Cases Brief

1. Transcore v UOI

1. Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest

(SARFAESI/NPA) Act, 2002: Ss. 13 (2), 13(4), 17 (1)
2. Recovery of Debts Due to Banks and Financial Institutions (RDDBFI/DRT) Act, 1993- Ss. 19 (1)
 Under the first proviso of S, 19(1), the bank or FI may, with the permission of the DRT, on an
application made by it, withdraw the O.A. for the purpose of taking action under the NPA
Act, if no such action has been taken earlier under that Act.
 Under the second proviso, it is further provided that, any application made for withdrawal
to the DRT under the first proviso shall be dealt with expeditiously and shall be disposed of
within thirty days from the date of such application.

FACTS:

An Original Application (O.A.) was filed by Indian Overseas Bank (Bank) before the DRT,
Chennai for recovery of dues from M/s Transcore (T) and bring the properties to sell. The
claim was disputed. Later on, a notice under Section 13(2) of the SARFAESI Act was issued
vide which T was called upon to repay the amount due together with interest within sixty
days. T failed to repay the amount. The Bank took the possession of the immovable
properties and the same became subject to the charge of the Bank.

CONTENTIONS

Transcore:

1. The Bank could not have invoked the SARFAESI Act under the proviso to Section 19(1) of the
DRT Act without the prior permission of the Tribunal before whom the O.A. was already
pending.
2. The Notice under Section 13(2) of the SARFAESI Act was merely a show cause notice and
such a Notice did not constitute an action in terms of the first proviso to the said Section
19(1) of the DRT Act. Consequently, the Bank was duty bound and obliged to make an
application to the DRT seeking withdrawal of the O.A.
3. Since, the proviso has not been complied with by the Bank the Possession Notice/ Order
issued by the Bank under Section 13(4) of the NPA Act was illegal and bad in law and liable
to be set aside.
4. The doctrine of election is applicable. The doctrine is a branch of the rule of estoppel which
postulates that when two remedies are available for the same relief, the
aggrieved party has an option to elect either of the two but not both.
 Bank:

1. The proviso to S. 19(1) of the DRT Act is an enabling provision and banks and financial
institutions have an independent right to recover debts;
2. Banks/Financial Institutions (FIs) are not mandatorily obliged to obtain the prior leave of
DRT and the said proviso is not a condition precedent to taking recourse to the NPA Act.
3. NPA Act is the special Act whose provisions override all other laws inconsistent therewith.

ISSUE: Whether withdrawal of Original Application (O.A.) in terms of the first proviso to
Section 19(1) of the RDDBFI Act is a condition precedent to taking recourse to the
SARFAESI Act, 2002.

HELD:

The Apex Court in this case pointed out some crucial differences and similarities between
the DRT Act and NPA Act in terms of their relief, object and purpose, etc. apart from
clarifying the meaning of certain related terms.

