M/s Mitexo & Ors vs Canara Bank

Ashok Menon, Chairperson

This is an application filed by the Appellants under section 21 of the Recovery of Debts and Bankruptcy Act, 1993 (‘RDB Act’, for short) for waiver of mandatory pre-deposit.

The Appellants are the defendants in Original Application (O.A.) No. 1824/2000 and are in appeal impugning the order dated 11/04/2023 in Misc. Application (M.A.) 33/2022 on the files of the Debts Recovery Tribunal-I, Mumbai (D.R.T.) dismissing the application filed by the Appellants under section 19 (25) of the RDB Act to amend the Recovery Certificate issued in the aforesaid O.A.

The facts can be encapsulated thus:

The Appellants and the Certificate Holder Canara Bank have been litigating for more than two decades. The aforesaid O.A. which was originally filed before the D.R.T.-II, Mumbai was allowed on 29/07/2004 permitting the CH Bank to recover a sum of ₹88,06,914.96 together with interest at the rate of 13% per annum with quarterly rest from the defendants with effect from the date of filing of the O.A. that is, 11/01/1999. Consequent to the issuance of the Recovery Certificate, the CH filed recovery proceedings as RP No. 538 of 2004. The secured assets were sold during 2008-2009 and ₹96.75 lakhs were recovered. For the realisation of the balance amount, an attachment warrant was issued on 24/03/2006 in respect of Flat No. 401, ‘Sea Sparkle’, Juhu Tara Road, Mumbai.

The appeal filed by the Appellants challenging the judgment in the O.A. before the D.R.A.T. proved futile. Thereafter, the Appellants challenged the attachment resorting to the provisions of Rule 68 B of the II Schedule to the Income Tax Act. The award of attachment issued on 24/03/2006 was withdrawn and a fresh warrant of attachment was issued on 23/10/2012 by the Recovery Officer. The 4th Appellant filed a review application before the Recovery Officer at the same was dismissed. Challenging the order, the Appellants preferred a Writ Petition No. 1300/2013 before the Hon’ble High Court of Bombay. An interim order was passed in favour of the Appellants directing the Respondent Bank to carry out a valuation of the identified property, but the writ petition was ultimately rejected on 16/04/2014. Dissatisfied, the Appellants filed a Review Petition No. 53/2014 before the Hon’ble Bombay High Court seeking a review of that order. That too was dismissed on 06/08/2014. The Appellants approached the Hon’ble Apex Court with  the  Special  Leave  Petition  No.  516-517/2015.  In  the meanwhile, the Recovery Certificate was transferred from D.R.T.-II to D.R.T.-I consequent to the change of territorial jurisdiction and the recovery proceedings was renumbered as T.R.P. 758/2016.

The  Hon’ble  Supreme  Court  disposed  of  the  SLP  on 11/10/2017 thus:

“We have heard the learned counsel for the parties.

In the present case, against the loan of ₹ 60,00,000/-(Rupees Sixty lakh) made available by the Respondent bank to the petitioner (s) in the year 1997, till date the Respondent bank has received a sum of ₹12,869,756/-(Rupees one crore Twenty Eight lakh Sixty Nine thousand Seven hundred and Fifty six). The aforesaid amounts were received by the Respondent bank in the year 2008-2009. If the year 2009 is to be taken into account for the purpose of computation of the outstanding dues to the Respondent bank the figure that has been worked out is ₹ 21,604,718/-(Rupees Two crore Sixteen lakh Four thousand Seven hundred and Eighteen). This is approximately four times the loan amount.

Having considered the matter we are of the view that the ends of justice would be met if this petitioner(s) is required to pay the balance amount i.e., ₹ 8,734,962/-(Rupees Eighty Seven Lakh Thirty Four thousand Nine hundred and sixty two) [₹21,604,718/- minus (-) of ₹12,869,756/-] within a period of 6 months from today, if required, by instalments.

The Special Leave Petitions are disposed of in the above terms.”

The Appellants did not seize the opportunity of paying the amount directed to be paid by the Hon’ble Supreme Court vide the above cited order. The Respondent bank filed a Review Petition No. 939-940/2018 before the Hon’ble Supreme Court but the same was dismissed on 10/04/2018.

The Ld. Recovery Officer proceeded with the recovery proceedings and the sale was fixed on 03/10/2019. Aggrieved by that order of the Recovery Officer, the Appellants filed an appeal under section 30 of the RDB Act before the Presiding Officer as Appeal No. 672/2019. Simultaneously, the Appellants filed Writ Petition No. 3025/2019 before the Hon’ble High Court of Bombay seeking a stay of the auction. The Hon’ble High Court was not inclined to intervene and hence the writ petition was dismissed as withdrawn on 23/10/2019. Subsequently, Appeal No. 672/2019 was also dismissed as the proposed sale had failed for the want of bidders. The Recovery Officer thereafter ordered physical possession of the identified property to be taken over by the receiver. The Appellants challenged that order before the Presiding Officer by filing yet another Appeal No. 727/2019 under section 30 of the RDB Act. The Ld. Presiding Officer refused to grant any interim relief in view of failure on the part of the Appellants to make the mandatory pre-deposit under section 30 A of the RDB Act for entertaining the appeal. The Appellants deposited ₹1 crore before the Recovery Officer together with an undertaking to hand over physical possession of the identified property to the auction purchaser on sale being conducted. On the basis of that undertaking, the Ld. Recovery Officer deferred physical possession and the Respondent Bank withdrew the amount deposited and appropriated the same towards the debt due.

