Bombay High Court
Galvanotek Industries Private ... vs Coventry Spring And Engineering ... on 25 January, 2018
Bench: Vasanti A. Naik
WP 4683/17 1 Judgment
IN THE HIGH COURT OF JUDICATURE AT BOMBAY,
NAGPUR BENCH, NAGPUR.
WRIT PETITION No. 4683/2017
Galvanotek Industries Private Limited,
a company incorporated under the
provisions of the Companies Act, 1956
and having its registered office at 16,
Ganesh Chandra Avenue, 7th Floor,
Kolkata - 700 072. PETITIONER
.....VERSUS.....
1. Coventry Spring and Engineering
Company Limited,
a company incorporated under the
provisions of the Companies Act, 1956
and having its registered office at 23,
Ganesh Chandra Avenue, Kolkata,
manufacturing units at J.L. No.25,
Mouza: Alampur, Police Station Sankrail,
District Howrah, West Bengal (Howrah Unit)
and Plot No.D-2, MIDC Industrial Area,
Village Wadi, Nagpur and Bombay Office
at 108, Marol Co-operative Industrial Estate,
Sir M.V. Road, J.B. Nagar Post, Mumbai -
400 059 through it Authorised Officer
Shri Prakashmal Bafna.
2. M/s Coventry Coil-O-Matic (Haryana)
Limited, a company incorporated under
the provisions of the Companies Act, 1956
and having its registered office at Village
Salawas, Post Sangwari, District Rewari-
123 401, Haryana, and having its Mumbai
Office at 107, Marol Co-operative Industrial
Estate, Sir M.V. Road, J.B. Nagar Post,
Mumbai - 400 059 through it Authorised
Officer Shri Prakashmal Bafna.
3. Nishant Bafna,
107, Marol Co-operative Industrial Estate,
Sir M.V. Road, Andheri East,
Mumbai - 400 059.
4. Mr.Ashokmal Bafna of 57,
Raja Basanta Roy Road, Kolkata-700 029.
5. Narendramal Bafna of 1476,
Govande Layout, Snehnagar, Nagpur
- 440 015.
6. Shri Rajendra Bafna of Village Salawas,
Post - Sangwari, District - Rewari -
123 401, Haryana.
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WP 4683/17 2 Judgment
7. M/s Assets Reconstruction Company
of India Limited (ARCIL),
a company incorporated under the
provisions of the Companies Act, 1956
and having its registered office at
17th Floor, Express Towers,
Nariman Point, Mumbai - 400 021. RESPONDENTS
Shri M.G. Bhangde, Senior Counsel with Shri S.N. Tapadia, counsel for the petitioner.
Shri Anand Jaiswal, Senior Counsel with Shri R.V. Malviya, counsel for the respondent
no.1.
Shri Umesh Shetty with Shri C.B. Dharmadhikari, counsel for the respondent nos.2 to 6.
Shri S.N. Kumar, counsel for the respondent no.7.
CORAM :SMT.VASANTI A NAIK AND
A.D. UPADHYE, JJ.
DATE : 25 TH JANUARY, 2018.
ORAL JUDGMENT (PER : SMT. VASANTI A NAIK, J.)
RULE. Rule made returnable forthwith. The petition is heard
finally at the stage of admission with the consent of the learned counsel
for the parties.
2. By this writ petition, the petitioner has challenged the order
of the Debts Recovery Appellate Tribunal, Mumbai, dated 20.06.2017
allowing an application filed by the respondent no.1 for waiver of pre-
deposit for filing the appeal under Section 18 of the Securitisation and
Reconstruction of Financial Assets and Enforcement of Security Interest
Act, 2002 (hereinafter referred to as 'the Securitisation Act' for the sake of
brevity) and directing the respondent no.1 to deposit 25% of notice
amount, i.e. Rs.1.75 Crores within four weeks.
