Continental Construction Ltd. And Ors vs State Bank Of India And Ors

P.K. Bhasin, J

I.A. No. 378/2017 and I.A. No. 396/2017:

These two miscellaneous applications have been filed by appellant/CD No. 1 and appellant/CD No. 4 for stay of execution of R.C. No. 239/2015 issued by DRT-II, Delhi on 25.5.2015 in O.A. No. 38 of 1998 whereby four defendants originally impleaded by the respondent Bank in its O.A. filed under Section 19 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (now called The Recovery of Debts and Bankruptcy Act, 1993), out of whom one Shri C.L. Verma had died during the pendency of the O.A. and his LRs were brought on record, were held liable to pay to the respondent Bank a sum of Rs. 89,21,25,119/- with interest thereon @ '15% p.a. on half yearly rest from 5.2.1998 onwards until recovery with cost of Rs. 2,00,000/- from D-1 to D-4 jointly and/or severally'. The recoverable amount from the four appellants/CDs as on date according to the Certificate Holder Bank is over Rs. 1100 crores for the recovery of which amount the Recovery Officer is now threatening to order the detention of the CDs in prison and which threat has necessitated filing of these two stay applications. Some of the immovable properties of the appellant/applicant No. 1 Company, which was the principal borrower, stand attached also and now are to be auctioned.

These applications have been filed on the principle of Order 41 Rule 5 of the Code of Civil Procedure, 1908 read with Rule 22 of The Debts Recovery Appellate Tribunal (Procedure) Rules, 1994. Though not a money decree as is understood in ordinary civil law but the Recovery Certificate issued by a DRT is as good as a money decree which can be executed almost in the same way as a simple money decree is executed by any Civil Court. The Recovery Officer attached to DRTs executes the Recovery Certificates in accordance with the provisions of Section 29 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (now called The Recovery of Debts and Bankruptcy Act, 1993) read with the provisions of Schedule 2 to the Income Tax Act.

Appearing for one of the applicants/CDs Mr. Rajeev Nayyar, learned Senior Advocate, had submitted, and which submissions were adopted by the learned Counsel for the other applicant/CD also, that even though the Recovery Officer now is proceeding to recover over 1000 crores of rupees from the Certificate Debtors but in fact that amount is only on account of interest calculated at an unconscionable rate and as far as the principal amount adjudged by the DRT to be recoverable from the CDs stands paid almost in full when the appeal before this Tribunal was to be entertained for hearing and, therefore, now the execution of the Recovery Certificate deserves to be stayed. Learned Senior Counsel also submitted that the appellant No. 1 Company has during the pendency of the appeal voluntarily surrendered two floors of a huge Commercial property in Nehru Place, New Delhi known as 'Continental House' built on plots No. 28 and 29 and the Receiver has also taken possession of some land in Faridabad and that should be a sufficient security for the recovery of the decretal amount to a great extent if at all the appeal of the appellants/CDs against the final order of the DRT fails though the appellants have a very strong case for its reversal by this Appellate Tribunal. Mr. Nayyar while making these submissions very fairly had also submitted he was conscious of the fact that a huge amount of public money is being sought to be recovered from the CDs of this case and also that the Hon'ble Supreme Court has been saying in its judgments that normally execution of money decrees should not be stayed by Appellate Court but the astronomical figure of recoverable amount will be established to be only an imaginary figure having no legs to stand on once the hearing in the appeal, which is going on, concludes.

Mr. S.L. Gupta, learned Counsel for the respondent/CH Bank on the other hand seriously opposed the stay of execution proceedings primarily for the reason that the Bank is fighting this legal battle from the year 1998 to recover its money payable by the CDs and which amount is now over 1000 crores and the amount which the CDs are now claiming to have paid is negligible amount. He also submitted that even in normal cases of recoveries of money stay of execution of money decrees passed in normal commercial transaction between two private parties is not granted as per the decisions of the Apex Court and therefore no stay should be granted in this case where huge amount of 'public amount' is to be recovered by the respondent Bank and the Apex Court has been taking very tough view in such like recovery cases that recoveries of public monies should not be stayed in 'public interest'. It was also submitted that even though the appellant No. 1/CD has surrendered physical possession of two floors of its 'Continental Tower' in Nehru Place but it has not given its consent for putting it to auction and in any case even, the two floors are sold only a negligible amount will be recovered as against the recoverable dues of over 1100 crores.

