NATIONAL LAW INSTITUTE UNIVERSITY, BHOPAL

EQUITY, TRUST AND SPECIFIC RELIEF – FOURTH TRIMESTER

PROJECT

AN ANALYSIS OF

CIVIL APPEAL NO.5634 OF 2006

Raghunath Rai Bareja and another …Petitioner(s)

V.
Punjab National Bank &Ors …Respondent(s)

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

DECIDED ON : 06/12/2006

JUDGES : [HON’BLE MR. JUSTICE S.B SINHA]

[HON’BLE MR. JUSTICE MARKANDEY KATJU]

BENCH TYPE : DIVISION BENCH

SUBMITTED BY: SUBMITTED TO:

DURGESH N. YADAV SANJAY YADAV

ROLL NO: 2018BALLB72
SECTION: B (SECOND YEAR)
ENROLLMENT NO: A-1979
 TABLE OFCONTENTS
CERTIFICATE .................................................................................................................................................... 3

ACKNOWLEDGEMENT ................................................................................................................................... 4

MATERIAL FACTS ........................................................................................................................................... 5

QUESTION OF LAW INVOLVED ................................................................................................................... 7

ARGUMENT ON BEHALF OF APPELLANT ................................................................................................. 8

ARGUMENT ON BEHALF OF RESPONDANT ............................................................................................ 10

REASON FOR ACCEPTANCE OR REJECTION OF ARGUMENT ............................................................... 9

CONCRETE JUDGEMENT ............................................................................................................................. 11

RATIO DECIDENDI ........................................................................................................................................ 12

 CERTIFICATE

This is to certify that the project paper titled Raghunath Rai Bareja and another V. Punjab National Bank
& Ors has been prepared and submitted by Durgesh Nandan Yadav, who is currently pursuing his BA LLB
(Hons.) at National Law Institute University, Bhopal in fulfilment of the Equity, Trust and Specific Relief
course. It is also certified this is original research report and this paper has not been submitted to any other
university, nor published in any journal.

Date :
Student’s Signature :
Teacher’s Signature :
 ACKNOWLEDGEMENT

This paper has been made possible by the unconditional support of many people. I would like to acknowledge
and extent my heartfelt gratitude to Sanjay Yadav for guiding me throughout the development of this paper
into a coherent whole by providing helpful insight and sharing their brilliant expertise. I would also like to
thank the officials of the Gyan Mandir library, NLIU for helping me to find the appropriate research material
for this study. I am deep indebted to my parent, senior and friend for all the moral support and
encouragement.
 INTRODUCTION

The maxim applied in Raghunath Rai Bareja Vs. Punjab National Bank and Ors. was ‘Equity follows the Law’.
The maxim is also expressed as ‘Aequitas Sequitur Legem’. It means that equity cannot override the provisions
of law. Equity follows the Rule of Law. Equity does not act in contradiction to the law but it rather supplements
it. Equity respects every word of law. When the rules of common law did not apply specifically or clearly then
only the rules of equitable rights were enforced.
The discretion of the court is to be governed by the rules of law and equity, which are not oppose, but each, in
turn, to be subservient to the other, this discretion, in some cases, follows the law implicit, in other assists it and
advances the remedy; in other against it relieves against the abuse, or allays the rigor of it but in no case does it
contradict or overturn the grounds of principle thereof.1
There are two aspects of this maxim i.e. Equity adopts and follows the rules of law in all cases where applicable
and Equity follows the analogy of law.
Equity cannot apply when: (i) Where a rule of law did not specifically apply. (ii) Where even by analogy the
rule of law did not apply, equity formulated and applied its own rules.

1
Cowper vs. Cowper (1734) 2P WNS 720
 MATERIAL FACTS

 The High Court ordered winding up of the Company and an Official Liquidator was appointed to take
over possession of the properties of the Company.

 A suit for recovery of a certain loan amount was filed by the respondent with pendente lite and future
interest from the plaintiff.

 A preliminary decree for recovery of the loan amount was passed by the High Court in favour of the
respondent and finally a decree was passed in favour of the respondent.

 Before the expiry of period of limitation, three execution petitions were filed by the respondent in the
company court but all of them were dismissed by the High Court. 

 The period of limitation for filing an execution application expired. Thereafter a fresh new petition
was filed by the bank for restoration of third execution petition but it was again dismissed by the High
Court.

