# UNION OF INDIA AND ANR v. DELHI HIGH COURT BAR ASSOCIATION AND ORS

- **Citation:** [2002] 2 S.C.R. 450
- **Court:** Supreme Court of India
- **Decided:** 2002-03-14
- **Bench:** B.N. Kirpal, Y.K. Sabharwal, K.G. Balakrishan
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/union-of-india-and-anr-v-delhi-high-court-bar-association-and-ors-18380
- **Pages:** 27

## Headnote

Debt Laws:
Recovery of Debts Due to Banks and Financial Institutions Act, 1993
C (as amended): Section 19-Applications to the Tribunal-Pecuniary
jurisdiction-Act vested jurisdiction in Tribunals in respect of recovery suit
exceeding Rs. JO lakhs-Jn respect of recovery of suits for less than Rs. JO
lakhs, jurisdiction vested in ordinary civil courts and High Courts-Validity
of-Held: Such pecuniary jurisdiction is no ground for holding the Act as
D invalid
Section 22-Tribunal and Appellate Tribunal-Procedure and powersEffect-Held: Establishment of a Banking Tribunal does not erode the
independence of judiciary and justice would not be denied to the defendantsSuch tribunals are effective parts of the justice delivery system like courts of
E law-However, decision of the Appellate Tribunal is not final as the same is
subject to judicial review by the High Court.
Section 25 and 28-Validity of-Held: Recovery Officer has to attach
and sell the immovable property in order to recover the debts-He has the
F power to appoint a Receiver for protection and preservation of such immovable
property--Hence, Ss. 25 and 28 are not arbitrary, unreasonable or without
any guidelines.
Section 31-Transfer of pending cases-From civil court to TribunalValidity of-Held: Jurisdiction of civil courts is barred by S.18-Therefore, it
G is logical that matters pending in civil court should stand transferred to the
Tribunal.
H
Debt Recovery Tribunal (Procedure) Rule, 1993 (as amended):
Rule 12(6)-Particularsfact or facts-Proving of-By Affidavit-Validity
450
-
~-
T
U.0.l. v. DELHI HIGH COURT BAR ASSOCIATION
45 l
of -Held: No transaction with the Bank would be oral and without proper A
documentation-Hence, the Tribunal should be able to decide cases on the
basis of documents and affidavits.
Constitution of India, 1950:
lists II and Ill of Seventh Schedule-Matters not covered by-Power of B
Parliament to enact law relating thereto-Held: is absolute.
Articles 323-A and 323-B-Setting up of tribunals-Scope and ambit
of-Held: These Articles do not prohibit the legislature from establishing
tribunals not covered by them as long as there is legislative competence under
' ~
an appropriate entry in the Seventh Schedule.
C
-
Entry 45 List I Seventh Schedule-Banking-Tribunal -Competence of
Parliament to legislate in relation thereto-Held: The term "Banking" would
mean legislation regarding all aspects of Banking including ancillary or
subsidiary matters relating to Banking-Setting up of an ac{judicatory body
like the Banking Tribunal clearly falls under Entry 45 List I.
D
Banking Tribunal~Po1i•er of Parlian1ent to enact a law relating thereto--
Held: Is not taken away though the matter is not covered by Arts. 323-A or
323-B-The power conferred by Art. 246 (/)can be exercised notwithstanding
the existence of Arts. 323-A or 323-B.
Words and Phrases:
""Banking "-Meaning of-In the context of Entry 45 list I of the Seventh
Schedule to the Constitution of India, 1950.
E
The respondents tiled a writ petition before the High Court challenging F
the constitutional validity of the Recovery of Debts Due to Banks and Financial
Institutions Act, 1993 (as amended) on the ground that the Act is unreasonable
and is violative of Article 14 of the Constitution and that the same was beyond
the legislative competence of the Parliament. The High Court held that the
Act was unconstitutional as it eroded the independence of the judiciary and G
was irrational, discriminatory, unreasonable, arbitrary and was hit by Article
14 of the Constitution. The High Court also held that the Act lowered the
status of the High Court inasmuch as the Tribunal, which was presided over
by an officer who did not have the status of a High Court Judge would be
deciding the suits for recovery of money exceeding Rs. 10 lakhs. Hence this
appeal.
H
452
SUPREME COURT REPORTS
[2002] 2 S.C.R.
A
Allowing the appeal, the Court
_,
).
HELD: 1.1. The power of the Parliament to enact a law, which· is not
covered by an Entry in Li

## Text

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A
UNION OF INDIA AND ANR .
..
v.
DELHI HIGH COURT BAR ASSOCIATION AND ORS ..
MARCH 14, 2002
B
[B.N. KIRPAL, Y.K. SABHARWAL AND K.G. BALAKRISHAN, JJ.]
