Lata Steel Agency Pvt. Ltd. vs Jammu And Kashmir Bank Ltd.

S.N.H. Zaidi, J

Both these applications have been filed under Section 21 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (for short, the RDDBFI Act) for waiver of the requirement of deposit of 75% of the amount of debt due as determined against the appellants by the Tribunal below in O.A. Nos. 43 and 44/2006, for the entertainment of the accompanying appeals. Briefly stated, the relevant facts are that O.A. Nos. 43/2006 and 44/2006 have been allowed for the recovery of Rs. 11,67,73,324/- and Rs. 18,08,82,432.02 respectively along with pendente lite and future interest @ 15% per annum, vide separate orders dated 11.11.2010 passed by DRT-II, Delhi. The defendants of both the O.As. have filed appeal against the respective orders along with applications (M.A. Nos. 73/2011 and 82/2011) for waiver of deposit under the proviso to Section 21 of the RDDBFI Act. Both the said applications were disposed of by this Tribunal vide separate orders dated 9.2.2011 directing the appellants to deposit 50% of the amounts of debt determined by the Tribunal below within the given time and subject to such deposits the appeals were admitted and the recovery proceedings were stayed. The aforesaid orders were assailed by the appellants in two separate writ petitions before the Delhi High Court and the Hon'ble Court, vide order dated 26.4.2011, permitted the writs to be withdrawn with the liberty to the petitioners to file fresh applications seeking waiver of the deposit along with copy of the income tax returns (ITRs) and statement of accounts, etc.

The appellants, accordingly, filed M.A. No. 427/2011 in Appeal No. 51/2011 and M.A. No 428/2011 in Appeal No. 52/2011 for the waiver of pre-deposit along with ITRs and statement of accounts to which the respondent Bank filed replies and opposed the applications. The parties were heard on those applications and this Tribunal, vide order dated 30.8.2011, disposed of the applications with the directions to the appellants to deposit 40% of the aforesaid amounts instead of 50% as directed earlier.

The order dated 30.8.2011 of this Tribunal was again challenged by the appellants through W.P.(C) 7646/2011 (Lata Steel Agency Pvt. Ltd. v. The Jammu & Kashmir Bank) and W.P.(C) 7647/2011 (Sunil Engineering Corporation v. The Jammu & Kashmir Bank) before the Delhi High Court. Since the appellants had not deposited the directed amounts, both the appeals were dismissed by this Tribunal for want of pre-deposit, vide order dated 16.5.2012. The above said writ petitions have been allowed by the Hon'ble Court by a common order dated 21.1.2013 and the order dated 30.8.2011 of this Tribunal has been set aside and the matter has been remanded back to this Tribunal, after restoration of the appeals, for the determination of the issue of waiver afresh in the light of the discussion made in the order.

Parties' Counsel were accordingly heard qua those applications and they were directed to file affidavits qua the status of the property bearing No. BQ-63, Shalimar Bagh, Delhi as it was shown as the residential address of the appellants of Mr. I.K. Lata and Mr. Gopal Krishna Lata despite the contention of the appellants that the said property was sold by the Bank. Mr. I.K. Lata and the Manager of the respondent Bank have filed their respective affidavits in compliance of the said direction.

Mr. A.K. Sharma, the learned Counsel appearing for the appellants in both the matters, has reiterated the same plea that the appellants have no sufficient means or income with which 75% of the amounts as determined in both the matters can be deposited under Section 21 of the Act.

In Appeal No. 51/2011 besides the borrower company, Mr. Sanwar Mal Lata and Mr. Inder Kumar Lata are the other two appellants. In their respective affidavits filed along with the application it has been said that they were the Directors of the borrower company which had suffered huge losses, consequently the loan account became sticky and could not be operated and the company became defunct. It has also been said that the respondent Bank has admitted in the O.A. that except the commercial property/office bearing Room Nos. 11 and 12, First Floor, Building No. 2897/98/99, Bazar Sikriwalan. Delhi, the remaining mortgaged properties have been sold and the sale proceedings have been adjusted in its account and this fact has been recorded by the Tribunal below in paragraph 10 of the order impugned. They have also said that all the stock of the company, including the hypothecated stock, was liquidated into cash which was adjusted towards its creditors/respondent Bank. It has been pointed out that they have no objection if the aforesaid commercial property of Bazar Sikriwalan, Delhi is sold/disposed of by the Bank. The appellant S.M. Lata has further stated that his residential house at Rana Pratap Bagh, Delhi was released by the respondent Bank for Rs. 70 lacs, which amount was arranged from a collaborator who had sold ground and first floors of that building and the remaining floor was mortgaged by him with Cholamandalam DBS Finance Ltd. for Rs. 55 lacs to repay to the collaborators. He has also said that though he had started some business by selling stainless steel on commission basis since 2006 in the name M/s. Lata Metals, but the income is not sufficient enough to meet both ends and he is dependent on his son Amit Lata.

