ICICI Ltd vs Grapco Industries Ltd
decided
on 14.05.99 by Supreme Court of India, Judges – D. P. Wadhwa & S. Sagir Ahmed,
Case No : 3167 of 1999
Citations -
1999 (3) Scale 674 : 1999 (4) SCC 710 : 1999 (2) UJ(SC) 1010 : 1999 AIR(SCW)
1664 : 1999 AIR(SC) 1975 : 1999 (5) Supreme 547 : 1999 (3) JT 619
DRT Solutions
Citation –
DRTS-012-ICICI vs
Grapco-1999
(We have now
numbered the Judgments published on this web site as DRTS-00.)
Accordingly all the judgments published so far have been numbered. The judgment
on this page is numbered as DRTS-012.
Comments by DRT Solutions
An Important Supreme Court Judgment laying down that DRTs can even go beyond CPC
(a)
The
full text of the judgment is given below with important portions marked in Red.
(b)
As
per the Section 22 of the DRT Act, the DRT and DRAT shall not be bound by the
procedure laid down by the CPC but shall be guided by the principles of natural
justice. The general impression was that the CPC is not applicable in DRTs.
(c)
But
as per this Supreme Court judgment, the DRTs can even go beyond CPC. Hence
whenever our clients pointed out that the POs in DRTs were not permitting
application of CPC, we cited this particular judgment to them. Since such
queries have increased we have thought appropriate to publish the full text of
the judgment as under with important portions marked in Red, which are self
explanatory. The said Red portions from Para Nos are reproduced below.
(d)
It is relevant to point out that the CPC is nothing but codification of the
principles of natural justice. Hence in the interest of justice and depending
on the facts and circumstances, the DRTs will have to follow not only the CPC
but as per the law laid down in this Supreme Court judgment, the DRTs can even
travel beyond CPC.
Extract from Para 7
“For all intent and purpose, an application
(u/s 19
of the DRT Act) is like a plaint in civil suit and
applicant would be plaintiff and respondent a defendant.
The details which are required to be given in the
application in substance conform to the requirements of a plaint under the Code
of Civil Procedure. - - -it may perhaps be better to describe the applicant as a
plaintiff, an application as a plaint and respondent as defendant.”
Extract from Para 11
“When Section 22 of the Act says that the tribunal shall not be bound by the
procedure laid by the Code of Civil Procedure, it does not mean that it will not
have jurisdiction to exercise powers of a court as contained in the Code of
Civil procedure.
Rather, the tribunal can travel beyond the Code of
Civil Procedure and the only fetter that is put on its powers is to observe the
principles of natural justice.”
IN THE
SUPREME COURT OF INDIA
Judges :
D.P.Wadhwa : S.Saghir Ahmad
Industrial Credit and Investment Corporation of India Limited
Versus
Grapco Industries Limited
Case No. :
3167 of 1999
Date of
Decision : 14-May-1999
JUDGMENT/ORDER:
D.P.Wadhwa, J.
(1) LEAVE granted.
(2) QUESTION of law that arises for consideration in these appeals is:
if the Debts Recovery tribunal constituted under Section 3(1) of the Recovery of
Debts Due to Banks and Financial Institutions Act, 1993 (for short, the 'Act')
has jurisdiction to grant ad interim ex parte order of injunction or stay
against the defendant on an application filed by the bank or financial
institution for recovery of debt as defined under clause (g) of Section 2 of the
Act. tribunal under clause (o) of Section 2 of the Act means the tribunal
established under Ss. (1) of Section 3 of the Act. These appears are from the
judgment of the Calcutta High court given on petitions filed under Article 227
of the Constitution holding that the tribunal has no jurisdiction to grant ex
parte orders under the Act. It is further held on merits as well that the
tribunal was wrong in granting an ex parte order of injunction.
(3) WHEN we see Preamble to the Act, it provides for the establishment
of tribunals for expeditious adjudication and recovery of debts due to banks and
financial institutions and for matters connected therewith or incidental
thereto. Under Section 17 of the Act a tribunal shall exercise 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. There is also a provision for establishment of Appellate Tribunal.
Under Section 18 of the Act, no court or other authority shall have, or be
entitled to exercise, any jurisdiction, powers or authority in relation to the
matters specified in Section 17 of the Act. This bar of jurisdiction, however,
does not apply to the Supreme court or to a High court exercising jurisdiction
under Articles 226 and 227 of the Constitution. It is not necessary for us to
consider as to how a tribunal and Appellate Tribunal are established and their
qualifications.
