Naresh Kumar Garg And Ors. vs IFCI And Ors.

Ranjit Singh, J

Vide an order dated 21.6.2013, the Tribunal below has rejected the prayer of the appellants for recall of the order dated 2.4.2013 for which the appellant had filed LA. No. 562/2013 before the Tribunal. Appellants have filed this appeal to challenge the said order passed by the Tribunal below. The Tribunal below had permitted the respondent FI to sell the property of the respondent company while disposing of I.A. No. 774/2005 and I.A. No. 285/2009. These I.As. had been field by respondent FI seeking permission of the Tribunal to sell the secured assets on the ground that the respondent company had admitted its liability. The present appellant and the other respondents impleaded in the O.A. had raised no objection to this prayer made before the Tribunal and accordingly the respondent FI was allowed to sell the property of the respondent company.

The above referred order was passed on 2.4.2013. The present appellants, who were defendant Nos. 2 and 4 in the O.A. filed I.A. No. 562/201 3 on 20.5.2013 praying for recall of the order dated 2.4.2013 on the ground that they had not given any consent for sale of the property as was recorded in that order. This application has been rejected by the Tribunal below on 21.6.2013 against which the appellants have field the present appeal.

The appellants have filed this appeal only against order dated 21.6.2013. The order dated 2.4.2013 vide which the respondent FI was permitted to sell the property of the company has not been challenged. During the course of arguments of the present appeal during one of the hearings, it surfaced that the appellants have not challenged the order dated 2.4.2013. The prayer for recall of this order is declined through the impugned order. On request made by the Counsel for the appellants, the case was adjourned for him to consider this aspect.

The appellants thereafter filed an application seeking amendment of the present appeal to challenge the order dated 2.4.2013 as well. Notice on this application seeking amendment was issued. The Counsel for the respondent FI chose not to file any reply. The Counsel for the parties were accordingly heard on the application seeking amendment of the appeal as well as on the appeal.

Mr. Rakesh Bhatia, the Counsel for the appellants, would refer to the application filed on 20.5.2013 for recalling the order dated 2.4.2013 on the ground that the consent on behalf of the appellants and respondent No. 6 for the sale of the property had been wrongly recorded whereas he (Mr. Bhatia) had never been a Counsel for respondent No. 6 and had not appeared on behalf of the said respondent. The plea otherwise by the Counsel is that the action of the Tribunal below in permitting the sale of the property without issuing recovery certificate (R.C.) would be in violation of the statutory provisions. The Counsel points out that the prayer in the application only was for issuance of R.C. whereas the Tribunal has gone beyond the prayer and has permitted the FI to sell the property.

In support of his submission reference is made to Rule 12(5) of the DRT (Procedure) Rules, 1993. By referring to Sub-rule (5) of Rule 12 of the Rules, the Counsel would contend that the Tribunal below could have ordered the defendants in the O.A. to pay the amount to the extent of admission failing which the Tribunal could only issue certificate in accordance with Section 19 of the RDDBFI Act to the extent of the amount admitted by the defendants. The Counsel would contend that any consent given by the appellants or anybody else against the statute would be a nullity in the eyes of law. Accordingly, the Counsel would pray that the impugned order passed by the Tribunal below even on the basis of so-called consent could not be taken to have been validly passed by the Tribunal below and the same deserves to be set aside. The Counsel is emphatic in stating that he had never consented for the sale of the property and this fact is wrongly recorded in the order that there was no objection from the Counsel appearing on behalf of the appellants.

From the manner and tenor of submissions made by the Counsel for the appellants, it is clear that the whole emphasis in the appeal is to set aside the order dated 2.4.2013. In the appeal no prayer is made for setting aside this order as the appeal is only directed against the order dated 21.6.2013. The amendment of the appeal to make a challenge to the order dated 2.4.2013 now would mean that the appellants have taken action to impugn the order dated 2.4.2013 in the year 2015. Any amendment in the pleadings has to be considered as per the scope of the legal provision. Some of the valid consideration governing the principle in exercise of discretionary power by a Court in relation to amendment is that it must be exercised judiciously and with great care. It is true that the Court must not refuse bona fide, legitimate, honest and necessary amendment whereas it should never permit mala fide, worthless and/or dishonest amendments. The Court has also to consider potentiality of prejudice or injustice which is likely to be caused to the other side by amendment and amendment should not cause such prejudice to the other side which cannot be compensated adequately in terms of money. As a general rule, the Court should not decline amendments if a fresh suit on the amended claims would be barred by limitation on the date of application. Thus, the amendment of the claim or relief barred by time should not be allowed.

