- (1.) Two important questions of law arise for consideration in the present first appeal and on this arguments of not only learned counsel for the appellants and respondents were heard by this Court at length, but besides that learned counsel appearing in other cases involving same question, also addressed the Court in the present appeal as Amicus Curiae and they were heard at length. The questions are- 1) "Whether after enactment of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, ("Securitisation Act" for brief), with effect from 17-12-2002 which contains a bar against exercise of Jurtsdiction by Civil Courts in Section 34 of the said Act, whether the civil suit involving the banks and financial institutions who have taken measures u/S, 13 (4) of the aforesaid Act can be filed and whether the Civil Court in civil suits filed u/S. 9 of CPC can entertain such suits for deciding inter se rights between third parties, including borrower of such banks and financial Institutions and also impleading banks and financial institutions in such suit?" "Whether the Civil Courts while dealing with such civil suits filed u/S. 9 CPC, can grant any injunction against the banks and financial institutions after they have initiated action u/S. 13 (4) of the Securitisation Act, 2002?"
(2.) The factual background giving rise to the present appeal in brief is as under :- The present appellants Mohan Lal and Smt. Prem Bai claimed their right of preemption in respect of suit property and filed a suit for claiming their right of pre-emption on 10-9-1987 in the trial Court with the case set up that one Radha Devi mortgaged the said property in favour of Shri Ram and Dwarka Prasad s/o Shri Ram on 10-9-1981, which was a conditional sale for a period of five years and when the said period of five years expired, the present appellants Mohal Lal and Prem Bai filed the suit for pre-emption, which came to be rejected by the trial Court on 11-1-2001. The plaintiff-appellants Mohan Lal and Prem Bai came up in appeal before this Court namely First Appeal No. 127/2001, which is also pending in this Court. In the said appeal, an injunction came to be passed on 18-4-2003 directing both the parties to maintain the status quo in respect of the property in question., However, before the said stay order was granted after two years of filing of the said appeal on 3-8-2002, the aforesaid mortgagee Dwarka Prasad sold the suit property to one Ghanshyam, who in-turn mortgaged the same to the defendant Bank SBBJ, Jaipur on 2-9-2002 to obtain certain loan. A few days thereafter on 24-9-2005, the present plaintiff-appellants filed another suit in the trial Court, which was a suit for declaration and permanent injunctipn on the basis of pre-emption rights claimed in the aforesaid separate suit, against which the connected appeal is pending in this Court. On 24-1-2006, the defendant-Bank filed application before the trial Court under Order 7, Rule 11, CPC saying that in view of bar of Jurisdiction contained in Section 34 of the Securitisation Act, 2002, the present Suit No. 167/2005 was not maintainable. The trial Court after hearing the arguments accepted the said application under Order 7, Rule 11, CPC and dismissed the suit as not maintainable in view of bar of Section 34 of the Securitisation Act on 30-1-2006, This is the order impugned in the present appeal and has given rise to aforesaid two questions of law. For considering the said questions, it would be important to reproduce certain provisions of relevant statutes. Section 34 to Section 37 of the Securitisation Act are reproduced hereunder :- "34. Civil Court not to have jurisdiction.- No Civil Court shall have jurisdiction to entertain any suit or proceeding in respect of any matter which a Debts Recovery Tribunal or the Appellate Tribunal is empowered by or under this Act to determine and no injunction shall be granted by any Court or other authority in respect of any action taken or to be taken in pursuance of any power conferred by or under this Act or under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993). 35. The provisions of this Act to override other laws.- The provisions of this Act shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law. 36. Limitation.- No secured creditor shall be entitled to take all or any of the measures under sub-section (4) of Section 13, unless his claim in respect of the financial asset is made within the period of limitation prescribed under the Limitation Act, 1963 (36 of 1963). 37. Application of other laws not barred.- The provisions of this Act or the rules made thereunder shall be in addition to, and not in derogation of, the Companies Act, 1956 (1 of 1956), the Securities Contracts (Regulation) Act, 1956 (42 of 1956), the Securities and Exchange Board of India Act, 1992 (15 of 1992), the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993) or any other law for the time being in force."
