Panther Fincap And Management ... vs Bank Of India And 2 Ors
2017 Latest Caselaw 1612 Bom

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          IN THE HIGH COURT OF JUDICATURE OF BOMBAY
                  (ORDINARY ORIGINAL CIVIL JURISDICTIOIN)

                         WRIT PETITION NO.904 OF 2016

 1        Panther Fincap & Management
          Services Limited,
          5th Floor, Manek Mahal,
          Veer Nariman Road,
          Mumbai 400 020
          And
          At Ground Floor, Bhupen Chambers,
          Dalal Street, Fort, Mumbai 400 023


 2        Mr. Navinchandra N. Parekh,
          Indian Inhabitant, residing at 568,
          Lady Jehangir Road, Five Gardens,
          Matunga, Mumbai 400 019


 3        Mr. Ketan V. Parekh
          of Mumbai, Indian Inhabitant having
          his office at 1st Floor, Radha Bhavan,
          121, Nagindas Master Road,
          Mumbai 400 023
          And residing at 19/1, 3rd Floor,
          Zaver Mahal, Netaji Subhash Marg,
          Marine Drive, Mumbai 400 020


 4        Mr. Kirtikumar N. Parekh,
          of Mumbai, Indian Inhabitant,
          residing at 103/5, W.H. Marg,
          Blackie House, 3rd Floor,
          Fort, Mumbai 400 001                               Petitioners


          Versus




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 1        Bank of India
          a Banking Company constituted
          under the Banking Companies
          (Acquisition & Transfer of
          Undertakings) Act, 1970 having its
          Head Office at Express Towers,
          Nariman Point, Mumbai 400 021


 2        Triumph International Finance
          India Limited,
          having its registered office at
          Oxford Centre, 10, Shroff Lane,
          Colaba Causeway, Colaba,
          Mumbai 400 005


 3        State of Maharashtra,
          Through the Government Pleader,
          High Court, Mumbai                                       Respondents

Mr. Mayur Khandeparkar a/w Mr. Prakash Shinde, Ms. Chinmayee Ghag, Ms. Ambreen Sahid i/by Mr. Devanshu Pravinbhai Desai advocates for the petitioners

Ms. Saumya Shrikrishna a/w Ms. Pooja Karacha i/by Nahush Shah Legal for respondent No.1

Mr. U.S. Upadhyaya, Assistant Government Pleader for respondent No.3 _______________ CORAM : R.M. BORDE & A.S. GADKARI, JJ

Reserved on : 23rd January, 2017 Pronounced on :11th April,2017

ORAL JUDGMENT (Per: R.M. Borde, J)

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1 Heard respective counsel appearing for both the parties.

2 Rule. With the consent of the parties, petition is taken-up

for final decision at admission stage.

3 The petitioners are aggrieved by the order dated 31.5.2017

passed by the Recovery Officer, Debts Recovery Tribunal, below

Exhibit 111 in the Recovery Proceedings No.187/2005, allowing

the Application, presented by Respondent No.1 bank, requesting

to put the petitioner No.3 in civil prison. The Appeal presented

by the petitioner to the Debts Recovery Tribunal (DRT) has been

rejected by the learned Presiding Officer by order dated

21.9.2007. The petitioners, herein, preferred an Appeal bearing

No.346/2007, which has also been dismissed by the Chair Person,

Debts Recovery Appellate Tribunal (DRAT) on 3.2.2016.

Applications presented, seeking recall of the order by the

petitioners, have also been rejected by the DRAT on 14.3.2016.

4 In the Application presented by respondent No.1 bank, it is

stated that, the bank has obtained three separate Recovery

Certificates against the debtors, petitioners herein, authorizing

the recovery of more than Rs.200 crores. The Recovery Officer

directed the petitioners herein to disclose their assets on

affidavit, along with income-tax and wealth-tax returns by order

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dated 11.10.2005. However, after extending sufficient

opportunity to the petitioners, they did not disclose the assets,

nor produced the documents, as directed by the Recovery

Officer. On 7.3.2006, a last opportunity was given to the

petitioners to disclose their assets, however, they did not comply

with the direction. It is recorded that, the petitioners are facing

several proceedings initiated at the instance of Central Bureau of

Investigation (CBI) and other Authorities. It is the contention of

the bank that, the petitioners have sufficient means to pay the

dues recoverable by the bank. However, they are intentionally

avoiding to pay the debt. It is the contention of the bank that,

the petitioners herein have made a payment of more than Rs.280

crores to Madhavpura Mercantile Cooperative Bank Limited

(herein after referred to as 'MMCB' for the sake of convenience).

