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Judgment
Raj Mani Chauhan, J
This Miscellaneous Appeal under Section 20 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (hereinafter referred as "RDDBFI Act") has been directed by the appellant against the judgment and order dated 30th January, 2013 passed by Mr. K.J. Paratwar, the then learned Presiding Officer (Learned P.O.), Debts Recovery Tribunal No. II (DRT), Mumbai in Appeal No. 39/2012 (Crosslinks Finlease Pvt. Ltd. (Pan India Motors Pvt. Ltd.) v. Asset Reconstruction Company (India) Ltd. (ARCIL), whereby the learned Presiding Officer has dismissed the Appeal filed by the appellant against the order dated 22nd November, 2012 passed by the Recovery Officer on the Miscellaneous applications (M.A.) (Exh. Nos. 146, 159, 194, 196 and 220) in Recovery Proceeding (R.P.) No. 01/2012, whereby the Recovery Officer allowed the Miscellaneous Application (M.A.) (Exh. 194) filed by respondent No. 1 and set aside the sale in favour of respondent No. 11, Crosslinks Finlease Pvt. and its nominee, the appellant, Pan India Motors Pvt. Ltd. The Recovery Officer has also allowed the other prayers sought for by respondent No. 1 in the aforesaid M.A. The relevant facts giving rise to the present Appeal may be briefly stated as under:
The respondent No. 3, Daewoo Motors Pvt. Ltd., a Company incorporated under the existing laws of Korea, having its Registered Office at 541, 5 Ga, Nam-daemun-no, Chunggu Seoul, Korea, and its Unit at Plot No. A-1, Surajpur Industrial Area, Noida-Dadri Road, Surajpur 203 207, District Gautam Budh Nagar, Uttar Pradesh, had availed various credit facilities sanctioned by the consortium Banks, including erstwhile ICICI Bank Ltd. and respondent No. 4, EXIM Bank. The amount of credit facilities availed by the borrower was secured by creation of equitable mortgage of the immovable properties and hypothecation of movable properties by the borrower. The mortgage properties is being described as follows:
"All that piece and parcel of lease hold land bearing plot No. A-1 situated at Surajpur Industrial area, Greater Noida, Gautam Budha Nagar, Tehsil-Dadri, District Ghaziabad, U.P., State Industrial Development Corporation Ltd. (UPSIDC), Ghaziabad (lessor) for a period of 9 years from 18th November, 1978. The lease rent payable to UPSIDC is @ Rs. 100 per year for first thirty years @ Rs. 150/- per acre per year for the period for next thirty years. The Suit land is bounded as under:
On or towards the North by others land.
On or towards the South by 30m approach Road.
On or towards the East by others land.
On or towards the West by Noida-Dadri Road.
Together with all the structures standing thereon, along with Suit plant and machinery except the Vendor Toolings and current assets, lying herein on as is where is basis. The approximate built-up area of all Suit structures is 1,95,193 sq. mtrs."
The respondent No. 3 Company indisputedly could not repay the amount of credit facilities availed by it. Consequently, one of the lender Banks, i.e. ICICI Bank Ltd. filed Original Application (O.A.) No. 162/2002 before DRT-III, Mumbai, against the borrower and guarantors inter alia for recovery of an amount of Rs. 5,11,02,84,697/- (Rupees five hundred eleven crores two lakh eighty-four thousand six hundred ninety-seven only) due as on 31st March, 2002 together with further interest from the date of institution of the Suit till final repayment.
The applicant Bank moved an application before the DRT for appointment of Receiver which was allowed by the learned Presiding Officer, DRT. The learned Presiding Officer, appointed Khade Bapat Kabe Sinha & Associates, as DRT Receiver. The appellant thereafter moved Miscellaneous application (M.A.) before the DRT to allow the DRT Receiver to sell the fixed assets and current assets of respondent No. 3 Company. But the aforesaid Misc. Application filed by the appellant was rejected by the learned Presiding Officer. The appellant thereafter challenged the aforesaid order passed by the learned Presiding Officer, DRT, by filing Appeal before this Appellate Tribunal. This Appellate Tribunal vide order dated 8th August, 2002 allowed the aforesaid Appeal filed by the applicant Bank and permitted DRT Receiver to sell the movable and immovable properties of respondent No. 3. The learned Presiding Officer, DRT-III, Mumbai vide judgment and order dated 31st August, 2004 allowed the aforesaid Original application filed by ICICI Bank Ltd. and issued Recovery Certificate (R.C.) to recover the decretal amount. One of the lender Banks, i.e. EXIM Bank was defendant No. 3 in the aforesaid Original Application.
The original appellant, ICICI Bank Ltd. On 9th March, 2005 assigned the debt of respondent No. 3 also with the R.C. issued by the learned Presiding Officer, DRT in the Original Application (O.A.) and underlying securities in favour of respondent No. 1, ARCIL. Another creditor EXIM Bank, the defendant No. 3 also assigned the debt of respondent No. 3 along with underlying securities in favour of Stressed Assets Stabilization Fund (SASF).
The Recovery Officer, DRT-III, Mumbai, at the instance of ARCIL initial R.P. No. 44/2003 for recovery of the decretal amount. The DRT Receiver tried to sell the fixed assets as well as current assets of respondent No. 3 on so many dates, by way of public auction, but no bidder came forward to offer proper price of the secured assets. ARCIL thereafter put a proposal before the Recovery Officer to sell the secured assets by way of private treaty. The Recovery Officer accepting the aforesaid proposal vide order dated 10th November, 2006 with the consultation of ARCIL, settled the terms and conditions of the sale, by way of private treaty. ARCIL in pursuant to the order dated 10th November, 2006 passed by the Recovery Officer forwarded a list of intending purchasers to the DRT Receiver, who in turn, sent letters along with copy of the terms and conditions of the sale and other particulars to the intending purchasers, calling them to submit their offer on or before 7th December, 2006.
The DRT Receiver finally received five offers, including the offer of Crosslink Finlease Pvt. Ltd. The Crosslink Finlease Pvt. Ltd. on 18th December, 2006 submitted its revised offer to the DRT Receiver to purchase the fixed assets of respondent No. 3 for Rs. 765 Crores. Crosslink Finlease Pvt. Ltd. also offered to purchase the current assets. ARCIL after going through the revised offer submitted by Crosslink Finlease, vide its letter dated 2nd January, 2007 communicated its acceptance to the DRT Receiver for finalising the sale in favour of Crosslink Finlease Pvt. Ltd., who was the highest bidder. The DRT Receiver submitted the proposal of Crosslink Finlease Pvt. Ltd. before the Recovery Officer for acceptance of the offer made by Crosslink Finlease Pvt. Ltd. The Recovery Officer on 12th February, 2007 after hearing the learned Counsel for the parties, accepted the offer of Crosslink Finlease Pvt. Ltd., to purchase the fixed assets in favour of its nominee, Pan India Motors Pvt. Ltd. however, the offer of Crosslink Finlease Pvt. Ltd. to purchase the current assets was rejected.
