Ayush Calcium Pvt. Ltd. And Ors. vs Punjab National Bank

Ranjit Singh, J

Though the SA No. 261 of 2008 filed by the appellants was disposed of on 25th May, 2009 yet they have succeeded in keeping their challenge revived by moving one application after another in the SA which was disposed of. The first question which the Tribunal below was required to address was the right of the appellants to maintain one application after another in the SA which was disposed of. No such question was asked but the Tribunal below kept on entertaining such application one after the other till the present order in passed on 23rd February, 2015. Thus, the appellants have been able to stall the recovery for a period of over five years after disposal of their S.A. It is high time that such actions are checked by the Tribunal below to expedite the recovery in case where intention apparently is to delay the proceedings some how or the other and thus stall speedy recovery.

The present Appeal is filed by the appellants against the order passed by the Tribunal below dismissing two IA No. 433 of 2014, IA No. 434 of 2014 and one MA No. 1 of 2011. Prayer in IA No. 434 of 2014, filed in a transferred SA earlier disposed of on 25th May, 2009, was to reimburse the appellant Company proportionate value of the machinery which had been destroyed/disposed of/stolen during the custody or physical possession of the same by the Bank. Prayer was also to direct the Bank to refund a sum of Rs. 10 lacs deposited by the intending purchaser of the hypothecated machinery which was also the prayer made by the intending purchaser in IA No. 433 of 2014.

How and why these applications came to be filed has a history which may need to be recapitulated here.

Respondent Punjab National Bank had sanctioned various credit facilities to the appellant Ayush Calcium Pvt. Ltd. The appellant had created an equitable mortgage in respect of the commercial property situated in village Peena Pargana Baghra, Tehsil and District Muzaffarnagar, U.P. Some other properties were also mortgaged with the Bank to secure this debt. The account of the Company was classified as NPA on 30th November, 2007. The Bank had accordingly issued notice under Section 13(2) of the SARFAESI Act on 13th December, 2007. This was followed by possession notice. Aggrieved against the measures taken by the Bank against the secured assets, the appellant Company filed SA No. 261 of 2008 before the Debts Recovery Tribunal-II at Delhi.

The Tribunal below had stayed the action of the Bank to take physical possession of the property on the condition that the appellant to deposit a sum of Rs. 15 lacs. The appellant failed to make this deposit. The Tribunal below still continued to entertain the application and directed the appellant Company to deposit Rs. 20 lacs. The direction was not complied with. The appellant Company moved an application with a prayer for extension of time to make this deposit of Rs. 20 lacs. Having sought time and without complying with the direction to deposit this amount, one of the Directors of the Company, Mr. Neeraj Bansal, represented before the Tribunal that the appellant had a suitable purchaser/investor for the hypothecated plant and machinery had been identified who was interested in purchasing the said property. On the basis of this submission, the SA was disposed of by the Tribunal below.

Perusal of the order dated 25th May, 2009 would show that the Tribunal below had examined Mr. Neeraj Bansal on 22nd April, 2009. He was directed to being a competent person of Jaimurthy Minerals and Chemicals Pvt. Ltd. as the Tribunal had come to know that this Company was interested to take over the factory premises of the appellant. Pursuant to the direction issued by the Tribunal, the appellant Company had submitted its balance sheet on 15th May, 2009. It was noticed that the appellant Company had been able to sell its product during the financial year 2007-2008 to the extent of Rs. 2,60,36,000/-. The Counsel for the Bank had pointed out before the Tribunal from the affidavit filed by the Chief Manager of the Bank that the appellants were not entitled to any concession due to willful disobedience of orders passed by the Tribunal from time-to-time and pointed out that the conditional order passed on 15th July, 2008 had not been complied with. Out of this amount of Rs. 2,60,36,000/-, only a sum of Rs. 27,54,031/- was deposited by the appellant Company with the Bank.

The facilities extended by the Bank had been accepted by the appellant Company. The Counsel for the Bank has also invited attention of the Tribunal where the appellant had accepted the debt liability to the extent of Rs. 3,92,31,521/- as on 31st March, 2009. Mr. Neeraj Bansal, Director of the Company conceded that he owed the above debt liability. The Tribunal has then noticed that as on the date of NPA the amount due was Rs. 3,22,76,561.25. The Tribunal therefore held that the NPA amount of Rs. 3,22,76,561.25 with 10% simple reducing balance based interest be imposed from 1st December, 2007 till liquidation of the above amount. The Tribunal also took note of the fact that the different amount than the NPA is settled or compromise purpose has been fixed as it has heard the Counsel appearing for Mr. Neeraj Bansal on that day.

