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IN THE HIGH COURT OF JUDICATURE OF BOMBAY
(ORDINARY ORIGINAL CIVIL JURISDICTIOIN)
WRIT PETITION NO.904 OF 2016
1 Panther Fincap & Management
Services Limited,
5th Floor, Manek Mahal,
Veer Nariman Road,
Mumbai 400 020
And
At Ground Floor, Bhupen Chambers,
Dalal Street, Fort, Mumbai 400 023
2 Mr. Navinchandra N. Parekh,
Indian Inhabitant, residing at 568,
Lady Jehangir Road, Five Gardens,
Matunga, Mumbai 400 019
3 Mr. Ketan V. Parekh
of Mumbai, Indian Inhabitant having
his office at 1st Floor, Radha Bhavan,
121, Nagindas Master Road,
Mumbai 400 023
And residing at 19/1, 3rd Floor,
Zaver Mahal, Netaji Subhash Marg,
Marine Drive, Mumbai 400 020
4 Mr. Kirtikumar N. Parekh,
of Mumbai, Indian Inhabitant,
residing at 103/5, W.H. Marg,
Blackie House, 3rd Floor,
Fort, Mumbai 400 001 Petitioners
Versus
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1 Bank of India
a Banking Company constituted
under the Banking Companies
(Acquisition & Transfer of
Undertakings) Act, 1970 having its
Head Office at Express Towers,
Nariman Point, Mumbai 400 021
2 Triumph International Finance
India Limited,
having its registered office at
Oxford Centre, 10, Shroff Lane,
Colaba Causeway, Colaba,
Mumbai 400 005
3 State of Maharashtra,
Through the Government Pleader,
High Court, Mumbai Respondents
Mr. Mayur Khandeparkar a/w Mr. Prakash Shinde, Ms. Chinmayee Ghag, Ms. Ambreen Sahid i/by Mr. Devanshu Pravinbhai Desai advocates for the petitioners Ms. Saumya Shrikrishna a/w Ms. Pooja Karacha i/by Nahush Shah Legal for respondent No.1 Mr. U.S. Upadhyaya, Assistant Government Pleader for respondent No.3 _______________ CORAM : R.M. BORDE & A.S. GADKARI, JJ Reserved on : 23rd January, 2017 Pronounced on :11th April,2017 ORAL JUDGMENT (Per: R.M. Borde, J) ::: Uploaded on - 17/04/2017 ::: Downloaded on - 18/04/2017 00:19:53 ::: {3} wp 904.16 Bombay.odt 1 Heard respective counsel appearing for both the parties. 2 Rule. With the consent of the parties, petition is taken-up for final decision at admission stage.
3 The petitioners are aggrieved by the order dated 31.5.2017 passed by the Recovery Officer, Debts Recovery Tribunal, below Exhibit 111 in the Recovery Proceedings No.187/2005, allowing the Application, presented by Respondent No.1 bank, requesting to put the petitioner No.3 in civil prison. The Appeal presented by the petitioner to the Debts Recovery Tribunal (DRT) has been rejected by the learned Presiding Officer by order dated 21.9.2007. The petitioners, herein, preferred an Appeal bearing No.346/2007, which has also been dismissed by the Chair Person, Debts Recovery Appellate Tribunal (DRAT) on 3.2.2016. Applications presented, seeking recall of the order by the petitioners, have also been rejected by the DRAT on 14.3.2016. 4 In the Application presented by respondent No.1 bank, it is stated that, the bank has obtained three separate Recovery Certificates against the debtors, petitioners herein, authorizing the recovery of more than Rs.200 crores. The Recovery Officer directed the petitioners herein to disclose their assets on affidavit, along with income-tax and wealth-tax returns by order ::: Uploaded on - 17/04/2017 ::: Downloaded on - 18/04/2017 00:19:53 ::: {4} wp 904.16 Bombay.odt dated 11.10.2005. However, after extending sufficient opportunity to the petitioners, they did not disclose the assets, nor produced the documents, as directed by the Recovery Officer. On 7.3.2006, a last opportunity was given to the petitioners to disclose their assets, however, they did not comply with the direction. It is recorded that, the petitioners are facing several proceedings initiated at the instance of Central Bureau of Investigation (CBI) and other Authorities. It is the contention of the bank that, the petitioners have sufficient means to pay the dues recoverable by the bank. However, they are intentionally avoiding to pay the debt. It is the contention of the bank that, the petitioners herein have made a payment of more than Rs.280 crores to Madhavpura Mercantile Cooperative Bank Limited (herein after referred to as 'MMCB' for the sake of convenience). Order passed by the Apex Court dated 27.2.2006 against the petitioners herein has been placed on record. It is also the contention of the bank that, the petitioners are paying Rs.1 crore a month to Mr. Ashok Mittal, apart from making payment of Rs.238 crores to MMCB. It is thus contended by the Respondents that, petitioners herein have sufficient assets to satisfy the decree amount. However, they are deliberately avoiding repayment of amount and are making the payment to other creditors. The willful disobedience on the part of the petitioners ::: Uploaded on - 17/04/2017 ::: Downloaded on - 18/04/2017 00:19:53 ::: {5} wp 904.16 Bombay.odt herein calls for extreme action like putting them in civil prison by taking recourse to remedies provided under section 25(b) of The Recovery of Debts Due to Banks & Financial Institutions Act, 1993 (''the RDB Act'').
