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Judgment
S. Ravindra Bhat, J.
E.A. Nos. 224/2006 [Under Section 51(e), 225/2006 (Under Order 21 Rule 41) and 506/2009
The Judgment Debtor/respondent claims variation of the order dated 27.04.2006, whereby the statement was recorded that its two properties located at Sahibabad and Ghaziabad (hereafter referred to as "the subject-properties") could be subjected to attachment; that order reads as follows:
Notice, returnable on 11.7.2006. Learned Counsel for the Judgment debtor accepts notice. Reply be filed within four weeks. Rejoinder within two weeks thereafter.
Learned Counsel for the Judgment debtor, on instructions from Mr. P.K. Gupta, Vice President of the Judgment debtor states that till the next date of hearing property bearing No. A-4/2, South Side of GT Road, UPSIDC, New Area Ghaziabad and Plot No. 8/7, Industrial Area, Site IV, Sahibabad, near Maharajpur, District Ghaziabad will not be alienated or transferred or encumbered any further (as at present certain loan facilities are being enjoyed against mortgage of these properties) without leave and liberty of this Court and the said statement is being made without prejudice to the rights and contentions of the Judgment debtor in the replies proposed to be filed.
The applicant contends that when the order was made, the two properties were subject to encumbrances; a first charge had been created in favor of the State Bank of India, Corporate Accounts Branch, for a corporate loan of Rs. 36 crores and the second pari passu charge in favor of PICUP, Lucknow, for Rs. 4.25 crores; another second pari passu charge in favor of the Jammu and Kashmir Bank, of its assets (except Ghaziabad property) had been created. It is contended that the applicant is a solvent company with a net worth of Rs. 441 crores, which is alleged to be ten times the amount of the alleged decree, that is sought to be executed.
During the course of submissions, learned Counsel had relied upon a sanction letter issued by the State Bank of India on 09.05.2009 as well as previous letter dated 15.09.2004 by the same bank as also letters dated 01.10.2004 and 11.08.2009 issued by the PICUP, and submitted that the statement recorded earlier would operate to its disadvantage now that substantial repayments had been made to the financial institutions. Reliance was also placed upon the sanction letter dated 09.05.2009 to submit that the total value of the property was Rs. 101.50 crores, which is in excess of the decreetal amount with interest (which works-out to Rs. 36.22 crores, as on date).
After some hearing, learned Counsel for the applicant placed on record what was termed as a proposal, on 13.10.2009; a copy of the said document containing six-annexures was supplied to the counsel for the decree holder. It was contended on the basis of these documents that the term limits (i.e. cash credit, bank guarantee and letter of credit facilities), originally sanctioned by the State Bank of India to the judgment debtor, were to the tune of about Rs. 30 crores (in the year 2004); and that they were enhanced to Rs. 55 crores. The applicant points out that the term limits were secured by hypothecation of entire current assets of the company, excluding any collateral security as well as personal guarantee of one of its Directors.
After some hearing, the applicant filed a further affidavit on 31.10.2009, enclosing the Annual Report for the year ending 2008; it was submitted that this also establishes that the valuation of the immovable property was, as mentioned by the State Bank of India in its letter dated 09.05.2009, Rs. 101 crores.
Learned Counsel for the applicant submitted that the Court should pass an appropriate equitable order relieving the alleged Judgment Debtor of its statement made on 27.04.2006 so as to enable it to avail the benefit of the loan sanctioned by the State Bank of India - an offer which is to expire on 09.11.2009. It is contended that the only outstanding amount payable to the Jammu and Kashmir Bank is to the tune of Rs. 60 lakhs. It was submitted that of the two properties that have been subjected to attachment, the Judgment Debtor would be agreeable if the attachment is continued in respect of the Sahibabad property, which is valued in excess of Rs. 52 crores - as reflected in the Sanction Letter of the State Bank of India.
The Decree Holder had contended that the documents placed on record did not show the necessity of varying the previous orders of the Court. It was pointed out that the balance-sheet and other materials disclose that the Judgment Debtor has generated surplus of more than Rs. 14 crores for the previous year. It was also submitted that despite the letter issued by the Judgment Debtor on 08.07.2009, to the State Bank of India, latter has not clarified that the two properties have been released from encumbrances.
