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Judgment
P.K. Bhasin, J
Appellant No. 1 Dena Bank had been advancing loans to respondent No. 1 herein since the year 1985. The loans were secured by way of mortgages of properties of this borrower Company and others. The relationship as lender and borrower between Dena Bank and respondent No. 1 went on well for years but then a time came when the respondent No. 1 became a defaulter in repayment of the outstanding dues of the said lender Bank due to internal fights between different Groups of shareholders/Directors who were wanting to take over the control of the management of the borrower Company. The default in repayment of Bank's dues led to initiation of legal proceedings by Dena Bank for recovery of its unpaid dues of Rs. 4,63,67,534/- with interest at the contractual rate of 19.75% p.a. compounded quarterly. The Bank had approached Debts Recovery Tribunal (DRT) by filing an Original Application (O.A.) under Section 19 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993. The O.A. was initially filed before the DRT at Hyderabad in the year 2000 where it was registered as O.A. No. 29/2000. At that time only respondent Nos. 1 to 6 herein were impleaded as defendants in the O.A. but subsequently respondent No. 7 M/s. Sanman Distributors (P) Ltd. also came to be impleaded as a defendant. The O.A. which was filed before the DRT at Hyderabad, however, came to be transferred to DRT-II in Delhi pursuant to the orders passed by the Hon'ble Supreme Court in some petition filed by respondent No. 7 herein and it was registered in DRT, Delhi as T.A. No. 5/2010, The O.A. was finally allowed on 30.4.2012 in favour of the applicant Dena Bank and against respondent Nos. 1-3 only and not against other respondents, including respondent No. 7, which Company is now the main character in the present ongoing proceedings before the DRT in the disposal of O.A. of Dena Bank and out of which proceedings the present appeal has arisen.
Recovery proceedings are going on before the Recovery Officer to recover the money ordered by the DRT to be recoverable from respondent Nos. 1 to 3 herein. Though the final order in the O.A. was for recovery of a sum of Rs. 4,63,67,534/- against respondent Nos. 1 to 3 but now the amount recoverable is stated to have mounted to over seventy crores of rupees, which includes amount of interest also.
While the learned Recovery Officer was struggling to recover the money due from respondent Nos. 1 to 3 under the recovery certificate received by him from the DRT, respondent No. 7 herein, M/s. Sanman Distributors (P) Ltd. has filed one application (being M.A. No. 116/2018) purporting to be under Sections 27(1) and 19(25) of the RDDBFI Act, 1993 before the DRT offering to liquidate the dues of Dena Bank, which after the passing of the final order by DRT in its O.A. has assigned its right by way of E-auction to recover its dues under the recovery certificate issued in its favour by DRT in favour of appellant No. 2.
Relevant averments made in that application moved by M/s. Sanman Distributor (P) Ltd. are as under:
Applicant's Ownership of VDL & Disputes Pertaining Thereto :
The applicant/SDPL owns and controls 100% shareholding of VDL having acquired almost 100% paid up equity share capital of the four Investment Companies, which in turn owns and controls 100% shareholding of VDL. The four Investment Companies which are holding 100%) shareholding of VDL are; (a) Deccan Holdings Pvt. Ltd.; (b) Deccan Securities Pvt. Ltd.; (c) Chamunda Holdings Pvt. Ltd.; and (d) Yogeshwar Holdings Pvt. Ltd. The applicant/SDPL between 7th-9th October, 1991 purchased the paid-up and subscribed majority equity share capital of the four Investment Companies for valuable consideration. The applicant on completion of the aforesaid transaction was delivered original share scrips of VDL and four Investment Companies as well as other statutory records. The applicant since then has been in control of four Investment Companies and also managed the affairs of VDL through its Board of Directors before disputes were raised by the erstwhile shareholders of one of the Investment Companies i.e. Deccan Holdings Pvt. Ltd., namely, S.K. Aggarwal (since deceased) and A.K. Aggarwal both jointly referred to as "Aggarwal Group".
The disputes raised by the Aggarwal Group, culminated into legal proceedings filed by the applicant before Bombay High Court and by the Aggarwal Group before City Civil Court, Hyderabad. The Bombay High Court vide order dated 30.4.1993 granted injunction in favour of the applicant and against the Aggarwal group restraining them from interfering in the management of VDL. Aggarwal Group subsequent thereto obtained conflicting orders from City Civil Courts, Hyderabad.