(4) CH. IV of the Act provides for the procedure of tribunals. Section
19, which is relevant for our purpose, is 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, 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 (c) the cause
of action, wholly or in part, arises. (2 Every application under sub-section (1
shall be in such form and be accompanied by such documents or other evidence and
any such documents or other evidence and by such fee for filing the application
as may be prescribed : Provided that the fee may be Prescribed having regard to
the amount of debt to be recovered: Provided further that nothing contained in
this Ss. relating to fee shall apply to cases transferred to the tribunal under
Ss. (1 of Section 31. (3 On receipt of the application under sub-section (1, 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. (4 The tribunal may, after giving the applicant and the defendant an
opportunity of being heard, pass such orders on the application as it thinks fit
to meet the ends of justice. (5 The tribunal shall send a copy of every order
passed by it to the applicant and the defendant. (6 The tribunal may make an
interim order (whether by way of injunction or stay) 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. (7 The Presiding Officer shall issue a certificate under his
signatures on the basis of the order of the tribunal, to the Recovery Officer
for recovery of the amount of debt specified in the certificate. (8 The
application made to the tribunal under Ss. (1 shall be dealt with by it as
expeditiously as possible and endeavour shall be made by it to dispose of the
application finally within six months from the date of receipt of the
application."
(5)
SECTION 22 prescribes the procedure and powers of the tribunal and that of
the Appellate tribunal and, in relevant part, it is as under:
"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 their
sittings. (2 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 :- (a)
summoning and enforcing the attendance of any person and examining him on oath;
(b) requiring the discovery and production of documents; (c) receiving evidence
on affidavits; (d) issuing commissions for the examination of witnesses or
documents; (e) reviewing its decisions; (f) dismissing an application for
default or deciding it ex parte; (g) setting aside any order of dismissal of any
application for default or any order passed by it ex parte; (h) any other matter
which may be prescribed. (3 ......................"
(6) UNDER Section 24 of the Act, provisions of the Limitation Act 1963
apply to the applications made to a tribunal. As per requirements of Section
19(2 of the Act, a form of application has been prescribed under the Debt
Recovery tribunal (Procedure) Rules, 1993 framed under the Act.
(7) BANK or a financial institution which files an application for
recovery of debt is called the applicant under the Act and the person from whom
debt is to be recovered is called the defendant. But when we see the form
prescribed for the application for recovery of debt, the terms given are
applicant and respondent. For all intent and
purpose, an application is like a plaint in civil suit and applicant would be
plaintiff and respondent a defendant. The
details which are required to be given in the application in substance conform
to the requirements of a plaint under the Code of Civil Procedure. To
understand the rival contentions, it may perhaps be
better to describe the applicant as a plaintiff, an application as a plaint and
respondent as defendant.
(8) UNDER Ss. (1 of Section 19, a bank or a financial institution which
has to recover any debt from any person can file a plaint before the tribunal
having jurisdiction in the matter. Under Ss. (2 a plaint is to be in the form
prescribed. Under Rule 10 of the Rules, a plaint shall not seek relief or
reliefs based on more than a single cause of action in one single plaint unless
the reliefs prayed for are consequential to one another. Under Ss. (3 of Section
19, on receipt of the plaint, tribunal shall issue summons to the defendant
requiring him to show cause as to why relief prayed for should not be granted.
Under Ss. (4, the Tribunal may, after giving the plaintiff and the defendant an
opportunity of being heard, pass such order on the plaint as it thinks fit to
meet the ends of justice. Thereafter under subsection (5, a copy of every order
passed by the tribunal is to be sent to the plaintiff and the defendant. Under
Ss. (7, the Tribunal is to issue a certificate on the basis of its order to the
Recovery Officer as defined in clause (k) of Section 2 of the Act for recovery
of the amount of debt specified in the certificate. That is the scheme of
Section 19. But here we have left out Ss. (6 which empowers the tribunal to pass
interim ordeR.The dispute is if the tribunal can pass ex parte order.
