Bombay High Court
Premkumar L. Kothari And 2 Ors vs Indusind Bank Limited And 3 Ors on 5 July, 2016
Bench: Naresh H. Patil
1/36 wp3071-3096.15.sxw
PDP
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
WRIT PETITION NO.3071 OF 2015
1) Fine Platinum (India) Limited,
having office at Plot No.62,
SEEPZ-SEZ, Andheri (East),
Mumbai-400 096.
2) Rajesh L. Kothari,
having address at 112-A,
Embassy Apartments, 46,
Nepean Sea Road, Mumbai-400 006.
ig ...Petitioners
Versus
1) Indusland Bank Limited, a
Banking Company registered
under the Companies Act, 1956
having Branch Office at Acme
Plaza, CTS No.32, Andheri Kurla
Road, Andheri (East),
Mumbai-400 059.
2) Bank of India having Branch
office at SEEPZ-SEZ, Andheri
(East), Mumbai-400 096.
3) Fine Jewellery (India) Limited,
having office at G-6, G & J
Complex, SEEPZ-SEZ, Andheri,
(East), Mumbai-400 096.
4) M. Shashikant Export Limited,
having office at 301-B, Aman
Chambers, 113, Mama Parmanand
Marg, Mumbai-400 004.
::: Uploaded on - 08/07/2016 ::: Downloaded on - 08/07/2016 23:57:58 :::
2/36 wp3071-3096.15.sxw
5) Premkumar L. Kothari,
residing at 131/C, Rambha, 66,
Nepean Sea Road, Mumbai-400 006.
...Respondents
WITH
WRIT PEETITON (L)NO.3096 OF 2015
1) Premkumar L. Kothari,
residing at 131/C, Rambha, 66,
Nepean Sea Road, Mumbai-400 006.
2) Fine Jewellery (India) Limited,
having office at G-6, G & J
Complex, SEEPZ-SEZ, Andheri,
(East), Mumbai-400 096.
3) M. Shashikant Export Limited,
having office at 301-B, Aman
Chambers, 113, Mama Parmanand
Marg, Mumbai-400 004. ...Petitioners
Versus
1) Indusland Bank Limited,
Acme Plaza, CTS No.32,
Andheri Kurla Road, Andheri (East),
Mumbai-400 059.
2) Bank of India
SEEPZ-SEZ, Andheri(East),
Mumbai-400 096.
3) Fine Platinum (India) Limited
Plot No.62, SEEPZ-SEZ,
Andheri (East), Mumbai-400 096.
4) Rajesh L. Kothari,
112-A, Embassy Apartments, 46,
Nepean Sea Road, Mumbai-400 006.
...Respondents
::: Uploaded on - 08/07/2016 ::: Downloaded on - 08/07/2016 23:57:58 :::
3/36 wp3071-3096.15.sxw
Mr. Rohan Cama a/w T. N. Tripathi & Ms. Sapna Rachure i/b. M/s. T. N.
Tripathi & Co. for the Petitioners in WP No. 3071 of 2015 and for
respondent nos.3 and 4 in WP (L) No. 3096/15.
Mr. Cheerag Balsara a/w Nikhil Chandava, Mihir Mody i/b. M/s. K. Ashar
& Co. for Respondent No.1 in both the matters.
Mr. Pradip Bhor i/b. M/s. O. A. Das & Associates for Respondent No.2 in
both the matters.
Mr. V.R. Dhond, Senior Counsel a/w Agasti Vibhute i/by M/s. Jayakar &
Partners for petitioners in WP (L) No. 3096 of 2015 and for respondents
3, 4 and 5 in WP No. 3071/15.
ig CORAM : NARESH H. PATIL AND
A.A. SAYED, JJ.
RESERVED ON : 22nd February, 2016 /
27th June, 2016
PRONOUNCED ON: 5th July, 2016
JUDGMENT (PER NARESH H. PATIL, J)
Rule, Rule made returnable forthwith. Heard finally by consent of
parties.
2. The petitioners in Writ Petition No. 3071/2015 and the petitioners in
Writ Petition (L) No. 3096/15 have prayed for writ of certiorari or order or
direction seeking to set aside the impugned order dated 11 th September,
4/36 wp3071-3096.15.sxw
2015 passed by the learned Chairperson of the Debt Recovery Appellate
Tribunal at Mumbai in M.A. No. 147/2015 in Appeal No. 82/2015. The
petitioner in Writ Petition No. 3071/2015 - Fine Platinum (India) Limited
submits that petitioner no.1 is a company incorporated under the
Companies Act, 1956. Petitioner no.2 is an Indian Citizen and Director of
petitioner no.1 - company. The respondent nos. 1 and 2 are Banks
carrying on business of banking. Respondents nos. 3 and 4 are
companies under the Companies Act, 1956 and respondent no.5 is an
Indian inhabitant. The brief facts as stated by the petitioners are that by a
sanction letter dated 3rd February, 2006, respondent no.1 claims to have
sanctioned to petitioner no.1 various Working Capital facilities
aggregating to Rs.632 lacs to take over certain liabilities of petitioner no.1
from INC Vyasya Bank Limited. On 16th February, 2006 respondent no.1
claims to have got various loan and security documents executed from
petitioners. On 9th November, 2006 various consortium documents were
executed including memorandum of entry substituting respondent no.1 in
place of ING Vyasya Bank Limited. By a sanction letter dated 5 th January,
2010 the credit facilities were revised and reduced to 480 lacs with
interest at the rate of 12% per annum.
