Banking laws: Multiple laws which created multiple forums made litigations infinite. What is the solution ?


1.        Faced with the mind-boggling burden of arrears which today is more than 3.4 crores in the case of the subordinate courts and more than 51.5 lakhs in the case of the High Courts and even 62,064 in the case of the Supreme Court, our legislature and the superior Courts invoking even legislative powers, which the founding fathers had never visualized, have created large number of tribunals in substitution of the Civil Court, even the High Court. However, far from reducing the backlogs, such laws and tribunals have contributed in inconceivable terms, towards adding to the existing backlog of cases. Some of our neighbors too, following our path, enacted laws to establish tribunals in substitution of the Civil Courts. Those countries too face the same result. Legendary Justice Krishna Iyer, I believe, probably had sensed the counter productiveness of tribunalization of justice. However, I am not sure whether even Justice Krishna Iyer, who lamented about the trivialization of justice by tribunalization, had thought of the futility of creating tribunals in substitution of the Court, from the point of view I beg to submit.

2.        Roman lawyers, particularly Ulpian, who lived in the third century, realized the undeniable truth of the total inability of any man-made justice delivery system to do justice. He was concerned, for even innocent men were sent to the gallows only because the court failed to ascertain the truth. In those days it is doubtful whether any system of appeal existed. The Roman lawyers realized that even a provision for appeal will be of little solace because an appellate authority may commit the very same error which the fact-finding authority had committed. As a lawyer I have come across many an instance where a correct decision on facts, and very often even on law, of the lower court being reversed by the superior court. Even providing for multiple layers of appeal may not solve the injustice arising out of the decision of judicial bodies manned by fallible human beings. Recently, Justice Sanjay Kishan Kaul of the Supreme Court of India, was humble enough to admit in the public domain that if there were a court superior to the Supreme Court, 50% of the decisions of the Supreme Court would be reversed. Every legal practitioner, even informed common people, understand that no judicial forum can do justice which is free from human infallibility.

3.          The Roman lawyers understood the undeniable fact that for the legal system to survive, even erroneous decisions at the hands of tribunals consisted of fallible human beings are to be treated as truth. This concept is called the doctrine of res judicata, the very foundation of our justice delivery system. To quote Ulpian, res judicata pro veritate accipitur, namely, a thing adjudicated is received as the truth, nay, a judicial decision is conclusive as between the parties, although other parties may not be bound. The Roman lawyers felt that no party to a judicial decision shall be allowed to reopen the same even where the decision is palpably wrong, because to do so would result in multiplicity of proceedings and it is in the interest of the republic that it shall not be allowed. They said “interest reipublicae ut sit finis litium”, it is in the interest of the republic that there is finality of litigation. They also felt that it is against the interest of the parties to a litigation which had culminated, to allow the same to be reagitated. Ulpian said, “nemo debet bis vexari pro uno eadem causa”, no man shall be vexed on the same question more than once. In other words, the Roman lawyers realised that no judicial body consisting of fallible human beings can do justice in all cases, and for a legal system to exist, even grave injustice arising out of fallible judicial process ought to be given effect to. Gaius, one of the classical Roman lawyers used a metaphor to bring home the concept of finality and authoritativeness of even erroneous judicial decisions which was considered to be an inevitable evil, as thus: res judicata facit ex albo nigrum, ex nigro album, ex curvo rectum, ex recto curvum, a thing adjudged makes what was white, black; what was black, white; what was crooked straight; what was straight, crooked.

4.        The common law system which we have adopted by virtue of Article 372 (1), has mainly four sources, namely, Roman law, statutes, precedents and customs, of which Roman law is the most important foundation. The common law which in the due course of time provided for multiple layers of appeal- incorporated to minimise the injustice arising out of judicial decisions at the hands of fallible men- is pyramidical in structure. It is founded on the principle that all causes between the same parties be brought to one forum and its decision, right or wrong, be taken as truth, authoritative and binding between the parties, subject to correction, if any, by way of an appeal before a superior court. Chief Justice Edward Coke, in his book Institutes of the Laws of England, described the concept of ‘cause of action estoppel’ thus:

Cause of action is a disputable evidence, and when it is subjected to a trial it merges with the decree of the court and thereafter ceases to be in existence. And such a decree of a court is of uncontrollable verity, the validity of which cannot be questioned, except by way of appeal, if any, which the Parliament has provided for. He described the process of a cause of action, a disputed right or evidence, ceasing to be existing at the conclusion of a trial and becoming an incontrovertible truth as ‘transit in rem judicatum’.  One will find an elucidation of this principle in Thoday v Thoday.