The Recovery Officer thereafter vide order dated 16th October, 2007 sanctioned the sale of the fixed assets (Lot No. 1) of respondent No. 3, in favour of Pan India Motors Pvt. Ltd., the nominee of Crosslink Finlease Pvt. Ltd. for Rs. 765 Crores on the terms and conditions of the sale. As per the terms and conditions of the sale, Pan India Motors Pvt. Ltd. had to pay 35% of the sale consideration i.e. an amount of Rs. 267.75 Crores affront, by way of pay order and balance 65% of the sale consideration was to be paid in kind i.e. Pan India Motors Pvt. Ltd. had to issue Secured Non-Convertible Debentures (NCDs) of Rs. 267.75 Crores and Secured Optionally Convertible Debentures (OCDs) of Rs. 229.5 Crores in favour of ARCIL and SASF, carrying on interest 10% per annum. Both, NCDs and OCDs were required to be secured by Pan India Motors Pvt. Ltd. by creating first charge by way of hypothecation and mortgage over its entire current assets and fixed assets of respondent No. 3, in favour of ARCIL and SASF.
Pan India Motors Pvt. Ltd. vide its letter dated 16th October, 2007 informed ARCIL that it will issue and execute requisite documents necessary to complete the sale transactions as per the said order dated 16th October, 2007 passed by the Recovery Officer. ARCIL on the basis of the aforesaid letter of Pan India Motors Pvt. Ltd. vide its letter dated 16th October, 2007 gave No Objection to the DRT Receiver to hand over the possession of the sold property to Crosslink Finlease/Pan India, likewise SASF also on 17th October, 2007 wrote a letter to the DRT Receiver to had over the possession of the sold property to Crosslink Finlease Pvt. Ltd./Pan India.
The DRT Receiver in pursuant to the aforesaid letter of ARCIL and SASF, on 25th October, 2007 handed over the possession of the fixed assets of respondent No. 3 Daewoo Motors Pvt. Ltd. to Crosslink Finlease/Pan India.
Although Crosslink Finlease/Pan India in pursuant of the terms and conditions of the sale had paid affront 35% of the sale consideration i.e. an amount of Rs. 267.75 Crores to ARCIL. But they despite taking over the possession of the purchased property, could not comply with the other terms and conditions of the sale. ARCIL, therefore, on 6th March, 2009 moved an application (Exh. 91) before the Recovery Officer for directing Crosslink Finlease/Pan India, purchasers to comply with the order dated 16th October, 2007 passed by him. ARCIL in the alternative prayed for setting aside the sale in favour of Crosslink Finlease/Pan India. Even then, they could not comply with the other terms and conditions of the sale. However, they entered into a settlement with ARCIL and SASF and on 13th November, 2009 filed consent term (Exh. 141) before the Recovery Officer. The consent term included almost the same terms and conditions of the sale, except few more terms and conditions.
The Recovery Officer on 8th March, 2011 took the consent terms on record. Crosslink Finlease/Pan India even after availing so many opportunities, could not comply with the terms and conditions of the consent terms. Therefore, ARCIL on 3rd May, 2010 filed M.A. (Exh. 146) before the Recovery Officer for setting aside the sale. Crosslink Finlease/Pan India sought extension after extension for compliance of the terms and conditions of the consent terms. Lastly, they on 26th July, 2010 prayed for 15 days time for compliance of the consent terms, which was allowed by the Recovery Officer up to 10th August, 2010. Crosslink Finlease/Pan India thereafter moved one or the other applications before the Recovery Officer, but they could not fully comply with terms and conditions of the consent terms. Consequently, ARCIL on 18th February, 2011 filed M.A. (Exh. 194) before the Recovery Officer for setting aside the sale as well as for ad interim injunction. Crosslink Finlease/Pan India also filed M.A. (Exh. 196) for admitting certain documents as well as for time for compliance of the consent terms.
ARCIL in the aforesaid M.A. (Exh. 146) had alleged that the Recovery Officer had confirmed the sale vide order dated 18th October, 2007 in respect of the fixed assets of respondent No. 3, Daewoo Motors Pvt. Ltd. (now in liquidation) in favour of Pan India Motors Pvt. Ltd., being nominee of Crosslink Finlease. Accordingly, they were required to comply with the terms and conditions of the sale. The purchasers failed to comply with the terms and conditions of the safe, rather they sought extension after extension for compliance of the terms and conditions of the sale. It just with a view to co-operate with the purchasers in the matter and on their assurances that they would comply with the remaining terms and conditions of the sale, which will be in the interest of the parties and which will also facilitate recovery proceeding, discussed the matter with them and agreed to enter into consent terms. In pursuant to the aforesaid discussion, they filed consent terms (Exh. 114) before the Recovery Officer on 13th November, 2009 which was signed by the parties. As per the said consent terms, respondent Nos. 1 and 2 (Crosslink Finlease/Pan India) were required to comply with the obligation/undertaking in time bound manner. However, they had committed breach of the following terms and conditions of the consent terms:
(a) Although in the terms and conditions of the said consent terms, respondent No. 2 (Pan India Motors Pvt. Ltd.) issued a letter of allotment of redeemable secured. Optionally Convertible Debentures and letter of allotment of Redeemable Secured Non-Convertible Debentures in favour of the applicant, (ARCIL) and SASF (respondent No. 4) on 21st December, 2009, but the details regarding the pledge of additional equity shares of respondent No. 2 and appointment of Debenture trustee were not mentioned in the said letter of allotment. Further, Pan India had also not taken further action in respect of creation and filing of charge with the concerned Registrar of Companies' pledge of additional equity shares, issuance of debenture certificate, etc., and the same are pending till date. Therefore, the said letters of allotment were incomplete and ineffective.
(b) Pan India Motors Pvt. Ltd. had also failed to comply with the other terms and conditions of the consent terms as agreed and undertaken therein within the indicated time frame which were as follows:
(i) Pan India Motors Pvt. Ltd., respondent No. 2 failed to execute and register the debenture trust deed for creating legal mortgage on its property situated at Gujarat in favour of the debenture trustees for the benefit of debenture holders i.e. ARCIL and SASF.
(ii) Pan India Motors Pvt. Ltd. failed to issue debenture certificates in favour of ARCIL and SASF.
(iii) Pan India Motors Pvt. Ltd. failed to execute unattested Memorandum of Hypothecation.
(iv) Pan India Motors Pvt. Ltd. failed to ensure pledge of additional equity shares by promoters and execution of necessary documents in respect thereof.
(v) Pan India Motors Pvt. Ltd. failed to submit its business plan for the next five years, including future projection of revenue, expenses, profit and loss accounts, cash flow and balance sheet to the ARCIL.
(vi) Pan India Motors Pvt. Ltd. failed to obtain transfer of leasehold rights of the suit properties in its favour in the record of the Uttar Pradesh State Industrial Development Corporation (UPSIDC) and also a specific permission for creation of mortgage in favour of the debenture trustee/the Applicant, ARCIL & SASF thereto over the suit property.
