A.R.C.I. Ltd. vs Rakesh Garg

Ranjit Singh, J

In this Appeal, Asset Reconstruction Company (India) Ltd. (ARCIL) has impugned the order passed by the Tribunal permitting the respondent to make payment within 60 days filing which giving the appellant permission to proceed against the property in accordance with law. The Tribunal below has held that respondent borrower would have a right as per Section 13(8) of the SARFAESI Act to redeem the property in question and he has to be afforded a fair opportunity to do so in the interest of justice. The appellant being aggrieved against this order has filed this Appeal which is delayed by a day.

Notice on the application was issued. There is no serious objection coming from the respondent for granting the prayer for condoning the delay of one day in filing the Appeal. For the reasons stated in the application, single day delay in filing the Appeal is condoned and the application is accordingly disposed of.

While permitting the respondent to redeem this property, the Tribunal below has taken note of a settlement which was arrived at between ARCIL and the respondent on 22nd March, 2010. It is noticed that ARCIL had accepted the proposal of the applicant for settling the liability on payment of Rs. 88 lacs. This amount was to be paid in the time-schedule provided in the settlement and complete payment was to be cleared by 31st December, 2010 in a phased manner. As per the Tribunal, no default clause was mentioned in the terms of settlement.

As the record would show, the respondent herein failed to make the payment in the stipulated period though he had subsequently approached the appellant to settle the matter one way or other and even deposited a sum of Rs. 90 lacs wish the appellant during the pendency of this S.A., which was accepted by the appellant without prejudice to its rights. The Tribunal, therefore, apparently has revived the earlier compromise reached between the parties and to balance the equities, has directed the respondent to compensate the appellant by paying interest for the defaulted period by allowing interest @ 12% p.a. simple from the date of default in-making the payment as per settlement till the date of realization.

Notice in this Appeal was issued. When the respondent appeared before this Tribunal on 7th November, 2014 the Counsel pointed out that the respondent had not only paid the settled amount, but had even paid the interest, for the delayed period as was directed by the Tribunal. The plea accordingly was that nothing would therefore survive in the Appeal.

The Counsel for the appellant, however, had pointed out that the compromise reached between the parties in the year 2010 had failed as the respondent had not made the payment as per the schedule laid down in the compromise and thus the Tribunal below was not legally or otherwise justified in reviving the said compromise and permitting the respondent to redeem the property on payment of interest for the period for which this comprise amount was not paid. Taking note of these submissions, the Counsel for the appellant was given time to have instructions if the appellant could still settle the issue instead of pursuing the Appeal.

Today, the Counsel for the appellant states that if the respondent is ready to pay interest from the date of NPA, then the issue can be settled. As per the appellant, this will add to the liability to the tune of Rs. 16 lacs on the respondent. The amicable settlement therefore is not a possibility. Accordingly, the Counsel for the parties have been heard in the Appeal.

The main grievance of the appellant is that earlier the Tribunal below had disposed off the S.A. on 8th February, 2011, directing the respondent to pay a sum of Rs. 89,44,446.30 within a period of 60 days. Fifteen months' time was given to make the payment in 15 monthly instalments commencing from second week of April 2011. The order was passed by marking presence of Mr. Vivek Singh as a Counsel for the respondents this order, however, subsequently was recalled on 10th June, 2011 when Mr. Vivek Singh advocate moved an application seeking deletion of his name as he was not engaged as a Counsel for the respondent and his presence had been marked on behalf of the respondent in Appeal while disposing off the S.A. It was stated before the Tribunal that Mr. Vivek Singh was never engaged as a Counsel by the respondent (petitioner). The name of Mr. Vivek Singh being the Counsel of the respondent-petitioner was deleted and the order having been passed on a date which was not fixed was after recalled.

The parties were given time to consider the proposal and see if the issue could be settled. The borrower had expressed his desire to settle the matter on more than one occasion. When the issue could not be settled, the applicant then filed an application for recall of the order passed n 8th February, 2011. In this scenario, the borrower made a request for compromise while expressing his readiness to pay interest for the intervening period.

It may need a notice here that as per the earlier compromise, the borrower was required to pay a sum of Rs. 88 lacs only and this amount was agreed to be paid in the following manner:

Rs. 5 lacs by March 2010.