I am in full agreement with the submissions of the learned Counsel for the CH Bank that execution of the Recovery Certificate issued by the Tribunal below should not be granted.

Hon'ble Supreme Court in one of its decisions I (2009) SLT 499 : 1 (2009) CLT 236 (SC), rendered on 18th December, 2008 in Civil Appeal No. 7410-7411 of 2008 (Arising out of SLP (C) No. 18095-18096 of 2008), Ms. Malwa Strips Pvt. Ltd. v. M/s. Jyoti Ltd. had while considering the scope of Civil Court's power to stay execution of money decrees observed as under:

"The Parliament, by reason of Section 87 of Act 104 of 1976 inserted Sub-rule (3) in Rule 1 of Order 41 of the Code, which is to be in the following effect:

"(3) Where the appeal is against a decree for payment of money, the appellant shall, within such time as the Appellate Court may allow, deposit, the amount disputed in the appeal or furnish such security in respect thereof as the Court may think fit," 6. An explanation was also added to Sub-rule (1) of Rule 5 of Order XLI. In terms of Sub-rule (1) of Rule 5 of Order XLI, an appeal shall not operate as a stay of proceedings. It is for the Appellate Court who may, for sufficient cause, order stay of execution of such decree. The explanation appended to the said sub-rule reads as under:

"Explanation--An order by the Appellate Court for the stay of execution of the decree shall be effective from the date of the communication of such order to the Court of first instance, but an affidavit sworn by the appellant, based on his personal knowledge, stating that an order for the stay of execution of the decree has been made by the Appellate Court shall, pending the receipt from the Appellate Court of the order for the stay of execution or any order to the contrary, be acted upon by the Court of first instance."

In terms of Sub-rule (5) of Rule 5 of Order 41, the Court shall not make an order staying the execution of the decree notwithstanding anything contained in the foregoing sub-rules, where the appellant fails to make the deposit or furnish the security specified in Sub-rule (3) of Rule 1.

We will proceed on the assumption that although the word 'shall' has been used in Order 41 Rule 1(3) of the Code, the same is not mandatory in character, and, thus, may be read as directory.

In Rajasthan State Electricity Board & Anr. v. Ram Deo & Ors., AIR 1999 Rajasthan 264, after noticing some of the aforementioned decisions as also the legislative history of the said provision, a learned Single Judge of the Rajasthan High Court held as under:

"19. After close scrutiny of the aforesaid observations, I am of the opinion that in view of the provisions of Sub-Rule (5) of Rule 5 of Order 41, CPC it cannot be held that appeal against the decree for payment of money is not maintainable, if filed without making compliance of the provisions contained in Sub-rule (3) of Rule 1 of Order 41, CPC and it is the duty of the Registry to see that on application under Order 41 Rule 5, CPC seeking stay of money decree the appellant has to incorporate a note in regard to his readiness and willingness to comply with the directions under Sub-rule (3) of Rule 1 of Order 41, CPC. If the appeal is preferred against the decree for payment of money without any stay application under Order 41 Rule 5, CPC then in that event, it is the duty of the appellant to incorporate a note in the memo of appeal in respect of his readiness and willingness to comply with the directions issued by the Court under Sub-rule (3) of Rule 1 of Order 41, CPC."

We may, however, notice that although the provisions of Sub-rule (3) of Rule 1 of Order 41 have been held not to be mandatory, this Court in Kayamuddin Shamsuddin Khan v. State Bank of India, (1998) 8 SCC 676, opined that non-compliance of a direction to deposit the decretal amount or part of it or furnish security therefor would result in the dismissal of the stay application but not the entire appeal, stating:

"8. This would mean that non-compliance with the direction given regarding deposit under Sub-rule (3) of Rule 1 of Order 41 would result in the Court refusing to stay the execution of the decree. In other words, the application for stay of the execution of the decree could be dismissed for such non-compliance but the Court could not give a direction for the dismissal of the appeal itself for such noncompliance."