5/36 wp3071-3096.15.sxw
3. The petitioners submit that respondent no .2 as a Lead Bank of
consortium issued demand notice dated 1st July, 2011 under Section
13(2) of the Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002 (hereinafter referred to as
SARFAESI Act, 2002). On 20th September, 2011 respondent no.2 took
possession of factory premises of petitioner no.1 at Plot No.62, Seepz,
Andheri (W), Mumbai - 400 092 with stocks and movable assets lying
therein under Section 13(4) of the said Act. The petitioners claim that on
29th December, 2011 the petitioner no.1 paid Rs. 75 lacs to respondent
no.1 by way of direct remittance from the overseas buyer. By letter dated
22nd February, 2011 and 18th August, 2011 the petitioner no.1 sought
permission for sale of said property. On 24 th March, 2012 respondent
no.1 Bank approved Memorandum of Understanding for sale of said
immovable security for Rs. 675 lacs.
4. The petitioners' contention is that in haste respondent no.1
filed Original Application No. 88/2011, inter alia, for recovery of
Rs. 5,49,25,118/- and for enforcement of mortgage over plot no.62,
Seepz Andheri (W)(hereinafter referred to as said property). The
petitioner no.2 and respondent nos. 3 to 5 were joined as Guarantors in
the said original application.
6/36 wp3071-3096.15.sxw
5. Respondent no.1 moved interim application and sought attachment
of the said property. On 16 th November, 2012 the petitioners filed
detailed written-statement. The petitioners disputed and denied the
alleged claim of respondent no.1.
6. On 11th October, 2012 respondent no.1 filed interim application
(exhibit 17) dated 11th October, 2012 for issuance of interim Recovery
Certificate for Rs. 3,99,05,735/- under Rule 12(5) of the Debts Recovery
(Procedure) Rules, 1993 (for short 'Rules of 1993') based on annual
report of Petitioner No.1 for the assessment year 2010-11.
7. The petitioners filed a reply to the said interim application on 11 th
December, 2012.
8. By an order dated 14th August, 2014 the Debts Recovery Tribunal
No. III allowed the said application and granted Recovery Certificate with
interest at the rate of Rs. 20.75% per annum with monthly rests from 15 th
September, 2014 till realisation.
7/36 wp3071-3096.15.sxw
9. Being aggrieved, the petitioners in both writ petitions filed Appeal
No. 82/2015 before DRAT, Mumbai. The petitioners also filed Misc.
Application No. 147/2015 seeking waiver of deposit as required under
Section 21 of the Recovery of Debts Due to Bank and Financial
Institutions Act, 1993 (hereinafter referred to as RDDBI Act).
10. By an order dated 11th September, 2015 the learned Chairperson
directed the petitioners to deposit Rs. 2 Crores within eight weeks in two
equal installments of Rs. One Crore each. The Miscellaneous Application
No. 147/2015 was disposed of. It was further ordered that in case of
default in payment of any installment, the appeal shall stand dismissed
automatically.
11. Learned Senior Counsel Shri Dhond appearing for Guarantors in
Writ Petition (L) No. 3096 of 2015 referred to various provisions of RDDBI
Act, 1993, SARFAESI Act, 2002 and the relevant documents on record.
The learned Counsel submitted that the interim application was filed
against the borrower and not against the Guarantors, therefore, the
Guarantors are not liable to face the recovery proceedings which were
directed to be initiated against the borrower. By referring to Rule 12(5) of
8/36 wp3071-3096.15.sxw
the Rules of 1993, learned Counsel submitted that in rule 12(5) the
Tribunal was entitled to order such defendant to pay the amount which
would not include the Guarantor. In the present case the Guarantor had
denied their liability to pay. Learned Counsel submitted that the Debt
Recovery Tribunal did not apply its mind to the facts and the pleas raised
by the contesting parties before it. It was submitted that the Appellate
Tribunal failed to appreciate the issue raised before it by the appellants.
The Tribunal did not accord any reasons for ordering payment of Rs. 2
Crores for entertaining the appeal. There is no application of mind by the
Appellate Tribunal according to learned Counsel. Learned Counsel
placed reliance on the judgment of the Division Bench consisting of
Justice D.Y. Chandrachud (as His Lordship then was) and Justice A.A.
Sayed in the case of Sterlite Technolligies Ltd. V/s. Union of India &
ors. {2012(2) Mh. L.J.)}. In the facts the Division Bench observed that,
"........ In considering as to whether a waiver should be
granted, both the elements of a prima facie case and the
question of financial hardship would have to be considered
by the Appellate Tribunal. Where as in the present case, the
Appellant does not plead financial hardship that is a relevant
consideration which has to be taken into consideration and
placed in the balance by the Appellate Tribunal. The
9/36 wp3071-3096.15.sxw
Appellate Tribunal in its appellate jurisdiction is required to
evaluate as to whether a prima facie case has been made
out for the grant of waiver...."
Learned Counsel also placed reliance on the judgment in the case of
Maya Devi (dead) through Lrs v/s Raj Kumari Batra (dead) through
LRs and ors. {(2010) 9 Supreme Court Cases 486}. Paragraphs 22
and 28 read as under:
"22. The juristic basis underlying the requirement that
courts and indeed all such authorities, as exercise the
power to determine the rights and obligations of
individuals must give reasons in support of their orders
has been examined in a long line of decisions rendered
by this Court. In Hindustan Times Ltd. v. Union of India
the need to give reasons has been held to arise out of
the need to minimise chances of arbitrariness and
induce clarity."