5 The application was opposed by the petitioners herein contending that by a Notification dated 5,10.2001, Mr Ketan Parekh (petitioner No.3) and Mr. Navinchandra Parekh (Petitioner No.2) are declared a Notified Parties. Their movable and immovable assets are already attached. It is contended that, so far as payment to MMCB is concerned, the repayment is being made by the debtors of MMCB for and on behalf of Mr. Ketan Parekh - petitioner No.3. It is the contention of the petitioners that, they have disclosed their assets and have filed balance sheet for three years. The borrowers of MMCB have deposited Rs.236 crores on behalf of Mr. Ketan Parekh in October, 2006 and deposits have not been made by Mr. Ketan Parekh but by the borrowers of MMCB on behalf of Mr. Ketan Parekh. 6 The Recovery Officer, after hearing both the sides, allowed the application, issuing direction to issue arrest warrant against Mr. Ketan Parekh/Petitioner No.3.
7 It is the contention of the petitioners that, it is impermissible for the Recovery Officer to take extreme step of ::: Uploaded on - 17/04/2017 ::: Downloaded on - 18/04/2017 00:19:53 ::: {6} wp 904.16 Bombay.odt issuing arrest warrant, before availing the other modes of recovery provided under the Act. The petitioners contend that, since Mr. Ketan Parekh is a notified party and his movable and immovable assets have been attached by the Special Court in order to enforce recovery of amount, it is incumbent upon the respondent bank to approach the Civil Court and the application presented by the bank at Exh.111 ought not to have been entertained by the Recovery Officer. The petitioners also contend that, since the debtor does not have any means to pay amount, issuing direction for his arrest and putting him in civil prison is violative of article 21 of the Constitution of India, as well as spirit of Article 11 of the International Convention of Civil & Political Rights.
8 The modes of recovery of debts have been provided under Chapter V. In section 2 of The Recovery of Debts Due to Banks & Financial Institutions Act, 1993 (''the RDB Act''), it is provided thus:-
" 25. Modes of recovery of debts.:- The Recovery Officer shall, on receipt of the copy of the certificate under sub- section (7) of Section 19, proceed to recover the amount of debt specified in the certificate by one or more of the following modes, namely:-
(a) attachment and sale of the movable or immovable property of the defendant;::: Uploaded on - 17/04/2017 ::: Downloaded on - 18/04/2017 00:19:53 :::
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(b) arrest of the defendant and his detention in prison;
(c) appointing a receiver for the management of the movable or immovable properties of the defendant. "
9 It is the contention of the petitioner that, the amount recoverable under the Certificate can be recovered by attachment and sale of movable and immovable properties of the defendants and only in the event of failure to recover the debt by such mode, further step can be taken for arrest of the debtor and his detention in prison. It is the contention of the petitioners that, without availing the other modes for recovery of the amount, extreme step of issuing arrest warrant against the petitioner Mr. Ketan Parekh ought not to have been taken. The procedure prescribed under second and third schedule of Income-tax Act, 1961 and The Income-tax (Certificate Proceedings) Rules, 1962 as far as possible with necessary modifications as if the said provision and the rules refer to amount of debit due under RDB Act instead of income-tax Act is applied. In view of section 29 of the RDB Act. Chapter V of second schedule under the Income tax Act relates to arrest and detention of the defaulter. Rules 73 to 79 prescribe procedure in respect of issuance of an order of arrest and detention in civil prison of a defaulter. Rule 73 provides for issuance of show cause ::: Uploaded on - 17/04/2017 ::: Downloaded on - 18/04/2017 00:19:53 ::: {8} wp 904.16 Bombay.odt notice; whereas rule 74 contemplates hearing on the application. The order of detention shall be passed in consonance with Rule 77 of the Rules. Though the petitioners contend that, procedure prescribed under the Rules has not been adhered to, however, no specific breach has been pointed out. Though it is contended that, the period of detention has not been prescribed, however, such argument has been dealt with by the DRT and DRAT in their orders. Rule 76 of second schedule contemplates making of an order of detention of the defaulter at the conclusion of enquiry and cause his arrest if he is not already under arrest. Rule 77 of second schedule provides that, every person detained in the civil prison in execution of a certificate may be so detained, where the certificate is for a demand of an amount exceeding two hundred and fifty rupees for a period of six months and in any other case for a period of six weeks. In the instant matter, an order of issuance of warrant has been issued and the further order within contemplation of the Rules is required to be passed only after the execution of the arrest warrant. 10 The petitioners have invited our attention to the Judgment in the matter of Jolly George Varghese & Another Versus The Bank of Chochin (1980 2 SCC 360) to contend that, if the judgment debtor is bonafide unable to pay off his debt, an order of detention in prison in execution of a decree would violate ::: Uploaded on - 17/04/2017 ::: Downloaded on - 18/04/2017 00:19:53 ::: {9} wp 904.16 Bombay.odt article 21 of the Constitution of India as well as article 11 of the International Covenant on Civil & Political Rights.
