JUDGMENT F.I. Rebello, J.
1. Rule. Heard forthwith.
2. After hearing the counsel for the parties, in our opinion the question that really has to be decided in this petition is as under :
Can the property of the person notified under the Special Courts (Trial of offences Relating to Transactions in Securities) Act, 1992 (hereafter referred to as " Special Courts Act") be sold in execution of the certificate obtained under the provisions of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (hereinafter referred to as "Debt Recovery Act")." under the provisions of the Debt Recovery Act.
The relevant facts which need to be set out are as under :
The Petitioner was declared as a notified party on 6.10.2001. Pursuant to the said notification, considering Section 3(3) of the Special Courts Act, all properties, movable and immovable stand attached simultaneously. The record shows that the Custodian confirmed the attachment on 1.11.2001. The Respondent No. 1 filed an application being Original Application No. 233 of 2002 against the Petitioner herein. The Petitioner took out Misc. Application for impleading the custodian as party in O.A. No. 233 of 2002. That came to be rejected by order dated 16.3.2005. The Petitioner aggrieved by the said order preferred an appeal before the Appellate Tribunal namely D.R.A.T. That came to be rejected by order dated 19.8.2005. The present petition has been filed to challenge that order.
3. Before D.R.T. it was argued on behalf of the Petitioner, that the Custodian under Special Courts Act ought to be joined as necessary party, as the Petitioner was a notified party under the Special Courts Act. This was opposed by the Respondent Bank on the ground that defendant No. 2 has been sued merely as a guarantor and therefore, provisions of the Special Courts Act are not attracted. Before the learned Member of the D.R.T. it was contended that Section 9A of the Special Courts Act, would be attracted. On behalf of the Respondent Bank it was contended that the provisions of Section 9A are not attracted, as the Petitioner was sued in his personal capacity as guarantor and not as mortgagor or pledger of the movable or immovable properties. D.R.T. accepted the said contention and rejected the objection raised by the Petitioner herein. An appeal was preferred against the said order. The learned appellate tribunal proceeded on the basis that the property of the Petitioner stood attached by the custodian under the Special Courts Act. The learned appellate tribunal further held, that it does not mean that the permission of the custodian is required nor is it necessary that the original application should be transferred to the Special Court under Special Courts Act. This reasoning was based on the assumption that the Petitioner was not sued in his personal capacity but as guarantor and not as a mortgagor or pledger of the movable or immovable property. After quoting the section, the learned appellate tribunal held that the provision of the Special Courts Act are not attracted and consequently dismissed the Appeal.
4. At the hearing of this petition, on behalf of the Petitioner, it is contended that as the Petitioner is a notified party, all the properties of the Petitioner stand attached pursuant to Section 3(3) of the Special Courts Act and considering section 9A of the Special Courts Act, it is the special Court which will have jurisdiction in so far as notified party is concerned. The learned counsel has placed reliance on the judgement of the Special Court in Fairgrowth v. Solidare . The court's attention is invited to Paragraphs 12 and 13 of the judgment to contend that the jurisdiction of the civil Court is now being exercised by the Special Court. At this stage, it was pointed out that the judgment of the Special Court in Fairgrowth (supra) was taken in appeal before the Apex Court. The issue which was decided by the learned Special Court was neither raised nor answered. It therefore, cannot be said that there is a concluded judgment of the Apex Court in respect of the properties of the notified parties and bearing in mind Section 9A of the Special Courts Act.
On the other hand, on behalf of the Respondent Bank and the intervenor, it is submitted that the provisions of the D.R.T. Act being legislation subsequent to the provisions of the Special Courts Act and considering the provisions of Section 17, 18 and 34, it is the D.R.T. alone which would have jurisdiction and the special court would have no jurisdiction. Section 34, it is submitted, would have an over-riding effect considering the Judgment in Allahabad Bank v. Canara Bank and Anr. A.I.R. 2000 S.C. 1535 and jurisdiction of the D.R.T. is exclusive. Reliance has been placed on the judgment of the Apex Court in the case of Tejkumar Balkrishna Ruia v. A.K. Menon and Anr. . That was the judgement on the issue as to whether the property of the notified person acquired by him and income generated by his own labour after the date of notification stands attached. The Apex court was pleased to hold that it is only the property of the notified person as on the date of notification which is attached and not the property which he may subsequently acquire. That judgement is really of no assistance. Similarly reliance was placed on the judgment in the case of BOI Finance Ltd. etc. v. The Custodian and Ors. etc. . One of the issues which arose in that judgment was, what is the effect of attachment of the properties on the notification being issued under Section 3 of the Special Courts Act. The Apex court was pleased to hold that the virtue of attachment, the property does not vest in the custodian and that he is merely a custodian and his position is not like that of the receiver under the Code of Civil Procedure.