Debt Laws:
Recovery of Debts Due to Banks and Financial Institutions Act, 1993
C (as amended): Section 19-Applications to the Tribunal-Pecuniary
jurisdiction-Act vested jurisdiction in Tribunals in respect of recovery suit
exceeding Rs. JO lakhs-Jn respect of recovery of suits for less than Rs. JO
lakhs, jurisdiction vested in ordinary civil courts and High Courts-Validity
of-Held: Such pecuniary jurisdiction is no ground for holding the Act as
D invalid
Section 22-Tribunal and Appellate Tribunal-Procedure and powersEffect-Held: Establishment of a Banking Tribunal does not erode the
independence of judiciary and justice would not be denied to the defendantsSuch tribunals are effective parts of the justice delivery system like courts of
E law-However, decision of the Appellate Tribunal is not final as the same is
subject to judicial review by the High Court.
Section 25 and 28-Validity of-Held: Recovery Officer has to attach
and sell the immovable property in order to recover the debts-He has the
F power to appoint a Receiver for protection and preservation of such immovable
property--Hence, Ss. 25 and 28 are not arbitrary, unreasonable or without
any guidelines.
Section 31-Transfer of pending cases-From civil court to TribunalValidity of-Held: Jurisdiction of civil courts is barred by S.18-Therefore, it
G is logical that matters pending in civil court should stand transferred to the
Tribunal.
H
Debt Recovery Tribunal (Procedure) Rule, 1993 (as amended):
Rule 12(6)-Particularsfact or facts-Proving of-By Affidavit-Validity
450
-
~-
T
U.0.l. v. DELHI HIGH COURT BAR ASSOCIATION
45 l
of -Held: No transaction with the Bank would be oral and without proper A
documentation-Hence, the Tribunal should be able to decide cases on the
basis of documents and affidavits.
Constitution of India, 1950:
lists II and Ill of Seventh Schedule-Matters not covered by-Power of B
Parliament to enact law relating thereto-Held: is absolute.
Articles 323-A and 323-B-Setting up of tribunals-Scope and ambit
of-Held: These Articles do not prohibit the legislature from establishing
tribunals not covered by them as long as there is legislative competence under
' ~
an appropriate entry in the Seventh Schedule.
C
-
Entry 45 List I Seventh Schedule-Banking-Tribunal -Competence of
Parliament to legislate in relation thereto-Held: The term "Banking" would
mean legislation regarding all aspects of Banking including ancillary or
subsidiary matters relating to Banking-Setting up of an ac{judicatory body
like the Banking Tribunal clearly falls under Entry 45 List I.
D
Banking Tribunal~Po1i•er of Parlian1ent to enact a law relating thereto--
Held: Is not taken away though the matter is not covered by Arts. 323-A or
323-B-The power conferred by Art. 246 (/)can be exercised notwithstanding
the existence of Arts. 323-A or 323-B.
Words and Phrases:
""Banking "-Meaning of-In the context of Entry 45 list I of the Seventh
Schedule to the Constitution of India, 1950.
E
The respondents tiled a writ petition before the High Court challenging F
the constitutional validity of the Recovery of Debts Due to Banks and Financial
Institutions Act, 1993 (as amended) on the ground that the Act is unreasonable
and is violative of Article 14 of the Constitution and that the same was beyond
the legislative competence of the Parliament. The High Court held that the
Act was unconstitutional as it eroded the independence of the judiciary and G
was irrational, discriminatory, unreasonable, arbitrary and was hit by Article
14 of the Constitution. The High Court also held that the Act lowered the
status of the High Court inasmuch as the Tribunal, which was presided over
by an officer who did not have the status of a High Court Judge would be
deciding the suits for recovery of money exceeding Rs. 10 lakhs. Hence this
appeal.
H
452
SUPREME COURT REPORTS
[2002] 2 S.C.R.
A
Allowing the appeal, the Court
_,
).
HELD: 1.1. The power of the Parliament to enact a law, which· is not
covered by an Entry in List II and List III, is absolute. While Articles 323-A
and 323-B specifically enable the legislature to enact laws for the establishment
B
of tribunals, in relation to the matters specified therein, the power of the
Parliament to enact a law constituting a Tribunal, like the Banking Tribunal,
which is not covered by any of the matters specified in Article 323-A or 323B, is not taken away. With regard to any of the entries specified in List I, the
exclusive jurisdiction to make laws with respect to any of the matters
enumerated in List I is with the Parliament. The power conferred by Article
c 246(1) can be exercised notwithstanding the existence of Article 323-A or 323-
+ ;
""
B of the Constitution. [460-C-D)
Navinchandra Mafatla/ v. CIT., [1955) 1 SCR 829 and Union of India v.
H.S. Dhillon, [1972) 2 SCR 33, relied on.
D
Delhi High Court Bar Association v. Union of India, Am (1995) Del 323,
reversed.
United Province v. Atiqa Begum, (1940) FCR 110, cited.