5.        In short, the common law which has its foundation in Roman law, is founded on the doctrine of res judicata estoppel, of which a species is the concept of ‘issue estoppel’. To put it simply, a judgment of a court of competent jurisdiction upon an issue before it, is absolutely binding, final and authoritative between the parties to the litigation, howsoever, erroneous it could be otherwise. A judicial decision, for example, a decision of a court convicting an innocent man charged with murder, if had been upheld by the Supreme Court, the erroneous conviction and sentence to death, having merged with the order of the Supreme Court rejecting the appeal of the innocent man erroneously found guilty, that decision will have to be given effect, subject to the power of pardon, remission, etc. vested in the executive government. It could be shocking to the conscience of a common man that the doctrine of res judicata estoppel would render a hanging of an innocent man wrongly convicted of murder as perfectly legal. But the Roman lawyers felt that without which the legal system cannot exist. They said fiat justitia ruat caelum, that justice be done even if heaven should fall. The true import of the maxim is contrary to the common perception, namely, in the context of an innocent man found guilty of murder and sentenced to be hanged, the maxim would mean that he be hanged, no matter he was innocent.

6.        The concept of res judicata estoppel, the very foundation of our legal system, finds it complete incorporation in the Code of Civil Procedure, 1859, the first ever such codification in legal history, which now stands re-enacted as the Code of Civil Procedure, 1908. The concept of estoppel can be stated in a simple, four-word latin maxim- ne bis in idem, not twice in the same thing. The relevant provisions of the CPC are, Section 10 (stay of suit), Section 11 (res judicata), Section 12 (bar of suit), Section 13 (foreign judgment not conclusive) and Order 1 Rule 1 and Order 1 Rule 3 (which mandate the joining as Plaintiff/defendants all persons… where any right to relief in respect of, or arising out of, the same act or transactions or series of acts or transaction is alleged to exist in/against such persons whether jointly or severally) and Order 2 Rule 2. Other relevant provisions of the CPC are Order 1 Rule 8(2), Order 1 Rule 9, Order 1 Rule 10 and Order 23. Apart from CPC, many other enactments expressly or by necessary implication provide that on the same cause of action between the very same parties, not more than one action or proceedings can be instituted by the ‘person aggrieved’, and the institution of one action will act as a bar on another instituted simultaneously and a judgment in one action will constitute an absolute bar, res judicata, between the parties on any future action based on the same cause of action. Till our Parliament/Courts, in complete forgetfulness of the doctrine of estoppel, which is the very foundation of the concept of rule of law, created multiple tribunals, our justice delivery system was on the right path, with finality of judgments, a certainty. The British too, established tribunals or forums in substitution of the Civil Court, but that unlike the one created by us did not overturn the concept of finality of judicial pronouncements. The first ever tribunal/forum created in substitution of the Civil court were the ones created under the Income Tax Act of 1922.  The British realised that the tribunals created under the Income Tax Act, cannot absolutely substitute the Civil Court, for to have conferred on a department/tribunal the power to declare any provision of the Income Tax Act, 1922, or the rules made thereunder, was inconceivable. Therefore, the Act provided for a reference to the High Court, for determination of any question as to the constitutionality or vires of any of the provisions of the Income Tax Act or the rules made thereunder. The Income Tax Act of 1922 was therefore a code in complete substitution of the Code of Civil Procedure and it has been working smoothly.

7.        The concept of tribunals has its genesis in French jurisprudence. What was initially contemplated was not even judicial tribunals stricto sensu. The concept of judicial and non-judicial tribunals is often misunderstood. What distinguishes a judicial tribunal from others is the existence of a lis, namely, the assertion of a right by one of the parties and the denial of the same by the other and the need to ascertain the truth by allowing the parties to the dispute to adduce evidence in support of their case as also against their adversary. An administrative tribunal, though could be following a judicial procedure and even taking evidence, need not necessarily be judicial in nature. The tribunals as originally contemplated were ones where no element of judicial work was involved, for example, to recommend to the Government or local body where a housing scheme or an airport or a highway could be built. The finding of such tribunals which were called ‘quasi-judicial’ were mere recommendations. What the British introduced in India were

a)        quasi-judicial tribunals which involved no adjudication, and

b)        tribunals like the one under the Income Tax Act, 1922, which are judicial tribunals though the enquiry to be conducted is one-sided. It was a judicial tribunal because its function was to adjudicate a lis, nay, dispute between the revenue and the subject. The  Income Tax tribunal is absolutely in consonance with the pyramidical concept of administration of justice and involve no conflict of judgements or multiplicity of proceedings. A finding of a fact-finding authority under the Income Tax Act, namely, the accessing authority is amenable to correction by way of appeal to the appellate authority, appellate tribunal and further appeal before the High Court/Supreme Court. The concept of ne bis idem remained intact.

c)         The tribunals created post independence unlike of the British era, for instance, the Authorised Officer and the Debt Recovery Tribunals under the SARFAESI Act, and the NCLT under the IBC and the forums under the MSME Act, which are in violation of ne bis idem seek to achieve the impossible, namely, expeditious adjudication of the inter se dispute between a Bank or Financial institution and a consumer of banking services/borrower. The reason is simple. By providing for multiple forum, which is contrary to the concept of ne bis in idem the said enactments made authoritativeness and finality of judicial decisions, impossible.

