Why One Shall Not Be Justified in Thinking that an Attempt is Being Made to Anyhow Uphold the Claim of the State?


An extract is reproduced below from ‘Walk the Talk’ on NDTV 24×7 with The Indian Express Editor-in-Chief Shekhar Gupta, former Supreme Court judge and now chairman of the Press Council of India, Justice Markandey Katju, talks about ‘judicial overreach’ and ‘media excesses’ (posted on Indian Express website: Tue Oct 18 2011, 03:52 hrs)

“But the anger that we are generally seeing is more of what the executive now complains about—obiter dicta.

I don’t want to comment about other judges but I became a judge in the Supreme Court in 2006 and shortly after, I gave a judgment in which I said that the judges must know their limits and not behave like emperors. They must not try to run the government; judges must not ordinarily encroach into the domain of the legislature or the executive. Judges must know their limits, they must be restrained, particularly in economic and social matters. When it comes to civil liberties and fundamental rights, then a judge must be an activist.”

In my humble view, by and large, even the judiciary is completing a “formality” in delivering the judgments as detailed below. With respect, my views are as follows.

 (1) The Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (hereinafter called ‘DRT Act’). SECTION 19. Application to the Tribunal.—

(1) Where a bank or a financial institution has to recover any debt from any person, it may make an application to the Tribunal within the local limits of whose jurisdiction—………..x……….x……….x……..x……….x…….

Provided that the bank or financial institution MAY, with the permission of the Debts Recovery Tribunal, on an application made by it, WITHDRAW THE APPLICATION, whether made before or after the Enforcement of Security Interest and Recovery of Debts Laws (Amendment) Act, 2004 for the purpose of taking action under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002), if no such action had been taken earlier under that Act:

Provided further that any application made under the first proviso for seeking permission from the Debts Recovery Tribunal to withdraw the application made under sub‑section (1) shall be dealt with by it as expeditiously as possible and disposed of within thirty days from the date of such application:

Provided also that in case the Debts Recovery Tribunal refuses to grant permission for withdrawal of the application filed under this sub‑section, it shall pass such orders after recording the reasons therefor.”

AUTHOR’S OBSERVATION:- Notwithstanding the mandatory language of Proviso to section 19 of DRT Act,  recently, hon’ble Supreme Court in  M/s Transcore Vs Union of India & Anr {(2008) 1 SCC 125; Date of Judgment: 29/11/2006}, held, inter alia, as follows.

“For the above reasons, we hold that withdrawal of the O.A. pending before the DRT under the DRT Act is not a pre-condition for taking recourse to NPA Act. It is for the bank/FI to exercise its discretion as to cases in which it may apply for leave and in cases where they may not apply for leave to withdraw. We do not wish to spell out those circumstances because the said first proviso to Section 19(1) is an enabling provision, which provision may deal with myriad circumstances which we do not wish to spell out herein.”

            COMMENT (1): Whether, even hon’ble Supreme Court can put an interpretation, which is wholly inconsistent with a statutory provision and thus  violate the well settled ‘Literal Rule of Interpretation’?

(2) Further, hon’ble Supreme Court in  United Bank of India Vs Satyawati Tondon and others {(2010) 8 SCC 110; Decided on 26.07.2010} observed and held, inter alia, as follows.(SCC para 35 and 36)

“35…………….The reason which prompted the High Court to pass the impugned interim order and operative portion thereof are extracted below:

            "Learned counsel for the petitioner has urged that the loan was taken by respondent No.4 for opening a colour lab at 50/43, Raj Complex, K.P. Kakkar Road, Allahabad, but the loan has not been repaid by respondent No.4 and the bank is proceeding against the petitioner who is the guarantor of the loan. It is not clear   from the documents produced by learned counsel for the bank as to what steps have been taken by the bank against the borrower of the loan and merely issuance of notice under section 13(2) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 against the borrower is not sufficient. The bank should have proceeded against the borrower and exhausted all the remedies against him and thereafter the bank could have proceeded against the guarantor……"

“36.    We have heard learned counsel for the appellant and perused the  record. Normally, this Court does not interfere with the discretion exercised by the High Court to pass an interim order in a pending matter but, having carefully examined the matter, we have felt persuaded to make an exception in this case because the order under challenge has the effect of defeating the very object of the legislation enacted by the parliament for ensuring that there are no unwarranted impediments in the recovery of the debts, etc. due to banks, other financial institutions and secured creditors.” 