To the same effect is the decision of this Court in Sihor Nagar Palika Bureau v. Bhabhlubhai Virabhai & Co., (2005) 4 SCC 1, wherein it was held:

"6. Order 41 Rule 1(3) of the CPC provides that in an appeal against a decree for payment of amount the appellant shall, within the time permitted by the Appellate Court, deposit the amount disputed in the appeal or furnish such security in respect thereof as the Court may think fit. Under Order 41 Rule 5(5) a deposit or security, as above said, is a condition precedent for an order by the Appellate Court staying the execution of the decree. A bare reading of the two provisions referred to hereinabove, shows a discretion having been conferred on the Appellate Court to direct either deposit of the amount disputed in the appeal or to permit such security in respect thereof being furnished as the Appellate Court may think fit. Needless to say that the discretion is to be exercised judicially and not arbitrarily depending on the facts and circumstances of a given case. Ordinarily, execution of a money decree is not stayed inasmuch as satisfaction of money decree does not amount to irreparable injury and in the event of the appeal being allowed, the remedy of restitution is always available to the successful party. Still the power is there, of course, a discretionary power and is meant to be exercised in appropriate cases."

To the same effect is the decision of this Court in B.P. Agarwal & Anr. v. Dhanalakshmi Bank Ltd. & Ors., (2008) 3 SCC 397. The High Court in this case failed to notice the provisions of Sub-rule (3) of Rule 1 of Order 41.

The Appellate Court, indisputably, has the discretion to direct-deposit of such amount, as it may think fit, although the decretal amount has not been deposited in its entirety by the judgment debtor at the time of filing of the appeal. But while granting stay of the execution of the decree, it must take into consideration the facts and circumstances of the case before it. It is not to act arbitrarily either way. If a stay is granted, sufficient cause must be shown, which means that the materials on record were required to be perused and reasons are to be assigned. Such reasons should be cogent and adequate.

Even if the said provision is not mandatory, the purpose for which such a provision has been inserted should be taken into consideration. An exceptional case has to be made out for stay of execution of a money decree. The Parliamentary intent should have been given effect to. The High Court has not said that any exceptional case has been made out. It did not arrive at the conclusion that it would cause undue hardship to the respondent if the ordinary rule to direct payment of the decretal amount or a part of it and/or directly through the judgment debtor to secure the payment of the decretal amount is granted. A strong case should be made out for passing an order of stay of execution of the decree in its entirety."

(Emphasis laid by me)

Thus, even in cases of normal commercial transactions between private parties resulting in passing of simple money decrees by Civil Courts the Apex Court has been of the view that execution of money decrees should by stayed by Appellate Courts only in exceptional cases since recovery of decretal amount will not cause any irreparable injury to the judgment debtors.

This matter centres around recovery of over thousand crores of 'public money'. Hon'ble Supreme Court in the case of United Bank of India v. Satyawati Tandon, AIR 2010 SC 3413 : III (2010) BC 495 (SC) : VI (2010) SLT 52 had observed about the tendency of Courts in granting stays against recoveries of public monies in the following words:

"18...............It must be remembered that stay of an action initiated by the State and/or its agencies/instrumentalities for recovery of taxes, cess, fees, etc. seriously impedes execution of projects of public importance and disables them from discharging their constitutional and legal obligations towards the citizens. In cases relating to recovery of the dues of Banks, financial institutions and secured creditors, stay grafted by the High Court would have serious adverse impact on the financial health of such bodies/institutions, which ultimately prove detrimental to the economy of the nation. Therefore, the High Court should be extremely careful and circumspect in exercising its discretion to grant stay in such matters ..............."

