INDIAN OVERSEAS BANK vs P.S. Bawa

APPELLANT Bank which was the Opposite Party before the State Commission has filed this Appeal against the judgment and order dated 13.04.07 passed by the State Consumer Disputes Redressal Commission, Delhi (in short, ''the State Commission '') in Complaint Case No. C-257/1997 whereby the State Commission while allowing the complaint filed by the complainant/Respondent No.1 has directed the Appellant Bank to return all the documents furnished by the Respondent No.1 as guarantor to the credit facilities availed by the Respondent No.2, along with Rs.10,000/- as costs of litigation within a period of one month.

BRIEFLY stated the facts of the case are that the Appellant Bank extended credit facilities of Rs.22 lakhs to the Respondent No.2 on 8.3.94. Complainant/Respondent No.1 stood guarantee for repayment of loan and mortgaged his plot measuring 4742 sq. yards, Khasra No.201/7, Khatta No.3234 situated in Village Mirazpur, Ghaziabad, UP as a collateral security. He deposited the title deed with the Bank. Sum of Rs.5.5 lakhs was disbursed to the Respondent No.2. Respondent No.1 vide his letter dated 16.04.94 sought to withdraw the guarantee given by him and requested the Appellant Bank to absolve him from the obligation and return the title deed of the mortgaged property as Respondent No.2 was involved in a fraud case. In response to the said letter, Appellant wrote a letter dated 10.06.94 to the Respondent No.1 expressing its inability to return the title deed till the account is adjusted/settled. Respondent No.1 was also informed by the Appellant that they had taken up the matter with the borrower and in the meantime the account having balance of Rs.5,28,850.20 as on 10.06.94 was blocked. On 5.3.97, Appellant filed a suit before the Debt Recovery Tribunal for the recovery of Rs.10,11,978.20 impleading the Respondent No.2 as Defendant No.1 and Respondent No.1 as Defendant No.3 being the guarantor and mortgager. Decree was passed by the Debt Recovery Tribunal, Delhi on 10.06.02 directing the Defendants to pay jointly and severally a sum of Rs.10,11,978.20 along with pendentelite and future interest @ 23.75% p.a. from the date of filing of O.A till the date of payment within a period of four weeks.

DURING the pendency of the proceedings before the Debt Recovery Tribunal, Delhi, Complainant filed the complaint before the State Commission seeking return of the titles papers of the mortgaged property along with compensation of Rs.20 lakhs.

APPELLANT , on being served, entered appearance and filed its written statement resisting the complaint, inter-alia, on the grounds that the liability of the Respondent No.1 being co-extensive with the borrower/Respondent No.2, the title deed could not be released till the account is adjusted/settled; that the account of the Respondent No.2 was blocked after receiving the intimation from the Respondent No.1; that the Bank had taken all possible steps and immediately initiated appropriate proceedings against the account holder to recover the dues; that the Appellant had already intimated to the Respondent No.1 by letter dated 10.06.04 that the title deeds could not be returned till the account is settled/adjusted. It was also pleaded that there was no deficiency in rendering the service on its part. State Commission allowed the complaint and directed the Appellant Bank to return all the documents furnished by the Respondent No.1 as guarantor against the credit facilities availed by the Respondent No.2, along with Rs.10,000/- as costs of litigation within a period of one month. State Commission observed as under: - "In view of the contention of OP No.1 that account of OP NO.2 was blocked after receiving intimation from the complainant and the complainant having not suffered any monetary loss either in the form of loan amount as guarantor or in any other form, we hold the OP No.1 guilty for deficiency in service only for not returning the documents furnished by the complainant on receipt of intimation from the complainant that he should be absolved from the liability of standing guarantor for OP NO.1 "

Appellant, being aggrieved, has filed the present appeal. We have heard the learned counsel for the parties at length.

LD . Counsel appearing for the Appellant contends that the subject matter of the dispute before the State Commission was outside the scope and ambit of the Consumer Protection Act, 1986; that the dispute between the parties was covered by the Recovery of Debts Due to Bank and Financial Institution Act, 1993 and the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (For short, the Securitization Act ''); that the State Commission did not have the jurisdiction to adjudicate on dispute regarding the recovery of debts due to the Banks and Financial Institution as a special Tribunal had been created under the Securitization Act to decide the matter falling under the said Act; that Section 18 of the Securitization Act creates a bar on the jurisdiction of the Civil Court or any other authority in relation to the matters specified in Section 17 of the said Act; that the State Commission without noticing the defence taken by the Appellant allowed the complaint; that since the State Commission did not take into consideration the defence taken by the Appellant, the order was liable to be set aside. As against this, Learned Counsel appearing for the Complainant/Respondent No.1 support the order passed by the State Commission.

WE find substance in the submission made by the Learned Counsel for the Appellant. Under Securitization Act, a Special Tribunal has been created to exercise, on and from the appointed day, the jurisdiction, power and authority to entertain and decide applications from the Banks and Financial Institutions for recovery of debts due to such Banks and Financial Institutions. Under Section 18, on and from the appointed day, the jurisdiction of the Civil Court or any other authority in relations to the matters specified in Section 17 has been barred except that of the Supreme Court and a High Court exercising jurisdiction under article 226 and 227 of the Constitution. Section 17 and Section 18 are produced below: - 17. Jurisdiction, Powers and authority of Tribunal: - (1) A Tribunal shall exercise, on and from the appointed day, 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. "18. Bar of Jurisdiction: - On and from the appointed day, 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 article 226 and 227 of the Constitution) in relation to the matters specified in section 17. "

State Commission without noticing the defence taken by the Appellant that it had already moved to the DRT for recovery of money and a decree had already been passed against the Respondents, allowed the complaint and directed the Appellant to return the title deed of the mortgaged property. In view of the fact that the DRT was already seized of the matter and a decree had been passed against the Respondents, the State Commission should have refrained itself from proceeding with the complaint filed by the Respondent No.1. In view of Section 18 of the Securitization Act, the fora under the Consumer Protection Act did not have the jurisdiction to try the suits relating to recovery of debts due to Banks and Financial Institutions. Section 18 clearly bars the jurisdiction of any Civil Court or Authority to entertain complaint/suit relating to recovery of loan amount by the Bank or Financial Institutions. In view of the bar created by the Section 18 of the Securitization Act, the complaint filed by the Respondent No.1 under the Consumer Protection Act, 1986 was not maintainable. State Commission exercised the jurisdiction which did not vest in it.

SINCE in the suit filed by the Appellant before the DRT, a decree had already been passed by a court of competent jurisdiction directing the Respondents to pay jointly and severally a sum of Rs.10,11,978.20 along with pendente lite and future interest @ 23.75% p.a. from the date of filing of O.A till the date of payment, the State Commission could not absolve the guarantor, Respondent No.1 from his liability to pay the loan amount due from the principle debtor as his liability was co-extensive with the principle debtor to pay the loan amount.

A specific plea had been taken by the Appellant in its written statement regarding the power and jurisdiction of the State Commission to entertain the complaint filed by the Respondent No.1 as DRT was already seized of the matter under the Securitization Act. State Commission did not deal with this point at all. State Commission should have noticed the defence of the Appellant while deciding the dispute. The order of the State Commission is liable to be set aside on the ground that the State Commission has failed to take note of the defence taken by the Appellant. State Commission failed to exercise the jurisdiction vested in it. For the reasons stated above, the appeal is allowed, order of the State Commission is set aside and consequently complaint is dismissed with costs which are assessed at Rs.10,000/-.

SUM of Rs.35,000/- deposited by the Appellant alongwith accrued interest be refunded to Appellant by the Registry. Appeal allowed.