"28. It is in the light of the above pronouncements
unnecessary to say anything beyond what has been so
eloquently said in support of the need to give reasons
for orders made by courts and statutory or other
authorities exercising quasi-judicial functions. All that
we may mention is that in a system governed by the rule
of law, there is nothing like absolute or unbridled power
10/36 wp3071-3096.15.sxw
exercisable at the whims and fancies of the repository of
such power. There is nothing like a power without any
limits or constraints. That is so even when a court or
other authority may be vested with wide discretionary
power, for even discretion has to be exercised only
along well-recognised and sound juristic principles with
a view to promoting fairness, inducing transparency and
aiding equity."
12. Learned Counsel Shri Cama appearing for the petitioners in Writ
Petition No. 3071/2015 submitted that for Section 21 to apply there must
be determination under Section 19 of the RDDBI Act. The determination
in this case was made under Rule 12(5) of the Rules of 1993. Merely
because a Recovery Certificate may later be issued in accordance with
Section 19, it does not make the "determination" one which is
contemplated under Section 19. Learned Counsel without prejudice
submitted that Rule 12(5) of the Rules of 1993 is in two parts. The
impugned order relates to first part directing payment. Such order is not
an order under Section 19 of the RDDBI Act as there is no final
determination and nor is there any Recovery Certificate issued in
accordance with Section 19 of the RDDBI Act.
13. Learned Counsel submitted that an order passed under Rule 12(5)
11/36 wp3071-3096.15.sxw
of the Act of 1993 is of interim nature and is not an order under Section
19. The application was titled "interim application" with no reference to
Section 19 of the Act. In the submissions of Counsel, Section 19 of the
Act contemplates the final determination by the Tribunal of the original
application itself. In the facts no Recovery Certificate was issued. There
is a mere direction in the DRT order that it will be issued on failure to pay.
Learned Counsel placed reliance on the judgment in the case of M/s.
Kavita Pigments and Chemicals (Pvt.) Ltd. And ors. v/s. Allahabad
Bank and ors. {AIR 2000 Patna 43}. Paragraph 40 reads as under:
"40. This requirement of pre-deposit of amount determined
is a common feature in many fiscal statutes and the said
requirement of pre-deposit is only to be enforced in a case
where the determination has been made by the Tribunal
under Section 19 of the said Act. Therefore, the expression
"such appeal" has been used. The requirement of such pre-
deposit of the amount determined cannot be enforced by
the Appellate Tribunal in connection with an appeal where
no such determination has been made as is in the instant
case. So this has no substance."
12/36 wp3071-3096.15.sxw
14. Both the learned Counsel Shri Dhond and Shri Cama unanimously
submitted that under the RDDBI Act only an order of final determination
can ever invite the requirement of pre-deposit. The provisions of Rule
12(5) are materially different from Order 12, Rule-6 of the CPC. Learned
Counsel submitted that analogy sought to be drawn to the provisions of
SARFAESI Act is patently misconceived.
15.
On the merits of the order passed by the Appellate Tribunal, the
learned Counsel submitted that DRAT has not given any reasons
whatsoever for its order. On that ground alone the order deserves to be
quashed and set aside according to learned Counsel.
16. The learned Counsel Shri Balsara appearing for the respondent
no.1 Bank submitted that Section 21 of the RDDBI Act requires deposit
of 75% of the amount of debt so due as determined by the Tribunal under
Section 19 of the RDDBI Act. In the present case, not only the amount
has been determined by the Tribunal on failure to make payment of same
but the Tribunal has passed a self operative order for issuance of
Recovery Certificate. Section 22 of RDDBI Act expressly provide that
13/36 wp3071-3096.15.sxw
provisions of Civil Procedure Code do not apply to recovery proceedings
under RDDBI Act. In the facts the debtor is required to deposit 75% of
the debt adjudicated to be due and payable. Learned Counsel submitted
that amount for which Recovery Certificate has been directed to be
issued by DRT by the order dated 14 th August, 2014, as on the date of
impugned order passed by the DRAT dated 11th September, 2015, is
Rs.4,89,13,785.27. The DRAT has directed to deposit only Rs. 2 Crores.
According to learned Counsel the same is just 40.89% of adjudicated
amount. Hence, the petitioner cannot be aggrieved by reasons not being
given by DRAT in the impugned order. Without prejudice the learned
Counsel submitted that DRAT has given reasons for passing impugned
order. Learned Counsel Shri Balsara submitted that the only two points
pressed before DRAT were that there was no admission by the
Guarantors and that there was offer of Rs. 6.5 Crores. Learned Counsel
submitted that a common written-statement was filed by the Principal
Debtor and Guarantors and common reply to the interim application was
filed by the Principal Debtor and the Guarantors. A common
Miscellaneous Application for waiver of pre-deposit under Section 21 of
the RDDBI Act was filed by Principal Debtor and Guarantors. The
Principal Debtors and Guarantors had filed Writ Petition (L) No.
