Neelima Sheetal Kitchloo vs Bank Of India

Ranjit Singh, J

Bank of India filed an application for issuance of Recovery Certificate (R.C.) for a sum of Rs. 3,66,38,122.54 along with future interest. As per the applicant bank, it had granted Overdraft limit and Foreign Bill Purchase (FBP) limit to M/s Great Fortune Trading Ltd. on 29.10.2005 at its Hong Kong branch. M/s Great Fortune Trading Ltd. was wound up on 27.12.2006 and one of its Director Mr. Ravinder Koul Kitchloo was declared insolvent on 23.5.2007. The bank, thereafter, filed claim before Official Receiver and prayed for recovery of banks' dues against appellant-defendant Smt. Neelima Sheetal Kitchloo. A decree/judgment dated 15.5.2008 was passed by the Hon'ble High Court of Hong Kong against the appellant in the sum equivalent of Rs. 3,27,13,678.34 plus interest @6% p.a. w.e.f. 28.2.2008. This decree is sought to be executed now through the Tribunal below.

When this application was filed, the appellant herein raised an objection before the Tribunal below about the maintainability of the same pleading that it was liable to be dismissed on the ground that it is ex parte foreign decree passed by the High Court of Hong Kong and the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (for short, the RDDBFI Act) does not contain any provision qua the foreign Court for execution of the decree 'passed by foreign Courts. The Tribunal, after hearing the counsel and relying upon the provisions of section 31A of the RDDBFI Act, allowed the execution application and directed the appellant to pay to the applicant bank within 30 days a sum of Rs. 3,27,13,678.34 along with cost, expenses and interest @6% p.a. w.e.f. 28.2.2008 till the date of realization. If the appellant fails to pay the aforesaid amount, the same was ordered to be recovered from the mortgaged property, i.e., (i) freehold residential apartment No. 155 W2C, (15th floor) Wellinghton Estate, DLF City-V, Gurgaon, Haryana along with parking space No. 2CO-38 in the said building, (2) freehold property bearing Plot No. T-60 (area 1 Kanal & 16 Marlas) in Killa No. 67/22/6, in the revenue estate of Village Chauma, Tehsil & District Gurgaon, Haryana and (3) freehold residential House No. 101/52, Silver Oak Apartments, DLF City, Phase-I, Gurgaon, Haryana. Against this order, the appellant has preferred the present appeal.

The first hurdle which the appellant has to confront is the requirement of pre-deposit. The learned counsel for the appellant relied upon the judgment in the case of Almania Foods & Ors, vs. Catholic Syrian Bank (M.A. No. 292/2002 in Misc. Appeal No. 256/2001, decided on 26.6.2002 to urge that the requirement of pre-deposit would not arise in the present appeal in view of the law laid down in this case. His plea is that the impugned order is challenged only on the ground of jurisdiction. Notice in the appeal was issued subject to the final outcome of these contentions raised in regard to the requirement of pre-deposit.

The respondent stands served. Counsel appearing for the respondent submits that the appeal cannot be entertained without the pre-deposit and since no prayer or application has been moved seeking waiver of the pre-deposit, the appeal is liable to be dismissed on this short ground. Before proceeding further, this issue whether there would be a requirement of pre-deposit in terms of the provisions in the relevant statute would have to be considered first.

Counsel for the appellant has been rather emphatic that the requirement of pre-deposit does not arise in this case and in support has made reference to the provisions of section 21 of the RDDBFI Act. As per the counsel, an appellant is required to meet the condition of pre-deposit in that case where an amount of debt is due to the bank or financial institution or a consortium of banks and financial institutions has been determined by the Tribunal under section 19 of the Act. The counsel would contend that there had been no determination of the debt under section 19 and hence the question of any pre-deposit as a requisite for entertaining the appeal would not arise in this case. In support, the counsel would submit that there is no challenge to the impugned order on merit and there is no decree under section 19 of the RDDBFI Act and further that only issue raised by the appellant before the Tribunal below was that the foreign decree is not executable by the Tribunal. Since the Tribunal has not determined any debt which is due, therefore, the requirement of pre-deposit would not arise in the present appeal, says the counsel.

