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Judgment
Brijesh Sethi, Chairperson
This is an appeal filed by the appellant under section 18 of the Securitization and Reconstruction of Financial Assets and Enforcement of Securities Interests Act against impugned Order dated 17.05.2021 and 02.06.2021 in SA No. 18 of 2021 (pending before the Debt Recovery Tribunal-I, Chandigarh for 1. 07.2021).
It is submitted that the respondent No.2 which is a limited company availed of the financial facilities to the extent of Rs.10,25,06,000/- in the form of CC Limit of Rs.8.43 crores, Term Loan-I of Rs.85.00 lacs, Term Loan-Il of Rs.8.96 lacs, Term Loan-Ill of Rs.60.00 lacs, Term Loan-IV of Rs.25.00 lacs and LG Limit of Rs.3.10 lacs for their unit at Panipat. In consideration thereof, necessary security documents were executed and in addition to the primary security in the form of stocks, receivables and book debts etc., following properties were equitably mortgaged as primary/ collateral security:
(i) Factory property situated at Madkhdoom Jagdan, Abadi Saini Colony, near Mata Chowk, near MC Limit, Panipat, Haryana measuring 825 sq. yards owned by Sh. Bal Kishan Batra.
(ii) Industrial land and building measuring 11 kanal 12 marIa (1.45 acre) situated in village Dadola, Tehsil Bapoli, Distt. Panipat owned by M/s. Ashna Textiles Pvt. Ltd.
(iii) Residential house No.1366-P, Sector 12, HUDA, Panipat.
It is further submitted that because of non servicing of the financial facilities by the borrower, the account of the borrower was declared as non performing asset on 30.6.2016 and demand notice under section 13(2) of the SARFAESI Act was served on the respondents on 11.7.2016 calling upon the respondents to pay a sum of Rs.10,23,32,432/-. The demand notice was personally served on all the respondents. Neither any objection under section 13(3A) was raised nor the amount demand was paid. Consequently, the possession notice was served on the respondents on 17.9.2016 taking symbolic possession. It was duly served in accordance with law, but the same was never challenged by the respondents.
It is further submitted that an effort was made to sell the secured assets on the basis of symbolic possession as per details given below:
Date of notice u/r 8(6)
Date of auction
Properties put to sale
Reserve Price
Results
13.12.2017
15.1.2018
Property of land which is part of khasra No.295/1 min, waka patti makhdoom jadgan, property no. 561-A/16 waka abadi Nr Matta Chowk, Main Road, Inside M.C. limit, Panipat owned by Sh. Bal Kishan s/o Sh. Ram Rakha Batra & Sh. Raj Kumar Batra s/o Sh. Ram Rakha Batra.
Industrial property situated on the land which is part of khewat No.413 min, khasra No.74/11(5- 16), 12(5-16), waka village Dadola Tehsil Bapoli, Distt. Panipat owned by Ashna Textile Pvt. Ltd. through its director Sh. Raj Kumar, Smt. Suman Batra and Sh. Naveen Batra measuring 11 kanals 12 marlas or 1.45 acre
Rs. 1,86,87,000/-
Rs. 1,43,38,000/-
Failed
Failed
20.5.2019
20.6.2019
Property of land which is part of khasra No.295/I min, waka patti makhdoom jadgan, property no.561-A/16 waka abadi Nr Matta Chowk, Main Road, Inside M.C. limit, Panipat owned by Sh. BaI Kishan s/o Sh. Ram Rakha Batra & Sh. Raj Kumar Batra s/o Sh. Ram Rakha Batra.
Industrial property situated on the land which is part of khewat No.413 min, khasra No.74//11(5- 16), 12(5-16), waka village Dadola Tehsil Bapoli, Distt. Panipat owned by Ashna Textile Pvt. Ltd. through its director Sh. Raj Kumar, Smt. Suman Batra and Sh. Naveen Batra measuring 11 kanals 12 marlas or 1.45 acre.
Residential property situated on House No.1366-P, Sector 12, HUDA, Panipat owned by Smt. Varsha Rani w/o Sh. Bal Kishan Batra, Smt. Suman Batra w/o Sh. Ramesh Batra and Smt. Urmila Batra w/o Sh. Raj Kumar Batra measuring 441 sq.mtrs. or 527.43 sq.yards
Rs. 1,69,10,000/- plus 1% TDS thereon
Rs.1,12,28,05 0/- plus 1% TDS thereon
Rs.3,33,57,35 0/- pIus 1% TDS thereon
Failed
11.3.2020
30.3.2020
Industrial situated on land which is part of khewat No.1129, khatoni No.1415, khasra No.286 (13-D), waka Patti Makhdoom Failed 26 Jadgan, Abadi Saini Coloni, near Matta Chowk, inside MC limit, Panipat, Haryana having total land area of 825 sq.yards and owned by Sh.Bal Kishan Batra sb Sh. Ram Rakha Batra.
Industrial property situated on the land which is part of khewat No.413 min, khasra No.74//11 (5- 16), 12(5-16), waka village Dadola Tehsil Bapoli, Distt. Panipat owned by Ashna Textile Pvt. Ltd. through its director Sh.Raj Kumar, Smt. AMB ) 27 Suman Batra and Sh. Naveen Batra measuring 11 kanals 12 marlas or 1.45 acre.
1,43,43,500/- (including 1% TDS)
Rs.95,96,000/- (including 1% TDS)
23.12.2020
30.1.2021
Industrial property situated on the land which is part of khewat No.413 min , khasra No.74//11(5- 16), 12(5-16), waka village Dadola Tehsil Bapoli, Distt. Panipat owned by Ashna Textile Pvt. Ltd. through its director Sh.Raj Kumar, Smt. Suman Batra and Sh. Naveen Batra measuring 11 kanals 12 marlas or 1.45 acre.
Plant & machinery
Rs.95,00,000/-
Rs.25,00,000/-
Bid was receive d but the auction purcha ser did not deposit balance 25% amount and the auction failed.
6.2.2021
4.3.2021
Industrial situated on land which is part of khewat No.1129, khatoni No.1415, khasra No.286 (13-D), waka Patti Makhdoom Jadgan, Abadi Saini Coloni, near Matta Chowk, inside MC limit, Panipat, Haryana having total land area of 825 sq.yards and owned by Sh. Bal Kishan Batra s/o Sh. Ram Rakha Batra.
Rs.1,25,00,000/ -
Sold at Rs.1,25, 50,000/-
Industrial property situated on the land which is part of khewat No.413 min, khasra No.74//11(5- 16), 12(5-16), waka village Dadola Tehsil Bapoli, Distt. Panipat owned by Ashna Textile Pvt. Ltd. through its director Sh. Raj Kumar, Smt. Suman Batra and Sh. Naveen Batra measuring 1.1 kanals 12 marlas or 1.45 acre.
Rs.95,00,000/-
Sold at Rs. 1,74,50 ,000/
It is submitted that in addition to these secured assets, in the original application filed by the appellant, property in the form of industrial building situated on the land in which part of khasra No.295/1min, Patti Makhdoom Jagdan, Property No.156-A/16, Waka Patti near Matta Chowk, Main Road inside MC limit, Panipat covered under deed No.6474 dated 23. 2.1983 (owner Raj Kumar Batra to the extent of 283.33 sq.yards) and deed No.8659 dated 10.2.2015 (owner Bal Kishan to the extent of 66.67 sq. yards) is attached. This property is valued at nearly Rs.75.00 lacs.
It is next submitted that when the effort to sell the properties on the basis of symbolic possession were failed, the appellant took actual physical possession of factory land and building vide possession notice dated 26.11.2020 and proper inventory was also prepared in this regard.
It is further submitted that in order to hamper the recovery process, the respondents got a collusive suit filed with regard to property measuring 11 kanals 12 marlas on which the industrial unit was operational and gave a consent to set aside the mutation in their favour. Consequently a collusive civil court decree in which the appellant is not a party was got passed by respondent on 1.5.2010.
It is further submitted that after having taken the actual physical possession of the property in question, the same was put to auction again. The notice under Rule 8(6) read with Rule 9(1) of the Security Interest (Enforcement) Rules, 2002 was served on the respondents on 23.12.2020 and the actual date of auction was fixed as 30.1.2021. Necessary publication was also carried out in different newspapers and it was also duly displayed on the e-auction portal of the bank.
It is further submitted that the respondents have taken no effort to clear the outstanding dues in spite of the fact that the account had become a non performing asset way back in the year 2016. Finding that the property might be sold at this time, purely as a self serving evidence, the respondents gave a onetime settlement offer on 18.12.2020 in which they assessed the value of the secured assets as Rs. 501.97 lacs and offered to pay the same. It is worth mentioning here that in spite of knowing that no onetime settlement can be submitted without an upfront payment, no upfront payment was ever given. Since the onetime settlement offer was only a self serving evidence created by the respondents with the sole intention of hampering the recovery process, the same was rightly declined by the appellant vide communication dated 19.12.2020.
It is further submitted that the respondents knowing fully well that the sale of the secured assets is fixed for 30.1.2021, yet another onetime settlement offer was given by them on 2. 01.2021 without any pre-deposit raising the onetime settlement offer to Rs. 518.00 lacs. It is worth mentioning here that all the immovable properties were assessed practically at the same rate and the amount was raised by including the valuation of the machinery installed at village Dadola, Tehsil Bapoli, Distt. Panipat.
It is further submitted that the offer given on 02.01.2021 was practically on the same terms of the earlier OTS proposal which has already been rejected and the same was, therefore, not considered by the bank and the appellant proceeded with the auction proceedings. In order to thwart the auction process, the respondents filed SA No.18 of 2021 titled as M/s. Ashna Textiles Pvt. Ltd. & Others Vs. Indian Overseas Bank through its authorized officer on 28.1.2021. It is worth mentioning here that in spite of drafting the SA on 24. 1.2021, the same was filed only on 28.1.2021 after the respondents came to know that there is a bidder of the mortgaged properties. It is also worth mentioning here that the primary ground taken in the SA by the respondents was that the land which is being sold by the bank is agriculture in nature.
It is further submitted that the SA was taken up after the auction date by learned respondent No.1 on 01.02.2021 and the interim protection was declined to the respondents.