2. Narendra Kantilal Shah v Joint Registrar of Cooperation Society Bombay

A batch of writ petitions has been placed before this Bench. The principal question of law
that arises for consideration is "do the courts and authorities constituted under the
Maharashtra Cooperative Societies Act, 1960 (the 1960 Act)and the Multi-State Co-
operatives Societies act, 2002 (the 2002 Act) continue to have jurisdiction to entertain
applications/disputes submitted before them by the Cooperative Banks incorporated under
the 1960 Act and the 2002 Act for an order for recovery of debts due to them, after
establishment of a Tribunal under the Recovery of Debts Due to Banks and Financial
Institutions Act, 1993. (the 1993 Act ). "
(2.)THE events that led to the placing of all these petitions before us are that the shamrao
Vithal Co-operative Bank Ltd. , a scheduled Multi-State Co-operative Bank, filed an
application before the Debts Recovery Tribunal constituted under the 1993 Act for recovery
of certain amounts from M/s. Star Glass Works. Before the Debts Recovery Tribunal an
objection was raised to the jurisdiction of the Debts Recovery Tribunal to entertain the
proceedings on the ground that the applicant/bank was a Co-operative bank and not a
company incorporated under the Companies Act, 1956. That objection was upheld by the
Debts Recovery Tribunal. An appeal preferred against the that order of the DRT before the
Appellate Tribunal was also dismissed. Therefore, the writ Petition No. 835 of 2002 was filed
in this Court challenging those orders. That writ petition was decided by the Division bench
of this Court by judgment dated 17/ 18th Dec. , 2002 (2003 (2) All MR 583 : (AIR 2003 Bom
205 ). The Shamrao Vithal Co-operative Bank Ltd. v. M/s. Star Glass Works. By that judgment
this Court set aside the order passed by the DRT as also the Appellate Tribunal. This Court
held that the Debts recovery Tribunal constituted under 1993 act possess the jurisdiction to
entertain an application for recovery of debts due to it submitted by a Co-operative Bank.
 The Division Bench after referring to the provisions of Section 56 of the Banking Regulation
Act, 1949, in detail, held that the Co-operative bank is a bank within the meaning of Section
2 (d) of 1993 Act and therefore the only remedy available in terms of the provisions of the
1993 Act to Co-operative Bank after constitution of the tribunal under 1993 Act for recovery
of dues due to it is to apply to such a tribunal for an order.
(3.)IT appears that Shri Narendra Kantilal shah filed Writ Petition No. 6029 of 2002 in this
Court praying for an order setting aside the recovery certificate dated 6th Sept. , 2000
issued by the Asst. Registrar, Co-operative societies as also the warrant of attachment
issued pursuant thereto. It appears that the recovery certificate has been issued by the asst.
Registrar in exercise of his power under Section 101 of 1960 Act on the application made by
the Jankalyan Sahakari Bank ltd. , which was joined as Respondent No. 3 in that writ
petition. When that petition came up for admission before the learned Single judge of this
Court, it appears that the judgment of the Division Bench in the case of shamrao Vithal Bank
referred to above was relied on by the petitioner. The learned Single Judge, however, it
appears was of the opinion that the Division Bench in its judgment referred to above did not
consider that the 1960 Act has been enacted under Entry 32 of the List II in the Seventh
Schedule of the Constitution of India. The learned Single Judge observed that considering
the importance of the question it would be appropriate to place the papers before the
hon'ble the Chief Justice, so that the matter can be referred to the Full Bench. It appears
that, thereafter, papers were placed before the Hon'ble the Chief Justice, who decided to
refer to the matter to the Full bench. It further appears that some writ petitions came up
before the Division Bench of this Court, which also directed that the matter should be
placed before the Full bench. This is how all these petitions have been placed before us for
deciding the above referred questions.

Relevant section and act- not sure

Section 2 of RDDFBI act

3. Sardar Prem Singh Vs Bank of Baroda and Others

Acts Referred:

 Constitution of India, 1950 — Article 226

In this petition the name of Sri Kuldeep Saxena has been shown for the petitioner. Mr.
Pradeep Kumar, learned Counsel for the respondent Bank of Baroda states that whenever
the case is listed an illness slip is sent by the petitioner. Since the impugned recovery is of
more than Rs. 60 lakhs (sixty lakhs) we are not inclined to adjourn this petition.
2. The order sheet of the case of 7.11.2000 shows that there is a detailed order of the
Division Bench of this Court stating that this is the 7th writ petition filed by the petitioner
challenging the recovery. In our opinion this is clear abuse of the process of the Court. In the
order dated 7.11.2000 it has also been stated that prima facie the allegations of the
respondents appear to be correct.,
3. The petitioner has prayed for one time settlement, but it is well settled that there is no
right to a party to get one time settlement vide MM. Accessories v. U.P. Financial
Corporation 2002 ALR 261.
4. Granting one time settlement is really re-scheduling of the loan, and only the Bank can do
that. This Court under Article 226 of the Constitution cannot direct for one time settlement.
The Court can only interfere when there is violation of law, but no such violation has been
pointed out.
5. Learned Counsel for the petitioner has referred to the guidelines of the Reserve Bank of
India for recovery of non-performing assets mentioned in the letter of respondent No. 1
dated 24.8.2000 (Annexure-1 to the petition). In our opinion these guidelines are only for
the internal guidance of the Banks and the Financial Institutions, but a party who has taken
the loan cannot derive any benefit from these guidelines, and these guidelines of the
Reserve Bank of India do not confer any right on a party which has taken the loan to get one
time settlement. These guidelines are purely executive instructions and not statutory
directions. Hence no right can be claimed by anyone on their basis.
6. It is well settled that purely administrative instructions are not enforceable in a Court of
Law vide G.J. G.J. Fernandez Vs. State of Mysore and Others, , The State of Maharashtra and
Another Vs. Lok Shikshan Sansatha and Others, , Union of India v. Maiji AIR 1977 SC 257
(paras 31 -36), Jt. Chief Controller. Joint Chief Controller of Imports and Exports, Madras Vs.
Aminchand Mutha Etc., , State of Assam and Another Vs. Ajit Kumar Sharma and
Others, , Satyanarayan Laxminarayan Hegde and Others Vs. Millikarjun Bhavanappa
Tirumale, , Rowther v. S.T.A.T. AIR 1959 SC 896, Nagendra Nath Bora and Another Vs. The
Commissioner of Hills Division and Appeals, Assam and Others, , etc.
For the reasons given above, this petition is dismissed.