5. With the above background, we may now consider the issue as raised. Really speaking the contention as now raised was not the subject matter of the application nor was it so raised or answered either by the D.R.T. or the appellate authority. However, as the parties have argued the matter and is relevant for consideration of the issues and in order to avoid multiplicity of proceedings and as the question raised does not require further investigation of the facts, we thought it fit to answer the issue as framed by us earlier and which has been canvassed and argued before us. . We have perused the reliefs sought for in the original Application by the Respondent Bank. The Petitioner herein is Respondent No. 2 before the D.R.T. Prayer Clause (1) (2) and (3) are the prayer clauses for a decree for a sum of money and issuance of certificate for the amount advanced as set out therein. Prayer Clause (b)(1) is for the declaration that the Payment of amount mentioned in prayers (9) (i) and (ii) are duly and fully secured by valid and subsisting charge in respect of all the movable and immovable properties of the Defendants, more particularly described and mentioned in Schedule annexed and marked Exhibit "V" to the main application. There is no dispute that this includes properties of the Petitioner who is admittedly a notified party.
6. We shall first therefore, examine whether the application by the Respondent Bank was maintainable in respect of the reliefs as prayed for therein. The Special Courts Act came into force on 6.6.1992. Section 13 of the Act sets out that the provisions 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, or in any decree or order of any Court, tribunal or other authority. When the Act came into force, Section 9A of the Special Courts Act was not on the statute book, but was inserted by Act No. 24 of 1994 with effect from 25.1.1994. Section 9A(iii) reads as under :
On and from the commencement of the Special Court (Trial of Offences Relating to Transactions in Securities) Amendment Act, 1994, no Court other than the Special Court shall have, or be entitled to exercise any jurisdiction, power or authority in relation to any matter or claim referred to in sub section (l).
For the sake of convenience, Section 9A(1) may be reproduced :
On and from the commencement of the Special Court (Trial of Offences Relating to Transactions in Securities) Amendment Act, 1994, the Special Court shall exercise all such jurisdiction, powers and authority as were exercisable, immediately before such commencement by any Civil Court in relation to any matter or claim : (a) relating to any property standing attached under sub section (3) of Section 3.
Section 3(3) and (4) reads as under :
(3). Notwithstanding anything contained in the Code and any other law for the time being in force, on and from the date of notification under sub section (2), any property, movable or immovable, or both, belonging to any person, notified under that sub section shall stand attached simultaneously with the issue of the notification.
(4) The property attached under sub section (3) shall be dealt with by the Custodian in such manner as the Special Court may direct.
(5) The Custodian may take assistance of any person while exercising his powers or for discharging his duties under this section and Section 4.
These are the provisions which will have to be considered to find out whether in respect of the property notified under Special Courts Act, it is the Special Court which will have jurisdiction or it is the court constituted under the D.R.T. Act.
7. The provisions of the D.R.T. Act have been considered by the Apex Court in Allahabad Bank (supra). That was the case considering the provisions of the Companies Act. After considering various contentions including the issue as to what happens when there are two special laws, the court came to the conclusion that the D.R.T. Act is a special law and to that extent would prevail over the provisions of the Companies Act to the extent the issue is covered by the provisions of the D.R.T. Act.
Section 17 of the D.R.T Act confers special jurisdiction on the Tribunal constituted to entertain and decide application from Banks and financial institutions for recovery of dues due to such banks and financial institutions. Section 18 of the D.R.T. Act sets out that no court or other authority shall have, or be entitled to exercise, any jurisdiction, powers or authority (except the Supreme Court, and a High Court exercising jurisdiction under Articles 226 and 227 of the Constitution) in relation to the matters specified in section 17. Section 34 is the provision providing for over-riding effect. It sets out that the DRT 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. There are several acts which are set out therein, which set out that the D.R.T. Act shall be in addition and not in derogation of the various Acts mentioned therein. The Special Courts Act is not one such Act.