41.2. Articles 323-A and 323-B are enabling provisions, which specifically
E enable the setting up of tribunals contemplated by the said Articles. These
Articles, however, cannot be interpreted to mean that it prohibits the
legislature from establishing tribunals not covered by these Articles, as long
as there is legislative competence under an appropriate entry in the Seventh
-
Schedule. Articles 323-A and 323-B do not take away that legislati\'e
.....l..__
F competence. (460-E)
D.K. Abdul Khader v. Union of India, AIR: (2000) Kar 176, overruled.
2. Entry 45 of List I would cover the types of legislation now enacted.
Entry 45 of List I relates to "Banking". Banking operations would, inter alia,
G include accepting of loans and deposits, granting of loans and recovery of the
debts due to the bank. There can be little doubt that under Entry 45 of List
.,.
I
I, it is the Parliament, alone which .can enact a law with regard to the conduct
of business by the banks. Recovery of dues is an essential function of any ·
...
banking institution. In exercise of its legislative power relating to banking,
the Parliament can provide the mechanism by which monies due to the Banks
H and Financial Institutions can be recovered. The Tribunals have been set up
•'
I •
_,,
'-'~ ' •
,
U.O.l. v. DELHI HIGH COURT BAR ASSOCIATION
453
in regard to the debts due to the banks. The special machinery of the Tribuna~ A
.which has been constituted as per the preamble of the Recovery of Debts Due
to Banks and Financial Institutions Act, 1993" (as amended) would squarely
fall within the am hit of Entry 45 of List I. As none of the items in the lists are
to be read in a narrow or restricted sense, the term "Banking" in Entry 45
would mean legislation regarding all aspects of Banking including ancillary B
or subsidiary matters relating to Banking. Setting up of an adjudicatory body
like the Banking Tribunal relating to transactions in which banks and financial
institutions are concerned would clearly fall under Entry 45 of List I giving
the Parliament specific power to legislate in relation thereto.
(460-H; 461-A-C)
Delhi High Court Bar Association v. Union of India, AIR (1995) Del 323,
reversed.
D.K Abdul Khader v. Union of India. AIR (2001) Kar 176, overruled.
c
3. The very purpose of establishing the Tribunal being to expedite the
disposal of the applications filed by the banks and financial institutions for D
. realisation of money, the Tribunal and the Appellate Tribunals are required
to deal with the applications in an expeditious manner. It is precisely for this
·~-
reason that Section 22(1) stipulates that the Tribunal and the Appellate
Tribunal shall not be bound by the procedure laid down by the Code of Civil
Procedure. Therefore, even though the Tribunal can regulate its own E
procedure, the Act requires that any procedure laid down hy it must be guided
~
by the principles of natural justice while, at the same time, it should not regard
itself as being bound by the provisions of the Code of Civil Procedure.
(466-Ff
4. When the High Court and the Supreme Court in exercise of their F
jurisdiction under Article 226 and Article 32 can decide questions of fact as
well as law merely on the basis of documents and affidavits filed before it
ordinarily, there should be no reason as to why a Tribunal, likeWise, should
not he able to decide the case merely on the basis of documents and affidavits
before it under Rule 12(6) of the Debt Recovery Tribunal (Procedure) Rules, G
1993 (as amended). It is common knowledge that hardly any transaction with
the Bank would be oral and without proper documentation, whether in the
form of letters or formal agreements. In such an event the bona fide need for
the oral examination of a witness should rarely arise. There has to be a very
good reason to hold that affidavits, in such a case, would not be sufficient.
(471-A-Bf H
454
SUPREME COURT REPORTS
[2002] 2 S.C.R.
-:1
L
A
5. The manner in which a dispute is to be adjudicated upon is decided
by the procedural law, which are enacted from time to time. It is because of
"Q"-
~
t_he enactment of the Code of Civil Procedure that normally all disputes
)-
between the parties of a civil nature would be adjudicated upon by the civil
courts. There is no absolute right in anyone to demand that his dispute is to
B be adjudicated upon only by a civil court. The decision of the High Court
proceeds on the assumption that there is such a right. It is by reason of the
provisions of the Code of Civil Procedure that the civil court has the right,
i
prior to the enactment of the Debt Recovery Act, to decide the suits for
:..
recovery filed by the banks and financial institutions. This forum, namely,
that of a civil court, now stands replaced by a banking tribunal in respect of
•
c the debts due to the bank. When in the Constitution Articles 323-A and 323B contemplates establishment of a tribunal and that does not erode the
~
independence of the judiciary, there is no reason to presume that the banking
tribunals and the appellate tribunals so constituted would not be independent,
or that justice would be denied to the defendants or that the independence of
,...,
the judiciary would be eroded. [471-C-E]
'---.,
D
Delhi High Court Bar Association v. Union of India, AIR (1995) Del 323,
reversed.
6. The tribunals, whether they pertain to ~ncome tax or Sales tax or
--\.