14/36 wp3071-3096.15.sxw
2932/2015 jointly. After withdrawal of the said petition, separate writ
petitions have been filed now. Learned Counsel submitted that order
passed under Rule 12(5) of the Rules of 1993 has to be read alongwith
provisions of Section 19 of the RDDBI Act as the Recovery Certificate is
ordered to be issued in accordance with Section 19 of the RDDBI Act. In
the facts in deciding the interim application the Tribunal thus determined
the issue. Hence, it cannot be argued that in deciding interim application,
there is no determination by the Tribunal.
17. Learned Counsel Mr. Balsara placed reliance on the Madhya
Pradesh High Court judgment in the case of Naresh Agrawal vs. Bank
of India & ors. Passed in Writ Petition No. 14526/2012. The Court
observed as under:
"Now, the only question is as to whether this appeal
challenging rejection of the application under Order IX Rule
13 CPC is only a miscellaneous appeal and, therefore, the
provision of deposit under section 21 of the Act of 1993 is not
applicable.
Under the Act of 1993, the provision of appeal is under
section 20, Section 20 sub-section (1) contemplates that
save as provided in sub-section(2) any person aggrieved by
15/36 wp3071-3096.15.sxw
any order made, or deemed to have been made by a
Tribunal under this Act may prefer an appeal to the Appellate
Tribunal having jurisdiction in the matter. However, sub-
section(2) contemplates that no appeal shall lie to the
Appellate Tribunal from an order made by the Tribunal with
the consent of the parties. Thereafter, section 21
contemplates that where an appeal is preferred by any
person from whom any amount of debt is due to a bank of a
financial institution or a consortium of banks or financial
institution, such appeal shall not be entertained by the
Appellate Tribunal until and unless deposit to the extent
indicated in section 21 is made.
It is, therefore, clear that against any order passed by the
DRT an appeal is maintainable under section 20. An order
passed in an application under Order IX Rule 13 will also
come in the category of any order as contemplated in section
20(1).
No other provision is brought to our notice wherein any
miscellaneous appeal or appeal can be filed. Once an
appeal is filed under section 20 and when there is a debt due
against the petitioner and which is being recovered by way of
revenue recovery certificate, the provision of section 21 is
attracted and we see no error in the order passed by the
Appellate Tribunal in applying the provisions of section 21."
16/36 wp3071-3096.15.sxw
Learned Counsel also placed reliance on the Supreme Court judgment in
the case of Allahabad Bank v/s. Canara Bank & anr. {(2000) 4 SCC
406}. In paragraph 52 it is observed as under:
"52. Before we go to Section 19(19), we would like to
dispose of another minor point raised by the respondent
on the basis of Section 19(2). That sub-section permits
other banks or financial institutions to be impleaded in
the main application filed under Section 19(1) by a bank
or a financial institution. Question is whether Canara
Bank can be impleaded in the main application under
Section 19 at this stage. We may point out that Section
19(2) permits such impleadment "at any stage of the
proceedings before a final order is passed". The final
order here is the order of adjudication under Section
19(1) as to whether the debt is due or not. In the
present case, the adjudication order in respect of the
debt has already been long back and therefore Section
19(2) does not permit any impleadment in the main
application under Section 19(1) at this stage. Hence,
this relief for impleadment cannot be granted."
(emphasis supplied)
Reliance is also placed on the judgment in the case of Ultramatix
Systems Pvt. Ltd. v/s. State Bank of India & ors. {2007 (6) ALL MR
17/36 wp3071-3096.15.sxw
327}. In paragraph 8 it is observed as under:
8. Having come to the conclusion that the amounts set
out in the profit and loss account are an admission of
amounts due by the petitioner to respondent no.1, the
question that has to be answered is whether the admission
has to be in the course of the proceedings. We may refer to
the judgment of the Supreme Court in Uttam Singh Dugal &
Co. Ltd. Vs. Union Bank of India and Ors. The issue there
arose considering the provisions of Order XII, Rule 6 of the
Civil Procedure Code. The contention urged was that
resolutions or minutes of the meeting of the Board of
Directors and resolution thereof cannot amount to a pleading
to come within the ambit of the rule. The Supreme Court
noted that before the trial Court, there was no pleading much
less an explanation as to the circumstances in which the said
admission was made so as to take it out of the category of
admission. The Court noted that the matter could be decided
even without referring to the expression 'otherwise' in Rule 6
of Order XII of Civil Procedure Code and that in inference or
liability could be drawn on the basis of the pleadings. In the
instant case also, in the application, the respondent no.1 had
pleaded based on the profit and loss account of the
petitioners that the amount set out therein was an admission
that the amount was due and payable. There was no specific
denial except for such vague pleadings. It is, therefore, clear
that there was an admission by the petitioner in response to
the application taken out by the respondent no.1. No material
18/36 wp3071-3096.15.sxw
was produced or explanation given of the circumstance under
which the admission was made to take it out of the category
of admissions which created the liability. On this count itself,
the petition, in our opinion is liable to be dismissed as the
admission would be admission binding on the petitioner and it
was open to the Tribunal to pass an order in terms of section
19(20) of the Act read with Rule 12(5) of the Rules.
Assuming it not to so, then whether the admission is
required to be made only in the pleadings. The language of
the Rule does not lend itself to that construction, as the
expression does not require that the admission must be
made by the defendant in the pleadings before the Tribunal.