WP 4683/17 3 Judgment
3. The respondent no.1 had secured a loan from the State Bank
of India and after the financial assets were taken over by the respondent
no.7-ARCIL from the State Bank of India, a notice under Section 13 of the
Securitisation Act was served on the respondent nos.1 to 6 on
26.07.2006. On 25.08.2007 and 29.08.2007, the possession of the
secured assets at the Nagpur unit and Alampur unit was taken by ARCIL.
An application was filed by the respondent no.1-Coventry Spring and
Engineering Company Limited under Section 17 of the Act on 08.10.2007
challenging the measures. It is the case of the respondent that on
23.04.2007 and 24.04.2007, the secured assets were sold by the
respondent no.7-ARCIL to the petitioner by a treaty. It is the case of the
respondents that on 18.01.2008, by a deed of assignment, the financial
assets were transferred by the respondent no.7-ARCIL in favour of BMW
Industry. On 03.06.2011, the Debts Recovery Tribunal dismissed the
application filed by the respondent no.1-Coventry under Section 17 of the
Act. An appeal was filed by the respondent no.1-Coventry against the
said order on 24.06.2011. On 04.07.2011, an order of waiver was passed
and on 11.04.2012, by withdrawing the said order, an order granting full
waiver of the pre-deposit was made. The petitioner challenged the order
granting waiver, dated 11.04.2012 in Writ Petition No.5005 of 2012. On
01.11.2012, while admitting the said writ petition, this Court permitted
the DRAT to proceed with the appeal on merits after making it clear that
WP 4683/17 4 Judgment
the outcome of the proceedings of the appellate tribunal would be subject
to the result of the petition. On 07.08.2013, since the petitioner had not
removed certain objections, a conditional order that the writ petition
would stand dismissed automatically without further reference to Court,
if appropriate steps are not taken within two weeks, was passed. Since
the compliance was not made within two weeks, the writ petition stood
dismissed in default on 21.08.2013. After the writ petition was dismissed
in default and before it was restored on 28.02.2014, the appeal filed by
the respondent no.1 was allowed by the DRAT on 13.01.2014. The
judgment of DRAT allowing the appeal of the respondent no.1 was
challenged by the petitioner in Writ Petition No.1006 of 2014. The
respondent no.7-ARCIL had also filed Writ Petition No.3574 of 2014
against the judgment of the DRAT. On 09.03.2015, the writ petition
filed by Galvanotek bearing Writ Petition No.5005 of 2012 was allowed
and the order granting complete waiver dated 11.04.2012 was set aside.
The matter was remanded to the DRAT to reconsider the application filed
by the respondent no.1-Coventry for grant of waiver. On 31.03.2015, the
respondent no.1 filed a special leave petition before the Hon'ble Supreme
Court challenging the judgment dated 09.03.2015 in Writ Petition
No.5005 of 2012 but the special leave petition was dismissed on
24.03.2015. On 04.10.2015, a review application was filed before this
Court seeking a review of the judgment dated 09.03.2015 in Writ Petition
WP 4683/17 5 Judgment
No.5005 of 2012 on the ground that the fact that the appeal filed by the
respondent no.1 was allowed by the DRAT and the effect thereof on the
order granting waiver and the dismissal of the writ petition in default was
not considered. The review application was, however, disposed of by the
order dated 04.10.2016 after observing that the contentions raised in the
application were hypothetical. However, the contentions raised on behalf
of the respondent no.1-Coventry were kept open for consideration if a
cause of action arises in future. The order disposing of the review
application was carried by the respondent no.1-Coventry in a special
leave petition to the Hon'ble Supreme Court. The special leave petition
was however dismissed after recording a statement made by the learned
Senior Counsel for the respondent no.1-Coventry that the respondent
no.1 would make a submission before the DRAT in view of the order
passed in the main appeal by the DRAT and the other issues which are
pending before the High Court in Writ Petition No.1006 of 2014. The
said order dated 27.02.2017 was modified by substituting the earlier
statement of the Senior Counsel by the statement that the respondent
no.1 would make a submission before the DRAT in view of the order
passed by it in main appeal no.135 of 2011 and the other issues that are
pending before the High Court in Writ Petition No.1006 of 2014. After
the said order was passed, by the order dated 20.06.2017, the DRAT re-
decided the application filed by the respondent no.1-Coventry for seeking
WP 4683/17 6 Judgment
a waiver of the statutory deposit and granted partial waiver by directing
the respondent no.1-Coventry to deposit 25% of notice amount, i.e.