In these circumstances the applicant directly assailed he orders passed by City Civil Court, Hyderabad to the Hon'ble Supreme Court of India and simultaneously sought transfer of those suits to Bombay. The Hon'ble Supreme Court of India in August, 1994, while setting aside the interim orders passed by City Civil Court, Hyderabad transferred oil proceedings pertaining to ownership of VDL to Hon'ble Delhi High Court. The Hon'ble Delhi High Court vide order dated 13.2.1995, as an interim measure since it was a running distillery then, appointed Aggarwal Group as "Joint Receivers" of VDL to protect and preserve the properties of VDL pending final decision in the suits. The Hon'ble Supreme Court of India confirmed the interim arrangement and changed the nomenclature of Aggarwal Group from "Joint Receivers" to "Court Commissioners". The provisions of Order 40 Rule 1, CPC were made applicable mutatis mutandis. Relevant pages of the Judgment and Order dated 13.2.1995 are annexed hereto as Annexure-2.
Acts of Mismanagement & Misfeasance By Aggarwal Group/Defendant Nos. 2 & 3
That the Aggarwal Group acting as Court Commissioners misused their poser and position and made several attempts to fritter away the properties of VDL for their personal enrichment thereby violating the conditions of their appointment as Court Commissioner. This compelled the applicant to file applications for removal of Aggarwal Group as Court Commissioner setting out instances of mismanagement and the observations made in the judicial orders relating to incompetency of the Aggarwal group to remain in management of VDL. These acts of omission and commission of the Court Commissioner resulted in huge accumulation of liabilities upon VDL including that of the applicant Bank.
Because of such acts detrimental to the interest of VDL, there was a fall out amongst the Aggarwal Group inasmuch as A.K. Aggarwal supported the removal of S.K. Aggarwal being the person responsible for exposing the assets of VDL. The Hon'ble Delhi High Court vide order dated 18.9.2009 (Annexure-3) while disposing of the aforementioned application filed for removal of the Court Commissioners, allowed the applicant to submit a proposal not only for running the affairs of VDL but also forwarding the Securitization Action that was invoked by applicant Bank against VDL. The applicant was prevented for submitting a proposal since the financial records of the Company were fudged the fabricated creating fictitious liabilities upon VDL.
That VDL was declared a Sick Industrial Undertaking within the meaning of SICA in December, 1989 and continues to remain a sick industrial unit, however, the reference filed before BIFR got abated in light of the amended provision of Section 15(1) of the SICA.
The applicant Bank to recover its alleged debt filed OA under Section 19 of the Recovery of Debts and Bankruptcy Act, 1993 (RDB Act) for recovery of its alleged dues. The alleged principal amount outstanding as on 13.12.1999 was Rs. 1,97,16,250.56 (Annexure-4). The applicant Bank claimed a sum of Rs. 4,63,67,534/- in the present TA on the date of filing viz., 19.1.2000.
That in the year 2005 pending the OA the applicant Bank invoked SARFAESI Act. The actions and the measures taken by applicant Bank while invoking SARFAESI Act was challenged by the applicant, Aggarwal Group in the name of VDL and otherwise before the Hon'ble Delhi High Court and Hon'ble High Court of Andhra Pradesh at Hyderabad. The Hon'ble Supreme Court of India vide order dated 31.8.2009 (Annexure-5) granted liberty to the parties to file and applicant under Section 17 of the SARFAESI Act.
That DRT, Hyderabad passed the following order on the first date of hearing i.e. 2.5.2018 in TSA No. 1/2010:
XXX XXX XXX
That in TSA No. 1/2010 five points were framed for determination and the same was allowed by this Hon'ble Tribunal on 30.4.2012 by giving its decision on the five points in the following manner:
xxx xxx xxx
That on 30.4.2012 the present TA was also allowed by this Hon'ble Tribunal as per the claim of the applicant Bank along with 12% simple interest, since not opposed by the defendants including the applicant herein.
The applicant Bank aggrieved by the orders dated 30.4.2012 passed in TA No. 5/2010 and TSA No. 1/2010 preferred and Appeal before Hon'ble DRAT, Delhi being Appeal No. 282 of 2012 and Appeal No. 75 of 2013 respectively.
The Hon'ble DRAT allowed both the appeal vide order dated 28.10.2014. The interest was varied and was made contractual whereas TSA No. 1/2010 was remanded back for fresh consideration by this Hon'ble Tribunal. TSA No. 1/2010 is pending adjudication.