It is next submitted that the appellant immediately filed written statement to the SA vide diary No.1024 dated 8. 02.2021 which was taken up on record by learned respondent No.1 and it was noticed that the plant and machinery has been sold for a sum of Rs.25.87 lacs and the said sale has been confirmed. It was also noticed by learned Presiding Officer that the auction with respect to the immoveable properties failed as the successful auction purchaser did not deposit balance 25% of the amount as required. The prayer of the respondents to restrain the bank from delivering the possession of plant and machinery was declined keeping in view the fact that the demand notice under section 13(2) of the SARFAESI Act was of the year 2016 and more than Rs.10.00 crores were payable.
It is further submitted that since the auction had failed, a fresh sale notice was published by the appellant and a notice under Rule 8(6) of the Rules was served on the respondents on 06.02.2021 and the date of auction was fixed for 4. 03.2021 and both the immoveable properties which are the secured assets were put to auction.
It is next submitted that, the respondents instead of challenging the fresh sale notice or by amending the SA, which they had already filed, filed IA No.149 of 2021 to challenge the sale notice dated 6.2.2021. Although the said IA was not maintainable in view of the settled law on this issued, learned respondent No.1 entertained the IA and issued notice to the appellant for 01.03.2021.
It is further submitted that the matter could not be taken up on 01.03.2021 or 02.03.2021 and the same was adjourned to 15.04.2021. In spite of the fact that the matter had been adjourned to 15.04.2021, vide order dated 02.03.2021, the matter was taken up again on 04.03.2021, when learned respondent No.1 was duly informed that both the properties attracted bidders and have since been sold. The prayer of the respondents for an interim order not to accept the bids was declined and a strange order was passed, in which the appellant was permitted to confirm the bids, but not to confirm the sale till the next date of hearing. In fact, vide the same order, the appellant was directed to file reply to the SA by 9. 03.202 1 in spite of the fact that the reply to the main SA had already been filed by the appellant vide diary No.1024 dated 8.2.2021.
It is next submitted that in order to ensure that the matter is disposed of early in view of the fact that properties are sold, an application was filed by the appellant for pre-poning the date and yet another application was filed by the respondents bearing IA No.237 of 2021 and IA No.306 of 2021. Surprisingly IA No.237 of 2021 was primarily for staying the subsequent auction which had taken place on 04.03.2021 which had already been rendered infructuous and in IA No.306 of 2021 a strange prayer was made by the respondents for directions to the bank to consider third OTS proposal dated 02.01.2021. It is worth mentioning here that during the intervening period, all the properties, except the house in question, had already been sold. As far as plant and machinery is concerned, the auction had attained finality and, in fact, the possession of plant and machinery had already been handed over to the auction purchaser. While two bids for the industrial units of the respondents have been received and accepted, but the sale could not be confirmed because of the interim orders passed by learned respondent No.1. Although the said IAs were again not maintainable, yet without permitting the appellant to file reply to those applications, both the applications were heard and the matter was adjourned for orders on those IAs.
It is further submitted that the Presiding Officer did not hold the court on 18.03.2021 and the matter was adjourned to 24. 03.2021.
It is next submitted that on 24.03.2021 the learned respondent No.1 passed a detailed order in which it was duly noticed that the arguments were heard on 09.03.2021 when IA No.237 of 2021 and IA No.306 of 2021 were taken up for the first time and no opportunity of filing the reply to these applications was given to the appellant. However, learned Presiding Officer duly noticed the fact that the appellant had already put on record the confirmation letters dated 08.03.2021 vide which the highest bid of both the immoveable properties has been accepted. It was duly informed that one property which had the reserve price of Rs.1.25 crore was sold for a sum of Rs.1,25,50,000/- and the other property which had the reserve price of Rs.95.00 lacs was sold for a sum of Rs.1,74,50,000/-. Learned Presiding Officer was further informed that the OTS proposal dated 2.01.2021 was not in accordance with the OTS proposal and was not considered simply because it was same as was declined vide communication dated 19.12.2020, yet learned respondent No.1 gave a strange direction to the appellant and directed the appellant to decide the OTS proposal dated 02.01.2021 and confirmation of sale was further stayed till the OTS proposal is finally decided by the competent authority.
It is further submitted that in spite of the fact that IA No.237 of 2021 which was practically for staying the auction proceedings which had taken place on 04.03.2021 had practically become infructuous and the respondents if, at all, aggrieved by any such subsequent action of the bank, were required to either file a fresh SA or they were required to amend the SA, the same was kept pending on the ground that it will be heard only after the decision of the OTS proposal. Thereafter the matter was adjourned to 15.4.2021.
It is next submitted that since the matter was getting unduly delayed, in spite of the fact that two properties had already been sold and their bids were confirmed because of the orders passed by learned respondent No.1 and the auction purchaser was pressing for confirmation of the sale so that they could enjoy the fruits of the property which they had brought, the appellant filed IA No.412 of 2021 with the prayer for preponing the date and also informing learned respondent No.1 that the OTS proposal dated 2.1.2021 has already been rejected. The said IA was taken up for hearing on 6.4.2021, but instead of preponing the date and hearing the main case, the IA was ordered to be heard with the main case on 15. 4.2021.
It is further submitted that the matter could not be taken up on 15.4.2021 and thereafter it was adjourned to 22.4.2021. The order dated 15.4.2021 is not available. However, on 22. 4.2021 the matter was not heard and it was adjourned to 27. 4.2021.
It is further submitted that on 27.4.2021, in spite of the fact that the OTS proposal given by the respondents had already been rejected, learned respondent No.1 went completely out of way and purely for reasons unknown to the appellant bank observed that before any OTS proposal is filed with the appellant, the same should be placed before the Debt Recovery Tribunal. A strange direction was issued directing the respondents/borrower to give a fresh OTS proposal by 30.4.2021 and the matter was adjourned to 1.5.2021. Although another strange direction was given to the respondents to keep the upfront amount ready so that the same could be offered along with the proposed OTS on 1.5.2021.
It is further submitted that the matter could not be taken up on 1.5.2021 and the same was taken up on 4.5.2021. Learned Respondent No.1 was duly informed that the direction given by respondent No.1 had not been complied with as no OTS proposal was provided before 30.4.2021 and strangely learned respondent No.1 directed the bank to take a decision on the OTS proposal given by the respondents after 30. 4.2021 and the matter was adjourned to 11.05.2021.
It is next submitted that on 11.5.2021, learned respondent No.1 was duly informed that the OTS proposal given by the respondents had already been declined. Although the rejection order of the OTS proposal was placed on record, but the same was not noticed in the order dated 11. 5.2021. In spite of the fact that the competent authority had already rejected the OTS proposal given by the respondents, the respondents were directed to place on record the confirmation of balance in their account for which the cheques were issued in the light of OTS. While saying so, learned Presiding Officer was duly aware of the fact that no OTS proposal can even be filed before any authority without an upfront payment and the cheques in this regard were never accepted.
It is further submitted that on 17.5.2021, the matter was again heard in which it was duly noticed by learned respondent No.1 that the OTS proposal given by the respondents on 3.5.2021 in spite of the fact that they were supposed to give such proposal by 30.4.2021 (vide order dated 27.4.2021) and noticed that amount of Rs.6.15 crores was offered as onetime settlement. He also noticed the fact that the OTS given was completely illusive as they had only offered Rs.30.00 lacs to be kept in no lien account. They also produced the cheque of Rs 3.15 crore for setting aside the auction which had already taken place and had further offered to pay balance amount within 90 days. Although the said proposal was promptly dealt with by the competent authority and declined within 3 days and the decision was conveyed to the respondents on 6.5.2021, instead of appreciating the promptness with which the OTS proposal given by the respondents was considered and declined, learned respondent No.1 started making unwarranted observations against the Bank officials and observed that the rejection of the OTS proposal vide communication dated 6.5.2021 has been passed by the Assistant General Manager without placing the same before the competent authority and a strange order was passed in which the following directions were issued:
"1. Sh. Santosh Kumar Pandey, AGM, who declined OTS, through letter dated 06.05.2021, is hereby directed to remain connected through VC, for arguments on the next date of hearing.
Respondent bank will also file copy of rules/guidelines showing competency level of officers, who can decide the OTS proposal, finally in the present case, as the amount as offered in OTS is more than Rs. 5 Crore. Put up for compliance and further arguments on 21 .05.2021. All the parties are hereby directed to not to seek any adjournment on any ground, order of status quo, shall continue, till further orders."
It is further submitted that the learned Presiding Officer has completely overlooked the fact that Sh. Santosh Kumar Pandey was not a party in the SA or in the lAs filed by the respondent and he had not been given any opportunity to file written statement for any assertion levelled against him during the course of oral hearing, yet directions were issued and as such the directions especially in an SA when the learned Debt Recovery Tribunal had no authority to pass such directions seems strange. It is worth mentioning here that during the course of arguments learned respondent No.1 was duly aware of the fact that the Hon'ble Division Bench of the Delhi High Court in the case of M/S Satnam Agri Products Ltd. & Ors. Vs. Union of India &Ors., 2014 SCC OnLine Del 6965 has categorically noticed the fact that the Debt Recovery Tribunal exercise jurisdiction within the parameters mentioned in the Recovery of Debts and Bankruptcy Act or SARFAESI Act and while hearing an SA, the Debt Recovery Tribunal has got absolutely no authority to issue directions either for restructuring or for onetime settlement. In spite of this fact having brought to the notice of learned respondent No.1 and the judgement have been placed before him, learned respondent No.1 kept on insisting that the bank should enter into onetime settlement which was practically against the financial interest of the bank.
It is next submitted that the matter was adjourned to 21. 5.2021, the appellant filed an application before learned Respondent No.1 with the prayer that the orders passed on 11. 5.2021 may kindly be kept in abeyance. However, learned Respondent No.1 dismissed the said prayer by saying that vide order dated 17.5.2021 further directions have already been issued and the matter was again adjourned to 21.5.2021 for compliance of the orders dated 11.5.5021. It is worth mentioning here that the OTS proposal has already been rejected and the matter has been fixed for orders on 21. 5.2021.
It is further submitted that the matter was taken up on 21. 5.2021 and the concerned Assistant General Manager remained present through video conferencing, but no order is uploaded for that date and subsequently the matter was taken up on 24.5.2021. On 24.5.2021 it was noticed by learned Presiding Officer that the matter was heard on 21.5.2021 and learned Presiding Officer was informed that the onetime settlement proposal was rejected by the competent authority, but the orders on that day could not be dictated because by the time the arguments were over, the concerned official had left and as such the orders were dictated on 24.5.2021. Two more lAs bearing No 461 of 2021 and 462 of 2021 were also filed. Learned Presiding Officer was informed that two mortgaged properties have been sold and full amount has been received, but in view of the interim order granted, the sale has still not been confirmed. The appellant bank was once again directed to place on record the communication vide which the competent authority declined the onetime settlement proposal.
