Anand Bhardwaj And Ors. vs Oriental Bank Of Commerce And Ors.

Ranjit Singh, J

The Tribunal below has allowed the appeal filed by the Bank under Section 30 of the RDDBFI Act against the order dated 18.7.2006 passed by the Recovery Officer (R.O.) allowing the objectors to withdraw the money which they had submitted for one-time settlement, which had not come through. Aggrieved against the same, the appellants have filed the present appeal. This appeal filed in July 2012 has seen a number of adjournments for which both the parties are responsible. At one stage, the appeal had to be dismissed for non-prosecution on 30.12.2014 when this Tribunal found that the Counsel for the parties were seeking adjournments turn-wise though the case was ripe for arguments on various dates whereas the Counsel were not ready to make submissions. This was the position even despite imposing a cost of Rs. 10,000/- while granting adjournment to check the unnecessary prayer for adjournment.

On an application filed by the Counsel for the appellants, the appeal was restored on 27.4.2015, as the Counsel for the appellants was statedly in personal difficulty on 30.12.2014 on account of sickness of his mother. While issuing notice in the application seeking restoration of the appeal, the Counsel for the parties were forewarned to be ready to make submission in the main appeal as no request for adjournment was to be entertained The appeal has accordingly been heard today and is being disposed of on merit.

The Counsel for the appellants has pressed this appeal hard though during the course of hearing it has surfaced that the appellants are neither the borrowers nor the guarantors and even have no concern with the recovery proceedings where they were not even arrayed as parties. Can the appellants thus maintain the present appeal is a question which may have to be addressed as well.

The Counsel for the Bank has pressed this plea about the right of the appellants to maintain the present appeal. To decide this issue and other issues involved in the appeal, facts giving rise to this appeal are, therefore, being noticed in brief.

Recovery Certificate (R.C.) was issued for recovery of Rs. 1,97,38,968/- with interest and cost while allowing O.A. No. 34/2002. The property mortgaged with the Bank was put to auction which was held on 26.4.2005. The auction purchaser deposited the full amount. The CDs had filed various applications raising frivolous objections before the R.O. for withdrawal of auction proceedings. These were primarily aimed at blocking the confirmation of sale.

Prior to the confirmation of sale CD No. 2, Mr. Naresh Sharma, filed an application on 21.11.2005 giving a proposal for one-time settlement of the dues of the Bank. In this application, CD No. 2 had offered to make a payment of Rs. 30.50 lacs which was more than the amount of Rs. 30 lacs deposited by the auction purchaser Mr. B.M. Khemka. The CD No. 2 had also proposed to pay the amount in eight half-yearly instalments.

Strangely, however, CD No. 2 had attached only the photocopies of drafts for a sum of Rs. 30.50 lacs while seeking direction to the Bank to consider his proposal of one-time settlement. The prayer in the application was to keep the amount in no-lien interest bearing account of the applicant CD with the Bank on the condition that if the one-time settlement proposal being offered simultaneously was found acceptable by the Bank, then the Bank may be allowed to appropriate the said amount along with interest accrued thereon. The proposal of the CD further was that if the one-time settlement proposal was not found acceptable, the amount be refunded to him with interest.

Obviously, such a proposal would not have been acceptable to the Bank which had rejected this conditional proposal for settlement of the dues. The CD did not furnish the original drafts and even failed to disclose the source of this payment in the application filed on 21.11.2005. Since the deposit was proposed by the CD-2, it could invite adjustment of this amount to satisfy R.C. The R.O. thought it appropriate to investigate the source of funds from which the drafts were obtained and passed an order staying the release of payment pending investigation.

During the course of the proceedings, it was revealed that these drafts were issued by two Banks namely, the Development Credit Bank, Jhasra Road, Gurgaon (for a sum of Rs. 20.50 lacs) and Gurgaon Gramin Bank, Branch Office NIT, Faridabad (for Rs. 10 lacs). The drafts were purportedly issued in favour of Oriental Bank of Commerce on account of M/s. Saturn Project Ltd. Further inquiries showed that these drafts were purchased by four parties/persons, namely, Mr. Anand Bhardwaj (Rs. 5 lacs), Mr. Inder Singh (Rs. 5 lacs), Mr. Hardwari Lal (Rs. 10 lacs) another by Mr. Hardwari Lal (Rs. 0.5 lacs) and yet another draft of Rs. 10 lacs by M/s. Max Industries' proprietor Mr. Parveen Sharma, and corresponding amounts were debited in their accounts.

