Kotak Mahindra Banking Ltd. vs Industrial Development Bank Of ...
2007 Latest Caselaw 1069 Del

JUDGMENT

Manmohan Sarin, J.

1. Petitioner by this writ petition assails the impugned order dated 6-2-2007 passed by the Debt Recovery Appellate Tribunal whereby it stayed the proceedings pending before the Debt Recovery Tribunal, Delhi. The order passed by the Debt Recovery Appellate Tribunal is a short one and is reproduced for facility of reference as under:

Present : Mr. Virendra Gainda with Mr. O.P. Mathur for the appellant.

Ms. Deiksha Asija, counsel for the 1st respondent and Mr. Mukul Chandra, counsel for the 2nd respondent.

In the miscellaneous appeal, a ticklish issue is involved whether a bank which originally lent the money to the borrower can assign its debts to another agency which is to be examined by this Tribunal. The Bar Members are requested to assist on this aspect so as to enable the Tribunal to take an appropriate view.

Let this matter come up for final decision on 5-4-2007. Pending a decision in this appeal, there shall be stay of all further proceedings in OA No. 445/1998 on the file of DRT-I, Delhi.

2. Shorn of unnecessary details, respondent No. 1 (IDBI) had instituted proceedings by an OA for recovery against respondent No. 3, before the Debt Recovery Tribunal. These proceedings have been going on for the last 9 years but had been stayed by the impugned order. The O.A. before the Debt Recovery Tribunal had been filed on 22-12-1998 seeking to recover Rs. 6,19,93,815/- as on 30-11-1998 together with interest. Sometime in the month of March, 2006 M/s. IDBI assigned the debt to the petitioner. Petitioner thereupon moved for substitution before the Debt Recovery Tribunal. The application for substitution was allowed despite objection of the respondent vide order dated 12-12-2005.

3. The respondent, aggrieved by the order dated 12-12-2005, filed appeal wherein impugned order was passed.

4. Mr. Neeraj Kishan Kaul, learned senior Counsel for the petitioner, submits that assigning of the debt is legal, valid and in accordance with Section 35A of the Banking Regulation Act and the Reserve Bank of India Guidelines do permit assignment and transfer of non-performing assets to another banking institution by financial institution amongst others. He relies in this context on the decision of a Division Bench of this Court. reported in Haryana Steel and Alloys Ltd. v. IFCI Ltd. . In these circumstances, learned Counsel for the petitioner submits that there was no occasion for the Debt Recovery Appellate Tribunal to nurture any doubts with regard to the permissibility of such assignments and in any case even if this issue was sought to be examined by it, there was no occasion to stay the proceedings, which had been going on for the last over 8 years.

5. Mr. V. Gainda, on behalf of respondent No. 3 submits that assignment has been obtained in a deceitful and clandestine manner. The respondent had been in negotiation with IDBI and made proposals for one time settlement which were under consideration. Respondent had also offered Rs, 2.25 crores by way of settlement. Learned Counsel for the respondent also sought to place reliance on the record of nothings and minutes of IDBI, where the proposal made by the respondent was being evaluated and according to the respondent it was being processed for acceptance. He submits that this had happened around 27-3-2007. In these circumstances, the assignment of debt to the petitioner was not a bona fide one. It had been done on 31-3-2006 surreptitiously without knowledge of answering respondent and stood vitiated. He also submitted that the matter is pending before the Debt Recovery Appellate Tribunal, which is seized of the matter and the Debt Recovery Appellate Tribunal may be asked to dispose of the matter expeditiously within a time frame.

6. Learned Counsel for petitioner submits that the challenge to the assignment of debt apart from being legally unsustainable, was devoid of merit and was intended to delay and frustrate the pending proceedings before the Debt Recovery Tribunal. It was pointed out that respondent No. 3 itself had made an offer for settlement of Rs. 2.40 crores to the petitioner thereby recognizing the assignment of debt in favor of the petitioner.

7. During the course of arguments, we had put to learned Counsel for the parties that prima facie there does not appear to be any legal impediment or obstacle in the assignment of the debt by financial institution like IDBI. However, if the respondents wish to contest the O.A. filed by the petitioner before the Debt Recovery Tribunal on merits and/or to contend that petitioner was also bound by the settlement recommended for acceptance by the petitioners predecessor-in-interest i.e. IDBI or to urge any ground on merits in defense to the OA, these could be raised before the Debt Recovery Tribunal. Confronted with this situation after some deliberations, learned Counsel for the respondents accepts this position and says that the matter be disposed of and the Debt Recovery Tribunal be asked to examine afresh the defense of the respondents on merits including its contention that the petitioner were bound by the purported decision of its predecessor-in-interest i.e. IDBI to accept the proposal of the respondents. Learned Counsel for the petitioners has no objection to the same, subject to their right to contend that there has been no settlement. Besides petitioner's right to urge that respondent No. 3 itself had recognised the petitioner as an assignee when they offered to improve upon the proposal already made to IDBI.

8. In view of the foregoing, the impugned order of the Debt Recovery Appellate Tribunal is set aside. The appeal filed by the respondents before the Debt Recovery Appellate Tribunal stands disposed of with this order. Parties respondents will file their written statement before the said date wherein the respondents may take any objection on merits in defense of the O.A. as admissible at law.

9. The writ petition stands disposed of in the above terms.