~
Excise and Customs or Administration, have now become an essential part
E of the judicial system in this country. Such specialised institution may not
strictly come within the concept of the judiciary, as envisaged by Article 50,
but it cannot be presumed that such tribunals are not an effective part of the
justice delivery system, like courts of law. Persons who are appointed Presidi_ng
•.
Officers of the Tribunal or of the Appellate Tribunal would be well versed in
law to be able to decide cases independently and judiciously. The decision of
·-
F
-!-
the Appellate Tribunal is not final, in the sense that the same can be subjected
f
to judicial review by the High Court under Articles 226 and 227 of the
Constitution. (472-C]
I
7. Section 31 of the Act is not in any way bad in law. Once Debt
I
G Recovery Tribunal has been established, and the jurisdiction of civil court
I
barred by Section 18 of the Act, it would be only logical that any matter
r
pending in the civil court should stand transferred to the Tribunal. This is
,r,---... '.
what happened when the Central Administrative Tribunal was established.
~
All cases pending in the High Courts stood transferred. Now that exclusive
jurisdiction is vested in the Banking Tribunal, it is only in that forum that
H bank cases can be tried and, therefore, a provision like Section 31 was enacted.
r--
...
U.0.1. v. DELHI HIGH COURT BAR ASSOCIATION
455
8. The Act has been enacted for the whole of India. In most of the States, A
the High Courts do not have original jurisdiction. In order to see that the
Tribunal is not flooded with cases where the amounts involved are not very
large, the Act provides that it is only where the recovery of the money is more
than Rs. I 0 lakbs that the Tribunal will have the jurisdiction to entertain the
application under Section 19. With respect to suits for recovery of money less B
than Rs. 10 lakbs, it is the subordinate courts, which wouid continue to try
them. In other words, for a claim of Rs. 10 lakhs or more, exclusive jurisdiction
has been conferred on the tribunal but for any amount less than Rs. 10 lakhs,
it is the ordinary civil courts, which will have jurisdiction. The bifurcation of
original jurisdiction between the Delhi High Court and the subordinate Courts
is a matter, which cannot have any bearing on the validity of the establishment C
of the Tribunal. It is only in those IDgh Courts which have original jurisdiction
that an anomalous situation arises where suits for recovery of money less than
Rs. 10 lakhs have to be decided by the High Courts while the tribunals have
jurisdiction to decide suits for recovery of more than Rs. 10 lakhs. This
incongruous situation, which can be remedied by the High Court divesting
itself of the original jurisdiction in regard to such claims and vesting the said D
jurisdiction with the subordinate courts or vice versa, cannot be a ground for
holding that the Act is invalid. [472-D-G)
Delhi High Court Bar Association v. Union of India, AIR (1995) Del 323,
reversed.
E
9. A perusal of Sections 25 and 28 of the Act cannot lead one to the
conclusion that the same are arbitrary, unreasonable or without any
guidelines. It is quite clear that in order to recover the debts, the recovery
officer has to attach and sell the immovable property and that for protection
and preservation of the same, he has the power to appoint a Receiver for the F
management thereof. [476-B)
I 0. In view of Section 29 of the Act it cannot be said that the recovery
officer would act in an arbitrary manner. Furthermore, Section 30, after
amendment by Amendment Act, 2000, gives a right to any person aggrieved G
by an order of the Recovery Officer to prefer an appeal to the Tribunal. Thus
now an appellate forum has been provided against any orders of the Recovery
Officer which may not be in accordance with law. There is, therefore, sufficient
safeguard which has been provided in the event of the Recovery, Officer acting
in arbitrary or an unreasonable manner. The provisions of Sections 25 and
28 are, therefore, not bad in law. [476-C-E]
H
456
SUPREME COURT REPORTS
[2002) 2 S.C.R.
A
11. The Act or any other provisions thereof is not in any way arbitrary
or bad in law and is a valid piece of legislation.
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 4679 of
1995.
B
From the Judgment and Order dated 10.3.1995 of the Delhi High
Court in C.W.P. No. 3050/94 and C.M. No. 5739/94 with C.W.P. No.
3277/94 & C.M. No. 6112 of 1994.
WITH
C
T.P. (C) Nos. 400, 406-409, 302-304, 321, 329, 335, 355, 356, 357,
•
358, 813, 778/96, 659-667/95, C.A. Nos. 3951, 15334/96, 5394/97, 62276243, 6245-6246/2000, W.P. (C) No. 37/2001, T.C. (C) No. 4/98 and
C.A. Nos. 2098, 2094-20.97, 2099-2145 of 2002.
Harish N. Salve, Solicitor General, Mukul Rohtagi, Additional Solicitor
D General, and P.K. Goswami, Ms. Indra Sawhney, S. Wasim A. Quadri,
Hemant Sharma, Ms. Sushma Suri, S.N. Terdol, B.V. Balaram Das, Ms.
