Oriental Bank Of Commerce vs Rehal Steel Industries And Ors.

Ranjit Singh, J

Respondents M/s. Rehal Steel Industries and another had filed this SA before the Debt Recovery Tribunal-II at Chandigarh. The respondents filed I.A. No. 194/2014 seeking permission to withdraw the SA on the ground that the Bank had already taken physical possession of the property and therefore the borrower was not interested to pursue the matter. Another I.A. was filed for preponing the case and for issuing direction to the Bank to take sympathetic approach towards the OTS proposal submitted by them. While dealing with this prayer, the Tribunal below could notice certain inappropriate action and therefore had issued certain directions to the Bank to produce the documents while adjourning the case. After putting certain queries, the Tribunal had deferred the hearing of the IA filed with the prayer to withdraw the SA. In this background, the Tribunal below has gone on to notice certain developments which had taken place during the course of proceedings of the SA.

As is noticed in the order dated 18th March, 2014, the respondents had pleaded before the Tribunal below that they had a perspective buyer to liquidate all the dues and on this ground prayed for some breathing time. The Tribunal below had placed the case before the Lok Adalat on 16th February, 2013. The respondents herein had come forward to make an offer of payment of Rs. 3.25 crores with simple rate of interest. This offer was declined by the Bank pleading that it was not ready to accept any offer below Rs. 3.63 crores. The matter accordingly could not be settled before Lok Adalat.

The Bank went ahead with the action under the SARFAESI Act and obtained permission from the District Magistrate to take possession of the property. The respondents again came forward with a plea that they had a buyer who was ready to purchase the property over and above the valuation carried out by the Bank. The respondents thus moved another application and prayed for restraining the Bank from taking possession of the property. When this application came up for consideration on 15th April, 2013, the AGM, present before the Tribunal below did not accept the offer by stating that the account could not be settled less than Rs. 3.63 crores out of which the borrower would have to pay 25% of the amount immediately. The Tribunal accordingly passed a detailed order on 16th April, 2013 which is found reproduced in the order dated 18th March, 2014.

In this manner, the Bank took physical possession of the property in question. The property was put to sale on 19th October, 2013 fixing the reserve price of Rs. 115 lacs for factory land and building, Rs. 275 lacs for commercial plot and Rs. 18 lacs for plant and machinery. The Bank could not succeed in auctioning the property in question in this manner. Though earlier the Bank had rejected the offer of the Borrower for settlement at Rs. 3.28 crores stating that nothing less than Rs. 3.64 crores would be acceptable, the Borrower came up with the offer of Rs. 160 lacs which was recommended against total amount of Rs. 4 crores. AGM who was earlier not agreeing for an amount less than Rs. 3.64 crores now was responding to the offer asking the borrower to enhance despite being fully aware that he had earlier rejected the offer of much higher amount. The Tribunal below thus found the conduct of the Borrower to be suspicious when it filed an application pleading that the case was settled for Rs. 1.60 crore and had prayed for withdrawal of his SA.

Earlier, the AGM of the Bank had written to the Borrower on 16.2.2013 that recoverable sum was Rs. 3,73,81,544/- and offer to settle at Rs. 3.25 crores was rejected being not in consonance with Bank guidelines. The obvious doubt may-arise in one's mind as to how the case was being settled for Rs. 1.60 crores whereas earlier offer of Rs. 3.25 crores was rejected. The Tribunal below has gone on to make some scathing observations as noticed above and has questioned as to how an amount of Rs. 2 crores was being sacrificed by accepting offer of Rs. 1.60 crores. Simultaneously, the Tribunal had noticed that it had no jurisdiction to encroach upon the area which is exclusively in the purview of the Bank for setting the account, and had allowed the prayer for withdrawal of the SA. The Tribunal directed that the copy of the order passed be sent to the Central Vigilance Commission for enquiring into the matter. A copy of the order was also directed to be sent to the CMD of the Bank and for placing the same on the personal file of the concerned officer. The Tribunal had further directed that the concerned officer, Mr. R.K. Raina, should be removed immediately from the assignment of authorized officer and from monitoring of recovery aspects in this case. Besides, the Tribunal had also directed that an enquiry be marked against all the four officers who had sacrificed this public money.

The Counsel for the appellant Bank states that this order passed by the Tribunal below was not challenged at that time. As per the Counsel, copy of the order was placed before the CMD and enquiry was also held and the concerned officer, Mr. R.K. Raina, was removed from the assignment. Since the order was practically complied with, the Bank did not consider it appropriate to challenge the same.