 The decree-holder Bank filed Company Application for transfer of the Execution Petition to the Tribunal.
The appellant filed a reply stating that the High Court does not have any jurisdiction to entertain the
Bank’s Application.

 However, by an impugned order the High Court transferred the Execution Petition pending before it to
the Debt Recovery Tribunal, Chandigarh.


 QUESTION OF LAW INVOLVED

 Whether the High Court in exercise of its inherent jurisdiction can transfer the execution petition to
the Debt Recovery Tribunal?

 Whether the respondent bank is entitled to recover the loan amount from the appellant?
 ARGUMENT ON BEHALF OF APPELLANT

1. The impugned order was wholly without any jurisdiction. The council for the appellant relied on the
provisions of Section 17, 18, 24 and 31 of the The Recovery of Debts due to Banks and Financial
Institutions Act, 1993.
As per Section 17:
Jurisdiction, powers and authority of Tribunals. — (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. (2) An Appellate Tribunal shall exercise, on and from the appointed
day, the jurisdiction, powers and authority to entertain appeals against any order made, or
deemed to have been made, by a Tribunal under this Act.
As per Section 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 articles 226 and 227 of the Constitution) in relation
to the matters specified in section 17.
As per Section 24:
Limitation. —The provisions of the Limitation Act, 1963 (36 of 1963), shall, as far as may be,
apply to an application made to a Tribunal.
As per Section 31:
Transfer of pending cases.—(1) Every suit or other proceeding pending before any court
immediately before the date of establishment of a Tribunal under this Act, being a suit or
proceeding the cause of action whereon it is based is such that it would have been, if it had
arisen after such establishment, within the jurisdiction of such Tribunal, shall stand transferred
on that date to such Tribunal:
Provided that nothing in this sub-section shall apply to any appeal pending as aforesaid before
any court.
(2) Where any suit or other proceeding stands transferred from any court to a Tribunal under
sub-section (1),-- (a) the court shall, as soon as may be after such transfer, forward the records
of such suit or other proceeding to the Tribunal; and (b) the Tribunal may, on receipt of such
records, proceed to deal with such suit or other proceeding, so far as may be, in the same manner
as in the case of an application made under section 19 from the stage which was reached before
such transfer or from any earlier stage as the Tribunal may deed fit.
 Hence it was contended by appellant that the Debt Recovery Tribunal, Chandigarh was established
in 1993 and hence after 1993 the exclusive jurisdiction regarding recovery of debts pertaining to
which the RDB Act applies is with the Tribunal.

Further, the council for the appellant relied on the decision of the Supreme Court in the case of
Allahabad Bank vs. Canara Bank & Anr2. The Supreme Court observed that the word ‘proceedings’
in Section 31 of the RDB Act includes ‘execution proceedings’ pending before a civil court before the
commencement of the Act. Supreme Court observed that the Debt Recovery Tribunal has exclusive
jurisdiction under the RDB Act, 1993 both at the stage of adjudication of the claim under Section 17
of the Act as well as execution of the claim. The Court observed that the provisions of the RDB Act,
1993 are to an extent inconsistent with the provisions of the Companies Act, 1956, and the latter Act
has to yield to the provisions of the former. This is also applicable when there is a pending winding-
up petition against the debtor company and also after a winding-up order is passed. The Court further
held that no leave of the Company Court is necessary under Section 446 of the Companies Act, 1956
for initiating or continuing the proceedings under the RDB Act, 1993.

2
2000(4) SCC 406
 ARGUMENT ON BEHALF OF RESPONDANT

1. The council for the respondent relied upon Section 446(1) of the Companies Act which states that:
When a winding-up order is passed or the official liquidator is appointed as a provisional
liquidator, no suit or other legal proceeding shall be commenced, or if pending at the date of the
winding-up order, shall be proceeded with against the company, except by leave of the court
and subject to such terms as the court may impose.

2. The counsel for respondent-Bank relied on Sub-section (3) of Section 446 of the Companies Act,
1956.
(3) Any suit or proceeding by or against the company which is pending in any Court other than
that in which the winding up of the company is proceeding may, notwithstanding anything
contained in any other law for the time being in force, be transferred to and disposed of by that
Court.

