State Bank Of India vs M/S Prestige Light Ltd. And Others
2015 Latest Caselaw 5303 ALL

HIGH COURT OF JUDICATURE AT ALLAHABAD
 
 

A.F.R.
 
Reserved
 

 
Case :- WRIT - C No. - 65035 of 2012
 

 
Petitioner :- State Bank Of India
 
Respondent :- M/S Prestige Light Ltd. And Others
 
Counsel for Petitioner :- Bhanu Prakash Dubey
 
Counsel for Respondent :- Vikash Goswami,K K Arora, R.G.Goswani, S.C., Suneet Kumar
 

 
Hon'ble Pankaj Mithal,J.

The State Bank of India and one of its "Stressed Assets Recovery Branch" (SARB), Dehradun has invoked the writ jurisdiction of this Court for quashing of the orders dated 7.11.2012 (Annexure - 1 to the writ petition) and 23.1.2012 (Annexure - 13 to the writ petition) passed by the Debts Recovery Appellate Tribunal, Allahabad.

The brief facts leading to the passing of the impugned orders are that an order was passed by the Debts Recovery Tribunal on 1.12.2006. This order was taken in appeal to the Debt Recovery Appellate Tribunal. The appeal was decided on 23.1.2012 in terms of some settlement whereupon the Bank preferred Writ Petition No.15010 of 2012 alleging that the order of the appellate tribunal dated 23.1.2012 is based upon incorrect facts. The said writ petition was disposed of with liberty to the Bank to file a proper application before the appellate tribunal, if so advised, and it was expected that if such an application is filed it shall be decided expeditiously in accordance with law. It is in pursuance of the above order that the Bank moved an application for recall of the order dated 23.1.2012. The said application after contest has been rejected by the impugned order dated 7.11.2012.

Sri Bhanu Prakash Dubey, learned counsel for the Bank argued that in the first place the Debts Recovery Appellate Tribunal could not have decided the appeal on the basis of the alleged settlement as it is contrary to the guidelines of the Reserve Bank of India and the law laid down by the Supreme Court in M/s. Sardar Associates and others1; and secondly, the Bank had declined OTS to the contesting respondent and there was no settlement on the basis of which the appeal could have been decided. No deliberation had taken place before the Debts Recovery Appellate Tribunal for the purposes of settlement and that the counsel under law is not authorized to enter into any compromise or settlement without instructions of the party concerned.

In contra to the above submissions advanced on behalf of the Bank, Sri K.K. Arora learned counsel for respondents No.1 to 4 submits that the order-sheet of the appeal reflects that the parties were negotiating and deliberating for settlement. The Debts Recovery Appellate Tribunal had passed the order dated 23.1.2012 in open court in presence of the counsel for the Bank, after the parties have deliberated on the matter. The order of settlement passed by the Debts Recovery Appellate Tribunal is not against the guidelines of the Reserve Bank of India, inasmuch as one of the conditions for the payment of interest on the balance principal amount payable in installments was not applicable to the facts of the present case. The counsel for the Bank was specifically authorized to enter into a settlement on its behalf and in view of the said specific power, the Bank is bound by the settlement which was recorded in the presence of its counsel. In terms of the said settlement the Bank had accepted the payment and had encashed the drafts/cheques without objecting to the settlement and is, therefore, stopped under law from contending that the said settlement is not binding upon it.

The order of the Debts Recovery Appellate Tribunal dated 23.1.2012 passed on the basis of the deliberations which took place during the course of argument decided the appeal in terms of the settlement with the following directions:

(1) The contesting respondents are to pay Rs.56 in full & final settlement of the debt as on that date;

(2) 25% of the above amount is to be paid within 15 days from the said date;

(3) The remaining amount of Rs.42 Lakhs is to be paid within six months in six equal monthly installments of 7 Lakhs each from the date of deposit of 25% of the amount;

(4) In the event the entire amount is paid as aforesaid the Bank shall return the title deeds to the contesting respondents within 15 days; and

(5) In case the amount is not paid within the stipulated period as aforesaid the Bank shall be entitle to recover the amount in terms of the recovery certificate dated 1.12.2006 already issued by the Debts Recovery Tribunal.