In the reported matter, in execution of money decree, the executing Court ordered for attachment of all immovable properties of the appellant judgment-debtor and appointment of a Receiver for management of the attached properties and also issued warrant of his arrest and detention in civil prison under section 51 and order 21, rule 37 of the Civil Procedure Code (CPC). The High Court summarily dismissed the revision filed by the Judgment-debtor against the order of arrest. While dealing with the challenge, the Honourable Supreme Court has observed:-
" To cast a person in prison because of his poverty and consequent inability to meet his contractual liability is too flagrantly violative of Article 21 unless there is a proof of the minimal fairness of his willful failures to pay in spite of his sufficient means and absence of more terribly pressing claims on his means such as medical bills to treat cancer or other grave illness. Unreasonableness and unfairness in such a procedure is inferable fro Article 11 of the Covenant. As such, even though at any time after the passing of an old decree the judgment debtor might have come by some resources but had not discharged the decree, he cannot be detained in prison under Section 51 read with Order 21, Rule 37, C.P.C. If at the later point of time he was not found to be penniless. However, the simple default to discharge is not enough. There must be some element of bad faith beyond mere indifference to pay, some deliberate or ::: Uploaded on - 17/04/2017 ::: Downloaded on - 18/04/2017 00:19:53 ::: {10} wp 904.16 Bombay.odt recusant disposition in the past or, alternatively, current means to pay the decree or a substantial part of it. The provision emphasises the need to establish not more omission to pay but an attitude of refusal on demand verging on dishonest disowning of the obligation under the decree. Here considerations of the debtor's other pressing needs and straitened circumstances will play prominently.
11 The reliance placed on the Judgment by the petitioners in the matter of Jolly George Varghese is misplaced for several reasons. Firstly, the procedure for execution of a decree taking recourse to provisions of the Civil Procedure Code cannot be equated with the proceedings for recovery under a certificate issued by the DRT. A certificate issued by the DRT cannot be equated with a decree and moreover, the proceedings under the RDB Act are predominantly recovery proceedings at the instance of bank and does not lead to passing of a decree like a Civil Court. The DRT is not a Civil Court and the provisions of C.P.C. Cannot be straight-way made applicable to the proceedings in respect of recovery of amount by the Recovery Officer, exercising powers under RDB Act. Even otherwise, the factual matrix of Jolly George Varghese's case is totally different and decision therein cannot be made applicable to the instant matter. The Apex Court has led emphasis on attitude of refusal of demand verging on dishonest and disowning of the obligation under the decree. In the instant matter, the primary contention of the bank is that, ::: Uploaded on - 17/04/2017 ::: Downloaded on - 18/04/2017 00:19:53 ::: {11} wp 904.16 Bombay.odt the petitioners, though have sufficient means, are dishonestly refusing to pay the debt. The petitioners though have paid Rs.238 crores to Madhavpur Mercantile Cooperative Bank after his (Mr. Ketan Parekh) declaration as a Notified Party and continued to pay other debtors only when they are put to coercion. In the instant matter, as has been contended by the bank, there is an element of bad faith beyond mere indifference to pay, some deliberate or recusant disposition in the past and there are means available to pay the decree or substantial part of it but there is willful failure to pay.