20% of the settlement amount by the end of April, 2010.

75% of the settlement amount by 31st December, 2010.

The borrower, however, could not make the payment as per the above schedule which the Tribunal below has now revived by allowing payment with 12% interest for the period which has intervened from the date of settlement to the date of payment.

The borrower in this case had availed Cash Credit limit of Rs. 53 lacs from Oriental Bank of Commerce in the year 2000. This was later enhanced up to Rs. 70 lacs besides some other facilities. Due to receipt of huge inflated electricity bill to the tune of Rs. 67 lacs approx. for which the borrower suffered heavy losses, he could not maintain the financial discipline. The Bank had accordingly issued notice under Section 13(2) of the SARFAESI Act on 17th August, 2006 demanding a sum of Rs. 89,44,446.30. Later, the Bank assigned this debt to appellant ARCIL when the borrower had approached the appellant for compromise leading to the settlement as noticed above.

It is when the Tribunal had taken up S.A. after recall of its earlier order that the borrower had deposited a sum of Rs. 90 lacs as per the direction of the Tribunal Despite this and status quo order, ARCIL has uploaded on internet a notice on 29th July, 2013 for the sale of property for which even notice for contempt was issued to the officials of the appellant. The contempt proceedings, however, were dropped by accepting unqualified apology.

The Tribunal below thereafter had passed the impugned order, leading to the disposal of the S.A. The Tribunal, after relying on certain observations made in the case of Central Bank of India v. Ravindra, I (2002) BC 150 (SC) = VII (2001) SLT 400 = IV (2001) CLT 127 (SC) and in the case of State Bank of India v. Vijay Kumar, Appeal (Civil) No. 1573 of 2007, decided on 26th March, 2007, has passed the impugned order.

As per the respondent, it has also paid the interest which is to the tune of Rs. 30 lacs and accordingly the Counsel would submit that the order passed by the Tribunal has balanced the equity in a fair manner. Although the Counsel for the appellant continues to have grievance which is even against the order whereby the Tribunal had recalled the earlier order passed on 8th February, 2011. The appellant has challenged that order and during the pendency of that Appeal the present impugned order was passed. The said Appeal filed earlier by the appellant was rendered in fructuous in view of the final order passed and liberty was given to the appellant to challenge the order on the grounds raised in the earlier Appeal as well.

To challenge the order of recall, the Counsel for the appellant submits that the respondent had filed such an application after long delay despite knowing the fact that this order had been passed in the presence of a Counsel who had not been engaged. To answer the objection, the Counsel of the respondent would submit that the respondent had in the meantime approached the appellant for settlement and when the appellant did not agree for settlement, the application for recall of the order dated 8th February, 2011 was filed. The Counsel has also drawn distinction between the recall and review to submit that for moving an application for recall, no limitation is provided and limitation, if any, is only for filing a review application. As per the Counsel, no application for review of the order was filed but prayer was only for recall of the order as it was passed even on a date when the case was not listed and was so passed by recording the presence of a Counsel who had not been engaged by the respondent.

The Tribunal below, in my view, was fully justified in recalling the order which was passed on the date not fixed in the case and in the presence of the Counsel who was not engaged. Parties in case have to be given proper opportunity of being heard and any order passed without hearing the parties or the Counsel representing the parties would be an order passed in violation of principles of natural justice which the Recovery Tribunals are required to follow while conducting proceedings. The order passed therefore, was unsustainable and was rightly recalled. The objection raised by the appellant in this regard is misplaced and misconceived and cannot be accepted.

Once the order in the S.A. was recalled, the Tribunal below apparently would be justified in deciding the same in accordance with law. The Tribunal below, in my view, has balanced the equity in a fair manner. Agreed that the compromise failed because of the conduct of the borrower, but for that he is paying the penalty of interest. If the borrower had made the payment as per the schedule provided in the compromise, he could have settled the issue on payment of Rs. 88 lacs. He has now been made to my a sum of a Rs. 90 lacs and thereafter interest thereon which is to the tune of Rs. 30 lacs. The grievance of the appellant only is to ask for some more amount and that too is not very substantial for which there is apparently not much justification.

In view of the fact that the Tribunal has balanced the equities well, I am not inclined to interfere in the impugned order and therefore would dismiss this Appeal.