(Emphasis laid by me)

It is not that the Apex Court had expressed its concern over the stalling of recoveries of public money by judicial orders only in Satyawati Tandon's case (supra). Way back in the year 1984 also same views were expressed in a judgment AIR 1985 SC 330 : 1984 (SLT Soft) 384 : 1985 SCR (2) 190, Assistant Collector of Central Excise Chandan Nagar, West Bengal v. Dunlop India Ltd. & Ors. Those views are re-produced below:

"It is indeed a great pity-and, we wish we did not have to say it but we are afraid; we will be signally failing in our duty if we do not do so some Courts, of late, appear to have developed an unwarranted tendency to grant interim orders--interim orders with a great potential for public mischief--for the mere asking. We feel greatly disturbed. We find it more distressing that such interim orders, often ex parte and non-speaking, are made even by the High Courts while entertaining writ petitions under Article 226 of the Constitution........In several other cases........this Court was forced to point out how wrong it was to make interim orders so soon as an application was but presented, when a second thought (or a second's thought) would expose the impairment of the public interest.......

In Siliguri Municipality v. Amalendu Das (supra) A.P. Sen and M.P. Thakkar, JJ. had to deal with an interlocutory order passed by the Calcutta High Court restraining the Siliguri Municipality from recovering a graduated consolidate rate on the annual value of buildings in terms of the amended provisions of the Bengal Municipal Act. We reiterate the following observations made therein: "We are constrained to make the observations which follows as we do feel dismayed at the tendency on the part of some of the High Courts to grant interlocutory orders for the mere asking. Normally, the High Court should not, as a rule, in proceedings under Article 226 of the Constitution grant any stay of recovery of tax save under very exceptional circumstances. The grant to stay in such matters, should be an exception and not a rule.

...........The Court has to show awareness of the fact that in a case like the present a municipality cannot function or meet its financial obligations if its source of revenue is blocked by an interim order restraining the municipality from recovering the taxes........The grant of an interlocutory order of this nature would paralyze the administration and dislocate the entire working of the municipality............We can also take judicial notice of the fact that the vast majority of the petitions under Article 226 of the Constitution are filed solely for the purpose of obtaining interim orders and there after prolong the proceedings by one device or the other. The practice certainly needs to be strongly discouraged.............Where a plentitude of power is given under a statute, designed to meet a dire situation, it is no answer to say that the very nature of the power and the consequences which may ensue is itself a sufficient justification for the grant of a stay of that order, unless, of course, there are sufficient circumstances to justify a strong prima facie inference that the order was made in abuse of the power conferred by the statute. A statutory order such as the one under Clause 8-B purports to be made in the public interest and unless there are even stronger grounds of public interest an ex parte interim order will not be justified.........To grant interim relief straightaway and leave it to the respondents to move the Court to vacate the interim order may jeopardise the public interest. It is notorious how if an interim order is once made by a Court, parties employ every device and tactic to ward off the final hearing of the application. It is, therefore, necessary for the Courts to be circumspect in the matter of granting interim relief, more particularly so where the interim relief is directed against orders or actions of public officials acting in discharge of their public duty and in exercise of statutory powers...........We repeat and deprecate the practice of granting interim order which practically give the principal relief sought. In the petition for no better reason than that a prima facie case has been made out, without being concerned about the balance of convenience, the public interest and a host of other relevant considerations..........

.........All this is not to say that interim orders may never be made against public authorities. There are, of course, cases which demand that interim orders should be made in the interests of justice. Where gross violations of the law and injustices are perpetrated or are about to be perpetrated, it is the bounden duty of the Court to intervene and give appropriate interim relief. In cases where denial of interim relief may lead to public mischief, grave irreparable private injury or shake a citizen's faith in the impartiality of public administration, a Court may well be justified in granting interim relief against public authority. But since the law presumes that public authorities function properly and bona fide with due regard to the public interest, a Court must be circumspect in granting interim orders of far reaching dimensions or orders causing administrative, burdensome inconvenience or orders preventing collection of public revenue for no better reason than that the parties have come to the Court alleging prejudice, inconvenience or harm and that a prima facie case has been shown. There can be and there are no hard and fast rules. But prudence, discretion and circumspection are called for. There are several other vital considerations apart from the existence of a prima facie case. There is the question of balance of convenience. There is the question of irreparable injury. There is the question of the public interest. There are many such factors worthy of consideration.............