3. The counsel for the respondent-Bank submitted that it will be very unfair if the debts were not paid
by the appellant, who was the guarantor of the loan and also the director of the company which took
the loan.

4. The counsel for the respondent-Bank also submitted that a purposive interpretation should be put on
Section 31 of the RDB Act so that the bank can recover its dues.
 REASON FOR ACCEPTANCE OR REJECTION OF ARGUMENT

1. The court was of the opinion that the impugned order of the High Court for the transfer of execution
petition pending before it to the Debt Recovery Tribunal was clearly beyond the scope of Section
31 of the RDB Act because states that only suits or other proceeding pending before the Court
immediately before the establishment of the Tribunal under the Act, stand transferred to the
Tribunal. Since the tribunal was established in 1993 and at the time of establishment there were no
pending proceedings no transfer could take place under Section 31 of the RDB Act. The third
execution petition was filed much after the tribunal was established. Hence obviously there could
be no such transfer to the Tribunal under Section 31 of the RDB Act. There are no other provisions
for transferring suits other than Section 31. Hence, the impugned order dated 26.5.2005 was clearly
illegal and without jurisdiction.
Further the court said that the Section 24 of the RDB Act also applies to the Limitation Act, 1963
and since by Section 136 of the Limitation Act the period of limitation is 12 years for filing an
execution petition hence now no such application can be filed since that period of 12 years expired.
Hence, ARGUMENT (1) of the appellant got accepted.

2. The Supreme Court mentioned that by Companies (Second Amendment) Act, 2002, Section 446(3)
of the Companies Act was omitted and evidently the High Court has overlooked this Amendment.
Hence the court held that the High Court has no power to transfer the Execution Petition to the Debts
Recovery Tribunal. Also, it was held in Allahabad Bank vs. Canara Bank & Anr. that Section 34 of
the act gives overriding effect to the provisions of the RDB Act and thus Section 446 has no
application.
Hence, ARGUMENT (1) and (2) of the respondent got rejected.

3. The court agreed with the learned counsel that equity was wholly in favour of the respondent (Bank),
since a Bank should be allowed to recover its debts however it was stated by the court that it is well
settled that when there is a conflict between law and equity, it is the law which has to prevail, in
accordance with the Latin maxim ’dura lex sed lex’, which means ’the law is hard, but it is the law’.
Equity can only supplement the law, but it cannot supplant or override it.
The court further observed that equity is in favour of the respondent-Bank, the law is in favour of
the appellant and thereby was of the opinion that that the impugned order of the High Court was
violating Section 31 of the RDB Act. Also, it was observed that the claim was time-barred in view of
Article 136 of the Limitation Act read with Section 24 of the RDB Act.
Hence, ARGUMENT (3) of the respondent got rejected.
4. The court said that “first and foremost principle of interpretation of a statute in every system of
interpretation is the literal rule of interpretation. The other rules of interpretation e.g. the mischief
rule, purposive interpretation etc. can only be resorted to when the plain words of a statute are
ambiguous or lead to no intelligible results or if read literally would nullify the very object of the
statute”.
Hence, ARGUMENT (4) of the respondent got rejected.
 CONCRETE JUDGEMENT

 The court said that, “In the present case, while equity is in favour of the respondent-Bank, the law is
in favour of the appellant, since we are of the opinion that the impugned order of the High Court is
clearly in violation of Section 31 of the RDB Act, and moreover the claim is time-barred in view of
Article 136 of the Limitation Act read with Section 24 of the RDB Act.”
 The court held that, “In the present case, we are clearly of the opinion that the literal rule applies, and
the other rules have no application to interpreting Section 31, since the language of Section 31 is plain
and clear, and cannot be said to be ambiguous or resulting in some absurdity.”
 The court said that, “In view of the above, we are clearly of the opinion that the recovery in question
is time-barred and it is hereby quashed. The impugned order of the High Court is set aside. The appeals
are accordingly allowed.”
 RATIO DECIDENDI

 Rules of interpretation other than literal rule would come into play only if there is any doubt
with regard to express language used or if plain meaning would lead to an absurdity.

 Jurisdiction under Recovery of Debts Due to Banks and Financial Institutions Act, 1993 is
exclusive, hence High Court cannot transfer execution petition to the Debt Recovery
Tribunal because appellant had given his consent to transfer of Execution Petition to
Tribunal. Consent cannot confer jurisdiction.