Rs.1.75 Crores within four weeks. The said order is challenged by the
petitioner in the instant petition.
4. Shri Bhangde, the learned Senior Counsel for the petitioner,
submitted that the impugned order is liable to be set aside as no reasons
whatsoever are recorded by the appellate tribunal while partly allowing
the application for waiver of pre-deposit. A reference is made to the
provisions of the third proviso to Section 18(1) of the Act to submit that it
would be obligatory for the appellate tribunal to record reasons in writing
for granting the waiver. It is submitted that since the provisions of
Section 18 clearly provide for recording of the reasons in writing, waiver
could not have been granted without recording reasons. It is submitted
that the appellate tribunal was not only required to record the reasons in
view of the provisions of the third proviso to Section 18 of the Act but
also in view of the directions issued by this Court to the appellate tribunal
to pass an appropriate reasoned order on the application for waiver of the
deposit. It is submitted that a duty was cast on the tribunal by the
provisions of Section 18 of the Act and also by the directions in the
judgment dated 09.03.2015 in Writ Petition No.5005 of 2012 to record
reasons. It is submitted that in the circumstances of the case, the
impugned order is unsustainable.
WP 4683/17 7 Judgment
5. Shri Jaiswal, the learned Senior Counsel for the respondent
no.1, has supported the order. It is submitted that it appears from the
impugned order that the entire material on record and the contentions of
all the parties were considered while directing the respondent no.1-
Coventry to deposit 25% of the notice amount. In the alternative, it was
submitted that on the date of filing of the appeal before the DRAT by the
respondent no.1-Coventry, there was no debt due either to the bank or to
the respondent no.7-ARCIL. It is submitted that on a reading of the
definition clause and the third proviso to Section 18, it could be gathered
that what is required to be deposited before the appellate tribunal by a
party filing an appeal is 50% of the amount of the debt due from him. It
is submitted the Securitisation Act would come into play only if the
secured creditor is the one falling within the definition of the said term.
It is submitted that in the instant case, the secured assets are transferred
from a financial institution to a non-financial institution, viz. BMW
Industry and the provisions of the Act would not apply after the said
assignment. It is submitted that there would be no debt due from the
respondent no.1-Coventry either to the bank or to the respondent no.7-
ARCIL as the secured assets and the debt was assigned to BMW Industry
much before the appeal was filed by the respondent no.1-Coventry before
the DRAT. It is submitted that there was an assignment of the debt on
18.01.2008 to a non-financial institution, viz. BMW Industry and the
WP 4683/17 8 Judgment
appeal was filed by the respondent no.1-Coventry before the tribunal on
24.06.2011. It is stated that considering this aspect of the matter, the
writ petition is liable to be dismissed. It is submitted that the said
contentions, as are made on behalf of the respondent no.1-Coventry were
kept open in view of the order passed by this Court in the review
application and the order of the Hon'ble Supreme Court in the special
leave petition challenging the order dismissing the review application
dated 04.10.2015. It is submitted that in the aforsaid set of facts, the writ
petition is liable to be dismissed.
6. Shri Shetty, the learned counsel for the respondent nos.2 to 6,
has also supported the order. It is submitted that the petitioner would
not have a locus standi to file the appeal. It is stated that the facts in
regard to the assignment of the debt to the non-financial institution were
brought to the notice of the DRAT by the respondent nos.2 to 6 by filing
an affidavit and the respondent no.7-ARCIL had not filed a counter
affidavit in denial. It is submitted that in view of the assignment of the
debt to a non-financial institution, the provisions of pre-deposit would not
apply. It is submitted that in view of the assignment to the BMW
Industry, it was not necessary for the respondents to make the pre-
deposit. It is submitted that since the appeal filed by the respondent no.1
was allowed by the DRAT, the present writ petition is liable to be
dismissed.
