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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
A.S.OKA, V.L.ACHLIYA and ANUJA PRABHUDESAI, JJ.
ICICI Bank Limited - Appellant
Vs.
Unimers India Limited & Ors. - Respondents
APPEAL (L) NO.84 OF 2015
Decided On : 7-3-2016
DEBT RECOVERY TRIBUNAL - JURISDICTION - SUIT BY DEBENTURE TRUSTEE - WHETHER MAINTAINABLE ON ORIGINAL SIDE OF HIGH COURT OR BEFORE DEBT RECOVERY TRIBUNAL - INTERPRETATION OF SECTIONS 17 AND 18 OF RECOVERY OF DEBTS DUE TO BANKS AND FINANCIAL INSTITUTIONS ACT, 1993 - DISTINCTION BETWEEN SUIT BY BANK FOR RECOVERY OF DEBT DUE TO IT AND SUIT BY BANK AS DEBENTURE TRUSTEE FOR RECOVERY OF AMOUNTS PAYABLE TO DEBENTURE HOLDERS - APPLICABILITY OF DECISION IN KRISHNA FILAMENTS LTD. V. INDUSTRIAL DEVELOPMENT BANK OF INDIA (2004) 2 Mh.L.J. 823 - EFFECT OF AMENDMENTS TO DEFINITION OF "FINANCIAL INSTITUTION" IN SECTION 2(H) OF RECOVERY OF DEBTS DUE TO BANKS AND FINANCIAL INSTITUTIONS ACT, 1993 AND ENACTMENT OF SECURITISATION AND RECONSTRUCTION OF FINANCIAL ASSETS AND ENFORCEMENT OF SECURITY INTEREST ACT, 2002 - ANALYSIS OF DECISIONS IN ALPHA AND OMEGA DIAGNOSTICS INDIA LTD. V. ASSET RECONSTRUCTION COMPANY (P) LTD. (2010) 5 ALL M.R. 553 AND UNITED BANK OF INDIA V. DEBTS RECOVERY TRIBUNAL (1999) 4 SCC 69 - HELD, SUIT BY DEBENTURE TRUSTEE FOR RECOVERY OF AMOUNTS PAYABLE TO DEBENTURE HOLDERS IS NOT A SUIT FOR RECOVERY OF DEBT DUE TO BANK OR FINANCIAL INSTITUTION - DRT HAS NO JURISDICTION TO ENTERTAIN SUCH SUIT - JURISDICTION OF REGULAR CIVIL COURT IS NOT EXCLUDED.
Fact of the Case:
Suit filed by a bank as a debenture trustee for the recovery of amounts payable by the first defendant under 12.5% secured, redeemable and nonconvertible debentures aggregating Rs.997 lacs together with interest, costs and charges as well as other monies payable at the contractual rates in accordance with the terms of the issue of debentures. The learned Single Judge upheld the contentions of the first defendant and held that this Court will not have jurisdiction to entertain and try the suits. Accordingly, the suits before him were ordered to be returned for presentation to the appropriate Debt Recovery Tribunal. The plaintiff has taken an exception to the said Judgment and Order dated 6th January 2015 by preferring the present Appeal.
Finding of the Court:
1. A suit by a debenture trustee for recovery of the amounts payable to the debenture-holder can be filed on the original side of this Court since suit is not for recovery of the debt. 2. Such proceedings cannot be initiated by the debenture-trustee before the Debt Recovery Tribunal. 3. The judgment in the case of Krishna Filaments (supra) would be applicable to the facts of the present case and there is no difference of opinion between two judgments which are delivered by two Division Benches of this Court.
Issues: 1. Whether a debenture trustee suing on behalf of the debenture-holder for recovery of sums payable to the debenture-holder can file a suit on the original side of this Court since suit is for recovery of the debt? 2. Whether such proceedings can be initiated by the debenture-trustee before the Debt Recovery Tribunal? 3. Whether the judgment in the case of Krishna Filaments (supra) would be applicable to the facts of the present case and whether there is any difference of opinion between two judgments which are delivered by two Division Benches of this Court?
