Bombay High Court
Pan India Motors Pvt. Ltd vs Asset Reconstruction Company ... on 22 April, 2016
Bench: S.C. Dharmadhikari
PAN INDIA MOTORS V ARCIL & ORS
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SHEPHALI/ATUL
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
WRIT PETITION NO. 2648 OF 2014
Pan India Motors Pvt. Ltd.
a company incorporated under the Companies
Act, 1956, having its office at A-1, Surajpur
Industrial Area, Noida-Dadri Road Surajpur
203207, District Gautam Budh Nagar, Uttar
Pradesh ig ... Petitioner
Versus
1. Asset Reconstruction Company (India)
Ltd.,
having their office at 17th Floor, Express
Towers, Nariman Point, Mumbai 400
021; & its registered office at The Ruby
10th Floor, 29 Senapati Bapat Marg,
Dadar (West), Mumbai 400 028.
2. The Official Liquidator
attached to the Hon'ble Delhi High Court
as Liquidator to Daewoo Motors India
Ltd., having his office at A-2/W-2 Curzon
Roads Barracks Kasturba Gandhi Road,
New Delhi
3. Daewoo Corporation
a Company organized and existing under
the laws of Korea, having its registered
office at 541, 5GA, Namdaemun-no,
Chung-gu Seoul, Korea
4. Stressed Assets Stabilisation Fund
IDBI Towers, WTC Complex, Cuffe
Parade, Mumbai 400 005
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5. Canara Bank
Canara Bank Building 112
Jayachamarjidar Road, P.O.Box No. 6648,
Bangalore 560002 (through Chief
Manager (Legal))
6. Pegasus Asset Reconstruction Pvt. Ltd
(asisgnee of State Bank of Patiala) 507,
Dalamal House, Nariman Point, Mumbai
400 021
7. Indusind Bank
2401, General Chinmmayya Raod,
Cantonment, Pune 411 001 Through its
Chief Manager
8. Indian Bank
66, Rajaji Street, Chennai 600 001
9. Khade Bapat Kabe Sinha & Associates
Receiver appointed by DRT-Mumbai,
Bansilal Mansion, Room No. 27-B, 3rd
floor, Homi Mody Street, Fort, Mumbai
400 023
10. Uttar Pradesh State Industrial
Development Corporation Ltd.,
Having Head Office at UPSIDC
Complex, A-1/4, Lakhanpur Post Box No.
1050 Kanpur 208024 and having its
Regional Office at Administrative
Building, EPIP, Surajpur V, Kasna
Greater Noida District, Gautam Buddha
Nagar 201 306 (U.P.)
11. Crosslinks Finlease Pvt. Ltd.
a company registered under the
Companies Act, 1956 having its registered
office at B1, Kalindi Colony, New Delhi
110 065 ... Respondents
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APPEARANCES
For the Petitioner Ms. Fereshte Sethna, a/w Joini Shah,
i/b MLS Vani & Associates.
For Respondent No. 1 Mr. T. K. Cooper, a/w Mr.
Bhalchandra Palav and Mrs.
Radha Jayraman, i/b M/s. Cyril
Amarchand Mangaldas & S. A.
Shroff & Co.
For Respondent No. 2 Ms. Varsha Parulekar.
For Respondent No. 4 Mr. Sham Walve, a/w Ms. Sushila
Vichare, i/b M/s. KS Legal
ig Consultant.
For Respondent No. 10 Mr. Karan Bhosale, i/b Ms. Neha
Bhosale
For the Applicant in Ms. Bhavna Mhatre,with Ms. Gayatri
Notice of Motion No. Singh, Senior Advocate, i/b Kranti
345 of 2015 LC for the Applicant
CORAM : S.C. Dharmadhikari
& G.S.Patel, J.J.
JUDGMENT RESERVED ON : 22nd January 2016
JUDGMENT PRONOUNCED ON : 22nd April 2016
JUDGMENT (Per G. S. Patel, J.):
1. By this Petition, filed under Articles 226 and 227 of the
Constitution of India, the Petitioner seeks to challenge an order
dated 8th January 2014 passed by the Debt Recovery Appellate
Tribunal ("DRAT") in Miscellaneous Appeal No. 58 of 2013. The
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present Petitioner was the Appellant before the DRAT. Although
Ms. Sethna for the Petitioner says that this is the limited challenge
in the Writ Petition, we find that in actuality, there are two other
orders that are implicitly under challenge. The first of these is an
order dated 22nd November 2012 passed by the Recovery Officer
on an application made by the 1st Respondent pursuant to which a
certain sale of property, to which we will refer hereafter, in favour of
the Petitioner was ordered to be cancelled and was set aside. The
second is an order dated 30th January 2013 passed by the Presiding
Officer of the Debt Recovery Tribunal in a First Appeal filed by the
Petitioner.
2.
We have heard Ms. Sethna for the Petitioner and Mr. Cooper
for the 1st Respondent, the Asset Reconstruction Company (India)
Limited ("ARCIL"), at considerable length. The record before us
includes the Petition in two volumes, running to about 500 pages, a
substantial Affidavit in Reply, a copy of the written submissions
filed before the Debt Recovery Appellate Tribunal, a four volume
compilation of documents filed by the 1st Respondent, the
Petitioner's written submissions and authorities along with an
accompanying compilation and the 1st Respondent's written
submissions and compilation of judgments. There are also two
Receiver's reports, as also two compilations in support of the report
of a site commissioner appointed by the Debt Recovery Appellate
Tribunal. We have considered all this material.
3. In order to more properly appreciate the controversy before
us, it is necessary to set out briefly the facts that led to the filing of
this Petition.
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(a) On 26th April 2002, ICICI Bank Ltd. filed Original
Application No. 162 of 2002 before the Mumbai Debt
Recovery Tribunal ("DRT"). It sought recovery of
Rs.511,02,86,697/-, said to be due as on 31st March
2002, jointly and severally from Daewoo Motors
Private Limited ("Daewoo"), by then in liquidation,
and Daewoo Corporation, a holding company
(Respondents Nos. 2 and 3 before us). ICICI Bank also
sought further interest at an contractual rate with
quarterly rests from 1st April 2002, and sought
realization and enforcement of its security over the
mortgaged and hypothecated properties as set out in
the O.A.
(b) On 9th May 2002, on ICICI Bank's application, the
DRT appointed its Receiver of the suit property,
without, however, a power of sale. On 23rd July 2002,
the DRT rejected ICICI Bank's application for a
direction to the DRT Receiver to sell the unit
properties. ICICI Bank filed an Appeal before the
DRAT. By its order dated 8th August 2002, the DRAT
directed the DRT Receiver to sell the suit properties by
public auction or private treaty.
(c) The fixed assets of Daewoo included most importantly
a large plot of leasehold land. This was Plot No. A-1,
Surajpur Industrial Area, Greater Noida, Gautam
Buddha Nagar, Tahasil-Dadri, District Gaziabad, Uttar
Pradesh. The plot measures 204 acres. There are
several structures standing on this land along with
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plant and machinery. This was once a motor car
manufacturing and assembly plant.
(d) Following the order of 9th May 2002 read with the
DRT's order of 31st March 2003, the DRT Receiver
took possession of the suit properties. This included
the land at Surajpur Industrial Estate.
(e) It seems that the DRT Receiver then made several
attempts to sell the suit properties including the public
auctions. These attempts were unsuccessful.
(f)
In the the meantime, on 31st August 2004, the ICICI
Bank's O.A. was finally allowed. On 11th October
2004, a Recovery Certificate was issued in favour of
ICICI Bank.