It is further submitted that on 2.6.2021, IA No.462 of 2021 was taken up for hearing in which proper facts were duly noticed in detail and purely on the basis of oral arguments addressed, learned respondent No.1 noticed the averments made by the respondents but the arguments raised by the appellant were not even noticed. A specific reference was made with regard to onetime settlement arrived at between the bank and M/s. Hindustan Trading and M/s. S.A. Fabrics by observing that it is more or less similar. It is worth mentioning here that during the course of arguments, learned Presiding Officer was informed that there cannot be any similarity as far as onetime settlement is concerned, especially when the onetime settlement is not on the basis of any enforceable onetime settlement policy. Learned Presiding Officer was further informed that the cases of M/s. Hindustan Trading and M/s. S.A. Fabrics were completely on different footings and as far as the present respondents are concerned, in spite of the fact that the demand notice was served on 11.7.2016 and now as on today more than Rs.20.00 crores are payable, no upfront payment was ever offered by the respondents. Learned respondent No.1 was further informed that as far as the present case is concerned, the valuation of the properties given by the respondents is completely on lower side and the appellant has already recovered more amount that what was assessed by the respondents. The property which was assessed by respondents at Rs.95.00 Iacs/Rs.1.00 crore was sold for a sum of Rs.1,74,50,000/- and the plant and machinery which was assessed at Rs 12.00 lacs was sold for a sum of Rs 25.00 lacs. The fact that the Bank officials have declined the OTS proposal after approval of the competent authority was also placed before learned respondent No.1. In spite of the fact that all the facts were duly brought to the notice of learned Presiding Officer and all documents have been placed on record, the same were not considered while passing order dated 2.6.2021.
It is further submitted that from the facts as mentioned above, it is apparent that the orders passed by learned Presiding Officer practically forcing the bank to accept onetime settlement offer given by the respondents and as such the appellant is constrained to file the present appeal.
It is next submitted that the impugned orders dated 17. 05.2021 and 02.06.2021 passed by learned respondent No.1 are patently erroneous and the same are liable to be set aside.
It is further submitted that respondent No.1 while passing the impugned orders has completely overlooked the fact that the account of the respondents was classified as NPA in the year 2016 when more than Rs.10.00 crores were payable by the respondents. Since the respondents had no defence to offer, they did not raise any objection nor paid the outstanding dues forcing the bank to proceed further in accordance with law. At no stage any intention was shown by the respondents to settle the dues of the bank in spite of the fact that further action under the SARFAESI Act was deferred by the authorized officer for nearly one and a half years and it was only in the year 2018 that the process of selling the secured assets was initiated. Not only that, during the auction which was fixed earlier, respondents knowing that there are no bidders never came forward to give any onetime settlement offer at any stage and in fact the property was sold in the month of Jan., 2020. It was only in December, 2020 that a frivolous onetime settlement offer of Rs 5.01 crore was made by the respondents without any upfront payment which was rightly declined by the bank vide communication dated 19.12.2020. Further the OTS which was made on 2.1.2021 was practically in the same terms as the amount was raised by including the cost of machinery which was rightly considered as the same was again without any upfront payment and was practically the same which had already been rejected vide communication dated 19.12.2020. A person who did not make any onetime settlement offer for a period of four years and subsequently made a frivolous offer had to be thrown out at the outset. In fact, the judgement passed by Hon'ble Punjab and Haryana High Court in CWP No.18874 of 2020 decided on 9.11.2020 which is reported as 2021(1) R.C.R.(Civil) page 566 titled as Lalit Rajpal and others versus Bank of Baroda and others was placed on record to show that such onetime settlement offers are required to be dismissed with heavy costs as they are not bonafides. In spite of these admitted facts, learned respondent No.1 has been repeatedly directing the bank to enter into onetime settlement which is not in the interest of the bank. It is the settled law that learned Debt Recovery Tribunal does not have any inherent jurisdiction and they are required to function within the parameters as provided in law. Hon'ble Delhi High Court in the case of Satnam Agri Products Ltd.(supra) has practically dealt with this issue at length and has categorically held that in an SA learned Debt Recovery Tribunal is only required to see' compliance of provisions of the SARFAESI Act and neither any direction for restructuring nor for onetime settlement can be issued. For ready reference relevant paragraph of the said judgement is quoted below:
"21. It may also be added that DRT being a statutory Tribunal can perform only such functions as the statute provides From reading of the Securitization Act, we are unable to find any provision empowering DRT, in a proceeding under Section ii to issue any such direction to the creditor Bank/Financial Institution to consider the proposal for rehabilitation.
The Supreme Court in Standard Chartered Bank v. Dharmender Bohi, 2013 (12) SCALE 124 held that the DRT is required to function within its statutory parameters and does not have any inherent powers. While observing that Section 19(25) of the DRT Act confers limited powers, it was held:
"27. It is submitted that the tribunal has been given power under the statute to pass such other orders and give such directions to give effect to its orders or to prevent abuse of its process or to secure the ends of justice. Thus, the tribunal is required to function within the statutory parameters. The tribunal does not have any inherent powers and it is limpid that Section 19(25) confers limited powers. In this context, we may refer to a three-Judge Bench decision in Upper Doab Sugar Mills Ltd. v. Shandara (Delhi) Saharanpur Light RIy. Co. Ltd., AIR 1963 SC 217 wherein it has been held that when the tribunal has not been conferred with the jurisdiction to direct for refund, it cannot do so. The said principle has been followed in Union of India v. Orient Paper and Industries Limited (2009) 16 SCC 286."
The tribunal under the RDB Act has been established with a specific purpose and we have already focused on the same. Its duty is to see that the disputes are disposed of quickly regard being had to the larger public interest It 43 is also graphically clear that the role of the tribunal has not been fettered by technicalities. The tribunal is required to bestow attention and give priority to the real controversy before it arising out of the special legislations. As has been stated earlier, it is really free from the shackles of procedural law and only guided by fair play and principles of natural justice and the regulations formed by it."
It is further submitted that the Supreme Court has also made it clear that the Tribunals cannot assume the role of a Court of different nature which really can grant "liberty to initiate any action against the Bank" and that it is only required to decide the lis that comes within its own domain.
It is further submitted that DRT does not have any power to issue any direction to the creditor bank to consider the rehabilitation or settlement proposal, if any submitted by the borrower.
It is further submitted that in the application filed by the borrower, the entire emphasis is being made on the observations made by Hon'ble Supreme Court of India in the case of M/s Sardar Associates Sardar Associates & Ors. Vs. Punjab & Sindh Bank & Ors., (2009) 8 SCC 257 to say that the Debt Recovery Tribunal or the Debt Recovery Appellate Tribunal has the powers to consider the request of onetime settlement. However, while observing on this issue, the Hon'ble Supreme Court in the case of Sardar Association has explained at length to say that such a power can only be exercised in the proceedings initiated by the bank by way of original application and not on an application filed under the SARFAESI Act. It has also been observed that the judgement in the case of Sardar Associates came only with respect to one time settlement scheme circulated by Reserve Bank of India while in the present case, the onetime settlement which is being insisted upon by the borrower/learned Tribunal is not circulated by Reserve Bank of India and the proceedings are under the SARFAESI Act and not under the Recovery of Debts and Bankruptcy Act. In view of the fact that learned respondent No.1 has got no jurisdiction to force a bank to enter into onetime settlement with the borrower which is not in the interest of the bank, the impugned orders are patently illegal and are required to be set aside.
It is further submitted that the Learned respondent No.1 has further erred in law in overlooking the fact that there is no onetime settlement policy which has been circulated by Reserve Bank of India which confers any enforceable right on a defaulting borrower to claim onetime settlement as a matter of right. As far as the normal onetime settlements are concerned, it is always the discretion of the financial institution. The officers of the bank performed their duty as public servants and it is their fundamental duty to ensure that the maximum possible recoveries are affected from the secured assets. Growing NPAs is a matter of grave concern and in the present case the sole effort of the appellant was to ensure a better recovery from the secured assets. In any case, there is no onetime settlement policy which confers any enforceable right on the respondents to ask for onetime settlement as a matter of right. This fact has been stand settled by practically all the High Courts of this country in several judgements. Sole reliance has been placed by the respondents on the judgement passed in the case of Sardar Associates(Supra) which has got no applicability in the present case. The respondents have further relied upon different judgements which in fact are not the judgements but only simple directions to the bank to consider the proposal of OTS. There is not even one judgement which had been relied upon by the respondents which makes it mandatory to a financial institution to accept an OTS which is not in the interest of the financial institution. Both the directions given by learned respondent No.1 to consider onetime settlement given by the respondents were without jurisdiction, yet those were complied with and onetime settlement offers given by the respondents were declined by giving valid reasons which are already on record. It is not within the scope of the authority of learned Debt Recovery Tribunal to go into the correctness of the commercial decision taken by the competent authority. Once the competent authority finds that there is no onetime settlement policy which confers any enforceable right on the borrower and the bank can recover more from the defaulting borrower, there is absolutely no reason to force a bank to accept onetime settlement which is against the commercial interest of the bank. Few of the judgements which specifically lay down that even the Hon'ble High Court cannot issue a mandamus while exercising the powers under Article 226 of the Constitution of India which are much wider in nature to enforce a bank to accept onetime settlement. Since the respondents have got no enforceable right to claim onetime settlement as a matter of right, no such directions could be issued to the appellant by respondent No.1 and that too time and again and the procedure adopted is patently wrong and as such the impugned orders deserve to be quashed.