The expression 'defendant' has to be considered in the
context of the opponent in the proceeding. The language
used is to order such defendant to pay the amount to the
extent of such admission. The language, therefore, used is
susceptible of a wider meaning to include any admissions by
the defendant. In other words, in proceedings either before
the Tribunal or also in any other document. The object of the
Act being to enable financial institutions to recover their debts
expeditiously. Any other construction would defeat the very
object of the Act. The language used in Order XII, Rule 6 of
Civil Procedure Code is in the pleadings or otherwise, unlike
the language of Rule 12(5) of the Rules. As we have noted,
the statement contained in the profit and loss account duly
certified by the auditor is based on the records of the
company. Once the balance sheet/profit and loss account
shows the amount and that as a statutory requirement of the
Companies Act, we fail to understand as to how that cannot
19/36 wp3071-3096.15.sxw
be an admission which can be proved against the company.
It is for the company to establish by relevant facts that the
admission would not be an admission in the eyes of law. In
the instant case, the petitioner has been unable by any
relevant fact to displace the admission made in the balance
sheet. In our opinion, therefore, the admission in the balance
sheet has been proved against the petitioner and as we have
held earlier that such an admission even other than in the
pleadings before the Tribunal can be proved against the party
in making the admission. We have, therefore, no hesitation
in holding that the expression 'admission' in Rule 12 (5) of
the Rules can be read to mean an admission both in the
pleadings, in the proceedings as well as an admission of fact
not in the proceedings and which is evidenced by any
document or mode provided under section 17 of the Indian
Evidence Act. That contention must, therefore, be rejected."
Reliance is also placed on judgment of this Court in the case of Godavari
Laxmi Co-op. Bank Ltd. vs. Union of India & anr. {2012(2) Mh.LJ}.
Paragraph-12 of the order reads as under:
12. We find that the Appellate Tribunal committed error in
waiving the mandatory condition of pre-deposit by the
respondent no.2 before entertaining the appeal as stipulated
under the provisions of section 18 of the Act of 2002. In the
light of the reasonings adopted by us as above, we find that
the order passed by the Appellate Tribunal is required to be
quashed and set aside."
20/36 wp3071-3096.15.sxw
18. The issue raised before this Court is as to whether provision under
Section 21 of RDDBI Act relating to pre-deposit for entertaining an appeal
is applicable to the order passed by the Debts Recovery Tribunal on an
interim application filed under Rule 12(5) of the Rules of 1993. The
second issue raised is as to whether the impugned order lacks reasoning.
Learned counsel Shri Cama and Shri Balsara have also filed written
synopsis/submissions.
19.
Some of the provisions of the RDDBI Act are required to be
referred. Section 19 falls under Chapter IV referring to procedure of
Tribunal. An application is preferred to Tribunal under Section 19 of the
Act where a Bank or financial institution has to recover any debt from any
person. Procedure is prescribed for filing of such application and for its
process by the Tribunal. Relevant provisions of Section 19 (1) of RDDBI
Act read as under: -
"19. Application to the Tribunal.-(1) Where a bank or a
financial institution has to recover any debt from any person,
it may make an application to the Tribunal within the local
limits of whose jurisdiction--
(a) the defendant, or each of the defendants where there are
more than one, at the lime of making the application, actually
21/36 wp3071-3096.15.sxw
and voluntarily resides or carries on business or personally
works for gain; or
(b) any of the defendants, where there are more than one, at
the time of making the application, actually and voluntarily
resides or carries on business or personally works for gain; or
(c) the cause of action, wholly or in part, arise.
Sub-sections (20A), (21) and (22) of Section 19 of RDDBI Act, read as under:-
(20A) Where it is proved to the satisfaction of the Tribunal
that the claim of the applicant has been adjusted wholly or in
part by any lawful agreement or compromise in writing and
signed by the parties or where the defendant has repaid or
agreed to repay the claim of the applicant, the Tribunal shall
pass orders recording such agreement, compromise or
satisfaction of the claim.
(21) The Tribunal shall send a copy of every order passed
by it to the applicant and the defendant.
(22) The Presiding Officer shall issue a certificate under his
signature on the basis of the order of the Tribunal to the
Recovery Officer for recovery of the amount of debt specified
in the certificate."
22/36 wp3071-3096.15.sxw
Section 20 refers to Appeal to the Appellate Tribunal. It reads as under:
"Section 20 - Appeal to the Appellate Tribunal. (1) Save as
provided in sub-section (2), any person aggrieved by an order
made, or deemed to have been made, by a Tribunal under
this Act, may prefer an appeal to an Appellate Tribunal having
jurisdiction in the matter.
(2) No appeal shall lie to the Appellate Tribunal from an order
made by a Tribunal with the consent of the parties.
(3) Every appeal under sub-section (1) shall be filed within a
period of forty-five days from the date on which a copy of the
order made, or deemed to have been made, by the Tribunal is
received by him and it shall be in such form and be
accompanied by such fee as may be prescribed:
Provided that the Appellate Tribunal may entertain an appeal
after the expiry of the said period of forty-five days if it is
satisfied that there was sufficient cause for not filing it with in
that period.
(4) On receipt of an appeal under sub-section (1), the
Appellate Tribunal may, after giving the parties to the appeal,
an opportunity of being heard, pass such orders thereon as it
thinks fit, confirming, modifying or setting aside the order
appealed against.
23/36 wp3071-3096.15.sxw
(5) The Appellate Tribunal shall send a copy of every order
made by it to the parties to the appeal and to the concerned
Tribunal.
(6) The appeal filed before the Appellate Tribunal under
sub-section (1) shall be dealt with by it as expeditiously as
possible and endeavour shall be made by it to dispose of the
appeal finally within six months from the date of receipt of the
appeal.
