# M/s Hindustan Ferro & Inds. Ltd and another v. Debt Recovery Tribunal and another

- **Citation:** (2001) 2 ILRA 57
- **Court:** High Court of Judicature at Allahabad
- **Decided:** 1999-10-05
- **Source:** https://unisonlegal.in/judgment/allahabad-high-court/m-s-hindustan-ferro-inds-ltd-and-another-v-debt-recovery-tribunal-and-another-39737
- **Pages:** 5

## Text

2All] M/s Hindustan Ferro & Inds. Ltd and another V. Debt Recovery Tribunal and another
pleases. An open auction guarantees
fairness as everyone gets a chance to
participate and the Government gets the
best price for its goods.

9. The facts of the case in hand
clearly show that the authorities of the
State have gone out of their way to help
respondent no. 4 in the matter and have
awarded contract to him in a wholly
illegal
manner.
The
order
of
the
Commissioner dated 5.10.1999 awarding
the contract to respondent no. 4 cannot,
therefore, be sustained and is liable to set
aside.

10. In the result, the writ petition
succeeds and is hereby allowed. The order
dated
5.10.1999
passed
by
the
Commissioner,
Allahabad
Division,
awarding the contract to respondent no. 4
to realise the toll on Kara Ghat in district
Pratapgarh
is
hereby
quashed.
The
authorities are directed to issue a fresh
advertisement and proceed in accordance
with law expeditiously, preferable within
one month from today, for awarding the
contract to realise the toll in question on
Kara Ghat in district Pratapgarh. In order
to avoid any public hardship and loss to
public exchequer, it is further directed
that respondent no. 4 shall be permitted to
continue to realise toll on the ghat in
question till a fresh arrangement is made.
He shall pay the amount for the period for
which he will collect the toll which shall
be calculated on the basis of Rs. 8 lakhs
per year.

Petition Allowed.

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By the Court

1. The woodcut profile of the case of
the petitioner no. 1, a company duly
registered under the Companies Act,
1956, carrying on the business of
manufacturing Ferro Silicon and of which
the petitioner no. 2 is the director is that
an agreement was executed in 1990
between
petitioner
company
and
respondent no. 2 - State Bank of India,
Industrial Finance Branch, Sarvodaya
58 INDIAN LAW REPORTS ALLAHABAD SERIES [2001
Nagar, Kanpur for grant of credit facility.
It was renewed on 03.11.1997. The credit
facility was granted to the petitioners on
hypothecation of stock, stores, spares and
finished goods etc. That apart, U.P.
Financial
Corporation
Limited
and
Pradeshiya
Industrial and Investment
Corporation of U.P. have also granted
term loans to the petitioners and they have
the first priority/charge to claim fixed
assets of the company, such as land,
building, plant, machineries etc. On the
amount of loan, the respondent no. 2 -
Bank had charged interest of about Rs. 20
lacs, with the result that the petitioner
company could not pay off the loan
amount, and it became sick unit in 1998.
Thereafter, the promoters had taken over
the company and the respondent no. 2bank had issued clean credit to the tune of
Rs. 70 lacs to the promoters. The
petitioner claim that they have repaid a
sum of Rs. 46,56,565 to the Bank.
However, despite this, the Bank continued
to charge excess interest from the
petitioner. The amount of interest sought
to be charge excess interest from the
petitioners. The amount of interest sought
to be charged by the Bank swelled to Rs.
13,25,000.
The
petitioners
filed
a
complaint and referred the matter to the
Banking
Ombudsman,
Kanpur
an
authority constituted under a scheme
(Annexure 1) formulated by the Reserve
Bank
of
India
under
the
Banking
Regulation Act, 1949. A notice was
issued to the Bank which submitted its
reply on 15.07.2000, a copy of which is
Annexure 3 to the petition. The Banking
Ombudsman, thereafter respondent no.
called upon the petitioners to furnish
details, as required by the Bank. The
petitioners submitted their reply and
thereafter the matter remained pending
before the Banking Ombudsman. During
the pendency of the aforesaid matter
before the Banking Ombudsman, the
respondent no. 2 - Bank called upon the
petitioners
through
a
notice
dated
12.06.2000
(Annexure
5)
to
make
payment of cash credit to the Bank within
10 days from the date of receipt of the
notice. The petitioners were warned that
in case they fail to make aforesaid
payment, proceedings under Section 19 of
the Recovery of Debt Due to Bank and
Financial
Institutions
Act,
1993
(hereinafter referred to as 'the Act') shall
be initiated. The petitioners failed to make
payment and instead they submitted a
reply to the Bank on 23.06.2000. The
respondent no. 2-Bank, therefore, moved
an application before Debt Recovery
Tribunal (for short called 'the D.R.T.')
registered as O.A. No. 90 of 2000, under
Section 19 of the Act for recovery of Rs.
39,24,379.52 from the petitioners. The
petitioners moved an application duly
supported by an affidavit praying for stay
of the proceedings under Section 19 of the
Act on the ground that the matter is sub
judice before Banking Ombudsman. The
application of the petitioners has been
rejected
by
the
D.R.T.,
Allahabadrespondent no. 1 by the impugned order
dated 01.12.2000. Annexure 8 to the
petition. It is this order which has given
rise to the present writ petition under
Articles 226 and 227 of the Constitution
of India. The petitioners have prayed for
quashing of the order dated 11.12.2000
passed by the respondent no. 1 - Tribunal
and for a direction in the nature of
mandamus commanding the respondent
no. 2 to stay the proceedings till the
complaint no. 75 of 2000 is finally
decided by the Banking Ombudsman,
Kanpur.
2All] M/s Hindustan Ferro & Inds. Ltd and another V. Debt Recovery Tribunal and another
2. Heard Sri R.N. Singh, learned
Senior Advocate, assisted by Sri Rakesh
Kumar and Sri Satish Chaturvedi for the
State Bank of India as well as learned
Standing Counsel.

