Hdfc Bank Limited vs South Delhi Motorscycles

This order is being prepared while working from home for being signed and communicated to the parties because of the suspension of physical hearing of DRAT appeals due to spread of Corona Virus (Covid-19) in the entire country. This procedure for the preparation of orders by quasi judicial tribunals and their communication to the concerned litigants in place of formal pronouncement in open Court has been recognised by the Hon'ble Supreme Court in one of its judgments reported as AIR 2008 SC 2594, " State Bank of India and Ors. Vs. S.N.Goyal"(para 19) wherein it was observed that:-

".............While some quasi judicial tribunals fix a day for pronouncement and pronounce their orders on the day fixed, many quasi judicial authorities do not pronounce their orders. Some publish or notify their orders. Some prepare and sign the orders and communicate the same to the party concerned... "

The appellant bank is aggrieved by the refusal of the DRT to permit the appellant bank by an ex parte order to re-possess the vehicle(BMW MINI COOPER S HATCH) No. HR 26 DE 5400) which it had financed to the respondent herein. That relief was sought by the appellant bank in its Original Application (O.A.) filed by it under Section 19 of the Recovery of Debts Due to Banks and Financial Institutions Act,1993('RDDBFI Act' in short) to recover its outstanding dues of Rs. 31,95,388.81 from the respondent-borrower in the loan account.

The learned DRT while issuing notice of the O.A. did not pass an order, as was prayed for by the O.A. applicant bank, for appointment of its officer as court receiver to seize the aforesaid financed high end car. Feeling aggrieved by the order dated 07.01.2020 whereby a simple notice of the O.A. was directed to be given to the respondent- defendant, the bank has come up in appeal.4. It was submitted by the learned counsel for the appellant that the respondent-defendant has not entered appearance in the pending O.A. Therefore, there is no need of issuing any notice to the respondent. Learned counsel for the appellant cited before me a number of orders passed under similar circumstances by Hon'ble Delhi High Court and one decision of Bombay High Court setting aside orders of DRT relying upon the cited judgment of Bombay High Court, not appointing by ex parte orders receivers to repossess financed vehicles. The judgment of Full Bench of Bombay High Court was rendered on 25.04.1995 in Appeal No. 290/1995, "State Bank of IndIa vs Trade Aid Paper and Allied Products(India) Pvt. Ltd. & Ors."" Judgments of Delhi High cited before me all laid down that appointment of receivers in such like cases by an ex parte order should in variably be ordered. One such decision was in the case of "ICICI Bank Ltd vs Collage Estates Pvt Ltd And Ors."( FAO No. 293/2015) decided on 15 September, 2015. I think appropriate to notice in extenso the paragraphs from this judgment so that it becomes clear for the drts that appointment of reciver by ex part orders should be the rule:-

"2. This is an appeal directed against order dated 19.08.2015 whereby the learned Additional District Judge (Central), Tis Hazari, has declined to grant the prayer sought for appointment of a receiver, at the ex parte stage. 2.1 The learned ADJ was of the view that the ex parte appointment of a receiver was dependent on the facts and circumstances obtaining in each case.

2.2 Having said so, the learned ADJ did not elaborate as to what were those facts, which persuaded her to not appoint a receiver, at the ex parte stage, as was prayed for by the appellant.

2.3 In this particular case, the appellant has averred that, a loan in the sum of Rs.30 Lakhs was sanctioned in favour of the respondents. It is further averred that in pursuance of the same, an amount equivalent to Rs.29,95,550/- was disbursed to respondent no.1.

2.4 It is also stated that in this behalf a loan agreement dated 12.04.2012 was executed between the appellant and the respondent. In pursuance of the aforementioned loan agreement, a sum equivalent to Rs.29,95,550/- was disbursed on 17.04.2012.

2.5 It is stated that pursuant to the loan extended to the respondents, the respondents, purchased and, were consequently, delivered a vehicle described as MERCEDES BENZ/S 320 ODIL; bearing registration no. DL- 3CBM 3706 (hereafter referred to the subject vehicle).