After disposal of the SA in the manner as noticed, the case stood closed. Still, the present impugned order dated 22nd September, 2014 came to be passed when an application for return of documents was filed, which is impugned by the Bank in the present appeal.

As can be made out from the order dated 22nd September, 2014, the Bank had moved some application for return of the original file which was directed to place on record of the SA which was earlier dismissed as withdrawn on March 18, 2014. While dealing with this application, the impugned order is passed by the Tribunal below, observing that the Bank in clandestine manner has sacrificed crores of rupees but still the Bank had given clean chit to the officers which is termed as eyewash in the order. The Tribunal has directed that copy of the order be sent to Central Bureau of Investigation (CBI) to look into the matter. Aggrieved against the direction issued by the Tribunal below, the appellant Bank has filed the present appeal.

In the order dated 16th April, 2013, the Tribunal below has observed that the applicants have been misleading the said Tribunal. Earlier, on request by the applicant the case was placed before Lok Adalat, but could not be settled. The applicant even thereafter filed an IA that the Bank was in the process of obtaining permission from the District Magistrate for taking physical possession of the property. The applicant respondent then came up with the plea for settling the matter with the Bank as they were directed to present the buyer. Instead of bringing the buyer, the respondent applicants came up with the prayer to sell the property in parts. The Tribunal thus has noticed that sufficient time was given to the respondent applicants but they failed to discharge the liability in any manner. As per the Tribunal, the applicant respondent had been doing so only to gain time and delay the process of recovery. The proposal for selling the property in parts termed as hypothetical and accordingly was rejected. The Bank was directed to go ahead and take possession to sell the property immediately.

Notice in the appeal was issued. Service has been effected on the respondents, but none has chosen to appear.

Since there is no opposition or objection for condoning the delay in filing the appeal, I am inclined to condone the delay. For the reasons mentioned in the application, the prayer made in the application (I.A. No. 132/2015) seeking condonation of delay is accordingly allowed. Delay in filing the appeal is condoned.

Let the appeal be numbered. On being numbered as Appeal No. 328/2015, it is taken up for final disposal today itself.

Apparently, the Tribunal below has gone overboard to issue the impugned directions, that too, on an application filed in a disposed of SA. Not only this, the Tribunal below, in my view, even has failed to consider if it will have any power or jurisdiction to refer the case to CBI. The Tribunals constituted under the RDDBFI Act have limited jurisdiction which they can exercise strictly in terms of the provisions contained in the SARFAESI Act and the RDDBFI Act. This Tribunal in Miscellaneous Appeal No. 380/2011 titled Hari Kripa Towers (P) Ltd. v. Ministry of Finance & Ors., II (2015) BC 1 (DRAT), has held that there is no power or source available under these enactments on the basis of which any directions for holding investigation or inquiry can be issued by these Tribunals. It is further held:-

"10. The investigation has to be by setting the criminal law into motion which certainly may not be within the competence of this Tribunal. The inquiry also can be either held under the Criminal Procedure Code or any other inquiry in nature of domestic inquiry. No directions to hold investigation can be issued and such directions would be a call beyond the jurisdiction of this Tribunal. This Tribunal also would have no source or power to direct inquiry in nature of domestic inquiry which may be directed against any person who may have committed any misconduct."

That being the position of law otherwise, any direction by a Tribunal constituted under the RDDBFI Act to refer the matter to CBI constituted under the Delhi Special Police Establishment Act would certainly appear to be beyond the powers of the Tribunal. In fact, there has been a serious debate about the powers of the constitutional Courts like High Court to issue direction for investigation to CBI which is constituted under the Delhi Special Police Establishment Act. This issue has been resolved by a Constitution Bench in the case of State of West Bengal & Ors. v. The Committee For Protection of Democratic Rights West Bengal & Ors., II (2010) SLT 136 : JT 2010(2) SC 352.

The issue before the Constitution Bench was whether the High Court, in exercise of its jurisdiction under Article 226 of the Constitution of India, can direct the Central Bureau of Investigation established under the Delhi Special Police Establishment Act to investigate a cognizable offence, which is alleged to have taken place within the territorial jurisdiction of a State, without the consent of the State Government.

