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Judgment
R. D. Khare, Chairperson
The present appeal has been filed under Section 20 of the Recovery of Debts and Bankruptcy Act, 1993 against the judgment and order dated 12.04.2022, whereby the appeal filed by the appellant-Bank under Section 30 of the said Act has been dismissed.
The brief facts of the matter are that the respondent No.1-Company was granted various credit facilities by the consortium banks/FI, namely, IDBI Limited, LIC, IFCI Limited, SBI and Allahabad Bank on 18.11.1980 and 07.11.1980, to which the respondent No.2 stood as guarantor and furnished an irrevocable and unconditional guarantee on 06.04.1983. The said borrower-company was declared as sick by BIFR on 07.02.1992 and the case was referred to Hon’ble Allahabad High Court for winding up the said company by filing Misc. Company Application No. 04 of 1997, which was allowed vide order dated 08.12.1999. Thereafter, the ICICI Bank issued a notice dated 16.06.2000 to the respondents No. 1 and the respondent No. 2 on 28.06.2000 for repayment of the loan. Since the respondent-company did not pay any heed to the said demand, therefore, the ICICI Bank Limited filed an Original Application No. 291 of 2001 before the Tribunal below for recovery of Rs. 56,41,37,770/- along with pendetelite and future interest, in which the respondent No.2 was made party in the capacity of guarantor.
It appears that during the pendency of the aforesaid O.A., the ICICI Bank assigned its debt to the appellant-Bank on 31.03.2005 and accordingly, it was substituted in the said O.A. as applicant vide order dated 27.10.2005 passed by the Tribunal below.
It also appears that the Hon’ble Allahabad High Court confirmed the auction sale of the assets of the borrower-company in favour of M/s Jai Prakash Associates vide order dated 11.10.2006 for a sum of Rs. 459.00 crores. On invitation of claim by the official liquidator attached to Hon’ble Allahabad High Court, the appellant-bank submitted its claim for a sum of Rs. 46,59,51,812.32 as on 08.12.1999 on the basis of the agreed rate of interest on contractual basis. The Hon’ble High Court considering the large number of claims of the creditors including workmen constituted a Settlement Claims Committee (SCC) under the official liquidator to scrutinize the claims raised by the secured creditors. After scrutiny, the SCC submitted a dividend report to the official liquidator, which was accepted by it and on the basis of the same, 11% simple interest was granted to the secured creditors upto the date of winding up of the company. The same was challenged by the secured creditors including the appellant-Bank by filing an appeal under Rule 164 of the Companies (Court) Rules, 1959, which was partly allowed vide order dated 27.04.2007 by the Hon’ble High Court. (at page No. 147 para 97)
It is averred that the appellant-Bank filed an objection No. 242222 of 2007 before the Hon’ble High Court, which was rejected vide order dated 11.10.2007 observing that the calculation of the official liquidator is valid and is in accordance with the judgment dated 27.04.2007. Accordingly, the sale proceeds were distributed amongst the secured creditors and workmen on pro rata basis and the appellant has received its pro rata share of Rs. 33,93,24,318/- from the official liquidator on 25.10.2007.
Against the order dated 11.10.2007, the appellant-Bank filed a Special Appeal No. 1604 of 2007 before the Hon’ble High Court, which was dismissed as not maintainable vide order dated 07.01.2019 holding that the order dated 27.04.2007 passed in appeals has not been challenged, therefore, the same has attained finality.
It is further averred that in the meantime, the original application No. 291 of 2001 filed by the appellant-Bank was decreed by the Tribunal below in toto against the respondents vide judgment and order dated 06.12.2006 and accordingly, the recovery certificate was issued for a sum of Rs. 56,41,37,770/- along with pendentelite and future interest @ 12% with half yearly rests, which was received by the respondent No.1 on 07.02.2007 and the recovery proceedings were instituted as DRC Case No. 12 of 2007. The Recovery Officer pursuant to the recovery proceedings issued demand notices under Rule 2 of second schedule of Income Tax Act, 1961 read with section 29 of the RDB Act, 1993 to the respondents No.1 and 2, but no amount was paid by them, therefore, the Recovery Officer passed the orders dated 10.07.2008 and 31.07.2008 directing the bank accounts of respondent No.2-State of U.P. to be attached. The Recovery Officer further vide order dated 25.09.2008 directed the bank to remit the amount lying in the attached accounts in the name of Recovery Officer.