It is further submitted that the learned respondent No.1 while passing the impugned orders has chosen to completely overlook the fraudulent conduct of the respondents. Every possible effort has been made by the respondents to hinder the recovery process. The account of the respondents became NPA in the year 2016 but they did not make any effort to settle the same in spite of the fact that they never challenged the process adopted by the bank. Finding that the property may be sold, a collusive civil court decree has been obtained with regard to the property which is mortgaged with the bank, although such a decree has got no bearing on the recovery rights or the mortgagee rights of the bank as the bank is not a party to those proceedings, yet the action and the conduct of the respondents in obtaining such a collusive decree has to be considered while seeing whether a high valued defaulter is entitled to any discretionary relief keeping in view his fraudulent conduct. Not only that, it is on record that at no stage, the respondents made a valid onetime settlement offer as upfront payment was not given with any of the offers made. It is further apparent that the respondent himself assessed the minimum value at Rs.599.00 lacs. Although the said calculations are meaningless as the policy under which the respondents are claiming benefit is not legally enforceable and it is only for the internal guidelines of the bank. The said policy does not lay down that the bank is bound to accept the minimum value. In fact, the policy specifically says that every effort has to be made to recover maximum possible amount. The policy under which these calculations have been shown is not legally enforceable and in any case does not lay down that the competent authority is duty bound to accept the minimum value. Moreover, the minimum value as calculated by the respondents on the face of it is erroneous as the property which is shown as valued at Rs.95.00 lacs has been sold for a sum of Rs.1,74,50,000/- and the machinery which was valued at Rs.12.00 lacs by the respondents was sold for Rs.25.00 lacs. In fact, the policy on which the reliance is supposed to be placed by the respondents is not enforceable and in any case, the minimum payable value under the said policy cannot be calculated unless and until the appellant is able to have the correct valuation done at the current rates. The respondents never offered the properties to the appellant for assessing its market value and since various parameters have been providing for seeing the secured and unsecured portion, it is not possible to arrive at a minimum value in the present case as the plant and machinery has already been sold and the amount has been recovered and appropriated towards the dues of the borrower. Other two properties have also been sold for nearly Rs.3.00 crores which were assessed by the respondents at much lesser value. As the properties which have already been sold, the same cannot be included for any onetime settlement offer given and as such the entire exercise undertaken by learned respondent No.1 is erroneous and liable to be set aside. Keeping in view the conduct of the respondents and the fact that the total amount payable by the respondents is more than Rs.20.00 crores and after a great efforts a small amount is being recovered, the respondents are not entitled to any relief from the Debt Recovery Tribunal in an SA.
It is further submitted that the whole exercise undertaken by respondent No.1 is completely contrary to law. The perusal of various zimni orders passed by learned respondent No.1 shows that learned respondent No.1 is trying to say that the sale has to be set aside only for the purposes of enabling the respondent to arrive at onetime settlement, whereas, no such procedure is prescribed under the provisions of the SARFAESI Act. Prior to amendment, Section 13(8) of SARFAESI Act gave a right to a defaulting borrower to redeem the properties before the same could be sold and the question of sale was interpreted in different ways by different judgements. For ready reference Section 13(8) (before amendment) is reproduced below:
"(8) If the dues of the secured creditor together with all costs, charges and expenses incurred by him are tendered to the secured creditor at any time before the date fixed for sale or transfer, the secured asset shall not be sold or transferred by the secured creditor, and no further step shall be taken by him for transfer or sale of that secured asset."
It is further submitted that in order to remove such confusion which was being created, the Legislature in its wisdom amended Section 13(8) of the SARFAESI Act w.e.f. 1. 9.2016 and the right of redemption given to a borrower was confined only to the date on which the sale notice is given. For ready reference Section 13(8)(after amendment) is reproduced below:
"(8) Where the amount of dues of the secured creditor together with all costs, charges and expenses incurred by him is tendered to the secured creditor at any time before the date of publication of notice for public auction or inviting quotations or tender from public or private treaty for transfer by way of lease, assignment or sale of the secured assets,-
(I) the secured assets shall not be transferred by way of lease assignment or sale by the secured creditor; and
(ii) in case, any step has been taken by the secured creditor for transfer by way of lease or assignment or sale of the assets before tendering of such amount under this subsection, no further step shall be taken by such secured creditor for transfer by way of lease or assignment or sale of such secured assets."
It is further submitted that the perusal of Section 13(8) makes it amply clear that once the auction notice is published in the newspapers and was served on the respondents, the right to redeem the property was extinguished at that stage. However, learned Presiding Officer seems to be completely ignoring the provisions of Section 13(8) of the SARFAESI Act as amended while passing various directions to the bank to practically forcing the bank to enter into onetime settlement. On this ground also, the impugned orders are erroneous and liable to be set aside.
It is next submitted that the learned respondent No.1 has further overlooked the fact that the subsequent sale notice was never stayed and the properties have already been sold. The highest bid was accepted as per the liberty given by respondent No.1 and the entire sale consideration has already been deposited by the subsequent purchasers. The fact that the financial institutions are unable to sell the properties because of the fear that it will be dragged into litigation is a matter of common knowledge. Once the auction was conducted and the successful auction purchaser has deposited the entire consideration, he cannot be denied to enjoy the fruits of the property and the unnecessary continuation of the stay orders prohibiting the conformation of sale and issuance of sale certificate is not only against the interest of the appellant but it is against the interest of the entire banking industry. It is the burdened duty of the financial institutions to ensure that the auction purchasers are able to enjoy the fruits of the properties purchased by them from the financial institutions under the SARFAESI Act without any hindrances and without any delay and the prompt service by the financial institutions in this regard will encourage better participation. By prohibiting an auction purchaser from enjoying the fruits of the property which he has purchased is against the very interest of the financial institutions and as such it is because of this reason that the appellant is filing the present appeal only to ensure that the sale in favour of the auction purchaser is confirmed and the impugned orders are set aside by this Hon'ble Appellate Tribunal.
It is further submitted that the enthusiasm of learned respondent No.1 in pushing for onetime settlement of the respondents is rather strange. The stay was declined to the respondents on 2.1.2021 and the sale of plant and machinery was not only confirmed but the auction purchaser was also permitted to remove the machinery which he had taken away. The said sale has in fact not been challenged by the respondents in the subsequent lAs. IA to stay the subsequent sale notice was also dismissed and in fact, the appellant was permitted to confirm the bids (which is the exact impression used in the order) yet the appellant has been restrained from confirming the sale which on the face of it is contradictory. While permitting the appellant to confirm the bid, it was duly noticed that nothing has been paid for the last 5 years and the amount payable is more than Rs.10.00 crores. It has also been noticed by learned Respondent No.1 that the property has been sold and it has also been brought to his notice that the entire sale consideration has been paid, yet for the reasons best known to the respondents, the auction purchaser has not been impleaded as party till date. Once the bid was ordered to be confirmed by respondent No.1, a right has been accrued to the auction purchaser and that right could not be adjudicated upon in his absence. This objection was taken on several occasions, but the same was not dealt with by learned Presiding Officer and no effort has been made by the respondents to amend the SA to implead the auction purchaser. Even an IA has not been filed to implead the auction purchaser as a party. Since the auction took place on 4.3.2021, the limitation for challenging the said sale has expired in the absence of the auction purchaser. Since the auction purchaser is not a party till date in spite of the bid having been confirmed in his favour, the continuation of order prohibiting the confirmation of the sale is not only self contradictory but is patently illegal and the same deserves to be set aside. On this ground also the appellant is entitled to the appropriate relief.
It is further submitted that the learned Respondent No.1 has further erred in law in making unnecessary observations/comments against Sh. Santosh Kumar Pandey, Assistant General Manager of ARM Branch. Firstly the observations on the face of it are erroneous and uncalled for. The observations of learned respondent No.1 to the effect that Sh. Santosh Kumar Pandey was not competent to reject the onetime settlement offer given by the respondents is factually incorrect. Although different authorities have been mentioned for consideration of onetime settlement offer given by the borrower depending on the amount involved, yet the Asstt. General Manager, who is heading the recovery branch of high valued cases, is the first authority which deals with onetime settlement offer given by any borrower. At the same time, he is not supposed to act like a post office and he is not supposed to recommend any proposal given by a borrower to the higher authorities. It is his duty to first scrutinize the proposal and see that it is in the interest of the bank and it also conform through the parameters settled by the bank. He has to also ensure that the proposal is accompanied by necessary upfront payment to show his bonafide for further consideration of OTS. In the present case, the proposals given by the respondents were not conforming to any of the parameters and were not accompanied by any upfront payment. The concerned Assistant General Manager declines the onetime settlement proposal and gave specific reasons which have been placed on the file of learned Debt Recovery Tribunal. The fact that the said communication by the Assistant General Manager was with the concurrence of the competent authority has further been placed before the learned Debt Recovery Tribunal by placing on record the e-mail which had ratified the decision taken by the Asstt. General Manger. The observation that the Asstt. General Manager is not competent authority and all his action is without any authority, is complete misreading of the functioning of the banks and such observation is required to be expunged from the records of the case. Moreover, no personal observations could have been made by the respondents without impleading Sh. Santosh Kumar Pandey as party which is the elementary principle of pleadings. Since learned respondent No.1 had made adverse comments against the concerned Assistant General Manager without giving an opportunity to him to file appropriate reply in response to the observations made against him, the observations are patently illegal and are required to be expunged from the records.
It is further submitted that as per the documents on record the conduct of the default borrower is not above board and in fact, is malafide. The proceedings under section 13(2) and 13(4) of the SARFAESI Act initiated way back in the year 2016 were never challenged. First four auctions which were conducted and which attracted no bidder was never challenged as the detailing borrower was keeping a track about the possibility of auction attracting a bidder. It was only in the auction which was fixed for 31.1.2021, for which notice under Rule 8(6) of the Security Interest (Enforcement) Rules, 22002 was served, that the borrower gave a sham one time settlement offer of Rs.5.01 crore which was immediately declined by the competent authority on 19.12.2020. On coming to know that the auction fixed is likely to attract bidders, a second one time settlement offer was given on 2. 1.2021 offering a sum of Rs.5.18 crores. This offer also lacked bonafides as neither any upfront payment was made nor the valuation as shown in the schedule was reflecting the correct picture. The said one time settlement offer was ignored as a similar offer had already been declined by the competent authority on 19.12.2020. The borrower was fully aware of this fact and in fact in the auction fixed on 30.1.2021, the machinery which was valued by the borrower at Rs.12.00 lacs was sold for a sum of Rs.25,87,500/-. Even the second property got a higher price, but since the auction purchaser could not make the entire payment, the same failed. However, two properties were subsequently sold in the auction which was held on 4.3.2021 and the properties have fetched much better price than what was being claimed in the OTS proposal dated 2.1.2021. For ready reference the chart showing the valuation claimed by the borrower and the rate at which the property has been sold/valuation of the unsold properties is as under:
Details of the property
Valuation of the property as per letter dated 02.02.2021 given by the borrower
Rate at which the property sold/ valuation of unsold property
Industrial situated on land which is part of khewat No.1129, khatoni No.1415, khasra No.286 (13- D), waka Patti Makhdoom Jadgan, Abadi Saini Coloni, near Matta Chowk, inside MC limit, Panipat, Haryana having total land area of 825 sq. yards and owned by Sh. Bal Kishan Batra sb Sh. Ram Rakha Batra.
