The Recovery of Debts Due to Banks and Financial Institutions Act, 1993 ousts the jurisdiction of the Civil Court and vests the power to adjudicate upon the liability exclusively in the Tribunal.

Headnote:
Recovery of Debts Due to Banks and Financial Institutions Act - Jurisdiction of Civil Court - Section 17, Section 18 - Section 31-A - Validity of Decree - Jurisdiction of Tribunal - Exclusive Jurisdiction of Tribunal - Transfer of Pending Cases - Recovery Certificate - Adjudication of Liability - Bar on Civil Court - Supreme Court's Interpretation of the Act
Fact of the Case:

The State Bank of Hyderabad filed a suit for recovery of a loan against the defendants. The suit was decreed, and the Recovery of Debts due to Banks and Financial Institutions Act, 1993 came into force. The bank sought recovery certificate and possession of the properties. The defendants filed a suit challenging the decree and seeking various declarations and injunctions.
Finding of the Court:

The court found that the jurisdiction of the Civil Court was ousted by the Act, and the power to adjudicate upon the liability was exclusively vested in the Tribunal. The court held that the issue of the validity of the decree and the liability of the defendants could only be adjudicated by the Tribunal.
Issues: The main issue was whether the Civil Court had jurisdiction to entertain a suit challenging the validity of the decree and the liability of the defendants under the Recovery of Debts due to Banks and Financial Institutions Act, 1993.
Ratio Decidendi: The court held that the Act ousted the jurisdiction of the Civil Court and vested the power to adjudicate upon the liability exclusively in the Tribunal. The Supreme Court's interpretation of the Act was relied upon to support the exclusive jurisdiction of the Tribunal.
Final Decision: The court held that the suit challenging the validity of the decree and the liability of the defendants was barred under Section 18 of the Act, and the jurisdiction to adjudicate upon the liability was exclusively vested in the Tribunal.

Judgment :-

D. Murugesan, J.

1. The parties are referred to as per the cause title in O.A. No.315/2004.

The averments in brief that led to the present reference are as follows:

The first respondent viz., The State Bank of Hyderabad, Indira Nagar Branch, Madras had filed C.S. No.993/1993 before this Court for a judgment and decree against the defendants 1 to 13 therein including the 2nd and 3rd respondents herein jointly and severally to pay to the plaintiff a sum of Rs.2,95,05,577/- together with interest at the rate of 24.05% p.a. from the date of plaint, till the date of realisation and other reliefs. The Suit was filed on the ground that the first respondent sanctioned over draft facility to a limit of Rs.200 lakhs to the defendants 1 to 4 for construction of residential flats at Virugambakkam, Madras. The terms of sanctions were subject to various conditions specified therein denoting disbursement of loan in various stages, inter alia , the loan was to be secured by collateral security by various equitable mortages including the equitable mortgage of landed property bearing S.F. No.218 situate at Virugambakkam, Madras measuring 83394 sq.ft. belonging to Mrs. Deepa Udayakumar, Miss Priya Dharshini (the petitioners), A.S. Balachandar and Smt. Kavitha Ravichandran. The 2nd respondent executed an on demand promissory note promising to pay the defendants. 2 to 8 or order at the State Bank of Hyderabad for the value received with interest. It was also alleged in the plaint that on the same day, all the defendants 1 to 8 therein endorsed on the reverse of the promissory note for payment to State Bank of Hyderabad. It was further alleged in the plaint that the defendants 9 to 13 executed a equitable mortgage through their power of attorney by name Mr. A. Muthuvelu, the 3rd respondent herein in respect of the properties mentioned in the schedule as security. It was also alleged in the plaint that after availing of the said over draft facility, as the defendants therein were very irregular in repayment, they were compelled to file the Suit for recovery of Rs.2,95,05,577/- together with interest at the rate of 24.05% p.a. from the date of plaint, till the date of realisation and other reliefs.

2. The said Suit was decreed on 10.8.1994 on the basis of a compromise memo. Based on the said decree and in view of the Recovery of Debts due to Banks and Financial Institutions Act, 1993 (hereinafter referred to as “the Act”) came into force on 24.8.1993 and the Debt Recovery Tribunal-I was constituted at Madras on 31.10.1996. The plaintiff filed Application in O.A. No.159/1998 before the Tribunal for issue of recovery certificate showing the appellants as respondents. A recovery certificate was also issued in respect of the schedule mentioned properties in the Suit including the property said to belong to the petitioners herein. Pursuant to the recovery certificate, possession of the property was taken, auction was conducted and the same was confirmed in favour of the 4th respondent, M/s Sabari Foundations. As the petitioners came to know about this, approached this Court by filing Suit in C.S. No.318/2004 for the following relief:

(a) for a declaration that the judgment and decree passed in C.S. No.993/1993 dated 10.8.1994 based on the compromise memo is illegal, invalid and non-est in law and not binding on the plaintiffs in respect of their right, title and interest in the Suit property;

(b) for a declaration that the Recovery Certificate issued in O.A. No.159/1998 by the Debt Recovery Officer II, Debt Recovery Tribunal, Chennai dated 24.4.2000 and consequential sale proceedings in respect of the Suit property are illegal, invalid and non-est;

(c) for a declaration that there is no valid equitable mortgage in favour of the first defendant in respect of Suit A Schedule binding the plaintiff and affecting their rights.

(d) for a mandatory injunction directing the bank to deliver all the title deeds pertaining to the A schedule property to the pla

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Judicial Analysis