The counsel has referred to some precedents but basically rely upon the Almania Foods' case (supra). The counsel would refer to that portion of the judgment where the Tribunal has given illustration about the types of order that can be made under the Act against which the appeal may be preferred. In this case, Tribunal has considered the question whether the provisions of section 21 of the Act would be attracted in an appeal against all the kinds of orders. The Tribunal, thereafter, has grouped orders in three broad categories and has held that from the scheme of the Act it is clear that when final order is passed by the Tribunal, in which a debt has been determined against the defendants, is sought to be reviewed by the defendants or anyone of them, there is no provision in the Act requiring that defendant(s) to deposit 75% of the amount determined.

Considering the provisions of section 21 of the Act, the Tribunal has observed that this section has been enacted with the purpose that no frivolous appeal is filed and while admitting the appeal the interest of the banks/financial institutions is taken care of. Accordingly, the Tribunal has viewed that section 21 of the Act applies only in those appeals by the judgment-debtors where the order by which debt has been determined by the Tribunal against the appellant is under challenge. Explaining further, the Tribunal has held that where the appellant does not challenge the determination of the debt against the appellant and the impugned order is other than the one by which debt as been determined, the provisions of section 21 of the Act shall not come into operation.

The counsel has referred to the case New India Assurance Co. Ltd. vs. Union Bank. of India, I (2007) BC 40. In this case, appeal was against an order refusing to set aside the ex parte final order. Relying upon the law laid down in Almania Food's case (supra), the Tribunal took a view that section 21 of the Act is not applicable in such a case and the appellant in that case was not required to make any pre-deposit. The counsel has also referred to Motia Rani & Ors. vs. Punjab national Bank & Ors, I (2004) BC 170, which was a case where the appellant being a defendant in the O.A. was not served with the notice. The Tribunal found that there is no justification for ordering substituted service. The question which arose in the case was whether there would be any requirement of compliance of the condition provided in section 21 of the Act or not. Tribunal, while relying upon the judgment in Almania Foods's case, has taken a view that in appeal of this nature there is no need for complying with the provisions of section 21 of the Act.

On the other hand,the counsel for the respondent bank has referred to the provisions of section 31 of the Act, which provides for transfer of pending cases. As per the counsel, all suits or other proceedings pending before any other Court immediately before the date of establishment of the Tribunal are required to be transferred to such Tribunal. The appeals, however, are not required to be transferred. Section 31(2) regulates the procedure where any suit or other proceedings stand transferred from any Court to a Tribunal under sub-section (1). This sub-section requires the Court to forward the record of such suit or proceedings to the Tribunal and section 31(2)(b) calls upon the Tribunal to act in the same manner on receipt of such record. As per this provision, the Tribunal, on receipt of such records, is required to proceed to deal with such suit, or other proceedings, so far as may be, in the same manner as in the case of an application made under section 19 from the stage which was reached before such transfer or from any earlier stage as the Tribunal may deem fit. Accordingly, the counsel contends that once the case is validly transferred to a Tribunal, then the Tribunal is required to follow the said case as if the case of an application under section 19 and has to proceed further from the stage where it was pending or even can try this case from any earlier stage as the Tribunal may deem fit. The counsel, therefore, would contend that once the case is transferred, then any order passed would be deemed to be an order as if made under section 19 of the Act. That being the position in law, the appellant cannot escape the responsibility of making pre-deposit as required under section 21 of the Act as this case has come before the Tribunal at execution stage.

