The Judgment was delivered by : RONOJIT KUMAR MITRA (CHAIRPERSON)
1. This appeal has been preferred from an order dated 21st January, 2004, made by the learned Presiding Officer, Debts Recovery Tribunal-(l), Kolkata, hereinafter referred to as "the DRT". The facts of the case in short were that, in the recovery proceedings before the DRT the Bank claimed a sum of Rs. 11 crores as being due and payable by the respondent Nos. 1 to 5, hereinafter referred to as "the respondents". Sometime in March, 2002, the Bank treated the respondent No. 1 as a wilful defaulter, within the meaning of the relevant guidelines issued, from time to time, by the Reserve Bank of India, hereinafter referred to as "the R.B.I.". Tha respondent No. 1, without any notice to the Bank, moved an application before the DRT, on 30th September, 2003 and prayed inter alia for an order of injunction, restraining the Bank and the respondent No. 6 "from taking any step, which would have the effect of treating the petitioner as a wilful defaulter, within the meaning of the appropriate guidelines of the Reserve Bank of India". The DRT made an ex parte order, directing the creditors to maintain status quo, and they were "restrained from sending any limitation to the RBI.........till the next date of hearing". The application was kept pending. In their written objection the Bank disclosed, that some time in 2002 the Bank in compliance with the RBI guidelines had treated the respondent No. 1 as a wilful defaulter, and had accordingly communicated the RBI. In August, 2003 the respondent No. 1 took over Jessop and Co. Ltd., hereinafter referred to as "the Company". It was alleged, that the Company for its revival sought financial assistance from Banks and financial institutions but that the prospective lenders were prevented because the name of the respondent No. 1 appeared in the list of wilful defaulters. In those circumstances, on 17th November, 2003 the respondent No. 1 moved a second application before the DRT, and prayed inter alia for a declaration that the. enlistment of the name of the respondent No. 1 as a wilful defaulter was null and void and the same may be quashed, and the RBI be restrained from taking any step in the matter. The parties had filed their affidavits and both the applications were disposed of by the impugned order dated 21st January, 2004. Aggrieved by the order, the Bank has preferred this appeal.
2. It was argued by advocate for the Bank, that the fact that the respondent No. 1 had taken over the Company, under disinvestment scheme of the Central Government, must be understood to imply reasonably that the respondent No. 1 had inadequate funds, and accordingly was credible to financiers for the purpose of obtaining further funds. He contended, that in neither of the two petitions which were disposed off by the DRT, was there any denial of the Bank's contention that inspite of being funds in the respondents deliberately did not repay the Bank's debts. He argued, that unless the respondent No. 1 was financially sound the Central Government would not have allowed it to acquire the Company under the disinvestment scheme for the purpose of revival. He submitted, that instead of availing of the bill discounting account, the respondent No. 1 without intimating the Bank wrongfully, illegally and with intent to avoid payment of the Banks debts was discounting its bills by third parties.
3. The provisions contained in Sections 19, 20 and 25 of the , hereinafter referred to as "the Act", submitted advocate for the respondents, were applicable in the present circumstances, because it was the intention of the Legislature that justice ought to be done by the Tribunals expeditiously, in deciding the issues raised in the recovery proceedings. He argued, that the Bank admittedly did not intimate the respondent No. 1 that it had been listed as a wilful defaulter, nor was it given any hearing before the Bank took such decision, and consequently the conduct of the Bank was a clear breach of the principles of natural justice. In support of his submissions, he cited and relied on a decision reported in 1993 (1) SCC 78. He argued, that the DRT was competent to entertain and dispose of the applications, as in the impugned order, and that his powers extended to all matters arising out of or in relation to the subject matter of the claim petition. In support of his submissions, he cited and relied on the decisions reported in 1991 CWN 665; 1994 (4) SCC 710 and 1999 (6) SCC 755.