2.6 The said loan was required to be paid by the respondent in 36 Equated Monthly Instalments (EMIs) equivalent to Rs.1,03,290/- each. The loan facility, apparently, carries a penal interest of 24% p.a. The said loan, according to the appellant is secured by a deed of hypothecation and an irrevocable power of attorney. The latter document i.e. irrevocable power of attorney, apparently, authorises the appellant to take possession of the subject vehicle and sell the same, in case, of commission of default in the repayment of dues by the respondents.

2.7 According to the appellant, the respondents failed to adhere to the terms of the loan agreement, and thus, committed defaults in payment of the EMIs. The total sum due and payable against the outstanding instalments, according to the appellant, is an amount of Rs.3,08,870-/. This amount is, in addition, to the instalments falling due in future; which is, an amount equivalent to a sum of Rs.3,09,870/- and Rs.33,435/- towards the late payment and cheque bouncing charges, as on 05.02.2015.

2.8 In view of the aforesaid, the appellant appears to have issued a recall notice dated 20.11.2014.

2.9 It is the appellant's case that the respondent neither replied to the notice nor repaid the amount, which was due and payable under the loan agreement.

By virtue of the aforesaid notice, the respondent was also directed to hand over the possession of the subject vehicle.

3.1 The appellant having failed, in its endeavour, to receive the defaulted amount and / or the possession of the subject vehicle, proceeded to institute an action for this purpose in the court below. The said suit was moved on 12.02.2015. As indicated above, a prayer was made for appointment of a receiver, at that stage itself. The trial court, however, has declined the request for appointment of a receiver at the ex parte stage.

It is, in these circumstances, that the appellant has filed the instant appeal.

Having heard Mr. Bhalla and perused the record, I am of the view that the appellant has set up a prima facie case for appointment of a receiver. The balance of convenience also appears to be in favour of the respondent. There is in the given circumstances every possibility of harm being caused to the interest of the appellant if, the respondent were to create third party interest in the subject vehicle in the interregnum.

5.1 Accordingly, the prayer made by the appellant for appointment of a receiver ought to have been granted by the trial court. As indicated at the very outset, if the trial court had reasons to decline the request for appointment of the receiver, the same ought to have been articulated in the order itself. The trial court has done neither; except for, directing issuance of summons in the suit.

5.2 In my view, the order being bereft of reasons and given the fact that a good prima facie case has been set up by the appellant, I am inclined to both appoint a receiver and set aside the impugned order. It is directed accordingly. Mr. Gyanesh Kumar, a representative of the appellant is appointed as a receiver. He will take possession of the subject vehicle. In case the respondent were to pay the outstanding amount, the subject vehicle will be released to him, albeit on superdari. The receiver will also, in such an eventuality, issue a receipt to the respondent evidencing the payment of dues by the respondent.

5.3 In case police assistance is required, the concerned SHO, on being approached, by the receiver will render the necessary assistance. The receiver will, however, ensure that while taking possession of the subject vehicle every courtesy is extended to the respondent and / or the person who may be in seisin of the subject vehicle, at the time the receiver seeks to take possession of the same. The receiver while taking possession, will bear in mind the place and time when the possession of the subject vehicle is sought to be taken so as to ensure that no inconvenience is caused to the respondent or the person who, at the relevant point in time, may be in seisin of the subject vehicle.

The directions passed by me hereinabove for appointment of the receiver will continue to operate till the trial court hears and disposes of the application filed by the appellant in the suit for the very same purpose.

6.1 The Trial court will have liberty, upon hearing the respondent i.e. the original defendant to modify, vary or even vacate the order if, the circumstances impel it to do so."