Section 21 refers to deposit of amount of debt due, on filing appeal. It
reads as under:
"Section 21 - Deposit of amount of debt due, on filing
appeal -Where an appeal is preferred by any person from
whom the amount of debt is due to a bank or a financial
institution or a consortium of banks or financial institutions,
such appeal shall not be entertained by the Appellate Tribunal
unless such person has deposited with the Appellate Tribunal
seventy-five per cent, of the amount of debt so due from him
as determined by the Tribunal under section 19:
Provided that the Appellate Tribunal may, for reasons to be
recorded in writing, waive or reduce the amount to be
deposited under this section.
We may refer to certain provisions of Debts Recovery ( Procedure )
Rules, 1993. Rule 12(5) reads as under:-
24/36 wp3071-3096.15.sxw
"12. Filing of reply and other documents by the defendant.-
(1) ..........
(2) ..........
(3) .........
(4) .........
(5) Where a defendant makes an admission of the full or part of
the amount of debt due to a bank or financial institution, the
Tribunal shall order such defendant to pay the amount, to the
extent of the admission, by the applicant within a period of one
month from the date of such order failing which the Tribunal may
issue a certificate in accordance with section 19 of the Act to the
extent of amount of debt due admitted by the defendant."
20. Admittedly, the interim application (Exhibit 17) was filed and
decided in accordance with the provisions of Rule 12(5) of the Act of 1993
as according to the applicants therein there was an admission in the
audited balance-sheet of respondent no.3 - Fine Platinum to the tune of
Rs. 3,99,05,735/-. The DRT considered the pleas raised by the
contesting parties and reached conclusion to pass order under Section
12(5) by directing the defendants, including borrowers and Guarantors to
pay the admitted debt. The Presiding Officer of DRT-III, Mumbai passed
the following order:
25/36 wp3071-3096.15.sxw
"1. The application (Exh. 17) is allowed.
2. The Defendants shall pay a sum of Rs.3,99,05,735/- to the
Applicant within one month failing which recovery certificate
for the said amount with interest @ 20.75% per annum with
monthly rests from 15.09.2014 till realization shall be issued.
3. The O.A. shall proceed further on merits."
21.
A simple, literal construction is required to be applied to the
provisions of Section 21 of the RDDBI Act. The reference to amount of
debt due as determined by the Tribunal under Section 19 occurring in
Section 21 is of significance. It is relevant and important because in the
facts of the present case, the petitioners have raised issue that there was
no determination done as per Section 19 of the RDDBI Act.
22. On the principles of interpretation of statutes, we may refer to some
of paragraphs of the reported judgment in the case of M/s. Kavita
Pigments and Chemicals (Pvt.) Ltd. And ors. v/s. Allahabad Bank
and ors. {AIR 2000 Patna 43}. Paragraphs 31 to 34 of the said
judgment read as under:
26/36 wp3071-3096.15.sxw
"31. Again in Pakala Narayan Swami v. Emperor reported
in AIR 1939 PC 47 Lord Atkin, speaking for the Bench at page
51 of the report has put the same principle as simply as this :
"But in truth when the meaning of words is plain it is not the
duty of the Courts to busy themselves with supposed
intentions."
32. Justice Gajendragadkar in Kanailal Sur v. Paramnidhi
Sadhu Khan reported in AIR 1957 SC 907 has also spoken in
the same vein. The words of the learned Judge may be
quoted below:--
"If the words used are capable of one construction only then it
would not be open to the Courts to adopt any other
hypothetical construction on the ground that such
construction is more consistent with the alleged object and
policy of the Act."
33. Justice S. R. Das was even more emphatic in saying
"Th spirit of the law may will be an elusive and unsafe guide
and the supposed spirit can certainly not be given effect to in
opposition to the plain language of the section of the Act."
See Rananjay Singh v. Baijnath Singh reported in AIR 1954
SC 749 at page 752.
34. Francis Bennion in his famous treatise 'Statutory
Interpretation', Second Edition, Butterworths at page 599 has
reiterated this principle by saying that there is a presumption
in favour of literal interpretation and saying so the learned
27/36 wp3071-3096.15.sxw
author has quoted two learned Judges. The said passage is
set out below:-
"The presumption in favour of literal interpretation was stated
by a nineteenth century Lord Chancellor, Lord Selborne, in
the words 'there is always some presumption in favour of the
more simple and literal interpretation of the words of the
statute.' Judges of the present day show no inclination to
abandon the presumption, despite the growing popularity of
'purposive' construction. As Lord Parkar CJ said : "the
intention of Parliament must be deduced from the language
used."
23. Learned counsel Shri Balsara appearing for the bank submitted that
since the petitioners filed waiver application before the DRAT, they were aware
that a pre-deposit was mandatory, in the facts of the case and in view of
provisions of Section 21 of the RDBBI Act. The petitioners did not argue
before the DRAT that in the fact situation, there was no requirement of pre-
deposit. Therefore, they are now precluded from raising a new ground before
this court. We find that the petitioners are raising a legal ground in respect of
interpretation of provisions of Section 21 of the RDDBI Act. We are of the
considered view that the petitioners must be permitted to raise this ground in
the present proceedings.