(9) HIGH court relied on a decision of this Court in Morgan Stanley
Mutual Fund vs. Kartick Das [1994 4 SCC 225] to hold that the tribunal has no
jurisdiction to grant ex parte ordeR.The aforesaid judgment of this Court was
under Section 14 of the Consumer Protection Act, 1986 which Section did not
provide for grant of any interim relief or even ad interim relief and provided
only for final relief. At the same time, High court noticed that this court in
this very judgment laid down principles to be taken into consideration by a
court or tribunal while granting ex parte injunction. This court has said that
an ex parte order should be granted only under exceptional circumstances. Grant
of ex parte order is not a rule but an exception. The factors which this court
said should weigh with the court or tribunal for the grant of ex parte
injunction may be noted. There are :
"A)
whether irreparable or serious mischief will ensure to the plaintiff; b) whether
the refusal of ex parte injunction would involve grater injustice than the grant
of it would involve; the court will also consider the time at which the
plaintiff first had notice of the act complained so that the making of improper
order against a party in his absence is prevented; the court will consider
whether the plaintiff had acquiesced for sometime and in such circumstances it
will not grant ex parte injunction; the court would expect a party applying for
ex parte injunction to show utmost good faith in making the application; even if
granted, the ex parte injunction would be for a limited period of time; general
principles like prima facie case, balance of convenience and irreparable loss
would also be considered by the court."
(10) HIGH court, in its judgment which is quite interminable considered
the provisions of the Act and the Rules framed therein and came to the
conclusion that grant of ad interim of ex parte order of injunction or stay
would be against the principles of natural justice and is not contemplated by
the Act and the Rules. Reference was made to Section 22 of the Act which
provides that the tribunal shall not be bound by procedure laid down by the Code
of Civil Procedure but shall be guided by the principles of natural justice and
subject to other provisions of the Act and the Rules. High court was of the view
that grant of ex parte order was very antithesis of the principles of naturals
justice.
(11) WE, however, do not agree with the reasoning adopted by the High
court. When Section 22 of the Act says that the
tribunal shall not be bound by the procedure laid by the Code of Civil
Procedure, it does not mean that it will not have jurisdiction to exercise
powers of a court as contained in the Code of Civil procedure.
Rather, the tribunal can travel beyond the Code of
Civil Procedure and the only fetter that is put on its powers is to observe the
principles of natural justice. Contrast Section 22 of the Act with
Section 13(4) of the Consumer Protection Act, 1986 which vests certain powers on
the authorities under the Act:
"(4) For
the purposes of this section, the District forum shall have the same powers as
are vested in Civil court under the Code of Civil Procedure, 1908 (5 of 1908,
while thing a suit in respect of the following matters, namely,- (i) the
summoning and enforcing attendance of any defendant or witness and examining the
witness on oath; (ii) the discovery and production of any document of other
material object producible as evidence; (iii)the reception of evidence on
affidavits; (iv) the requisitioning of the report of the concerned analysis or
test from the appropriate laboratory or from any other relevant source; (v)
issuing of any commission for the examination of any witness; and (vi) any other
matter which may be prescribed."
(12) WE may also have a look at Section 53 of the Foreign Exchange
Regulation Act, 1973, which is as under :
"53. Powers of the adjudicating officer and the Appellate Board to summon
witnesses, etc.- (1 WITHEUT- preiudice to any other provision contained in this
Act, the adjudicating officer and the Appellate Board shall have all the powers
of a civil court under the Code of Civil procedure, 1908 (5 to 1908, while
trying a suit, in respect of the following matters, namely:- (a) summoning and
enforcing the attendance of witness; (b) requiring the discovery and production
of any document; (c) requisitioning any public record or copy thereof from any
court or office; (d) receiving evidence on affidavits; and (e) issuing
commissions for the examination of witnesses or documents. 2.
.........................."
Similarly Section 169 of the Motor Vehicles Act, 1988 provides for procedure and
powers of Claims tribunals, says that in holding an inquiry, the Claims tribunal
may, subject to any rules follow such summary procedure as it thinks fit and
that the Claims Tribunal shall have all the powers of a civil court for the
purpose of taking evidence on oath and of enforcing the attendance of witnesses
and of compelling the production of documents and material objects and such
other purposes as 35 may be prescribed. It will, thus, be seen that while there
are no limitations on the powers of the tribunal under the Act, the legislature
has thought fit to restrict the powers of the authorities under various
enactments while exercising certain powers under those enactments while
exercising certain powers under those enactments. We
have to give meaning to Section 22 of the Act as here the Tribunal is exercising
powers of a Civil court while trying a money suit. Further, when power is given
to the tribunal to make interim order by way of injunction or stay, it inheres
in it the power to grant that order even ex parte, if it is so in the interest
of justice and as per the requirements as spelt out in the judgment
of this court in Morgan's case which has been quoted above.