Anil Katiyar, Dhruv Mehta, Ms. Shobha, Ms. Anu Mehta, S.K. Mehta,
Ranjan Mukherjee, Ms. Radha Rangaswami (NP), Udya Gupta, Ms. Nina
Gupta, Ms. Arpita Mahajan, Vineet Kumar, Ghanshyam Joshi, Krishnanand
E Pandeya (NP), Sanjay Kapur, Ms. Shubhra Kapur, Rakesh K. Sharma
(NP), Arvind Kumar, Ms. Laxmi Arvind, Ms. Jaya Sinha, Sushi! Kumar
Jain (NP), Harish J. Jhaveri (NP), K.M.K. Nair (NP), Ms. Shipra Ghose,
Suresh C. Gupta, A. Guneswar Sharma, Sanjay Pal, Kamal Mohan Gupta,
Janendra Lal (NP), M.K. Michael (NP), A.P. Medh (NP), Ms. Bharathi
Reddy (NP), H.K. Puri, S.K. Puri, Ujjwal Banerjee, Ms. Anindita Gupta,
F
Ms. Sarla Chandra (NP), E.C. Agrawala (NP), Rathin Das (NP), Joseph
Pookkatt, Prasenjit Keswani, Prashant Kumar, P. Venugopal, P.S. Sudheer,
K.J. John, Ms. Bina Gupta (NP), A.V. Rangam, P.P. Singh (NP), G.S.
Chaterjee, Raja Chatterjee, Dalip Kumar Malhotra (NP), Ms. Mridula Ray
Bharadwaj (NP), Shrish Kumar Misra (NP), Chander Shekhar Ashri (NP),
G K.V. Sreekumar (NP), Vijay Hansaria, Sunil Jain, Prabirananda Chowdhary
A. Bhattacharya, Rajiv Mehta, Avijit Bhattacharjee, (NP) and S.K. Verma,
(NP) for the appearing parties.
The Judgment of the Court was delivered by
H
KIRPAL, J. Leave granted. The transfer petitions are allowed.
J.
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U.0.1. v. DELHI HIGH COURT BAR ASSOCIATION [KIRPAL, J.]
457
The challenge to the constitutional validity of The Recovery of Debts A
-*
Due to iynks and Financial Institutions Act, 1993 (hereinafter referred to as
'
'the Act') on the ground that the Act is unreasonable and is violative of
Article 14 of the Constitution, and that the' same is beyond the legislative
competence of the Parliament, arises for consideration in these cases.
The banks and financial institutions had been experiencing considerable B
difficulties in recovering loans and enforcement of securities charged with
them. The procedure for recovery of debts due to the banks and financial
institutions which was being followed had resulted in a significant portion of
the funds being blocked. In order to remedy the locking up of huge funds,
the Parliament enacted the said Act, which was preceded by an ordinance. c
..
The Act, inter alia, provides for the establishment of Tribunals and Appellate
Tribunals. The Tribunals have been given 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 fmancial institutions, while the
Appellate Tribunals have the jurisdiction, powers and authority to entertain
appeals. The procedure which is required to be followed is provided and the D
Act also has provisions relating to the modes of recovery of debts for which
Recovery Officers are to be appointed.
' ...
The jurisdiction of the Tribunals is in respect of debts which are in
excess of Rs. I 0 lacs. In other words, for disputes between the banks and the
other parties it was the Civil Courts which have the jurisdiction to entertain E
the same if the claim was less than Rs. I 0 lacs. According to Section 18 of
the Act, no Court or other authority is entitled to exercise any jurisdiction,
powers or authority in relation to matters in respect of which such jurisdiction,
powers and authority are vested with the Tribunal. Section 18, however,
provides that the bar of other Courts and authorities to entertain such disputes F
shall not in any way oust the jurisdiction of this Court or of the High Courts
in exercise of their jurisdiction under Articles 226 and 227 of the Constitution.
The validity of the said Act was successfully challenged before the
Delhi High Court. By it's decision reported in Delhi High Court Bar
Association and Another vs. Union of India and Others, AIR 1995 Delhi 323, G
~""
against which appeal No. 4679 of 1995 is filed, the High Court held that
though Tribunal could be constituted by Parliament even though it was not
within the purview of Articles 323A and 323B of the Constitution, and that
the expression "administration of justice" as appearing in Entry I IA of List
III of the Seventh Schedule to the Constitution would include Tribunals as
well administering justice; the impugned Act was unconstitutional as it erodes H
458
SUPREME COURT REPORTS
[2002] 2 S.C.R.
A the independence of the judiciary and was irrational, discriminatory,
unreasonable, arbitrary and was hit by Article 14 of the Constitutio~ In this
judgment, it also quashed the appointment of a Presiding Officer of the
Tribunal but that question no longer arises for consideration in these appeals.