(g) By an Assignment Agreement dated 29th March 2005,
ICICI Bank assigned, transferred and sold all loans of
Daewoo together with the Recovery Certificate and all
underlying securities, including the suit properties, to
ARCIL. The Recovery Certificate was then amended
to bring ARCIL on record. ARCIL then initiated
Recovery Proceeding No. 440 of 2004 before the
Recovery Officer, Mumbai DRT ("Recovery
Officer").
(h) In the meantime, IDBI Bank, till then also a creditor of
Daewoo, entered into an Assignment Agreement by
which it assigned, transferred and sold all its loans to
Daewoo along with all underlying securities, including
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the suit properties, to one Stressed Assets Stabilisation
Fund ("SASF"). This is Respondent No. 4 to the
present Writ Petition. SASF was brought on record in
ARCIL's Recovery Proceeding.
(i) Since the DRT Receiver was unable to sell the
properties by public auction, ARCIL filed an
application before the Recovery Officer seeking that
the DRT Receiver be permitted to invite bids in public
auction for sale of the assets but on various payment
options such as deferred payment, payment in cash,
payment in kind and so on. The DRT Receiver
attempted to sell the properties in execution of the
Recovery Certificate in various public auctions. At a
sale conducted on 23rd August 2006, the DRT
Receiver certain offers. These were rejected as they
were not in accordance with the terms and conditions
of the sale fixed by the Recovery Officer. It was in these
circumstances that ARCIL says that it sought fresh or
modified terms of conditions of sale by way of private
treaty (with these modified payment terms) and placed
these before the Recovery Officer.1 The Recovery
Officer considered this application and by his order
dated 10th November 2006 sanctioned and permitted
it. ARCIL then forwarded a list of intending offerers to
the DRT Receiver. The DRT Receiver in turn sent an
intimation along with a copy of the terms and
conditions of sales and other particulars to the
intending officers inviting bids. These were to be
received on or before 7th December 2006. The DRT
1 ARCIL Compilation, Vol. I, pp. 1-18.
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Receiver received five offers, including one from one
Crosslinks Finlease Private Limited ("Crosslinks"),
the 11th Respondent before us. At that time, Crosslinks
was the second highest bidder at Rs.459 crores. The
highest bidder was one Adzon Media Pvt. Ltd.
(j) The DRT Receiver asked the bidders to improve their
offers. Interested bidders submitted revised officers.
Crosslinks too made a revised officer dated 18th
December 2006 in respect of the fixed assets (Lot
No.1) and the currents assets (Lot No.2) separately,
increasing its offer to Rs.765 crores.2 Adzon, previously
the highest bidder, was now the fourth highest bidder
on this revision; two other bidders had offered more
than Adzon, but less than Crosslinks.
(k) On 2nd January 2007, having studied the revised
officers, ARCIL wrote to the DRT Receiver confirming
its acceptance of the offer made by the Crosslinks, then
the highest offerer.3 On 2nd February 2007, these
revised offers with their supporting documents were
placed by the Recovery Officer by the DRT Receiver,
who made a report on them.
(l) On 12th February 2007, after notice to parties, the
Recovery Officer held extensive hearings. By an order
dated 12th February 2007, the Recovery Officer
allowed the DRT Receiver's report dated 2nd February
2007 and accepted Crosslinks's revised offer in respect
2 ARCIL Compilation, Vol. I, pp. 19-20.
3 ARCIL Compilation, Vol. I, pp. 21-27.
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of the fixed assets in favour of Crosslinks's nominee,
i.e., Pan India Motors Private Limited, the Petitioner
before us today. The offer made by Crosslinks in
respect of Lot No. 2, the current assets, stood
rejected.4
(m) On 28th September 2007, an order came to be passed
by the Presiding Officer of the DRT recording and
noting the support of the workmen's union to the offer
made by the Petitioner as a nominee of the Crosslinks.5
(n) It seems that the Recovery Officer's order of 12th
February 2007 was carried in appeal by various parties
including Canara Bank. In one of these appeals, the
Presiding Officer of the DRT passed an order of status
quo of the sale of the suit properties (i.e., the fixed
assets). This order of status quo was finally brought to
an end by an order dated 5th October 2007 passed by
the DRT.
(o) ARCIL then filed an application before the Recovery
Officer seeking compliance of the previous order dated
12th February 2007. On this application, numbered as
Exhibit "52", the Recovery Officer passed an order on
16th October 2007 inter alia sanctioning the sale of the
fixed assets (Lot No. 1) in favour of the Petitioner for
4 ARCIL Compilation, Vol. I, pp. 30-47.
5 ARCIL Compilation, Vol. I, pp. 28-29.
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Rs. 765 crores on the terms and conditions of sale
mentioned in that order.6
(p) The offer from the Petitioner was for Rs.765 crores for
Lot No. 1. It said it would create a 'Special Purpose
Vehicle' or SPV to take over these assets. The SPV
would be capitalized by equity and debt in the ratio of
35:65. There would be an initial payment of 35% of the
sale consideration, i.e., Rs.267.75 crores. The balance,
Rs.497.25 crores along with interest at 10% per annum,
was to be paid on a deferred date and this was the debt
component. That date of payment was deferred to the
due date of Secured Non Convertible Debentures
("NCDs") in the value of Rs.267.75 Crores and
Secured Optionally Convertible Debentures
("OCDs") of Rs.229.5 crores to be issued by the SPV
in favour of ARCIL and SASF. Both the NCDs and
OCDs were to be secured in favour of ARCIL and
SASF by a first charge by way of hypothecation and
mortgage over all the SPV's assets.
(q) On 16th October 2007, the Petitioner also executed an
irrevocable declaration or undertaking in favour of
ARCIL and SASF that it would execute the necessary
documents to complete the sale transaction in
accordance with the order of 16th October 2007 passed
by the Recovery Officer.7 It was on these basis that
ARCIL and SASF issued their no objection letters
6 ARCIL Compilation, Vol. I, pp. 48-52.
7 ARCIL Compilation, Vol. I, p. 53.
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dated 16th October 2007 and 17th October 2007
respectively to the DRT Receiver.8
(r) On 17th October 2007, the Recovery Officer passed
certain further directions regarding delivery of
possession of the fixed assets to the Petitioner.9 A day
later, on 18th October 2007, one of the unsuccessful
bidders filed an application in its pending appeal before
the DRT, and sought stay of the Recovery Officer's
order of 16th October 2007. By its order dated 18th
October 2007, the DRT adjourned this application for
orders to 23rd October 2007 and restrained the DRT
Receiver from taking any further steps in the matter.
Aggrieved by this order, ARCIL and Crosslinks filed
separate appeals before the DRAT. By a common order
19th October 2007, the DRAT directed the DRT to
dispose of the unsuccessful bidder's application on
22nd October 2007. On that day, the DRT passed an
order of interim stay of the recovery proceedings
pending the final decision in all pending appeals. Again
aggrieved by this order, ARCIL and Crosslinks filed
appeals to the DRAT. By its order dated 25th October
2007, the DRAT vacated the interim stay of the
recovery proceedings.
(s) On 25th October 2007, the DRT Receiver delivered
possession of the fixed assets to the Petitioner.
8 ARCIL Compilation, Vol. I, pp. 54-55.
9 ARCIL Compilation, Vol. I, pp. 56-67.
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(t) On 7th November 2007, the DRT passed a common
order confirming the Recovery Officer's order of 12th
October 2007 and rejecting the objections raised by
bidders that the sale was not in conformity of the DRT
Act and Income Tax Act. The bidders' appeals were
dismissed. Aggrieved by this order, Canara Bank filed
an appeal to the DRAT. That appeal is pending.