12 In the matter of Nahar Industrial Enterprises Limited versus Hong Kong & Shanghai Banking Corporation (2009 8 SCC 646) a finding is recorded that, DRT cannot be equated with a Civil Court. DRT cannot pass a decree. It can only issue Recovery Certificate. The power of DRT to grant interim relief is attenuated with circumspection. Concededly, in the proceedings before the DRT, detailed examination, cross-examinations, by application of provisions of Evidence Act as also application of other provisions of the Civil Procedure Code like interrogations, discoveries of documents and admission need not be gone into. Taking recourse to such proceedings would be an exception. Entire focus of the proceedings before the DRT centres round ::: Uploaded on - 17/04/2017 ::: Downloaded on - 18/04/2017 00:19:53 ::: {12} wp 904.16 Bombay.odt legally recoverable dues of the bank.
13 In view of the Judgment in the matter of Nahar Industrial Enterprises, the proceedings for recovery under a Certificate issued by the Recovery Officer, DRT in exercise of powers conferred under the RDB Act, cannot be equated with a decree passed by the Civil Court. The proceedings before the DRT which have culminated in issuance of recovery certificate, cannot be equated with the proceedings in a Civil Court. In view of the observations, as referred to above in Nahar Industrial Enterprises case, reliance placed by the petitioners, on the Judgment of the Supreme court in the matter of Jolly George Varghese is misplaced.
14 The petitioners contend that since Mr. Ketan Parekh is a notified party and since all the assets, movable and immovable have been attached, in order to enforce recovery of amount, the only remedy available to the bank is to approach the Civil Court. The petitioners place reliance in the matter of Ketan Parekh V/s Oriental Bank Limited (Writ Petition No.6162/2003 decided by the Division Bench of this Court on 17.1.2016). The issue that arose for consideration in the matter was:-
" Can the property of the person notified under the Special Courts (Trial of offences Relating to Transactions in Securities) Act, 1992 (hereinafter referred to as ::: Uploaded on - 17/04/2017 ::: Downloaded on - 18/04/2017 00:19:53 ::: {13} wp 904.16 Bombay.odt "Special Courts Act") be sold in execution of the certificate obtained under the provisions of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (herein after referred to as "Debt Recovery Act"), under the provisions of the Debt Recovery Act. "
While dealing with the issue, the division bench has observed in paras No.8 and 9 of the Judgment as quoted below:
" 8. The D.R.T. Act, apart from providing mechanism for deciding claims of financial institution, also contains provisions, for recovery of debts determined by the tribunal. In other words, the Act also provides a mechanism for recovery. Section 25 sets out the manner in which the property can be sold for satisfaction of the amount set out in the certificate issued in favour of financial institution. That would include attachment and sale of the movable and immovable properties of the Judgment debtor. The D.R.T. Exercises the jurisdiction which otherwise was conferred on the civil Court in so far as recovery of monies of the financial institutions. Let us take an illustration, if some other financial institution not coerced by the Act had obtained a decree and pursuant to that decree in execution had movable and immovable properties attached for satisfying the decree, could the recovery officer exercise powers under Section 25 once again and attach the properties and sell the same ? To our mind the answer would be a clear no. At the highest perhaps, there could be conditional order of attachment, once the first order of attachment is set aside. If the order of attachment is not set aside and the properties are sold, then the procedure would be to file a claim before the Court executing the decree for whatever ::: Uploaded on - 17/04/2017 ::: Downloaded on - 18/04/2017 00:19:53 ::: {14} wp 904.16 Bombay.odt reliefs the party would be entitled to. To our mind, the same principle will have to be applied in the instant case. The property of the notified person is attached by operation of law. Section 3(4) empowers the Special Court to deal with the property. The Legislature finding absence of power in the Special Court in dealing with the properties of a notified person and as such by the Amendment Act also conferred such power on it. In other words dealing with the properties of a notified person, would be that f the Special Court which will exercise the same power as that of a Civil Court. What that would mean, is that if a financial institution obtains a certificate under D.R.T. Act and if in execution, any property of a notified person is required to be sold in satisfaction of the certificate, then the financial institution will have to move the Special Court for necessary directions which can mean filing claim before the Special Court. In that event the Special Court as a Civil Court while disposing of the assets will have to consider the claim as set out in the certificate and accordingly dispose f the application.
In our opinion, if such construction is adopted, then the two Acts can be harmoniously considered. The power conferred on the Special Court under Section 3(4), (5) and 9A would not become redundant. If not so held, it would mean that the custodian would have to file his claim before the Executing Authority under the D.R.T. Act. Once by operation of law the property stands attached and Parliament has thought it fit to confer power on the custodian in dealing with that property in the manner direct ed by the Special Court, we will have to give effect to that intent more so after section 9A has been introduced which has conferred power on the Special Court as Civil Court to decide all issues relating to the ::: Uploaded on - 17/04/2017 ::: Downloaded on - 18/04/2017 00:19:53 ::: {15} wp 904.16 Bombay.odt property which has been attached.
