Punjab National Bank vs Punjab State Industrial Development Corpn. Ltd. And Ors.

Ranjit Singh, J

Punjab National Bank has filed this appeal against the order dated 27th December, 2011 passed by DRT-1, Chandigarh whereby the appeal filed by the Punjab State Industrial Development Corporation Limited against the order passed by the Recovery Officer has been allowed in execution proceeding which was pending for recovery of the amount pursuant to the decree passed by the Civil Court which was transferred to the Tribunal for the purpose of executing the decree. Facts noticed in brief are that the appellant Bank had filed a civil suit before the Sub-Judge 1st Class, Kharrar for recovery of Rs. 1,38,86,452.30 against respondent Nos. 2 and 3. This suit was subsequently transferred to the High Court under Section 446 of the Companies Act vide order dated 12th March, 1987. The suit was ultimately decreed on 5th March, 1992 and an amount of Rs. 1,38,86,452.30 was held recoverable against respondent Nos. 1 to 3 alongwith interest @ 16% per annum from the date of suit till realization. However, the liability of respondent No. 1 war, limited to the extent of Rs. 25 lacs.

The Bank thereafter filed execution before the Company Judge of the High Court for execution of the decree dated 5th March, 1992. The properties of the Company were sold by the Official Liquidator. Since the amount was still recoverable despite the fact that the Company was under liquidation, art application under Section 31 of the RDDBFI Act was filed for transfer of the execution of the decree before the DRT. The Hon'ble High Court vide its order dated 23.10.2003 transferred the execution proceedings to the Tribunal to enable the appellant Bank to proceed against the guarantors. The operative part of the High Court's order while transferring the execution proceedings, is as under-

"The execution proceedings pending in this Court in the matter of M/s. Accumeasure Punjab Limited (in liquidation) are ordered to be transferred to the Debts Recovery Tribunal, Chandigarh to enable the petitioner to proceed against the guarantors only. The petitioner may appear before the Debts Recovery Tribunal on 15.1.2004 for further proceedings."

The case was accordingly transferred to DRT-I, Chandigarh for further proceedings. The High Court had also directed the appellant to appear before the Tribunal on 15th January, 2004. On this date, the Recovery Officer proceeded to execute the decree dated 5th March, 1992 and issued notice against the guarantors. On receipt of the notice of execution from the Recovery Officer, the appellant and CD No. 4, who is respondent No. 1 here in the present appeal, appeared and filed an application on 17th August, 2004 contending that after amendment of the RDDBFI Act, 1993 Section 31-A has been incorporated and as per this section the appellant must obtain a certificate under Section 31-A for seeking execution of the decree. Plea by respondent No. 1 was that unless and until certificate under Section 31-A is issued, the Recovery Officer will have no jurisdiction to proceed against the appellant.

The Counsel for the appellant appearing before the Recovery Officer refuted the submissions so advanced on behalf of respondent No. 1. The Counsel maintained that there is no requirement to obtain the Recovery Certificate in terms of Section 31-A of the RDDBFI Act. The Recovery Officer on the basis of submissions made dismissed with the said application vide his order dated 4th September, 2008. Against this order, respondent No. 1 filed appeal before the Presiding Officer, DRT-1, Chandigarh under Section 30 of the RDDBFI Act. The Tribunal below has passed the impugned order allowing the appeal and setting aside the recovery proceedings pending before the Recovery Officer. The Tribunal below has further observed that the issue of limitation would be considered on filing of an appropriate application by the appellant for issuance of Recovery Certificate Aggrieved against this order, the present appeal is filed.

Counsel for the appellant would contend that once execution proceedings were transferred to the Tribunal below, it would not have jurisdiction to interfere with the decree passed by the Civil Court which in this case is the High Court. The Counsel would contend that there was no requirement for moving an application under Section 31-A of the RDDBFI Act for obtaining Recovery Certificate for the purpose of execution of the decree which is already passed. The submission made the appellant's Counsel is vehemently countered by the Counsel for the respondents herein. As per the Counsel for the respondents, Section 31 of the RDDBFI Act talks about the transfer of pending cases whereas on such transfer power of the Tribunal to issue Certificate of Recovery in the case of decree or order would have to be passed under Section 31-A of the RDDBFI Act.

