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Judgment
Ashok Menon, Chairperson
These are applications filed by the Appellants for waiver of deposit under section 21 of the Recovery of Debts and Bankruptcy Act, 1993 (‘RDB Act’ for short).
The appeals filed impugning the common order in Appeal No. 14/2015, MA No. 50/2015 and MA No. 51/2015 in Recovery Proceedings No. 37/2007 in OA No. 371-A of 2001 on the files of the Debts Recovery Tribunal, Aurangabad dated 24/01/2017.
The 1st Respondent Central Bank of India had sanctioned a loan of ₹110 lakhs to M/s Niranjan Alloy Steel Pvt. Ltd., in the year 1997. The company defaulted and the bank filed Original Application No. 371-A/2001 before the DRT Aurangabad against the company mentioned above and the Guarantors for the realisation of money due. The Original Application was allowed directing the defendants to pay a sum of ₹14,963,928/-jointly and severally to the bank. Recovery Proceedings were filed as No.37/2007 before the Recovery Officer. The company entered into a one-time settlement (OTS) with the bank. The company deposited ₹8 lakhs vide letter dated 07/07/2009 and ₹4 lakhs more vide letter dated 07/09/2009 to indicate their earnestness about the settlement. The bank agreed to the OTS and sent letters of acceptance to the company that if the compromise did not work out, the above-mentioned sum of ₹12 lakhs would be refunded and deposited in a no-lien account. The compromise proposal was sanctioned by the bank vide letter dated 19/09/2009. However, the amount agreed to be paid as per the OTS could not be paid by the company and they sought a refund of ₹12 lakhs. The bank refused to refund the token amount stating that it has been adjusted towards the amount due. It is contended that the guarantors were not made parties to the compromise. The certified debtor No. 3 namely, Shripatrao Jadhav died on 17/04/2013. The Appellants in Appeal No. 90/2017 and 91/2017 are the wife and daughter of the aforesaid Shripatrao Jadhav, and his legal representatives. The Appellant in Appeal No.89/2017 is one of the guarantors and the certified debtor No. 5. Exhibits 29, 30 and 31 were filed by the Appellants and Certified Debtor No. 6 before the Recovery Officer for discharging them from the liability in view of novation of contract by the principal debtor excluding the guarantors, as a result of which, the guarantors stood discharged of the liability under sections 62 and 135 of the Contract Act. The Ld. Recovery Officer dismissed the applications and proceeded with the recovery. Aggrieved with the dismissal, the Appellants preferred appeals under section 30 of the RDB Act before the Presiding Officer. Vide the impugned order, the appeals were dismissed. Hence, the Appellants are before this Tribunal.
The contention of the Appellants is that the contract/compromise entered into between the 1st certified debtor company and the bank, results in a novation of the contract between the creditor and the principal debtor, and hence the guarantors will have to be discharged under section 135 of the Contract Act.
The Learned Presiding Officer refused to interfere with the order of the Recovery Officer and dismissed the appeals. The only question that arises for consideration is whether the Appellants are entitled to a discharge in view of the provisions under section 135 of the Contract Act.
The present applications are for deciding the question of waiver of deposit. The contention of the Appellants is that they are not liable to pay any amount to the secured creditor and, therefore, they need to be exempted from payment of pre-deposit as well. This Tribunal had earlier vide order dated 04/05/2017 found that there was no need to go into the prima facie case as that would result in determining the appeals itself, and directed the Appellants to pay 50% of ₹3.5 crores as pre-deposit under section 21 of the RDB Act. The Appellants challenged the order of this Tribunal and vide judgment dated 29/06/2017 the Hon’ble High Court of Judicature at Bombay, Bench at Aurangabad in Writ Petitions Nos. 6722/2017 and 8263/2017 quashed and set aside the order of this Tribunal dated 04/05/2017 and directed the waiver applications to be considered afresh. It was also directed to clarify whether the sum ordered to be deposited needs to be divided into three, or whether the amount is required to be deposited by individual Appellants separately.
On a prima facie consideration, I find that the alleged novation of the contract did not come into effect as the OTS scheme failed in the 1st defendant even requested a refund of the token money paid for consideration of the OTS scheme. Hence there was no concluded contract. The letter of acceptance from the bank indicates that it was only a proposal, and the 1st of certified debtor company did not accept it by compliance, making it a concluded contract. Moreover, the Appellants are guarantors who, along with the principal debtor were jointly and severally liable to pay the decree amount. Being guarantors there is a liability cast upon them to pay the entire debt jointly and severally. In the decision relied upon by the learned counsel for the Appellants reported in Maharashtra Apex Corporation Ltd. vs. Poovappa and others AIR 1985 Kar 116 it was held that notwithstanding joint and several liabilities after the decree, the relationship between the principal borrower and sureties continues. Grant of instalments without the assent of surety amounts to the discharge of surety under section 135 of the Contract Act. The liability of a guarantor is different from that of a surety. Moreover, in the Karnataka decision, there was a concluded contract between the principal debtor and the creditor subsequent to the decree. In the instant case there is no concluded contract, as already opined, and hence no novation. The decision cited is, therefore, not applicable to the facts and circumstances of the present case.
For the foregoing reasons, the Appellants cannot be exempted from payment of pre-deposit as required under section 21 of the RDB Act. The Appellants have not pleaded or established any financial stress which makes it difficult for them to pay the pre-deposit. There is also no prima facie case established. Under the circumstances, the Appellants are directed to pay 50% of the amount due from them which comes to about ₹4 crores. Interest will have to be calculated till the date of filing of the appeal. 50% of this amount would come to ₹2 crores. The Appellant in Appeal No. 89/17 shall deposit ₹1crore and the Appellants in Appeals Nos. 90/2017 and 91/2017, being the legal representatives of the deceased the 3rd certified debtor, liable only to the extent of the property devolved upon them are, therefore, directed to deposit ₹ 50 lakhs each as pre-deposit. The entire amount shall be deposited by the Appellants in the proportion mentioned above within a period of one month, on or before 01.12.2022; failing which, the appeals shall stand dismissed without any further reference to this Tribunal.
The amount shall be deposited in the form of a Demand Draft with the Registrar of this Tribunal.
As and when the said amounts are deposited, they shall be invested in term deposits in the name of Registrar, DRAT, Mumbai, with any nationalized bank, initially for 13 months, and thereafter to be renewed periodically.
On deposit of the payment within the stipulated time, all further proceedings to be initiated by Respondent under the SARFAESI Act shall stand stayed.
With these observations, the I.As. are disposed of. The Respondent is at liberty to file a reply in the Appeals with an advance copy to the other side.
Post on 02.12.2022 for reporting compliance concerning the payment.