3. The learned Standing Counsel
raised a preliminary objection that the
present petition is not maintainable in
view of the fact that the D.R.T. has been
constituted under Section 3 of the Act and
an appeal against an order passed by the
Tribunal lies under Section 20 of the Act
before the Debts Recovery Appellate
Tribunal (for short called 'the D.R.A.T.')
constituted under Section 8 of the Act,
Section 17(2) of the Act, provides that an
Appellate
Tribunal
(DRAT)
shall
exercise, on an from the appointed day,
the jurisdiction , powers and authority to
entertain appeals against any order made,
or deemed to have been made by a
tribunal under the Act Sri R.N. Singh,
learned
Senior
counsel
repelled
the
aforesaid submission and urged that this
court has the jurisdiction, under Articles
226 and 227 of the Constitution, to
analyse and scrutinise the correctness,
propriety or otherwise of the interim order
passed by a tribunal or subordinate court.
To fortify his submission, he placed
reliance on a decision of the apex court in
Industrial
Credit
and
Investment
Corporation
of India Vs. Grapco
Industries Ltd. and others - AIR 1999
Sc-1975. The provisions of Sections 3(1)
and 19(6) of the Act came to be
interpreted in the said case. In paragraph
14 of the report, it was held :-

"14. .....There was no bar on the
High Court to itself examine the merits of
the case in the exercise of it jurisdiction
under Article 227 of the Constitution if
the circumstances so require. There is no
doubt that High Courts and tribunals even
interfere with interim orders of the Courts
and tribunals under Article 227 of
Constitution if the order is made without
jurisdiction. But then a too technical
approach is to be avoided. When facts of
the case brought before the High Court
are such that High Court can itself correct
the error, then it should pass appropriate
orders instead of merely setting aside the
impugned order of the Tribunal and
leaving everything in vacuum."

4. The provisions of Section 18 of
the Act bars the jurisdiction of other court
or authority, in relation to the matters
specified in Section 17, except the
Supreme Court and a High Court
exercising jurisdiction under Article 226
and 227 of the Constitution. Therefore,
this legal position that this court has the
power to interfere, if the circumstances so
require, is beyond the pale of challenge.
In appropriate matters, this court will not
hesitate
to
intervene
if
the
justice
demands
even
though
there
is
an
alternative statutory remedy of appeal
under Section 20 of the Act.