Thereafter, the appellant-Bank filed an application dated 17.07.2009 for remittance of the amount in favour of the appellant-Bank towards dues payable by the borrower. Since the said application was not being decided by the Recovery Officer, therefore, the appellant-bank filed a writ petition No. 38173 of 2019 before the Hon’ble High Court, which was disposed of vide order dated 26.11.2019 directing the Recovery Officer, DRT, Allahabad to decide the application dated 17.07.2009 in accordance with law as expeditiously as possible preferably within a period of three months from the date of receipt of the said order. The copy of the said order was served on the Recovery Officer on 27.12.2019. Pursuant to the said order, the Recovery Officer vide order dated 12.02.2020 directed the State Bank of India, Kanpur Nagar to remit the amount of Rs. 83,48,60,750.08, which was attached on 11.08.2008, within 15 days from the receipt of the order. The said order was delivered through Advocate Commissioner on 25.02.2020 to the State Bank of India, Kanpur Nagar and in compliance of the same, the said bank has tendered a Demand Draft of Rs. 83,48,60,750.08 on 11.03.2020 to the Recovery Officer, DRT, Allahabad, which was kept in the form of FDR. The copy of the order dated 12.02.2020 passed by the Recovery Officer was also served on the respondent No.2 through its Chief Secretary by the Advocate Commissioner and till date the said order has not been reversed by any of the Courts.
It is also averred that the M.A. No. 47 of 2008 filed by the respondent No.2 for recalling the judgment and decree passed in O.A. was dismissed being barred by time by the Tribunal below vide order dated 08.01.2019 holding that the respondent No.2 is liable to pay the dues of the bank and financial institutions jointly and severely and the said order has also not been reversed till date. Pursuant to the order dated 26.11.2019 passed by the Hon’ble High Court, the matter was heard on 17.03.2020, but the Recovery Officer did not release the attached amount and was bent upon to retain the same in fixed deposit in its name. Against the order dated 17.03.2020 passed by the Recovery Officer, the appellant-Bank filed an appeal under Section 30 of the RDB Act before Tribunal below, which was registered as Appeal No. 01 of 2020. The said appeal was disposed off by the Tribunal below vide order dated 16.06.2020 directing the Recovery Officer to take up the DRC No.12 of 2007 for disposal and to take decision for release of amount in case no legal impediment exists. The copy of the said order dated 16.06.2020 was filed before the Recovery Officer on 20.06.2020. Copy of the said order was also sent to the respondent No.2 through its e-mail id.
It also transpires that after repeated directions of the higher Courts, the Recovery Officer vide order dated 23.07.2020 directed to release the attached amount of Rs. 83,48,60,750.08 along with interest accrued there on after furnishing undertaking by the appellant-Bank. Pursuant to the said order, the said amount was released in favour of the appellant-Bank on furnishing the undertaking.
It further transpires that the appellant-Bank filed two applications dated 03.08.2020 before the Recovery Officer along with the urgency application as well as the calculation sheet and the circular issued by the Ministry of Finance for execution of attachment order dated 31.07.2008 and for remittance and release of the recovered amount. The Recovery Officer vide order dated 20.11.2020 dismissed both the applications filed by the appellant-Bank directing the official liquidator to furnish clarifications, as to whether Rs. 33,93,24,318/- received by the Bank on 25.10.2007 from official liquidator was under one time settlement, if not, what steps are being taken in the matter for recovery of remaining amount. Against the said order, the appellant-Bank filed an Appeal No.04 of 2020 before the Tribunal below under Section 30 of the RDB Act, which was also dismissed vide order dated 12.04.2022 holding that there is no illegality in the order dated 20.11.2020 passed by the Recovery Officer in DRC No. 12 of 2007. Being aggrieved by the said order, the present appeal has been filed by the appellant-Bank.
Learned counsel for the appellant submitted that the execution proceeding (DRC No. 12 of 2007) is still pending pursuant to the judgment and decree dated 06.12.2006 passed by the Tribunal below in O.A. No. 291 of 2001, whereby it has been held that the respondent No. 2-State of Uttar Pradesh is a guarantor and its liability is joint and several. It was further submitted that the appellant-Bank being a secured creditor has never relinquished its security in the winding up proceedings, as the same were not the recovery proceeding. The winding up proceedings were done in accordance with the provisions of the Companies Act, 1956 and the Companies (Court) Rules, 1959.