The Tribunal has then gone on to question Mr. S. Baskar, the Branch Manager of the Delhi office of the intending purchaser Company to finally hold that he was not competent to give consent for anything. Mr. Neeraj Bansal then apprised the Tribunal about the offer for settlement made on behalf of the appellant Company to the Bank and that an amount of Rs. 10 lacs had been deposited with the Bank for the purpose of settlement. The amount was directed to be kept in the 'no lien account'. As disclosed, the competent person, Shri S.S. Maithani, one of the Directors of Jaimurthy Minerals and Chemicals Pvt. Ltd. could not come present on account of expiry of his mother-in-law. The Tribunal, thus, directed the appellant Company to bring before the authorized officer of the Bank in person qualified and person competent enough to run the company and to carry on the factory business in the manufacturing or processing of the calcium carbonate, who shall deposit with the Bank the above determined amount along with expenditure legally incurred and in a just manner by itself within a period of 30 days from the date of receipt of the order falling which the Bank was given liberty to introduce any person who was qualified in the above field to run the factory. If the appellant Company did not bring any person before the authorized officer within the stipulated period, the protection provided to the Company was to stand withdrawn.

The Tribunal had also noted that 21 electric motors hypothecated to the Bank were still in possession of the appellant Company and the appellant was directed to restore and handover immediately the possession of these 21 electric motors to the authorized officer of the Bank failing which the Bank was given liberty to initiate criminal proceedings against the appellant and its Director. On the request made by Mr. Neeraj Bansal, 30 days' time allowed initially was enhanced to 60 days and all the prohibitory orders including the appointment of the Receiver were to stand withdrawn after the extended period.

Once the SA was disposed of with the above direction, the appellants were expected to strictly comply with the same. But, instead, the appellants filed MA No. 255 of 2009 seeking extension of time for six months for compliance of this order. The Tribunal entertained this application. One Mr. Akil Baksh was brought before the Tribunal by the appellant Company who tendered an amount of Rs. 5 lacs through two demand drafts which were handed over to the Bank officer for acceptance. Mr. Akil Baksh expressed his intention to purchase the entire property i.e. factory, land, plant, machinery and building while agreeing to deposit the amount within a period of three months with a promise to deposit Rs. 5 lacs within 7 days from the date of the order i.e. 1st June, 2010. The Banks was directed to serve inventory to be prepared by the borrower at the time of handing over possession of the plant and machinery. The appellant Company and the other borrowers were to bring a person before the authorised officer of the Bank to deposit a sum of Rs. 70 lacs for other four properties by 30th October, 2010. On deposit of Rs. 70 lacs by the person or the borrowers the Bank was directed to release four original title deeds to the borrower or to the person so brought within 48 hours of deposit of this amount. On payment of full amount of Rs. 1.60 crores, the authorized officer of the Bank was to issue sale certificate to the person brought by the borrower. This application was disposed of on 1st June, 2010.

Mr. Akil Baksh wrote a letter to the Bank on 19th July, 2010 stating that the balance amount of Rs. 150 lacs was ready with him. He requested the Bank to arrange visit to the factory premises so as to verify everything as per the Receiver's report. Mr. Akil Baksh wrote yet another letter dated 28th October, 2010 to arrange visit expressing his readiness to pay the balance amount. On 30th July, 2010, the Bank wrote to Mr. Neeraj Bansal that as per the order of the Tribunal, Mr. Akil Baksh was to deposit Rs. 150 lacs by 31st August, 2010. Accordingly, the Bank stated that it was ready to give possession to Mr. Akil Baksh as soon as the amount was deposited and accordingly told Mr. Neeraj Bansal to advice Mr. Akil Baksh to make the deposit. Copy of this letter was addressed to Mr. Akil Baksh as well. On 5th August, 2010 the Bank even wrote to Mr. Akil Baksh requiring him to make the deposit of Rs. 1.50 crore as per the order.