Article 141 of the Constitution the law declared by the Supreme Court shall be binding on all Courts within the territory of India and under Article 144 all authorities, civil and judicial in the territory of India shall act in aid of the Supreme Court.

...........We do not have the slightest doubt that the orders of the learned single judge as well as Division Bench are wholly unsustainable and should never been made. Even assuming that the company had established a prima facie case, about which we do not express any opinion, we do not think that it was sufficient justification for granting the interim orders as was done by High Court. There was no question of any balance of convenience being in favour of the respondent-Company. The balance of convenience was certainly in favour of the Government of India. Governments are not run on mere Bank Guarantees. We notice that very often some Courts act as if furnishing a Bank Guarantee would meet the ends of justice. No Governmental business or for that matter no business of any kind can be run on mere Bank Guarantees. Liquid cash is necessary for the running of a Government as indeed any other enterprise. We consider that where matters of public revenue are concerned, it is of utmost importance to realise that interim orders ought not to be granted merely because a prima facie case has been shown. More is required. The balance of convenience must be clearly in favour of the making of an interim order and there should not be the slightest indication of a likelihood of prejudice to the public interest. We are very sorry to remark that these considerations have not been borne in mind by the High Court and interim order of this magnitude had been granted for the mere asking..........."

(Emphasis laid)

So, when the Apex Court of the land says that even if there is a prima facie case in favour of a litigant seeking interim relief against recovery of public dues, as was the submission of Mr. Rajiv Nayyar, learned Senior Counsel, that fact alone will not be sufficient to stay recovery of public money and that irreparable injury is not caused if a money decree is executed how can this Tribunal stay execution of the recovery certificate issued by the Tribunal below ignoring the views of the Apex Court. Hon'ble Supreme Court has also been reminding the Subordinate Courts/Tribunals that not following or passing orders ignoring its judgments amounts to judicial impropriety. In Dwarikesh Sugar Industries Ltd. v. Prem Heavy Engineering Work, 1997 (SLT Soft) 1159, the Hon'ble Apex Court had expressed its anguish in the following words:

"It is unfortunate that the High Court did not consider it necessary to refer to various judicial pronouncements of this Court in which the principles which have to be followed while examining an application for grant of interim relief have been clearly laid down...........

We are constrained to make these observation with regard to the manner in which the High Court had dealt with this case because this is not an isolated case where the Courts, while disobeying or not complying with the law laid down by this Court, have at time been liberal in granting injunction restraining encashment of Bank guarantees.

It is unfortunate, that notwithstanding the authoritative the pronounce-merits of this Court, the High Courts and the Courts subordinate thereto, still seem intent on affording to this Court innumerable opportunities for dealing with this area of law, thought by this Court to be well settled.

When a position, in law, is well settled as a result of judicial pronouncement of this Court, it would amount to judicial impropriety to say the least, for the subordinate Courts including the High Courts to ignore the settled decisions and then to pass a judicial order which is clearly contrary to the seeded legal position. Such judicial adventurism cannot be permitted and we strongly deprecate the tendency of the subordinate Courts in not applying the settled principles and in passing whimsical orders which necessarily has the effect of granting wrongful and unwarranted relief to one of the parties. It is time that this tendency stops.

(Emphasis laid)

In a subsequent judgment in the case of Hombe Gowda Edn. Trust & Anr. v. State of Karnataka & Ors., I (2006) SLT 225, Appeal (Civil) No. 2554 of 2003, decided on 16 December, 2005 Hon'ble Supreme Court had observed as under:

"...........The Tribunal being inferior to that of this Court was bound to follow the decisions of this Court which are applicable to the fact of the present case in question. The Tribunal can neither ignore the ratio laid down by this Court nor refuse to follow the same."

The stay applications are accordingly dismissed. Since the recovery officer is awaiting decision of this Tribunal on these stay applications though there was no stay he will now proceed with the execution proceedings with utmost expedition and resort to all lawful steps to effect recovery from the CDs.