The order dated 7.11.2012 by which the application of the Bank for recall of the order of settlement has been rejected assigns three grounds for its rejection. First, the Bank has accepted the payment as per the settlement and is estopped from getting the order recalled; secondly, the order of settlement was dictated in open court in the presence of the counsel for the Bank who had not objected to the the settlement; and lastly though 23.1.2012 was the day of "Mauni Amawasaya" and the Bar had requested for no adverse order but as the counsel for the parties were present and the Court was having sufficient time, the matter was deliberated without any objection from the counsel of the Bank not even to the effect that the officers of the Bank were not present or that he wants an adjournment.

I prefer to take up first the argument that there were no deliberations; the officers of the Bank were not present; there was no settlement; and the counsel had no authority to consent for settlement.

In dealing with the above aspect of the matter, it is pertinent to note that Sri Bhanu Prakash Dubey who is appearing for the Bank here in this petition was himself counsel even before the Debts Recovery Appellate Tribunal for the Bank. He himself had steered all proceedings before the Debts Recovery Appellate Tribunal on behalf of the Bank. His power of attorney "Vakalatnama" is part of the record. The settlement was recorded in his presence. He had applied for recall of the order of settlement dated 23.1.2012 on behalf of the bank.

In order to examine if a case for procedural review/recall of the order dated 23.1.2012 has been made out or not one has to go through the pleadings of the Bank as contained in its recall application as well as the writ petition.

The recall application as filed by the Bank is Annexure - 15 to the writ petition and runs into 31 pages. I have gone through the said application and find that it has been drafted and signed by none else than Sri Bhanu Prakash Dubey, counsel of the Bank all through these proceedings. It contains no averment that there were no deliberation with the officers of the Bank or that the officers of the Bank were not present or were not consulted or that they had not consented for entering into any settlement or that he had no instructions to settle the matter by means of compromise except for stating in paragraph 5.2 of the application that he was present when the order dated 23.1.2012 was passed by the Debts Recovery Appellate Tribunal but he was not having any authority of any kind to compromise and the settlement was in gross violation of principles of natural justice and the guidelines of the Reserve Bank of India.

It is pertinent to clarify at this place itself that having no authority to settle the matter or having no instructions for it are conceptually two distinct things.

The Bank nowhere states that its counsel had no instructions for the settlement of the matter by negotiations.

Even in the writ petition the Bank has not pleaded that the compromise was forced upon it; the counsel had no instructions to get the matter decided by way of settlement and that he was not instructed in this regard or that there were no deliberations with the officers of the Bank and they were not present.

It is well settled that the pleadings are crucial and that no party can be permitted to travel beyond the pleadings and rely upon facts not pleaded. The purpose of the pleadings is to give the opponent a fair chance to rebut/controvert the facts pleaded and adduce evidence in that regard. The opponent cannot be taken by surprise at the time of arguments by raising factual pleas for which foundation has not been laid in the pleadings.

Sri Dubey, learned counsel for the Bank emphasized that a supplementary affidavit was filed by the Bank in the previous Writ Petition No.15010 of 2012 by the Chief Manager SARB and it was stated that no official of the Bank was present before the Debts Recovery Appellate Tribunal during the entire proceedings of the appeal.

The said supplementary affidavit was filed before the High Court as initially the Court was not inclined to hear the Bank against the settlement order dated 23.1.2012 on the ground raised that it was passed without the consent of the Bank. It was in this context that the said supplementary affidavit was filed and the petition was finally disposed of on 24.7.2012 with liberty to the Bank to move proper application before the Debts Recovery Appellate Tribunal. However, the fact remains that before the Debts Recovery Appellate Tribunal no pleadings were raised or any affidavit to the above effect was filed. The above supplementary affidavit was also not placed before the Debts Recovery Appellate Tribunal.