To meet the objection that section 31 does not relate to a situation Which has been dealt with by the Tribunal below, the counsel for the respondent has referred to section 31A of the Act. This section talks of the power of the Tribunal to issue a certificate of recovery in case of a decree or order. As per this section, where a decree or order passed by any Court before the commencement of the RDDBFI Act, which has not been executed, then the decree-holder may apply to the Tribunal to pass an order for the recovery of the amount. As per the counsel, this section would cover the power of the Tribunal to deal with the decree passed by a foreign Court as well, To buttress his submission, the counsel, has relied on a Supreme Court judgement in the case of Punjab National Bank, Dasuya vs. Chajju Ram & Ors., 2000 (6) SCC 655. This was a case where the appellant therein had filed an execution application before the Civil Court but subsequently moved the Court for transfer of execution proceedings to Tribunal, which was allowed. This order was reversed by the High Court. While dealing with the appeal, the Supreme Court considered the question whether the Tribunal had jurisdiction or such an execution had to be decided only by the Civil Court. The judgment passed by the High Court was set aside. As held by the Court, section 31 of the Act not only contemplates transfer of the suit, but also transfer of proceedings which may be other than a suit, like execution application. As observed by the Hon'ble Court, understood in this context the words being a suit or proceeding the cause of action whereon it is based..' would mean that in the case of an execution application if the decree is for more than Rs. 10 lakhs, then that is the cause of action or the reason for an application for execution being filed before the Tribunal. The Court had then gone on to observe that to put matters beyond any doubt, the RDDBFI Act has been amended and section 31A inserted. A decree passed by a Court before the commencement of the Amendment Act, which had not yet been executed, thus would clearly fall within the purview of section 31A of the Act.

From the above discussion one thing would be clear that there is thus no scope of any doubt that a case can be dealt with by the Tribunal at the execution stage. Appellant has not disputed the jurisdiction of the Tribunal so far as subject matter or cause is concerned. The objection primarily is based on the contention that there is no provision made in the RDDBFI Act for execution of decree or ex parte decree passed by foreign court. This question ultimately is to be decided in the present appeal. The issue at this stage is if the appellant is required to meet with the condition of pre-deposit for being entitled to be heard in appeal. In this regard plea of the counsel for the appellant is that there is no determination under section 19 of the Act and so the appellant cannot be required to meet the condition of pre-deposit as per section 21 of the Act. The question, therefore, now to be considered is whether the impugned order leads to any determination. Undoubtedly, the order creates a liability for the appellant which he is required to discharge and on failure to do so, the property has been put under charge. If we read the provisions of sections 31 and 31A of the Act, one thing becomes very clear that pending cases can be transferred to the Tribunal whatever may be the stage. Doubt, if any, has now been removed by the legislature that even at the stage of execution when a decree has already been passed by any other Court, the same can be transferred to the Tribunal for the purpose of execution if it had not been executed till then. If the provisions of sections 31 and 31A are examined it may emerge that these provisions may have to be read together. Though this Act was enacted in the year 1993, section 31A was inserted w.e.f. 17.1.2000. What could be the need for introducing such a provision? The obvious reason which may come to mind is that there may have been grey area in those cases where the Civil Court had already passed decree. In such cases, the obvious question which would arise would be whether such decree passed by the Civil Court is to be executed by the Civil Court only or it could be or has to be transferred to the Tribunal for execution. Section 31(2)(b) has made a provision that the suit pending before a Civil Court is to be continued from the stage where it has reached before the said Court. Once the transfer of pending cases was provided in the statute and the Tribunal was empowered to deal with such cases on transfer from the stage where it was before the Civil Court and even to deal with such cases from an earlier stage if it so thought fit, the suit at the execution stage could also be transferred before the Tribunal. In order to clarify the doubt, section 31A has been inserted and thus these two sections seem to be inter-connected. Execution is also a stage of a trial in civil suit. Once the legislature has clearly given power to the Tribunal to deal with the cases on transfer even where the decree has been passed but not yet executed, obviously section 31 of the Act cannot be ignored while considering the provisions made in section 31A of the Act. These two sections are deeply interconnected and section 31A is only an extension of section 30 of the Act. In my considered opinion, once it is held that a case can be transferred to the Tribunal at the stage of execution of decree passed by any Civil Court, then the determination of debt by such a Civil Court would become determination by the Tribunal. If the submission made by the counsel for the appellant is accepted, then it may lead to a situation where one may plead that decree passed by Civil Court transferred to the Tribunal for execution would not be a determination by the Tribunal under section 19 of the Act. Once sections 31 and 31A of the Act have made a specific enabling provision for transfer of case to the Tribunal at whatever stage it is pending and have empowered the Tribunal to deal with the case from the stage it deems fit, it cannot be said that the order so passed by the Tribunal, even at the execution stage, would not lead to a determination of debt by the Tribunal under section 19 of the Act. Provisions of section 31 of the Act are rather clear that the case decided on being transferred to the Tribunal would mean determination of debt under section 19 of the Act. Once it is viewed that section 31A of the Act is an extension of section 31 of the Act, which in my view indeed it is, then it is not possible to hold that the case transferred at the stage of execution could not be a determination under section 19 of the Act. The view expressed by the Hon'ble Supreme Court in the case of Punjab National Bank vs. Chajju Ram (supra) is so clear that if the amount due to the bank under decree is more than Rs. 10 lacs, then the execution application could only be entertained by the Tribunal and not by Civil Court. Thus, the execution of the decree passed by foreign Court for more than Rs. 10 lacs is required to be filed before the Tribunal below and not before any Civil Court as Order XXI rule 10 CPC would have no application in view of section 34 of the Act. It can be noticed here that as per section 34 of the Act provisions of this Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in any instrument having effect by virtue of any law other than this Act. In addition, section 18 of the Act bars the jurisdiction of Courts in relation to matters specified in section 17 of the Act. The issue arising in this case has to be determined by the Tribunal. The ratio that can be culled out of Punjab National Bank vs. Chajju Ram (supra) is that if decree is not executed, then it shall be executed by the Authority who has the jurisdiction to do so by amendment.

