Indian Bank vs M/S Rexima Exports Pvt. Ltd. & Ors
2015 Latest Caselaw 3945 Del

$~7
*      IN THE HIGH COURT OF DELHI AT NEW DELHI

%                                                  DECIDED ON: 18.05.2015


+                          W.P. (C) 3804/2015
                           C.M. Nos.6805, 6806/2015

       INDIAN BANK                                            ..... Petitioner
                           Through: Mr. Sudhir Nandrajog, Sr. Advocate
                           with Mr. Gautam Awasthi and Mr. Ayush
                           Choudhary, Advocates.



                           versus

       M/S REXIMA EXPORTS PVT. LTD. & ORS         ..... Respondents

Through: Ms. Ananya Bhattacharya, Advocate.

CORAM:

HON'BLE MR. JUSTICE S. RAVINDRA BHAT HON'BLE MR. JUSTICE R.K. GAUBA S.RAVINDRA BHAT, J. (OPEN COURT)

1. Heard the counsel for the parties.

2. The petitioner has preferred the present proceedings under Article 226 of the Constitution of India claiming to be aggrieved by the order of the Recovery Officer dated 27.03.2015, which was made in the course of the proceedings arising out of the Recovery of Debts due to Banks and Financial Institutions Act, 1993 (hereafter referred

W.P.(C)3804/2015 Page 1 to as "the Recovery Act").

3. The petitioner bank's contention is that since the property - F-23, Green Park (Main), New Delhi was proceeded against under Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereafter referred to as "SARFAESI ACT"), the Recovery Officer had no jurisdiction to issue the directions that it did in the impugned order.

4. The brief facts are that the Bank had afforded certain credit facilities including the irrevocable letter of credit issued at the behest of respondent/borrower dated 28.02.1990. Apparently, the borrower/guarantor had provided certain collateral to secure these advances and facilities. These include, inter alia, immovable properties and some fixed deposits. After prolonged and marathon proceedings, the Debt Recovery Tribunal ("DRT") made its final order on 28.03.2012 in the three applications initiated by the petitioner bank - OA 870-871/1996 and 895/1996. In the course of its final order, the DRT recorded, inter alia, in paragraph 59 that the Bank was bound to adjust the fixed deposit and interest accruing therefrom which too had not been credited at the stage of final recovery. The operative directions issued by the DRT were as follows: -

"61. Point No.8 OA 895/96 is allowed as hereunder: -

(1) The applicant shall be entitled to recover the sum of Rs.16,77,76,578/- with interest @ 10% p.a. from 6.11.1996 until realization with cost from the defendant 1 to 3 and they shall be jointly and severally liable.

W.P.(C)3804/2015 Page 2 (2) The certificate amount can be recovered by sale of the immovable property bearing No.F-23, Green park, New Delhi.

(3) The FDRs, with interest @ 13% p.a. shall be adjusted towards the principal amount due and the bank shall be entitled to recover only balance amount after such adjustment.

(4) The Recovery Certificate shall be issued on the above terms. (5) Defendant 2 and Defendant 3 shall appear before the Recovery Officer on 07.06.2012.

OA 871/96 The application is allowed as hereunder: -

1) The applicant shall be entitled to recover the sum of Rs.22,20,16,133/- with interest @ 10% p.a. from 06.11.1996 until realization with cost from the defendant 1 to 3 and they shall be jointly and severally liable.

2) The certificate amount can be recovered by sale of the immovable property bearing No.F-23, Green Park, New Delhi.

3) The FDRs, with interest @ 13% p.a. shall be adjusted towards the principal amount due and the bank shall be entitled to recover only balance amount after such adjustment.

4) The Recovery Certificate shall be issued on the above terms.

5) Defendant 2 and Defendant 3 shall appear before the Recovery Officer on 07.06.2012

OA 870/96 The application is allowed as hereunder: -

1) The applicant bank shall be entitled to recover the sum of Rs.16,13,14,444/- with interest @ 10% p.a. from 06.11.1996 until realization with cost from the defendant 1 to 3 and they shall be jointly and severally liable.

W.P.(C)3804/2015 Page 3

2) The certificate amount can be recovered by sale of the immovable property bearing No.F-23, Green park, New Delhi.

3) The FDRs, with interest @ 13% p.a. shall be adjusted towards the principal amount due and the bank shall be entitled to recover only balance amount after such adjustment.

4) The Recovery Certificate shall be issued on the above terms.

