Bank Of Baroda vs Saras Cabs Pvt. Ltd. And Ors.

S.N.H. Zaidi, J

This application has been filed by respondent No. 2 for directing the appellant Bank to return the title and other property documents given to it for creating the mortgage and also to issue the 'No Dues' Certificate. The appellant has filed reply to that application, opposing the same. It has also filed a synopsis of its written submissions.

I have heard Mr. Sanjiv Kakra on behalf of the respondent/applicant and Mr. K.K. Sharma, learned Sr. Advocate, on behalf of the appellant/non-applicant Bank and perused the record.

The relevant facts qua this application, in brief, are that two O.As. filed by the Bank against M/s. Saras Cabs Pvt. Ltd. and Others and M/s. Abhinav Enterprises and Others and three S.As. filed by M/s. Canary Travels Pvt. Ltd., M/s. Saras Cabs Pvt. Ltd. and M/s. Northeast Trade and Investment Pvt. Ltd. against the Bank were disposed of by DRT-III, Delhi by a common order/judgment dated 17.9.2008/ 5.11.2008 against which five appeals ( Nos. 267/2009, 362/2009, 273/2010, 429/ 2010 and 430/2010) have been filed before this Tribunal. Besides that, proceedings of the Recovery Certificate (RC No. 6/2010) are also pending before the Recovery Officer (RO) for the recovery of the RC amount.

Mr. Kakra has pointed out that during the pendency of the aforesaid appeals, one time settlement (OTS) proposal in Rs. 355 lacs, made by respondent No. 2 on behalf of M/s. Saras Cabs Pvt. Ltd. and M/s. Abhinav Enterprises vide letter dated 9.11.2012 (Annexure-A) and tendering an amount of Rs. 85 lacs along with it, was sanctioned/accepted by the Bank vide its letter dated 8.3.2013 (Annexure-B) inter alia with the following conditions:

XXX XXX XXX

Rs. 355 lacs (Rupees three crores fifty-five lacs only) now being offered in full and final settlement of the remaining dues of the Bank (as of today) shall be paid as under--

(i) Rs. 85/- lacs tendered along with the proposal and kept in no lien account shall be appropriated in the account on conveying the sanction.

(ii) Rs. 270/- lacs, would be deposited in 2/3 instalments within a period of three months from now.

to 5. xxx xxx xxx

This OTS will not have any bearing what so ever on the ongoing criminal cases/proceedings pending in the Court against the borrowers and that such compromise settlement will relate only to the recovery proceedings for dues outstanding (Saras Cabs P. Ltd., Rs. 1,21,15,306/- and Abhinav Enterprises, Rs. 87,00,124/- = Total Rs. 2,08,15,430/-) at Asset Recovery Management Branch, New Delhi.

The Borrower firm/Company/promoters and guarantors shall also withdraw all legal (Securitization applications)/other proceedings/counter claims filed, if any, at various forums (known/not known to the Bank) against the Bank or any of its officials and shall co-operate in quashing/ withdrawing CC No. 3676/1 before the MM, Saket, New Delhi.

In case of any default in repayment of OTS dues as per agreed payment terms and in the event of non-compliance of other stipulated terms and conditions, Bank reserves the right to frustrate the OTS and continue recovery actions under SARFAESI Act and also at DRT, and reserves the right to recover the contractual dues along with the legal and other expenses, incurred and to be incurred in future by the Bank.

Bank to file consent memo in DRT along with the company, with default clause in terms of the compromise (for consent decree).

After the receipt of full amount as per the terms of compromise sanction, Bank will issue 'No Dues' certificate, release securities charged to the Bank as well as discharge personal/corporate guarantees and file satisfaction of Bank's charge with respective ROC, etc.