This judgment was followed in a subsequent judgment also rendered on 30.10.2015 in "Icici Bank Ltd. vs Satish Kumar"", FAO 320/2015. I will like to notice in particular the following para from the decision of the High Court:-

"7.2 Furthermore, in so far as this principle is concerned, it has to been seen in the light of the law which has evolved via-a-vis claims of banks and financial institutions. A Full-Bench of the Bombay High Court exhorted courts to adopt a practical approach in exercising the power vested with them for appointment of a receiver, having regard to their outstanding claims. [See State Bank of India vs Trade Aid Paper and Allied Products (India) Pvt. Ltd. & Ors. AIR 1995 Bom 268]. 7.3 I may also indicate herein that the Full Bench judgement of the Bombay High Court in State Bank of India case was taken up in appeal to the Supreme Court only on one issue which was qua the embargo put in place by the Full Bench on the aspect of sale of the property by the receiver prior to a decree being passed in the suit. The Supreme Court over-ruled the Full Bench judgement on this aspect and stated, in no uncertain terms, in its judgement in the case of ICICI Ltd. & Ors. vs Karnataka Ball Bearings Corpn. Ltd. & Ors. (1999) 7 SCC 488, that no such fetter is contemplated on the powers of the receiver appointed under the provisions of Order 40 Rule 1 of the CPC. In other words, the Supreme Court went as far as to observe that a receiver, pursuant to the directions issued by the court in that behalf, is empowered to sell the property even before a decree is passed in the suit. This, according to the Supreme Court, is discernable on a plain reading of provisions of Order 40 Rule 1 of the CPC. The only caveat that the court entered was that while directing sale of the property before passing of a decree, it will apply sound judicial discretion in the matter. In this regard some of the instances, in which sale could be directed, which were articulated by the Supreme Court were as follows. These instances were cited by the Supreme Court only by way of illustration: (a) Where the court feels if the property is not sold, the initiator of the action would be subjected to a great fraud (b) Where there could be diminution in value of assets if immediate order is not passed. (c) Where there is apprehension of wastage or even where wrongful entrants or trespassers may attempt to make an in-roads in the property for permanent settlement.."

Similar view was taken by Delhi High Court in a later judgment dated 12.04.2017 in "ICICI BANK LTD versus Dharmendra" (CM(M) 384/2017"). Relevant paras therefrom are re-produced below:-

"2. By the present petition filed under Article 227 of the Constitution of India the petitioner seeks to impugn the order dated 21.01.2017 of the trial court by which order the trial court dismissed the application under Order 40 Rule 1 CPC for appointment of a Receiver.

The petitioner has filed a suit for recovery of Rs.1,89,273.46/- in connection with a vehicle loan. The vehicle that was bought, namely, Santro/GL Plus bearing registration No. HR 51 AZ 7694 also stands hypothecated to the petitioner bank. As per the petitioner, the respondents were to pay the loan amount in 35 EMIs of Rs.7,429/- towards repayment of CM(M)384/2017 Page 1 the loan amount of Rs.2,20,000/-. He has defaulted in five EMIs of Rs.37,003/- plus other charges. On account of default, the petitioner recalled the loan facility by sending a recall notice dated 30.07.2016. Along with the plaint the petitioner filed an application for appointment of a receiver relying upon the judgment of this court dated 21.12.2016 passed in CM(M) 1333/2016 titled as "ICICI Bank Ltd. vs. Ram Chandra Yadav".

The trial court surprisingly sought to ignore the judgment of this court dated 21.12.2016 noting that the Apex Court and this Court have already held that all courts should be conscious of day to day scenario and should be more pragmatic in exercising powers under Order 40 Rule 1 CPC. The trial court has hence issued summons in the suit but dismissed the application under Order 40 Rule 1 CPC.

In the judgment of this court dated 21.12.2016 passed in CM(M) 1333/2016, this court relied upon the observations of an earlier judgment of this court passed by Hon'ble Justice Rajiv Shakdar in FAO 7/2016 on 05.01.2016 titled as "ICICI Bank Ltd. vs. Updesh Nagar". The observations of this court in that case are as follows:-

"6.1 In my opinion, issuance of a mere notice can, in certain set of circumstances, cause prejudice to the applicant; the present matter is one such case.

6.2 On the aspect as to how a court is to proceed where a request, for appointment of a receiver, is made by a bank or a financial institution - the following observations of the Full Bench of the Bombay High Court, in the case of State Bank of India vs Trade Aid Paper and Allied Products (India) Pvt. Ltd. & Ors. AIR 1995 Bom 268, being instructive are required to be noticed.