If the amendment prayed for is allowed, then obviously it would amount to permitting a challenge which is barred by time. The appellants being conscious of this fact, states to have field one application for seeking condonation of delay in praying for amendment of the appeal to challenge the order dated 2.4.2013, which is not listed today. As per the Counsel, the said application is lying under some objection. To be fair to the Counsel, he has prayed for adjournment to remove the objection and to press his prayer for condoning the delay in filing the application seeking amendment. Though I have rejected the prayer for adjournment, but have heard the Counsel on the application for amendment as well as on the appeal which is filed against the order dated 21.6.2013.

The appellants ought to have filed application seeking condonation of delay along with the application through which the amendment of appeal is sought. I have not felt inclined to adjourn the hearing as even if this amendment is allowed, no substantial relief can possibly be given to the appellants in view of the factual position as would emerge from the record.

The Counsel for the respondent FI would invite my attention to another order dated 23.4.2009 passed on LA. No. 774/2005. This application was filed by the FI to issue direction to the company to make payment of the amount as per the admission contained in the Balance Sheet. The Counsel appearing for the respondent borrower company, Mr. Yash Paul Garg and Mr. Lajpat Rai Jindal had prayed for time to seek instructions. The Tribunal viewed that no instructions were needed, and direction was issued to defendant No. 1 to pay back the amount as per the Balance Sheet within one month, This order, which was passed on 23.4.2009 has not been challenged by the appellants or any other party. Once this payment was not made, the respondent FI filed another I.A. No. 285/2009 which was ultimately disposed of on 2.4.2013, permitting the respondent FI to sell the property of the respondent company. This order was passed when the Counsel appearing for the appellants and the respondent borrower did not raise any objection to the sale. Relevant part of the order in this regard would reveal so:

"...The learned Counsel for the applicant FI states that in view of admitted liability by defendant No. 1 the applicant FI may be permitted to sell the secured assets namely land and building on which neither the Counsel for the defendant Nos. 1, 3 and 5 nor defendant Nos. 2, 4 and 6 have any objection...."

In the absence of any challenge to the order dated 23.4.2009 and in view of the stand of the appellants before the Tribunal when order dated 2.4.2013 was passed, the appellants cannot be heard to complain that they had objected to the sale of the property. The stand of the appellants before Tribunal would show that the order was passed with their consent or implied consent.

Significantly, the appellants and the borrower respondents so far have not raised any challenge to the order dated 2.4.2013. The liability which they owed to the respondent FI was admitted in the Balance Sheet and on the basis of this admission directions were issued to the borrower company to make the payment within one month. Once this payment is not made, further action was taken though belatedly by the FI. The prayer in LA. No. 774/2005 was to issue direction to the borrower company to pay out its admitted liability. No doubt, the prayer in I.A. No. 285/2009 was to issue recovery certificate while FI sought permission to sell secured assets. The appellants did not raise any objection and in this background the Tribunal below allowed the FI to sell the property. Having agreed before the Tribunal, which would amount to consent on the part of the borrower for sale of the property, they cannot now be heard to state that no such consent was given or that such an order could not have been passed by the Tribunal below.

As per Rule 12(5) of the Rules, where a defendant makes any admission of the full or part of the amount of debt due to a Bank or financial institution, the Tribunal apparently would be under obligation to order such defendant to pay the amount to the extent of admission within a period of one month. If there is any failure on the part of the defendant to make payment, the Tribunal may issue certificate in accordance with Section 19 of the RDDBFI Act. It is the plea of the appellants that the Tribunal could not have granted permission to the FI to sell the property, but could have issued only a recovery certificate. This argument may appear attractive, but having regard to the facts in the present case, this plea certainly would sound misplaced. Rule 12(5) of the Rules has used the word 'shall' in the first part where the Tribunal is to issue direction for payment of amount to the extent of admission, but in the second part the word used is 'may' when the question of issuing certificate in accordance with Section 19 of the Act arises. Ordinarily, if the defendants who have failed to make payment as per the orders passed by the Tribunal invoking the powers in the first part of Sub-rule (5) of Rule 12 and continue to dispute the liability, then the Tribunal may issue a certificate as per the said rule. After issuance of a certificate, ultimately, recovery is to be effected by the sale of the property. If any Bank or FI before the Tribunal invoke the provisions of Rule 12(5) and plead that they may be permitted to sell the property and the borrower, etc. (defendants) consent to the same or they do not raise any objection, then it would be futile to expect the Tribunal to still issue recovery certificate. To grant permission to FI for sale cannot be termed or viewed as illegal in any manner, especially so, when it is not objected to in any manner. This cannot be taken as a case of any consent against the statute to plead that it was a nullity.