The only question left to be decided is whether the Tribunal would have jurisdiction to direct execution of the decree passed by foreign Court as that is the limited ground of objection raised before the Tribunal below and has been determined against the appellant. Now the appellant is held liable for the amount which is determined. Appellant has filed appeal against the said liability, may on the ground of jurisdiction. Once the impugned order has directed recovery of the amount determined, which would acquire the status of determination under section 19 of the Act, it may be difficult to escape the requirement of pre-deposit. In may view, the case of Almania Foods (supra) on which the appellant has based her entire case may not come to her rescue. As per this judgment, the cases exempted from the requirement of pre-deposit are those which were categorized in Category - I. In this, category this Tribunal has listed those cases where recovery applications are still pending before the Tribunal. In Category-II are the cases where the Tribunal has determined the debt so due. In such category of cases there is no doubt that pre-deposit is required. It is only some doubt in cases referred to in Category-Ill. Here again the Tribunal has held that where order allowing application of the defendants for setting aside the ex parte decree, or order allowing the application of the bank for restoration of recovery application by setting aside the dismissal of the' recovery application in default, or order dismissing an application of the bank for restoration of the recovery application which has been dismissed in default, the requirement of pre-deposit cannot arise. In this background, this Tribunal has gone on to hold that allowing or rejecting an application for review of the final order would not attract the provisions of section 21 of the Act. As held, section 21 of the Act applies only in those appeals where order determining the debt is either under section 19(2) of the Act or by an interim order under rule 12(5) of the rules made under the Act, directing the defendant to pay the amount as has been admitted by him to be due is challenged. Once it is viewed that application for execution would lie before the Debts Recovery Tribunal, then it is possible to view that the order passed by the Tribunal would be a determination under section 19 of the Act. The objection that foreign decree is not executable by the Tribunal has to be determined in the appeal if it is held to be properly constituted. The view expressed in Almania Foods (supra) does not appear to be attracted to the facts in this case as this issue regarding order passed by Tribunal at execution stage apparently has not been considered by this Tribunal therein. Once the direction is for recovery of the amount on the basis of a decree, this would, in my view, be a determination. The appellant, therefore, cannot escape the liability of requirement of pre-deposit under section 21 of the Act.

There may be a large number of other situations where objection to the jurisdiction may be raised and after determination the appeal may be filed before this Tribunal on the ground that this is not a determination on merit. Reading of section 21 does not show that requirement of pre-deposit would arise only if the Tribunal has to determine an amount due only on the merit of the controversy. That is not even the view in Almania Foods (supra). The Tribunal has certainly come to the conclusion that this amount of debt is due from the appellant and this would be a determination under section 19 of the Act as it is held on examining the provisions of sections 31 and 31A. I am, thus of the view that the appellant cannot escape the responsibility of making the pre-deposit in this case.,

I do not see any merit in the submissions made by the counsel for the appellant and so would reject the same. Let the case now be set down for hearing on 11.4.2014 for further proceedings. The appellant may, in the meantime, take action if she intends to seek any waiver of the requirement of pre-deposit.

Copy of this order be furnished to the parties as per law.