The Bank itself has enclosed a copy of one earlier order dated 11.10.2011 passed by the Debts Recovery Appellate Tribunal in the above appeal. The said order records the presence of Sri Bhanu Prakash Dubey as counsel for the Bank. It states that during the course of the arguments the point of one time settlement (OTS) was raised and the contesting respondents offered a sum of Rs.85 Lakhs though previously the Bank had rejected the proposals for OTS in 2006, 2007 and 2008. However, under the facts and circumstances of the case, in terms of the decision of the Supreme Court in M/s. Sardar Associates (supra) the parties were allowed to workout the formula by holding a meeting to settle the amount to end the dispute and the appeal was adjourned to 8.12.2011.

The order of the Debts Recovery Appellate Tribunal dated 11.10.2011 demonstrates that the parties were given opportunity to work out a settlement in terms of the guidelines in M/s. Sardar Associates (supra). The order dated 23.1.2012 records that there had been deliberations between the parties to settle the dispute finally and that the deliberations took place during the course of arguments.

There is no material on record to prove that no such deliberations took place. The Bank has not pleaded that there were no deliberations except for making an oral argument in this regard. None of the officers of the Bank or even the counsel of the Bank had filed any affidavit stating that the statement of fact as appearing in the above two orders regarding deliberations is false or that the matter was never deliberated for the purpose of settlement between the parties.

In view of the above, it is hard to believe that the order of settlement was passed without any deliberation between the parties.

The contesting respondents have brought on record the Vakalatnama filed by Sri Bhanu Prakash Dubey on behalf of the Bank in the above appeal on 17.9.2010. The said Vakalatnama is not an ordinary power of attorney but is very specific. It states that the Bank authorizes the counsel for the settlement of the dispute by compromise. The relevant part of the Vakalatnama which is in Hindi is reproduced herein-below:

"vr% izfrKk gS fd vfHkHkk'kd egksn; mijksDr U;k;ky; esa gejh vksj ls mifLFkr gksdj dk;Z djsa rFkk vkosnu&i=] izek.k&i=] LVkEi] U;k;ky; 'kqYd] uxn jkf'k izLrqr djsa vFkok ogk¡ ls okfil izkIr djsa] vkilh le>kSrk djsa] fdlh jkf'k] vkifRr ;k izkFkZuk&i= dk midze djsaA"

(emphasis supplied)

In view of the aforesaid power of the counsel on record it is evident that he was not only entitle to plead and argue on behalf of the Bank but was also authorized to settle the dispute by way of compromise.

In Himalayan Cooperative Group Housing Society2 it has been laid down that according to generally accepted notions of professional responsibility, lawyers should follow the client's instructions rather than substitute their judgment for that of the client and that lawyer must be specifically authorized to settle and compromise a claim as he does not have any implied or ostensible authority to bind his client to a compromise/settlement merely on the basis of his employment. The aforesaid decision leaves sufficient scope for the counsel to enter into a compromise/settlement on behalf of the client provided he is not only specifically authorized for the purpose but has instructions to that effect and the said authorization is not proved to be of a general nature.

In the instant case, the Vakalatnama of the counsel authorizes the counsel to settle the dispute in terms of the compromise. The Bank has not raised any pleading and has not even produced any material to show that the counsel was not instructed for settling the dispute on the negotiated terms and conditions.

Thus, the bank has failed to prove that the counsel was not authorized and that he was not instructed to settle the matter by negotiations.

The other aspect is regarding the consent for the settlement, if any, given by the counsel for the Bank.

The order dated 23.1.2012 does not in express terms contain any narration that the counsel for the Bank gave consent to the terms and conditions of the settlement. Nonetheless the order was dictated in the presence of the counsel and it was not objected to. The Bank has not pleaded that the counsel had no instructions to settle the matter and had not given consent to such an order.