Instead of making the deposit, another MA No. 179 of 2010 came to be filed by the appellant in the disposal of SA. The prayer in this application was to direct the Bank to have joint visit at the factory premises so that everything i.e. plant and machinery is verified as per the Receiver's report. Instead of raising locus of the appellant to file this application, the Tribunal issued direction to the appellant to bring Mr. Akil Baksh on the next date of hearing, who was directed to appear with a sum of Rs. 1.50 crore. The authorized officer of the Bank was also directed to appear with the list of hypothecated plaint and machinery and the application was adjoined to 23rd August, 2010. The Bank also wrote a letter to Mr. Akil Baksh on 17th August, 2010 expressing their readiness to handover possession as per the inventory dated 7th February, 2009 prepared by the Special Officer in the presence of the representative of the Company.

Both the Counsel for the parties agreed before the Tribunal below for inspection to be conducted by Mr. Akil Baksh over the plants and machineries in the presence and under the supervision of the Special Officer appointed earlier. The Special Officer was required to file report in this regard and the case was adjoined to 30th August, 2010.

The Special Officer then prepared list of inventories. The Manager of the Bank raised objection that electric motors and other items which were found missing were earlier, not found present. The Special Officer informed that he was making the inventories as on date the plant and machineries were available at the factory premises and asked the officer to make rest of the submissions before the Tribunal. The Special Officer found that some of the items were missing and the list was accordingly prepared. The details of the items found missing from the inventory prepared earlier are as under:

It is this inventory that has now been highlighted to rake up the issue which had earlier been brought to finality.

When the borrower had failed to comply with the order passed by the Tribunal, the Bank had published auction notice against which this SA No. 126 of 2011 was filed by the mortgagor. The Bank, in the meantime, filed OA No. 528 of 2011 for recovery of its dues. The borrower filed MA No. 01 of 2012 for staying the auction proposed to be held on 26th December, 2012. This MA is again filed in the SA No. 261 of 2008, which had been disposed of. The Tribunal below passed restraint order for proceeding against the land, building, plant and machinery of the appellant Company. The Company had filed a Transfer Petition before the Hon'ble Supreme Court which was dismissed and in this manner all the steps taken by the secured creditor to recover its dues were brought at naught and stalled by the borrower and the mortgagor by moving one application after another. The result thereof is before everyone to see.

It is in this background that now the present IA No. 433/2014 has been filed by Mr. Akil Baksh seeking refund of Rs. 10 lacs deposited by him on 1st June, 2010 with interest at the 18% p.a. The Director, Mr. Neeraj Bansal, has filed IA No. 434/2014 for reimbursing the applicant Company proportionate value of the machinery which has been destroyed or disposed of.

The Tribunal below has made reference to the stand of the Bank that the Special Officer had prepared fresh inventory of the plant and machinery showing many items as missing on the basis of the valuation report. The stand of the Bank was that these items were not available even at the time of giving possession. Reference is made to the order dated 5th February, 2009 passed by the Tribunal below which would reveal that one generator seen fixed with earth was discovered outside the generator shed which was hypothecated with the Bank. The Chief Manager of the Bank has also found missing the hypothecated generator machine from the second generator shed. It is on this basis that the Special Officer earlier appointed by the Tribunal below was directed to visit the factory premises within a period of 7 days.

The Bank had also pointed out that theft had taken place for which FIR No. 235 of 2009 was lodged with the Police. The Counsel for the Bank had also drawn attention of the Tribunal to the letter dated 18th February, 2009 written by the Director of the borrower Company to the effect that the factory was still under lock and key with the Company. The Tribunal below accordingly has found the person responsible for missing items is only management of the Company.

The Tribunal below has also made reference to the order dated 25th May, 2009 which shows that 21 electric motors hypothecated to the Bank were still in possession of the Company and the Company was directed to restore/handover immediately possession of these 21 electric motors to the authorized officer of the Bank failing which the Bank was given liberty to initiate criminal proceeding. How the Company could remove these 21 hypothecated electric motors defies explanation. The Tribunal below has then taken note of the fact that the borrower had not complied with the orders of the Tribunal till date. After having noticed all these facts, the Tribunal found these applications to be totally misconceived and accordingly rejected the same being devoid of merit.

