Vijaya
Bank versus B. L. Gupta decided on 16.03.11 by Debts Recovery Appellate
Tribunal, Delhi
upholding that counter-claim can be filed in the application u/s 17 of the
Securitisation Act in DRT. This is validation of our contentions past nearly 10
years. The full text of the judgment is given below with important portions
marked in Red.
Comments by DRT Solutions
:-
Our further comments are given at the end of the judgment below.
Debts Recovery Appellate Tribunal, Delhi
Before:
HON'BLE
J.M. MALIK, CHAIRPERSON:
Vijaya
Bank......................................................................................
Appellantt
Versus
;,
B.L. Gupta
& Ors........................................................................
Respondents
Misc. Appeal No. 148
of 2011, decided on 16.3.2011
Securitisation and
Reconstruction of Financial Assets and Enforcement of Security Interest Act,
2002, Sections 13(4) and 17
JUDGMENT
J. M.
Malik, Chairperson.-The
controversy in this appeal revolves around the question whether the respondents
can file counter-claim in the proceedings under Section 17 of the SRFAESI Act.
The learned Counsel for the appellant opined that the respondents cannot file
counter-claim.
He
explained that there is specific provision in the Recovery of Debts to Banks and
Financial Institutions Act, 1993. The attention of the Court was invited towards
Section 19, sub-sections (8) and (9) of the above said Act. It was argued that.
no such provision is provided in the SRFAESI Act. He also argued that Section 17
of the SRFAESI Act deals with the measures referred to in sub-section (4) of the
Section 13 of the SRFAESI Act.
2. I see
no merit in these arguments. The application under
Section 17 of SRFAESI Act is to be treated as civil suit. This view finds
support from the Apex Court authority reported in Mardia Chemicals Ltd.
v. Union of India, 2004; (4) SCC 311 and latest
authority by the Madras High Court in Misons Leather Ltd. represented by its
Managing Director v. Canara Bank,
represented by its Chief Manager,
I (2008) BC 440 wherein
it was
held:
"8.
Learned Counsel appearing for, the petitioners strenuously contended that in
Mardia Chemicals's case, the Supreme Court has clearly held that
the proceedings under Section 17 of the Act are in lieu of Civil Suit, which
remedy is already available but barred under Section 34 of the Act. Our
attention was drawn to the observations in paragraphs 59, 62 and 71 of the
judgment, which read as follows:
59.
We may like to observe that proceedings under Section 17 of the Act, in fact,
are not appellate proceedings. It seems to be a misnomer. In fact it is the
initial action which is brought before a Forum as prescribed under the Act,
raising grievance against the action or measures taken
by one of
the parties to the contract. It is the stage of initial proceeding like filing a
suit in Civil Court. As a matter of fact proceedings under Section 17 of the Act
are in lieu of a civil suit which remedy is ordinarily available but for the bar
under Section 34 of the Act in the present case. We may refer to a decision of
this Court in Ganga Bai v. Vijay Kumar where in respect of
original and appellate proceedings a distinction has been drawn as follows: (SCC
p. 397, para 15)
There is
a basic distinction between} the right of suit and the right of appeal. There is
an inherent right in every person to bring a suit of civil nature and unless the
suit is barred by statute one may at one's peril, bring a suit of one's choice.
It is no answer to a suit, howsoever frivolous to claim, that the law confers no
such right to sue. A suit for its maintainability requires no authority of law
and it is enough that no statute bars the suit. But, the position in regard to
appeal is quite the opposite. The right of appeal inheres in no one and
therefore an appeal for its maintainability must have the clear authority of
law. That explains why the right of appeal is described as a creature of
statute.
62. As indicated earlier, the
position of the appeal under Section 17 of the Act is like that of a suit in the
Court of the first instance under the Code of Civil Procedure. No doubt, in
suits also it is permissible, in given facts and circumstances and under the
provisions of the law to attach the property before a decree is passed or to
appoint a receiver and to make a provision by way of interim measure in respect
of the property in suit. But, for obtaining such orders a case for the same is
to be made out in accordance with the relevant provisions under the law. There
is no such provision under the Act.
71. Arguments have been
advanced as to how far principles of lender's liability are applicable.
Whatever be the position, however, it cannot be denied
that the financial institutions, namely, the lenders owe a. duty to act fairly
and in good faith. There has to be a fair dealing between the parties and
financing companies/institutions are not free to ignore performance of their
part of tlte obligation as a party to the contract. They cannot be free from it.
Irrespective of the fact as to whatever may have been held in decisions
of some American Courts, in view of the facts and circumstances and the terms of
the contract and other details relating to those matters, that may or may not
strictly apply, nonetheless, even in absence of any such decisions or
legislation, it is incumbent upon such financial institutions to act fairly and
in good faith complying with their part of obligations under the contract. This
is also the basic principle of the concept of lender's liability. It cannot be a
one-sided affair shutting out all possible and reasonable remedies to the other
party, namely, borrowers and assumes all drastic powers for speedier recovery of
NP As. Possessing more drastic powers calls for exercise of higher degree of
good faith and fair play. The borrowers cannot be left remediless in case they
have been wronged against or subjected to unfair treatment violating the terms
and conditions of the contract. They can always plead in defence deficiencies on
the part of the Banks and financial institutions.'