In arriving at the aforesaid conclusion the Delhi High Court, inter alia,
B held as follows:
c
D
E
(a) The act, in parti<;ular, Section 17 did not have a provision for a
counter·claim as provided under the provisions of the Code of
Civil Procedure and, therefore, the Act was irrational and arbitrary.
(b) The Act lowered the authority of the High Court vis-a-vis the
Tribunal in view of the fact that suits for recovery of money
exceeding Rs. I 0 lacs are to be filed before the Tribunal while the
suits for an amount between Rs. 5 lacs and Rs. I 0 lacs was to be
filed before the Delhi High Court and for less than Rs. 5 lacs
before the subordinate Courts. This lowered the status of the High
Court inasmuch as the Tribunal, which was presided. by an officer
who did not have the status of a High Court Judge would be
deciding the suits for recovery of money exceeding Rs. 10 lacs.
(c)
The Act eroded the independence of the judiciary since the
jurisdiction of Civil Courts had been truncated and vested in the
Tribunal. It also came to the conclusion that the independence of
the judiciary was eroded as the High Court had no role to play in
the appointment of the presiding officers.
During the pendency of this appeal, the Guwahati H.igh Court was also
required to consider the validity of this Act. By judgment dated 16.08.1999
F to 20.08.1999, which is the subject-matter of Civil Appeal Nos. 6227-6246
of 2000, the High Court came to the conclusion that though the Parliament
has legislative competence to enact the law, but as it had abrogated/negated
the power of judicial review, which had violated the basic feature of the
Constitution, the Act was void. It further held that some of the provisions of
G the impugned Act were liable to be struck off. The sections which were
struck down were Section 17 which gives jurisdiction, powers and authority
to the Tribunal and was held to be violative of Article 14 as being arbitrary
and unreasonable. It also struck down the appointment of Recovery Officer
and held the modes for recovery of debts under Sections 25 and 28(1) and
(2) as being arbitrary, unreasonable and without any guidelines, control etc.
H It further quashed Section 31 which deals with the transfer of suits/proceedings
'"'-
;
.~.
U.0.1. v. DELHI HIGH COURT BAR ASSOCIATION [KIRPAL, J.]
459
and Section 34( I) which gives overriding effect to the Act.
A
In the course of hearing, our attention was invited to a decision of the
Karnataka High Court in the case of D.K. Abdul Khader and Others vs.
Union of India and Others, AIR 200 l Karnataka 176 where a Single Judge
of the High Court, while taking a different view from the one expressed by
the Delhi High Court, came to the conclusion that the Parliament did not B
have the legislative competence to enact the Act inasmuch as Entry l lA of
List III could not include "Tribunal" and furthermore that the Parliament
could not exercise power to enact this law under the provisions of Article
323A or 323B of the Constitution. In other words, a Tribunal could not be
constituted for any matter not specified in Articles 323A and 323B.
c
We will first deal with the question as to whether the Parliament has
the competence to enact a law for establishing such Banking Tribunals. In
order to examine the question of the competence of the Parliament to enact
such a law, it is pertinent to bear in mind the observations of this Court in
Navinchandra Ma/at/al v. The Commissioner of Income-tax, Bombay City, D
[1955] I SCR 829 at 836 which are as follows:
" ........ As pointed out by Gwyer C.J. in The United Provinces v. Atiqa
Begum, [1940] F.C.R. 1 IO at page 134 none of the items in the Lists
is to be read in a narrow or restricted sense and that each general
word should be held to extend to all ancillary or subsidiary matters E
which can fairly and reasonably be said to be comprehended in it. It
is, therefore, clear-and it is acknowledged by Chief Justice Chagla
that in construing an entry in a List conferring legislative powers the
widest possible construction according to their ordinary meaning must
be put upon the words used therein ......... The cardinal rule of
interpretation, however, is that words should be read in their ordinary, F
natural and grammatihl meaning subject to this rider that in construing
words in a constitutional enactment conferring legislative power the
most liberal construction should be put upon the words so that the
same may have effect in their widest amplitude."
(Emphasis added) G
Again in Union of India v. H S. Dhillon, [I 972] 2 SCR 33 at page 51
it was observed as follows:
"It seems to us that the function of Art. 246(1), read with entries 196 List I, is to give positive power to Parliament to legislate in respect
of these entries. Object is not to debar Parliament from legislating on H
460
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[2002] 2 S.C.R.
_,A
a matter, even if other provisions of the Constitution enable it to do
so."
In Dhillon's decision, it was held that what one has to ask is whether
the matter sought to be legislated is included in List II or in List III and no
question has to be asked about List I. If the answer is in the negative, then
B it follows that the Parliament has power to make laws with respect to that
matter or text.
It has thus been clearly enunciated that the power of the Parliament to
enact a law, which is not covered by an Entry List II and List III, is absolute.