It was further revealed that two days prior to the issue of these drafts equivalent amounts had been credited in these accounts of above noted persons, and such credits were made from the account of the Citi Bank and was through cheques used in seriatim by one of the drawers from the account maintained with the Faridabad branch of the said Bank. The drawer of the cheques was found to be M/s. Manali Industries which was proprietorship concern of Smt. Renu Sharma, who is none else but wife of CD-2. From the statement of account obtained from Citi Bank, it was confirmed that the four cheques were issued from this account for the credit to four different persons named above, i.e., Mr. Anand Bhardwaj, M/s. Max Industries, Mr. Hardwari Lal and Mr. Inder Singh.

While the proceedings were in progress before the R.O., these four persons filed an application on 5.1.2006 stating that CD-2 had approached them for a loan amount of Rs. 30.50 lacs while assuring that he would hand them over the immovable property mortgaged with the Bank. They also disclosed that only photocopies of the drafts were given to CD-2 with the hope that the property would be released in his favour and that the original drafts were lying with them These persons claimed that these drafts did not belong to CD-2

These four persons filed yet another application on 25.5.2006 that these drafts were made after securing loan from M/s. Manali Industries, which had no connection with CDs, and accordingly prayed for release of the payment of drafts by vacating the stay order passed on 25.11.2005, as they were the valid purchasers of the instrument. M/s. Manali Industries was being run by the wife of CD-2 as already noticed

The Bank filed reply to this application pointing out that the drafts were made in the name of the Bank and no persons had any authority to get the said drafts cancelled as once it was handed over to the beneficiary, the same could not be withdrawn or cancelled. The Bank termed these objectors to be fictitious and benami persons and pleaded that the drafts were owned by the CDs over which the objectors could not make any claim. The Bank had pointed out that M/s. Manali Industries, a firm of CDs, was maintaining the account with Citi Bank and accordingly funds were provided to the objectors by the CDs themselves.

Besides filing reply to the application filed by the objectors, the Bank filed a separate application on 25.6.2006 and prayed for direction to the CDs to hand over the drafts to the Bank in view of the stand already taken before the R.O. The Bank also prayed for issuing direction to proprietor of M/s. Manali Industries and four objectors to appear in person for the purpose of examination and explaining the source of the funds of M/s. Manali Industries and to explain the purpose of giving this money to the four objectors. Prayer was made before the R.O. to look into the business transactions of M/s. Manali Industries which was stated to be an umbrella organization of CD-2. Even prayer was made before the R.O. to appoint a receiver to look into the affairs of M/s. Manali Industries and for issuing direction to the CDs to furnish details of one of their concern M/s. Dynamic Fire Products. Yet another application came to be filed by the Bank on 10.7.2006 for examining the business affairs of M/s. Manali Industries.

CD-2 filed reply to the applications filed by the Bank taking a stand that the drafts belonged to third-party objectors. As per CD-2, the objectors were not fictitious persons and the Bank had chosen to adopt mala fide tactics with ulterior motive to play fraud on the objectors. CD-2 further stated that the money was borrowed from the objectors and it was required to be returned to them. CD-2 also objected to each and every objection raised by the Bank besides contending that M/s. Dynamic Fire Products was a dead firm not belonging to him.

Smt. Renu Sharma, wife of CD-2, came up with an affidavit in reply to the application filed by the Bank. She claimed that purpose of filing application by the Bank was to harass her. Smt. Renu Sharma claimed that she being an educated lady was an income tax payer and has her own separate entity different from that of her husband.

On the basis of pleadings and the stand of different parties, the R.O. came to form a view that the CDs had not contributed towards the issue of drafts and purchase of the draft and so the objectors were entitled to receive payment of drafts amounts. The R.O. accordingly disallowed the prayer made by the Bank in its application for appropriation of the proceeds of the drafts towards satisfaction of the R.C. On a request made by the Counsel the R.O., however, allowed stay granted earlier to continue for 10 days from the date of service of the copy of the order to the Bank. Aggrieved against this order, the Bank had filed an appeal which has been allowed by the Tribunal below while setting aside the order passed by the R.O. The Tribunal below has further directed the R.O. to appropriate the proceeds of the drafts towards the satisfaction of the R.C. The present appeal is filed against the order so passed by the Tribunal below.

