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Judgment
R. D. Khare, Chairperson
The above mentioned appeals were heard and reserved for judgment by this Tribunal vide order dated 03.05.2024.
The above two appeals i.e. Appeal Dy. No. 473/2023 and Appeal Dy. No. 539/2023 have been preferred by the Bank and the auction purchaser under Section 18 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as “SARFAESI Act”) against the judgment dated 18.02.2023, whereby the S.A. No. 33 of 2017 filed by the borrowers was allowed.
The brief facts of the matter gathered from the Appeal Dy. No. 473 /2023 are that the respondent No.1 was granted various credit facilities by the appellant-bank through its Directors, to which immovable properties pertaining to respondents No.1 to 3 were mortgaged with the bank. Since the respondents-borrowers did not maintain the financial discipline, therefore, the account was classified as NPA on 10.12.2013 and demand notice dated 09.09.2015 under Section 13(2) of the SARFAESI Act was issued for a sum of Rs. 6,60,89,724.56/- followed by possession Notice dated 07.12.2015 under Section 13(4) of the said Act. Thereafter, the auction sale notice dated 08.02.2017 was issued scheduling the auction on 15.03.2017.
The respondents-borrowers challenged the entire proceedings of the appellant-bank including the sale notice dated 15.03.2017 and the auction dated 08.02.2017 by filing to S.A. No. 33 of 2017 before the Tribunal below. It appears that the auction held pursuant to auction sale notice dated 08.02.2017 could not be materialized, therefore, a fresh auction sale notice was issued on 24.08.2018 scheduling the auction on 12.09.2018 and the property was sold to the respondent No.4 for a sum of Rs. 5.17 crore and after deposit of the said amount, the sale certificate was issued on 31.10.2018, which was challenged by the respondents/borrowers by filing amendment application dated 21.11.2019 along with supplementary affidavit dated 17.01.2020 in the pending S.A.
The Tribunal below vide order impugned allowed the said S.A. with cost and compensation of Rs. 25,000/- to the respondents/borrowers by setting aside the sale certificate dated 31.10.2018 and sale notice dated 31.10.2019. Being aggrieved by the said order, the present Appeal Dy. No.473/2023 has been filed by the Bank and the Appeal Dy. No.539/2023 by the auction purchaser.
So far as the third Appeal i.e. Sr.No.89/2016 is concerned, the same has been filed by the borrowers under Section 20 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 challenging the judgment and decree dated 19.01.2016, whereby the O.A. No. 164 of 2014 filed by the Bank for recovery of Rs. 5,34,57,628.76/- has been allowed in toto and the recovery certificate has also been issued.
During the pendency of the above appeals, an application being I.A. No.792/2023 has been filed on behalf of the Bank and the borrowers stating therein that the matter has been settled between the Bank and the borrowers including the auction purchaser on the condition that the respondents No.1, 2 and 3 (borrowers) have agreed to continue with the auction sale and deposit Rs. 90.00 lakhs with the Bank towards the remaining dues and prayed that the above mentioned appeals may be disposed off in terms of the said settlement. Against the said application, an objection has been filed by Amit Kumar Verma and Sanjai Prasad, who have claimed themselves to be the Directors of the Respondent-borrower company that without their consent, the settlement has been reached, which is not sustainable, as they are necessary party being directors of the borrower-firm.
Learned counsel for the borrowers submitted that he is also representing the respondent no. 1-Company. The learned counsel further submitted that Shri Amit Kumar Verma and Shri Sanjay Prasad were inducted as Directors of the company in May, 2017 (hereinafter referred to as “the subsequent directors”) and the loan documents, mortgage documents and other documents were signed by the earlier Directors of the company in year, 2012. It is thus contended that the said directors were inducted subsequently, who were neither borrowers nor mortgagers or interested party in the SARFAESI proceedings. Therefore, they have no right to create any hindrance in the aforesaid compromise, which has been entered into between the borrowers, mortgagors, Bank and auction purchaser. A joint application has been moved that the settlement has been arrived at between the parties, therefore, they do not want to pursue the matter.
Learned counsel for the borrowers submitted that the company by completing the quorum conducted a meeting as per the articles and associations of the company and passed a resolution for entering into compromise, therefore, the compromise, which has been entered into, is a valid and legal, which cannot be challenged by any third party.
Learned counsel for the subsequent directors submitted that no notice in writing was given to every Directors of the borrower-company, therefore, the meeting of the board as held has no meaning in view of Section 173 of the Companies Act, 2013. The learned counsel further submitted that there is no settlement or compromise regarding waiver of any rights over the property in question and the bank had played fraud upon the Court by way of filing affidavit. It was also contended that the borrower Firm is a private limited company and in its resolution of the meeting dated 17.08.2023, Shri Amit Kumar Verma one of the Directors of the Firm has been authorized to sign and execute all the necessary documents on behalf of the company. It was, therefore, prayed that the above appeals may be heard and decided on merits.
Having heard the learned counsels for the parties and considering the material available on record, undisputedly the borrower-company was granted various credit facilities through its Directors. Rakesh Srivastava was promoter, Madhu Srivastava, Abhigya Srivastava and Ashish Kumar Srivastava were directors in the company, who had initially established the same. It is also admitted that Sanjay Prasad and Anil Kumar Verma were inducted as Directors in the company on 16.05.2017 i.e. much after shutting down the company. Moreover, the said directors were never party in any proceeding of the case either in the SARFAESI proceeding or in the O.A. proceedings under Section 19 of the RDB Act or at the time of taking the loan from the bank, instead they came into the picture after declaration of the account as NPA and the proceedings under the SARFAESI Act and RDB Act were already in process. As such, it is clear that during the whole period of running the company, the said directors have not invested even a single paisa in the said firm. The property mortgaged with the bank, which has now been sold, does not pertain to the said Directors. There is nothing on record, which may show that the said directors have ever invested any amount in the affairs of the borrowers’ company and even they have never tried to contest the case. If they were necessary party in the case, they would have participated in the proceedings, but they have never tried to do so and only they came into the picture, when they knew that the matter has been settled and the main borrowers have liquidated all the dues of the Bank. As such in my considered view, they have no locus to dispute the aforesaid settlement arrived at between the parties. If the subsequent directors have any grievance with regard to the Directorship of the company, they may seek remedy available under the law. Thus, the objection raised by the subsequent directors against the settlement arrived at amongst the Bank, borrowers and auction purchaser is unsustainable.
In view of the submissions made by the learned counsels for the Bank, borrowers and auction purchaser that the matter has been settled on the terms and conditions mentioned in the compromise deed, there remains nothing to be adjudicated on merits of the case, therefore, all the three appeals as mentioned above stand disposed off in terms of the settlement/compromise.
A copy of this order may be forwarded to the parties concerned as well as to the DRT concerned and be also uploaded on the e-drt portal.