Though the Court, after elaborate discussion, has answered the question holding that the High Court, in exercise of jurisdiction under Article 226 of the Constitution, can direct CBI to investigate cognizable offence without the consent of the State and that such power will neither impinge upon the federal structure of Constitution nor violate the doctrine of separation of power and shall be valid in law, but, at the same time, has emphasized that while passing any order, the Courts must bear in mind certain self-imposed limitations on the exercise of these Constitutional powers. It is further observed that the very plenitude of the power under the said Articles 226 and 32 requires great caution in its exercise. The Court has gone on to observe that no flexible guidelines can be laid down to decide whether or not such power should be exercised but it is noted that time and again it has been reiterated that such an order is not to be passed as a matter of routine or merely because a party has levelled some allegations against the local police. The Supreme Court has held that this extra-ordinary power must be exercised sparingly, cautiously and in exceptional situations where it becomes necessary to provide credibility and instill confidence in investigations or where the incident may have National and International ramifications or where such an order may be necessary for doing complete justice and for enforcing the fundamental rights. It is observed that otherwise the CBI would be flooded with a large number of cases and with limited resources, may find it difficult to properly investigate even serious cases and in the process lose its credibility and purpose with unsatisfactory investigations.

It is in the above-noted background of legal position that the validity of the directions issued by the Tribunal referring the case to CBI is required to be examined. The power of the CBI to investigate a criminal case has to be strictly regulated in terms of the provisions of the Delhi Special Police Establishment Act under which this force has been constituted. The preamble of the Act would show that it is enacted with a view to constitute a special force in Delhi for investigation of certain offences in Union Territories and to make provisions for the superintendence and administration of the said force and for extension to other areas of the powers and jurisdiction of the members of the said force in regard to the investigation of the said offences.

Section 5 of the Act empowers the Central Government to extend the powers and jurisdiction of Special Police Establishment to any area, in a State, not being a Union Territory for the investigation of any offences or classes of offences specified in a notification under Section 3 and on such extension of jurisdiction, a member of the Establishment shall discharge the functions of a police officer in that area and shall, while so discharging such functions, be deemed to be a member of the police force of that area and be vested with the powers, functions and privileges and be subject to the liabilities of a police officer belonging to that police force.

Section 6 of the Act makes a provision for consent of the State Government to exercise of powers and jurisdiction. This section states that nothing contained in Section 5 shall be deemed to enable any member of the Delhi Special Police Establishment to exercise powers and jurisdiction in any area in a State, not being a Union Territory or railway area, without the consent of the Government of that State. Thus, Section 6 imposes a restriction on the powers of the Central Government to extend the jurisdiction of the said Establishment and such extension of power can only be with the consent of the State Government concerned. It is on the basis of these provisions that challenge was made before the Hon'ble Supreme Court in the case The Committee For Protection of Democratic Rights West Bengal (supra) to the power and jurisdiction of the High Court to direct investigation without the consent of the State Government concerned. If there was serious debate about the powers of the Constitutional Courts to refer the case for investigation by CBI, the power of the other Courts and the Tribunals which are constituted under the RDDBFI Act would certainly be questionable. The power of the High Court to direct investigation by CBI while exercising jurisdiction under Article 226 has been upheld, the Article being very heart of the Constitution. Under Articles 32 and 226 of the Constitution, the Constitutional Court exercises the power of judicial review which is an integral part and essential feature of the Constitution, constituting part of its basic structure. The Hon'ble Supreme Court has observed that ordinarily the power of the High Court and the Supreme Court to test the Constitutional validity of legislations can never be ousted or even abridged. That being the scope of the power exercised by the Supreme Court and High Court under Articles 32 and 226 of the Constitution respectively was the main cause for upholding the powers of the High Court and the Supreme Court to direct investigation by special police force like CBI.

The Tribunals constituted under the RDDBFI Act do not exercise any such powers for which it can be taken to have powers to direct investigation by CBI or to refer the case for investigation to CBI which otherwise was constituted under the Delhi Special Police Establishment Act. The jurisdiction of this police force to investigate an offence is circumscribed by the limitation imposed under Section 6 of the Delhi Special Police Establishment Act and any happening in the State can only be investigated by this special force with the consent of the State Government. The Tribunal constituted under the RDDBFI Act certainly cannot have powers like Constitutional Courts would have to refer the case to the Special Police Establishment under the Delhi Special Police Establishment Act.