(u) On 2nd June 2008, the Petitioner filed Miscellaneous
Application No.33 of 2008 (later numbered Exhibit
"69") before the Recovery Officer. It sought directions
against ig the Uttar Pradesh State Industrial
Development Corporation ("UPSIDC"), the lessor of
the land at the Surajpur Industrial Estate, to forthwith
withdraw its claim in relation to the transfer of the
lease and demanding that the claim be lodged instead
with the Official Liquidator attached to Delhi High
Court. ARCIL was not joined as a party to this
application. UPSIDC filed an Affidavit and Written
Submissions opposing the application. Later that
month, ARCIL filed its own Miscellaneous Application
seeking a dismissal of the Petitioner's Application
No.33 of 2008.
(v) On 6th March 2009, ARCIL filed another
Miscellaneous Application (later, Exhibit "91")
seeking a direction against the Petitioner directing it to
comply with the Recovery Officer's order dated 16th
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October 2009 and, alternatively, for an order setting
aside the sale in favour of the Petitioner.10
(w) On 24th September 2009, the Recovery Officer
directed the Petitioner to insure the property in
question, failing which the sale in its favour would be
set aside.
(x) On 13th November 2009, Consent Terms (later Exhibit
"141") were entered into between ARCIL and the
Petitioner before the Recovery Officer.11 Under these
Consent Terms, the Petitioner was required to comply
with the terms and conditions of the sale in a time
bound fashion. The actual Consent Terms are about
five or six pages. The several annexures to the Consent
Terms include draft Deeds of Conveyance, a Deed of
Hypothecation and so on. The draft Conveyance Deed
is important, for it is Ms. Sethna's submission that
these Consent Terms, with their annexures, formed
the entirety of a completed sale and provided for
events of default, i.e., if the debentures were not paid
or converted on schedule; specifically, for the right of
ARCIL/SASF to place their nominees on the
Petitioner's board.12 Clauses 1 to 3, read with Clauses
4(e) and 4(f ) of the Consent Terms meant, she says,
that the debenture series were both secured. Clause
4(h) cast an obligation on the Petitioner to insure the
property in question.
10 ARCIL Compilation, Vol. I, pp. 67A-67AA.
11 ARCIL Compilation, Vol. I, pp. 68-309; Petition, Ex. "M", pp. 159-408.
12 Clauses 2(xvii), ARCIL Compilation, Vol. I, p. 90; Petition, p. 183.
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(y) Two days later, on 15th December 2009, the Recovery
Officer gave the Petitioner liberty to clear the entire
dues of UPSIDC in order to avoid further delay. The
Petitioner withdrew its claim against UPSIDC.
(z) On 21st December 2009, the Petitioner issued so-
called letters of allotment of both the NCDs and
OCDs.
(aa) Under directions of the Recovery Officer, ARCIL then
filed an Affidavit dated 29th January 2010, confirming
that the Consent Terms of 13th November 2009 did
not in any manner detract from or dilute the terms and
conditions of the sale. On 8th March 2010, the
Recovery Officer took the Consent Terms on file.
Accordingly, as provided in those Consent Terms, all
pending Miscellaneous Applications filed by both
ARCIL and the Petitioner came to be disposed of.
(bb) On 28th April 2010, a status Affidavit came to be filed
before the Recovery Officer pointing out default on the
part of the Petitioner. On 3rd May 2010, ARCIL filed
another Miscellaneous Application (later, Exhibit
"146") before the Recovery Officer once again seeking
to set aside the sale in favour of the Petitioner on the
ground that Petitioner was yet in default of their
obligations. The Petitioner filed an Affidavit dated 8th
June 2012 in reply. On 26th July 2010, the Petitioner
sought 15 days for compliance. Time was granted until
10th August 2010. Between June 2010 and February
2011, the Petitioner made several applications for time
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extensions for compliance with its pending obligations
under the terms and conditions of the sale. The details
of these various applications are not immediately
germane. It is sufficient to note that throughout this
period the Petitioner seems to have been in default.
Undoubtedly it put forward some reasons for this non-
compliance, but the fact remains that repeated
extensions were sought without demonstrating
compliance. The requirements in respect of the
requisite debenture trust deeds and the pledges of the
necessary shares were never fully complied with either.
From the record it appears that the Petitioner's
advocates kept sending fresh Miscellaneous
Applications with proposed documents of pledge and
trust deeds but these Miscellaneous Applications were
never actually filed.
(cc) On 26th October 2010, ARCIL wrote to the Petitioner
demanding payment of the balance sale
consideration.13 On 21st December 2010, the Recovery
Officer granted further time for compliance to the
Petitioner but imposed costs of Rs.5,000/-. The matter
was stood over to 13th January 2011. On that date,
before the Recovery Officer, the Petitioner filed yet
another Miscellaneous Application seeking a further
extension of four weeks to comply with the terms and
conditions of sale, viz., the creation of a mortgage in
favour of ARCIL and SASF and for the pledge of the
shares in question.14 On 24th January 2011, the
13 ARCIL Compilation, Vol. II, pp. 67-68.
14 ARCIL Compilation, Vol. II, pp. 69-71.
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Petitioner sent to ARCIL the purported debentures in
ostensible part compliance with the terms and
conditions of the sale.15 By then their redemption and
conversion dates had passed. On 25th January 2011,
ARCIL filed an Affidavit accepting that a final
opportunity be given to the Petitioner till 15th
February 2011 to create the requisite mortgage, charge,
pledges and other securities in compliance with the
terms and conditions of the sale.
(dd) On 4th February 2011, ARCIL replied to the Petitioner
saying that the debentures that ARCIL had received
were not in consonance with the terms and conditions
of the sale.16 ARCIL also pointed out that there were
further pending compliances required of the Petitioner.
(ee) On 14th February 2011, the Petitioner wrote to ARCIL
saying that it had complied with the terms and
conditions of the sale and apparently cleared all the
dues of UPSIDC.17 ARCIL claims that it did not
receive this letter till the time of a hearing before the
Recovery Officer several days later on 18th February
2011.
(ff) On that date, i.e., 18th February 2011, ARCIL applied a
second time to set aside the sale in favour of the
Petitioner. This was numbered as Exhibit "194".18
15 ARCIL Compilation, Vol. II, pp. 72-77.
16 ARCIL Compilation, Vol. II, pp. 101-102.
17 ARCIL Compilation, Vol. II, p. 103.
18 ARCIL Compilation, Vol. II, pp. 84-117.
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Simultaneously, the Petitioner filed an application,
Exhibit "196", bringing some documents on record and
seeking yet another time extension.19 At this time, one
RNA, a rival bidder filed a Miscellaneous Application,
Exhibit "197", seeking to continue with its bid
application previously filed and numbered as Exhibit
"182", and also seeking to withdraw the praecipe,
Exhibit "184", that it had filed for withdrawal of that
bid application. In other words, RNA now tried to
withdraw its withdrawal. In Ms. Sethna's submission
this demonstrates that the entire application by ARCIL
for cancellation of the sale to the Petitioner is vitiated
by mala fides, and all that it was trying to do was to re-
negotiate an already concluded transaction with a rival
bidder.
(gg) On 18th February 2011, the Recovery Officer passed an
order granting part of ARCIL's application restraining
the Petitioner from creating third party rights or
executing a lease deed. RNA was allowed to withdraw
its withdrawal praecipe and it was directed to deposit
Rs.35 to establish its bona fides. The matter was stood
over to 28th February 2011.
(hh) By its letter dated 23rd February 2011, ARCIL denied
that the Petitioner had at any time complied with the
sale conditions, and refuted the Petitioner's
contentions in its letter of 14th February 2011.