Section 31-A' of the RDDBFI Act has been introduced by way of amendment in the year 2000 Section 31 of the RDDBFI Act has been enacted for transfer of pending cases. This section provides that every suit or other proceeding pending before any Court before the date the Tribunal is established under this Act shall stand transferred on the date to such Tribunal where cause of action in a suit or proceeding is so based that if it had arisen after establishment of the Tribunal that it would have fallen within the jurisdiction of such Tribunal. Section 31 of the RDDBFI Act is reproduced as under:

"31. Transfer of pending cases--(1) Every suit or other proceeding pending before any Court immediately before the date of establishment of a Tribunal under this Act, being a suit or proceeding the cause of action where on it is based is such that it would have been, if it had arisen after such establishment, within the jurisdiction of such Tribunal, shall stand transferred on that date to such Tribunal

Provided that nothing in this sub-section shall apply to any appeal pending as aforesaid before any Court.

(2) Where any suit or other proceeding stands transferred from any Court to a Tribunal under Sub-section (1)--

(a) the Court shall, as soon as may be after such transfer forward the records of such suit or other proceeding to the Tribunal, and

(b) the Tribunal may, on receipt of such records, may proceed to deal with such suit or other proceeding 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 from any earlier stage as the Tribunal may deem fit."

The provision of Section 31 of the RDDBFI Act came up for consideration before the Courts Bombay High Courts in the case of Bank of India v. Shree Satya Corporation & Ors., III (2002) BC 377 (DB) : 2001(1) Bom. CR 547, has considered the view earlier held that the execution proceedings pending before the High Court were not required to be transferred to DRT as the execution would not fall within the definition of "other proceedings" used in Section 31(1) of RDDBFI Act. In another judgment Bank of Maharashtra v. Konkan Chemicals Pvt. Ltd. the same High Court had held that execution proceedings which were pending before the High Court prior to establishment of DRT need not be transferred to DRT. A view was that the language of Section 31 of the RDDBFI Act did not contemplate transfer of decree to the Recovery Officer for execution thereof and the DRT contemplates two things namely culmination of decree by the DRT and recovery of debt by the Recovery Officer. The words "suit" or "proceeding" used in Section 31 of the RDDBFI Act were held to mean that it will not apply to the suit, which is disposed of. It was held that the words "other proceeding" are to be read ejusdem generis with the word "suits". Accordingly, it was viewed that the execution proceedings could not be transferred to the Debts Recovery Tribunals.

Perhaps noticing this lacuna found in the Act, an ordinance was issued in the year 2000 to fill up the same. Ultimately, Section 31-A Act has been introduced which has also come up for consideration in Bank of India case (supra). It is observed that while under the old Section 31 of the RDDBFI Act, the Debts Recovery Tribunal was bound to continue with the transferred proceedings de novo, but these words were omitted by amending Ordinance and now it was made clear that the transferred proceedings would continue from the stage at which they were. It was further viewed that the words "other proceedings" had to be given due weight and the phraseology used in Section 31 what is really conveyed after the amendment is that every suit or proceeding pending before any Court before the date of establishment of the Tribunal which was based on the cause of action cognizable by the DRT shall stand transferred to the DRT automatically. The DRTs are now to proceed with such suit or proceeding from the stage which was reached before such transfer or from any earlier stage as the DRTs may deem it. Thus, the decrees which have not yet been executed are now required to be transferred to the DRT for the purpose of execution.

