ICICI Bank Ltd. vs Mainawanti

P.K. Bhasin, J

The appellant Bank is aggrieved by the order passed by the learned DRT ex-parte in its Original Application (O.A.) filed against the respondent borrower under Section 19 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 ('RDDFBI Act') for recovery of the unpaid loan amount which had been advanced to him for purchase of a car, whereby while issuing notice of the O.A. to the respondent borrower the DRT did not pass any order on the prayer made by the Bank for appointment of a Receiver for taking over of the possession of the financed vehicle. Learned Counsel for the appellant Bank has submitted, relying on one decision of the Hon'ble Supreme Court and various orders passed by Hon'ble Delhi High Court and one Full Bench decision of Bombay High Court, that the DRT was not justified in issuing simple notice of the O.A. to the borrower and in not appointing the Receiver at the ex-parte stage itself to seize the vehicle financed by the appellant Bank and which was hypothecated also by the borrower in its favour to secure the financed amount under a hypothecation deed whereunder the Bank was in fact authorised to itself take possession of the financed vehicle in case of defaulting repayment of loan amount by the borrower despite demand which in the present case was the situation. Counsel submitted that in these kind of cases Courts invariably pass orders appointing Receiver and that too by ex-parte orders and the Full Bench of Bombay High Court has held that appointment of Receiver in cases of Banks is a must. However, the DRT at Chandigarh in the present case has not done so and has not even said in the impugned order as to why it was not being considered to be a fit case for appointment of a Receiver by an ex-parte order.

Following orders of Hon'ble Supreme Court and High Courts (submitted without exact citations and downloaded through internet) dealing with the aspect of appointment of receivers for taking possession of the financed vehicle from the borrowers were cited by the Counsel for the appellant:

ICICI Bank Ltd. v. Prakash Kaur & Ors., 138 (2007) DLT 248 (SC) : III (2007) SLT 1 : II (2007) BC 226 (SC) : Appeal (Crl.) 267 of 2007, decided by the Hon'ble Supreme Court of India on 26 February, 2007 in which the Hon'ble Supreme Court had expressed its severe anguish against the manner in which Banks were seizing hypothecated/financed vehicles through muscle power/goonda elements and one of the suggestions given by the Court was that "This could be the best alternative if the Banks do not come forward to employ their own personnel and depute them for recovery of outstandings."

A. Venkatasubbiah Naidu v. S. Chellappan & Ors., VI (2000) SLT 767 : IV (2000) CLT 103 (SC) : decided by the Hon'ble Supreme Court of India on 19 September. 2000.

CITI Bank N.A. Ltd. v. Udesh Kumar, IAO 117/2002, decided by the Hon'ble Delhi High Court on 3.4.2002.

Standard Chartered Bank v. Devender Magar, CRP No. 223/2004 decided by the Hon'ble Delhi High Court on 7th May, 2004.

ICICI Bank Ltd. v. Jai Singh, FAO No. 271/2007 decided by the Hon'ble Delhi High Court on 20th July, 2007.

State Bank of India v. Trade Aid Paper and Allied Products, I (1996) BC 309 (FB) : decided by the Hon'ble Bombay High Court (Full Bench) on 25th May, 1995.

ICICI Bank Ltd. v. Collage Estates Pvt. Ltd. & Ors., FAO 293 of 2015 and CM No. 19476/2015, decided by the Hon'ble High Court on 15th September, 2015.

ICICI Bank Ltd. v. Pawan Kumar Yadav, FAO 436/2015, decided by the Hon'ble Delhi High Court on 23rd December, 2015.

ICICI Bank Ltd. v. Pradeep Sharma, CM (M) No. 825/16, decided by the Hon'ble Delhi High Court on 1st September, 2016.

ICICI Bank Ltd. v. Updesh Nagar, 2016 (DLT Soft) 5 : FAO No. 7/2016, decided by the Hon'ble Delhi High Court on 5th January, 2016.

Learned Counsel Mr. Bhalla also submitted that in most of these orders cited by him not only the appointment of Receivers at the ex-parte stage was approved of but it has been also been observed in some orders accepting the submission on behalf of ICICI Bank itself the instead of Advocate Commissioners Bank's officers should be appointed as Receivers because if Advocates are appointed Receivers they will have to be paid fees which would be spending good money for bad money as chances of recovery from the defaulting borrower in these kind of cases are bleak.

Mr. Bhalla also cited one decision of the Hon'ble Supreme Court in A. Venkatasubbiah Naidu v. S. Challappan & Ors., rendered on 19th September, 2000 (supra) wherein it was considered as to under what circumstances an order of injunction passed by the trial Court is appealable.