5. Now the moot point for
consideration is whether on account of the
complaint pending before the Banking
Ombudsman
under
the
Banking
Ombudsman Scheme, 1995 (hereinafter
referred
to
as
'the
Scheme')
the
proceedings in O.A. No. 90 of 1999
before the D.R.T. are required to be
stayed. At the outset, it may be pointed
out that the scope, object and purpose of
the Scheme and that of the Act are
entirely distinct and different. They
operate in entirely different fields. While
the object of the Scheme is to enable
resolution
of
complaints
relating to
provisions of banking services and to
60 INDIAN LAW REPORTS ALLAHABAD SERIES [2001
facilitate the satisfaction, or settlement of
such complaints, the purpose of the Act is
to provide for the establishment of
tribunals for expeditious adjudication and
recovery of debts due to banks and
financial institutions and for matters
connected therewith or incidental thereto.
The statement of the objects and reasons
in the form of prefatory note records that
Bank
and
Financial
Institutions
experienced considerable difficulties in
recovering loans and enforcement of
securities
charged
with
them.
The
procedure for recovery of debts due to
Banks and Financial Institutions as was
prevailing prior to the enactment of the
Act has blocked a significant portion of
their funds in unproductive assets, the
value of which deteriorated with the
passage of time. It was for this compelling
reason and to obviate the difficulties in
recovering debts due to the Banks and
Financial Institutions that the Act was
brought on the statute book. A particular
procedure has been prescribed in the
Scheme to entertain and process the
complaints with a view to facilitate the
satisfaction of its customers with regard to
banking services. The scheme has nothing
to do with the proceedings of recovery of
debts due to the banks and financial
institutions. A scheme formulated by the
Reserve Bank of India under the Banking
Regulation Act, 1949 cannot override or
nullify the provisions of the Act. As a
matter of fact, the application moved by
the petitioners to stay the proceedings in
the suit for recovery of dues on the
ground of pendency of their complaint
under the scheme was misconceived.

6. The contention of Sri R N Singh,
learned Senior Counsel that the Presiding
Officer has rejected the application of the
petitioners merely on the ground that he
has no power to pass interim order does
not bear an impress of reality. It distorts
the
reasoning
enumerated
in
the
impugned order.

7. The various provisions of the Act
have been drastically amended by the
Amendment No. 1 of 2000. There has
been substitution of new Section for
Section 19. Sub-section (25) of newly
substituted section 19 provides as follows:

"(25) The Tribunal may make such
orders and give such directions as may be
necessary or expedient to give effect to its
orders or to prevent abuse of process or to
secure the ends of justice".

8. It is, thus, indubitable legal
position
that
the
D.R.T
has
the
jurisdiction and competence to pass
interim orders as may be necessitated to
prevent the abuse of its process or to
secure the ends of justice. An application
seeking interim orders cannot be shelved
or rejected on the mere assumption that
the D.R.T. has no power to pass interim
orders. The amendment and substitution
of
Section
19
explodes
the
myth.
Indubitable, now the D.R.T. has power to
pass interim orders.

9. A bare reading of the impugned
order clearly shows that the Presiding
Officer, D.R.T. has nowhere mentioned
that he has no power to pass an interim
order. The Tribunal has refused to pass an
interim order on the application of
petitioners solely on the ground that the
application was not maintainable as
reference to the Scheme was otiose and
uncalled for.

10. In the conspectus of the above
facts, even though a petition under Article
2All] District Judge, Bulandshahr and another V. Bhudev Sharma

226 and 227 of Constitution may be
entertained, in appropriate cases in view
of the decision of the apex court in
Industrial
Credit
and
Investment
Corporation of India Ltd. (Supra), I feel
persuaded to observe that it is not a case,
fit enough requiring invocation of the
extraordinary writ jurisdiction by this
court. Accordingly, the writ petition is
dismissed.
Petition Dismissed.

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By the Court

1. Through this Special Appeal filed
on 25.05.2000 the Appellants - the
District
Judge,
Bulandshahr
and
Chairman of the Selection Committee,
assail validity of the Judgement and order
dated 25.09.1997 passed by a learned