The constructions of the various provisions of the Special Courts Acts makes it clear that Special Court had been set up, initially for deciding whether any person was involved in any offence relating to transaction in securities and for penal consequences. The Act came to be amended by insertion of Section 9A as noted earlier by conferring powers on the Special Court to exercise jurisdiction which the civil court would have, relating to any properties which stand attached by virtue of sub section (3) of section 3 of Special Courts Act. In other words, it is a Special Act in respect of the transactions of Securities for a particular period of time. Secondly if the person was notified,then as the properties stood attached by operation by law, the jurisdiction stands conferred on the Special Court to exercise the powers of the Civil Court in so far as attached properties are concerned. The D.R.T. Act on the other hand deals with the claims by the banks in respect of the loans advanced. In other words, they operate in two different fields or cover different subjects. The Special Court is in respect of the Securities and properties attached pursuant to notification, D.R.T. has jurisdiction to decide all issues pertaining to claims arising from loans. That would be both as principal or guarantor. The special courts Act exercises a jurisdiction in respect of properties of a principal or guarantor, dealing in securities and who is notified, in other words a distinct class of loanees. In our opinion therefore, considering the scope and intent of the two legislations, we see no reason as to why both cannot be harmoniously construed.
The D.R.T. Act to that extent can be held to be a Special Act in respect of all claims which can be considered by the tribunal under Section 17 of the Act. In other words, in respect of Prayer Clauses (i), (ii) and (iii) it will be the D.R.T. alone that will have exclusive jurisdiction. The parties agree that in so far as properties of the Petitioner are concerned, there was no charge in favour of the Respondent Bank. What the respondent bank is seeking is a charge against the properties for the amount claimed against the Petitioner herein who stands sued in his capacity as a guarantor for the loan. That being the case, there being no cause of action in so far as prayer Clause (b)(i) is concerned and as these properties stood attached by virtue of the Special Courts Act, and as the Special Court has been conferred power to deal with these properties, to that limited extent, D.R.T. court would have no jurisdiction.
8. The D.R.T. Act, apart from providing mechanism for deciding claims of financial institutions, also contains provisions, for recovery of debts determined by the tribunal. In other words the Act also provides a mechanism for recovery. Section 25 sets out the manner in which the property can be sold for satisfaction of the amount set out in the certificate issued in favour of financial institution. That would include attachment and sale of the movable or immovable properties of the judgment debtor. The D.R.T. exercises the jurisdiction which otherwise was conferred on the Civil Court in so far as recovery of monies of financial institutions. Let us take an illustration, if some other financial institution not covered by the Act had obtained a decree and pursuant to that decree in execution had movable and immovable properties attached for satisfying the decree, could the recovery officer exercise powers under Section 25 once again and attach the properties and sell the same? To our mind the answer would be a clear no. At the highest perhaps there could be conditional order of attachment, once the first order of attachment is set aside. If the order of attachment is not set aside and the properties are sold, then the procedure would be to file a claim before the Court executing the decree for whatever reliefs the party would be entitled to. To our mind the same principle will have to be applied in the instant case. The property of the notified person is attached by operation of law. Section 3(4) empowers the Special Court to deal with the property. The Legislature finding absence of power in the Special Court in dealing with the properties of a notified person and as such by the Amendment Act also conferred such power on it. In other words dealing with the properties of a notified person, would be that of the Special Court which will exercise the same powers as that of a civil Court. What that would mean is that if a financial institution obtains a certificate under D.R.T. Act and if in execution, any property of a notified person is required to be sold in satisfaction of the certificate, then the financial institution will have to move the Special Court for necessary directions which can mean filing claim before the Special Court. In that event the special court as a civil court while disposing of the assets will have to consider the claim as set out in the certificate and accordingly dispose of the application.
In our opinion, if such construction is adopted, then the two Acts can be harmoniously construed. The power conferred on the Special Court under Section 3(4), (5) and 9A would not become redundant. If not so held, it would mean that the custodian would have to file his claim before the Executing Authority under the D.R.T. Act. Once by operation of law the property stands attached and Parliament has thought it fit to confer power on the custodian in dealing with that property in the manner directed by the Special Court, we will have to give effect to that intent more so after section 9A has been introduced which has conferred power on the Special Court as Civil Court to decide all issues relating to the property which has been attached.
9. Having so held, we hold that the prayer for seeking declaration for attachment of the properties is not maintainable. Once the property has been attached by operation of law under the Special Courts Act, the D.R.T. Court would have no jurisdiction to grant a declaration that the properties of a notified person stand charged unless a charge had been created. At any rate, the certificate against such properties, cannot be executed by the Recovery Officer under D.R.T. Act. The Financial Institution will have to move the Special court in respect of the attached property. . Mr. Shetty, counsel, though not party in these proceedings as the issue involved would involve other financial institution concerning the notified person, was also allowed to address this court in order to avoid multiplicity of proceedings.
10. Rule made partly absolute accordingly. There shall be no order as to costs.