Subsequently the interest awarded by DRAT, Delhi was varied to 15% compounded quarterly rest.
That the current status of the proceedings pending before Hon'ble Delhi High Court and this Hon'ble Tribunal is as under:
(a) The proceedings pertaining to ownership of VDL are at the stage of final hearing and the next date of hearing is 13.9.2018. The Hon'ble Supreme Court of India as late as 15.12.2017 has ordered expeditious disposal of the suits since matters are pending for long.
(b) The Recovery Certificate No. 106/2012 is pending before the Recovery Officer and objections have been raised by the applicant against the sale of the assets and properties of VDL The order on objection is reserved and the next date of hearing is 15.9.2018.
(c) TSA No. 1/2010 is pending adjudication. Evidence was adduced by the applicants in TSA and the Bank has failed to either adduce evidence or rebut the said evidence by cross-examining the witnesses.
Attempts by the applicant to Settle the Dues of Dena Bank
The applicant herein from the very beginning has made repeated attempts to pay the outstanding dues of the applicant Bank with the sole object to prevent dissipation and alienation of the assets and properties of VDL of which the applicant is the sole owner. The said attempts have been scuttled by the Aggarwal Group in one way or the other in order to pressurize and hold the applicant to ransom. This plea of the applicant is corroborated by judicial orders reproduced hereinbelow for the ready reference of this Hon'ble Tribunal :
xxx xxx xxx
That despite the applicant offering to pay the legitimate dues of the applicant-Bank upfront, to protect and preserve the assets and properties of VDL for which the applicant has been litigating for the past 24 years, which the Bank has not been willing to consider, the applicant Bank on the other hand arbitrarily, discreetly and surreptitiously without any prior notice to the obligor/applicant/borrower took out an E-Auction notice dated August, 2018 (Annexure-7) for sale of NPA/VDL debt to an ARC at a Reserve Price of approximately Rs. 47 Cr. on 100% cash basis and approximately Rs. 52 Cr. on 60:40 basis.
That E-Auction Notice was not put in public domain and the applicant learnt about the same on 4.9.2018. The applicant on the same day issued a communication to the applicant Bank as well as a Legal Notice (Annexure-8 Colly) calling upon the applicant Bank to desist from carrying out E-Auctioning of the debt of VDL as it is in defiance of the order dated 2.5.2008 passed by this Hon'ble Tribunal in TSA No. 1/2010 and also because the properties of the Company are vested in Hon'ble Delhi High Court and Hon'ble Supreme Court of India being the custodia legis of the properties of VDL.
That the applicant made several queries and have now learnt that the successful bidder under the E-Auction was non-applicant No. 2 having submitted a bid of Rs. 52.50 crores on 100% cash basis.
That the applicant is challenging the aforesaid auction of the applicant Bank...................."
The main prayer made in the said application filed by M/s. Sanman Distributor (P) Ltd. is as under:
"(a) Allow the applicant to pay/deposit the dues of the applicant Bank on such terms and conditions as this Hon'ble Tribunal may deem just and proper in the facts and circumstances of the case to do complete justice; and"
Interim relief was also sought in that application and the prayer in that regard is also re-produced below:
"Interim Relief
(b) Pending disposal of the present application, restrain the applicant Bank/non-applicant No. 1, their officials, nominees, agents, assigns from executing any document for sale of NPA/assignment of debt of VDL in favour of non-applicant No. 2 or any other third party pursuant to the E-auction conducted on 5.9.2018 on such terms and conditions as this Hon'ble Tribunal may deem just and proper under the facts and circumstances of the case to do complete justice."
(c) Pass such other orders as this Hon'ble Tribunal may deem just and proper under the facts and circumstances of the case to do complete justice; and"
On 26.9.2018, the aforesaid application filed by respondent No. 7 herein in the disposed of O.A. was taken up by the learned Presiding Officer of DRT and the final order was passed:
"Heard both sides. The Counsel for the Dena Bank as well as assigned ANA ARC Private Limited present and submitted that he has no objection to deposit the title deeds provided if the amount is deposited in the Tribunal within one month. Counsel for the applicant in MA No. 116/18 is directed to deposit an amount of Rs. 7 crores today and the balance amount within one month. The Counsel for the Dena Bank and the assigned ANA ARC Private Limited ARC further submitted that the amount roughly comes to Rs. 72 crores as on 31.8.2018 and the applicant in MA No. 116/18 is willing to pay the said amount. Counsel for the Dena Bank and ANA ARC Private Limited submitted that he would file his reply in MA No. 116/18 and the title deeds can be deposited after liquidation of the entire amount within ten days thereafter. Counsel for the defendant Nos. 1 & 3 submitted that he has no objection to the applicant in MA No. 116/18 to liquidate the entire amount subject to the result of lis in Hon'ble High Court of Delhi. So far as the dispute regarding the party inter se concerned they can agitate in the lis already pending before the Hon'ble High Court of Delhi
For reply and hearing in MA posted to 29.10.2018.