19 ARCIL Compilation, Vol. II, pp. 214-222.
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(ii) On 28th February 2011, the Petitioner filed
Miscellaneous Appeal (L) No.202 of 2011 before the
DRT challenging the Recovery Officer's order dated
18th February 2011. The DRT stayed the Recovery
Officer's order in part.
(jj) Meanwhile, on that very day, before the Recovery
Officer the Petitioner sought an adjournment to file its
reply to ARCIL's application for setting aside the sale.
ARCIL's application was at that time already
supported by UPSIDC. The Recovery Officer, a few
days later, issued directions for filing Affidavits in
Reply and Rejoinder.
(kk) On 24th March 2011, the Petitioner filed a Transfer
Petition alleging bias on the part of the Recovery
Officer. On 30th March 2011, the ARCIL filed its
Affidavit in Rejoinder and the Recovery Officer heard
ARCIL's submissions. On 30th March 2011, ARCIL
filed its Affidavit in Rejoinder and the Recovery Officer
heard ARCIL's submissions on the question of setting
aside of the sale. On 5th April 2011, the Recovery
Officer was informed of the filing of the Transfer
Petition. Despite that Petition having been filed, the
Petitioner proceeded to file a compilation of
documents before the Recovery Officer, who heard the
Petitioner's counsel at some length. At this time
written submissions were also filed by the Workmen's
Union.
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(ll) On 15th April 2011, the arguments on behalf of the
Petitioner were concluded before the Recovery Officer.
The matter was adjourned for the arguments of
UPSIDC and for ARCIL's Rejoinder.
(mm) On 26th April 2011, the DRAT allowed the Transfer
Petition and transferred the recovery proceedings to
the Ahmedabad DRT. This order of the DRT was
challenged by ARCIL in Writ Petition No.1445 of 2011
before this Court. On 24th November 2011, this Court
disposed of the Petition and transferred the recovery
proceedings to the Recovery Officer of the Mumbai
DRT No.2.
(nn) A brief reference is necessary to the events of March
2012. During this period, it appears that the Petitioner
filed an application before the Recovery Officer for
vacating the Recovery Officer's injunction order dated
18th February 2011, i.e., one that had been passed
almost a year earlier. It also filed an application for
expediting the hearing. This was rejected. An appeal
from the order of rejection was also dismissed. A
further appeal to the DRT also failed. The Petitioner
filed a Writ Petition before this Court but, on 19th
March 2012 withdrew that Writ Petition.
(oo) On 22nd November 2012, the Recovery Officer set
aside the sale in respect of the suit property, viz., the
fixed assets, in favour of the Petitioner.20 ARCIL was
20 ARCIL Compilation, Vol. III, pp. 13-33.
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appointed a Receiver of those properties. The
Recovery Officer stayed his own order except to the
limited extent of permitting ARCIL to take an
inventory of these fixed assets. By this order, the
Petitioner's application to create a mortgage, charge,
hypothecation, and pledge in compliance with the
terms and conditions of sale was rejected by the
Recovery Officer.
(pp) The Petitioner filed an appeal to the Presiding Officer
of the DRT. The Presiding Officer continued the stay.
Before the DRT, the Petitioner said that the fixed
assets had been duly insured. This statement turned
out to be incorrect; those assets were never kept
insured.
(qq) On 30th January 2013, the Presiding Officer of the
DRT dismissed the Appeal and upheld the Recovery
Officer's order of 22nd November 2012.21 He also
vacated the stay granted by the Recovery Officer.22 On
this, the Petitioner filed a Second Appeal to the DRAT.
On 27th February 2013, the DRAT granted an order of
status quo in respect of these fixed assets. On 6th June
2013, ARCIL filed Miscellaneous Application No. 497
of 2013 seeking compliance of the order dated 27th
February 2013.
(rr) On 14th June 2013, the DRT passed an order taking
minutes on record for making an inventory of fixed
21 ARCIL Compilation, Vol. III, pp. 34-64.
22 ARCIL Compilation, Vol. III, pp. 65-67.
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assets and appointed the Recovery Inspector as
Commissioner for this purpose.23 ARCIL contends that
inventory was refused and obstructed by the
Petitioner.24 There are reports of the DRT Receiver
and the Commissioner (the Recovery Inspector) relied
on by ARCIL in this regard. There is a two-volume
compilation with colour photographs. It shows
extensive damage to the unit buildings and structures.
They appear not only to have been neglected but to
have been stripped down to their shells.
(ss) On 8th January 2014, the DRAT dismissed the
Petitioner's second appeal. This is the order under
challenge in the Writ Petition.25
(tt) There are a few further facts that must be noted
subsequent to the order of 8th January 2014. On 14th
March 2014, the Recovery Officer passed an order
inter alia directing simultaneous possession, inventory
and valuation of the fixed assets.26 ARCIL's advocates
wrote to the Petitioner's Advocates on 26th March
2014 informing them of the Recovery Officer's order
of 14th March 2014. By its letter dated 4th April 2014
to the Petitioner, ARCIL fixed 11th April 2014 as the
date for taking over possession. On 4th April 2014, the
Recovery Officer passed an order appointing a new
23 Affidavit in Reply, pp. 558-559.
24 Affidavit in Reply, pp. 563-572.
25 Petition, Ex. "A", pp. 33-90.
26 Petition, Ex. "W", pp. 506-507.
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valuer of the fixed assets.27 On 9th April 2014, ARCIL
wrote to the Petitioner postponing the possession date
and, on 16th April 2014, informed the Petitioner of the
Recovery Officer's order appointing a new valuer. On
25th April 2014, ARCIL again wrote to the Petitioner,
now fixing the possession date on 5th May 2014. On
5th May 2014, the Petitioner refused to hand over
possession or allow an inventory and valuation of the
assets. ARCIL took symbolic possession of the fixed
assets. This Petition was filed on 3rd May 2014 and
served on Arcil on 5th May 2014.
(uu) On 25th July 2014, there was an ad-interim order
passed by this Court inter alia directing the
maintenance of status quo and restraining the Petitioner
from alienating or disposing of the fixed assets.28 The
Petitioner was also directed to insure the fixed assets
and ARCIL was allowed full access to these fixed assets
for the purposes of inspection and inventory. ARCIL
was also permitted to give inspection to prospective
bidders after 72 hours' prior notice to the parties. This
Court appointed a Court Commissioner to attend the
site with ARCIL and to file detailed reports. The Court
also allowed the fixed assets to be re-auctioned subject
to re-confirmation by this Court.
(vv) We must note in passing, that there are two reports of
an Officer of this Court pursuant to this order that are
as yet pending final disposal. These are reports made
27 Petition, Ex. "X", p. 508.
28 SJ Vazidar (as he then was) and AK Menon JJ
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by Mr. Dilip R. Talekar, presently the Insolvency
Registrar of this Court. He has made two site visits.
The two reports are dated 29th September 2014 and
29th October 2015.
(ww) On 15th January 2015, on an application by the Official
Liquidator, and after some hearing, the Recovery
Officer apparently ordered a forfeiture of the amount
of Rs. 276.75 crores paid by the Petitioner. This order
is under challenge in a First Appeal before the
Presiding Officer of the DRT.
(xx) On 19th March 2015, pursuant to the leave granted by
this Court, the Recovery Officer initiated a re-auction
sale process in respect of the fixed assets. Notices for
sale proclamation were served on the Petitioner. On
23rd September 2015, the public notice or
proclamation of the sale along with the terms and
conditions of the re-auction were issued by the
Recovery Officer. The re-auction sale was fixed on
30th October 2015. The encumbrance of the Petitioner
was mentioned in the sale notice. A corrigendum
followed on 12th October 2015. On 15th October 2015,
ARCIL gave the Petitioner advance notice as required
by this Court's interim order. On 20th and 21st
October 2015, the Petitioner permitted inspection of
the fixed assets as mandated by this Court's interim
order dated 25th July 2014. However, on 22nd and
23rd October 2015, it seems that the Petitioner did not
permit further inspection of these fixed assets. This is
noted in Mr. Talekar's second report. On 30th October
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2015, the re-auction sale of the fixed assets scheduled
for 30th October 2015 was cancelled. A report was filed
by ARCIL on 30th October 2015 about the site visit for
inspection.