8.        The Parliament when it enacted the Recovery of Debts and Bankruptcy Act of 1993, failed to notice that the enquiry to be conducted in a dispute between a Banker/Financial institution on one hand and a borrower on the other, is not one-sided, but two-sided, and therefore, creation of a tribunal in substitution of the Civil Court is impossible, just as it is impossible for two parallel lines to ever meet. The Parliament failed to notice that if the DRT were to act as a substitute of the Civil Court, namely, to conduct an enquiry which is two-sided, then the tribunal will have to be a Civil Court, with the sole difference of having a difference nomenclature. To be more accurate, the Recovery of Debts and Bankruptcy Act, 1993, did not contemplate the investiture of jurisdiction of the Civil Court qua the claim of a borrower as against the Banker, in the DRT. The Act only, as is manifest from Section 17 of the same, provides for institution of claims by Banks and financial institutions as against the Borrower in the DRT. A borrower who is aggrieved as against the Bank was required to institute an action (suit) in a Civil Court, which meant two different forums conducting an enquiry in respect of the very same controversy, between the very same parties, which would lead to multiplicity of proceedings and conflict of judgments. The Parliament sought to undo the deficiency by adding Sub section (6) to (11) in Section 19 of the RDB Act. However, that also was of no avail because the Supreme Court, forgetting the maxim ne bis in idem held that the Bank and the Borrower, both, are free to decide whether an action against the Bank ought to be decided by the DRT or by the Civil Court. The Supreme Court unfortunate though undid the mischief which the Parliament sought to remedy by amending the Act.

9.        The creation of DRTs, far from being a panacea of mounting arrears in banking litigation, proved to be extremely counter-productive, it did no good whatsoever to the Banks, financial institutions or the borrowers. Far from the same being a solution, the new laws became a problem without a solution ever in sight. It took years in getting the suits transferred from the Civil Court/High Court, because the Act provided for such transfer to DRT. The provision for transfer itself made a minimum of 4 to 6 years and a large number of litigations arising out of such transfer which could have been avoided had there been no provision for transfer at all which meant the cases prior to the coming to force of the 1993 Act to be continued to be tried by Civil Courts.

10.      The Parliament enacted the SARFAESI Act of 2002, because the RDB Act of 1993 completely failed.  The Act contemplates the creation of a tribunal in substitution of the Civil Court, none other than by an officer of the Bank or Financial institution itself, named the ‘authorised officer’. The Act mandated the authorised officer as a judicial tribunal to conduct a summary enquiry affording the borrower a due opportunity to be heard. The Act expressly required the authorised officer to pass a speaking order, stating reasons why the objections of the borrower are not tenable, and further to communicate the same. Investiture of judicial functions on the authorised officer was in violation of the concept nemo potest esse simul actor et judex, no one can be at once suitor and judge. However, the doctrine of necessity may justify vesting of judicial power in an authorised officer, provided it is done with necessary safeguards against the authorised officer’s adjudication becomes a mockery.

11.      The SARFAESI Act, as it was originally enacted, further provided for an appeal to the DRT under Section 17 thereof, and even expressly clothed the DRT with the power to restore to the borrower possession of his properties if the action of the Bank taking possession and liquidating the same for the recovery of dues was illegal, so too, to even compensate him. There is a provision for further appeal to the DRAT. The Act was in full consonance with the doctrine of estoppel, for it required the Bank to withdraw the suit it had instituted in the DRT, if any, before invoking SARFAESI, and if any money was remaining to be recovered after exhausting the action under SARFAESI, the Bank was at liberty to institute a suit, keeping the concept of ne bis in idem absolutely intact.

12.      The SARFAESI Act in which the provisions of the Recovery of Debts and Bankruptcy Act stood incorporated, was to a large extent a code in substitution of the Civil Court, where a two-sided enquiry could be conducted which would avoid multiplicity of proceedings between the same parties on the same controversy. In other words, under the SARFAESI/ RDB Act as originally enacted both the Bank and the borrower could initiate action against each other, seek remedies against each other and both parties have equal access to justice. Under the said scheme the concept of res judicata estoppel, namely, the finality and authoritativeness of judicial decisions, all were kept intact, maintaining the pyramidical hierarchy of judicial authorities.