Order passed by the Apex Court dated 27.2.2006 against the

petitioners herein has been placed on record. It is also the

contention of the bank that, the petitioners are paying Rs.1 crore

a month to Mr. Ashok Mittal, apart from making payment of

Rs.238 crores to MMCB. It is thus contended by the Respondents

that, petitioners herein have sufficient assets to satisfy the

decree amount. However, they are deliberately avoiding

repayment of amount and are making the payment to other

creditors. The willful disobedience on the part of the petitioners

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herein calls for extreme action like putting them in civil prison by

taking recourse to remedies provided under section 25(b) of The

Recovery of Debts Due to Banks & Financial Institutions Act, 1993

(''the RDB Act'').

5 The application was opposed by the petitioners herein

contending that by a Notification dated 5,10.2001, Mr Ketan

Parekh (petitioner No.3) and Mr. Navinchandra Parekh (Petitioner

No.2) are declared a Notified Parties. Their movable and

immovable assets are already attached. It is contended that, so

far as payment to MMCB is concerned, the repayment is being

made by the debtors of MMCB for and on behalf of Mr. Ketan

Parekh - petitioner No.3. It is the contention of the petitioners

that, they have disclosed their assets and have filed balance

sheet for three years. The borrowers of MMCB have deposited

Rs.236 crores on behalf of Mr. Ketan Parekh in October, 2006 and

deposits have not been made by Mr. Ketan Parekh but by the

borrowers of MMCB on behalf of Mr. Ketan Parekh.

6 The Recovery Officer, after hearing both the sides, allowed

the application, issuing direction to issue arrest warrant against

Mr. Ketan Parekh/Petitioner No.3.

7 It is the contention of the petitioners that, it is

impermissible for the Recovery Officer to take extreme step of

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issuing arrest warrant, before availing the other modes of

recovery provided under the Act. The petitioners contend that,

since Mr. Ketan Parekh is a notified party and his movable and

immovable assets have been attached by the Special Court in

order to enforce recovery of amount, it is incumbent upon the

respondent bank to approach the Civil Court and the application

presented by the bank at Exh.111 ought not to have been

entertained by the Recovery Officer. The petitioners also contend

that, since the debtor does not have any means to pay amount,

issuing direction for his arrest and putting him in civil prison is

violative of article 21 of the Constitution of India, as well as spirit

of Article 11 of the International Convention of Civil & Political

Rights.

8 The modes of recovery of debts have been provided under

Chapter V. In section 2 of The Recovery of Debts Due to Banks &

Financial Institutions Act, 1993 (''the RDB Act''), it is provided

thus:-

" 25. Modes of recovery of debts.:- The Recovery Officer shall, on receipt of the copy of the certificate under sub- section (7) of Section 19, proceed to recover the amount of debt specified in the certificate by one or more of the following modes, namely:-

(a) attachment and sale of the movable or immovable property of the defendant;

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(b) arrest of the defendant and his detention in prison;

(c) appointing a receiver for the management of the movable or immovable properties of the defendant. "

9 It is the contention of the petitioner that, the amount

recoverable under the Certificate can be recovered by

attachment and sale of movable and immovable properties of

the defendants and only in the event of failure to recover the

debt by such mode, further step can be taken for arrest of the

debtor and his detention in prison. It is the contention of the

petitioners that, without availing the other modes for recovery of

the amount, extreme step of issuing arrest warrant against the

petitioner Mr. Ketan Parekh ought not to have been taken. The

procedure prescribed under second and third schedule of

Income-tax Act, 1961 and The Income-tax (Certificate

Proceedings) Rules, 1962 as far as possible with necessary

modifications as if the said provision and the rules refer to

amount of debit due under RDB Act instead of income-tax Act is

applied. In view of section 29 of the RDB Act. Chapter V of

second schedule under the Income tax Act relates to arrest and

detention of the defaulter. Rules 73 to 79 prescribe procedure in

respect of issuance of an order of arrest and detention in civil

prison of a defaulter. Rule 73 provides for issuance of show cause

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notice; whereas rule 74 contemplates hearing on the application.