In Appeal No. 52/2011, besides the borrower firm, its partners Mr. Inder Kumar Lata, Smt. Sarla Lata and Mr. Gopal Krishna Lata are the appellants. In their respective affidavits, they have also said that the borrower firm had suffered huge losses due to various factors and since it could not repay to the creditors and despite the fact that all its stock was liquidated into cash and the amount of the hypothecated stock was adjusted with the respondent Bank, the account became sticky and inoperative and the firm became defunct and except the property of defendant P.L. Madan at Rajender Nagar, Ghaziabad all the properties were disposed of by the respondent Bank and the amount was adjusted towards the loan account. Mr. I.K. Lata has stated in his affidavit that he was the owner of mortgaged properties at Shalimar Bagh, Delhi and Camel Back Road, Mussoorie, Dehradun, and both these properties were sold and the sale proceeds were adjusted to the loan account and he is having no immovable property. The appellants have also stated that they have no immovable property in their name. Smt. Sarla Lata has also stated that all her personal ornaments and jewellery were also sold and except a few ritual/religious ornaments, i.e., mangal sutra and few other jewellery items exceeding not more than 50 gms, she has no other jewellery. Mr. Gopal Krishna Lata has said that after the closure of the partnership firm he had started a separate partnership business of trading in steel in the name of M/s. Lata Steel (Delhi) with only 30% share in it, but the income from the said business, as per the ITRs for the years 2002 to 2010, had not been sufficient enough to deposit the required amount. He has also said he has three school-going children besides the wife and parents to maintain.

The respondent Bank in its reply to these applications has disputed the contentions of the appellants as false and concocted and has also said that the appellants have not divulged their full assets. According to it, the accounts of the company and firm are being operated by the appellants but they have deliberately not disclosed the complete business details of their company/firm. It has been pointed out that one of the ITRs of Lata Steels, Delhi for the A.Y. 2008-09 shows the gross turnover of more than Rs. 7 crores and the appellants have sufficient means to deposit the required amount. The Bank has further said that by misrepresenting to the Bank that they would sell the mortgaged properties located at Rana Pratap Bagh, Delhi, Shalimar Bagh, Delhi and Camel Back Road, Mussoorie, the appellants got the title deeds of those properties released but it transpired from the documents that the said properties have not been sold but are still with the borrowers and their living standard has not come down and they are living in areas of prime location and still afford to go abroad.

The appellant applicant Mr. Inder Kumar Lata has said in his additional affidavit dated 15.7.2013 that property situated at BQ-63, Shalimar Bagh was mortgaged with the Bank in the loan account of M/s. Sunil Engineering and the said property was directly sold by the Bank through a registered sale deed to M/s. Espirit Financial Service Ltd. on 24.4.2004 and after the sale of that property he had shifted to his son Mohan Lata at Ludhiana but since his other son Gopal Krishna Lata had taken the said house No. BQ-63, Shalimar Bagh, Delhi on rent from M/s. Espirit Financial Services Ltd. and is residing in that house, he also stays with him whenever he comes to Delhi, as such he had allowed the said address to be continued in his documents like ITRs, Bank accounts and ID proof, etc. The respondent Bank has said in its affidavit dated 17.7.2013 that the Bank had only executed an agreement to sell qua the Shalimar Bagh property for Rs. 25 lacs in favour of M/s. Espirit Financial Services Ltd. on the request of the appellants and no sale deed was executed by the Bank in favour of the said company and the recovered amount of Rs. 25 lacs has been adjusted in the appellants' loan account and the original title deeds of that property had been released. It has admitted that the property documents of Camel Back Road, Mussoorie property were released in favour of Ms. Monika Lata and Mr. Pawan Lata on deposit of a sum of Rs. 24 lacs with the Bank.

I have considered the submissions of the parties' Counsel and have gone through the record. The ITRs filed by the appellants along with the waiver applications show that the income of Inder Kumar Lata for the assessment years (A.Ys.) 2006-07 to 2009-10 had never increased to more than Rs. 80,000/- whereas the income of Gopal Krishna Lata for the Assessment Years 2000-01 to 2006-07 was in the range of Rs. 40,000/- to Rs. 1,70,000/- and the income of Lata Steels, Delhi, a partnership concern of Gopal Krishna Lata, during the Assessment Years 2008-09 and 2009-10 was within the range of Rs. 3 to 4 lacs. The appellant No. 2 Mr. S.M. Lata of Appeal No. 51/2011 has not filed any ITR of either himself as individual or of his concern M/s. Lata Metals. Though the appellant/applicants have said in the waiver applications that they have good prima facie case and are sanguine of success in these appeals but nothing has been said qua the prima facie case in these applications. The appellants' Counsel has also not addressed this Tribunal qua the prima facie case and has sought the waiver of the requirement of deposit only on the ground that the appellants have no sufficient means to deposit the required amount.