Aggrieved by the order of the Ld. Presiding Officer in Appeal No. 727/2019, the Appellants preferred Appeal No. 92/2019 before this Tribunal. Vide order dated 03/12/2019 the Appellants were directed to deposit a sum of ₹43,67,491/-being 50% of the amount directed to be paid by the Hon’ble Supreme Court as pre-deposit for entertaining the appeal. This Tribunal had on 10/12/2019, consequent to the deposit of the amount by the Appellants directed to proceed with the sale scheduled to be held on 10/12/2019 and await confirmation till the appeal was disposed of.

Challenging the order of this Tribunal to make a pre-deposit, the Appellants approached the Hon’ble High Court of Bombay by filing Writ Petition No. 3653/2021. The Hon’ble High Court disposed of the writ as also Appeal No. 92/2019 pending before this Tribunal and directed the amount deposited to be treated as a deposit for entertaining appeal No. 727/2019 pending before the D.R.T. Consequently, the said appeal was heard by the Ld. Presiding Officer and disposed as infructuous on 25/01/2022.

Thereafter the Appellants filed M.A.No.33/2022 under section 19 (25) of the RDB Act seeking a modification of the final order of the D.R.T. dated 24/07/2004 and an amendment of the Recovery Certificate reducing the amount decreed to ₹87,34,962/-as determined by the Hon’ble Supreme Court vide order dated 11/10/2017.

The Ld. Presiding Officer vide the impugned order dated 11/04/2023, dismissed the Misc. Application 33/2022 on the grounds of limitation stating that there is an unexplained delay in filing the application for modification of the order of the D.R.T.

The Appellants are aggrieved and hence in appeal.

The question that arises for consideration in this appeal is whether the Appellants are entitled to get the order of the D.R.T. and the consequent Recovery Certificate modified and amended in tune with the order of the Hon’ble Supreme Court dated 11/10/2017.

The Ld. Presiding Officer has not entered a finding regarding the entitlement of the Appellants to get the original judgment and  Recovery Certificate amended. However, in paras 14 and 15 of the impugned order the Ld. Presiding Officer observed thus:

“14. A reading of the above said order of Hon’ble Supreme Court revealed that the final order dated 29/07/2004 of this tribunal was not under challenge and this final decree was not changed. Rather in view of the ends of justice the Appellants are provided an opportunity to deposit the sum within 6 months but admittedly the Appellants failed to do so.

It is very surprising that at the one hand the Applicants therein debt not to comply with the order passed by the Hon’ble Supreme Court and not deposited a sum of ₹ 8,734,962/-within the period of 6 months from the date of order dated 11/10/2017 and never sought any extension of time for the same, however now on the other hand on the basis of the same order dated 11/10/2017 the Applicants seeking modification of the final decree dated 29/07/2004 passed by this Tribunal that too after more than 4 years. The said conduct of the Applicants is highly deplorable.” (sic)

Mr Kinkhabwala, the Ld. Counsel appearing for the Appellants fervently argues that the Hon’ble Supreme Court has crystalised the amount due from the Appellants to be ₹87,34,962/-as of 11/10/2017. Hence, the CH Bank cannot now claim recovery of the amount based on the Recovery Certificate or the original judgment of D.R.T. It is also pointed out that in the earlier appeal filed by Appellants as Appeal No. 92/2019, this Tribunal had, vide order dated 03/12.2019 directed a pre-deposit of 50% of the amount crystalised by the Hon’ble Supreme Court. In the Writ Petition filed by the Appellant before the Hon’ble High Court of Bombay this finding of the D.R.A.T. was not disturbed and the appeal itself was disposed of with a direction to the Presiding Officer of D.R.T. to consider that amount as a pre-deposit under Sec. 30 of the RDB Act for entertaining the Appeal No. 727/2019. Under the circumstances, Mr Kinkhabwala submits that the threshold amount for determining the pre-deposit under Sec. 21 of the RDB Act may be taken as ₹87,34,962/-. The Ld. Counsel Mr Kinkhabwala also offers to deposit a DD for ₹25 lakhs towards that amount and produced a Demand Draft for ₹ 21,83,741/- forthwith.