The order of detention shall be passed in consonance with Rule

77 of the Rules. Though the petitioners contend that, procedure

prescribed under the Rules has not been adhered to, however, no

specific breach has been pointed out. Though it is contended

that, the period of detention has not been prescribed, however,

such argument has been dealt with by the DRT and DRAT in their

orders. Rule 76 of second schedule contemplates making of an

order of detention of the defaulter at the conclusion of enquiry

and cause his arrest if he is not already under arrest. Rule 77 of

second schedule provides that, every person detained in the civil

prison in execution of a certificate may be so detained, where

the certificate is for a demand of an amount exceeding two

hundred and fifty rupees for a period of six months and in any

other case for a period of six weeks. In the instant matter, an

order of issuance of warrant has been issued and the further

order within contemplation of the Rules is required to be passed

only after the execution of the arrest warrant.

10 The petitioners have invited our attention to the Judgment

in the matter of Jolly George Varghese & Another Versus

The Bank of Chochin (1980 2 SCC 360) to contend that, if the

judgment debtor is bonafide unable to pay off his debt, an order

of detention in prison in execution of a decree would violate

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article 21 of the Constitution of India as well as article 11 of the

International Covenant on Civil & Political Rights.

In the reported matter, in execution of money decree, the

executing Court ordered for attachment of all immovable

properties of the appellant judgment-debtor and appointment of

a Receiver for management of the attached properties and also

issued warrant of his arrest and detention in civil prison under

section 51 and order 21, rule 37 of the Civil Procedure Code

(CPC). The High Court summarily dismissed the revision filed by

the Judgment-debtor against the order of arrest. While dealing

with the challenge, the Honourable Supreme Court has

observed:-

" To cast a person in prison because of his poverty and consequent inability to meet his contractual liability is too flagrantly violative of Article 21 unless there is a proof of the minimal fairness of his willful failures to pay in spite of his sufficient means and absence of more terribly pressing claims on his means such as medical bills to treat cancer or other grave illness. Unreasonableness and unfairness in such a procedure is inferable fro Article 11 of the Covenant. As such, even though at any time after the passing of an old decree the judgment debtor might have come by some resources but had not discharged the decree, he cannot be detained in prison under Section 51 read with Order 21, Rule 37, C.P.C. If at the later point of time he was not found to be penniless. However, the simple default to discharge is not enough. There must be some element of bad faith beyond mere indifference to pay, some deliberate or

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recusant disposition in the past or, alternatively, current means to pay the decree or a substantial part of it. The provision emphasises the need to establish not more omission to pay but an attitude of refusal on demand verging on dishonest disowning of the obligation under the decree. Here considerations of the debtor's other pressing needs and straitened circumstances will play prominently.

11 The reliance placed on the Judgment by the petitioners in

the matter of Jolly George Varghese is misplaced for several

reasons. Firstly, the procedure for execution of a decree taking

recourse to provisions of the Civil Procedure Code cannot be

equated with the proceedings for recovery under a certificate

issued by the DRT. A certificate issued by the DRT cannot be

equated with a decree and moreover, the proceedings under the

RDB Act are predominantly recovery proceedings at the instance

of bank and does not lead to passing of a decree like a Civil

Court. The DRT is not a Civil Court and the provisions of C.P.C.

Cannot be straight-way made applicable to the proceedings in

respect of recovery of amount by the Recovery Officer, exercising

powers under RDB Act. Even otherwise, the factual matrix of Jolly

George Varghese's case is totally different and decision therein

cannot be made applicable to the instant matter. The Apex Court

has led emphasis on attitude of refusal of demand verging on

dishonest and disowning of the obligation under the decree. In

the instant matter, the primary contention of the bank is that,

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the petitioners, though have sufficient means, are dishonestly

refusing to pay the debt. The petitioners though have paid

Rs.238 crores to Madhavpur Mercantile Cooperative Bank after

his (Mr. Ketan Parekh) declaration as a Notified Party and

continued to pay other debtors only when they are put to

coercion. In the instant matter, as has been contended by the

bank, there is an element of bad faith beyond mere indifference

to pay, some deliberate or recusant disposition in the past and

there are means available to pay the decree or substantial part

of it but there is willful failure to pay.