The Tribunal constituted under RDDBFI Act have been given power under the statute to pass such orders and give such directions to give effect to its order or to prevent abuse of its process or to secure the ends of Justice under Section 19(25) of the RDDBFI Act. While considering this provision the Hon'ble Supreme Court in case of Standard Chartered Bank v. Dharminder Bhohi and Ors., VIII (2013) SLT 313-IV (2013) BC 407 (SC) : (2013) Vol. 15 SCC 341 has held that the Tribunal is required to function within the statutory parameters. It is further held that the Tribunal does not have any inherent powers and it is limpid that Section 19(25) of the Act confers limited powers. The Court has also gone on to notice the difference between the Courts and the Tribunals while discharging their judicial power and functions. The Court has noted the well-recognized differences between the Courts and the Tribunals as under:

"(i) Courts are established by the State and are entrusted with the State's inherent judicial power for administration of justice in general. Tribunals are established under a statute to adjudicate upon disputes arising under the said statute, or disputes of a specified nature. Therefore, all Courts are Tribunals. But all Tribunals are not Courts.

(ii) Courts are exclusively manned by Judges. Tribunals can have a Judge as the sole member, or can have a combination of a judicial member and a technical member who is an 'expert' in the field to which the Tribunal relates. Some highly specialized fact-finding Tribunals may have only technical members, but they are rare and are exceptions.

(iii) While Courts are governed by detailed statutory procedural rules, in particular the Code of Civil Procedure and the Evidence Act, requiring an elaborate procedure in decision making, Tribunals generally regulate their own procedure applying the provisions of the Code of Civil Procedure only where it is required, and without being restricted by the strict rules of the Evidence Act."

Accordingly, the Court has held that Tribunal under the RDDBFI Act has been established with a specific purpose. As observed by the Court, the duty of the Tribunal is to see that the disputes are disposed of quickly regard being had to the larger public interest. It is noticed by the Court that the role of the Tribunal has not been fettered by technicalities. The Tribunals are required to bestow attention and give priority to the real controversy before it arising out of the special legislations. The Court has highlighted the provisions of Section 34 of the SARFAESI Act and 34 of the RDDBFI Act providing for overriding effect, to observe that sacrosanct purpose with which the Tribunals have been established is to put the controversy to rest between the Bank and the borrower and any third party who has acquired any interest. It is noticed that these Tribunals have been conferred jurisdiction by special legislation to exercise particular power in particular manner as provided under the Act, They cannot assume the role of a Court of different nature which can grant liberty to initiate any action against the Bank. They are only required to decide the lis that comes within their domain. If it does not fall within their sphere of jurisdiction, they are required to say so. The Court has thus ordered deletion of certain observation terming these unwarranted and being wholly bereft of jurisdiction.

There is thus no difficulty in holding that the Tribunals constituted under the RDDBFI Act, exercising limited jurisdiction, would have no authority or power or jurisdiction to direct investigation by CBI. The order passed by the Tribunal below, referring the case to CBI for investigation for any purpose whatsoever thus cannot be sustained.

Besides, the Tribunal had also sent the case to vigilance as well as to the CMD of the Bank. This order was passed by the Tribunal while dealing with an application filed by the Bank for return of the documents. Once the Tribunal has permitted withdrawal, issuing such direction in an application where mere prayer was for return of the document would not appear proper. I do not consider the need to go into the validity of that part of the direction where the Tribunal has sent the case to the vigilance as well. Since these directions have been issued in an application where no such issue arose, that part of the direction obviously can also not be sustained. The Tribunal below had referred the case for the information of the CMD of the Bank. This was because of the concern which the Tribunal had felt in settling the issue for a much lesser amount compared to the earlier offer made by the borrower, which was substantially for a higher amount. The earlier offer which was for Rs. 3.28 crores was rejected by the AGM of the Bank, stating that offer less than Rs. 3.64 crores was not acceptable due to RBI guidelines. How the offer for a sum of Rs. 1.60 crores or finally for Rs. 1.10 crores has been accepted in this case may call for some examination by the concerned CMD of the Bank. It is for the CMD to see if this action was bona fide or not. and it is for him to see if there is any need for further inquiry or investigation against anyone. The impugned order otherwise passed in this case for referring the case to CBI or Vigilance cannot be sustained. The present appeal is accordingly allowed. The impugned order passed by the Tribunal below referring the matter to CBI is set aside. The prayer made in the application otherwise has been allowed as the document of the Bank filed in this case has been received back by the Bank. Other prayers made in the appeal have been given up by the Counsel for the Bank and thus would stand disposed of accordingly. The present appeal is allowed in above terms.