COMMENT (2): The Indian Contract Act, 1872. SECTION 128. Surety’s liability.—The liability of the surety is co-extensive with that of the principal debtor, unless it is otherwise provided by the contract.” In my view, section 128 does not provide that “The liability of the surety is PRIMARY to  that of the principal debtor”. This might have prompted Allahabad High Court to pass orders quoted above with a view to trying to CHASE INJUSTICE, which also stands to reason.

COMMENT (2-A) How the order of High Court under challenge had the effect of defeating the very object of the legislation enacted by the parliament by merely stating that “The bank should have proceeded against the borrower and exhausted all the remedies against him and thereafter the bank could have proceeded against the guarantor?"

(3)(a) The Indian Contract Act, 1872-“SECTION 130. Revocation of continuing guarantee.—A continuing guarantee may at any time be revoked by the surety, as to future transactions, by notice to the creditor.”

(b) Still further, hon’ble Supreme Court in Sita Ram Gupta Vs. Punjab National Bank and Ors {(2008) 5 SCC 711; Decided on 10/03/2008} has held as follows:

“7. The question is whether the appellant, having entered into such an agreement of guarantee with the Bank, had waived his right under the Act. In our view, the High Court has rightly held and we too are of the view that the appellant cannot claim the benefit under Section 130 of the Act because he had waived the benefit by entering into the agreement of guarantee with the Bank……”

(c) Also, hon’ble Supreme Court in Remdeo Chauhan @ Rajnath Chauhan  Vs Bani Kant Das & Others  [JT 2010 (12) SC 516 = 2010(12) SCALE 184; Decided on 19.11.2010] has held as follows:

“52. ……..The jurisdiction of NHRC (‘National Human Rights Commission’) thus stands enlarged by section 12(j) of the 1993 Act, to take necessary action for the protection of human rights. Such action would include inquiring into cases where a party has been denied the protection of any law to which he is entitled, whether by a private party, a public institution, the government or even the courts of law. we are of the opinion that if a person is entitled to benefit under a particular law, and benefits under that law have been denied to him, it will amount to a violation of his human rights.”(capitals mine in all above paras)

COMMENT(3): Whether,  now Sita Ram Gupta can legitimately expect that in near future a subsequent bench of hon’ble Supreme Court will declare that his human rights had been violated by Supreme Court judgment dated 10.03.2008 in aforesaid Sita Ram Gupta case (supra)?

COMMENT(4): Keeping in view the detailed contents given above at para (1), (2) and (3) above, why one shall not be justified to carry an impression that an  attempt is being made to any how upheld the claim of the Banks / FIs (being an instrumentality of “the State” as per Article 12 of the Constitution) vis a vis the individual Borrower / Guarantor, who is admittedly an inseparable constituent of “WE, THE PEOPLE OF INDIA”?  

AUTHOR’S OBSERVATION:- In support of my COMMENT(4) above, kindly have a look at the following news item.



Jaipur: The reputation of the government bank is losing its credibility because of Industrialist families. The loan of 1.5 lakh crore taken by the government bank is still missing out of which more than 70 percent loan is taken by the industrialist families.

On Sunday (30.10.2011), All India Bank Officers Association’s two day conference being here in which this issue was brought in to light. The National President Alok Khare and General Secretary R.J.Sridharan said in the meeting that private banks earned around 45 thousand crore in the year 2011, but because of centre’s leniency around 20 thousand crore rupees is being distributed like corporate loan.

The banks which are running on the orders of the Reserve Bank publish the defaulter list of the common people but they don’t have the list of the defaulters of the corporate families. According to the bankers in the Bank Director’s meeting also this list is never mentioned, because of which till today the list have not come into existence. Some specialists blame the government for this. For the common man there are norms to return the money in a given time whereas there are no norms for the corporate families. There are laws of recovery but it is only implemented on the common man.

Note: The views expressed are my personal and a view point only.



Narendra Sharma,

Consultant (Corporate Legal)

E-mail: nkdewas@yahoo.co.in

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