(13) AN ex parte order is only of short duration and it is granted to
safeguard the interest of the applicant, but, at the same time, such an order
cannot be granted as a matter of course. A court or tribunal has also to
consider the consequences of such an order if ultimately the order is to be
revoked after hearing the defendant. In such circumstances, the tribunal must
put the applicant on terms while granting an ex parte order and compensate the
defendant in case the ex parte order was obtained without any justification and
harm has been caused to the defendant. It must be remembered that an ex parte
order can also affect the reputation of the person against whom it is issued and
sometimes it may be difficult to undo the damage caused by an interim order. A
tribunal while granting ex parte order of stay or injunction must record
reasons, may be brief one, and cannot pass a stereo-typed order in terms of the
prayer made. Then an ex parte order cannot be allowed to continue indefinitely
and the continuance of interim order has to be decided without undue delay when
the defendant puts in his appearance. It is not necessary to hear long drawn
arguments. Principles on which an interim order, can be granted are well
settled. Ss. (8 of Section 19 requires that application for recovery of debt
itself is to be disposed of finally within a period of six months from the date
of receipt of the application. That also shows the urgency to decide is an
interim order of injunction or stay granted ex parte is to be continued or not.
In our view, the High court was not correct in holding that a tribunal under the
Act has no power to grant an ex parte order of injunction or stay.
(14) HIGH court also said that on merits as well the tribunal was wrong
in granting an ex parte ordeR.It is not that High court itself considered the
merits of the case. Objection of the High court was twofold : (1 the tribunal
did not give any reasons and (2 it was an omnibus order and that there was no
reference even to prayers in the application and that the prayers stood allowed
"in terms of entire hog". Criticism of the High Court appears to be correct on
that account. Judgment of the High court, however, does not refer at all to the
facts of the case and it proceeds more on abstract principles of law. There was
no bar on the High court to itself examine the merits of the case in the
exercise of its jurisdiction under Article 227 of the Constitution if the
circumstances so require. There is no doubt that High court can even interfere
with interim orders of the courts and tribunals under Article 227 of the
Constitution if the order is made without jurisdiction. But then a too technical
approach is to be avoided. When facts of the case brought before the High court
are such that High court can itself correct the error, then it should pass
appropriate orders instead of merely setting aside the impugned order of the
tribunal and leaving everything in vacuum.
(15) WE may refer, in brief, facts of the case in the Civil arising out
of SLP (C) No. 8208 - The Industrial Credit and Investment Corporation of India
Ltd. (ICICI) vs. Grapco Industries Ltd. & Anr. ICICI filed an application under
Section 19 of the Act on 15/05/1997 claiming an amount of over Rupees thirty-six
and a half crore against respondents 1 and 2 jointly and severally. On that very
day. tribunal granted an order of injunction and restrained the respondents from
transferring or alienating the properties hypothecated to ICICI and further
appointing a special officer for making inventory of the assets and properties
hypothecated to ICICI and further appointing a special officer for making
inventory of the assets and properties hypothecated and mortgaged by the
respondents in favour of ICICI. By the same order, a show-cause notice was also
issued by the tribunal to respondents calling upon them show-cause within 15
days why temporary injunction could not be granted. On 23/06/1997, respondents
moved the High court under Article 227 of the Constitution praying for setting
aside the order of the tribunal dated 15/05/1997. High court stayed the
operation of the order of the tribunal. By the impugned judgment the order of
the tribunal dated 15/05/1997 was set aside. When High court stayed the order of
the tribunal dated 15/05/1997, it put no restraint on the respondents not to
deal with the assets and properties except in the normal course of its working.
High court itself did not consider it appropriate to consider as to what were
the merits of the case filed by the ICICI. When the tribunal issued ex parte
order, it granted 15 days time to respondents to show cause. Instead of merely
setting aside the order, High court could have remanded the matter to the
Tribunal to take a decision expeditiously while, at the same time, continuing
the interim order, in modified form or otherwise, since the circumstances of the
case certainly so warranted. At this point of time, we do not know the stage of
proceedings before the Tribunal, we do not know if there is any interim order
passed by the tribunal after the High court stayed the operation of the ex parte
order dated 15/05/1997. The object with which the tribunal passed the ex parte
order appears now to have been lost. We may not, therefore, interfere with the
impugned judgment of the High court setting aside the order dated 15/05/1997 of
the tribunal. But that is only because of passage of time and without our
knowing the stage of proceedings before the tribunal on the application filed by
the ICICI under Section 19(1 of the Act. It will, however, be open to the
tribunal to pass an interim order on the plea of the ICICI if the matter is
still pending before it.
(16) WHILE not agreeing with the views expressed by the High court, we
will not interfere with the impugned judgment in view of the circumstances
narrated above. The appeals are disposed of accordingly. Appellants shall,
however, be entitled of costs.