4. We have noted these facts in such detail not because we
believe we can go into them in our writ jurisdiction as we might had
we been an appellate court, but for precisely the converse reason,
i.e., because, given this complexity of facts and the very many
orders of the recovery tribunals, we cannot entertain any challenge
that is in the least fact-centric. Even assuming we could get into all
these disputes, we would then be sitting as a third appellate court,
something wholly alien to our jurisprudence.
5. Ms. Sethna's submission is, first, that ARCIL being regulated
by the terms of the Securitisation and Reconstruction of Financial
Assets and Enforcement of Security Interest Act, 2002
("SARFAESI Act") and being an assignee of the original lender,
ICICI Bank, elected to conduct a purely private treaty sale.
According to Ms. Sethna, such a private treaty sale lies specifically
within the purview of Rule 8 of the Security Interest Enforcement
Rules framed under the SARFAESI Act. Neither the Act nor the
Rules require permission from the DRT for such a sale and ARCIL
did not need to go to the DRT for a sale that was, in Ms. Sethna's
submission, entirely private. It also consequently did not need a
confirmation of the sale from the DRT. It could always enter into a
private conditional sale with specific terms and conditions. Ms.
Sethna makes reference to various Sections of the SARFAESI Act,
in particular Section 31(e), to submit that the SARFAESI Act does
not apply to conditional sales over which no security has been
created. This, in her submission, bars the application of the
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SARFAESI Act. In other words, it operates to oust the jurisdiction
of the DRT. Simply put, her submission is that Section 34, the
provision of the SARFAESI Act that ousts the jurisdiction of
ordinary Civil Courts, is itself ousted in the case of a private
conditional sale, and that jurisdiction re-vests with the Civil Court.
The SARFAESI Act has absolutely no application to such a sale.
6. Ms. Sethna relies on a number of judgements in support of
her submission that once it is shown that the DRT/DRAT lacked
inherent jurisdiction, all its orders would be non est and void ab
initio; these could then be challenged at any stage, and even in
execution of collateral proceedings.29 Though very well-settled, the
manner in which Ms. Sethna places the submission is overbroad and
of no assistance to her cause. This indiscriminate citing of
precedent, without regard to facts or even the statutes under which
those cases were decided, is more distracting than helpful. After all,
for the principle to apply, Ms. Sethna must first establish that lack
of jurisdiction of which she speaks. This cannot be assumed. There
is simply no basis for that submission. With that foundational
element gone, no amount of precedent can shore up the case. The
question is whether the first submission is at all correct, viz., that
the jurisdiction of the DRT and the DRAT stood ousted by virtue of
the nature of the sale effected in favour of the Petitioner.
7. We understand Ms. Sethna's submission to mean, first, that
the DRT has no jurisdiction over the sale at all, and, second, that
29 Suryadevi Rai v Ram Chander Rai, AIR 2003 SC 3044; State of Madhya
Pradesh v Babulal, AIR 1977 SC 1718; Arun Kumar v Union of India,
(2006) 286 ITR 89 (SC); Sarup Singh & Anr. v Union of India, AIR 2011
SC 514; Balvant N. Viswamitra v Yadav Sadashiv Mule, AIR 2004 SC
4377; Foreshore Cooperative Housing Society Limited v Praveen D. Desai,
(2015) 6 SCC 412
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ARCIL having bound itself to deferred payment terms could not
possibly apply to the DRT for any order cancelling that sale. The
DRT had no power or authority in law to order any such
cancellation. Once possession was given to the Petitioner, the sale
was absolute and only a Civil Court would have jurisdiction.
8. She further submits that ARCIL having conceded that a
confirmed sale took place in favour of the Petitioner, it could not
contend to the contrary before the DRT or the DRAT. It had no
right to seek an order setting aside that sale without proof of fraud
or material irregularity, neither of which has ever been contended by
ARCIL. Ms. Sethna relies on the decision of the Supreme Court in
Valji Khimji & Co. v Official Liquidator of Hindusthan Nytroproducts30
to allege that since ARCIL had neither set up a case of fraud or
material irregularity, it was precluded from assailing a confirmed
sale. Further, she submits that since ARCIL had intentionally
relinquished its known rights, its applications for setting aside the
sale were barred.31
9. Ms. Sethna submits, in the alternative and without prejudice,
that once Consent Terms were filed with the DRT, in effect these
operated as an application by ARCIL of a withdrawal of its
application to set aside the sale. No liberty was reserved to ARCIL
to bring a subsequent application to set aside the sale. ARCIL,
therefore, relinquished any right that it may have had to have the
sale set aside and it is now estopped from urging to the contrary.
The DRT was at best an executing Court. It had no right to
30 (2008) 9 SCC 299
31 Kadiyala Rama Rao v Gutala Kahna Rao, (2000) 3 SCC 87;
Superintendent of Taxes, Dhubri v Onkarmal Nathmal Trust, AIR 1975 SC
2065.
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unilaterally vary binding Consent Terms arrived at privately
between the parties or to go behind these Consent Terms. In Ms.
Sethna's submission, these Consent Terms operate as an estoppel
or as constructive res judicata; the more so since no liberty was
reserved to make a fresh application. Ms. Sethna relies on various
decisions to submit that a consent decree is binding like any other
and cannot simply be ignored.32 In this context, she also says that
acting as an executing Court, the DRT could not go behind the
Consent Terms which operated as a decree.33 The Consent Terms
provided for an event of default, giving ARCIL the right to put a
nominee on the Petitioner's board, and, correctly read, showed that
the both debenture series were fully secured. These Consent Terms
were overlooked right through, says Ms. Sethna, and this failure of
justice satisfies the jurisdictional question. We were somewhat
dismayed by Ms. Sethna's attempts to take us through the Consent
Terms in very minute detail, for this line of argument seemed to
overlook something fundamental: that in our writ jurisdiction we
could not possibly function as court of appeal and, in this case, a
court of third appeal at that.
10. She also contended that the DRT had no jurisdiction to act as
an executing Court at all. That jurisdiction, if ever it existed, ceased
once the sale in favour of the Petitioner was confirmed or, at any
rate, once possession of the property was delivered to the Petitioner
against the payment of the upfront first instalment. It was also
32 Parayya Allayya Hittalamani v Shri Parayya Gurulingayya Poojari, (2007)
14 SCC 318; Motilal Padampat Sugar Mills Co. Limited v State of Uttar
Pradesh & Others, AIR 1979 SC 621; Shankar Sitaram Sontakke & Anr. v
Balkrishna Sitaram Sontakke & Ors., AIR 1954 SC 352
33 State of Punjab v Krishan Dayal Sharma, AIR 1990 SC 2177; Rajasthan
Financial Corporation v Man Industrial Corporation Limited, AIR 2003
SC 4273; Pushpadevi Bhagat v Rajinder Singh, AIR 2006 SC 2628
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submitted that once ARCIL elected to conduct a private treaty sale,
any subsequent actions of the parties would not operate to confer on
the DRT a jurisdiction which it did not otherwise possess.