WP 4683/17 9 Judgment
7. Shri Kumar, the learned counsel for the respondent no.7, has
supported the case of the petitioner and canvassed that the impugned
order is liable to be set aside as it is sans reasons.
8. To consider the submissions made on behalf of the parties, it
would be necessary to refer to the impugned order. The impugned order
is reproduced here for ready reference:-
"Heard both sides.
This application is filed seeking waiver of statutory
deposit.
From the submissions of both sides that original
appeal is already allowed and matter is pending before the Hon'ble
High Court where all the parties are agitating their respective
rights. This Tribunal at the time of entertaining appeal granted
total waiver which was set aside by the Hon'ble High Court of
Judicature at Bombay, Nagpur Bench at Nagpur on 09.03.2015
and remitted back waiver to this Tribunal to decide the same as
per law. High Court order was challenged in the Supreme Court
and Hon'ble Supreme Court dismissed Special Leave Petition on
24.08.2016.
Now at this stage section 18 application has to be
decided, therefore, I deem it appropriate not to go into merits and
demerits of contentions raised on behalf of all parties and only to
consider the amount to be deposited by appellants as required
under section 18 of SARFAESI Act.
Advocate for appellants submitted that as the sale
conducted by the respondent is held as illegal by this Tribunal in
WP 4683/17 10 Judgment
Appeal No.135/2011 and as the property is not under the
enjoyment of appellants minimum amount may be fixed for
compliance of section 18 of Act.
Advocate for appellant further submitted that as on
today there is no debt in view of dismissal of the O.A. which was
dismissed for default as no steps are taken till today for
restoration.
On the other hand Mr.Nagori on behalf of respondent
no.6 represented that no grounds are made out to reduce 50%
statutory deposit therefore, appellants have to deposit 50%. He
submitted if for any reason order passed in the appeal is set aside
and appeal is restored respondent no.6 cannot again request this
Tribunal to enhance the statutory deposit, therefore, 50% has to
be deposited.
Advocate for respondent no.1 submitted that amount
as on date of filing of waiver application has to be taken by
calculating interest till that date for considering pre-deposit
amount.
Advocate for appellants submitted that respondent
no.1 has already assigned debt and therefore respondent no.1 has
no right to say anything and cannot have any locus standi in the
matter.
Considering material on record and contention of all
parties without prejudice to the respective rights of the parties, I
deem it appropriate to direct the appellants to deposit 25% of
notice amount i.e. Rs.1.75 Crores, within four weeks.
Appellants shall deposit above referred amount on or
before 18.07.2017 with Registrar of this Appellate Tribunal,
failing which application stands rejected.
WP 4683/17 11 Judgment
As and when the said amount is deposited it shall be
invested in term deposit in the name of Registrar, DRAT, Mumbai
with any nationalized bank, initially for a period of thirteen
months and thereafter it will be renewed periodically.
Stand over to 19.07.2017 for compliance."
It would be necessary to note at this stage that though the fact in regard
to the allowing of the main appeal filed by the respondent no.1-Coventry
under Section 18 of the Act was brought to the notice of this Court in the
review application and to the notice of the Hon'ble Supreme Court in the
special leave petition challenging the order disposing of the review
application, the review application and the special leave petition was
disposed of without giving any weightage to the judgment passed in
favour of the respondent no.1 in the main appeal, at that stage. This
would clearly show that the DRAT was duty bound to decide the
application filed by the respondent no.1 seeking a waiver of the statutory
deposit on merits after recording reasons. We find that this Court had,
while disposing of the review application and the Hon'ble Supreme Court
had, while disposing of the special leave petition kept the contentions
raised on behalf of the respondent nos.1 to 6 open. Therefore, the
submissions that are sought to be made on behalf of the respondent nos.1
to 6 in this Court cannot be for the first time considered and adjudicated
upon in this writ petition as the DRAT has not considered the same while
WP 4683/17 12 Judgment
partly allowing the application seeking the waiver of statutory deposit
though a reference to one of them is made in the order dated 20.06.2017.