12 In the matter of Nahar Industrial Enterprises Limited

versus Hong Kong & Shanghai Banking Corporation (2009

8 SCC 646) a finding is recorded that, DRT cannot be equated

with a Civil Court. DRT cannot pass a decree. It can only issue

Recovery Certificate. The power of DRT to grant interim relief is

attenuated with circumspection. Concededly, in the proceedings

before the DRT, detailed examination, cross-examinations, by

application of provisions of Evidence Act as also application of

other provisions of the Civil Procedure Code like interrogations,

discoveries of documents and admission need not be gone into.

Taking recourse to such proceedings would be an exception.

Entire focus of the proceedings before the DRT centres round

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legally recoverable dues of the bank.

13 In view of the Judgment in the matter of Nahar Industrial

Enterprises, the proceedings for recovery under a Certificate

issued by the Recovery Officer, DRT in exercise of powers

conferred under the RDB Act, cannot be equated with a decree

passed by the Civil Court. The proceedings before the DRT which

have culminated in issuance of recovery certificate, cannot be

equated with the proceedings in a Civil Court. In view of the

observations, as referred to above in Nahar Industrial

Enterprises case, reliance placed by the petitioners, on the

Judgment of the Supreme court in the matter of Jolly George

Varghese is misplaced.

14 The petitioners contend that since Mr. Ketan Parekh is a

notified party and since all the assets, movable and immovable

have been attached, in order to enforce recovery of amount, the

only remedy available to the bank is to approach the Civil Court.

The petitioners place reliance in the matter of Ketan Parekh

V/s Oriental Bank Limited (Writ Petition No.6162/2003 decided

by the Division Bench of this Court on 17.1.2016). The issue that

arose for consideration in the matter was:-

" Can the property of the person notified under the Special Courts (Trial of offences Relating to Transactions in Securities) Act, 1992 (hereinafter referred to as

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"Special Courts Act") be sold in execution of the certificate obtained under the provisions of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (herein after referred to as "Debt Recovery Act"), under the provisions of the Debt Recovery Act. "

While dealing with the issue, the division bench has

observed in paras No.8 and 9 of the Judgment as quoted below:

" 8. The D.R.T. Act, apart from providing mechanism for deciding claims of financial institution, also contains provisions, for recovery of debts determined by the tribunal. In other words, the Act also provides a mechanism for recovery. Section 25 sets out the manner in which the property can be sold for satisfaction of the amount set out in the certificate issued in favour of financial institution. That would include attachment and sale of the movable and immovable properties of the Judgment debtor. The D.R.T. Exercises the jurisdiction which otherwise was conferred on the civil Court in so far as recovery of monies of the financial institutions. Let us take an illustration, if some other financial institution not coerced by the Act had obtained a decree and pursuant to that decree in execution had movable and immovable properties attached for satisfying the decree, could the recovery officer exercise powers under Section 25 once again and attach the properties and sell the same ? To our mind the answer would be a clear no. At the highest perhaps, there could be conditional order of attachment, once the first order of attachment is set aside. If the order of attachment is not set aside and the properties are sold, then the procedure would be to file a claim before the Court executing the decree for whatever

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reliefs the party would be entitled to. To our mind, the same principle will have to be applied in the instant case. The property of the notified person is attached by operation of law. Section 3(4) empowers the Special Court to deal with the property. The Legislature finding absence of power in the Special Court in dealing with the properties of a notified person and as such by the Amendment Act also conferred such power on it. In other words dealing with the properties of a notified person, would be that f the Special Court which will exercise the same power as that of a Civil Court. What that would mean, is that if a financial institution obtains a certificate under D.R.T. Act and if in execution, any property of a notified person is required to be sold in satisfaction of the certificate, then the financial institution will have to move the Special Court for necessary directions which can mean filing claim before the Special Court. In that event the Special Court as a Civil Court while disposing of the assets will have to consider the claim as set out in the certificate and accordingly dispose f the application.