11. Ms. Sethna's next submission is that so long as the Consent
Terms were not themselves set aside, the sale could not
independently be set aside in the manner that was purported to be
done. Under the deferred payment terms, the second tranche was
not due till October 2010. Once the debenture instruments were
issued, ARCIL's remedies laying the exercise of their rights under
those debenture instruments, as further circumscribed by the
Consent Terms. There was no question of going behind either the
terms of the debenture documents or the Consent Terms. It is Ms.
Sethna's submission that either under the SARFAESI Act or under
the Recovery of Debts Due to Banks and Financial Institutions Act,
1993 ("the RDDB Act") the DRT has no authority to make and
order of sale on a deferred payment basis. It cannot be vested with a
continuing obligation to monitor performance in relation to any
particular terms and conditions of sale such as the issuance of
debentures. Central to Ms. Sethna's formulation is that ARCIL
suppressed the fact of the quite considerable UPSIDC dues of
nearly Rs. 18 crores at the time of the auction sale. When these
matters came to light, UPSIDC insisted on payment of its entire
dues upfront. This left the Petitioner with little choice but to initiate
a litigation with UPSIDC, and that in turn led to a considerable
delay. The Petitioner cannot, Ms. Sethna submits, be foisted with
the consequences of this inevitable delay, one that was entirely due
to suppression of relevant facts at the time of the sale by ARCIL
itself. She says that ARCIL made repeated applications to set aside
the sale between 2009 and 2011. There were three such attempts.
All of these were nothing but an attempt to transact on the property
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with another developer. There was also, she says, a considerable
delay on account of the workers' agitation, theft of property,
blunder and lock-outs. An amount of Rs. 50 crores has been
deposited by the Petitioner with the Official Liquidator of the Delhi
High Court in 2007. Nothing has been disbursed towards the dues
from that amount till date.
12. In any case, in her view, Article 127 of the Limitation Act,
1963 operates as a bar any application for setting aside the auction
sale. Possession was delivered to the Petitioner in October 2007
after the sale in its favour was confirmed by the DRT against
payment of agreed upfront cash consideration. The next payment
instalment, i.e., under the deferred payment terms, was due only in
October 2010. Any action to set aside the sale was required to be
brought within 60 days of the date of possession. Ms. Sethna relies
on the decision of the Supreme Court in Annapurna v Mallikarjun.34
In her submission, any application for setting aside the sale, even if
such an action was possible, had to be brought within 60 days of
27th October 2007 when possession was delivered to the Petitioner.
Any action thereafter, according to her was time-barred.
13. We will leave aside for the moment a somewhat emotive plea
by Ms. Sethna that ARCIL has been browbeating the Petitioner and
hindering it in the performance of its contractual obligations, and
that it has been mala fide transacting on the property with a rival
bidder. We do not believe that these submissions are relevant for the
purposes of a determination of this matter. This is, after all, as we
repeatedly pointed out to Ms. Sethna, not a substantive appeal, but
a Writ Petition invoking the discretionary remedy of this Court
34 (2004) 6 SCC 397
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under Articles 226 and 227 of the Constitution of India. Within that
framework, there are well established restrictions on what this
Court can and cannot do in the exercise of that discretion. Such
pleas of being browbeaten or coerced have no place and no role in
the writ jurisdiction of this Court.
14. This is substantially the framework of Ms. Sethna's
submissions.
15. The threshold argument by Mr. Cooper for ARCIL is that the
challenge in this Petition being to concurrent findings of fact
rendered by three tribunals, this Court should not exercise its
discretion under Article 226 and 227 of the Constitution of India. In
the context, Mr. Cooper relies on the decision of Supreme Court in
Gurdev Kaur v Kaki,35 in which the Supreme Court said that
findings of facts, however wrong or even inexcusable, cannot be
interfered with in a second appeal. The rationale behind this
principle, one that finds statutory voice in Section 100 of the Code
of Civil Procedure, 1908, is that there should be a judicial authority
possessed of jurisdiction to maintain and, where necessary, to
establish throughout its jurisdiction uniformity in law but this
jurisdiction is not to be exercised to create a legal environment of
constant uncertainty. We are bound by this decision.
16. Ms. Sethna's other submissions are refuted in terms by Mr.
Cooper for ARCIL. Briefly stated, his submission is that the sale in
favour of the Petitioner was a conditional sale subject to the
compliance of certain terms and conditions. It was not an absolute
sale and did not confer an absolute title on the Petitioner. The terms
35 AIR 2006 SC 1975
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and conditions were contained in the order 16th October 2007,
passed by the Recovery Officer as also in the Consent Terms of 13th
November 2009. The mere handing over of possession to the
Petitioner did not result in a waiver of ARCIL's right to seek
compliance of the terms and conditions including payment of
balance sale consideration. Possession was handed over as part of
the unconditional undertaking issued by the Petitioner in its letter of
16th October 2007 to honour the terms and conditions of the sale.
This letter of 16th October 2007 is not disclosed in the Petition. It is
produced by ARCIL.36 Mr. Cooper insists that possession was given
to the Petitioner not in confirmation of the sale but because the
Petitioner requested it; ARCIL consented, since otherwise ARCIL
would have to expend a huge amount for several years towards
security and other charges.
17. Mr. Cooper also says that the record reflects that the
Petitioner sought repeated extensions of time from 2009 to 2011 but
defaulted in compliance with its terms and conditions of sale
including the non-payment of the balance sale consideration; non-
issuance of debentures; non-procurement of the no objection
certificates from UPSIDC and the non-clearance of its claim; non-
exchange of debenture certificates with allotment letters within
stipulated time; failing to insure the fixed assets; failing to register
the debenture trust deeds and more. The last extension of time
sought by the Petitioner expired on 15th February 2011. It was for
this reason that the Petitioner was restrained by the Recovery
Officer by his order of 18th February 2011 from creating third party
rights. The Petitioner did not challenge this order for more than a
year. Its appeal from that order of the Recovery Officer finally
failed. No debentures as required by the terms and conditions of the
36 ARCIL Compilation, Vol. I, p. 53.
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sale or the Consent Terms were ever issued; what flowed from the
Petitioner was useless paper. No security was ever created and the
Petitioner was in breach of the Consent Terms in many ways, not
least of which was its failure to keep the property insured, and its
utterly false statement that it had done so. The NCDs were
redeeemable on 25th October 2010, three years from the possession
date of 25th October 2007. Even the Consent Terms confirm this. It
was only after that date that ARCIL demanded payment. But the
revised debentures sent on by the Petitioner, all still unsecured,
purported to unilaterally extend the dates of redemption and
conversion. The Consent Terms also required the creation of
further security; this too was never done. The Petitioner cannot, he
submits, and we believe quite correctly, claim a 'concluded' or
'completed' sale while being in wholesale default of its purchase
obligations. Either the Consent Terms are binding or they are not;
and the Petitioner cannot have it both ways. It cannot on the one
hand say they are binding and have received the imprimatur of the
Court, and then say that that very Court never had the fundamental
jurisdiction in the first place. The Consent Terms are critical to the
construct of Ms. Sethna's case; and those Consent Terms were only
possible in a Court and not outside it.