We are therefore not inclined to consider the submissions made on behalf
of the respondent nos.1 to 6 in this writ petition, specially when this
Court had not dealt with the same while disposing of the review
application filed by the respondent no.1 and the Hon'ble Supreme Court
had not thought it fit to decide the same before the special leave petition
was disposed of. If at all the respondent nos.1 to 6 were permitted to
raise the contentions that were sought to be raised in the review
application before this Court and before the Hon'ble Supreme Court in the
special leave petition, the respondent nos.1 to 6 were free to agitate them
before the DRAT. We do not find anything in the impugned order to
show that it was canvassed on behalf of the respondent no.1 before the
appellate tribunal that since no 'debt' was due from the respondent no.1
on the date of filing of the appeal, there was no question of seeking a
waiver of the pre-deposit. It is apparent from the impugned order that it
was not the case of the respondent nos.1 to 6 before the appellate
tribunal that they were not liable to make any deposit at all. A contention
was, however, raised on behalf of the respondent no.1 that since the
respondent no.7-ARCIL had already assigned the debt, it would have no
right to say anything in the matter. Be that as it may, we find from the
impugned order that though the appellate tribunal has recorded the
WP 4683/17 13 Judgment
submissions made on behalf of the respondent nos.1 to 6 for seeking the
waiver of the pre-deposit, there is no consideration or discussion of the
said submissions. It is observed by the appellate tribunal that
"considering the material on record and the contentions of all the parties,
without prejudice to the respective rights of the parties, I deem it
appropriate to direct the appellant to deposit 25% of notice amount
within four weeks". It is time and again held by this Court and the
Hon'ble Supreme Court that where an authority is bound to record
reasons for an order, it would be necessary for the said authority to give
at least some reasons while passing the order. We find that the appellate
tribunal has not recorded a single reason for allowing the application for
waiver of the pre-deposit. The observation that the material on record
and the contentions of all parties were considered, would not be a reason
for allowing the application for waiver of the pre-deposit. Since the third
proviso to Section 18(1) of the Act enjoins a duty on the appellate
tribunal to record reasons in writing while granting an application for
waiver of the pre-deposit it would be the duty of the appellate tribunal to
do so. In the instant case, apart from the duty cast on the appellate
tribunal under the provisions of the third proviso to Section 18(1) of the
Act, a duty was further enjoined on the appellate tribunal to pass an
appropriate reasoned order. While quashing the earlier order of the
appellate tribunal granting full waiver, this Court had, while allowing
WP 4683/17 14 Judgment
Writ Petition No.5005 of 2012, observed that the order passed by the
appellate tribunal was not in consonance with the provisions of Section
18 of the Act. Since the impugned order is sans reasons and since it was
necessary for the appellate tribunal to record reasons in writing for
granting an application for waiver of the pre-deposit, the impugned
order is liable to be set aside.
9. Hence, for the reasons aforesaid, the writ petition is partly
allowed. The impugned order of the appellate tribunal is quashed and set
aside. The matter is remanded to the appellate tribunal for deciding the
application filed by the respondent no.1-Coventry for waiver of the pre-
deposit in accordance with law. The appellate tribunal is directed to
decide the application within six weeks from the date of appearance of
the parties before the appellate tribunal. The parties undertake to appear
before the appellate tribunal on 12.02.2018 so that issuance of notice to
the parties could be dispensed with.
Rule is made absolute in the aforesaid terms with no order as
to costs.
JUDGE JUDGE
APTE