The applicant ARCIL further alleged that Crosslink Finlease/Pan India despite availing sufficient time, could not comply with the aforesaid terms and conditions of the Consent Terms. The Applicant ARCIL accordingly, prayed that the order dated 16th October, 2007, confirming the sale in favour of Crosslink Finlease/Pan India in respect of the fixed assets, (being Lot No. 1) be set side and part sale consideration (being 35% of the total sale consideration) of Rs. 267.75 Crores paid by respondent No. 1, Crosslink Finlease towards the said order dated 16th October, 2007 be forfeited and the Suit property be resold by appointing the Applicant as Receiver of the said Suit property. The applicant ARCIL further prayed that the purchasers, Crosslink Finlease/Pan India be directed to hand over the possession of the Suit properties to it, as Receiver with proper inventory. The Receiver be allowed to sell the Suit properties, either by public auction or by way of private treaty.
The appellant. Pan India filed affidavit of one, Mr. Satish Singh, their Authorized Officer, in reply to the aforesaid M.A. (Exh. 146) filed by ARCIL. The deponent contended that the M.A. filed by ARCIL is not maintainable, which is barred by limitation too. The purchasers have altered their position, acting upon the consent terms dated 13th November, 2009. Therefore, ARCIL is estopped to challenge the impugned sale. In fact, ARCIL has filed the aforesaid M.A. With mala fide intention for extraneous and nefarious reasons. The deponent has stated that as regards creation of debenture trust is concerned, as per the terms and conditions of the sale, IDBI Bank was to be appointed as debenture trustee, but when the purchasers approached IDBI Bank for being appointed as debenture trustee, it refused to act as such. The purchasers thereafter approached United Trust of India, Investment Advisory Services Ltd. to appoint them as trustee, which had agreed to be appointed so Trustee. In this regard, they sought permission of ARCIL too.
The dependent further contended that the purchasers have complied with all the terms and conditions of the sale as well as the consent terms. Only those conditions could not be complied with by them which were beyond their control, like obtaining No Objection Certificate from Uttar Pradesh State Industrial Development Corporation (UPSIDC), as UPIDC did not issue NOG to mortgage the secured assets in favour of ARCIL in time. IDBI Bank was not ready to act as debenture trustee. Therefore, they could not appoint IDBI Bank as debenture trustee. The deponent in Para-9 of his affidavit has given alleged breaches, as well as compliance made by the purchasers in a tabular form, which is being extracted below;
The dependent has sought for dismissal of the aforesaid M.A. (Exh. 146) filed by ARCIL.
The workers union of Daewoo Motors Pvt. Ltd. also filed M.A. (Exh. 159) before the Recovery Officer for setting aside the aforesaid sale, on the ground of fraud as well as for not following the provisions under Second Schedule to the Income-tax Act, 1961 in conducting the sale by DRT Receiver as well as by the Recovery Officer.
ARCIL thereafter on 18th February, 2011 filed another M.A. (Exh. 194) for setting aside the impugned sale as well as for ad interim injunction, restraining the purchasers in any manner from dealing with or creating third party right/interest very the fixed assets and from executing lease with respect of the fixed assets of respondent No. 3, Daewoo Motors Pvt. Ltd. ARCIL also prayed that the auction purchasers be directed to hand over the possession of the Suit properties to it as receiver. ARCIL had sought for setting aside the impugned sale, almost on the same grounds as in M.A. (Exh. 146). The purchasers, Crosslink Finlease/Pan India filed M.A. (Exh. 196) before the Recovery Officer for grant of further extension of time for creating pledge of equity shares as stated in the Applicant, ARCIL's letter dated 14th February, 2011.
The Recovery Officer on the aforesaid M.A. (Exh. 194) filed by ARCIL, passed an ad interim injunction on 18th February, 2011. The auction purchasers thereafter filed M.A. (Exh. 220) before the Recovery Officer for vacating the ad interim injunction order passed by him.
By an order dated 24th November, 2011 passed by the Hon'ble High Court of Bombay in Writ petition No. 1445/2011, R.P. No. 44/2003 pending on the file of the Recovery Officer, DRT-III was transferred to the Recovery Officer, DRT-II, Mumbai, where it was registered as R.P. No. 01/2012.
The Recovery Officer heard the learned Counsel for the parties on M.As. (Exhs. 146, 159, 194, 196 and 220). The Recovery Officer after going through the record, observed that the purchasers had paid 35% of the sale consideration i.e. an amount of Rs. 267.75 crores affront to the DRT Receiver, but they did not comply with the other terms and conditions of the sale. The Recovery Officer dealing with all the contentions raised by the parties, held that the impugned auction sale in favour of the purchasers was liable to be cancelled for non-compliance of the terms and conditions of the sale as well as the terms and conditions of the consent terms. He also found that the purchasers have already availed sufficient time for compliance of the terms and conditions of the sale as well as the terms and conditions provided in the consent terms, but they failed to make compliance. They even after availing the last opportunity, could not make compliance. Therefore, the auction purchasers do not deserve any extension of time. The Recovery Officer also observed that the purchasers had filed M.A. (Exh. 220) for recalling the order of ad interim injunction after eleven months. They could challenge the aforesaid ad interim injunction order by filing Appeal, but they did not prefer Appeal, therefore, the M.A. filed by them for recalling the ad interim injunction order is liable to be dismissed.
In view of the observations made above, the Recovery Officer vide impugned order dated 20th November, 2012 allowed M.A. (Exh. 194) filed by ARCIL and cancelled the sale of fixed assets of respondent No. 3, Daewoo Motors Pvt. Ltd. in favour of the purchasers, Crosslink Finlease/Pan India. He also allowed the prayer sought for by ARCIL for appointing it as DRT Receiver. The Recovery Officer accordingly ordered that the appellant assignee is appointed as DRT Receiver. He directed the assignee to give nomination of two Bank officers/Authorised persons who will complete the formalities, such as filing indemnity bond, issuance of writ, etc. and take inventories and possession of the fixed assets in the presence of the representatives of ARCIL, the Official Liquidator and Crosslink Finlease/Pan India. The Recovery Officer rejected M.As (Exhs. 196 and 220) filed by the purchasers. The Recovery Officer dismissed the M.A. (Exh. 159) filed by the Workers Union, as the same did not survive.
The purchasers, Crosslink Finlease/Pan India being aggrieved by the aforesaid impugned order passed by the Recovery Officer filed Appeal under Section 30 of the RDDBFI-Act before the DRT-II, Mumbai. The respondent No. 1, ARCIL; respondent No. 2, the Official Liquidator of Daewoo Motors Pvt. Ltd. and respondent No. 4, SASF resisted the appeal.
The learned Presiding Officer after hearing the learned Counsel for the parties at length and dealing with all the contentions raised by the raised by the appellant did not find any illegality in the impugned order dated 20th November, 2012 passed by the Recovery Officer. Consequently, the learned Presiding Officer by well considered impugned judgment and order dated 30th January, 2013, dismissed the aforesaid Appeal filed by the appellants.
The appellant being aggrieved by the aforesaid impugned judgment and order dated 30th January, 2013 passed by the learned Presiding Officer, DRT, has filed the present appeal under Section 20 of the RDDBFI Act before this appellate Tribunal.
The Appeal has been resisted by respondent No. 1, ARCIL; respondent No. 2, the Official Liquidator and respondent No. 4, SASF. During pending appeal, appellant No. 1 was transposed as "Proforma respondent No. 11".