18. As to the issue of the sale being a private contract or private
treaty between ARCIL and the Petitioner without the intervention
of the DRT and being contrary to provisions of the DRT or
SARFEASI Act and the applicable provisions of Income Tax Act,
1961 Mr. Cooper submits that this is the first time that these
contentions have been raised by the Petitioner. They are clearly an
afterthought. This is meant only to defeat the order of 25th July
2014 passed by the Recovery Officer forfeiting the Petitioner's
payment of Rs.267.75 Crores. Before the Recovery Officer in fact,
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and curiously, the Petitioner contended that the Recovery Officer
had no jurisdiction but that it was only the Chairperson of the DRT
who did have both seizin and jurisdiction. This objection was
rejected by all three tribunals below who held that it was the
Recovery Officer who had authority to sell the property and to set
aside that sale. The fact that the required terms and conditions were
never fulfilled is established, Mr. Cooper submits, by the Consent
Terms themselves. There can also be no dispute about this non-
compliance because the Petitioner itself made repeated applications
seeking extensions of time for this very purpose. In fact, ARCIL's
first application was not to set aside the sale, but to enforce it. The
Petitioner responded, and it was in that context that the Consent
Terms came to be filed. It was when the Petitioner continued to be
in breach that ARCIL applied to have the sale cancelled. There is a
steady pattern of non-compliance, exemplified, for instance and by
way of illustration, by the purported issue of debentures after the
maturity date and the failure to keep insured the property in
question. The Petitioner said it had been burgled; in fact it has been
stripped to the bone.
19. Mr. Cooper says that the entire edifice of the Petitioner's
case is based on a fundamentally flawed supposition that the sale in
favour of the Petitioner was an entirely private sale without the
intervention of the Recovery Officer. This is demonstrably
incorrect, Mr. Cooper says.
20. We agree. For it is a matter of record that by his order of 8th
August 2002, the Chairperson of the DRAT granted the power to
the Receiver to sell the properties in question by way of either
public auction or by private treaty. Several attempts at sale by public
auction were made. All failed. The Receiver appointed by the
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Recovery Officer submitted modified terms and conditions of sale
for the approval and sanction of the Recovery officer. On 10th
November 2006, the Recovery Officer sanctioned these special
terms and conditions on which the DRT-appointed Receiver was to
invite private offers from various prospective bidders. They were
about 19 prospective bidders, including Crosslinks. The Petitioner is
admittedly a nominee of Crosslinks. Mr. Cooper also points out that
the offers were invited from all the bidders who had participated in
the public auction. The Receiver received different offers in
response to the sale under these special terms and conditions. The
highest of these was one Adzon Media Private Limited at Rs.600
Crores. Crosslinks's bid then was Rs.459 Crores. It was the second
highest. In a later meeting, the parties were asked to revise and
enhance their offers. This was done. Crosslinks enhanced its offer
from Rs.459 crores straightaway to Rs.765 crores and thus became
the highest bidder. Adzon, the previous highest bidder, increased its
offer too, to Rs.650 crores. In between there were two others, both
below the revised offer made by the Crosslinks. It was in these
circumstances that the DRT-appointed Receiver submitted a report
to Recovery Officer, and it was on this report the Recovery Officer,
after a thorough analysis, declared and confirmed Crosslinks as the
highest bidder by his order dated 12th February 2007. This sale was
subsequently sanctioned by the Recovery Officer in favour of the
Petitioner as a nominee of Crosslinks by an order dated 16th
October 2007. Thus, it is clear that the sale is not, as Ms. Sethna
would have it, an entirely private sale or a private arrangement
between ARCIL and the Petitioner. It is most emphatically a Court-
directed sale, one in which other bidders also participated. The
Presiding Officer's order dated 7th November 2007, allowing the
Receiver to sell the properties by a so-called 'private treaty' under
supervision and orders of the Recovery Officer, makes this
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abundantly clear. Indeed, we are inclined to observe that given that
there were multiple bidders who were invited to participate, and did
in fact participate, including in revising their offers, this was not a
completely private treaty sale at all, but some sort of hybrid sale that
combined elements of both a public auction and a private sale.
21. Once we accept Mr. Cooper's view, then, in fact, the
remaining arguments canvassed by Ms. Sethna must necessarily
fade into irrelevance. It would not ordinarily have been necessary to
go any further than this, but since the matter has been strenuously
canvassed before us, we will deal with the remaining contentions.
22.
We find some of Ms. Sethna's submissions to be contrary to
the record. We are, for instance, unable to comprehend how it could
possibly be argued that the sale in favour of Petitioner was never
challenged before the Presiding Officer of the DRT. In fact, several
bidders did indeed challenge that sale. They filed appeals. In all of
these, it seems from the record that not only was the sale to the
Petitioner under challenge, but so too was its validity on the ground
that this was beyond the provisions of the DRT Act. These
objections were negatived by the Presiding Officer by his order of
7th November 2007 allowing the sale in favour of the Petitioner.
23. It appears to us beyond doubt that the sale in favour of the
Petitioner was not, as Ms. Sethna would have us hold, a private sale
entirely outside court, but was very much a Court-ordered sale with
its terms and conditions having been approved by the Recovery
Officer. We cannot understand how such a jurisdictional issue can
be raised now by this Petitioner. After all, it participated in the
auction without protest. It raised its offer when asked to do so. The
sale and its terms and conditions were approved and found to be
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according to law by the Recovery Officer and by the DRT. The
Petitioner defended the confirmation of the sale in its favour before
those authorities at various times. We cannot see how the Petitioner
can now do this complete volte face and contend to the contrary.
24. We are also unimpressed by the next submission by the
Petitioner that once the sale was confirmed in its favour by the
Recovery Officer, he became 'functus officio' and could not have set
aside the sale; and, further, that once the Petitioner had purported
to issue debentures against the balance consideration, the Recovery
Officer's jurisdiction ended. As we have noted, this was a Court-
sanctioned sale on special terms including inter alia as to deferred
payment. The sale was in pursuance of a Recovery Certificate
obtained in proceedings properly brought by ICICI Bank. We do not
see how officers and forums can be said to come and go like this or
to have jurisdiction at one stage only to not have it ab initio at a later
stage. Till such time as the Recovery Certificate, which is in that
sense akin to a decree of a Civil Court, was marked satisfied, the
Recovery Officer in execution of that Recovery Certificate
continued to have jurisdiction. In this, Mr. Cooper is, in our view,
correct in his submission that this is in fact the exclusive jurisdiction
of the Recovery Officer in view of Sections 17 and 18 of the DRT
Act. No civil court and no company court could ever have gone into
the questions of liability and recovery. That law is now well-
settled.37 Further, Rule 9 of the Second Schedule to the Income Tax
Act, 1961, which is applicable to the sale in view of Section 29 of the
DRT Act, expressly says that all questions that arise between the
Recovery Officer and the defaulter or its representatives relating to
the execution, discharge or satisfaction of a certification or relating
to a confirmation or setting aside of a sale held in execution of such
37 Allahabad Bank v Canara Bank, AIR 2000 SC 1535
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a certificate are to be determined not by a suit but by an order of the
Recovery Officer before whom such question arises. In our view, the
impugned order is faultless in this regard. We note, in particular, the
observation that the Petitioner repeatedly sought time extensions to
comply with the terms and conditions of the sale and that it is
therefore now not open to the Petitioner to challenge that sale as
being without jurisdiction.
25. Indeed, we find all these submissions on jurisdiction to be
self-defeating and contradicted by the Petitioner's own conduct. No
such objection was raised when Crosslinks submitted its bid or
revised it, and the Petitioner is only Crosslinks's nominee. No such
objection was taken at the time of possession. Indeed, the Petitioner
demanded possession, and that could only be in pursuance of the
sale in its favour, one that was under terms and conditions approved
by the Recovery Officer and accepted by the Petitioner or its
nominator. The Petitioner repeatedly sought extensions of time
from the Recovery Officer and the DRT to comply with its
obligations under these terms and conditions, and that too could
only be if the Recovery Officer and the DRT had the necessary
jurisdiction. No such plea was taken when the Petitioner attempted
its negotiation with UPSIDC, again an issue that is directly
traceable to a jurisdictionally-competent sale under the supervision
and orders of the Recovery Officer. The very jurisdiction that the
Petitioner now questions as never having existed is the one under
which it purported to take possession of the property and then to
strip it bare. The genesis of the Petitioner's involvement is, to begin
with, a proceeding for recovery before the DRT. The entire
structure of this argument is deeply flawed and, in our considered
view, fundamentally dishonest.