The Counsel for the appellant has made reference to the orders and communications of which I have taken note. The only submission is that the responsibility for the missing items would be that of the Bank as it has taken possession of all the hypothecated goods. Reference is made to the inventory which was prepared. The report of the Special Officer is dated 7th February, 2009. After considering this report and the valuation report, the Tribunal has passed the order dated 25th May, 2009. In his order, which is passed after the report of the Special Officer, the Tribunal below had noticed that 21 electric motors hypothecated to the Bank were still in possession of the appellant Company and the appellant Company was directed to restore/handover immediately the possession over these 21 electric motors to the authorized officer of the Bank. Relevant part of the order reads as under:

"The twenty-one electrical motors hypothecated to the Bank are still in the possession of the petitioning Company, the petitioning Company is being directed to restore, handover immediately the possession over those twenty-one electric motors to the authorized officer of the Bank, failing which the Bank shall be at liberty to initiate the criminal proceeding against the petitioning Company and the directors of itself. If the petitioning Company has failed to bring the above qualified person within the above time limit to square up the Bank's dues, there shall be no hindrance at the Bank's independent action."

There is no evidence placed on record by the appellant that these 21 electric motors which were found to be in possession of the appellant Company were ever handed over to the authorized officer of the Bank. This is what has been noticed by the Tribunal below as well. While noticing these facts, the Counsel for the appellant was required to first ensure that these 21 electric motors are handed over to the authorized officer of the Bank before he is afforded opportunity of being heard in the present Appeal. Instead of comply with this direction, the appellant Company has chosen to file an affidavit to say that the allegation of removing the machinery after 5th February, 2009 as was alleged on behalf of the Bank and recorded on 25th May, 2009 does not arise. I find that the appellants are trying to become too smart. Till date, the appellants have never challenged or sought review of the order and observation made by the Tribunal below in regard to these 21 electric motors. It is not that they have been sitting tight or silent over the issue involved in this case. They have resorted to file one application after the other in disposed of SA which prima facie were not maintainable. They never chose to contest the observation and finding recorded by the Tribunal below about these 21 electric motors were in their possession. The contest on this aspect now by filing this affidavit is nothing but an attempt to mislead, misguide and thus a misdirected approach. The finding of the Tribunal below given on 25th May, 2009 is clear and categorical. By simply relying on some report given by the Special Officer, appellant cannot be allowed to escape the responsibility and pass on blame on the part of the Bank. The plea raised by the appellant cannot be accepted.

Even the appellants, who have not made any payment to discharge the huge liability after seeking various opportunities, are now making a claim from the Bank. How such an application in the SA has been entertained by the Tribunal appears to be beyond comprehension. The question of liability of any item, if gone missing, can arise only once the appellants have done their part to discharge their loan liability. Instead they are seeking refund of meagre amount of Rs. 10 lacs which the intending purchaser deposited and who had failed to make the remaining deposit. Prayer is to refund the amount with interest. In this clever manner, the appellants have been able to stall the recovery for all these years by introducing purchaser who never had any intention to make any deposit. The appellants have succeeded in misleading the forum of the Tribunal below for all this while. It is high time that they are now checked.

Missing part of the plant and machinery primarily relates to the electric motors and gearbox and the Tribunal has expressed surprise by observing as to how the appellant could succeed in removing 21 electric motors is still a mystery. The judicial order passed by the Tribunal below has to be respected. Since the appellants have not chosen to challenge the same till date though being full aware of the same, they cannot be heard now to contest this. I find that no blame can be with the Bank in this regard and the responsibility, if any is that of the appellant alone. Similarly, the prayer of the appellant Company or Mr. Akil Baksh for return of the amount after not complying with the requirement of making deposit is totally misconceived and misplaced. In fact, the appellant Company and the intending purchaser have been able to hoodwink the Tribunals below by making one approach after the other. The Tribunal below instead of checking this action on the part of the appellant somehow went on entertaining the application. The Counsel for the appellant has not been able to satisfy this Tribunal in any manner as to how such applications could be maintained in disposal of S A and recovery stalled. I find that there is no merit in the pleas raised by the appellant. The present applications filed in the SA, which was disposed of six years ago, are held not maintainable and ought to have been dismissed on this ground as well.

The Appeal is accordingly dismissed in limine.