10
We are afraid that the contention is totally misconceived. The provisions of
Section 17 (1) of the Act provides remedy for the borrower / guarantor /
mortgagor to challenge the action of the Bank under Section 13 (4) of the Act
before the Debts Recovery Tribunal. The Debts Recovery Tribunal is required to
decide whether the action of the Bank/ Financial Institutions, under Section 13
(4) is in accordance with the provisions of the Act and the rules framed
thereunder, It is open to the borrower/guarantor /mortgagor to demonstrate
before the Debts Recovery Tribunal that resort to Section 13 of the Act is not
permissible by law. In a given case, the claim of the Bank/Financial
Institutions may be barred by limitation or there may be cases, where the
adjustment of the amount paid is not reflected in the notice or the calculation
of interest may not be in accordance with the contract between the parties.
Needless to say that all such grounds, which render the
action of the Bank/Financial Institutions illegal can be raised in the
proceedings under Section 17 of the Act before the Debts Recovery Tribunal.
11 Learned Additional
Solicitor General and the learned Counsel appearing for Banks and financial
institutions fairly stated that all the objections which can be legally raised
in the reply to the notice under Section 13 (2) of the Act can also be raised in
the proceedings under Section 17 (1) of the Act. It would be for the Debts
Recovery Tribunal to decide in each case whether the action of the Bank is in
accordance with the 'provisions of the Act and is legally sustainable."
3. In the light of the above discussion the petitioners/respondents can file the
counter-claim I see no illegality or infirmity in the order passed by the
learned Trial Court. The appeal is, therefore, dismissed in limine.
4. Copies of this order be
furnished to the parties as per law and one copy be sent to the learned DRT
forthwith.
Appeal dismissed in limine.
Comments by DRT Solutions
:-
Our comments are as
under:-
(a)
Past nearly 10 years we have been telling our clients to include loss and
damages (i.e. counter-claim) in their application u/s 17 of the Securitisation
Act. In fact in several of the said applications drafted by us, we have done so
e.g. in case of one of our clients from Bangalore in 2006.
(b)
We have voiced our contentions in our web site, DRT All India Conferences held
at Indore in 2008 and 2011 as well as in our weekly mails.
(c)
In the above DRAT Delhi judgment, reference has been made to the SC Judgment of
2004 in the matter of Mardia Chemicals.
(d)
As a whole our contentions are based on the following legal analysis:-
(i)
The borrower as a citizen has fundamental rights of fair trial under the
constitution of India and the said rights can not be abridged or curtailed by
anybody or by any enactment including the Securitisation Act of 2002.
(ii)
Since Sec 34 of the said Securitisation Act has barred the civil court, the said
rights of fair trial for the borrowers are to be ensured and assured by the DRTs.
(iii)
Since as per Mardia in 2004 and now specifically explained by the DRAT Delhi in
2011, borrower’s counter-claim has to be adjudicated upon by fair trial by the
DRTs.
(iv)
The DRTs may adopt expeditious and summary process to judicial determination of
the bank claims but for the counter-claim of the borrower, full and exhaustive
trial has to be conducted and carried out as he was entitled in the civil court
before the said bar due to Securitisation Act of 2002.
(v)
Since in most of the cases, we have found that the said loss and damages or
counter-claim is much more than the claim of the bank, there is the situation of
‘No Debt Due’ and hence no recovery action on the securities can be initiated
till the said ‘No Debt Due’ is judicial determined by the full and fair trial.
(vi)
On account of above, the DRT Act, Securitisation Act and DRTs have limited role
or function as it would have been better to improve the civil courts as a whole
instead of creating new forums like DRTs.
(vii)
We don’t want to learn from the experience of other countries. In UK, the
tribunals were introduced in 1800. It took more than 150 years to find out
correct solution i.e. by Sir Frank Committee in 1957.
(viii)
As told by eminent justice Krishna Iyer that our courts are 200 years behind the
courts in developed countries.. There are 73 countries whose judicial systems
are betttter than us. The only and better solution is to improve the courts
based on the system developed in those countries which have better judicial
system.
(ix)
Since the relevant institutions like Govt, Law Commission, Bar Council of India
and Law Colleges are not doing desirable work (and they will not do for obvious
reasons), the public has to come forward. While litigants in civil courts can
not do much, those in DRTs can do much better as the Businessmen and
Industrialists as litigants are much more competent and resourceful. Till the
judiciary and judicial systems are improved, we cannot have real democracy i.e.
rule for public, rule by public and rule of public as against rule by
Bureaucrats & Politicians, rule of Bureaucrats & Politicians and rule for
Bureaucrats & Politicians.
(x)
The full and fair adjudication of claim for loss and damages or counter-claim
will alone bring to light the wrong doings committed by the bureaucracy in the
banks and financial institutions after which only the banks and the said
institutions will improve and after that only the hold of the politicians on
these institutions will come down. Thus the DRT litigants have a great
responsibility and role to play.
DRT Judgments Favourable to Borrowers and Guarantors – Now Full text of such
Judgments is being provided on this Web Site with Important Portions marked in Red
vide link
DRT Judgments Favourable / Useful to Borrowers
We have been providing citations and extracts of judgments favourable / useful
to Borrowers and Guarantors. Subsequently several borrowers approached us to
provide the full text of the said judgments. Hence we have now started
providing full texts of such judgments on our this web site itself as above. Since the
advocates are quite busy in their routine work, we have marked the important
portion of such judgments in Red. Thus with passage of time, a library of
important judgments with full text in soft copies and important portions marked
in Red is being built up on the internet at our web site. The borrowers should go
through such judgments periodically and apprise their advocates. It is needless
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litigant borrowers, guarantors and their advocates to visit the above link
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guarantors, he may mail the full text of such
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