Rs. 1,44,00,000/-
Rs. 1,25,50,000/-
Industrial property situated on the land which is part of khewat No.413 min, khasra No.74//11(5- 16), 12(5-16), waka village Dadola Tehsil Bapoli, Distt. Panipat owned by Ashna Textile Pvt. Ltd. through its director 59 Sh. Raj Kumar, Smt. Suman Batra and Sh. Naveen Batra measuring 11 kanals 12 marlas or 1.45 acre.
Rs.1,00,00,000/-
1,74,50,000/-
Plant and machinery
Rs.12,00,000/-
Rs.25,87,500/-
Residential property situated on House No.1366- P, Sector 12, HUDA, Panipat owned by Smt. Varsha Rani w/o Sh. Bal Kishan Batra, Smt. Suman Batra w/o Sh. Ramesh Batra and Smt. Urmila Batra w/o Sh. Raj Kumar Batra measuring 441 sq. mtrs. or 527.43 sq. yards
Rs.2,62,00,000/-
Rs.3,12,00,000/-
It is further submitted that the property which has been got attached by the bank is also valued at Rs.75.00 lacs, in addition to the properties which are mortgaged/attached. The appellant has also got the personal securities of the borrower/guarantors and since all of them are financially well off, there is every possibility that after the sale of the secured/mortgaged/attached properties, the bank may be able to recover even more money. Whereas, the offer which was initially Rs.5.18 crores and which was subsequently placed during the SARFAESI proceedings before the Debt Recovery Tribunal to Rs.6.15 crores shows the dishonest intention of the borrower, as the offer given even on 2.1.2021 was much less than the value of the secured assets and subsequently the offers given are also much less than what can be possibly recovered by the bank. The money payable to the banks is public money and the same cannot be permitted to be wasted in such a manner and as such the entire effort of learned Tribunal in practically insisting upon the bank to enter into one time settlement is neither permissible in law nor is in any case in the interest of the bank. On this ground also the impugned orders passed by learned Debt Recovery Tribunal are erroneous and liable to be set aside.
Lastly the appellant has prayed that the impugned orders dated 17.05.2021 & 02.06.2021 passed by Respondent No. I may kindly be set aside in view of the grounds given therein and permit the appellant to immediately confirm the sale of the secured assets in favour of auction purchaser, which has already taken place.
Written Arguments on behalf of appellant Indian Overseas Bank
The Ld. Counsel for the appellant has also filed written submissions which are more or less on the line as pleaded by him in his appeal and arguments addressed before the court.
Reply on behalf of Respondent No. 2 to 6 to the appeal filled by the Bank:-
It is submitted that the present appeal deserves to be rejected on the preliminary ground that the Bank, has already filed an application for recall of the order dated 02.06.2021 and 17.05.2021 by filing I.A. No.568 of 2021. Therefore, the present appeal is not maintainable. Further the appellant has no where disclosed in the appeal regarding the above application which amounts to concealment of material fact which had bearing over the maintainability of the present appeal and hence, the same deserves to be dismissed with costs. In case if there is a concealment of material fact, the appellant has no right to be heard on the merits of the case. Further, the interim order secured also deserves to be vacated especially when the appeal itself is not maintainable. Incorrect facts and position of law has been pointed out to obtain interim relief which deserves to be rejected.
It is further submitted that the first argument of the Bank is that the D.R.T. does not have any power to direct the Bank to consider the case of settlement. The said contention is legally incorrect. Hon'ble Supreme Court, in the case of Sardar Associates Vs. Punjab & Sind BankSupra) in Para No.31,32 and 33 held as under:-
It may be that no specific prayer was made but the same our opinion, keeping in view the provisions of the 2002 Act, did not preclude the Appellate Tribunal to consider the offer of the appellants. The Appellate Tribunal in terms of the provisions of the Act like the original Tribunal is interested only in recovery of the amount. While doing so, it, in our considered opinion, has the requisite jurisdiction to consider the prayer made by a debtor for one time settlement particularly in view of the fact that the same is within the purview of One Time Settlement Scheme of the Reserve Bank of India.
If a public sector bank is otherwise bound by any guidelines issued by the Reserve Bank of India, we see no reason as to why the same cannot be enforced in terms of the provisions of the Act by the Tribunal and consequently by the Appellate Tribunal It is not a case where the appellants had prayed for quashing of a policy decision taken by the respondent - Bank.
The question which arose for consideration before the Appellate Tribunal as also before the High Court was as to whether offer having been made by the bank A the appellants herein, it could have turned around and contend that only because the appellants had furnished security to the extent of Rs. 11 crores, the same by itself would entitle it to take recourse to a discriminatory treatment. The answer to the said question must be rendered in the negative.
It is next submitted that a bare perusal of the above would reveal that the D.R.T. has power to consider and direct the Bank to enforce the settlement. Further, the contention that in the cited case, the OTS policy was of Reserve Bank of India, does not cut much eyes. This is for the reason that OTS Policy in the present case is of the Bank which is better than R.B.I. In the present case, O.T.S. is by the Bank itself Secondly, Hon'ble Supreme Court has held that deviation from an OTS Policy by a Government Institution, would amount to discrimination which is violative of Article 14 of the Constitution of India. The said principle applies to both in case if the OTS Policy is of the Bank or by the R.B.I It does not make any difference whether the OTS Policy is of the RBI Rather, in the present case, when the OTS proposal is of the Bank, it is completely enforceable. The Bank cannot raise an argument that OTS proposal of the Bank can Permit discrimination whereas that of RBI will not permit Further, RBI has stopped framing any OTS proposal for the Banks for last more than 10 years. Thus, it is the positive contention of the applicant that the legal issue raised by the Bank, is completely misplaced and where there is violation of fundamental rights of the applicant, that is discrimination by not following the OTS proposal framed by the Bank and adopting pick and choose manner, the power of D.R.T., cannot be curtailed to be treated to have restricted to a limited extent of examining only Section 13 (4) measures. Moreover in the case of Authorized Officer, Indian Overseas Bank v. M/s. Ashok Saw Mill., 2009 (8) SCC 366, the Hon'ble Supreme expanded the scope of the jurisdiction of D.R.T., by holding that even though Section 17 provides D R T. to examine measures U/s 13 (4), but that does not restrict examining even the measures of the sale. Therefore, Section 17 cannot be given a restrictive meaning.
It is further submitted it is matter of record that the Bank has not laid any challenge to the previous orders passed by the DRT . i.e. order dated 04.03 2021, which could have been challenged, but has not been challenged and therefore, has attained finality, in which while adjourning the matter for 9. 03.2021, the Bank was restrained from confirming the sale. Moreover, thereafter, vide order dated 24.03.2021, the Bank was directed to decide the OTS. The Bank did not even lay challenge to the said order. Rather, the said order was proceeded for purported compliance, even though, actually, there was no compliance. Therefore having accepted the order dated 24.03.2021, the Bank cannot now raise a plea that D R.T does not have any power to direct the Bank to consider the OTS Had that been so, the Bank ought to have challenged the order dated 24.03.2021 which was never challenged Therefore, it is to be assumed that the DIU has the power to direct the Bank to consider OTS. Therefore, the procedure of consideration of OTS is required to be seen. Thereafter, the Bank in purported compliance of the aforesaid order, which in fact, debars the Bank from challenging the competence of D.R.T. to direct the Bank to consider OTS, passed an order dated 31.03.2021, arbitrarily rejecting the offer.
It is further submitted that keeping in view the Judgment of Hon'ble Delhi High Court, in the case of Satnam Agri Products Limited Vs. Union of India(Supra), the jurisdiction of D.R.T., does not include direction to the Bank, for consideration of settlement or rehabilitation. This submission is not correct. A judgement of Supreme Court cannot be ignored on the basis of a judgment of Delhi High Court, which does not consider pars 29 of the judgment of Hon'ble Supreme Court. The judgment of Delhi High Court does not lay down the law correctly while not appreciating the law laid down by the Hon'ble Supreme court. Further in case of conflict it is the judgment of Hon'ble Supreme court which will prevail and not High Court as the latter has no jurisdiction to overrule the law laid down by the former.
It is further submitted that on the same day i.e. on 31. 03.2021, revised OTS proposal was submitted to the Bank. In that case, it was also requested that in case if the Bank intended to have a different amount, the Bank should have informed the said OTS amount to the applicant.
It is further submitted that the Bank refused to even accept the upfront amount which is evident from the affidavit of Shri Gurjit Singh Chugh, who stated that they met Mr. Santosh Kumar Pandey on 02.04.2021 at 3:00 P.M. who refused to accept the upfront amount, on the ground that the Bank has already sold the property. The rejection by She Santosh Kumar Pandey is highly unsustainable. On one hand. he rejects the proposal on the ground that upfront is not submitted and on the other hand, he refuses to accept the same. Secondly, in spite of direction of the Bank to consider the OTS, he states that the property has already been auctioned.
It is next submitted that there is an OTS proposal of the Bank, The said OTS proposal clearly gives the formula. The Bank is trying to evade the said formula. In any case, subsequently, on 13.04.2021, fresh proposal was submitted for Rs.6 crone.
It is further submitted that the I.A. No.559 of 2021, was filed, wherein violation of Article 14 of the Constitution of India was highlighted in terms of the Judgment of Hon'ble Supreme Court. In the said I.A., the applicant highlighted that in three other accounts i.e. Hindustan Trading, Hind Leather and SA Fabrics, the same Bank has settled the account under the same OTS proposal. Thereafter, on 27.04.2021, an order was passed, directing the Bank to consider the OTS. Thereafter, on 03.05.2021, revised OTS proposal was submitted to the Bank,
It is further submitted that on 06.05.2021, the OTS proposal was again rejected on frivolous grounds. The reason for rejection is that the Bank has received the sale consideration from the auction purchaser, even though the sale has not been confirmed. This is no ground for non-consideration of the OTS. Rather, the Bank is in violation of the said order dated 27.04.2021.