Heard the learned Counsel for the parties and perused the materials available on record. The learned Counsel for the parties have filed written submissions too along with case laws.
Section 29 of the RDDBFI Act provides that the provisions of Second and Third Schedules to the Income-tax Act, 1961 and Income Tax (Certificate Proceedings) Rules, 1962, as in force from time-to-time, shall as far as possible apply with necessary modifications as if the said provisions and rule referred to the amount of debt due under this Act instead of to the Income-tax.
In view of the aforesaid provisions, DRT Receiver was required to sell fixed assets and current assets of respondent No. 3, Daewoo Motors Pvt. Ltd. following the rules provided in the Second and Third Schedules to the Income-tax Act, 1961 as far as possible. It appears that the DRT Receiver tried to sell the fixed assets as wilt as the current assets of respondent No. 3, by way of public auction on so many dates, but every time the auction failed for want of bidders/buyers. Consequently, the DRT Receiver with the consultation of ARCIL and SASF proceeded to sell the fixed assets and current assets of respondent No. 3, by way of private treaty. The DRT Receiver with the consultation of ARCIL and SASF settled the terms and conditions of the sale, by way of private treaty which was approved by the Recovery Officer vide order dated 10th November, 2006. In pursuant to the aforesaid order, ARCIL forwarded a list of intending purchasers to the DRT Receiver, who in turn sent the intimation along with the terms and conditions of the sale to the officers for submitting their offer, if any, on or before 7th December, 2006.
In pursuant to the aforesaid notice, as many as five bidders approached the DRT Receiver. The Appellant, Crosslink Finlease/Pan India also approached the DRT Receiver, who offered to purchase the fixed assets (Lot No. 1) as well as the current assets of respondent No. 3 Crosslink Finlease/Pan India on persuasion of the DRT Receiver enhanced their offer to purchase the fixed assets of respondent No. 1 for Rs. 765 Crores, which was found to be the highest, while the offer of Crosslink Finlease/Pan India to purchase the fixed assets was found to be on a lower side.
The DRT Receiver accordingly on 2nd February, 2007 submitted his report before the Recovery Officer to accept the offer of Crosslink Finlease/Pan India to purchase the fixed assets of respondent No. 3 for Rs. 765 Crores. The Recovery Officer on 12th February, 2007 after hearing the learned Counsel for the parties, accepted the proposal of Crosslink Finlease/Pan India to purchase the fixed assets of respondent No. 3 in favour of its nominee, Pan India Motors Pvt. Ltd. However, the offer of Crosslink Finlease/Pan India to purchase the current assets was rejected by the Recovery Officer.
As provided in the terms and conditions of the sale, Pan India Motors Pvt. Ltd. was required to pay 35% of sale consideration i.e. Rs. 267.75 Crores affront and the balance amount of the sale consideration i.e. Rs. 479.25 Crores were to be paid in kind/form i.e. the purchasers were required to issue secured NCDs of Rs. 267.75 Crores and secured OCDs of Rs. 229.50 Crores in favour of ARCIL, carrying interest @ 10% p.a. The NCDs along with interest were to be redeemed after three years and OCDs, if not converted within three years, were to be redeemed after five years. Pan India Motors Pvt. Ltd. was required to observe other formalities too, as provided in the terms and conditions of the sale.
Pan India Motors Pvt. Ltd. vide its letter dated 16th October, 2007 gave an irrevocable declaration/undertaking and confirmation that they shall issue/execute/procure to be executed and deliver the following documents within seven days, exactly as per the format(s) provided/approved by ARCIL:
(a) Letter of Allotment of Redeemable Secured Non-convertible Debenture (s) to ARCIL and SASF.
(b) Letter of Allotment of Redeemable Optionally Convertible Debenture(s) to ARCIL and SASF.
(c) Pledge Deed (by shareholders of Pan India Motors Pvt. Ltd.) for 74% of the entire paid up equity capital of the Company with voting rights, pending creation of the security, together with the undertaking to pledge balance 26% equity shares in the event of default in creation of security in full as stipulated within 30 days herefrom.
(d) Deed of Hypothecation.
They also informed that in the mean time, they will deposit the share certificate held by three shareholders which (1) Mr. Ajay Singh, (2) Mr. B.V.R. Subbu and (3) Mr. Ashish Deora, aggregating to 74% of the total paid up equity capital of Pan India Motors Pvt. Ltd., as and by way of pledge for securing obligations of Pan India Motors Pvt. Ltd. to ARCIL and SASF.
ARCIL on the same date i.e. 16th October, 2007, vide its letter informed the DRT Receiver, Khade Bapat Kabe Sinha & Associates that the allotment letter, pledge and hypothecation have been created to their satisfaction as mentioned in the order passed by the Recovery Officer. ARCIL further informed that upon receipt of an amount of Rs. 187.75 crores after adjusting interest of Rs. 3.4 crores that has accrued on Rs. 765 Crores lying in the deposit, ARCIL has no objection to the DRT Receiver handing over the possession of the Suit properties to Pan India Motors Pvt. Ltd.
The respondent No. 4, SASF also on 17th October, 2007 wrote a letter to the DRT Receiver to the same effect as the aforesaid letter of ARCIL, giving its no objection to the DRT Receiver to hand over the possession of the suit properties to Pan India Motors Pvt. Ltd. The DRT Receiver in view of the aforesaid letter issued by ARCIL and SASF handed over the possession of the fixed assets of respondent No. 3 to Pan India Motors Pvt. Ltd. on 25th October, 2007. The appellants are in possession of the fixed assets since then.
In view of the facts as described above, the DRT Receiver had conducted the sale under the supervision of Recovery Officer but not in accordance with the provision under Second and Third Schedules to the Income-tax Act, 1961, rather he had conducted the sale, by way of private treaty on the terms and conditions settled by ARCIL and SASF which was approved by the Recovery Officer.
Rule 60 of the Second Schedule to the Income-tax Act, 1961 provides that where the immovable property has been sold in execution of a certificate, the defaulter, or any person whose interests are affected by the sale, may at any time within 30 days from the date of the sale, apply to the Tax Recovery Officer (TRO) to set aside the sale on his depositing the amounts contemplated therein. Rule 61 of the Second Schedule to the Income-tax Act, 1961 provides that where the immovable property has been sold in execution of a certificate, the defaulter or any person whose interests are affected by the sale, may at any time within 30 days from the date of the sale apply to the TRO to set aside the sale of the immovable property, on the ground that the notice was not served on the defaulter to pay the arrears as required by this Schedule or on the ground of a material irregularity in publishing or conducting the sale.
ARCIL has filed M.A. (Exh. 91) on 6th March, 2009 for directing Crosslink Finlease/Pan India to comply with the terms and conditions of the sale and in the alternative, seeking to set aside the sale.
The parties thereafter amicably settled the matter and on 13th November, 2009 filed Consent Terms (Exh. 141) before the Recovery Officer. The consent terms almost included the same terms and condition of the sale as well as the some more terms and conditions. The consent terms was taken on record by the Recovery Officer on 8th March, 2010. But Crosslink Finlease/Pan India could not comply with the terms and conditions of the consent terms within the given time frame as provided in the consent terms.