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26. It is also an argument without basis in law. Mr. Cooper is
correct in saying that a court's right to set aside a sale does not end
on confirmation of that sale. The present case is on surer footing,
for the sale had a term of deferred payment and the Court, viz., the
Recovery Officer, retained jurisdiction till that payment was made
and the Recovery Certificate satisfied.38
27. Ms. Sethna's submission that since ARCIL is a securitization
company governed by the SARFAESI Act it cannot have recourse to
the DRT for cancelling the sale is also a submission entirely devoid
of merit. Securitization companies are included in the amended
definition of 'financial institutions' under Section 2(h)(ia) of the
DRT Act. Therefore, it can have recourse to the RDDB Act in
addition. Every bank or financial institution (as defined) is free to
move under the RDDB/DRT Act as also under the
NPA/SARFAESI Act. Both are complementary.39
28. In our view, no question of limitation arises either. Article 127
of the Limitation Act is premised on the case falling under Order 21
Rr 89-91 of the Code of Civil Procedure, 1908. Those provisions are
inapplicable to a case where a sale has been set aside on account of a
default on the part of the purchaser in complying with the terms and
conditions of the sale. Further, it appears to us that the sale would
be governed primarily by Clause 21 of the Terms and Conditions
read with Rule 57 of the Second Schedule to the Income Tax Act,
1961.
38 Divya Manufacturing Co P Ltd v Union Bank of India & Ors., AIR 2000
SC 2346.
39 Transcore v Union of India, (2008) 1 SCC 125.
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29. The issues about 'non-disclosure' of UPSDIC dues and the
consequences of a workers' agitation are, to our mind, nothing but a
diversion. The sale terms are clear. It was on an 'as is where is' and
'as is what is' basis, coupled with a 'no complaint' and 'no
recourse' condition. Clause 25 of the approved Terms and
Conditions of sale made it the absolute and sole obligation of the
Petitioner to obtain UPSIDC consent and to clear all dues. The sale
was sanctioned in favour of the Petitioner on 16th October 2007.
For the next five years, till 18th February 2011, the Petitioner failed
to clear those dues. It can hardly be heard to complain now. The fact
that there were several workmen of Daewoo was also known to all.
Those workmen had intervened in the Appeals filed by unsuccessful
bidders before the Presiding Officer of the DRT. They supported at
first the Petitioner's offer. This finds mention in the order of 28th
September 2009.
30. We must observe that this does not appear to us to have been
attempt to revive the unit or a genuine offer to rehabilitate the unit
and provide employment to the workmen of Daewoo. It appears to
us to have been little more than an attempt to get possession and
control of a huge tract of land and turn it to real estate development.
The record indicates that at no point was any attempt made to run
the plant. The existing facilities were totally gutted, down to the
wiring and window frames being removed and the entire structure
being stripped bare and rendered unusable. Significant too is the
fact that the Petitioner sought change of user from industrial to
residential, another factor that is not brought out in the Petition at
all.
31. Mr. Talekar's reports are telling. They show how the the
fixed assets were allowed to be pilfered and destroyed. All of this is
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relevant in the context of the plea now made, which is to urge that
the sale in the Petitioner's favour was null and void; that the
Petitioner is under no further obligation to bring in any more
money; and that the order of forfeiture of what Ms. Sethna
describes as upfront poundage should, for those reasons, be
quashed. In Court, we repeatedly asked her if her clients would
bring in the balance even now due. Her response was that her
instructions were to say no; but to also say that if the upfront
payment was returned (i.e., not forfeited), the Petitioner would have
no further quarrel. We find this wholly unacceptable. The Petitioner
took the property under an order of a Court, without then
questioning it. It took it subject to terms and conditions. It accepted
those conditions. It sought time, repeatedly, to fulfil those
conditions. It did not. It says that Consent Terms filed in that very
Court were binding, but also now says that that very Court had no
jurisdiction ab initio. If there is an estoppel, it must run against the
Petitioner, not in its favour.
32. This leaves the question of Mr. Talekar's reports. He was
appointed under the interim order of this Court. He made two site
visits and has placed on record two reports. The first report is dated
29th September 2014 and the second report is dated 29th October
2015. In paragraph 10 of the first report, Mr. Talekar noted the
condition in which he found the subject property: no power supply
to many units, uncleaned and not maintained, electric cable stripped
of all but their shielding, empty electric boards, a damaged chimney
and so on. So much for the Petitioner's contention of having
'invested' in the plant. Mr. Talekar's first assignment was from 19th
August 2014 to 26th August 2014. His second report notes that on
23rd October 2015, when inspection was to be offered to third party
purchasers pursuant to this Court's interim order, that inspection
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was obstructed by the Petitioner's staff resulting in a cancellation of
the inspection. That has been the Petitioner's approach throughout:
dilatory, obstructive, non-cooperative and persistently in default.
Mr. Talekar was engaged in this second assignment from 19th
October 2015 to 22nd October 2015. We find his work meticulous
and sufficient for our purposes. His costs are to be quantified, and
we quantify these at Rs.1,10,000, computed at Rs.10,000 per day for
11 days. These costs will be paid to Mr. Talekar by the Petitioner
within two weeks from today.
33. In the facts and circumstances of the case, we believe we
would be utterly remiss in our duty if we failed to impose costs in a
matter such as this. We cannot escape the finding, established by
this voluminous record, that the Petitioner has played fast and loose
not only with the Recovery Officer, the DRT and the DRAT but
also with this Court. The Petition is wanting in candour. It is
deliberately mischievous. There is clear suppression. The Petition is
a gross abuse of the process of the Court, and this has been the
steady pattern of the Petitioner's conduct from the very beginning.
We see no sign at all of the Petitioner ever being honest and bona
fide in fulfilling its obligations and complying with the terms and
conditions of the sale. It is apparent that the attempt always was to
offer a high price to gain the top slot as a successful bidder, and then
to persistently delay completion of the sale by payment of the
balance consideration. To this end, there were constant applications
for time extensions, appeals, writ petitions and more, all seeking to
delay matters. Wholly incorrect statements were made include
about the issuance of the necessary debentures and about the
property being kept insured, as also of the so-called 'investment'
made by the Petitioner in the unit. What emerges from this is a
picture of the Petitioner trying by every means possible to grab this
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enormous tract of land, turn it to a residential development project,
no doubt at a huge profit to itself, without satisfying workers' dues
or the dues of UPSIDC and without satisfying the Recovery
Certificate in execution of which the sale was conducted in the first
place. The atempt seems to have been to get this land at nothing but
the initial upfront price. We believe it is about time that litigants
learnt the price of dishonesty in court, and learnt, too, that the days
when this Court would, for whatever reason, take a lenient view are
very firmly in the past. We have our eyes to the future. That
includes the economic, financial and developmental future of the
country. That concern is ill-served by litigants who clog up the
courts and consume judicial time pursuing false cases. Gone are the
days when the frivolous, the mendacious and the duplicitous could
expect indulgence without consequence from our courts. This is
now an age when such litigants meet their nemesis in this Court.
Enough is enough.
34. There is no merit in the Petition. It deserves to be dismissed,
and it is. It also deserves to be visited with costs, and it is. These
costs quantified at Rs. 10 lakhs payable to ARCIL. This is over and
above the costs payable to Mr. Talekar.
35. The pending Notice of Motion No.345 of 2015 does not
survive and is disposed of as such.
(S. C. DHARMADHIKARI, J)
(G.S. PATEL, J.)
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