In the absence of any such pleading, presumption is that he had instructions and there was implied consent of the counsel to the said order.

Apart from the above, the facts further reveal that the Bank had full and complete knowledge of the order dated 23.1.2012 from the day one as the certified copy of the same was applied and obtained on the same day.

There is no dispute to the fact that in terms of the settlement the entire amount was deposited by the contesting respondents. Initially, 25% of the total amount settled amounting to Rs.14 Lakhs was deposited and thereafter the remaining amount of Rs.42 Lakhs in six monthly installments of Rs.7 Lakhs each was deposited.

The submission of Sri Dubey that the aforesaid amount may have been deposited by the contesting respondents by putting drafts/cheques in the drop box of the bank and that would not amount to any acceptance is without any substance.

The Debts Recovery Appellate Tribunal has returned a clear finding that there is nothing on record to suggest that the amount was deposited by the contesting respondents by putting the cheques/drafts in the drop box of the bank. The contesting respondents have brought on record the various letters under which the cheques/drafts were submitted to the Branch Manager of the Bank. The stamp of the receipt clearly shows that the cheques/drafts were handed over to the bank officials personally and the receiving thereof were obtained. The said cheques/drafts were encashed. There is no averment that the encashment was done unknowingly. Once the Bank had accepted the cheques/drafts and had even encashed the same with no intention to return, it does not lie in their mouth to contend at this stage that the settlement is not acceptable to them rather it is clear acceptance of it.

The judgment of the Supreme Court in the case of M/s. Sardar Associates (supra) in paragraph 19 states that the Punjab & Sind Bank being a public sector bank is bound by the guidelines of the Reserve Bank of India and quotes the guidelines in respect of the settlement formula. The said guidelines provide that -

(A) where an account is declared as non performing asset (NPA) and is classified as doubtful or loss as on 31.3.2004, the minimum amount that should be recovered by way of compromise settlement would be 100% of the outstanding balance in the account as on the date on which the account was categorised as doubtful NPA;

(B) any NPA classified as sub-standard as on 31.3.2004 which becomes doubtful or loss subsequently, the minimum amount that should be recovered would be 100% of the outstanding balance in the account as on the date on which the account was categorised as doubtful NPA plus interest at existing basic prime lending rate from 1st April, 2004 till the date of final payment; and

(C) in both the above cases the payment should be made preferably in lump sum and in cases where the borrowers are unable to pay the entire amount in lump sum, at least 25% of the amount should be paid upfront and the balance amount of 75% in installments within a period of one year together with interest at the existing prime lending rate from the date of settlement up to the date of final payment.

In view of the above guidelines of the Reserve Bank of India highlighted by the Supreme Court, settlement in respect of an account which has been classified as NPA can be arrived, if possible, instead of contesting the matter on merits.

Sri Arora points out that the account of the contesting respondents was classified as NPA on or before 31st March, 2004 and the settlement is in accordance with the conditions (A) and (C) of the guidelines of the Supreme Court as referred to above and the condition (B) was not applicable.

The court is not on the merits of the application of the various guidelines laid down by the Reserve Bank of India for the settlement formula. The court has to only see if the settlement was there and whether the same is liable to be recalled for the reasons pleaded by the Bank assailing the settlement. It was beyond the scope of the recall application and consequently this writ petition to adjudge the merits of the settlement which ex-facie appears to be in consonance with the guidelines.

In view of the aforesaid facts and circumstances the petitioner has failed to establish that there were no deliberations and the matter was not settled with the implied consent of its counsel who had participated in the proceedings without taking any objection that the counsel was not authorized and instructed for negotiation or the settlement. Thus, there is no case for procedural review of the order dated 23.1.2012 or for interference with the order dated 7.11.2012 of the Debts Recovery Appellate Tribunal.

The writ petition is accordingly dismissed with no order as to costs.

Order Date :- December 10, 2015

Brijesh