(3.) Since the main provisions of Section 34 of the said Act refers to "any matter" which a Debts Recovery Tribunal or the Appellate Tribunal is empowered by or under this Act (Securitisation Act) and the bar is against entertainment of any suit or proceedings, it would be necessary to refer to the provisions contained in Section 13, 17 and 19 of the said Act also, "13. "Enforcement of security interest.- (1) Notwithstanding anything contained in Section 69 or Section 69A of the Transfer of Property Act, 1882 (4 of 1882), any security interest created in favour of any secured creditor may be enforced, without the intervention of the Court or tribunal, by such creditor in accordance with the provisions of this Act. (2) Where any borrower, who is under a liability to a secured creditor under a security agreement, makes any default in repayment of secured debt or any installment thereof, and his account in respect of such debt is classified by the secured creditor as non-performing asset, then, the secured creditor may require the borrower by notice in writing to discharge in full his liabilities to the secured creditor within sixty days from the date of notice failing which the secured creditor shall be entitled to exercise all or any of the rights under sub-section (4). (3) The notice referred to in sub-section (2) shall give details of the amount payable by the borrower and the secured assets intended to be enforced by the secured creditor in the event of non-payment of secured debts by the borrower. (3A) If, on receipt of the notice under subsection (2), the borrower makes any representation or raises any objection, the secured creditor shall consider such representation or objection and if the secured creditor comes to the conclusion that such representation or objection is not acceptable or tenable, he shall communicate within one week or receipt of such representation or objection the reasons for non-acceptance of the representation or objection to the borrower. Provided that the reasons so communicated or the likely action of the secured creditor at the stage of communication of reasons shall not confer any right upon the borrower to prefer an application to the Debts Recovery Tribunal under Section 17 or the Court of District Judge under Section 17- A. (4) In case the borrower fails to discharge his liability in full within the period specified in sub-section (2). the secured creditor may take recourse to one or more of the following measures to recover his secured debt, namely :- (a) take possession of the secured assets of the borrower including the right to transfer by way of lease, assignment or sale for realizing the secured asset; (b) take over the management of the busi- ness of the borrower including the right to transfer by way of lease, assignment or sale for realizing the secured asset : Provided that the right to transfer by way of lease, assignment or sale shall be exercised only where the substantial part of the business of the borrower is held as security for the debt : Provided further that where the management of whole, of the business or part of the business is severable, the secured creditor shall take over the management of such business of the borrower which is relatable to the security or the debt; (c) appoint any person (hereafter referred to as the manager), to manage the secured assets the possession of which has been taken over by the secured creditor; (d) require at any time by notice in writing, any person who has acquired any of the secured assets from the borrower and from whom any money is due or may become due to the borrower, to pay the secured creditor, so much of the money as is sufficient to pay the secured debt. (5) Any payment made by any person referred to in Clause (d) of sub-section (4) of the secured creditor shall give such person a valid discharge as if he has made payment to the borrower. (6) Any transfer of secured asset after taking possession thereof or take over of management under sub-section (4), by the secured creditor or by the manager on behalf of the secured creditors shall vest in the transferee all rights in, or in relation to, the secured asset transferred as if the transfer had been made by the owner of such secured asset. (7) Where any action has been taken against a borrower under the provisions of sub-section (4), all costs, charges and expenses which, in the opinion of the secured creditor, have been properly incurred by him or any expenses incidental thereto, shall be recoverable from the borrower and the money which is received by the secured creditor shall, in the absence of any contract to the contrary, be held by him in trust, to be applied, firstly, in payment of such costs, charges and expenses and secondly, in discharge of the dues of the secured creditor and the residue of the money so received shall be paid to the person entitled thereto in accordance with his rights and interests. (8) If the dues of the secured creditor together with all costs, charges and expenses incurred by him are tendered to the secured creditor at any time before the date fixed for sale or transfer, the secured asset shall not be sold or transferred by the secured creditor, and no further step shall be taken by him for transfer or sale of that secured asset. (9) In the case of financing of a financial asset by more than one secured creditors or joint financing of a financial asset by secured creditors, no secured creditor shall be entitled to exercise any or all of the rights conferred on him under or pursuant to sub-section (4) unless exercise of such right is agreed upon by the secured creditors representing not less than three-fourth in value of the amount outstanding as on a record date and such action shall be binding on all the secured creditors: Provided that in the case of a company in liquidation, the amount realised from the sale of secured assets shall be distributed in accordance with the provisions of Section 529A of the Companies Act, 1956 (1 of 1956) : Provided further that in the case of a company being wound up on or after the commencement of this Act, the secured creditor of such company, who opts to realise his security instead of relinquishing his security and proving his debt under proviso to sub-section (1) of Section 529 of the Companies Act, 1956 (1 of 1956), may retain the sale proceeds of his secured assets after depositing the workmen's dues with the liquidator in accordance with the provisions of Section 529A of that Act : Provided also that the liquidator referred to in the second proviso shall intimate the secured creditors the workmen's dues in accordance with the provisions of Section 529A of the Companies Act, 1956 (1 of 1956) and in case such workmen's dues cannot be ascertained, the liquidator shall intimate the estimated amount of workmen's dues under that section to the secured creditor and in such case the secured creditor may retain the sale proceeds of the secured assets after depositing the amount of such estimated dues with the liquidator : Provided also that in case the secured creditor deposits the estimated amount of workmen's dues, such creditor shall be liable to pay the balance of the workmen's dues or entitled to receive the excess amount, if any, deposited by the secured creditor with the liquidator : Provided also that the secured creditor shall furnish an undertaking to the liquidator to pay the balance of the workmen's dues, if any. Explanation.