It is further submitted that on 04.05.2021, it is ordered by the DRT that the OTS proposal has already been submitted In fact, this order dated 04.05.2021, was passed, in view of the fact that the applicant would submit an OTS proposal of Rs.6.15 crore, wherein Rs.6 crore would the OTS amount and Rs.15 lakhs would be amount which would be required to pay off the bidders.
It is further submitted that the property having detail vide sale deed no 6474 dated 23.02.1983 measuring 283.33 Sq Yards & ode sale deed no 8659 dated 10.02.2005 measuring 66.66 square yards was released by the Bank itself and amount stood deposited in the bank 31 03.2021, and thereafter NOC issued by the Bank within three days Ode Bank's letter dated 15.04.2021, and returned the required papers of the property, The Bank also issued a letter to the Tehsildar/Naib Tehsildar/Municipal Commissioner Panipat for lifting of the Bank's charge on the said land /property, The answering respondent submits that despite this, the Bank in an IA 550021 for modification of the order dated 18.05.2021 in IA 522/2021 qua the attachment of the property which has already been released by the bank upon deposit of the dues as detailed herein above, hence it is the Bank who has up, wrong declaration got the land attached again as per order dated 01.06.2021, which is wrong and hence needs to be corrected upon by withdrawing the attachment order by the bank
It is further submitted that the I.A. No.568 of 2021 was filed by the Bank, which completely and squarely covers the case of the applicant. A bare perusal of Page No.13, Para No 22 of the same would reveal that the Bank admits that the Bank is ready to consider the OTS proposal for Rs.6.15 crore. It was further stated that the OTS amount as per the OTS proposal is Rs. 6 crore. Thus, the only contention by the Bank today, is that the proposal cannot be processed because the bids have been received.
It is next submitted that on 17.05.2021, it is noticed that the OTS proposal given by the respondents on 05.03.2021, is for Rs.6.15 crore for full and final settlement of the loan account. Since the same was rejected by Shri Santosh Kumar Pandey on 06.05.2021, without forwarding the same to the competent authority, the Tribunal, in exercise of the powers conferred in view of the Judgment in the case of Sardar Associates Vs. Punjab & Sind Bank (Supra), Para No.31, 32 and 33 called upon the Bank to call upon the officers, to explain as to whether the same was forwarded to the competent authority or whether the same has been rejected on his own. This is very well permissible as the Tribunal is competent to enforce the policy of the Bank.
It is further submitted that as per the OTS proposal, A.G.M. of the Bank is not entitled to reject the proposal, whereas, inspite of this, the proposal was rejected. This is discriminatory, as in the case of S.A. Fabrics and in the case of Hindustan Trading, the proposal been accepted by the competent authority i.e. at the Head Office by the Settlement Committee and not by the AGM. Thus the action of the bank is in violation of Article 14 of the Constitution of India.
It is next submitted that as a matter of record, the rejection is by incompetent authority as in compliance of the aforesaid Order, the Bank had filed the alleged letter authorizing Shri Santosh Kumar Pandey to reject the offer. Therefore, it is apparent that the rejection is by the AGM, Head Office whereas even AGNI Head Office is not competent to delegate power to an AGM of the Zonal Office. Both AGMs are of the same rank. Once the AGM does not have any power, there is no question of delegating any authority. Any order passed by an incompetent authority is null and void. It is contrary to the OTS proposal, which can be enforced by the DRT as per the judgment of Hon'ble Supreme Court.
It is further submitted that once the application for recall of the order dated 02.06.2021 and 17.05.2021, is pending by way of I.A. No.568 of 2021, the Bank cannot file the present appeal. This is the preliminary objection of the applicant.
It is next submitted that the contention that in the case of Shri Vishnu Steel, sale can be challenged only by filing of an amendment application of fresh S.A., is factually incorrect. A bare perusal of the said Judgment would reveal that even an application to challenge subsequent cause without amending, is also maintainable.
It is further submitted that the rest of the contentions raised by the bank do no relate to the ground of challenge to the impugned orders especially when the matter is pending before the DRT. The bank has filed an application for hearing the matter before DRT on an early date which shows that the bank has relinquished all remaining grounds as contained in the present appeal as the bank is also of the view that the same are to be considered before the DRT where the matter is pending. The short reply is only for supporting arguments of the respondent in so far as limited challenge of the bank towards the two impugned orders are concerned. The Respondents are filing the present short reply with liberty to file a detailed reply if need so arises. It is, therefore, prayed that the present appeal may be dismissed with costs, in the interest of justice.
Written Submissions by Respondents.
Written arguments were also filed by the respondents more or less on the line of the pleadings and arguments submitted before this court.
FINDINGS
I have heard the Ld. Counsel for the parties and given though to the written submissions. The following two impugned orders passed by the Ld. PO DRT have been challenged by the appellant.
Impugned Order dated 17.05.2021
Arguments were heard on 11.05.2021 on the ground of submission of OTS proposal by applicant and its disposal by the respondent bank.
As per record latest OTS proposal was given by the applicant on 03.05.2021, through this they offered an amount of Rs. 6.15 Crores as full and final settlement in the subject loan account.
SA applicant further offered Rs. 30,00,000/-through cheque as upfront amount, to be kept in no lien account and to be adjusted, if OTS for Rs. 6.15 Crore is accepted.
Further, cheque of Rs. 3.15 Crore is also produced subject to encashment and payment to successful bidders, who deposited Rs. 300 Lacs, and Rs. 15 Lacs to be paid as compensation, subject to acceptance of OTS for Rs. 6.15 Crores. Balance amount of Rs. 2.70 Crores was to be paid in next 90 days.
Said OTS proposal was dismissed within 3 days, by AGM Sh. Santosh Kumar Pandey, through letter dated 06.05.2021, mainly on the ground that:-
,the present OTS cannot be considered due to following:-
as full sale consideration amount from the auction purchaser stands deposited,
The bank authorities may consider the OTS on merit…
From the language of the letter dated 06.05.2021, it is clear, that Sh. Santosh Kumar Pandey, AGM, decided the OTS proposal dated 03.05.2021, at his own, and without forwarding it to the competent authorities, who can take, final decision on it.
During the course of arguments, it was felt that there is some communication gap between the competent authority of the respondent bank and the officer who issued letter dated 06.05.2021, as dismissal of OTS was issued without placing the same before the competent authority.
As the amount outstanding, is very high, and applicant is ready and willing to deposit an amount of Rs.3.45 Crore, if OTS for Rs. 6.15 Crore is accepted, so I am of the considered view that the dispute requires to be settle down in the presence of competent authorities of the respondent, who can take decision on OTS as early as possible.
Accordingly following order is passed:-
Sh. Santosh Kumar Pandey, AGM, who declined OTS, through letter dated 06.05.2021, is hereby directed to remain connected through VC, for arguments on the next date of hearing.
Respondent bank will also file copy of rules/guidelines showing competency level of officers, who can decide the OTS proposal, finally in the present case, as the amount as offered in OTS is more than Rs. 5 Crore.
Put up for compliance and further arguments on 21.05.2021. All the parties are hereby directed to not to seek any adjournment on any ground, order of status quo, shall continue, till further orders.
Impugned order dated 02.06.2021
ORDER ON I.A. no. 462/2020
Arguments were heard on this I.A. on 27.05.2021 and Ld. Counsel for the applicant raised following points as arguments:-
As per facts, present applicant filed an OTS proposal on 02.01.2021 with the respondent bank and the same was decided on 31.03.2021, as declined.
The OTS policy dated 30.04.2020 came into existence and it was applicable till 31.03.2021.
That, while the OTS proposal dt. 02.01.2021 was kept pending for about 90 days and was declined on the last day of the closing of, filing of OTS proposal.
That Auction Notice was issued on 26.02.2021, and the auction was proposed on 04.03.2021.
That the applicant gave another OTS proposal on the same day by an improvement and also asking for the amount of OTS, as per calculation given in OTS policy dated 30.04.2020 of the respondent bank.
No response was given by the respondent bank.
That on 11.05.2020 one more OTS proposal was given by the applicant but the same was declined on 16.05.2021 without giving any reason of declining the same.
That the applicant gave OTS proposal of Rs. 6.15 Crore out of which Rs. 3.00 Crore were to be paid to the successful Auction Purchaser, an amount of Rs. 15.00 Lakhs, as compensation and remaining amount of Rs. 3.00 Crore to be paid in 90 days.
This I.A. was filed by the applicant with a prayer that the respondent bank may be directed to inform, the amount of OTS, in the light of scheme of the bank dated 30.04.2020.
During the course of arguments, Ld. Counsel for the applicant argued that the AGM of the bank Sh. Santosh Kumar Pandey, got settled two cases of different borrowers namely M/s Hindustan Trading and M/s S.A Fabrics having similar or more or less amount as outstanding, but in this particular case of the borrower, Sh. Pendey is declining OTS proposals either with delay of 90 days or without forwarding the same to the competent authority for approval and declined by himself.
Finally, Ld. Counsel for the applicant also argued that the respondent bank failed to comply with the directions issued by this Tribunal on 17.05.2021 and till the date of argument of this I.A., no guidelines/ rules/ circular regarding competency of decision of OTS proposal and decision of competent authority, regarding rejection of OTS proposal dated 11.05.2021, is not placed on record. Ld. Counsel for the applicant prayed to allow the I.A.
Ld. Counsel for the respondent bank strongly objected the prayer and arguments raised by Ld. Counsel for the applicant.
Ld. Counsel for the respondent bank argued that demand notice Dated 11.07.2016 was of more than Rs.10.00 Crore but the applicant failed to deposit any amount against the outstanding amount and are filing baseless Interim Applications, in order to avoid further recovery proceedings. It was also argued that as on date amount of more than Rs. 20.00 Crore is outstanding and OTS proposal given by the applicants were rightly rejected by the competent authority and conveyed by Authorized Officer, as no upfront amount is offered with any OTS proposal.
Ld. Counsel, vehemently argued that the OTS proposal against the two mortgaged properties, is not acceptable as those properties have already been sold out in the light of Auction Notice dated 04.03.2021 and confirmation of sale, is stayed by this Tribunal.
Ld. Counsel for the respondent bank also argued that OTS proposal cannot be accepted on the condition that the applicant wants to sale, two mortgaged properties, already auctioned. It is also alleged that the applicant is trying to linger the proceedings of this S.A. with malafide intentions and prayed that the S.A. is required to heard and decide finally, keeping in mind the amount of high value involved in this case.