9. Having so held, we hold that the prayer for seeking declaration for attachment of the properties is not maintainable. Once the property has been attached by the operation of law under the Special Courts Act, the D.R.T. Court would have no jurisdiction to grant a declaration that the properties of a notified person stand charged unless a charge had been created. At any rate, the certificate against such properties, cannot be executed by the Recovery Officer under D.R.T. Act. The financial Institution will have to move the Special court in respect of the attached property. "
15 It is an admitted position that vide Notification dated 5.10.2001, Mr. Ketan Parekh and Mr Navinchdnra Parekh have been notified as notified parties and by virtue of said Notification, movable and immovable assets of the debtors stand attached. Mr. Ketan Parekh in his letter dated 29.3.2001 addressed to the Chairman and Managing Director of Bank of India admitted that all the entities (in respect of which certificates of recovery have been issued) were controlled by him and he is acting as a decision maker and other family members though act as signatory, were not in the know of the things. It is thus an established fact that Ketan Parekh is in total control of these Companies which had made payment to Madhavpur Mercantile Cooperative Bank after passing of three decrees in favour of respondent No.1 bank. It is only after ::: Uploaded on - 17/04/2017 ::: Downloaded on - 18/04/2017 00:19:53 ::: {16} wp 904.16 Bombay.odt issuance of directions by the Supreme court on 29.7.2005, the payments are being made under the superintendence and consent of Mr. Ketan Parekh, which further goes to prove that he is having means to pay. The contention of Mr. Ketan Parekh that borrowers of Madhavpura Mercantile Cooperative Bank are making payment on his behalf is unacceptable. Such a huge amount of Rs.238 crores is paid, only after issuance of order by the Supreme Court on 29.7.2005 and only under an impending threat of arrest. There is no substantial explanation given by the petitioners in respect of payment made to Madhavapur Mercantile Cooperative Bank and other creditors. A sum of Rs.1 crore per month is being paid to Mr. Ashok Mittal to avoid proceedings of contempt and to save from the jail term, eminent in those proceedings. A finding of fact has been recorded by the Recovery Officer, confirmed by the DRT & DRAT to the effect that, the petitioners and more particularly Mr. Ketan Parekh has means to pay and is paying debts of Madhavpur Mercantile Cooperative Bank and is also making payment to Mr. Ashok Mittal, however, is avoiding to pay the debt of respondent bank. It is also observed by the Recovery Officer, in the order, referring to the Judgment of Securities Appellate Tribunal, Mumbai dated 14.7.2006 in case of Ketan Parekh v/s SEBI, "in view of serious allegations leveled against the Appellants, we are of the ::: Uploaded on - 17/04/2017 ::: Downloaded on - 18/04/2017 00:19:53 ::: {17} wp 904.16 Bombay.odt view that, it would be proper to lift the corporate veil of K.P. Entities and when we do that, we find, it is Ketan Parekh, who is lurking behind the corporate curtain. It is, therefore, very clear that, the payment even made by the associates of Ketan Parekh to MMCB and other creditors (even for the sake of argument) was made by Mr. Ketan Parekh only for all the purposes as per doctrine of lifting of Corporate veil." The finding of fact recorded by the Recovery Officer, DRT and DRAT need not be interfered with, in exercise of extraordinary jurisdiction under article 226 of the Constitution of India.
16 It is observed by the DRT in its order that the petitioners do have some undisclosed hidden assets and source of income, from which the amount is flowing to Madhavpur Mercantile cooperative Bank and Mr. Ashok Mittal and it is evident that, when a penal action is taken, then only the petitioners make payment. We are of the considered view that, the impugned orders passed by the Recovery Officer, Debts Recovery Tribunal and Debts Recovery Appellate Tribunal do not call for any interference, in exercise of extraordinary jurisdiction under article 226 of the Constitution of India. The petition is devoid of any substance and hence stands dismissed.
17 Rule is discharged. ::: Uploaded on - 17/04/2017 ::: Downloaded on - 18/04/2017 00:19:53 ::: {18} wp 904.16 Bombay.odt 18 No costs. (A.S. GADKARI, J ) (R.M. BORDE, J) vbd ::: Uploaded on - 17/04/2017 ::: Downloaded on - 18/04/2017 00:19:53 :::