- For the purposes of this sub-section.- (a) "record date" means the date agreed upon by the secured creditors representing not less than three-fourth in value of the amount outstanding on such date; (b) "amount outstanding" shall include principal, interest and any other dues payable by the borrower to the secured creditor in respect of secured asset as per the books of account of the secured creditor. (10) Where dues of the secured creditor are not fully satisfied with the sale proceeds of the secured assets, the secured creditor may file an application in the form and manner as may be prescribed to the Debts Recovery Tribunal having jurisdiction or a competent Court, as the case may be, for recovery of the balance amount from the borrower (11) Without prejudice to the rights conferred on the secured creditor under or by this section, secured creditor shall be entitled to proceed against the guarantors or sell the pledged assets without first taking any of the measures specified in clauses (a) to (d) of sub-section (4) in relation to the secured assets under this Act. (12) The rights of a secured creditor under this Act may be exercised by one or more of his officers authorized in this behalf in such manner as may be prescribed. (13) No borrower shall, after receipt of notice referred to in sub-section (2). transfer by way of sale, lease or otherwise (other than in the ordinary course of his business) any of his secured assets referred to in the notice, without prior written consent of the secured creditor." 17. "Right to appeal.- (1) Any person (including borrower), aggrieved by any of the measures referred to in sub-section (4) of Section 13 taken by the secured creditor or his authorised officer under this Chapter, (may make an application along with such fee, as may be prescribed) to the Debts Recovery Tribunal having jurisdiction in the matter within forty-five days from the date on which such measures had been taken : (Provided that different fees may be prescribed for making the application by the borrower and the person other than the borrower.) (Explanation.- For the removal of doubts it is hereby declared that the communication of the reasons to the borrower by the secured creditor for not having accepted his representation or objection or the likely action of the secured creditor at the stage of communication of reasons to the borrower shall not entitle the person (including borrower) to make an application to the Debts Recovery Tribunal under sub-section (1) of Section 17.) ((2) The Debts Recovery Tribunal shall consider whether any of the measures referred to in sub-section (4) of Section 13 taken by the secured creditor for enforcement of security are in accordance with the provisions of this Act and the rules made thereunder. (3) If, the Debts Recovery Tribunal, after examining the facts and circumstances of the case and evidence produced by the parties, comes to the conclusion that any of the measures referred to in sub-section (4) of Section 13. taken by the secured creditor are not in accordance with the provisions of this Act and the rules made thereunder, and require restoration of the management of the secured assets to the borrower or restoration of possession of the secured assets to the borrower, it may by order, declare the recourse to any one or more measures referred to in sub-section (4) of Section 13 taken by the secured assets as invalid and restore the possession of the secured assets to the borrower or restore the management of the secured assets to the borrower, as the case may be, and pass such order as it may consider appropriate and necessary in relation to any of the recourse taken by the secured creditor under sub-section (4) of Section 13. (4) If, the Debts Recovery Tribunal declares the recourse taken by a secured creditor under sub-section (4) of Section 13. is in accordance with the provisions of this Act and the rules made thereunder, then, notwithstanding anything contained in any other law for the time being in force, the secured creditor shall be entitled to take recourse to one or more of the measures specified under sub-section (4) of Section 13 to recover his secured debt. (5) Any application made under sub-section (1) shall be dealt with by the Debts Recovery Tribunal as expeditiously as possible and disposed of within sixty days from the date of such application : Provided that the Debts Recovery Tribunal may, from time to time, extend the said period for reasons to be recorded in writing, so, however, that the total period of pendency of the application with the Debts Recovery Tribunal, shall not exceed four months from the date of making of such application made under sub-section (1). (6) If the application is not disposed of by the Debts Recovery Tribunal within the period of four months as specified in subsection (5), any party to the application may make an application, in such form as may be prescribed, to the Appellate Tribunal for directing the Debts Recovery Tribunal for expeditious disposal of the application pending before the Debts Recovery Tribunal and the Appellate Tribunal may, on such application, make an order for expeditious disposal of the pending application by the Debts Recovery Tribunal. (7) Save as otherwise provided in this Act, the Debts Recovery Tribunal shall, as far as may be, dispose of application in accordance with the provisions of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993) and the rules made thereunder.)" 19. Right of borrower to receive compensation and costs in certain cases.- If the Debts Recovery Tribunal or the Court of District Judge, on an application made under Section 17 or Section 17A or the Appellate Tribunal or the High Court on an appeal preferred under Section 18 or Section 18A, holds that the possession of secured assets by the secured creditor is not in accordance with the provisions of this Act and rules made thereunder and directs the secured creditors to return such secured assets to the concerned borrowers, such borrower shall be entitled to the payment of such compensation and costs as may be determined by such Tribunal or Court of District Judge or Appellate Tribunal or the High Court referred to in Section 18B.";