Heard arguments and perused the documents, received through mail of this DRT.
As per facts of the case demand notice was issued on 11.07.2016 but till 2018 no further course of action, as provided in SARFAESI Act of 2002 was taken.
On this quarry being raised by this Tribunal Ld. Counsel for the respondent bank submitted that family members of the applicant filed various civil litigation, with regard to the mortgaged property and obtained stay, so no further actions could be initiated.
I.A No.237/2021, filed by, the applicant challenging the Auction Notice dated 04.02.2021, is kept pending for disposal and respondent bank filed copies of bid confirmation letters dated. 08.03.2021.
Perusal of the record goes to show that letter/emails with regard to rejection/decline of OTS proposal, submitted by the applicant are replied by Sh. Santosh Kumar Pandey, AGM and in the letter dated 04.05.2021, filed by the bank along with reply, it is clear, that the bank is not ready to accept OTS proposal against the sale of two properties sold out as bank received full amount from Auction Purchaser. In para-2 of the letter, it is mentioned that “it is further pertinent to mention that the amounts and consideration of the said OTS is only with regard, to the loan amount of M/s Ashna Textiles Pvt. Ltd., subject to approval from the competent authorities”. Copy of this letter is forwarded to CM at Chennai.
From the above facts, it is clear that the competent authority which can decide the OTS proposal is not AGM, Sh. Santosh Kumar Panday and it’s an authority sitting at Chennai.
It is also clear from the most of the rejection letters of OTS, issued and auction dated 04.03.2021, that the respondent bank do not want to entertain any proposal of redemption of two properties, so, auctioned treating as if sale/auction is finalized.
I am of the considered view, that at this stage only bids are confirmed and no third party interest can be even deemed to have been created.
On 08.03.2021, copies of bid confirmation letters dated 06.03.2021, of two mortgaged properties, were filed by respondent bank and from perusal of these “bids confirmation letters”, it is clear, that the Authorized Officer has not mentioned, about the direction of this Tribunal dated 04.03.2021 to not to confirm, the sale so, the Auction Purchaser’s might not have any intimation about stay on confirmation of sale and so it is at the sole risk of the respondent bank and its Authorized Officer. Moreover, the applicant is willing to pay entire bid amount of bid for Rs.3 crores and Rs.15 lacs, as 5% compensation to both the auction purchaser, so it is not clear, if the auction purchaser are having knowledge of the proceedings going before this Tribunal. Ld. Counsel for the applicant filed balance confirmation letter of the account of proposed buyer against an amount of Rs.3.15 crore, but respondent bank is not ready to accept, amount from a IIIrd party.
Here, I do not agree with the objections raised by the respondent bank because a defaulter, is at liberty, to arrange amount from anywhere based on any agreement/promise but to the extent that no harm, be caused to the interest of the bank. Moreover, if the applicant was having that much amount in their account, then why the account could have declared as NPA.
Ld. Counsel for both the parties, referred various judgments of Hon’ble Apex Court as well as Hon’ble High Court, and I am of the view, that first it is to be decided, that all OTS proposals given by the applicant were, in fact, declined, by the Competent Authority or by, Santosh Kumar Pandey himself as alleged by the applicant.
I am of the considered view, that the respondent bank failed to file on record, decision of competent authority, against rejections of all OTS proposals, and in the light of judgment of Hon’ble Punjab and Haryana High Court dated 20.03.2021 Kumar Notes Vs. Indian Overseas Bank referred by Ld. Counsel for the applicant, that the rejection, do not show consideration of the offer made as the respondent bank is obliged by virtue of the OTS guidelines, it is necessary to the respondent bank to provide detailed reason of rejection of OTS proposals.
Further, despite directions issued by this Tribunal on 17.05.2021 the respondent bank failed to produce on record, guidelines/rules and competency of level of officers, who are competent to decide the OTS proposal of loan account, defaulters. Though, AGM Sh. Santosh Kumar Pandey, during the course of argument through VC on 21.05.2021 assured that he will filed coy of decision of OTS proposal dated 11.05.2021 and guidelines but in fact nothing produced on record.
This Tribunal have taken a note of this non-compliance and it is now the sweet will of Sh. Santosh Kumar Pandey, to comply with the order dated 17.05.2021, on or before, next date of hearing, failing which, appropriate action, may be initiated as per law.
Along with IA No.306/2021, judgments of Hon’ble Punjab & Haryana High Court, passed in the matter of M/s Hindustan Trading Vs. Indian Overseas Bank dated 18.02.2021 and in the matter of M/s SA Fabrics & Others Vs. Indian Overseas Bank dated 02.03.2021, were filed, and from, these two judgments, it is clear, that it was the respondent bank itself, who gave offer of OTS, and amount involved in OTS, proposal is also around Rs. 5.00 Crore. Reference, of forwarding, the OTS proposal to competent authority, also found place in the order dated 02.05.2021, in the matter of M/s SA Fabrics & others.
I find force in the arguments, advanced by Ld. Counsel for the applicant that, similar bank, through same Authorized Officer offers OTS to, two borrowers and agreed for disposal of OTS proposal, staying the auction, but in the present matter, no decision of OTS proposal taken by competent authority.
Accordingly, I am of the view, that the respondent bank, is required to place on record detailed reason of rejection of all OTS proposals and also to inform, the amount of OTS, as per formula given in OTS proposal dated 04.03.2020 and to comply with the directions issued by this Tribunal on 17.05.2021. It is clear from the letter dated 31.03.2020 issued by Authorized Officer Sh. Santosh Kumar Pandey, that he conveyed decision of OTS proposal dated 02.01.2021, only on 31.03.2021, when, the OTS scheme was to be closed and this is sufficient to say, that the OTS, proposal dated 02.01.2021, was kept pending till the last date and after that further OTS proposals, were not declined on the ground that now OTS policy dated 30.04.2020 is closed.
Respondent bank is directed to comply with this order, within a week’s time and simultaneously both the parties are also directed to argue on IA No. 237/2021, challenging the auction notice dated 26.02.2021, so that, proceedings of this SA, may not linger on further.
With these observations, IA No. 462/2021, stands disposed off.
File be put up on 09.06.2021 for compliance & arguments on IA No. 237/2021.
The short question to be considered is whether the Bank can be directed by DRT to accept the OTS proposal given by the respondent or not?
It is settled law that bank cannot be forced to accept the OTS proposal. The said law has been laid down by the Hon’ble Supreme Court in its judgment titled Bijnor Urban cooperative Bank Limited, Bijnor and Ors. Vs. Meenal Agarwal & Ors., 2021 SCC Online SC 1255 in which the Hon’ble court in para 22 has framed the following two issues:-
I. Whether benefit under the OTS Scheme can be prayed as a matter of right?;
II. ii) Whether the High Court in exercise of powers under Article 226 of the Constitution of India can issue a writ of mandamus directing the Bank to positively consider the grant of benefit under the OTS Scheme and that too de hors the eligibility criteria mentioned under the OTS Scheme?
Thereafter, in para 24, the Hon’ble Supreme court has held that as per the guidelines issued, the grant of benefit of OTS Scheme cannot be prayed as a matter of right. In para 28, the Hon’ble Supreme court has held as under:-
28.Even otherwise, as observed hereinabove, no borrower can, as a matter of right, pray for grant of benefit of One Time Settlement Scheme. In a given case, it may happen that a person would borrow a huge amount, for example Rs. 100 crores. After availing the loan, he may deliberately not pay any amount towards installments, though able to make the payment. He would wait for the OTS Scheme and then pray for grant of benefit under the OTS Scheme under which, always a lesser amount than the amount due and payable under the loan account will have to be paid.
This, despite there being all possibility for recovery of the entire loan amount which can be realised by selling the mortgaged/secured properties. If it is held that the borrower can still, as a matter of right, pray for benefit under the OTS Scheme, in that case, it would be giving a premium to a dishonest borrower, who, despite the fact that he is able to make the payment and the fact that the bank is able to recover the entire loan amount even by selling the mortgaged/secured properties, either from the borrower and/or guarantor. This is because under the OTS Scheme a debtor has to pay a lesser amount than the actual amount due and payable under the loan account. Such cannot be the intention of the bank while offering OTS Scheme and that cannot be purpose of the Scheme which may encourage such a dishonesty.
Perusal of the above para reveals that no borrower can, as a matter of right, pray for grant of benefit of One Time Settlement Scheme (OTS). It was held by the Hon’ble Apex Court that in a given case, a person may borrow a huge amount of Rs. 100 Crores and after availing loan, he may not deliberately pay back the amount and wait for the OTS scheme under which, always a lesser amount than the amount due is to be paid. It was held that if in such a case, the borrower is given a right to avail the OTS scheme, it would be giving a premium to a dishonest borrower.
Further in para 29, the Hon’ble Court has held as under:
If a prayer is entertained on the part of the defaulting unit/person to compel or direct the financial corporation/bank to enter into a one-time settlement on the terms proposed by it/him, then every defaulting unit/person which/who is capable of paying its/his dues as per the terms of the agreement entered into by it/him would like to get one time settlement in its/his favour. Who would not like to get his liability reduced and pay lesser amount than the amount he/she is liable to pay under the loan account? In the present case, it is noted that the original writ petitioner and her husband are making the payments regularly in two other loan accounts and those accounts are regularised. Meaning thereby, they have the capacity to make the payment even with respect to the present loan account and despite the said fact, not a single amount/installment has been paid in the present loan account for which original petitioner is praying for the benefit under the OTS Scheme.
Perusal of the above, para reveals that if a prayer on the part of the borrower is accepted and financial corporation/ banker is compelled to enter into OTS then every defaulting borrower who is capable to pay, would like to wait and pay the lesser amount in OTS scheme.
Further in para 30, the Hon’ble Court has observed as under:-
The sum and substance of the aforesaid discussion would be that no writ of mandamus can be issued by the High Court in exercise of powers under Article 226 of the Constitution of India, directing a financial institution/bank to positively grant the benefit of OTS to a borrower. The grant of benefit under the OTS is always subject to the eligibility criteria mentioned under the OTS Scheme and the guidelines issued from time to time. If the bank/financial institution is of the opinion that the loanee has the capacity to make the payment and/or that the bank/financial institution is able to recover the entire loan amount even by auctioning the mortgaged property/secured property, either from the loanee and/or guarantor, the bank would be justified in refusing to grant the benefit under the OTS Scheme. Ultimately, such a decision should be left to the commercial wisdom of the bank whose amount is involved and it is always to be presumed that the financial institution/bank shall take a prudent decision whether to grant the benefit or not under the OTS Scheme, having regard to the public interest involved and having regard to the factors which are narrated hereinabove.