ARCIL thereafter on 3rd May, 2010, filed M.A. (Exh. 146) for setting aside the impugned sale. Crosslink Finlease/Pan India thereafter continued to seek extension of time for compliance of the terms and conditions of the consent terms on different dates which was allowed by the Recovery Officer. The Recovery Officer lastly allowed time to Crosslink Finlease/Pan India for compliance of the terms and conditions provided in the consent terms up to 15th February, 2011. Even then, they could not comply with the terms and conditions of the consent terms.
ARCIL thereafter on 11th February, 2011 moved an M.A. (Exh. 194) for setting aside the impugned sale as well as for ad interim injunction. The Recovery Officer on 18th February, 2011 allowed the prayer sought for by ARCIL for ad interim injunction.
The aforesaid M.A. (Exhs. 91, 146, 194) filed by ARCIL for setting aside the sale admittedly, do not fall under the Rules 60 and 61 of the Second Schedule to the Income-tax Act, 1961, rather the aforesaid M.As. were filed by ARCIL, for setting aside the sale, on the ground of non-compliance of the terms and conditions of the sale as well as terms and conditions of the consent terms.
The first contention of the learned Counsel for the appellant is that the Clause 8 of the terms and conditions of the sale inter alia, provided that after completion of the sale from the Hon'ble DRT, the DRT Receiver shall hand over such possession as it shall have of the said properties in the condition in which it is and on "as is where is" and "as is what is" basis. ARCIL vide its letter dated 16th October, 2007 and SASF vide its letter dated 17th October, 2007 informed the DRT Receiver that the purchaser has undertaken to comply with all the terms and conditions of the sale, therefore, the possession of the sold property be handed over to the purchaser. As contemplated under Clause 8 of the terms and conditions of the sale the possession was to be handed over to the purchaser after compliance of the terms and conditions of the sale.
The DRT Receiver with the permission of the Recovery Officer handed over the possession of the sold property to the purchaser on 25th October, 2007. The purchaser (appellant) is in possession of the purchased property since then. The impugned sale is confirmed and absolute sale. The respondent No. 1 moved M.A. for setting aside the sale on 3rd May, 2010 and thereafter on 11th February, 2011, The learned Counsel contended that as per the settled legal principle a confirmed and absolute sale normally cannot be quashed. It can be quashed in exceptional cases, like on the ground of the fraud and similar grounds. The learned Counsel in support of his argument has placed reliance of case Valji Khimji & Co. v. O.L. of Hindustan Nitro Product (Gujarat) Limited, IV (2008) BC 536 (SC) : VII (2008) SLT 621 : (2008) 9 SCC 299, and Bishan Paul v. Mothu Ram, AIR 1965 SC 1994, both decided by the Hon'ble Apex Court and Govindarajulu Mudaliar v. The North Vellore Thottapalayam Town Cooperative Bank, AIR (38) 1951 Mad. 661, decided by the Hon'ble High Court of Madras.
The second contention of the learned Counsel for the Appellant is that ARCIL vide its letter dated 16th October, 2007 and SAFS vide its letter dated 17th October, 2007 informed the DRT Receiver to hand over possession of the sold property to the purchaser. The DRT Receiver in pursuant to the aforesaid letters handed over possession of the sold property to the purchaser with the prior approval of the Recovery Officer, DRT. Whatever conditions provided in the terms and conditions of sale to be observed by the parties, stood waived by the ARCIL and SASF in view of their aforesaid letters dated 16th October, 2007 and 17th October, 2010. The ARCIL after long gap of 31/2 years from the date of the sale, could not seek for setting aside the impugned sale. The learned Counsel for the appellant in support of his argument has placed reliance on R.N. Gosain v. Yashpal Dhir, AIR 1993 SC 352; Cauvery Coffee Traders, Mangalore v. Homor Resources (International) Company Ltd., (2011) 10 SCC 420; Motilal Padampat Sugar Mills Co. Ltd. v. State of Uttar Pradesh, 1997 SC 409 and Delhi Cloth & General Mills v. Union of India, (1988) 1 SCC 86, all decided by the Hon'ble Apex Court.
The third contention of the learned Counsel for the appellant is that in the instant case the DRT Receiver had not conducted the sale in accordance with the rules provided under the Second and the Third Schedules to the Income-tax Act, rather he had conducted the sale by way of private treaty. The terms and conditions provided for the sale by way of private treaty amounted to the terms and conditions of a private sale. The acceptance of the offer made by the Appellant to purchase the property to be sold by the DRT Receiver amounted to a concluded contract between the two private parties. In case, if the appellant committed any breach of the terms and condition of the sale, ARCIL and SASF approach to the proper forum i.e., Civil Court to get the contract specifically enforced. They could not approach to the Recovery Officer, DRT, for setting aside the sale. The Recovery Officer, therefore, had got no jurisdiction to set aside private sale which was a confirmed sale and had become absolute. The learned Counsel in support of his argument had placed reliance on case Behrein Petroleum Co. Ltd. v. Pappu, (1966) 1 SCR 461 read with Rajasthan State Road Transport Corporation Corpn. v. Bal Mukund Bairwa, (2009) 4 SCC 299 and read with Chiranjilal Goenka v. Jasjit Singh, 1993(2) SCC 507, decided by the Hon'ble Apex Court.
The learned Counsel further contended that the parties on 13th November, 2009 filed a consent terms before the Recovery Officer which was taken on record by the Recovery Officer on 8th March, 2010. The terms and conditions of the sale were replaced by the parties providing terms and conditions in the consent terms. This was a private contract between the parties, therefore, if any of the parties fail to comply with the terms and condition of the consent terms, the aggrieved party may approach to the proper forum i.e. Civil Court for enforcement of the contract and not before the Recovery Officer. The Recovery Officer therefore, had got no jurisdiction to adjudicate to M.A. filed by the ARCIL for setting aside the impugned sale.
The fourth contention of the learned Counsel for the appellant is that ARCIL, had initially filed M.A. (Exh. 91) for setting aside the sale. Thereafter the parties entered into a settlement and filed consent terms before the Recovery Officer. ARCIL thereafter filed another M.A. (Exh. 146) for setting aside the sale on the ground that the appellant had not complied with the terms and conditions of the consent terms despite availing sufficient opportunities, the application remained pending. ARCIL thereafter on 11th February, 2011 filed another M.A. (Exh. 194) for setting aside the sale and for ad interim injunction. The matter directly substantially in issue in the M.A. (Exh. 91), had been culminated into a consent terms. The M.A. (Ext. 91) shall be deemed to have been disposed of in view of the consent terms, therefore, the subsequent M.A. (Exh. 194) filed by ARCIL for seeking the same relief i.e. for setting aside the sale was barred by principle of res judicata. The learned Counsel contended that once the prayer sought for by ARCIL in M.A. (Exh. 91) culminated into the consent terms, no subsequent application for the same relief could be moved by ARCIL, therefore, M.A. (Exh. 194) filed by ARCIL was not maintainable as barred by principle of res judicata. The learned Counsel in support of her contention has placed reliance on case Surjit Kaur v. Smt. Amarjit Kaur, (2003) ILR 1 (P. & H.).