4. Ruff v. Webb: The order must be an imperative and not a mere request although it may
be politely worded. The order must be unconditional.

5. Does not exist- Pannalal v Hargopal Khudiram

6. JAGJIVAN MAVJI VITHLANI Vs. RANCHHODDAS MEGHJI

Act referred- Negotiable Instruments Act, 1881 (XXVI of 1881) ss. 7, 32,
61, 64, 78-Drawee, liability of-Acceptance-Bill payable at
sight -Presentment-Acceptance-Oral-Whether valid.

The suit out of which this appeal arises, was instituted by the appellant on a hundi for Rs.
10,000 dated 4-12-1947, drawn in his favour by Haji Jethabhai Gokul and Co. of Basra on the
respondent, who are merchants and commission agents in Bombay. The hundi was sent by
registered post to the appellant in Bombay, and was actually received by one Parikh Vrajlal
Narandas, who presented it to the respondents on 10-12-1947, and received payment
therefor.
It may be mentioned that the appellant had been doing business in forward contracts
through Vrajlal as his commission agent, and was actually residing at his Pedhi. On 12-1-
1948, the appellant sent a notice to the respondents repudiating the authority of Vrajlal to
act for him and demanding the return of hundi, to which they sent a reply on 10-2-1948
denying their liability and stating that Vrajlal was the agent of the appellant, and that the
amount was paid to him bona fide on his representation that he was authorised to receive
the payment.

(2.)On 9-12-1950 the appellant substituted the present suit in the Court of the City Civil
Judge, Bombay. In the plaint he merely alleged that the payment to Vrajlal was not binding
on him, and that "The defendant-drawee" remained liable on the hundi. The defendants,
apart from relying on the authority of Vrajlal to grant discharge, also pleaded that the plaint
did not disclose a cause of action against them, as there was no averment therein that the
hundi had been accepted by them.
(3.)As the trial the appellant gave evidence that Vrajlal had received the registered covered
containing the hundi in his absence, and collected the amount due thereunder without his
knowledge or authority. The learned City Civil Judge accepted this evidence, and held that
Vrajlal had not been authorised to receive the amount of the Hundi. He also held that the
plea of discharge put forward by the respondents implied that the hundi had been accepted
by them. In the result, he decreed the suit.

7. RAMAWATI SHARMA Vs. UNION OF INDIA

Acts referred- Section 138 in The Negotiable Instruments Act, 1881

Article 14 in The Constitution Of India 1949
The Negotiable Instruments Act, 1881
Article 21 in The Constitution Of India 1949
Article 19 in The Constitution Of India 1949

(1.)The basic prayer in both these writ petitions cover the constitutional validity of Section
138 of the Negotiable Instruments Act (for short, N.I. Act). The petitioners in these two
matters have been prosecuted for an offence under Section 138 of the N.I. Act as the
cheques they had issued to pay up their debts had bounced for lack of proper fund in the
respective accounts. The provisions under the aforesaid section have been challenged as
violative of Articles 14, 19, 20 and 21 of the Constitution of India, hence a prayer was made
to declare the provisions ultra vires of the Constitution and to further quash the criminal
proceedings initiated under that section against the petitioners.

(2.)The case against Ramawati Sharma was filed by Rahul Malaviya in complaint No. 5376 of
1995 and the gist of the complaint case is that the accused had taken a loan from the
complainantand with a view to repay the same she had issued a cheque dated 30-4-95 The
cheque was drawn on the Kisanganj Branch of Allahabad Bank at Delhi, and it was deposited
in Indian Overseas Bank, Allahabad. The cheque could not be encashed as the drawer of the
cheque had directed that no payment under the cheque should be made. When the
complainant made enquiries from the accused, an explanation was given that payment was
directed to be stopped as she had no adequate sum to meet the cheque. On the request of
the accused, the cheque was withheld for some time and was placed in the bank again on 8-
9-1995 and it had bounced again with the same note that payment had been stopped.
Accordingly, a notice as required under the law was served upon the accused, but despite
receipt of the notice the sum under the cheque amounting to Rs.30,000.00 was not paid.

(3.)In the other case, the same Rahul Malaviya filed a complaint against the accused Rama
Shankar Sharma and Suresh Chandra Sharma. Here also a cheque of Rs. 30,000.00 was
issued by the accused for repayment of a loan and the cheque was drawn on Canara Bank,
Wazirpur Branch, Delhi, dated 30-4-1995 The cheque was deposited in Indian Overseas
Bank, Allahabad, and the complainant was informed that the cheque could not be encashed
as there was no sufficient deposit in the account against which the cheque was drawn. The
complaint was filed after due notice and after failure of the accused to pay the sum under
the cheque.