The facts as noticed above would clearly show that respondents 5 to 8 (appellants herein) have no concern with the recovery certificate or recovery proceedings. The application along with photocopies of the drafts was filed by CD-2, Mr. Naresh Kumar. He was statedly running M/s. Dynamic Fire Products after the borrower company M/s. Saturn Project Ltd. was closed. Though the Tribunal has not gone into the locus of the appellants who were not even arrayed as parties before the R.O., this issue cannot be ignored. One could understand if the appellants had come forward to deposit this amount or if any such disclosure was made in the application filed by CD-2 that the money was being paid by the objectors. The Counsel for the Bank is justified in raising the issue of locus on the part of the appellants to maintain the present appeal and the right of objectors to agitate the issues either before the R.O. or before the Tribunal below.

To an extent, the Bank is responsible for creating this confusion, as while filing appeal before the Tribunal below it had impleaded the appellants as respondents 5 to 8. More appropriately, the Bank was required to implead only those persons as party respondents who were parties to the proceedings before the R.O. Merely because the appellants came to file an application claiming that this amount of drafts belonged to them was not enough to make them necessary or proper parties in the appeal filed by the Bank before the Tribunal below. This is more so when the stand of the Bank before the R.O. as well as before the Tribunal below was that they are fictitious persons and this money was of the CDs, which had reached the said appellants through a circuitous route from the wife of CD-2. Since the appellants were impleaded as parties and have been heard in the appeal by the Tribunal below, it may not be now appropriate to dismiss this appeal filed by them only on the ground that they have no locus to maintain the said appeal. The Tribunal ought to have considered this aspect instead of going into the merits of the finding returned by the R.O. after holding enquiry in this regard. The inquiry, if any, could be with a purpose to find if this amount belonged to the CDs or not. In fact, there may not have been any need in this regard as well because the amount, if any, was belonging to CD-2 and he alone was entitled to make a claim over the amount. The application filed by the appellants before the R.O., claiming this amount, in fact, deserved to be dismissed simply on the ground that the said application by the appellants, who were strangers to the proceedings, was not maintainable. Nothing much, however, would now turn on this issue as the Tribunal below has set aside the order passed by the R.O. and has permitted the Bank to appropriate the amount towards the satisfaction of the R.C.

The grievance of the appellants who, indeed, are stranger to the recovery proceedings, is that this amount, which was offered in a no-lien account, could not have been allowed to be adjusted towards loan liability even if this amount was belonging to the borrowers. The Counsel would also plead that this amount had not come in the recovery proceedings in ordinary course of business but was proposed to be deposited with a purpose which was for one-time settlement. As per the Counsel, once the prayer for one-time settlement was rejected, this amount was required to be returned to the source from where it had come and could not have been allowed to be appropriated towards the satisfaction of the R.C.

I am not prepared to accept the submission advanced by the Counsel on these lines. Firstly, such a prayer can only be made by the borrower and not by any person like the appellants who were strangers to the recovery proceedings. If this amount belonged to the borrower, which is found to be so, then there cannot be any objection for adjustment of this amount towards the satisfaction of the R.C. Proceeding before the R.O. was for recovery of the R.C. amount. The borrower cannot claim that they have an amount but will not pay the same towards the satisfaction of R.C. The prayer made by the Counsel on the above lines, as noticed above, therefore, is without merit and deserves to be rejected.

The Counsel for the appellants would then submit that it is not established with certainty that this amount was of the CDs. He would also plead that the assets in the hands of the wife would be independent and cannot be clubbed with that of the husband. The Counsel has even brought the issue of Stridhan to support his submission. This was not even the plea raised before the Tribunal below. There, Smt. Renu Sharma, wife of CD-2, had claimed to be an independent entity having her own income. How she can now claim this amount to be her Stridhan which is even without any basis.