The Decree Holder had, during the course of hearing today, relied upon a compilation of documents; these included a copy of the Form-8 submitted by the judgment debtor to the Registrar of Companies, enclosing an agreement dated 24.11.2008 (entered into by the Judgment Debtor), with the State Bank of India. It was pointed-out that Clause-7 of the said agreement clearly created interest in respect of a limit of Rs. 91 crores, in favor of the bank. It was also pointed-out that the Annual Report containing the Judgment Debtor''s balance-sheet discloses that it continues to lend amounts to companies, which is reflected in the appropriate Schedule (Schedule-9). The Decree Holder''s senior counsel pointed that the loan advanced and recoverable from companies under the same management had increased from Rs. 85.56 crores for the year ending 31.12.2007 to Rs. 94.66 crores for the year ending 31.12.2008 and that similar loans receivable from other companies had increased from Rs. 52.81 crores to 57.75 crores over the corresponding period. It was emphasized that the Judgment Debtor had declined to bear the expenses of arbitration, in an e-mail communication dated 30.10.2009, in respect of a small amount of US$ 52,500/-, by claiming paucity of funds due to ongoing litigation between the parties.
The present application arises out of execution proceedings initiated by the Decree Holder; a foreign Court had granted summary judgment in favor of the Decree Holder to the extent of US$ 5,824,564.47/- and Euro 31,364.74/-. The decree holder applied for execution of the said foreign judgment claiming that the aggregate equivalent of principal and interest was Rs. 27,68,17,466/-, as on 24.04.2006. The Court had, while issuing notice on 27.04.2006, made an order on the basis of the statement recorded on behalf of the Judgment Debtor, reproduced above.
The Judgment Debtor''s claim for relieving it of the statement is premised primarily upon the facts that the valuation of the entire property, which is the subject-matter of attachment is in excess of Rs. 101 crores. It states that the State Bank of India''s sanction, or offer of 09.05.2009 would enable it to go in for business expansion. In support, the Judgment Debtor sought to satisfy the Court by producing copies of the Sanction Letter as well as the Annual Report for the year 2008, reflecting the said valuation. The documents on record do suggest that the Judgment Debtor has availed of other credit facilities to the extent of Rs. 55 crores. The Judgment Debtor had relied upon letter dated 03.10.2008 by the State Bank of India, which had enhanced the previously existing credit facilities; the said letter, while outlining the terms for enhancement (from the previously existing Rs. 30 crores to Rs. 55 crores) mentioned that the security was hypothecation of entire current assets. The same documents mention, in the very next column, as against the heading "Collateral" that there was no collateral and that the amount or enhancement was secured by personal guarantee of one of the Judgment Debtor''s Directors. The Judgment Debtor has also relied upon the letter of State Bank of India dated 07.09.2009, stating that its previously sanctioned corporate loan had been closed on 03.09.2009. The Judgment Debtor has also produced on record, PICUP''s letter dated 26.08.2009, stating that there was no dues payable to it, by the Judgment Debtor.
The Decree Holder''s reliance on the hypothecation agreement dated 24.11.2008 - which was placed on the record of the ROC is, no doubt, facially relevant; however, a reading of that concerned term would indicate that security for payment and discharge by the Judgment Debtor (borrower) to the bank was of the total amount of Rs. 91 crores could be "as may be required", the subject matter of a future mortgage. There is nothing on record to suggest that credit facilities to the extent of Rs. 55 crores are the subject matter of mortgage, currently.
On an overall consideration of the materials on record, the Court is satisfied that when the statement was made by the Judgment Debtor on 27.04.2006 - which has been continued till date, this Court had not been made aware of the valuation of the properties. The materials placed on the record now suggest that the value of the said two properties put together are in excess of Rs. 101 crores. The said materials also suggest that the evaluation of the Sahibabad is in excess of Rs. 52 crores and that of Ghaziabad property, in excess of Rs. 48 crores.
This Court is primarily concerned that in the ultimate event of the decree being upheld, and the Court concluding it to be executable, the decree holder should not be left with a paper-remedy and that if the judgment debtor is shown to possess means or assets that can satisfy the decree, it should be appropriately secured. At the same time, that would not imply that the Decree Holder should be dictating the Judgment Debtor''s options in carrying-on its business.
Having regard to all the circumstances, the Court is of the opinion that the Judgment Debtor should be relieved of the statement dated 27.04.2006, to the extent of the Ghaziabad property. Accordingly, the restraint order shall operate in respect of the property, being 8/7, Industrial Area, Site-IV, Sahibabad, Near Maharajpur, District Ghaziabad; the order dated 27.04.2006 is modified to the above extent.
E.A. Nos. 224/2006, 225/2006 and 506/2009 are disposed of in the above terms.
EX.P. 70/2006
List on 03.12.2009.