Perusal of the above para reveals that Hon’ble Apex Court has held that even Hon’ble High Court cannot issue a writ of mandamus in exercise of its power under Article 226 of the constitution of India directing the institution/Bank to positively grant the benefit of OTS to a borrower. According to the Ld. Apex court, such a decision should be left to the commercial wisdom of Bank whose amount is involved.
Thus, it is clear from the above judgment of Hon’ble Supreme Court that Ld. PO DRT could not have directed the Bank to accept the OTS proposal.
Ld. Counsel for the respondents no.2 to 6 have, however, tried to distinguish the above judgment of Bijnor Urban cooperative Bank Limited, Bijnor and Ors. Vs. Meenal Agarwal & Ors.(Supra) on the ground that it is not a binding principle as it has not considered the earlier judgment in case of Sardar Associates & Ors. Vs. Punjab & Sindh Bank & Ors., (2009) 8 SCC 257.
This Tribunal has considered the above contention of Ld. Counsel for the respondents and is of the opinion that the above judgment is distinguishable on the ground that in the case of Sardar Associates & Ors. Vs. Punjab & Sindh Bank & Ors.(Supra), the OTS was circulated by the Reserve Bank of India whereas in the present case, no OTS scheme has been circulated by the Reserve Bank of India. Further, in the above judgment, the Hon’ble Supreme Court has also talked about power of functioning of Reserve Bank of India under Section 36A of the Banking Companies Amendment Act, 1959. The Hon’ble Supreme Court has discussed the salient feature of OTS policy, circulated by Reserve Bank of India. It was observed by the Hon’ble Supreme Court that OTS policy circulated by Reserve Bank of India is statutory in nature and therefore, a writ in nature of mandamus can be issued. The Hon’ble Supreme Court has also referred to earlier judgment in which it has been held that guidelines issued by Reserve Bank of India are binding. It was further observed by the Hon’ble Supreme Court that a right has been created in faovur of borrower because of the fact that guidelines were issued by Reserve Bank of India. The matter before this Tribunal is entirely distinguishable for the reason that OTS was not circulated by the Reserve Bank of India
In view of the latest judgment of Hon’ble Supreme Court in Bijnor Urban cooperative Bank Limited, Bijnor and Ors. Vs. Meenal Agarwal & Ors.(Supra), the judgments cited by Ld. Counsel for the appellant in support of it case that directions can be issued by the Ld. DRT to the Bank to accept the OTS, cannot be accepted.
It is also a settled law that in SA, Ld. DRT is only required to see compliance of Provisions of SARFAESI Act and no direction for restructuring or settlement can be issued by it. In the case of M/S Satnam Agri Products Ltd. & Ors. Vs. Union of India & Ors. 2014 SCC OnLine Del 6965, the Hon’ble Division Bench of Delhi High Court has held in para 21 and 22 as under:-
It may also be added that DRT being a statutory Tribunal can perform only such functions as the Statute provides. From a reading of the Securitization Act, we are unable to find any provision empowering DRT, in a proceeding under Section 17, to issue any such direction to the creditor Bank/Financial Institution to consider the proposal for rehabilitation.
The Supreme Court in Standard Chartered Bank Vs. Dharmender Bohi, 2013 (12) SCALE 124 held that the DRT is required to function within its statutory parameters and does not have any inherent powers. While observing that Section 19(25) of the DRT Act confers limited powers, it was held:
"27. The aforesaid provision makes it quite clear that the tribunal has been given power under the statute to pass such other orders and give such directions to give effect to its orders or to prevent abuse of its process or to secure the ends of justice. Thus, the tribunal is required to function within the statutory parameters. The tribunal does not have any inherent powers and it is limpid that Section 19(25) confers limited powers. In this context, we may refer to a three-Judge Bench decision in Upper Doab Sugar Mills Ltd. v. Shahdara (Delhi) Saharanpur Light Rly. Co. Ltd.,AIR 1963 SC 217 wherein it has been held that when the tribunal has not been conferred with the jurisdiction to direct for refund, it cannot do so. The said principle has been followed in Union of India v. Orient Paper and Industries Limited (2009) 16 SCC 286." It was further observed in Para 29:
".......................... The tribunal under the RDB Act has been established with a specific purpose and we have already focused on the same. Its duty is to see that the disputes are disposed of quickly regard being had to the larger public interest. It is also graphically clear that the role of the tribunal has not been fettered by technicalities. The tribunal is required to bestow attention and give priority to the real controversy before it arising out of the special legislations. As has been stated earlier, it is really free from the shackles of procedural law and only guided by fair play and principles of natural justice and the regulations formed by it."
The Supreme Court has also made it clear that the Tribunals cannot assume the role of a Court of different nature which really can grant "liberty to initiate any action against the Bank" and that it is only required to decide the lis that comes within its own domain.
We are thus, of the view that DRT does not have any power to issue any direction to the creditor bank to consider the rehabilitation or settlement proposal, if any submitted by the borrower.
Thus, the Hon’ble court has categorically held that DRT being a Statutory Tribunal can perform such functions as Statute provides and it cannot pass any direction to the creditor Bank to consider the settlement proposal.
Ld. Counsel for the Respondent has next argued that the appellant has concealed material fact and therefore, the present appeal is not maintainable. He has submitted that on the date of filing of the appeal before this Tribunal, a review application bearing I.A.No. 568/2021, filed by the appellant against the impugned order dated 17.05.2021 and 2. 06.2021, was already pending before the Ld. PO and this fact has been concealed by the appellant and, therefore, the appeal should be dismissed on this ground alone.
Ld. Counsel for the appellant, on the other hand, has submitted that no fact has been concealed from this Tribunal. It is submitted that review petition, filed by the appellant before the Ld. DRT was subsequently withdrawn and keeping in mind the fact that said review application was withdrawn, the present appeal is maintainable. Ld. Counsel for the appellant has further submitted that withdrawal of review application later in time can at the most termed as an irregularity and not an illegality and therefore, the same stands cured, the moment review application was withdrawn.
The Tribunal has considered the rival submissions. It is a settled law as discussed in the case of M/S Satnam Agri Products Ltd. & Ors. Vs. Union of India & Ors. 2014 SCC OnLine Del 6965 that the Tribunal has not been fettered by technicalities and it is totally free from the shackles of procedural law and is only guided by fair play and natural justice and the regulation framed by it and, therefore, when the Ld. Counsel for the appellant has clearly stated at bar that he has withdrawn the review petition, the present appeal is maintainable before the Tribunal.
Ld. Counsel for the respondent has next argued that AGM Sh. Santosh Kumar Pandey was not competent to reject the OTS offer, given by the respondent. Ld. Counsel for the appellant, on the other hand, has refuted the above contention of Ld. Counsel for the respondent.
I have considered the rival submissions on the above issue. It will not be correct to say that AGM Shri Santosh Kumar Pandey was not competent to reject the One Time Settlement. Though different authorities have been mentioned for consideration of OTS proposal yet the AGM who is heading Recovery Branch of high valued cases is the first authority which deals with OTS offer given by any borrower. He is not supposed to act mechanically but is required to analyze the proposal and to see whether it is in the interest of bank or not. Since the proposal was rejected by the AGM by giving reasons and the said decision of AGM has the concurrence of the competent authority, in these circumstances, the contention of Ld. Counsel for the respondent that proposal was wrongly rejected by an officer of the Bank who was not authorized to do so, cannot be accepted.
Moreover, the Tribunal is of the opinion that as held by the Hon’ble Apex Court in Bijnor Urban cooperative Bank Limited, Bijnor and Ors. Vs. Meenal Agarwal & Ors., 2021 SCC Online SC 1255, the Bank cannot be forced to Accept the OTS offer and, therefore, the contention of Ld. Counsel that AGM was not a competent authority to take decision on an OTS proposal does not help him at all.
Ld. Counsel for the respondent has, however, next argued that the bank has not challenged the orders dated 24. 03.2021 and 04.05.2021 which have attained finality and therefore, the bank cannot challenge the impugned orders which are later in time.
I have perused the record. The orders dated 17.05.2021 and 02.06.2021 were passed in continuation of the earlier orders and, therefore, the earlier orders stand merged into the above mentioned impugned orders and, thus, there is no illegality even if the earlier orders have not been challenged by the appellant Bank.
Ld. Counsel for the respondent has lastly argued that since OTS of some other firms were accepted by the bank, the respondent’s OTS should also have been accepted by the bank.
In the opinion of this Tribunal, the above contention of Ld. Counsel for the respondent cannot be accepted for the reason that there are number of factors which have to be considered by the Bank while deciding the OTS application. Moreover, if OTS of one borrower is accepted, it does not confer any right upon the other borrower. The value of the securities, possibility of recovery from guarantors are some of the relevant factors which are to be considered by the authorities while analysing OTS application. Moreover, the OTS proposal only provides for the minimum amount which can be accepted by the bank and it does not provide maximum amount and the OTS proposal itself observes that all the Branch/Regional Offices should make every effort in increasing the borrowers’ OTS amount and should ensure that OTS brings maximum cash.
Thus, the above factors are required to be considered by the appellant Bank before accepting the OTS proposal. In the instant matter, the bank was not inclined to accept the OTS offer of Rs. 6.15 Crores since it was of the opinion that securities lying with it including that of guarantor can fetch more. Moreover, the total outstanding amount payable by the borrower is more than 23 Crores and he was offering only Rs. 6. 15 Crores and, therefore, the bank was right in its wisdom to reject the offer keeping in mind the guidelines laid down in the OTS Proposal.
In view of the above submission, and keeping in mind the judgment of Hon’ble Supreme Court in Bijnor Urban cooperative Bank Limited Vs. Meenal Agarwal (supra), in which the Hon’ble Court has clearly held that Bank cannot be compelled to accept OTS Proposal, the impugned orders passed by the Ld. PO, DRT-II, Chandigarh dated 17.05.2021 and 02.06.2021 are, therefore, set aside. The appeal stands allowed and appellant bank is at liberty to take further steps to confirm the sale of the secured assets in favour of auction purchaser and proceed further in accordance with law.
Copy of this order be provided to the parties free of cost.