He has further pointed out that on receipt of the OTS sanction letter, respondent No. 2 sent a letter dated 15.3.2013 (Annexure-C) stating that the compromise would be subject to certain conditions and the appellant Bank in reply thereof has stated in its reply dated 26.3.2013 (Annexure-D) that the issues stated therein have already been covered in Bank's OTS sanction letter and clarified that upon payment of the Bank's entire dues the original title documents deposited with the Bank at the time of creation of the equitable mortgage would be returned to the mortgagor. He has also pointed out that pursuant to the OTS, the respondent/ applicant deposited with the Bank the entire settlement amount as per the agreed payment schedule and requested the Bank, vide letter dated 26.6.2013 (Annexure-E), for the issue of 'No Dues' certificate as well as for the release of the original property papers, etc. deposited with the Bank and though the Bank in its reply dated 27.6.2013 has admitted the receipt of the OTS amount but has also stated that it was stipulated in the terms and conditions of the OTS that all cases (barring the CBI case) and more particularly CC 3676/1 pending before M.M. Saket, New Delhi would be withdrawn by the both sides which has not been done.

The contention of Mr. Kakra is that despite the acceptance of the OTS and receiving the entire settlement amount the Bank is not releasing the title documents and the instant application has been filed only for directing the Bank to release those documents as the applicant has paid the settlement amount after taking the loan. He has stated at the Bar that the respondent/applicant is ready to cooperate in quashing/ withdrawing CC 3676/1 from the Court of M.M., Saket, New Delhi. It is also contended by him that despite the specific agreement that after the receipt of the settlement amount the title papers would be released, the Bank is neither releasing the documents nor is issuing the 'No Dues' certificate.

The appellant Bank in its reply has disputed the maintainability of the present application on the ground that it does not fall within the purview of the present appeals. Mr. Sharma, the learned Senior Advocate, has contended on behalf of the appellant that unless the RC, which is pending before the RO is either satisfied or withdrawn by the Tribunal below under Section 26(2) of the RDDBFI Act, the question of the release of title documents to the applicant does not arise. He has also contended that condition No. 7 of the OTS has contemplated that the borrower company would withdraw all legal proceedings filed at various forums against the Bank or any of its officials and would also cooperate with the Bank in quashing/withdrawing CC No. 3676/1 pending before M.M. Saket, New Delhi. He has pointed out that all the interactions/correspondence with the Bank in respect of the OTS were made by Ms. Sanchana Gupta, the daughter of respondent No. 2, on behalf of the borrower company, who had sent various letters/mails qua the same and had signed the documents on behalf of the respondent companies as its authorized signatory. It has also been pointed out by him that Ms. Gupta is also one of the Directors of M/s. Canary Travels Pvt. Ltd. and a signatory to the criminal complaint filed against the Bank officers on behalf the said company before the M.M. Patiala House, wherein the police had filed the closure report after due investigation, but she has filed objections against the closure report and the matter is pending as CC No. 3676/1 before M.M. Saket, New Delhi. Mr. Sharma has also submitted that since she had filed the objections against the closure report and the OTS was arrived at on account of her efforts, therefore, it was expected that she would cooperate on behalf of the respondents in quashing/withdrawing of the said criminal proceedings but since no co-operation has been shown by the respondent in respect thereof and condition No. 7 of the OTS remains unfulfilled, therefore, the Bank, as per its condition No. 8, which gives the Bank right to frustrate the OTS and to continue with the recovery actions under the SARFAESI Act in the event of non-compliance of any of its terms and conditions, was considering to revoke the OTS and pursue the proceedings for the recovery of its RC amount in full.

It has been stated by the appellant in its written submissions that the Bank has already revoked the OTS and since the OTS is no more in existence, therefore, this application has become infructuous. The appellant has also stated that this Tribunal is to examine whether it has jurisdiction to decide the validity of the said revocation without proper pleadings in the framework of the present appeal as there is no provision in the RDDBFI Act to enable this Tribunal to entertain/consider the present application and its jurisdiction is restricted only to confirming/modifying or setting aside the order impugned, as per Section 20(4) of the said Act.

