( 1 ) THE petitioners have challenged the constitutional validity of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (for short the Act ) on the ground that the Act is unreasonable and is violative of Article 14 of the Constitution and that it is beyond the legislative competence of the Parliament to enact such a law. The petitioners have also challenged the appointment of the third respondent as the Debts Recovery Tribunal under section 5 of the Act. The immediate cause for filing this petition under Article 226 of the Constitution was the notification dated 5 July, 1994 issued by the Central Government in the Ministry of Finance, Department of Economic Affairs, Banking Division, whereby, under section 3 of the Act, Debts Recovery Tribunal, with the areas of jurisdiction as Delhi was established. It is alleged that the appointment of the third respondent is an exercise of fraud on the powers conferred on the Central Government under the Act.

( 2 ) THIS petition was filed on 22 July 1994 and when it came up for admission, notice was issued to the respondents to show cause as to why rule nisi not be issued, and at the same time the operation of the Act in its applicability to Union Territory of Delhi was stayed by passing the following order on 25 July 1994:-

"c. M. No. 5739/94 : Notice for 4 August, 1994. Mr. Luthra submits that the impugned Act, namely, The Recovery of Debts Due to Banks and Financial Institutions Act, 1993, is invalid. He says the Act is discriminatory in nature and that there is no provision for filing of counter-claims or set off before the Tribunal constituted under the Act, and further that while the High Court tries the suits of the value of Rs. 5 lakhs to Rs. 10 lakhs and the District Courts upto Rs. 5 lakhs, the Tribunal, who is equivalent to the rank of the District Judge, will hear suits of the valud of over Rs. 10 lakhs and the Act nevertheless preserving the powers of the High Court under Articles 226 and 227 of the Constitution. It is further pointed out that the procedure prescribed under section 19 of the Act defeats the vested rights of defence which are available to the defendant in a regular civil suit and further that no reasonable nexus exists in classifying suits filed by the banks and financial institutions on the basis of pecuniary claims, conferring on one set of suits the right of defence available in common law and denying statutorily such rights in suits/proceedings which stand transferred to the Tribunal. We are prima facie of the view that the Act as enacted may, perhaps, be not valid. To us it appears that it will be appropriate to stay the operation of the Act at this stage as otherwise if we do not do that and the petitioners succeed ultimately, it will create a great deal of complications and ramifications will be much more, and in case the petitioners lose the things can be mended. Accordingly, we direct that there shall be stay of operation of this Act in its applicability to the Union Territory of Delhi. Dasti. "

THEREAFTER, after answers to the show cause notices were filed, Rule D. B. was issued and liberty was given to the respondents to file further affidavits. A preliminary objection of the respondents was noted that the petitioners had no locus standi to file the petition.

( 3 ) ON the question of reasonableness of the law as enacted, Mr. Lekhi, learned counsel for the petitioners, REFERRED TO to the Statement of Objects and Reasons while presenting the Bill, which ultimately took the shape of the Act before the Parliament. Earlier an Ordinance called "the Recovery of Debts Due to Banks and Financial Institutions Ordinance, 1993" was promulgated by the President of India on 24 June 1993. The Act replaced that Ordinance. The Statement of Objects and Reasons may be reproduced:-

"banks and financial institutions at present experience considerable difficulties in recovering loans and enforcement of securities charged with them. The ex