24. Mr. Cama, learned counsel appearing for the petitioners submitted that
28/36 wp3071-3096.15.sxw
Rule 12(5) of the Rules of 1993 is in two parts. In the first part, the Tribunal
would pass order where defendant makes an admission of the full or part of the
amount of debt due to a bank or financial institution. In the second part, on
failure of the defendant to pay the amount, a recovery certificate in accordance
with Section 19 of the RDDBI Act to the extent of the amount of debt due
admitted by the defendant would be issued. It is submitted that the petitioners
had approached DRAT against first part of the order under Rule 12(5).
Therefore, the provisions of pre-deposit under Section 21 while filing appeal is
not attracted.
25. We are not convinced with the interpretation put up by the learned
counsel for the petitioners. In our view, Rule 12(5) cannot be separated in two
parts. The said Rule clearly stipulates that on failure of the defendant to pay the
amount to the extent of the admission within a period of one month from the
date of order, a certificate in accordance with Section 19 of the RDDBI Act
would be issued. The words "may issue a certificate" occurring in Rule 12 (5),
according to the learned counsel, would mean that only in certain
contingencies, the issuance of certificate could get delayed /postponed and a
party to the proceeding may independently challenge issuance of certificate
itself. Considering the scheme of the RDDBI Act, more precisely the
provisions of Section 19 and Rule 12 (5) of the Rules of 1993, we are of the
view that recovery certificate is akin to decree in a suit. A recovery certificate
29/36 wp3071-3096.15.sxw
would amount to formal expression of the adjudication. The Act and the Rules
do not contemplate separate proceedings to be initiated, much less, adjudicated
for getting the recovery certificate issued. Therefore, we are not inclined to
accept the contention canvassed on behalf of the petitioners.
26. It was submitted by the learned counsel appearing for the petitioners that
before issuance of recovery certificate, the debt has to be determined by the
Tribunal in accordance with the provisions of Section 19 of the RDDBI Act and
the determination is required to be conclusive one under Section 19. Perusal of
provisions of Section 19 (20) shows that the Tribunal may, after giving the
applicant and the defendant an opportunity of being heard, pass such interim or
final order, including the order for payment of interest from the date on or before
which payment of the amount is found due upto the date of realisation or actual
payment, on the application as it thinks fit to meet the ends of justice. This
shows that under provisions of Section 19, interim order in the shape of interim
determination is contemplated. In our view, the order passed under Rule 12(5)
would amount to interim determination. The adjudication done by DRT under
Rule 12(5) in directing to pay the admitted amount of debt would be in the
nature of final determination to the extent of the admitted amount. Such
amount determined under Rule 12(5) would not be subject matter of further
adjudication while the DRT proceeds to finally determine the rest of the amount
of debt due to a bank or financial institution.
30/36 wp3071-3096.15.sxw
27. Consequent to such interim determination a recovery certificate could be
issued under Sub-clause (22) of Section 19 by the Presiding Officer. The
provisions of Sub-clause (22) of Section 19 speaks that the Presiding Officer
shall issue a certificate under his signature on the basis of the order of the
Tribunal to the Recovery Officer for recovery of the amount of debt specified in
the certificate. Therefore, the order passed, on admission of defendant, by the
Tribunal would be under Section 19 read with Rule 12(5) of the Rules of 1993.
Upon Tribunal passing order under Rule 12(5) and on non payment by
defendant what follows is the issuance of recovery certificate by the Presiding
Officer. It is a consequential act of giving formal expression to the order passed
by the Tribunal.
28. If a party challenges order passed by the Tribunal under Rule 12 (5)
before recovery certificate could be issued, it would not be permissible to raise
a plea that order in the first part of Rule 12(5) has been challenged. A
defendant challenging such an order passed under Rule 12 (5) is appealing
against an order where the Tribunal, on admission of the defendant, has
determined a debt to the extent of admission. In the present case, the interim
application filed by the borrowers for a decree on admission was contested on
merits, replies were filed and the Tribunal had passed a reasoned order
determining the amount of debt due, as admitted by the defendant.
31/36 wp3071-3096.15.sxw
29. Under Section 20 of the RDDBI Act, any person aggrieved by an order,
may file an appeal to the Tribunal. The right of appeal is not denied in case of
interim orders. Under Section 21, there is a mandate of law to pay 75% of the
amount due and determined by the Tribunal while preferring an appeal. The
payment of pre-deposit is inherent and imperative under the provisions of
Section 21, except in cases where Appellate Tribunal, for reasons to be
recorded in writing, waives or reduces the amount.
30. Section 21 speaks that such of the appeals shall not be entertained by
the Appellate Tribunal unless such person has deposited with the Appellate
Tribunal 75%. This element of mandate of law is of significance. It was argued
that amount of debt so due from the party as determined finally by the Tribunal
under Section 19 could attract pre-deposit and not under any other
circumstance, including the order passed under Rule 12 (5). Considering the
scheme of the Act and the relevant provisions, we are of the considered opinion
that such an interpretation as tried to be put up by the learned counsel for the
petitioners would go contrary to the letter and spirit of the provisions of Sections
19, 20, 21 of the RDDBI Act and Rules 12(5) of the Rules of 1993.