13.      What the Parliament did in 2000 by amending the Recovery of Debts and Bankruptcy Act, by empowering the DRTs to adjudicate the claims of the borrowers as against the Bank, so too by providing for an appeal under Section 17 against the action of the authorised officer under Section 13(4) of the Act, was disturbed unwittingly by the Supreme Court in Mardia’s case. To repeat, the 2000 amendment of the Recovery of Debts and Bankruptcy Act, to some extend restored the concept of ne bis in idem, namely, res judicata. The SARFAESI Act by expressly providing that to invoke the same an O.A/suit instituted by the Bank in the DRT ought to be withdrawn and that it is free to institute a fresh suit/O.A after exhausting the recovery action under the SARFAESI Act, cemented the concept of ne bis in idem, nay, made multiplicity of proceedings impossible. The only lacuna was that it was still possible for a borrower to maintain an action in a Civil Court as against a Bank or Financial Institution, instead of agitating his claim as against the bank in the DRT, in the suit filed against him, by seeking remedies such as set off, counter claim. Nay, to institute a counter suit in the DRT itself. The judgements of the Supreme Court in a number of cases and, particularly, in Nahar Industries held that the bank and the borrower both are free to maintain independent action in the DRT or Civil Court at their option which meant creation of two forums for adjudication of the same cause between the same parties.

14.      The Recovery of Debts and Bankruptcy Act and the SARFAESI Act, both, which together constituted a complete code in substitution of the CPC, to a large extent was in consonance with the doctrine of ne bis in idem which made multiplicity of proceedings impermissible. The entire pyramidical structure of adjudication of disputes in the realm of Banking which to  assure finality in litigation and act as a deterrent against multiplicity of proceedings was given a deathblow, though manifestly by inadvertence, by the Supreme Court in Mardia’s and other cases.

15.      The Supreme Court in Mardia’s case (para 55) held that the appeal contemplated under Section 17 of the SARFAESI Act, is not an appeal, the word appeal is a misnomer and that it is nothing but an original proceedings instituted in the DRT as a court in substitution of the Civil Court by a borrower/any person aggrieved by the action of the authorised officer under Section 13(4) of the Act. The Court failed to notice the difference between an appeal and an original proceedings and of the calamitous ramifications if an original proceedings were to be treated as an appeal. Since appeal is a continuation of original proceedings, the appellant has no choice of forum. Under Section 13 of the SARFAESI Act, the authorised officer who assumes the role of an adjudicator is also the real plaintiff/actor, both at once. The borrower is in the position of the Respondent. If he is aggrieved by the action of the authorised officer, then he has to prefer an appeal in DRT within whose territorial limits the authorised officer reside/ function. The borrower as an appellant is not the dominus litus, stricto sensu. On the contrary, since the Supreme Court in Mardia’s case has held that the appeal under Section 17 is not an appeal but is really an original proceedings, the borrower’s status got entirely changed. He becomes the dominus litus, the master of the proceedings, the one who has control over it, the literal carrier of the proceedings thereof. The judgment in Mardia placed the borrowers in the status of a plaintiff instead of a respondent which he is in terms of Section 13 (2) of the SARFAESI Act. This led to borrowers instituting independent proceedings in different DRTs, leading to multiplicity of proceedings, cutting the concept of estoppel, nay, res judicata at its very root. The finality of litigation thus became impossible. For example, in a given case, there may be a number of properties, and even the very same property may be subjected to auction multiple times, where earlier auctions had failed. The Supreme Court in Ashok saw mill’s case, held that a borrower cannot be remedy-less where his properties were auctioned by the authorised officer and therefore, an application under Section 17 would lie every time an auction is conducted in respect of each and every property.

16.      With the Supreme Court terming the word appeal in Section 17 of the Act as a misnomer and declaring it to be an original proceedings, the question arose as to the place of suing, nay, the DRT to be approached where there is more than one DRT that can be approached considering the well established principles on the place of suing, particularly as embodied in the CPC. In common law/CPC the place of suing/forum is the sweet will of the plaintiff/actor. Broadly speaking, he could, at his option, institute a suit before a tribunal within whose territorial limits the Bank/financial institution/its branch concerned is situated, or where any of the secured asset is situated, or where the cause of action has arisen. The Delhi and Calcutta High Courts held that an application under Section 17 could be filed within the territorial limits of the DRT where the principal office/branch concerned of the Bank/financial institution is situated or where the cause of action has arisen, at the option of the borrower/s. This led to multiple proceedings being instituted at various DRTs at different points of time by different borrowers against the action of the authorised officer within the meaning of Section 13(4) of the SARFAESI Act.

17.      The Parliament failed to notice that the judgment of the Supreme Court in Mardia, Transcore, Ashok Saw Mill and other cases were in conflict with the concept of estoppel, and will completely defeat the purpose of expeditious recovery of debts and would instead lead to multiplicity of proceedings, a gross mischief, and therefore ought to undo the mischief by amending the Act and to expressly provide that the proceedings contemplated under section 17 of the SARFAESI Act is an appellate proceedings and there can be only one appellate proceedings against the action of the authorised officer under Section 13 (4) where he (authorised officer) act both as an actor/plaintiff and judex (judge) both at once. Because the Supreme Court in Mardia was ex facie erroneous. The Parliament instead amended the Act in 2004 substituting the word appeal in Section 17 with the word “application”, in deference to the views expressed by the Supreme Court in Mardia’s case. As has been stated above, in terms of the first proviso to Section 19 of Recovery of Debts and Bankruptcy Act, 1993 and Section 13(10) of the SARFAESI Act, a Banker cannot invoke recovery action under both the enactments simultaneously, but was required to elect either of the two at a time.