Otherwise also, I have examined the material available on record which has been considered and thoroughly examined by the Tribunal below to reach a conclusion that this amount belonged to the CDs. The finding by the Tribunal below is that Mr. Hardwari Lal had opened an account on 18.11.2005 on which date a cheque of Rs. 11 lacs was deposited. This cheque was issued from the account of Smt. Renu Sharma, wife of CD-2. On the next date, i.e. 19.11.2005, a DD was issued in the name of Oriental Bank of Commerce for a sum of Rs. 10 lacs. Another DD was issued for Rs. 50,000/- in favour of Oriental Bank of Commerce. Similar is the situation so far as the account of Mr. Inder Singh is concerned. A sum of Rs. 5 lacs was credited in his account on 17.11.2005 and he prepared a DD of this amount on 18.11.2005. In this manner only a cheque of Rs. 5 lacs was deposited in the account of Mr. Anand Bhardwaj on 17.11.2005 and DD in favour of Oriental Bank of Commerce for this amount was issued on 18.11.2005. M/s. Max Industries issued DD in favour of Oriental Bank of Commerce on 19.11.2005 when a cheque of Rs. 10 lacs was deposited in Citi Bank and credited in its favour.

In this manner, it is established that the wife of CD-2 had made the payments from the account of M/s. Manali Industries from which these drafts were got prepared. M/s. Manali Industries were formed on 26.11.2005 with the address 19/6 Mathura Road, Faridabad. The CDs were running M/s. Dynamic Fire Products from the same address. CDs had earlier filed an affidavit that they had no resources, The Tribunal thus found this affidavit to be false, as after closing M/s. Dynamic Fire Products, the CDs had started the firm M/s. Manali Industries in the name of the wife of CD-2,

The conceded position which would thus emerge is that M/s. Manali Industries is a proprietary concern of the wife of CD-2. The said firm is running from the same premises where the CDs were running M/s. Dynamic Fire Products after the close of M/s. Saturn Project Ltd. The account of the CD company was closed when the recovery proceedings were initiated. The two firms, therefore, can be termed as cover-up firms primarily to hoodwink the recovery by misleading the Tribunals. The finding by the Tribunal that CDs had used money received from the foreign remitters to buy that mortgaged property is well reasoned.

The Tribunal had also found that the CDs had played fraud with the Court and the R.O. who had ignored these vital facts and had even denied the prayer made by the Bank to summon the persons like Smt. Renu Sharma to furnish the details as noted in the application. The finding returned by the Tribunal below that this money belonged to the CDs thus is well supported by the material on record and would not call for any interference in this second appeal as this finding of fact was reached on the basis of sufficient evidence on record.

The Counsel for the appellants would then submit that the conclusions have been recorded by the Tribunal below without any material on record. The Counsel also mildly pleads for sending this case back to the R.O. to hold further inquiry in order to reach at some conclusive findings. Except for so stating, the Counsel has not been able to challenge the observations and material referred to and relied upon by the Tribunal below as well as by the R.O.

If the material as noticed in the impugned order is not sufficient, then what more would be needed to show that this was nothing but a fraud being played by the borrower. The Tribunal below as well as the R.O. could have simply ignored the pleas raised by the appellants, as they did not have any locus. The Tribunal below having noticed this plea being raised about the maintainability of the appeal has still examined the material available on record. It is a case where appellants were third parties and had made claim for refund of the amount which they never deposited. The application was by CDs for one-time settlement. The amount was deposited by the CDs. On what basis and in what circumstances the prayer by the appellants was entertained by the R.O. is apparently beyond comprehension. There is no provision which would permit a stranger to come forward and claim refund of an amount which is not deposited by him in any manner in the recovery proceedings. Permitting such an application by a stranger has led to this anomalous situation and if it is so permitted, it may seriously affect the purpose of this Act to ensure speedy recovery. The Tribunal below has rightly set aside the order passed by the R.O. and the impugned order does not call for any interference.

The submission by the Counsel that the Bank had not prayed for relief which has been allowed by the Tribunal can only be termed as a plea in frustration. From the manner in which the applications were filed by the Bank and in which regard the Bank had filed the appeal would leave no doubt that the Bank had made prayer for appropriating this amount towards the satisfaction of the R.C. on the plea that this amount was of the borrower. Thus, the direction issued by the Tribunal below cannot be faulted on this count. This is a case where the R.O. ought to have dismissed the application filed by the appellants without any inquiry on the ground that the amount had been deposited by the borrowers and hence belonged to them. Plea by a person to come forward to say that the amount which he deposited did not belong to him was a plea of convenience to avoid appropriation of the amount towards the R.C. There is thus no merit in this appeal which otherwise was not maintainable and, therefore, I have no hesitation in dismissing the same.

The appeal is accordingly dismissed.