Ratio Decidendi: 1. The jurisdiction of the DRT under section 17 of the RDB Act is restricted to the applications made for the recovery of debts due to banks and financial institutions. 2. A suit filed by a debenture trustee of debentures of a company on behalf of or for the benefit of the debenture holders is not a suit for recovery of a debt due to the bank or financial institution. 3. The DRT will have no jurisdiction to entertain an application for recovery in such a case. 4. The decision in the case of Krishna Filament continues to be a good law and to that extent, the observations made as regards the said decision in the case of Alpha and Omega are not correct.
Final Decision: Appeal allowed. Suit held to be maintainable on the original side of the High Court. DRT held to have no jurisdiction to entertain an application for recovery in such a case.
1. A Division Bench of this Court by an order dated 25th August 2015 expressed an opinion that the following questions should be decided by a larger Bench of this Court. The said three questions read thus:
“(i) Whether a debenture trustee suing on behalf of the debenture-holder for recovery of sums payable to the debenture-holder can file a suit on the original side of this Court since suit is for recovery of the debt?
(ii) Whether such proceedings can be initiated by the debenture-trustee before the Debt Recovery Tribunal?
(iii) Whether the judgment in the case of Krishna Filaments (supra) would be applicable to the facts of the present case and whether there is any difference of opinion between two judgments which are delivered by two Division Benches of this Court?”
2. The Hon'ble Acting Chief Justice by order dated 6th October 2015 directed that the present Full Bench be constituted to decide the aforesaid questions.
3. Though Larger Bench cannot decide the factual controversy, for the sake of convenience, a brief reference to the facts of the case will be necessary.
4. The appellant is a banking company incorporated under the provisions of the Companies Act, 1956. It is a scheduled bank within the meaning of the Reserve Bank of India Act, 1934. The appellant is the original plaintiff. For the sake of convenience, the parties are hereafter referred by their status before the learned Single Judge. The first defendant is a company carrying on business of manufacturing, producing, distributing, importing, exporting, buying, selling and dealing with all types of goods based on rubber or plastics whether for domestic or industrial use and ancillary products. The second to tenth defendants have been impleaded in the suit as they may have an interest in the properties of the first defendant that are charged to the plaintiff.
5. By an agreement 7th October 1992 executed by the first defendant in favour of the plaintiff, it was agreed that the plaintiff shall act as a trustee for the debentures (12.5% secured redeemable non convertible debentures aggregating Rs.997 lacs) issued by the first defendant. A suit was filed on 7th February 2002 by the plaintiff in its capacity as a debenture trustee for the recovery of the amounts payable by the first defendant under 12.5% secured, redeemable and nonconvertible debentures aggregating Rs.997 lacs together with interest, costs and charges as well as other monies payable at the contractual rates in accordance with the terms of the issue of debentures. A Notice of Motion was taken out by the first defendant raising an issue of jurisdiction of this Court to entertain the suit and also praying for rejection of the plaint by exercising the power under Rule 11 of Order VII of the Code of Civil Procedure, 1908 or in the alternative, for the return of the plaint for presentation to the appropriate Debt Recovery Tribunal (for short “DRT”). Apart from the suit filed by the present plaintiff, there were other similar suits placed before the learned Single Judge. By Judgment and Order dated 6th January 2015, the learned Single Judge upheld the contentions of the first defendant and held that this Court will not have jurisdiction to entertain and try the suits. Accordingly, the suits before him were ordered to be returned for presentation to the appropriate Debt Recovery Tribunal. The plaintiff has taken an exception to the said Judgment and Order dated 6th January 2015 by preferring the present Appeal.
6. Before the learned Single Judge, the plaintiff relied upon a decision of the Division Bench of this Court in the case of Krishna Filaments Limited vs. Industrial Development Bank of India (debenture trustees) and others, 2004 (2) Mh.L.J. 823. The said Judgment holds that such suits will be maintainable on the Original Side of this Court. The contention before the learned Single Judge was that as the present suit was filed by a bank for the recovery of an amount above a sum of Rs.10,00,000/- and as
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