4. The guidelines issued by the Reserve Bank of India were, of course, statutory in nature. The Banks, in their course of business, were bound by law to comply with the guidelines. It was in violation of the basic principles of law to have made allegations against the RBI, that it do not delete the name of the respondent No. 1 from its list of wilful defaulters, though the RBI was not made a party in the proceedings nor was it served with any notice of the hearing of the application. The issuance of the guidelines by the RBI and compliance thereof by the Bank, were undeniable conduct in the course of their internal administrative functions. There was no scope whatsoyer, in the Act for these Tribunals to interfere in such administrative functions of the RBI or the Banks. The provisions in Section 17 (1) of the Act, in no uncertain terms stipulates, that these Tribunals shall exercise "the jurisdiction, powers and authority to entertain and decide applications from the Banks and financial institutions for recovery of debts due to such Banks and financial institutions". The Act certainly does not empower the DRT to direct the Bank not to comply with the guidelines of the RBI or scrutinize whether the RBI guidelines were issued in violation of the principles of natural justice. I have already observed earlier that the guidelines are in the nature of statutes and that the alleged conduct of the Bank and the Reserve Bank of India had no bearing on the subject matter of the recovery proceedings. The allegation that the Company was refused financial assistance in particular, was a mere assertion without an iota of evidence, and a clear admission that the respondents could not and did not suffer any prejudice as they were not refused.
5. I am aware of the observation of the Supreme Court reported in 1970 AIR(SC) 150 that, "the dividing line between an administrative power and guas/'-judicial power is quite thin and is being gradually obliterated", and that, the principles of natural justice were applicable to the exercise of administrative powers as well. The question of applicability was however, clarified by the Supreme Court in its further observation that, "What particular rule of natural justice if any, should apply to a given case must depend to a great extent on the facts and circumstances of that case" 2003 (4) SCC 577. It would appear from a plain reading of the guidelines, that the very purpose of enlisting the name of Bank's debtor as wilful defaulter was, "In order to prevent the access to the capital markets by the wilful defaulters". In the present facts and circumstances, there was no attempt by the respondent to explain away the reasons forwhich the name of the respondent No. 1 had been enlisted as a wilful defaulter. There can be no dispute that such defaulters ought to be restrained forthwith from availing further finance from unwary prospective lenders, in particular Government concerns, in the interest of the general public. The grounds set out in the RBI guidelines for enlisting a debtor as a wilful defaulter are, as I have already observed, statutory in nature and these Tribunals are not competent to entertain an allegation challenging the validity, legality and propriety of an action taken by the RBI or the Banks in that respect.
6. In those circumstances, I hold unhesitatingly, that the impugned order was made in excess of the powers conferred on the DRT under the Act. The only letter produced before this Appellate Tribunal by advocate for the respondent No. 1, was written by Jessop & Co. Ltd. to the RBI requesting for directions which would enable prospective lenders to examine its case "on stand alone basis.......Notwithstanding name of Ruia Cotex Ltd. being in the wilful defaulters' list". In other words, the Company sought financial assistance as an independent entity, making it abundantly clear that RBI may give such direction so that the factum of the respondent No. 1 being a wilful defaulter should not operate as any impediment to the prospective lenders. Assuming there was any refusal, then the party aggrieved, if at all, was surely the Company which undeniably was not a party in these proceedings. The respondents clearly, therefore, had no cause of action before the DRT. There were no civil consequences by reason of the administrative action by the RBI or the Bank which could be referred to as violative of the rights of the respondents in these proceedings. The records further show, as mentioned earlier that neither the Company nor the RBI were parties in these recovery proceedings. There was no evidence before the Tribunal in the least, which would in any manner substantiate the contention that the respondent No. 1 had intimated the RBI that it was not a wilful defaulter. There was no evidence of any sort in support of the respondents' allegation that they had suffered prejudice by reason of refusal of financial assistance to the Company by other Banks and financial institutions. The Bank had in accordance with law, treated the respondent No. 1 as a wilful defaulter and intimated the RBI long before the application was made by the respondents. The observation by the DRT in the impugned order, that the list of wilful defaulters including the name of the respondent No. 1 was on the basis of intimation sentby the Bank and that it deserved to be quashed, was capricious, without any reason and in excess of his powers and jurisdiction, and was clearly bad in law. It would appear to me that the application for loan, if any, was made in the name of the Company with a mala fide intent to enable the respondents to obtain a loan which they could not otherwise obtain in law.
7. For those reasons, the appeal is allowed. The impugned order is not sustainable either in law or facts and is set aside.
8. A xerox of this judgment may be made available to the advocates for the parties by the Registry of this Appellate Tribunal.
9. A prayer for stay was made by advocate for the respondents. Such prayer was not entertained.