18.      As aforesaid, the judgement in Mardia’s case by converting an appellant proceedings into an original proceedings rewrote what Ulpian had said in the third century, interest republica ut sit finis litium, namely, it is in the interest of the republic that there is finality of litigation. The Mardia’s judgement meant the concept of finality reversed, into infinity in litigation. The Parliament, without noticing that any deviation from the doctrine of ne bis in idem would lead to great mischief, amended the Recovery of Debts and Bankruptcy Act, 1993, to protect the simultaneous action taken by the Banks prior to 11.11.2004, but did not permit the concept of ne bis in idem to be violated beyond 11.11.2004. The error committed by the Parliament in permitting dual action against a borrower both under the SARFAESI Act and the RDB Act had a very limited consequence because that was confined to dual action taken prior to 11.11.2004. Otherwise the insertion of the proviso as aforesaid in Section 19 of the SARFAESI Act had little impact.

19.      The amendment as aforesaid protecting dual action taken upto 11.11.2004 was undoubtedly bad. It was in violation of Article 14. However, the real calamity happened in 2007 where the Supreme Court in Transcore, far from realising that the departure from the doctrine of estoppel would make the SARFAESI Act (the panacea for the menace of NPAs running into lakhs of crores of rupees) unworkable, held that a banker is free to invoke SARFAESI and RDB Act both at once. All this happened because of two mistakes that the Court committed. Firstly, forgetting that its province is to interpret the law and to give the words employed by the Parliament its literal meaning, which is otherwise known as the ‘golden rule of interpretation’, and not to deviate from it, unless importing its literal meaning would lead to manifest injustice or absurdity. Secondly, failure to notice the distinction, subtle but real, between the doctrines of ‘election of forum or procedure’ and ‘election of remedies.’ So too the principle ne bis in idem, nay, estoppel the very foundation of the concept of the rule of law Let me deal with this one by one.

20.      The proviso to Section 19 of the Recovery of Debts and Bankruptcy Act, 1993, reads thus:

[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.]

21.      In this context, it is only appropriate to extract Section 13(10) of the SARFAESI Act.

Where dues of the secured creditor are not fully satisfied with the sale proceeds of the secured assets, the secured creditor may file an application in the form and manner as may be prescribed to the Debts Recovery Tribunal having jurisdiction or a competent court, as the case may be, for recovery of the balance amount from the borrower.

From the proviso quoted above, four things are clear, (a) the one-time exemption to pursue two actions at the same time is confined to actions taken prior to 11.11.2004 (b) it is obligatory to file an application seeking withdrawal of the suit instituted against the borrower which is pending before the DRT to invoke Section 13 of the SARFAESI Act, (c) the DRT, if it were to reject the application seeking permission to withdraw the suit, must provide reasons. (d) the bank/ FI can institute a suit in the DRT against a borrower for recovery of money remaining to be due even after sale of the secured assets.

22.      The Supreme Court, failing to remind itself that it is bound to follow the statutory provisions and not to act in violation or ignorance thereof, went on to hold in Transcore, that there is no need to withdraw an O.A instituted in the DRT to invoke action under the SARFAESI Act, and that both actions could be simultaneously invoked and pursued, failing to notice that the same will lead to multiplicity of proceedings and conflicting judgments. The Supreme Court failed to remind itself that it has no jurisdiction to act contrary to the express statutory provisions which are in conformity with the concept of ne bis in idem and to render a judgement against statute and against the first principles and thereby cause untold injury to both banks and financial institutions and its constituents namely, the commerce and industry/the borrowers, nay, even the economy of the country which require robust banking laws.

23.      The Court happened to hold that two simultaneous proceedings, one under the Recovery of Debts and Bankruptcy Act, 1993, and other under the SARFAESI Act could be pursued because it mistook the meaning of the concept of election of procedure/forum and the election of remedies, which are both elementary principles of jurisprudence. The concept of election of remedy came to be misunderstood because the concept of remedy itself is often used in a loose sense, distinct from the definite meaning it has in jurisprudence. The word remedy as often wrongly used in its loose sense, means procedure. The Supreme Court and the High Courts often reject petitions under Article 32 or 226, on the premise that the litigant has an efficacious alternative remedy. The Court in doing so is not referring to the concept of ‘remedy’ stricto sensu. The word ‘remedy’ there, is used to mean procedure. The word ‘remedy’ has a definite meaning in jurisprudence. They are generally classified as (a) constitutive or substantive remedies, and (b) executory or adjectival remedies. More commonly it is described as (a) common law remedies (b) equitable remedies and (c) declaratory remedies. Equitable remedies, namely, injunction, specific performance, set-off and the like, were originally in the exclusive province of the equitable courts. However, as time passed, common law courts also started granting these remedies. Declaratory remedies were considered distinct from common law and equitable remedies and as one which is sui generis. The distinction between common law court and court of equity is no longer relevant. All courts are empowered, nay, duty bound to grant these remedies, to advance the cause of justice.