I have given my anxious considerations to the submissions of the parties' Counsel and perused the record. Clause 7 of the terms and conditions of the OTS, as reproduced above, shows that the borrower company and its promoters/ Directors are required to extend cooperation to the Bank in quashing/withdrawing the criminal case pending before M.M., Saket, New Delhi. It is not in dispute that Ms. Sanchana Gupta, the daughter of respondent No. 2, had made the efforts and interacted/exchanged correspondence with the Bank as an authorised signatory of the respondent companies for arriving at the OTS and she is also one of the Directors of M/s. Canary Travels Pvt. Ltd. on whose behalf a criminal complaint under Section 156(3), Cr.P.C. was filed by her before the Magistrate. In view of the above circumstances, the contention of Mr. Sharma appears to have force that as she was acting on behalf of the respondent companies and making all out efforts to settle the matter and signing the correspondence letters on its behalf and the OTS had arrived at with the Bank due to her efforts with one of the terms that the borrower company and its promoter/Directors would extend its cooperation in the quashing/withdrawing of the criminal case pending before M.M., Saket, the appellant Bank was in legitimate expectation that in compliance of that term she would come forward and would withdraw the objections filed by her against the closure report of the police by extending the cooperation on behalf of the respondent companies.

It is, however, noteworthy that in Para 4 of the reply to the application, the appellant has stated that it was actively considering the revocation of the OTS as the borrower company and its promoters/Directors had not deliberately complied with condition No. 7 regarding withdrawal of the criminal case and by the letter dated 30.7.2013 the Deputy General Manager of the Bank had directed the Assistant General Manager(AGM) that a simple letter/notice of revocation be issued advising the parties to withdraw the criminal case pending before the MM. immediately within 7-10 days, failing which the Bank would be at liberty to presume that the party is not interested in OTS and the OTS would stand automatically revoked in terms of Clause 8 thereof, but the AGM without issuing any letter or notice of revocation to the borrower company or waiting for 7-10 days for the compliance of the condition, as directed, on the very next date, i.e. on 31.7.2013, when the present application was to be taken up by this Tribunal for hearing, issued a letter to the respondent company intimating about the revocation of the OTS. The said action of the AGM being contrary to the directions of his senior officer as well as against an appropriate conduct cannot be approved, as the appellant should have waited for the outcome of the present application before proceeding to take any decision for revoking the OTS. I am also of the view that this Tribunal has jurisdiction to see whether or not the ,OTS has been validly revoked as this issue is directly related with the appeals pending before this Tribunal and considering the aforesaid circumstances I have no hesitation to say the OTS has not been validly revoked.

I am, however, of the view that this submission of the appellant has force that since under Section 26(2) of the RDDBFI Act the DRT has power to withdraw the RC and the DRAT, Chennai has rightly observed in T. Padmavathy v. Western Exports India Pvt. Ltd. and Anr. I (2006) BC 206 (DRAT), that the DRTs are empowered to recall the RC on the ground that the matter has been settled between the creditor Bank and the borrower/guarantor and since the R.O. is still seized with the RC, therefore, the respondent company should have moved the DRT concerned under the aforesaid provision for the withdrawal of the RC on the ground of settlement of the matter and payment of the settlement amount to the C.H. Bank pursuant to the OTS. The title deeds of the property deposited with the appellant Bank may be released after the withdrawal of the RC.

In view of above, the respondent/applicant is directed to move the Tribunal below for the withdrawal of the RC under Section 26(2) of the Act and if such an application is filed, the Tribunal below is directed to take independent decision thereon without being influenced by any observation/opinion expressed in this order and to make endeavour to dispose of the same expeditiously after affording an opportunity of hearing to the parties and in any case not later than two months from the date of filing of such application. While disposing of the application the Tribunal below shall consider whether there has been any default on the part of the borrower company in complying with any term/condition of the OTS and until such disposal the OTS shall not be deemed to have been revoked. With the above directions, the application stands disposed of. List the appeals on 22.10.2013 for final arguments.

Copy of this order be furnished to the parties as per law and be also sent to the DRT concerned forthwith.