial was yet to commence, appellant sanctioned another loan and credit facilities to the respondent, but the sanctioned amounts were not released. For this, respondent filed a suit against the appellant in High Court for recovery of damages with interest. Recording of evidence in the suit had been completed and it was ripe for arguments. At this stage, appellant pleaded that the suit could not be tried by the High Court and it should be transferred to the D.R.T. on the ground that it was broadly in the nature of a counter-claim to appellant's O.A and was integrally connected with it. For this they relied on Sections 19(6) to (11) of the Act. High Court rejected these claims of appellant. Hence the present appeals. On the contentions of the parties, following questions arose for consideration of the Court: (a) Whether the subject-matter of the borrower's suit before the High Court and Bank's O.A. before D.R.T. were inextricably linked? (b) Whether the provisions of the Act require the transfer of an independent suit filed by a borrower against a Bank before a civil court to D.R.T. in the event of the Bank filing a recovery application against the borrower before D.R.T. to be tried as a counter-claim in the Bank's O.A.? Dismissing the appeal, the Court HELD: 1. It is evident from Sections 17 and 18 of the Debts Recovery Act that civil court's jurisdiction is barred only in regard to applications by a bank or a financial institution for recovery of its debts. The jurisdiction of civil courts is not barred in regard to any suit filed by a borrower or any other person against a bank for any relief. [68-f] 1.2. The Debts Recovery Act, as it orginally stood, did not contain any provision enabling a defendant in application filed by the bank/financial institution to claim any set off or make any counter claim against bank/financial institution. The Act was amended by Act 1 of 2000 to remove the lacuna by providing for set off and counter-claims by defendants in the applications filed by Banks/financial institution before the Tribunal. What is significant is that Sections 17 and 18 have not been amended. Jurisdiction has not been conferred on the Tribunal, even after the amendment, to try independent suits or proceedings initiated by borrowers or others against banks/financial institutions, nor the jurisdiction of civil courts barred in regard to such suits or proceedings. [64-b, c, d, f, g] Union of India v. Delhi High Court Bar Association, [2002] 4 SCC 5, relied on. Delhi High Court Bar Association v. Union of India, AIR (1995) Delhi 323 approved. 2. The issues that arose in the Bank's application was whether the borrower failed to repay the sums borrowed and whether the Bank was entitled to the amounts claimed. On the other hand, the issues that arose in the borrower's suit were whether the Bank had promised/agreed to advance certain monies, whether the Bank committed breach in refusing to release such loans in terms of the sanction letter; whether the borrower failed to fulfill the terms and conditions of sanction and therefore the Bank's refusal to advance, was justified; and even if there was breach, whether the borrower suffered any loss on account of such non-disbursement and if so whether the borrower was entitled to the amounts claimed. While the claim of the Bank was for an ascertained sum due from the borrower, the claim of the borrower was for damages which required firstly a determination by the court as to whether the Bank was liable to pay damages and thereafter assessment of quantum of such damages. Thus there is absolutely no connection between the subject matter of the two suits and they are no way connected. A decision in one does not depend on the other. Nor could there be any apprehension of different and inconsistent results if the suit and the application are tried and decided separately by different forums. In the circumstances, it cannot be said that the borrower's suit and Bank's application were inextricably connected. [61-c, f] 3. It is not disputed that the Calcutta High Court had the jurisdiction to entertain and dispose of suit filed by borrower when it was filed and continues to have jurisdiction to entertain and dispose of the said suit. There is no provision in the Act for transfer of suits and proceedings, except section 31 which relates to suit/proceeding by a Bank or financial institution for recovery of a debt. It is evidence from Section 31 that only those cases and proceedings (for recovery of debts due to bank and financial institutions) which were pending before any Court immediately before the date of establishment of a tribunal under the Debts Recovery Act stood transferred, to the Tribunal. In this case, there is no dispute that the Debts Recovery Tribunal, Calcutta, was established long prior to the company filing suit against the bank. The said suit having been filed long after the date when the tribunal was established and not being a suit or proceeding instituted by a bank or financial institution for recovery of a debt, did not attract section 31. [63-g, h; 64-a] 4. Making counter claim in the Bank's application before the Tribunal is not the only remedy, but an option available to the borrower/defendant. He can also file a separate suit or proceeding before a civil court or other appropriate forum in respect of his claim against the Bank and pursue the same. Even the Bank, in whose application, the counter-claim is made has the option to apply to the Tribunal to exclude the counter-claim of the defendant while considering its application. When such application is made by the Bank, the Tribunal may either refuse to exclude the counter claim and proceed to consider the Bank's application and the counter-claim and together or exclude the counter claim as prayed and proceed only with the Bank's application, in which event the counter claim would become an independent claim against a bank/financial institution. The defendant will then have to approach the civil court in respect of such excluded counter claim as the Tribunal does not have jurisdiction to try and independent claim against a bank/financial institution. A defendant in an application, having an independent claim against the Bank, cannot be compelled to make his claim against the Bank only by way of counter-claim. Nor can his claim by way of independent suit in a court having jurisdiction, be transferred to a Tribunal against his wishes. In this case, the first respondent does not wish his case to be transferred to the Tribunal. [65-a-e] United Bank of India, Calcutta v. Abhijit Tea Co. Pvt. Ltd., [2000] 7 SCC distinguished. 5. Many a time, after declaring the law, this court in the operative part of the judgment, gives some directions which may either relax the application of law or exempt the case on hand from the rigour of the law in view of the peculiar facts or in view of the uncertainty of law till then, to do complete injustice. While doing so, normally it is not stated such determination/order is in exercise of power under Article 142. It is not uncommon to find that courts have followed not the law declared, but the exemption/relaxation made while moulding the relief in exercise of power under Article 142. When the High Courts repeatedly follow a direction issued under Article 142, treating it as the law declared by this court, incongruously the exemption/relaxation granted under Article 142 becomes the law, though at variance with the law declared by this Court. The Courts should therefore be careful to ascertain and follow the ratio decidendi, and not the relief given on the special facts, exercising power under Article 142. One solution to avoid such a situation is for this Court to clarify that a particular direction or portion of the order is in exercise of power under Article 142. [70-d, e, f] L.N. Rao, Himanshu Munshi and Rajesh Kumar Chaurasia, for the Appellant. Jaideep Gupta, Rana Mukherjee, Siddharth Gautam and Goodwill Indeevar, for the Respondent.2006 AIR 1899, 2006(1 )Suppl.SCR52 , 2006(5 )SCC72 , 2006(4 )SCALE423 , 2006(5 )JT281