While Articles 323A and 323B specifically enable the legislatures to enact
C laws for the establishment of tribunals, in relation to the matters specified
therein, the power of the Parliament to enact a law constituting a Tribunal,
like the Banking Tribunal, which is not covered by any of the matters specified
in Article 323A or 323B, is not taken away. With regard to any of the entries
specified in List I, the exclusive jurisdiction to make laws with respect to any
D of the matters enumerated in List I is with the Parliament. The power conferred
by Article 246(1) can be exercised notwithstanding the existence of Article
323A or 323B of the Constitution.
Articles 323A and 323B are enabling provisions which specifically
enable the setting up of tribunals contemplated by the said Articles. These
E Articles, however, cannot be interpreted to mean that it prohibits the legislature
from establishing tribunals not covered by these Articles, as long as there is
legislative competence under an appropriate entry in the Seventh Schedule.
Articles 323A and 323B do not take away that legislative competence. The
contrary view expressed by the Karnataka High Court in D.K. Abdul Khader 's
F case does not lay down the correct law and we expressly disapprove of the
same.
The Delhi High Court and the Guwahati High Court have held that the
source of the power of the Par\iament to enact a la"Y
r~lating to the
· establishment of the Debt Recovery Tribunal is entry I IA of List Ill which
G pertains to "administration of justice; Constitution and organisation of all
Courts, except the Supreme Court and the High Courts" In our opinion, entry
45 of List I would cover the types of legislation now enacted. Entry 45 of
List I relates to "Banking". Banking operations would, inter alia, include
accepting of loans and deposits, granting of loans and recovery of the debts -,-
due to the bank. There can be little doubt that under Entry 45 of List I, it is
H the Parliament alone which can enact a law with regard to the conduct of
•
U.0.l. v. DELHI HIGH COURT BAR ASSOCIATION [KIRPAL, J.]
461
business by the banks. Recovery of dues is an essential function of any A
banking institution. In exercise of its legislative power relating to banking,
the Parliament can provide the mechanism by which monies due to the Banks
and Financial Institutions can be recovered. The Tribunals have been set up
in regard to the debts due to the banks. The special machinery of a Tribunal
which has been constituted as per the Preamble of the Act, "for expeditious
adjudication and recovery of debts due to banks and financial institutions and B
for matters connected therewith or incidental thereto" would squarely fall
within the ambit of Entry 45 of List I. As none of the items in the lists are
to be read in a narrow or restricted sense, the term "Banking" in Entry 45
would mean legislation regarding all aspects of Banking including ancillary
or subsidiary matters relating to Banking. Setting up of an adjudicatory body C
like the Banking Tribunal relating to transactions in which banks and financial
institutions are concerned would clearly fall under entry 45 of List I giving
the Parliament specific power to legislate in relation thereto.
The learned counsel has drawn our attention to the provisions of the
Act and we are unable to agree with the Delhi High Court that the Act or any D
other provision thereof is in any way arbitrary or bad in law. During the
pendency of these appeals, the Act has been amended and whatever lacunae
or infirmities existed have now been removed by the said Amending Act and
with the framing of more Rules. For example, Rules have been framed in
1998 for the appointment of Presiding Officers of the Tribunals as well as the E
Presiding Officers of the Appellate Tribunals. The Rules contemplate
appointments being made by a Selection Committee. Each of the Selection
Committee is to consist of the Chief Justice of India or a Judge of the
Supreme Court as nominated by the Chief Justice of India along with other
members referred to in the said Rules. The Selection Committee so constituted
would ensure fair and impartial selection of competent persons to act as F
Presiding Officers of the Tribunal. Furthermore Section 19 after its amendment
reads as follows:
"19. Application to the Tribunal.-( I) Where a bank or a financial
institution has to recover any debt from any person, it may make an G
application to the Tribunal within the local limits of whose jurisdiction-
(a) the defendan~ or each of the defendants where there are more
than one, at the time of making the application, actually and
voluntarily resides, or carries on business, or personally works
for gain; or
H
462
A
B
c
D
E
F
G
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SUPREME COURT REPORTS
[2002] 2 S.C.R.
(b) any of the defendants where there are more than one, at the time
of making the application, actually and voluntarily resides, or
carries on business, or personally works for gain; or
(c) the cause of action, wholly or in part, arises.
(2) Where a bank or a financial institution, which has to recover its
debt from any person, has filed an application to the Tribunal under
Sl!b-section (1) and against the same person another bank or financial
institution also has a claim to recover its debt, then, the later bank or
financial institution may join the applicant bank or financial institution
at any stage of the proceedings, before the final order is passed, by
making an application to the Tribunal.
(3) Every application under sub-section (1) or sub-section (2) shall be
in such form and accompanied by such documents or other evidence
and by such fee as may be prescribed:
Provided that the fee may be prescribed having regard to the amount
of debt to be recovered:
Provided further that nothing contained in this sub-section relating to
fee shall apply to cases transferred to the Tribunal under sub-section
(1) of Section 3 l.