I am surprised by the submission made by Mr. Puneet Bhalla that an Advocate should not appointed as a Receiver since more public money would be wasted in an attempt to recovery already doubtful recovery of public money since if this Bank was so conscious of saving public money it would not have filed this appeal when the DRT has simply issued a show cause notice to the borrower as to why his vehicle, which of course allegedly was purchased by loan money advanced to him by ICICI Bank, should not be seized and sold to repay the loan amount at least to the extent the financed vehicle would fetch from its auction.

In one of the decisions cited by the learned Counsel for the Bank itself Hon'ble Supreme Court A. Venkatasubbiah v. Chellappan, had held that an appeal against an order under Order 39, C.P.C. would not lie during the pendency of the injunction application and the aggrieved party can prefer an appeal only against an order passed under Rules 1, 2, 2A, 4 and 10 of Order 39, CPC and that party cannot approach either the Appellate Court or the Revisional Court during the pendency of the application for grant or vacation of temporary stay. Here, stay application moved by the Bank is yet to be disposed of on merits which the DRT has decided to do after hearing the borrower and I do not find any legal flaw or infirmity or perversity in that discretion exercised by the DRT justifying interference in this appeal which appears to be misconceived and ill advised in the facts and circumstances of this case. Normally a Trial Court is expected to give reasons if an order of appointment of Receiver or attachment before judgment is to be passed without hearing the party going to be affected by that order but there is no requirement to give reasons if the reliefs of appointment of Receiver to seize somebody's property or attachment before judgment, which orders are quite drastic in nature, are not to be granted by an ex-parte order. Here the DRT does not appear to be of the view that denial of ex-parte relied of appointment of Receiver will result in grave injustice to the Bank and in the facts and circumstances of this case even this Tribunal is also of the same view.

Even if it is accepted that this appeal is maintainable even during the pendency of the said matter before the DRT, I am of the view that prima facie there does not appear to be any urgency in the matter for the appointment of Receiver and that, too, by a ex-parte order. The appellant Bank is claiming that the vehicle for the impounding of which the appointment of a Recover is sought is hypothecated to the Bank vide a hypothecation deed. However, a perusal of the so-called hypothecation deed placed on record shows that it is a blank document and does not contain any particulars of the hypothecated vehicle and all the relevant columns are left blank. Except for the averments in the O.A., that the vehicle, of which particulars were mentioned in the O.A., there is no document to show even prima facie that the particular vehicle was in fact hypothecation to the Bank by the borrower. Even thought the Bank claims to have in its possession an irrevocable power of attorney executed in its favour by the borrower in which it was authorised to fill in the necessary details in the loan document, that has not been done. In order to claim that the Bank has a prima facie case of hypothecation of the vehicle which was being sought to be impounded through a Court appointed Receiver, the appellant Bank was expected to place on record some documents in support of this claim and merely on the basis of averment made in the O.A. It cannot be said that there is a strong prima facie case in its favour for the grant of ex parte relief of appointment of a Receiver.

Even in the demand notice allegedly sent to the borrower in March 2016, no details of the hypothecated vehicle were given and, in fact, in that demand notice the borrower was not even called upon to surrender the possession of the financed vehicle to the Bank. In fact, it was also not claimed in that notice that the loan amount sanctioned to the borrower was secured by hypothecation of any vehicle through a deed of hypothecation. Prima facie, the respondent borrower does not appear to be a total defaulter in the repayment of instalments and the copy of the statement account filed by the Bank itself shows that he has been making payment of instalments till February 2016 while the demand notice was sent to him in March 2016. For the delay in the payment of instalments, the appellant Bank has also been charging overdue charges. This fact also shows that there is no extreme urgency for appointment of Receiver by an ex-parte order.

In the aforesaid scenario, I am of the view that the appellant cannot be said to have made out a strong prima facie case for the appointment of a Receiver by ex-parte order. However, in case the borrower enters appearance before the DRT and the matter is heard in detail, the Bank can always explain the aforesaid deficiencies highlighted by this Tribunal and then the DRT would be at liberty to take any decision in accordance with law. This appeal is accordingly dismissed with costs of Rs. 10,000/-, to be deposited with DRT Bar Association, Chandigarh to be utilized for its needy members. The costs shall be deposited within 10 days and the concerned Bar Association shall be informed by the Registry about this direction. In case of default, the said Bar Association can take appropriate steps for the recovery of the costs imposed upon the appellant Bank.