24.      The concept of remedy, election of remedies, and the concept of election of forum may ex facie seem to be intricate subjects of jurisprudence. However, in reality, they offer no difficulty in comprehension. Both concepts belong to the doctrine of estoppel, both equitable concepts. A litigant is not obligated to elect between the remedies unless there is an inconsistency or manifest conflict. Generally speaking, today, a litigant can seek all remedies- common law, equitable and declaratory, because there is hardly any inconsistency in the various remedies which one could seek. It is difficult to conceive too many situations where there could be inconsistency in remedies which would mandate the litigant to elect between. Practically there is nothing today like election of remedies, stricto sensu. To elucidate the point as an example it may be stated that one cannot seek simultaneously a decree for restitution of conjugal rights and divorce, at the same time. Even the doctrine that one cannot approbate and reprobate at the same time, an equitable doctrine, does not fall under the province of election of remedies. The concept that one cannot approbate and reprobate is in the province of election of estate or rights and not in the province of election of remedies.

25.      In Transcore, the issue before the Supreme Court was whether the notice under Section 13(2) issued by the Indian Oversees Bank (IOB) against Transcore was an action taken within the meaning of the first proviso of the Recovery of Debts and Bankruptcy Act, 1993. If it was an action taken under the SARFAESI Act, there was no need to withdraw the suit/O.A instituted in the DRT because suits instituted up to 11.11.2004 was protected by the amendment. To repeat, the exemption was in respect of action taken prior to 11.11.2004 and not beyond. The only issue before the Supreme Court was whether the notice under Section 13 (2) was an action taken or not. Nothing else, and certainly the question whether suits instituted subsequent to 11.11.2004 was required to be withdrawn or not did not fall for consideration at all. It cannot fall for consideration because the Parliament has expressly said that the banker shall withdraw the suit to invoke SARFAESI where it is initiated after 11.11.2004. However, the Supreme Court, being misled, went on to hold that there is no need to withdraw the suits instituted even after 11.11.2004, though, to repeat, the statute has expressly required so. The Supreme Court in Transcore was, willfully or otherwise, misled to believe that there is no inconsistency between the “remedies” under the SARFAESI Act and the Recovery of Debts and Bankruptcy Act, 1993, and therefore that there is no obligation on the part of the Bank/financial institution to elect between the two remedies. The Supreme Court failed to notice that the concept of election of remedies and election of procedure are two distinct concepts, and that the question of election of remedies did not arise at all in Transcore. This is because there was no question of the Bank/financial institution being compelled to elect between the common law, equitable and declaratory remedies because of a conflict or inconsistency in the remedies which they sought to enforce. The question of election of remedies did not arise at all. Nobody questioned the Bank in seeking and having all remedies. Nobody mentioned any remedy such as set-off, counter claim, specific performance and the like to be inconsistent with each other. The only relevant question was the election of procedure or forum, namely, whether the IOB, could as against Transcore, simultaneously pursue a suit in the DRT and invoke SARFAESI, where the authorized officer or the bank himself is a tribunal. The Supreme Court, being misled on the concept of election of remedy qua election of procedure/forum and acting contrary to the express words of the Parliament that the Bank cannot pursue two action at the same time, held that the Banks are free to take recourse to multiple action.

26.      In law, a judgement of the Supreme Court which is rendered per incuriam or sub silentio (without noticing the express statutory provisions/in violation thereof) constitute no binding precedent. But that unfortunately in India is only in theory. In actual practice, per incuriam and sub silentio judgments are taken as precedents, though nothing could be more calamitous than the same. The judgment in Transcore was rendered in 2007, but even today, 14 years down the lane, the grave error therein remains to be corrected, leading to the clogging of DRTs, nay, making the SARFAESI Act wholly unworkable.

27.      The Transcore judgment was only the tip of the iceberg. The judgment in Mardia’s case meant opening of the floodgates. The judgment of the Delhi High Court in Indira Devi’s case added to the mess. The judgement the full bench of the Delhi High Court in Amish Jain and anr. v ICICI Bank, 2012 meant total deluge. In that case the Court held that the application under Section 17 is not an original proceedings but an execution proceedings, and that therefore, the place of suing ought to be the tribunal within whose territorial limits the secured asset is situated. Apparently, the Court held so to bring an end to the multiplicity of proceedings, which it felt was the outcome of the judgment in Indira Devi’s and other cases which gave the borrower the freedom to opt for the forum. In Amish Jain’s case, there was only one property. The Court overlooked the matter that in a given case there can be a large number of properties which fall within the territorial limits of different DRTs, and if the situs of the property is the determinative factor in choosing a forum in filing an application under Section 17, that would lead to multiplicity of proceedings.