Learned counsel for the appellant also submitted that the appellant-Bank received its pro rata share of Rs. 33,93,24,318/- from the official liquidator on 25.10.2007, therefore, the appellant is fully entitled to recover the remaining outstanding dues from the respondent No.2/guarantor, whose liability is joint and several. The learned counsel has referred to the order dated 27.04.2007 passed by the Hon’ble High Court and has stated that in the said order, it is clear that there was no One Time Settlement and the Hon’ble High Court vide said order had only directed the official liquidator to disburse the claim of the secured creditors on the basis of agreed contractual rate of interest up to the date of winding up of the Company. The learned counsel further submitted that the Tribunal below has misinterpreted the order dated 27.04.2007 passed by the Hon’ble High Court to arrive at the conclusion that there was settlement by the secured creditors, whereas in the said order it is clearly recorded that there is no settlement amongst the secured creditors. It was also contended that the Recovery Officer has wrongly come to the conclusion that since a sum of Rs. 83,48,60,750/- has already been released in favour of the appellant, therefore, the attachment order dated 31.07.2008 has attained finality and the same is no longer under attachment. The learned counsel further submitted that there is no such provisions whereby the account of the State already attached can be treated to be automatically released from attachment without satisfaction of the recovery certificate issued by the Tribunal below.
The learned counsel also submitted that in the order dated 23.07.2020, the Recovery Officer has recorded the submission of the learned counsel for the liquidator that he has nothing to file on behalf of the official liquidator, even though the Recovery Officer has again directed the official liquidator to furnish the clarification pertaining to receipt of its pro rata share of Rs. 33,93,24,318/- on 25.10.2007. It was further submitted that the Recovery Officer has wrongly interpreted its order dated 31.07.2008 that the same was attached for a specific amount only.
In the last, the learned counsel submitted that the Recovery Officer could not go behind the decree passed by the Tribunal below and the order has been passed by misreading the correct facts. Further, there was no one time settlement, therefore, the observation in that regard is also not sustainable. It was, therefore, prayed that the orders dated 12.04.2022 and 20.11.2020 may be quashed and the appeal may be allowed.
Learned counsel for the respondent No.2 submitted that once whatever amount has been paid to the appellant-Bank in liquidation proceedings, that has attained finality and no further amount can be claimed. The next contention is that under Section 128 of the Contract Act, if the principal borrower is not in existence and all assets have been auctioned/sold, then personal guarantee will not continue thereafter. It was, therefore, prayed that orders impugned do not require any interference, therefore, the appeal may be dismissed with heavy costs.
Having heard the learned counsels for the parties and considering the material available on record, undisputedly, the appellant-Bank filed an original application before the Tribunal below, which was decreed for a sum of Rs. 56,41,37,770.00 along with pendentelite and future interest @ 12% per annum with half yearly rests. It is also not disputed that against the said decretal amount, the appellant-Bank received Rs. 33,93,24,318.00 on 25.02.2007 from auction sale of the secured assets of the borrower/company and thereafter, the appellant-Bank received Rs. 83,48,60,750.08 from the Recovery Officer, which was recovered from the attached accounts of the guarantor i.e. respondent No. 2 on 23.07.2020. As such, against the aforesaid decretal amount, the appellant-Bank has received a total sum of Rs. 1,17,41,85,068/-, as the DRC proceeding is still pending before the Recovery Officer.
The first question requiring consideration in the present case is, as to whether the attachment order dated 31.07.2008 passed by the Recovery Officer was for a specific amount or not?
In this regard, it is to be seen that firstly, the Recovery Officer pursuant to the recovery proceedings issued demand notice to the borrower-company and the respondent No. 2-guarantor for payment of the loan amount, but they did not pay any heed to the same, therefore, the Recovery Officer attached the account of the respondent No.2-State of U.P. vide orders dated 10.07.2008 and 31.07.2008. The relevant portion of the said order is reproduced as under:-
“In pursuance to the recovery of the above amount, you are hereby directed to attach the amount subject to maximum of Rs. 83,48,60,750.08 from the Account T.O. Nagar (Misc.) – 10638482780, T.O. Dehat (Misc) – 10638482779, P.L.A Nagar-10638482860, P.L.A Dehat – 10638482826, S.T.R.O. Dehat 10638482791, P.W.D. Nagar-10638482848, P.W.D. Dehat – 10638482804, S.T.R.O. Dehat 10638482791, T.O. Nagar (Misc.) – 10638482780, T.O. Dehat (Misc.) – 10638482779, Trade Tax Nagar- 10638482768, Tax Dehat-10638482757 belonging to State Government of Uttar Pradesh immediately.