The fifth contention of the learned Counsel for the appellant is that in view of the provision under Section 29 of the RDDBFI Act, the rules provided under the Second and Third Schedules to the Income-tax Act will be applicable to the Recovery Proceeding conducted by the Recovery Officer under the RDDBFI Act. The Rules 60 and 61 of the Second Schedule to the Income-tax Act lay down the provision for setting aside the sale. Any person aggrieved by the sale conducted by the Tax Recovery Officer (T.R.O.) Recovery Officer can apply for setting aside the sale under the aforesaid provisions within 30 days from date of the sale by depositing such amount with the Recovery Officer, as contemplated therein. The respondent No. 1, ARCIL, filed the M.A. (Exh. 146) and M.A. (Exh. 194) for setting aside the sale long after confirmation of the sale. Both the applications were highly barred by time. Neither there is a provision under the Second or the Third Schedules to the Income-tax Act for condonation of delay nor ARCIL has sought for any condonation of delay in filing the aforesaid M.As. for setting aside the impugned sale. The aforesaid applications filed by ARCIL are highly barred by time which were liable to be dismissed on this ground alone.
The sixth contention of the learned Counsel for the appellant is that the respondent No. 1, ARCIL, in M.A. (Exh. 146) had prayed for setting aside the impugned sale as well as for the forfeiture of the amount paid by the appellant upfront i.e. an amount of Rs. 267.75 Crores. But the Recovery Officer has only set aside the sale. He has left the matter of forfeiture to be adjudicated at a subsequent stage. The M.A. filed by the respondent No. 1 could not be disposed of by the Recovery Officer in a piece-meal, therefore, the order passed by the Recovery Officer was bad in the eyes of law. The learned Presiding Officer also did not consider this legal aspect while passing the impugned judgment and order, therefore, the impugned judgment and order passed by the learned Presiding Officer is also bad in the eyes of law which is liable to be quashed.
The seventh contention of the Counsel for the appellant is that although as provided in 'terms and conditions of the sale, compliance of the terms and conditions was to be complied by the purchaser within a given time schedule which was essence of the contract, but it was a private sale, therefore, the time was not the essence for the compliance of the terms and conditions of the sale. The learned Counsel contended that as regard non-compliance of the terms and conditions of the sale, ARCIL has falsely alleged that the Appellant had not complied with the terms and conditions of the sale. In fact, the appellant had fully complied with the terms and conditions of the sale. The learned Counsel contended that as per the terms and conditions provided in the sale as well as provided in the consent term the appellants were required to pay 35% of the sale price i.e. an amount of Rs. 267.75 Crores within 10 days from the date of the sale and rest amount of sale price was to be paid by them to ARCIL and SASF in kind i.e. by using secured NCDs for an amount of Rs. 267.75 Crores and OCDs for an amount of Rs. 229.50 Crores. The appellant with the given time schedule had issued NCDs and OCDs, but ARCIL did not accept NCDs and OCDs on the ground that the appellants had not complied with the other conditions like obtaining NOC from UPSIDC for creation of the mortgage of the sold property in favour of ARCIL as the sold plot was allotted by UPSIDC whose prior permission was necessary for creation of mortgage. The appellants had not created debenture trust and the NCDs and OCDs were not secured. The learned Counsel contended that IDBI was to be appointed as debenture trustee, but when the appellant approach the IDBI for being appointed as debenture trustee, it declined to act as debenture trustee. The appellant thereafter approached the UTI and requested them to act as debenture trustee. The UTI accepted their proposal to act as the debenture trustee. Therefore, the appellants sought permission from ARCIL to appoint UTI as the debenture trustee. But the respondent No. 1 did not timely give their consent for appointment of UTI as debenture trustee. The Appellant could not obtain NOC from UPSIDC as it was not within their control. They were continuously following up the matter before the UPSIDC for obtaining the NOC. The UPSIDC at later stage to issue NOC on payment of the outstanding dues which was more that Rs. 1 Crore. The appellants as provided in the consent terms were not required to pay the outstanding dues of the UPSIDC.
Lastly, the UPSIDC after persuasion of the appellant, reduced its claim, but the respondent No. 1 had already moved application for setting aside the sale. The learned Counsel contended that the appellants had complied with all the terms and conditions of the sale in pith and substance which were within their control. Some of the conditions could not be complied with by the appellants as they were not within their control. Therefore the appellants cannot be held responsible for noncompliance of the terms and conditions of the consent terms.
The learned Counsel contended that the appellants after paying 35% of the sale consideration have already invested a huge amount on the unit. They cannot be penalized after the sale had become complete and absolute. The Recovery Officer as well as the learned Presiding Officer have held that the Appellant has not complied with the terms and conditions of the sale as well as terms and conditions provided in the consent terms which is against the documentary evidence available on record. The finding recorded by the Recovery Officer as well the learned Presiding Officer, therefore, suffers from perversity which are liable to be quashed.
The last contention of the learned Counsel for the appellant is that the Appellants had paid 35% of the amount of the sale consideration i.e. Rs. 267.75 Crores to ARCIL within 10 days from the date of the sale as provided in the terms and conditions of the sale. ARCIL and SASF consented to the DRT Receiver to hand over possession of the sold property to the appellants. The DRT Receiver as permitted by the learned Recovery Officer handed over the possession of the sold property to the appellant. The appellants, thereafter invested more than Rs. 150 Crores on the unit to make the unit viable. The appellant are in possession of the unit since 25th October, 2007. In case the sale is set aside then they will suffer irreparable loss. In view of the facts and circumstances of the case, the equity lies in favour of the appellant. Therefore, it will be improper to set aside the impugned sale, which is a confirmed sale. The learned Counsel contended that the Recovery Officer as well as the learned Presiding Officer while passing the impugned orders did not properly appreciate the evidence available on record. The learned Presiding Officer also failed to appreciate the points of law involved in the matter, therefore, impugned order passed by the Recovery Officer and the learned Presiding Officer is bad in the eyes of law and is liable to be quashed.
Per contra, the learned Counsel for the respondent Nos. 1 and 4 supporting the impugned judgment and order passed by the learned Presiding Officer, DRT, contended that the Recovery Officer on the basis of material available on record, has observed that the impugned sale is not a confirmed sale, while the learned Presiding Officer has observed that the impugned sale is confirmed sale, subject to the compliance of the terms and conditions provided for the sale as well as the terms and conditions provided in the consent terms. The learned Counsel contended that although in this case, the sale was not conducted in accordance with the Rules provided under Second and Third Schedules to the Income-tax Act, 1961, rather the sale was conducted by the DRT Receiver, by way of private treaty on the terms and conditions agreed/settled by ARCIL and SASF which was approved by the Recovery Officer DRT. But the order of confirmation of sale was required to be passed by the Recovery Officer to complete the sale. The Roznama of R.P. No. 01/2012 shows that no such confirmation order of the impugned sale was ever passed by the Recovery Officer, as required under Rule 63 of the Second Schedule to the Income-tax Act, 1961. The terms and conditions of the sale was approved by the Recovery Officer. He had accepted the proposal of the purchaser, Crosslink Finlease Pvt. Ltd. to purchase the fixed assets of respondent No. 3. If the terms and conditions of the sale would have been complied with by the purchaser, the Recovery Officer would have issued sale certificate in accordance with Rule 63 of the Second Schedule to the Income-tax Act, 1961 in favour of the nominee of the purchaser i.e. Pan India Motors Ltd.
