The duty of the court to ensure protection of properties and repayment of loans by banks and financial institutions, emphasizing the practical approach required in exercising powers under Order 40 Rule 1 CPC.

JAYANT NATH, J.

CM No.13440/2017 (Exemption)

Exemption is allowed, subject to all just exceptions.

CM(M) 374/2017

1. An advance copy of the petition has been sent to the respondents but none is present on behalf of the respondents.

2. By the present petition filed under Article 227 of the Constitution of India the petitioner seeks to impugn the order dated 21.01.2017 of the trial court by which order the trial court dismissed the application under Order 40 Rule 1 CPC for appointment of a Receiver.

3. The petitioner has filed a suit for recovery of Rs.2,22,204.62/- in connection with a vehicle loan. The vehicle that was bought, namely, Honda Civic/1.8 S MT bearing registration No. DL-3CBE-0445 also stands hypothecated to the petitioner bank. As per the petitioner, the respondents were to pay the loan amount in 25 EMIs of Rs.14,083/- towards repayment of the loan amount of Rs.2,93,550/-. He has defaulted in four EMIs of Rs.56,273/- plus other charges. Along with the plaint the petitioner filed an application for appointment of a receiver relying upon the judgment of this court dated 21.12.2016 passed in CM(M) 1333/2016 titled as “ICICI Bank Ltd. vs. Ram Chandra Yadav”.

4. The trial court surprisingly sought to ignore the judgment of this court dated 21.12.2016 noting that the Apex Court and this Court have already held that all courts should be conscious of day to day scenario and should be more pragmatic in exercising powers under Order 40 Rule 1 CPC. The trial court has hence issued summons in the suit but dismissed the application under Order 40 Rule 1 CPC.

5. In the judgment of this court dated 21.12.2016 passed in CM(M) 1333/2016, this court relied upon the observations of an earlier judgment of this court passed by Hon’ble Justice Rajiv Shakdar in FAO 7/2016 on 05.01.2016 titled as “ICICI Bank Ltd. vs. Updesh Nagar”. The observations of this court in that case are as follows :-

“6.1 In my opinion, issuance of a mere notice can, in certain set of circumstances, cause prejudice to the applicant; the present matter is one such case.

6.2 On the aspect as to how a court is to proceed where a request, for appointment of a receiver, is made by a bank or a financial institution – the following observations of the Full Bench of the Bombay High Court, in the case of State Bank of India vs Trade Aid Paper and Allied Products (India) Pvt. Ltd. & Ors. AIR 1995 Bom 268, being instructive are required to be noticed.

6.3 Briefly, the court in its judgment exhorts adoption of a practical approach while exercising power of appointment of a receiver in the case of banks and financial institutions having regard to the fact that they deal in public funds :-

“…Indeed, it is the duty and function of the Court entertaining the suits instituted by Banks and financial institutions to ensure that efforts are made to dispose of the suits as early as possible and even during the pendency of the suits, ensure that not only the properties are protected but the defendant is made to repay the amount, if desirous of enjoying the benefits secured by obtaining the loan. The powers of the Court under Order 40, Rule 1 of the Code of Civil Procedure are to be exercised to advance cause of justice and what is ‘just and convenient’ depends upon the nature of the claim and the surrounding circumstances. The Court should not close eyes to the realities and blindly follow the principles laid down 50 years before when the suits by Banks and financial institutions were a novelty. The economic liberalization and the policy of the Government to grant loans for various activities have increased the number of suits by Banks and financial institutions and in this Court every year more than 2,000 suits are instituted. It would not be difficult to imagine how much public money is involved in these suits and how long the Nationalised Banks and financial institutions are deprived of their dues. The Court should be conscious of these facts and should be more pragmatic in exercisi