28.      Elsewhere in the world, the precedential value of a judgment is solely based on the validity of the reasoning employed and not the strength of the Bench. Unfortunately, in India, what is relevant is not the reasoning but the strength of the bench. In India, larger benches even overrule judgements of lesser strength which has cut the concept of precedent at its root for in India precedent is no longer the reason for the judgement (ratio decidendi) but the strength of the bench. It is difficult to imagine a greater calamity than this. Amish Jain was rendered by a bench of 3 judges, and therefore, that judgment was taken as binding precedent, though it was manifestly ill founded. Since then, the borrowers institute an SA in the DRT under Section 17 of the SARFAESI Act each time an auction notice is published and in respect of each property separately and in different DRTs when the property is situated in different places. All in respect of the very same debt, multiple proceedings in the different DRTs and in the very same DRT at different point of time all in respect of the very same cause.

29.      But for the erroneous judgments of the Supreme Court and the High Courts, the pyramidical structure under the Acts could have been maintained and a finality of litigation could have been achieved. Today, instead of one single application as contemplated by the Parliament under Section 17, at times even more than two dozen applications are filed and as an off shoot from those proceedings further proceedings in the DRATs, High Courts, etc. The SARFAESI Act and the Recovery of Debts and Bankruptcy Act, 1993, has totally failed. The Parliament, concerned as it was of the mindboggling rise in NPAs, crossing ten lakh crores, enacted the Insolvency and Bankruptcy Code, creating yet another hierarchy of courts, the NLCT and NCLAT. The creation of the NCLT and the NCLAT, far from resolving the crisis in recovery of debts, made it all the more complicated. Why is it so? The reason is simple. The IBC is only a multi-layered forum for the adjudication of disputes, for all practical purpose, between Banks/financial institutions and the borrowers. It cannot adjudicate any other dispute for it has no jurisdiction to do so. With the creation of NCLT in addition to the existing forums, the concept of ne bis in idem, the very foundation of finality and prevention of multiplicity of proceedings is further violated. This may require a little elaboration.

30.      The NCLT under the IBC is not a tribunal in substitution of the Civil Court, even in the narrowest sense. It is one of extremely limited jurisdiction. While the Recovery of Debts and Bankruptcy Act and the SARFAESI Act, contemplate no mechanism of resolution or revival of an account which has become stressed, the IBC is an ambitious venture to prevent the stressed companies from being straight away wound up and instead contemplate the resolution of the debt. To achieve that objective, it seeks to oust the promoter/owner from the conduct of the affairs of the company and replace him by a Resolution Professional, who will act under the guidance and control of the creditors/financial institutions and the NCLT, both. If the Resolution professional fails to turn things around, the company will be wound up.

31.      The resolution process contemplated under the IBC can work only if all other modes of recovery is barred. It is illogical to think of the resolution of an industry in crisis by appointing a Resolution Professional one hand, and to allow the recovery proceedings under the Recovery of Debts and Bankruptcy Act and the SARFAESI Act. It is equally illogical to allow the liquidation proceedings to be initiated and taken to its logical end where resolution has failed, and to simultaneously allow the recovery proceedings under the SARFAESI Act and Recovery of Debts and Bankruptcy Act. Keeping this incongruity in mind, the legislature incorporated Section 14 in the IBC, which provides for a moratorium against recovery and other laws.

32.      The IBC contemplates in a secured creditor/operational creditor the role of an ‘actor’/plaintiff to the exclusion of all other creditors and claimants as against a company for they alone can institute a proceedings against a company in the NCLT. Once an application is admitted by the NCLT, all those who may have a claim against the company, for the scheme of the Act to work, will have to be denied a right to enforce their remedies against the company. A proposition that, except the operational creditors and the financial creditors, all others have no right to invoke the jurisdiction of the NCLT or of the Civil court or of any other forum for the enforcement of their rights cannot be countenanced in law, for ubi jus ibi remediem (if there is a right, there is a remedy), is an inviolable principle in our constitutional scheme. It would also amount an impermissible discrimination within the meaning of Article 14.

33.      The procedure for liquidation contemplated under the IBC is akin to the one under the Companies Act, where the Company Court (High Court) acts as a tribunal in substitution of the Civil Court. The concept of Company Court as a liquidator offers no difficulty because the High Court in our constitutional scheme is a court of record of plenary jurisdiction. The NCLT under the IBC cannot, in our constitutional scheme, be clothed with the powers of a Civil Court, and it has not been so. As aforesaid, the NCLT is a tribunal of very limited jurisdiction, one created failing to notice that the creation of such a tribunal, far from resolving the resolution of disputes in the realm of banking, would further worsen it. The Banks and financial institutions continue to invoke the SARFAESI Act and even the Recovery of Debts and Bankruptcy Act on the premise that the proceedings in the NCLT in no way constitute a bar, though it certainly ought to, the doctrine of estoppel being the very foundation of the concept of rule of law.