( 4) On receipt of the application under sub-section (I) or sub-section
(2), the Tribunal shall issue summons requiring the defendant to show
cause within thirty days of the service of summons as to why the
relief prayed for should not be granted.
~
(5) The defendant shall, at or before the first hearing or within such
time as the Tribunal may permit, present a written statement of his
defence.
(6) Where the defendant claims to set-off against the applicant's
demand any ascertained sum of money legally recoverable by him
from such applicant, the defendant may, at the first hearing of the
application, but not afterwards unless permitted by the Tribunal,
present a written statement containing the particulars of the debt sought
to be set-off.
(7) The written statement shall have the same effect as a plaint in a
(
U.0.1. v. DELHI HIGH COURT BAR ASSOCIATION [KIRPAL, J.]
463
cross-suit so as to enable the Tribunal to pass a final order in respect A
both of the original claim and of the set-off.
(8) A defendant in an application may, in addition to his right of
pleading a set-off under sub-section (6), set up, by way of counterclaim against the claim of the applicant, any right or claim in respect
of a cause of action accruing to the defendant against the applicant B
either before or after the filing of the application but before the
defendant has delivered his defence or before the time limited for
delivering his defence has expired, whether such counter-claim is in
the nature of a claim for damages or not.
(9) A counter-claim under sub-section (8) shall have the same effect C
as a cross-suit so as to enable the Tribunal to pass a final order on
the same application, both on the original claim and on the counter
claim.
(10) The applicant shall be at liberty to file a written statement in
answer to the counter-claim of the defendant within such period as D
may be fixed by the Tribunal.
(I I) Where a defendant sets up a counter-claim and the applicant
contends that the claim thereby raised ought not to be disposed of by
way of counter-claim but in an independent action, the applicant
may, at any time before issues are settled in relation to the counterE
claim, apply to the Tribunal for an order that such counter-claim may
be excluded, and the Tribunal may, on the hearing of such application
make such order as it thinks fit.
(12) The Tribunal may make an interim order (whether by way of
injunction or stay or attachment) against the defendant to debar him F
from transferring, alienating or otherwise dealing with, or disposing
of, any property and assets belunging to him without the prior
permission of the Tribunal.
(13) (A) Where, at any stage of the proceedings, the Tribunal is
satisfied, by affidavit or otherwise, that the defendant, with intent to G
obstruct or delay or frustrate the execution of any order for the recovery
of debt that may be passed against him,-
(i) is about to dispose of the whole or any part of his property; or
(ii} is about to remove the whole or any part of his property from the
local limits of the jurisdiction of the Tribunal; or
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SUPREME COURT REPORTS
(2002] 2 S.C.R.
A
(iii) is likely to cause any damage o,r mischief to the property or affect
B
c
D
its value by misuse or creating third party interest,
the Tribunal may direct the defendant, within a time to be fixed by
it, either to furnish security, in such sum as may be specified in the
order, to produce and place at the disposal of the Tribunal, when
required, the said property or the value of the same, or such portion
thereof as may be sufficient to satisfy the certificate for the recovery
of debt, or to appear and show cause why he should not furnish
security.
(B) Where the defendant fails to show cause why he should not
furnish security, or fails to furnish the security required, within the
time fixed by the Tribunal, the Tribunal may order the attachment of
the whole or such portion of the properties claimed by the applicant
as the properties secured in his favour or otherwise owned by the
defendant as appears sufficient to satisfy any certificate for the recovery
of debt.
(14) The applicant shall, unless the Tribunal otherwise directs, specify
the property required to be attached and the estimated value thereof.
(15) The Tribunal may also in the order direct the conditional
attachment of the whole or any portion of the property specified
E
under sub-section (14).
F
G
(16) If an order of attachment is made without complying with the
provisions of sub-section (13), such attachment shall be void.
( 17) In the case of disobedience of an order made by the Tribunal
under sub-sections (12), (13) and (18) or breach of any of the terms
on which the order was made, the Tribunal may order the properties
of the person guilty of such disobedience or breach to be attached
and may also order such person to be detained in the civil prison for
a term not exceeding three months, unless in the meantime the Tribunal
directs his release.
(18) Where it appears to the Tribunal to be just and convenient, the
Tribunal may, by order,-
(a) appoint a receiver of any property, whether before or after grant
of certificate for recovery of debt;
H
(b) remove any person from the possession or custody of the property;
U.0.1. v. DELHI HIGH COURT BAR ASSOCIATION [KIRPAL, J.]
465
(c) commit the same to the possession, custody or management of A -
-<
the receiver;
(d) confer upon the receiver all such powers, as to bringing and
defending suits in the courts or filing and defending applications
..
before the Tribunal and for the realization, management, protection,
preservation and improvement of the property, the collection of B
the rents and profits thereof, the application and disposal of such
rents and profits, and the execution.