"DASTI"
Before 29.10.2018, the appellant Bank had moved an application (No. 1595/2018) seeking clarification in the said order dated 26.9.2018 wherein, according to the appellants' reading of the said order, the DRT had recorded a submission to have been made on behalf of the Bank that it had no objection to deposit the title deeds in Court while, in fact, no such concession was made and it was a suggestion made on behalf of the applicant of M.A. No. 116/2018 that it will deposit payment in the Tribunal within a month and title deeds in respect of mortgaged properties should be deposited with the Tribunal. It was claimed by the Bank in its clarification application that since it had sought time to file reply to M.A. No. 116/2018 it was clear that there was no occasion for its Counsel for giving no objection for deposit of title deeds in the DRT and the DRT also had granted time to the Bank to file reply.
Notice of Bank's application No. 1594/2018 was ordered to be issued on 23.10.2018 for 26.10.2018.
Though on 26.10.2018 the matter was taken up by the DRT, but Bank's M.A. No. 1595/2018 was not taken up on that date and only application No. 116/2018 of respondent No. 7 herein was taken up and the following order was passed:
"Dena Bank/ANA ARC Pvt. Ltd. shall bring the title deeds, as per the documents exhibited by the Bank, before this Tribunal on Monday i.e. 29.10.2018. Simultaneously, the defendants shall bring the DD in the name of the Registrar of this Tribunal with payment upto date on Monday i.e. 29.10.2018. The photocopies of the demand drafts with interest till date are taken on record and also supplied the copies of the drafts to the other side. The date is extended till 29.10.2018 for payment.
For reply and hearing in MA posted to 29.10.2018."
On 29.10.2018, the DRT passed the following order:
"Original title deed exhibited as AW-106 dated 30.4.1971 executed by Sahu Brothers in favour of Vinedale Distilleries Pvt. Ltd. not produced. The present applicant submits that he is ready with the demand draft, the copies are already given on the last hearing date, the interest shall stop from today in favour of the defendants until further orders.
The applicant ANA ARC Pvt. Ltd. shall file the original title deed with copies to other sides. Meanwhile the original documents shall be kept in a sealed cover with the Registrar of this Tribunal.
Posted to 3.11.2018."
The appellant Bank felt aggrieved by the direction given to it to deposit the title deeds in DRT and acceptance of photocopies of some Bank drafts of the amount which respondent No. 7 herein was volunteering to pay to the Bank towards full satisfaction of the recovery certificate issued against respondent Nos. 1 to 3 only. Accordingly, the present appeal came to be filed.
I have heard the arguments advanced on behalf of the appellants by the learned Senior Counsel Mr. Rakesh Tiku and arguments on behalf of respondent No. 7 herein by its learned Senior Counsel Mr. Amit Singh Chadha and have also perused material on record, including already referred different orders passed by the learned DRT. The learned Senior Counsel for the appellant had submitted that the learned DRT was not justified in directing the appellants to bring the title deeds of the mortgaged properties to DRT to be deposited there in the Registry and that, too, on the prayer of respondent No. 7 herein who had no locus standi to move any application for the purpose of getting back the title deeds of the properties released in its favour and that, too, without clearing the entire recovery dues of the Bank under the recovery certificate. It was further submitted that after passing of the order dated 26.9.2018, which has been reproduced already, the respondent No. 7 had written a letter to the appellants that it was ready to pay a sum of Rs. 72 crores for recording of satisfaction of recovery certificate in question. Further, the appellants had not agreed to close the recovery chapter by accepting payment of Rs. 72 crores. In any event, there was no justification for the learned DRT to take on record the photocopies of the Bank drafts submitted on behalf of respondent No. 7 herein and if tall the DRT had the authority, though it had already become functus officio after passing of the final order in the Bank's O.A., to accept any payment from respondent No. 7 for the satisfaction of the recovery certificate, this respondent ought to have been first directed to make actual payment of the entire decretal amount to the appellants as per the recovery certificate and not as per its own whims and fancies, thereby causing loss of crores of rupees, which certainly DRT ought not have permitted and, particularly, against the wishes of CH Bank/assignee.