In our opinion, if such construction is adopted, then the two Acts can be harmoniously considered. The power conferred on the Special Court under Section 3(4), (5) and 9A would not become redundant. If not so held, it would mean that the custodian would have to file his claim before the Executing Authority under the D.R.T. Act. Once by operation of law the property stands attached and Parliament has thought it fit to confer power on the custodian in dealing with that property in the manner direct ed by the Special Court, we will have to give effect to that intent more so after section 9A has been introduced which has conferred power on the Special Court as Civil Court to decide all issues relating to the

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property which has been attached.

9. Having so held, we hold that the prayer for seeking declaration for attachment of the properties is not maintainable. Once the property has been attached by the operation of law under the Special Courts Act, the D.R.T. Court would have no jurisdiction to grant a declaration that the properties of a notified person stand charged unless a charge had been created. At any rate, the certificate against such properties, cannot be executed by the Recovery Officer under D.R.T. Act. The financial Institution will have to move the Special court in respect of the attached property. "

15 It is an admitted position that vide Notification dated

5.10.2001, Mr. Ketan Parekh and Mr Navinchdnra Parekh have

been notified as notified parties and by virtue of said

Notification, movable and immovable assets of the debtors stand

attached. Mr. Ketan Parekh in his letter dated 29.3.2001

addressed to the Chairman and Managing Director of Bank of

India admitted that all the entities (in respect of which

certificates of recovery have been issued) were controlled by

him and he is acting as a decision maker and other family

members though act as signatory, were not in the know of the

things. It is thus an established fact that Ketan Parekh is in total

control of these Companies which had made payment to

Madhavpur Mercantile Cooperative Bank after passing of three

decrees in favour of respondent No.1 bank. It is only after

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issuance of directions by the Supreme court on 29.7.2005, the

payments are being made under the superintendence and

consent of Mr. Ketan Parekh, which further goes to prove that he

is having means to pay. The contention of Mr. Ketan Parekh that

borrowers of Madhavpura Mercantile Cooperative Bank are

making payment on his behalf is unacceptable. Such a huge

amount of Rs.238 crores is paid, only after issuance of order by

the Supreme Court on 29.7.2005 and only under an impending

threat of arrest. There is no substantial explanation given by the

petitioners in respect of payment made to Madhavapur

Mercantile Cooperative Bank and other creditors. A sum of Rs.1

crore per month is being paid to Mr. Ashok Mittal to avoid

proceedings of contempt and to save from the jail term, eminent

in those proceedings. A finding of fact has been recorded by the

Recovery Officer, confirmed by the DRT & DRAT to the effect

that, the petitioners and more particularly Mr. Ketan Parekh has

means to pay and is paying debts of Madhavpur Mercantile

Cooperative Bank and is also making payment to Mr. Ashok

Mittal, however, is avoiding to pay the debt of respondent bank.

It is also observed by the Recovery Officer, in the order, referring

to the Judgment of Securities Appellate Tribunal, Mumbai dated

14.7.2006 in case of Ketan Parekh v/s SEBI, "in view of

serious allegations leveled against the Appellants, we are of the

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view that, it would be proper to lift the corporate veil of K.P.

Entities and when we do that, we find, it is Ketan Parekh, who is

lurking behind the corporate curtain. It is, therefore, very clear

that, the payment even made by the associates of Ketan Parekh

to MMCB and other creditors (even for the sake of argument)

was made by Mr. Ketan Parekh only for all the purposes as per

doctrine of lifting of Corporate veil." The finding of fact

recorded by the Recovery Officer, DRT and DRAT need not be

interfered with, in exercise of extraordinary jurisdiction under

article 226 of the Constitution of India.

16 It is observed by the DRT in its order that the petitioners

do have some undisclosed hidden assets and source of income,

from which the amount is flowing to Madhavpur Mercantile

cooperative Bank and Mr. Ashok Mittal and it is evident that,

when a penal action is taken, then only the petitioners make

payment. We are of the considered view that, the impugned

orders passed by the Recovery Officer, Debts Recovery Tribunal

and Debts Recovery Appellate Tribunal do not call for any

interference, in exercise of extraordinary jurisdiction under

article 226 of the Constitution of India. The petition is devoid of

any substance and hence stands dismissed.

 17       Rule is discharged.





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 18       No costs.



              (A.S. GADKARI, J )           (R.M. BORDE, J)




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