In support of the binding nature of the order of the Hon’ble Supreme Court, Mr Kinkhawala relies on a catena of decisions. In Kunhayammed & Ors vs State of Kerala & Ano. AIR 2000 SC 2587, the Hon’ble Supreme Court holds that once the superior court has disposed of the lis before it either way- whether decreed or the order under appeal is set aside or modified or simply confirmed, it is the decree or order of the superior court, tribunal or authority which is a final, binding and operative decree or order wherein merges the decree or order passed by the court, tribunal or authority below. In Director of Settlements, A.P. & Ors vs. M. R. Apparao & Ano. (2002) 4 SCC 638 it is observed that when the Supreme Court decides a principle it would be the duty of the High Court or a subordinate Court to follow the decision of the Supreme Court. It is also held that the decision in a judgment of the Supreme Court cannot be assailed on the ground that certain aspects were not considered or the relevant provisions were not brought to the notice of the Court. In Khoday Distilleries Ltd. (Now known as Khoday India Ltd) & Ors vs. Shri Mahadeshwara Sahakara Sakkare Karkhane Ltd Kollegal (under liquidation) represented by Liquidator (2019) 4 SCC 376, it is held that when an appeal or revision is provided against an order passed by a court, tribunal or any authority before the superior forum and such superior forum modifies, reverses or affirms the decision put in issue before it, the decision of the subordinate forum merges in the decision by the superior forum and it is the latter which subsists, remains operative and is capable of enforcement in the eye of law.

Mr Rishabh Shah, the Ld. Counsel appearing for the Respondent Bank vehemently opposes the stand taken by the Appellants by contending that the Hon’ble Supreme Court was not sitting on judgment over the decision taken by the D.R.T. on 29/07/2004. The appeal that was preferred by the Appellants over the said judgment before the D.R.A.T. was dismissed as early as 08/12/2006 and it has become final. What was challenged by the Appellants before the R.O., then the High Court and ultimately before the Supreme Court was the issue raised regarding the issuance of a fresh warrant of attachment of the identified properties in violation of the provisions under Rule 68 B of the II Schedule to the Income Tax Act. A reading of the order of the Hon’ble Supreme Court dated 11/10/2017 does not indicate that the judgment of D.R.T. dated 29/07/2004 or the Appellate order confirming it on 08/12/2006 was in any way interfered, modified or altered. Moreover, the opportunity given to the Appellant to settle the dues once and for all by making a payment of ₹87,34,962/- within six months was not availed by them. They did not pay a penny towards that amount. Though the Review Application filed by the Bank was dismissed by the Hon’ble Supreme Court, it does not in any way alter the original judgment or the Recovery Certificate issued by the D.R.T., submits the Ld. Counsel

After having anxiously considered rival contentions, the order of the Hon’ble Supreme Court and the catena of decisions relied upon the Ld. Counsel Mr Kinkhawala as also the impugned order of the D.R.T., I find that prima facie there is no indication that the final judgment of D.R.T. as affirmed in appeal by this Tribunal on 08/12/2006 has been altered. The Hon’ble Supreme Court was not exercising its jurisdiction questioning the propriety of the findings in the order disposing of the O.A. The Hon’ble Supreme Court had observed that the borrower had already paid four times the amount borrowed and therefore, crystalised an amount to be paid within a stipulated time. The Appellants failed to seize that opportunity offered to them. In the decision of Kunhayammed (supra), it is also observed that the nature of jurisdiction exercised by the superior forum and the content or subject matter of the challenged laid or which could have been laid shall have to be kept in view. In Director of Settlement (supra) the Hon’ble Supreme Court was referring to the nature of a binding precedent in a constitutional matter. In the case of Khoday Distilleries (supra), it is clarified that when a superior forum modifies, reverses or affirms the decision put in issue before it, the decision of the subordinate forum merges with the decision by the superior forum and it is the later which subsists, remains operative and is capable of enforcement in the eye of law. (emphasis supplied).

I am therefore, not in agreement with Mr Kinkhabwala on on the point that the Hon’ble Supreme Court had modified the findings of the D.R.T. with regard to the amount that is payable by the Appellants. After having failed to comply with the directions of the Supreme Court to pay a specified amount within a stipulated time, the Appellants cannot now be taken advantage of the said order by relying on the amount directed to be paid by interpreting that the debt payable was crystalised in supersession to the original decree.

Interest has accumulated over the period of two decades and the outstanding dues as of the filing of the Appeal is ₹10,77,63,011.51. After having protracted the litigation by deploying dilatory tactics, the Appellants do not deserve any concession. The Appellants are directed to deposit a sum of ₹5 cores a pre-deposit under Sec. 21 of the RDB Act. The amount shall be paid in two equal instalments of ₹2.5 crores each. The first instalment shall be payable within a period of three weeks i.e. on or before, 20.06.2023 and the second instalment of ₹2.5 crores shall be payable within three weeks therefrom i.e. on or before, 11.07.2023. In default of the payment of any instalments on time, the appeal shall stand dismissed without any further reference of the Tribunal.

On the payment of the first instalment on time, the Appellants shall be entitled to stay of the recovery proceedings before the R.O.

The amounts 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 nationalised bank, initially for 13 months, and thereafter to be renewed periodically.

The I.A. is disposed of in the above terms. The Respondent Bank is at liberty to file a reply in the Appeal with an advance copy to the other side.

Post on 21.06.2023 for reporting compliance concerning the first instalment.