On the other hand, Mr. Amit Chadha, learned Senior Counsel for respondent No. 7, M/s. Sanman Distributors (P) Ltd. submitted that the appellants had hastily rushed to this Tribunal and filed this appeal when, in fact, the learned DRT is yet to finally dispose of M.A. No. 116/2018 and while passing the final order, the DRT will naturally deal with all the aforesaid contentions being raised before this Tribunal on behalf of the appellants if they are raised before the DRT also at the time of hearing of the said application of respondent No. 7. It was also submitted that the photocopies of the Bank drafts were placed on record to show that in fact this respondent is ready with payment which it was volunteering to make towards full satisfaction of the recovery certificate issued against respondent Nos. 1 to 3. It was further submitted that respondent No. 7 cannot be said to be a stranger to the proceedings having no right to discharge the recovery certificate inasmuch as it has been claiming the right of ownership of the borrower Company, respondent No. 1 herein, for more than 10 years in different litigations before different Fora and at one point of time even the learned predecessor Chairman of this Tribunal had permitted respondent No. 7 to make payment of decretal amount in case it was seeking to redeem the mortgaged assets. In any case, submitted Mr. Chadha, all these aspects urged before this Tribunal by Mr. Tiku are yet to be examined by the learned DRT and it would not be appropriate and in the interest of justice for this Tribunal to first form any view on the reliefs which were being claimed by respondent No. 7 before the learned DRT in its application No. 116/2018.
After giving my due consideration to the rival submissions made from the side of real contesting parties, as far as the present appeal is concerned, I am of the view that the learned Senior Counsel for respondent No. 7 was right in his submission that the DRT has not taken any final view in the matter which will, of course, be taken after hearing both the sides and considering all the objections to be raised on behalf of two appellants herein. The appellants could wait for the final order to be passed in M.A. No. 116/2018 of respondent No. 7. However, I also find substance in the grievance raised on behalf of the appellants that without pronouncing its final order on M.A. No. 116/2018 of respondent No. 7 herein, the learned DRT ought not to have given a direction to the appellants for deposit of the title deeds of the mortgaged assets in the Registry of DRT without returning any findings as to the locus standi of respondent No. 7 herein to move such an application under Section 27 of the RDDBFI Act and whether this respondent-applicant had right to seek redemption of mortgaged properties of the mortgagers who had mortgaged the same, even after volunteering to clear the dues under the recovery certificate. The DRT will be considering as to whether applicant-respondent No. 7, if at all it had the locus standi to come forward to clear the dues under the recovery certificate even though no decree had been passed against it, can seek recording of satisfaction of the recovery certificate without ensuring recovery of the full amount already adjudicated to be recoverable from respondent Nos. 1 to 3 herein. The learned Presiding Officer has not even given any reason for directing the appellants to deposit the title deeds in the Registry of the DRT before deciding M.A. No. 116/2018 of respondent No. 7; Sanman Distributors (P) Ltd.
During the course of hearing of this appeal, it was also contended on behalf of respondent No. 7 that the appellants were intending to release title deeds of the mortgaged properties in a clandestine manner so that the mortgaged properties could be sold to someone of their choice and if that is done, respondent No. 7 will be gravely prejudiced and its fight for control over the management/assets of respondent No. 7 borrower Company going on for over a decade will get frustrated while appellants will be in a position to recover the public money from respondent No. 7 who can in law come forward to liquidate the recovery certificate amount despite the fact that it was not a certificate debtor and was only one of the defendants in the O.A. All these submissions will first be examined by the DRT.
Considering all the facts and circumstances of the case, this Tribunal is of the view that the only appropriate order to be passed is to direct the DRT to dispose of appellants' M.A. No. 1595/2018 and M.A. No. 116/2018 of respondent No. 7 herein within a period of ten days from the date of receipt of this order and till the disposal of these applications the direction given to appellants to deposit the title deeds in the Registry of DRT will remain stayed. It is ordered accordingly.
It is clarified that the DRT would be at liberty to take any decision on both these applications, in accordance with law, without considering any observation made hereinabove to be an expression of any opinion on the merits/demerits of the cases of the appellants and respondent No. 7.
The record of the DRT be sent back forthwith.