One situation is where the decree holder may apply to the DRT to pass an order for recovery of the amount under decree and on receipt of such application; the DRT may issue a certificate for recovery to the Recovery Officer. If wording of Section 31-A of the RDDBFI Act is noticed, then it will clearly show that it empowers the Decree Holder to apply to the Tribunal to pass an order for recovery of the amount Section 31 of the RDDBFI Act, on the other hand, rather mandates for transfer of pending cases of those suits or proceedings where cause of action is such which would lie within the jurisdiction of the DRT for its transfer to the Tribunal The words used are "shall stand transferred on that date to such tribunal". It can be observed that this transfer is automatic. In this case, an application was filed before the High Court where the execution was pending and the case was transferred to the Tribunal Though such case was required to be automatically transferred, but still it was so transferred on an application filed by the Bank. Whether requirement of issuing Recovery Certificate in such case would arise, thus, would be the question? This may not get straight answer.

In Punjab National Bank, Dasuya v. Chajju Ram and Ors., V (2000) SLT 802 : 2000(6) SCC 655, the Hon'ble Supreme Court has considered the case where the appellant therein had filed an execution application before the Civil Court but subsequently moved the Court for transfer of execution proceeding to the Tribunal, which was allowed. This order was reversed by the High Court. The Hon'ble Supreme Court considered the question whether the Tribunal had jurisdiction or such an execution had to be decided only by the Civil Court. While setting aside the judgment passed by the High Court, it is held that Section 31 of the RDDBFI Act not only contemplates transfer of suit, but also transfer of proceedings which may be other than a suit, like execution application. As is observed by the Apex 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 execution application if the decree is for more than Rs. 10 lakh, then that is the cause of action or the reason for an application for execution being filed before the Tribunal. The Court has gone on to observe that to put matters beyond any doubt, the RDDBFI Act has been amended and Section 31A inserted. Reading the provisions of Sections 31 and 31-A of the RDDBFI Act would make one thing clear that the pending cases can be transferred to the Tribunal whatever may be the stage. Doubt in this regard has now been removed by the Legislature that even at the stage of execution when the decree has already been passed by any 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 31-A are examined, it may emerge that these provisions may have to read together. The Act having been enacted in the year 1993, Section 31-A was inserted w.e.f. January 17, 2000. The only need for introducing such provision was that there was some grey area in those cases where the Civil Court has already passed the decree. In such cases, the question which would have arisen would be whether such decree passed by the Civil Court is to be executed by the Civil Court or has to be transferred to the Tribunal for execution. Though as per Section 31 of the RDDBFI Act also, the case could be transferred at the execution stage, but still Section 31A of the RDDBFI Act has now made this position very clear and has removed all the doubts. It can be said that these two sections are deeply interconnected. Section 31A is only extension of Section 31 of the said Act. That being the position, determination of debt by the Civil Court would take the shape of determination by the Tribunal. In this background, submission that there was need to make an application under Section 31A of the RDDBFI Act for issuing Recovery Certificate to continue with the execution proceedings may not be fully in consonance with the provisions of the Act. Even if for the sake of arguments, it is to be so held, then it would incumbent upon the Tribunal below to act in accordance with law on the basis of the provisions of Sections 31 and 31A of the RDDBFI Act. Transfer of cases, whatever be the stage, being automatic will take place by operation of law. Once the case reaches the Tribunal, as in the present case, it was for the Tribunal to consider whether there was any need or requirement to issue a Recovery Certificate. The order passed by the High Court would clearly show that the case was transferred to the Tribunal below and not to the Recovery Officer. The parties were also directed to appear before the Tribunal below and indeed they were bound to appear before the Tribunal below. It is the Tribunal below which perhaps had transferred the execution application to the Recovery Officer. If there was need under law to issue a Recovery Certificate then the Tribunal ought to have complied with that requirement before sending the case so transferred by the High Court, to the Recovery Officer.

Even if for some reason this was not done earlier, and view was that it is required to done, the Tribunal below could have taken action even now in accordance with law instead of passing the impugned order setting aside the complete execution and thus bringing the decree passed by the High Court to a naught.