This submission can be tested by noting that the borrower at any stage of pendency of the O.A. can come forward to make payment before the Tribunal. If any borrower comes forward to make payment, the Tribunal would certainly permit him to make the deposit which would render the O.A. infructuous on claim being satisfied. In such an eventuality, it cannot be expected from the Tribunal that it would still issue recovery certificate to recover the amount. During the pendency of the O.A., the borrower can always come forward with a prayer that secured asset be sold and amount realized. This would be to make payment during the pendency of the O.A. The borrower can always come forward to say that the money be realized by the sale of the property. It would be rather misconceived to expect that the Tribunal still should issue R.C. and then the sale be held. No grievance can be made to say that the Tribunal will still want to adjudicate the O.A. and then issue recovery certificate for the recovery of the amount. Accordingly, I have not been able to find any prohibition or illegality which would go to disable the Tribunal to direct sale of the property in question even when the borrower had come forward to give consent for such a sale.

There can otherwise be a serious objection to the maintainability of the present appeal. Once the liability has been admitted, and on that basis the Tribunal below has issued direction for the company to pay the amount, the present appeal may not be maintainable as the appellants have never challenged the order whereby the liability was admitted. Even the consent in the form of no-objection raised against the prayer made by the F1 seeking permission to sell the property would directly stare at the appellants on their right to maintain the present appeal. Section 20(2) of the RDDBFI Act provides that:

"No appeal shall lie to the Appellate Tribunal from an order made by a Tribunal with the consent of the parties."

The order dated 2.4.2013 clearly was an order which can be construed to have been passed with the consent of the parties. The belated attempt by the appellants to withdraw the consent which they had given and was duly noticed and recorded in the order primarily would be aimed at maintaining the present appeal. The prayer by the appellants was to recall the order dated 2.4.2013 on the ground that they had not consented for sale of the property. This would clearly show that the order dated 2.4.2013 was taken and construed as having been passed on the consent of the appellants. The prayer of the appellants for recall of the order having been rejected would mean that the order dated 2.4.2013 was with the consent of the parties which would disentitle the appellants to maintain the present appeal. This may be taken as added reason not to consider the plea of the appellants for amendment of the appeal which is even otherwise hopelessly time-barred. The infirmities staring at the appellants are more than one in number. The liability was admitted leading to an order on 23.4.2009. That being so, the direction to pay the amount has not been contested till date. The borrower, company and the other respondents, till date, have not come forward either to challenge the order dated 23.4.2009 or the order dated 2.4.2013. It can thus be taken that the present appellants have filed the appeal without any basis after having consented for sale of the property. If it was otherwise one could expect other respondents to file the appeal who are conceding to have consented for the sale of the property.

There is yet another reason in this regard which is significant. The application by these appellants for recall of the said order dated 2.4.2013 was filed after changing the Counsel. The changed Counsel could not have been in any position to know as to what transpired before the Tribunal when the order dated 2.4.2013 was passed. Since the consent was recorded not only on behalf of the appellants but borrower company, etc. who have not come forward complain against this order, it would be reasonable to assume that the Tribunal has rightly recorded the consent of the parties while permitting the sale of the property by FI. The present Counsel appearing in the appeal was representing the appellants before the Tribunal when the order dated 2.4.2013 was passed but statedly he is no more the Counsel in this case. Apparently, he has been made to appear in this appeal to avoid objection that changed Counsel would not be in a position to assert as to what transpired before the Tribunal as regard to the issue of consent/objection when the order dated 2.4.2013 was passed.

I thus find no merit in the appeal. The application made by appellants for the recall of the order is just only assertion of the appellants which cannot be accepted. In view of the detailed discussion, I find no merit in the appeal and would dismiss the appeal.