6.3 Briefly, the court in its judgment exhorts adoption of a CM(M)384/2017 Page 2 practical approach while exercising power of appointment of a receiver in the case of banks and financial institutions having regard to the fact that they deal in public funds :-

"...Indeed, it is the duty and function of the Court entertaining the suits instituted by Banks and financial institutions to ensure that efforts are made to dispose of the suits as early as possible and even during the pendency of the suits, ensure that not only the properties are protected but the defendant is made to repay the amount, if desirous of enjoying the benefits secured by obtaining the loan. The powers of the Court under Order 40, Rule 1 of the Code of Civil Procedure are to be exercised to advance cause of justice and what is „just and convenient‟ depends upon the nature of the claim and the surrounding circumstances. The Court should not close eyes to the realities and blindly follow the principles laid down 50 years before when the suits by Banks and financial institutions were a novelty. The economic liberalization and the policy of the Government to grant loans for various activities have increased the number of suits by Banks and financial institutions and in this Court every year more than 2,000 suits are instituted. It would not be difficult to imagine how much public money is involved in these suits and how long the Nationalised Banks and financial institutions are deprived of their dues. The Court should be conscious of these facts and should be more pragmatic in exercising powers under Order 40, Rule 1 of the Code of Civil Procedure."

(Emphasis is mine) 6.4 To be noted, the abovementioned Full Bench judgement of the Bombay High Court in State Bank of India vs Trade Aid Paper and Allied Products (India) Pvt. Ltd. & Ors. case was taken up in appeal to the Supreme Court only on one issue which was qua the embargo put in place by the court on the aspect of sale of the property by the receiver prior to a decree CM(M)384/2017 Page 3 being passed in the suit. The Supreme Court over-ruled the Full Bench judgement on this aspect and stated, in no uncertain terms, in its judgement in the case of ICICI Ltd. & Ors. vs Karnataka Ball Bearings Corpn. Ltd. & Ors. (1999) 7 SCC 488, that no such fetter is contemplated on the powers of the receiver appointed under the provisions of Order 40 Rule 1 of the CPC. In other words, the Supreme Court went as far as to observe that a receiver, pursuant to the directions issued by the court in that behalf, is empowered to sell the property even before a decree is passed in the suit. This, according to the Supreme Court, is discernable on a plain reading of provisions of Order 40 Rule 1 of the CPC. (See : ICICI Bank Ltd. v. Collage Estates Pvt. Ltd. & Ors., 2015 SCC Online Del 12143)"

It was in view of the above legal position that this court in CM(M) 1333/2016 appointed a Receiver.

It is not clear as to why the trial court did not deal with the application for appointment of receiver. The judgment dated 21.12.2016 has been passed in a case with almost identical facts. That case also pertained to a vehicle loan against hypothecation of the vehicle. There was failure on the part of the respondent therein to pay necessary EMIs. In view of the above, it is clear that the impugned order to the extent it dismisses the application under Order 40 Rule 1 CPC suffers from illegality and irregularity. I quash the said order dismissing the application under Order 40 Rule 1 CPC."

Facts of the present case are similar to the facts involved in abovenoted judgments of Hon'ble Delhi High Co0urt which have strangely been ignored by the learned DRT. Here also the appellant bank had financed 0ver thirty lacs on the hypothecation of one BMW car. The repayment of loan was by way of instalments. The respondent had failed adhere to the agreed instalment schedule which led to the recall of the loan and filing of recovery proceedings under Section 19 of RDDBFI Act,1993. Here in the present case also the appellant bank had prayed before the DRT for an ex parte order for appointment of a receiver to seize the financed BMW Car but the learned DRT did not pass any ex parte order in that regard and that has led to the filing of the present appeal.

In the facts and circumstances and the legal position in such like cases laid down by Hon'ble Delhi High Court as also the Bombay High Court the appeal deserves to be allowed and direction of appointment of a receiver is required to be issued.

This appeal is accordingly allowed and Mr.Deepak Kumar, officer of the appellant Bank is appointed as the receiver to seize the above-referred financed BMW Car wherever the same is found. After the car is seized the bank will be at liberty to seek from the Tribunal below further directions for its sale even before issuance of final recovery certificate in the pending O.A.