In the instant case, respondent No. 1 had moved M.A. for setting the sale treating the sale as "confirmed sale". Even if on the basis of admission of ARCIL, if the impugned sale is treated to be confirmed sale, but it was a sale subject to the terms and conditions of the sale as well as the terms and conditions in the consent terms, which was to be complied with by the purchasers within a given time schedule. The observation of the learned Presiding Officer in view of the facts of the case to this extent may be taken as right that it was confirmed sale, subject to compliance of the terms and conditions of the sale as well as terms and conditions provided in the consent terms. As per the contention of ARCIL as well as held by the Recovery Officer and Learned Presiding Officer that the appellant had no complied with the terms and conditions of the sale as well as terms and conditions provided in the consent terms, therefore, at the instance of ARCIL, the Recovery Officer could set aside the sale. The submission of the learned Counsel for the Appellant that it was confirmed and absolute sale is misconceived as well as against documentary evidence available on record.
The learned Counsel further contended that the learned Counsel for the appellant has argued that the Recovery Officer has got no jurisdiction to set aside the sale, on the ground that it was a sale by way of private treaty. The terms and conditions of the sale was settled between private individuals i.e. ARCIL and the appellants. The consent terms and conditions provided in the sale as well as in the consent terms, were arguments between two parties. Such an agreement Counsel be enforced by the aggrieved party through proper forum i.e. Civil Court and not through the DRT. The learned Counsel contended that this submission of the learned Counsel for the appellant too is misconceived. The impugned sale although was a sale by way of private treaty, but the sale was conducted by DRT Receiver which was approved by the Recovery Officer. The sale was being conducted under the supervision of the Recovery Officer as well as the DRT. The terms and conditions of the sale were approved by the Recovery Officer, DRT. If the Recovery Officer could approve the sale, it was within his domain to cancel the sale too for non-compliance of the terms and conditions of the sale as well as the terms and conditions of the consent terms. Moreover, the purchaser was declared as successful by order of the Recovery Officer. It therefore, cannot challenge the jurisdiction of the Recovery Officer.
The learned Counsel further contended that as per the contention of the learned Counsel for the appellant, respondent Nos. 1 and 4 by giving their consent in favour of the appellant to take over the possession of the sold property, had waived their rights to get the remaining terms and conditions of the sale complied with by the appellants. The learned Counsel contended that there is no question of waiver on the part of ARCIL to its right to get the remaining terms and conditions of the sale complied with by purchaser. The learned Counsel contended that Pan India Motors Pvt. Ltd. on 16th October, 2007 wrote a letter to ARCIL that they irrevocably agree, declare, undertake and confirm that they shall issue, execute, procure to be executed and deliver the following documents within seven days exactly as per the format(s) provided/approved by ARCIL:
(a) Letter of Allotment of Redeemable Secured Non-Convertible Debenture(s) to ARCIL and SASF.
(b) Letter of Allotment Redeemable Optionally Convertible Debenture(s) to ARCIL and SASF.
(c) Pledge Deed (by shareholders of Pan India Motors Pvt. Ltd.) for 74% of the entire paid up equity capital of the Company with voting rights, pending creation of the security, together with the undertaking to pledge balance 26% equity shares in the event of default in creation of security in full as stipulated within 30 days herefrom.
(d) Deed of Hypothecation.
ARCIL on the aforesaid undertaking, just with a view to co-operate with the appellants purchasers wrote a letter on 16th October, 2007 to Khade Bapat Kabe Sinha & Associates, the DRT Receiver, giving their no objection to the Receiver to hand over the possession of the Suit property to Pan India Motors Pvt. Ltd. SASF also on 16th October, 2007 wrote a letter to the DRT Receiver, Khade Bapat Kabe Sinha & Associates to the same effect i.e. it has no objection in handing over the possession of the Suit property by the Receiver to the purchasers. As per the undertaking dated 16th October, 2007, Pan India Motors Pvt. Ltd. was under obligation to comply with the undertaking given in the letter, but it never fully complied with the aforesaid undertaking.
The learned Counsel contended that although the appellant had issued NCDs/OCDs in favour of ARCIL and SASF, but no debenture trust was created by them. They could not get No-Objection Certificate (NOC) from UPSIDC within time. They could also not secure NCDs/OCDs. They failed to comply with the other terms and conditions of the sale as provided in the consent terms. In view of these facts, it cannot be said that ARCIL has waived its right. In this case, the question of waiver does not arise. The appellants were duty bound to comply with the terms and conditions of the consent terms to make the impugned sale complete.
The learned Counsel further contended that the terms and conditions of the sale were to be complied with by the applicant within a given time scheduled provided in the terms and conditions of the sale as well as in the consent terms. They could not comply with the terms and conditions of the sale. The time schedule provided for compliance of the terms and conditions of the sale as well as the terms and conditions of the consent terms was essence of the contract which was to be complied with by the appellants within the given time scheduled to complete the sale. The appellants admittedly, could not comply with the terms and conditions within the stipulated time. They continuously sought time for compliance of the terms and conditions of the sale. But they could not comply with the terms and conditions, Although time was the essence for compliance of the terms and conditions of the sale, even if the time may not be treated as essence of the contract, but the appellants were required to make compliance of the terms and conditions of the sale within a reasonable time. They had availed so many opportunities for compliance, but they could not comply with the terms and conditions of the sale as well as the terms and conditions of the consent terms. The appellant now cannot say that they can make compliance of the terms and conditions at any time they like. In fact, the Appellant had to make compliance of the terms and conditions of the sale as well as the terms and conditions of the consent terms, strictly in accordance with the time scheduled provided in the consent terms.
The learned Counsel further contended that the Suit property was sold by the DRT Receiver to the Appellants for an amount of Rs. 765/- Crores, out of which the appellants were required to make payment of 35% i.e. Rs. 267.75 crores affront within days from the date of the sale and balance 35% of the sale consideration i.e. Rs. 229.50 Crores in the form NCDs and remaining 35% of the sale price i.e. Rs. 267.77 Crores in the form NCDs. Both kind of payments were required to be secured. Although the Appellant had made payments of 35% of the sale consideration i.e. Rs. 267.75 Crores within ten days from the date of sale. They gave an undertaking to ARCIL and SASF. They will comply with the terms and conditions of the sale. ARCIL AND SASF therefore, consented to the DRT Receiver for handing over the possession of the suit property to the purchaser. The Receiver as directed by the Recovery Officer, handed over the possession of the suit property to the appellant on 25th December, 2007. Admittedly, the NCDs/OCDs were carrying interest @ 10% p.a. Admittedly, no secured NCDs/OCDs were issued by the appellants are enjoying the suit property way back since 25th October, 2007 without paying the balance sale price. The NCDs/OCDs in due course have been matured. Even then, the appellant did not pay any amount, rather they are enjoying the properly without paying the full consideration. Therefore, the equity too, is entitled in favour of ARCIL and SASF and not in favour of the appellant. The appellants without compliance with the terms and conditions of the sale, as well as terms and conditions in the consent terms want to enjoy the property without payment of the full consideration. They even after a period of redemption of the NCDs/OCDs, did not make any payment. The appellants therefore, do not have any claim over the Suit property on the ground of equity.