31. The key words of Section 21 of the RDDBI Act are "debt is due". "Debt"
is defined under Section 2 (g) of the RDDBI Act. Section 2(g) reads as under:-
32/36 wp3071-3096.15.sxw
"2. Definitions. - In this Act, unless the context otherwise
requires,-
(a)
(b)
(c)
(d)
(e)
(f)
(g)
"debt" means any liability (inclusive of interest) which is
claimed as due from any person by a bank or a financial institution
or by a consortium of banks or financial institutions during the
course of any business activity undertaken by the bank or the
financial institution or the consortium under any law for the time
being in force, in cash or otherwise, whether secured or
unsecured, or assigned, or whether payable under a decree or
order of any civil court or any arbitration award or otherwise or
under a mortgage and subsisting on, and legally recoverable on,
the date of the application."
The debt has to be adjudged to be due. The process of adjudicating is
required to be gone into, may be to limited extent or on an interim application, to
find out the quantum of money to be due. Ordinarily, the final adjudication
would take place upon conclusion of proceeding filed under Section 19 of the
RDDBI Act. But, there could be interim adjudication of part of the claim, while
33/36 wp3071-3096.15.sxw
the remaining adjudication of the balance of the claim is determined in a final
judgment or order. Under the scheme of the relevant provisions, as quoted
above, it is clear that Section 21 of the Act applies to an order which could be
an interim order adjudicating part of the claim, while leaving the balance of the
claim to be adjudicated. In other words, the determination under Section 19, as
contemplated under Section 21, could be interim or final. Any contrary view, in
our consideration, would go contrary to the very scheme of the Act. It would
not be permissible to read provisions of Rule 12(5) in a way to defeat the object
of Sections 19 and 21 of the RDDBI Act. The Rules would not override the
statutory provisions. It is elementary that the rules prescribed by a subordinate
legislation cannot be in excess or in derogation of the statute under which it is
made. Rule 12 (5) is framed in exercise of powers under Sub-sections (1) and
(2) of Section 36 of the RDDBI Act by the Central Government, which confers
powers on Central Government to make rules to carry out the provisions of the
said Act.
32. Even under Rules of 1993, the definition of "application" is
prescribed under Rule 2(c), which reads as under :-
"2. Definitions. - In these rules, unless the context otherwise
requires, -
(a)
(b)
(c) "application" means an application filed under section 19 or
under section 31A and includes an "appeal" filed under section
34/36 wp3071-3096.15.sxw
30(1) of the Act;
The definition itself signifies that the application filed under these Rules
would mean an application under Section 19 of the RDDBI Act.
33. Mr. Dhond, learned Senior counsel appearing for the petitioners in WP
(L) No. 3096/15 submitted that Rule 12 (5) contemplates passing of an order
only against "such of the defendants" who had made an admission. The
present suit being a mortgage suit, there was no question of a pre-deposit,
according to the learned counsel. It was submitted by the learned counsel that
petitioners being guarantors, were not liable and responsible to pay the amount
of debt under the order passed by the Tribunal. We are not inclined to accept
this submission. Learned counsel appearing for the respondents placed
reliance on Clause (3) of Guarantee Deed wherein it was agreed by the
guarantors that any admission or acknowledgement in writing given by borrower
in respect of their indebtedness, shall be binding on the guarantors and shall
be treated as such on behalf of the guarantors also.
34. In view of the clauses in Guarantee Deed, we are of the view that the
guarantors are equally responsible to honour and pay the amount due as
determined by the Tribunal.
35/36 wp3071-3096.15.sxw
35. So far as the issue of financial hardship raised by the respective
petitioners, we find that only two points were urged before the DRAT, that there
was no admission by the guarantors and there was an offer of Rs.6.5 Crores.
It is now well settled that several points may be taken in the pleadings but if
they are not urged before the court, the court is not required to adjudicate on
the same. Even assuming that any other point raised by the petitioners was not
considered by the DRAT, they were required to approach DRAT pointing out this
grievance, which the petitioners have failed to do.
36. According to the respondent-Bank, the amount found due under order
dated 14/8/2014 as on the date of the impugned order dated 11/9/2015 of the
DRAT comes to Rs.4.89 Crorers. DRAT had, however, directed only Rs.2
Crores as pre-deposit, which is 40.89% of the said amount. In the facts, the
petitioners were directed to deposit an amount which was much less than the
mandatory pre-deposit of 75%.
37. The petitioners, alternatively, submitted that for want of appropriate
reasoning by the DRAT, the impugned order be quashed and set aside and
matter be remanded. Ordinarily, 75% pre-deposit is imperative. In the facts
and circumstances of the case the DRAT has directed about 40% pre-deposit
and we do not find this to be a fit case to interfere with the discretion exercised
by the DRAT and to remand the matter back on this count.
36/36 wp3071-3096.15.sxw
38. For the reasons stated above, we hold that the order passed by the DRT
under Rule 12(5) of the Rules of 1993 amounts to an interim determination of
the amount due. In the facts, the petitioners-borrowers/guarantors would be
liable to pay an amount towards pre-deposit under the provisions of Section 21
of the RDDBI Act.
We hold that if a person files an appeal to DRAT against an order passed
by DRT under Rule 12(5) of the Rules of 1993, the provisions of Section 21 of
the RDDBI Act gets attracted, irrespective of as to whether a recovery certificate
was issued or not.
In the interest of justice, we, however, direct that in case the petitioners
deposit the amount of pre-deposit, as directed by DRAT, within four weeks from
today, then the appeal filed by the petitioners shall stand restored to the file of
DRAT.
39. The petitions are accordingly dismissed with no order as to cost. Rule is
discharged.
(A.A. SAYED, J.) (NARESH H. PATIL, J.)