5) Defendant 2 and Defendant 3 shall appear before the Recovery Officer on 07.06.2012."

5. The Bank had, in the meanwhile, on 4.4.2006 initiated proceedings under the SARFAESI Act by issuing notice under Section 13 (2). The respondent/borrower had sought recourse to an appeal under Section 17 (1) of the SARFAESI Act. The matter had travelled to this Court on an earlier occasion in W.P.(C)6616/2010. As on date, no appeal under Section 17 (1) of the SARFAESI Act initiated or lodged by the respondent is pending before the DRT. The Bank sought to proceed against one of the secured assets, i.e., F-23, Green Park (Main), New Delhi under SARFAESI Act. At that stage, in the light of the final order of the DRT and the Recovery Act proceedings, the borrower/guarantor contended that such action was impermissible. It is in this context that the impugned order was made on 27.03.2015. The Bank - which had in the meanwhile proceeded to auction the property and realize the sale proceeds, was directed not to appropriate the sale proceeds during the pendency of the proceedings before the Recovery Officer. It is contended that the Recovery Officer had no jurisdiction once the proceedings under the SARFAESI Act were initiated, given that an appeal against those

W.P.(C)3804/2015 Page 4 proceedings had not been pressed or pursued further. It is submitted that even though the DRT's final order adjudicates the rights of the parties substantively with respect to all the liabilities of the borrower/guarantor, that is not with respect to the mortgaged property but it concerns itself with all liabilities arising out of the various credit facilities given and the entitlement of the Bank to realize all properties.

6. Counsel for the respondent/borrower, on the other hand, urged that the petitioner ought to have sought recourse to appeal proceedings and cannot, in the given circumstances of the case, in view of the liability determined at his behest, including liability vis-a-vis mortgaged of the secured asset in question, press the further proceedings under SARFAESI Act.

7. It is evident from the above discussion that during the pendency of the application under Section 19 of the Recovery Act, SARFAESI action was initiated. The notice under Section 13 (2) quantified the amounts due as Rs.183 Crores 70 lakhs & 46 thousand, Rs.133 Crores 16 lakhs & 25 thousand, and Rs.138 Crores 52 lakhs & 27 thousand. The bank has in support of its writ petition relied upon the advertisement issued which discloses the quantified amount (said to have been arrived at after the final orders of the DRT dated 28.03.2012). This indicates the total amount due on the said three accounts as Rs.46,61,96,127, Rs.32,63,87,849.38 and Rs.34,66,81,749.15.

8. The final order of the DRT was issued after the initiation of action under Section 13 (2). Whilst, the Bank may have been -

W.P.(C)3804/2015 Page 5 during the pendency of the proceedings under Section 17 of the Recovery Act, justified in proceeding to auction the properties on its understanding as to what the dues were as on that date and its "determination in terms of Section 13 (2)" - the position altered after 28.03.2012, in that, the DRT's final order made upon the Bank's application directed adjustment of the respondent's liability given that it had pledged certain fixed deposit amounts with the Bank. The adjustment directed was not merely with respect to the principal amounts but also with regard to the interest on which credits were not given by the Bank during the pendency of the proceedings. In these circumstances, the respondent/borrower, in our opinion, to a certain extent is justified in contending that the Recovery Officer has to independently decide the final quantified amount recoverable from the borrower in the light of the final decision of the DRT. As is evident from the impugned order, that has not been done. In the meanwhile, the Bank has proceeded to auction the property in view of its independent powers under the SARFAESI Act. That cannot be held to be per se illegal. At the same time, the adjustment indicated in the advertisement dated 12.02.2015 cannot be considered final since the determination of liability has to proceed in the light of the adjudicated liabilities of the respondent by the DRT.

9. In these circumstances, the Recovery Officer is directed to decide and pronounce upon the final liabilities of the respondent having regard to the final order of the DRT dated 28.03.2012, taking note of and considering the amounts, if any, deposited during the pendency of the credits due to the respondent in the light of the

W.P.(C)3804/2015 Page 6 direction of the DRT. This decision shall be made by the Recovery Officer at his earliest convenience, and in any event, within eight weeks from today. The Bank's rights to proceed and confirm the bid are left undisturbed. However, the final apportionment of the liabilities shall be dependent upon and subject to the decision of the Recovery Officer.

10. The writ petition stands disposed off.

Order dasti.

S. RAVINDRA BHAT (JUDGE)

R.K. GAUBA (JUDGE) MAY 18, 2015 /vikas/

W.P.(C)3804/2015 Page 7