The Tribunal below had also noticed the view expressed by the DRAT in the case of Subhash Kumar Anand v. Punjab and Sind Bank, II (2000) BC 70 : 2000 ISJ (Banking) 142 that the jurisdiction of the Recovery Officer did not depend upon issuance of Recovery Certificate particularly when execution petition pending in Civil Court is transferred to the DRT for proceeding from the stage it reached before it on transfer. In this order, the Tribunal had, however, made it clear that after the decrees are passed by the Civil Courts and execution petitions are not filed by those decree holders in the Civil Courts, the Decree Holder want to file fresh execution petition after the Act, necessarily they will have to apply to Debts Recovery Tribunal for that purpose and in that case by virtue of the aforesaid provisions, the Presiding Officer will examine the same and issue certificate and forward the same to the Recovery Officer for recovery of the dues. This view of the DRAT was, however, not followed by the Tribunal below in view of the judgment rendered by the Bombay High Court in the case of Bank of India v. Shree Satya Corporation, III (2002) BC 377 (DB) : 2001 ISJ (Banking) 337. As per the Tribunal below, ratio of law laid down in Subhash Kumar Anand (supra) was not applicable to the facts of the present case as it was prior to the amendment Ordinance dated 17th January, 2000. The Tribunal below in my considered view has failed to appreciate the fact that amendment introduced in the form of Section 31A of RDDBFI Act has only clarified the position which was apparent from the provision of Section 31 of the RDDBFI Act as well. In this regard, view expressed by the Hon'ble Supreme Court in the case of Chajju Ram (supra) may be relevant. The Hon'ble Supreme Court even in that case of Allahabad Banks. Canara Bank and Another, I (2000) BC 627 : III (2000) CLT 129 (SC) : IV (2000) SLT 325 : JT 2000(4) 411 has already held that the word "proceeding" in Section 31 would include an execution proceeding pending before a Civil Court before the commencement of the Act. The Hon'ble Apex Court, in this case has further held that the suits and proceedings so pending would stand transferred to the Tribunal. The Court in Chajju Ram's case (supra) then considered the provisions of Section 31 of the RDDBFI Act and has observed that a bare reading of the aforesaid section shows that execution application being proceeding pending in a Civil Court when the Act came into force was liable to be transferred to the Tribunal as the amount for which execution application was filed as per the decree was over Rs. 10 lacs. The plea that use of words "cause of action" in Section 31 of the RDDBFI indicated that only pending suit could be transferred was not accepted. The Court has observed that the words "cause of action" are preceded by words "being a suit or proceeding". Section 31 of the RDDBFI Act contemplates not only the transfer of a suit but also transfer of a proceeding which may be other than the suit, like execution application. The Court has then observed that to put the matters beyond doubt, the Act has been amended by inserting Section 31A which clearly is attracted in such like cases. After the amendment, it is only the Tribunal below which would have the jurisdiction of entertaining an application for execution of decree where the decree sought to be executed is over Rs. 10 lacs. In this background, the observation that the view expressed by this Tribunal was prior to the issuance of Ordinance was not very material for considering this issue. In any event, once it is viewed that the jurisdiction to execute the decree passed by the Civil Court, if it is for recovery of more than Rs. 10 lacs, would be exclusively with the Tribunal than execution ought not to have been brought to halt in this manner or could not have been brought to halt in this manner. If the Tribunal below felt that there is a need to issue a Recovery Certificate, it could still do so while entertaining the appeal instead of setting aside the entire execution proceedings. It is not a case where the party was seeking execution but a case where execution proceedings has been transferred for the purpose of execution of decree and the responsibility to act in accordance with law would equally be that of the Tribunal as well. Accordingly, the order under appeal cannot be sustained and is set aside. The case is remanded back to the Tribunal below to consider the case afresh if it viewed that there is need for issuance of Recovery Certificate for execution of the decree, then the Tribunal below may pass appropriate order in this regard Once the case is transferred at execution stage, it would be the responsibility of the Forum under the Acts to ensure execution of the decree and this action be taken without any further delay. Thereafter, the Recovery Officer shall continue with the recovery proceedings. The appeal is accordingly disposed of in the above terms.