Perusal of the contents of the aforesaid order shows that the accounts of the respondent No.2-guarantor were attached pursuant to the said order passed by the Recovery Officer for maximum amount of Rs. 83,48,60,750.08. It is admitted by the appellant-Bank and the same has been released and received by the appellant-Bank on 23.07.2020 on the requisite undertaking. Since the attachment order passed by the Recovery Officer was for a limited amount as mentioned above, therefore, the same can be said to have been satisfied and has attained finality. Thus, the Recovery Officer has rightly held that the account of the respondent No.2 in question is no longer under attachment. Besides it, there is nothing on record which may show that the treasury of the State of U.P. has ever been attached by the Recovery Officer. Hence, the contention of the learned counsel for the appellant that the attachment order passed by the Recovery Officer was not for a specific sum, is not sustainable. Hence the orders impugned passed by the Recovery Officer as well as the Presiding Officer of the Tribunal below do not call for any interference to this extent.
So far as the question with regard to the settlement amongst the parties is concerned, the order 27.04.2007 passed by the Hon’ble High Court Allahabad in Misc. Company Application No. 04 of 1997 is relevant. In the said order, the Hon’ble High Court in para 97 of the said judgment has clearly stated that “the argument does not merit any consideration in as much as the one time settlement principally agreed by Financial Institutions and Banks was not finalized in the meeting. The financial intuitions and bank had agreed towards request of the State Bank of India to one time settlement of their dues in view of the offer of M/s Grasim Industries Limited”. In the said para it is also stated that “the negotiations did not materialize as the Court rejected the offer of State Government to sell the assets to M/s Grasim Industries Limited”. It is thus clear that the consortium Bank had agreed to settle the matter, but the same was not executed amongst the parties, therefore, it cannot be said that the amount received by the appellant-Bank from the official liquidator was under any final settlement. Hence the Recovery Officer has erred in directing the official liquidator to submit its clarification as to whether the amount received by the appellant-Bank was under one time settlement or not and if not, what steps are being taken by the official liquidator for recovery of the remaining amount, because the official liquidator acts under the provisions of the Companies Act and it can only recover the amount from auction the assets of borrower-company, as it cannot proceed against the guarantor for recovery of the remaining dues by selling the personal assets of the guarantor. Thus, the order impugned is liable to be set aside to this extent.
So far as the contention of the learned counsel for the respondent No.2 that once whatever amount has been released in liquidation proceedings that has attained finality, therefore, no further amount can be claimed and if the principal borrower is not in existence and all assets have been auctioned sold, then personal guarantee will not continue thereafter, is concerned, it is to be seen that the respondent No.2 was the guarantor to the loan advanced by the consortium banks and furnished its personal guarantee to secure the loan. The appellant-Bank after decretal of the Original Application received and accepted a sum of Rs. 33,93,24,318/- from the official liquidator of the Company. It is observed that no documents has ever been filed by the respondent No. 2 either before the Tribunal below or before this Appellate Tribunal, which may show that the amount was paid to the appellant-Bank by the official liquidator as full and final settlement towards outstanding dues. Mere acceptance of any amount by the appellant-Bank from the official liquidator cannot be treated as full and final settlement. It is also to be noted that the respondent No. 2 has failed to submit any evidence to this effect that there was any settlement between the Bank and the official liquidator to treat this amount as full and final settlement and no record of the liquidation proceedings was submitted, which may suggest that any such type of directions were given by the Hon’ble Company Judge or the Bank Officer has ever agreed to accept part payment as full and final. Thus, the amount received by the appellant-Bank cannot be treated as full and final payment of dues against the company. Hence, the appellant-Bank is still entitled to recover the remaining amount from the guarantor i.e. the respondent No.2 of the Company.
In view of the above, the order impugned passed by the Tribunal below affirming the order dated 20.11.2020 of the Recovery Officer to the extent of setting aside the applications dated 03.08.2020 filed by the appellant-Bank does not call for any interference by this Tribunal, but the same to the extent of seeking clarification from the official liquidator with regard to one time settlement between the parties is set aside. Thus, the appeal filed by the appellant-Bank is allowed to this extent. However, the appellant-Bank may proceed to recover its remaining dues from the guarantor i.e. respondent No. 2-State of U.P. in accordance with the provisions of the RDB Act. No order as to costs.
A copy of this judgment be sent to the parties as well as to the DRT concerned and be also uploaded on e-DRT portal.