The Hon'ble Delhi High Court has observed in the order dated 21.1.2013 that:

We may notice that learned Counsel for the petitioners at the stage of seeking entertainment of the writ petition had pleaded that his real grievance against the order of the DRT dated 11.11.2010 was that the application for recovery was filed in the year 2006 in respect of loan documents executed in the year 1996 and declared as NPA on 1.10.1997 on the basis of a mortgage suit for which the prescribed period of limitation was 12 years, yet the suit, on the one hand, has been treated as being within time while on the other hand passing directions in the operative portion of the order for recovery of amount from the secured assets followed by further direction that in the event of nonpayment of full amount balance, if any, shall be recovered from their personal assets.

The perusal of the grounds of appeals, however, shows that the ground of limitation has been taken on the basis that the loan documents were executed in the year 1996 whereas the O.A. was filed in 2008, that is, much beyond the prescribed period of limitation and the alleged balance confirmation letters dated 31.3.2003, 16.8.2003 and 20.9.2003 qua the loan relating to Lata Steel Agency and the alleged document dated 12.8.2003 in respect of the loan account of Sunil Engineering Corporation, were not executed by the appellants and were forged and fabricated. The Tribunal below has held in respect of both the matters that it is a mortgaged suit, wherein various properties were mortgaged by the defendants qua which the prescribed period of limitation is 12 years and since the O.As. were filed in the year 2006, they were well within limitation. The question relating to limitation is a mixed question of fact and law and though the facts relating to the execution of the balance confirmation letters have been disputed by the appellants yet it does not show any strong prima facie case qua the legality of the order impugned which may warrant the complete waiver of deposit as required under the law.

Section 21 of the RDDBFI Act, which requires for making the pre-deposit for the entertainment of the appeal reads as under:

Deposit of amount of debt due, on filing appeal--Where an appeal is preferred by any person from whom the amount of debt is due to a Bank or a financial institution or a consortium of Banks or financial institutions, such appeal shall not be entertained by the Appellate Tribunal unless such person has deposited with the Appellate Tribunal seventy-five per cent of the amount of debt so due from him as determined by the Tribunal under Section 19:

Provided that the Appellate Tribunal may, for reasons to be recorded in writing, waive or reducing the amount to be deposited under this section.

The above provision clearly shows that the appeal shall not be entertained unless the person against whom an amount of debt has been determined by the DRT as due deposits 75% of such debt, though the proviso to the section gives a discretion to this Tribunal to waive or reduce the amount of such deposit, after recording the reasons. Considering the main object of the RDDBFI Act of expeditious recovery of debts due to the Banks and financial institutions and keeping in view the mandatory nature of the requirement of deposit for availing the statutory remedy of appeal given to a person against whom an amount of debt has been determined by the DRT as due, I am of the considered view that the facts and circumstances of these appeals do not warrant complete waiver of the requirement of deposit for its entertainment. The contention that the appellants have no sufficient means to make the required deposit cannot be accepted as a ground sufficient for waiver of the deposit. The appellants S.M. Lata of Appeal No. 51/2011 and Gopal Krishna Lata of Appeal No. 52/2011 according to their submissions, are in the business of trading in steel and having incomes from the said business. Mr. S.M. Lata has not filed any TTR of either himself as an individual or of his concern Lata Metals and ITR for the A.Y. 2008-09 of the partnership firm of Mr. Gopal Krishna Lata shows that the turnover of his firm was more than Rs. 7 crores in that year and these circumstances show that the appellants are capable of making the deposit.

As stated earlier, the determined amount of debt qua Appeal No. 51/2011 is about 18 crores and odd whereas in respect of Appeal No. 52/2011 it is more than 11.5 crores and looking to these amounts, which are public money, the appellants, in view of the above discussion, do not appear to be entitled for the complete waiver and they are directed to deposit 30% of the amount of debt determined by the Tribunal below, in each of these appeals. They are, however, entitled to the adjustment of the payment made in the loan accounts pending the O.As. or subsequent to its disposal. The amounts shall be deposited within six weeks from today through DD in the name of the Registrar of this Tribunal who shall, in turn, keep the said amount in the form of FDR with any Nationalized Bank for an initial period of six months, subject to renewal. Needless to mention that in case of default of deposit, the appeals shall not be entertained and shall be dismissed. Both the miscellaneous applications stand disposed of accordingly.

List the matter on 3.3.2014 for overseeing the compliance of the order. Copy of this order be furnished to the parties as per law.