34.      The contention of the Banks and financial institutions appears to be that the Resolution Professional’s domain is confined to the properties of the company under the resolution process and not that of the guarantors. The Banks and financial institutions, therefore, assert that they can invoke as against the personal properties given as collateral security by the promoters/guarantors. The incongruity there is manifold. One is that it is illogical to allow the Banks/financial institutions to proceed against the personal properties of the promoters/guarantors even when the resolution process is underway. They contend that the Resolution Professional steps into the shoes of the promoter/management and not into the shoes of the Banks/financial institutions and, therefore, they have the right to be an ‘actor’/plaintiff independent of the Resolution Professional. The argument that the Resolution professional is acting on behalf of the company, and that the company and Banks/financial institutions are independent entities, vested of distinct and independent legal rights and, therefore, the latter is entitled to invoke SARFAESI against the personal properties of the promoter/guarantors, on the face of it, may be appealing. Such incongruities are the consequence of bringing in a system of recovery of debts of bank and financial institutions, contrary to the elementary principles of jurisprudence, namely, ne bis in idem. The Resolution professional/liquidator, cannot in law proceed against the personal properties of a promotor or a guarantor on behalf of the Bank/financial institution, even where a security interest is created in favour of the Bank/FI, because his (RP) job is to recover the money from the debtors of the company and pay off the dues of the creditors, to deal with the assets and liabilities of the company under liquidation. On the contrary, a Bank/FI as a secured creditor, can recover from the person and properties of the debtor. The action in such a scenario being initiated and pursued by two independent juridical entities, the liquidator and the Bank/FI, respectively, the question of infringement of the concept of ne bis in idem does not arise.

35.      It is only appropriate to briefly mention about the BIFR created under the SICA and as also of the mechanism under the MSME Act for nursing and care of the medium, small and micro enterprises. The BIFR not only could not achieve anything beneficial for the Banks/FIs or the companies under stress or the economy in general, but instead caused enormous injury to all concerned. It was an unprecedented calamity. It was a total failure and it is repealed. The resolution mechanism under the MSME though was absolutely workable and was a felt need, it did not take off because the beneficiaries of the scheme being small players had no wherewithal to apply the requisite pressure on the governmental agencies which were entrusted with the job of its enforcement, what a calamity, what else to say.

36.      All these laws were enacted and the multiple-forums and huge infrastructure was created in the misplaced hope that such measures will secure just and expeditious adjudication of the dispute between Banks and financial institutions and the borrowers, namely, industry and commerce. The multiple laws and the bodies created thereunder have only benefited the unscrupulous and the dishonest, making recovery of debts and resolution of stress difficult if not impossible. It meant enormous drain of public finances in the form of the cost of establishment of large number of tribunals, its infrastructure, salaries and perks to the officers and staff with practically nothing in return. It helped the unscrupulous to rob the Banks/FIs, taking advantage of the multiple layers of forums which these laws have created, the complexities and incongruities the text of many of these poorly drafted legislations offered. The obvious causalities were the honest, upright entrepreneurs and businessmen, a tribe which is facing extinction, who were in distress due to the vagaries and uncertainties of business and industry.

37.      It is time that the Parliament, the Courts and the informed public and, in particular, the bar, realise there can be no substitution of the Civil Courts and the Code of Civil Procedure, and that what is required is to strengthen the ordinary Civil Court, attract the best talents on the Bench and the Bar, strengthen and modernise the infrastructure and realise that a mere lip service that “the subordinate judiciary is the face of judiciary” is not enough. The day we recognise that the framers of the constitution had envisaged the subordinate judiciary to be the true constitutional courts which can hold even an Act of Parliament to be unconstitutional and it is not the High Courts and Supreme Court exercising jurisdiction under Article 226 and 32, the solution to the problems we face is in sight. The earlier we realise that the discretionary of jurisdiction under Article 226 and 32 is against the fundamental principle of law that, “that legal system which gives the least discretion to a judge is the best and that judge who exercises the least discretion is the best.” It is time that we realise that nowhere in the world the Supreme Court is the first court of original jurisdiction but is only the final court of appeal and if the Article 32 were to work, without giving room for complaints of partiality and arbitrariness, the strength of the Supreme Court will have to be raised to a few hundreds, which is a preposition on the very face of it is unworkable and therefore cannot even be thought of. It is time that we realise that the only solution for the demon of mounting arrears and to insulate our justice delivery system from allegations of corruption and malpractices is to completely do away with the innumerable tribunals (except a few), which many consider to be white elephants and instead restore the pristine glory of the Civil Court as a court of plenary jurisdiction, empowered, competent and duty bound to embark upon any controversy of a civil nature under the sun, which would mean an end to the multiplicity of proceedings and restoration of the concept of authoritativeness and finality of judicial proceedings by restoring the pyramidical hierarchy of our justice delivery system. All monies and effort wasted in creating tribunals and the infrastructure for the same at least now be invested in creating adequate number of Civil Courts manned by the best available talents and to provide such courts adequate infrastructure, men and material.