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CASE NO.: Appeal (civil)  10074-10075 of 2003 PETITIONER: Indian Bank RESPONDENT: ABS Marine Products Pvt. Ltd. DATE OF JUDGMENT:...

a conditional gift is not maintainable under Muslim law "....The burden of proof is, therefore, on the person who sets up a gift to show that the rigid forms stipulated by the Muslim Law have been complied with. It is, hence, essential to the validity of a Muslim gift that the donor should divest himself or herself completely of all ownership and dominion over the subject of the gift before he or she can effect delivery of possession of the property gifted. Actionable claims and even incorporeal property can form the S.A.655/1996. 38 subject matter of the gift. If the gift is in respect of immovable property, it must effect an immediate transfer of the corpus of the property. Where a gift of the corpus is given and the donor does not reserve any dominion over the corpus but merely retains his right to take the produce or income or usufructus from the property, the gift is valid." 33. In this context it will also be useful to refer to the decision reported in Hafeeza Bibi v. SK. Farid ((2011) 5 SCC 654) wherein it was held as follows: "The position is well settled, which has been stated and restated time and again, that the three essentials of a gift under Mohammadan Law are: (1) declaration of the gift by the donor; (2) acceptance of the gift by the donee; and (3) delivery of possession. Though, the rules of Mohammadan Law do not make writing essential to the validity of a gift; an oral gift fulfilling all the three essentials makes the gift complete and irrevocable. However, the donor may record the transaction of gift in writing." S.A.655/1996. 39 34. From a reading of the relevant provisions of the Mohammedan Law and also the decisions referred to above, under the Muhammedan Law for validity of a gift four elements appears to be necessary. They are (i) Declaration of gift by donor. (ii) Relinquishment by donor over ownership and domain. (iii) Acceptance of gift by the donee. (iv) Delivery of possession of property by the donor. 35. It cannot be doubted that in order to complete the gift, the donor has to relinquish control and ownership over the property absolutely in favour of the donee. The donee should accept the gift. The acceptance signifies the intention of the donee to take the property. The gift is complete only on acceptance. It is also evident from the decisions on the point that the delivery of possession of the subject matter of gift is essential for a valid gift. It need not always be actual physical delivery. Such delivery as the S.A.655/1996. 40 subject matter would make it possible is sufficient.

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 IN THE HIGH COURT OF KERALA AT ERNAKULAM SA.No. 655 of 1996(C) 1. KADEEJAMMAL                       ...  Petitioner             ...