The learned Counsel further contended that the appellants in spite of the undertaking/assurances given by them vide letter dated 16th October, 2007, did not comply with the terms and conditions of the sale. They sought extensions of time again and again for compliance of the terms and conditions of the sale before the Recovery Officer, which was extended by him. When they could not comply with the terms and conditions of the sale, ARCIL on 6th March, 2009 moved M.A. (Exh. 91) to direct the appellant to comply with the terms and conditions of the sale and in the alternative for cancellation of the sale too. The appellant thereafter on 13th November, 2009 entered into consent terms with ARCIL and SASF and filed consent terms (Exh. 141) before the Recovery Officer, which was taken on record by the Recovery Officer on 8th March, 2010. The consent terms also included the same terms and conditions which was provided for the sale. However, some more conditions were included in the consent terms. The appellants were required to make compliance of the aforesaid terms and conditions of the sale within a given time scheduled, but they failed to comply with their commitments. Although the appellant had issued NCDs/OCDs in favour of ARCIL and SASF, but they were not secured as provided in the consent terms. Pan India Motors Pvt. Ltd. failed to clear the dues of UPSIDC and failed to obtain No Objection Certificate from UPSIDC for creating mortgage and charge in favour of the debenture trustee, as per the terms and conditions of the sale. Pan India Motors Pvt. Ltd. also failed to create debenture trustee as per the terms and conditions of the sale. It also failed to create mortgage of its Gujarat property as provided in the consent terms. In this way, the appellant failed to comply with the terms and conditions of the sale within a given time schedule. They in their M.A. (Exh. 197) themselves asked for extension of time for compliance of the terms and conditions of the sale. Now it is not open to them to seek further extension of time for compliance of the terms and conditions of the sale, as well as the terms and conditions of the consent terms.
The learned Counsel contended that the present Appeal has been filed by the appellant before this Appellate Tribunal, which is the second appeal. The scope of the second Appeal is very limited. This Appellate Tribunal in the second Appeal has to consider the only law point involved in the matter. The finding of facts recorded by the Recovery Officer and learned Presiding Officer cannot be disturbed by this Appellate Tribunal, unless there is perversity in the finding. The learned Counsel for the appellants has failed to show any perversity, neither in the finding of the Recovery Officer nor in the finding of the learned Presiding Officer. Therefore, the impugned judgment and order passed by the learned Presiding Officer cannot be interfered with by this Appellate Tribunal. The learned Counsel in support of his arguments, has placed reliance on the following cases decided by the Hon'ble Apex Court:
(i) Gurdev Kaur v. Kaki, III (2006) SLT 492=II (2006) CLT 210 (SC)=AIR 2006 SC 1975.
(ii) Kondiba Dagadu Kadam v. Savitribai Sopan Gujar, IV (1999) SLT 163=III (1999) CLT 62 (SC)=AIR 1999 SC 2213.
(iii) Sheel Chand v. Prakash Chand, VII (1998) SLT 331=IV (1998) CLT 61 (SC)=AIR 1998 SC 3063.
The learned Counsel further contended that the parties filed consent terms (Exh. 91) which was accepted by the Recovery Officer. The learned Counsel for the appellant on the basis of consent terms, contended that the prayer sought for by ARCIL in M.A. (Exh. 146) cumulate into the consent terms which has attained finality. Therefore, M.A. (Exh. 194) filed by ARCIL for the same relief i.e. for setting aside the impugned sale is barred by res judicata. But the contentions of the learned Counsel has got no force. Although ARCIL has moved separate M.A. (Exh. 194) for cancellation of the impugned sale, but the prayer sought for by the ARCIL in M.A. (Exh. 194) is in continuation of the earlier sought in M.A. (Exh. 146). The Recovery Officer had not disposed of M.A. (Exh. 146) on merit. Therefore, the principle that res judicata will not be attracted to the subsequent M.A. (Exh. 194) filed by ARCIL seeking for cancellation of the sale.
The learned Counsel further contended that the appellant has contended that on account of order of ad interim injunction passed by the Recovery Officer on 18th February, 2011, they could not obtain NOC from UPSIDC as well as they could not create mortgage. But this contention of the appellant has got no force, as the appellant since 16th October, 2007 used to seek extension of time again and again for compliance of the terms and conditions of the sale as well as terms and conditions of the consent terms. The Recovery Officer lastly, allowed extension to the appellant for compliance of the terms and condition of the consent terms up to 15th February, 2011, but the Appellants could make compliance. The appellant thereafter filed M.A. (Exh. 196) for extension of time for compliance and further filed M.A. (Exh. 220) for vacating the ad interim injunction. The appellant did not challenge the order of ad interim injunction passed by the Recovery Officer by filing any Appeal. The Recovery Officer therefore, keeping in view of the dilatory tactics of the appellant, did not allow their M.A. (Exh. 196) for further extension of time and M.A. (Exh. 220) for vacating the order of ad interim injunction.
The learned Counsel contended that the Recovery Officer as well as the learned Presiding Officer on the basis of materials available on record has held that the appellant has failed to comply with the terms and conditions of the consent terms, therefore, the sale is liable to be cancelled. The Recovery Officer accordingly, cancelled the impugned sale which has been approved by the learned Presiding Officer vide impugned judgment and order. The impugned order dated 22nd November, 2012 passed by the Recovery Officer in R.P. No. 01/2012 and impugned judgment and order dated 30th January, 2013 passed by the learned Presiding Officer in Appeal No. 39/2012 do not suffer from any error, as such they do not call for any interference.
I have given active consideration to the rival submissions by the learned Counsels for the parties.
It is undisputed that the DRT Receiver in this case, had not conducted the sale in accordance with the Rules provided in the Second and Third Schedules to the Income-tax Act, 1961, rather he conducted the sale by way of private treaty. He had settled the terms and conditions of the sale with the consultation of ARCIL, which was approved by the Recovery Officer, DRT.
The sale was being conducted under the supervision and guidance of Recovery Officer. As per the terms and conditions of the sale, the purchaser were required to comply with the terms and conditions of the sale within a given time schedule. Whether the purchasers had complied with the terms and conditions of the sale, it was to be ascertained by the Recovery Officer. The Recovery Officer on the basis of documentary evidence available on record, after being satisfied that the terms and conditions of the sale, were complied with by the Appellant had to pass an order for confirmation of the sale in accordance with Rule 63 of the Second Schedule to the Income-tax Act, 1961 and issue Recovery Certificate too in accordance with Rule 65 of the Second Schedule to the Income-tax Act, 1961 in favour of the Appellants. The Recovery Officer was, therefore, empowered to ascertain, whether the terms and conditions of the sale had been complied with by the purchasers or not. It is undisputed that the purchasers time and again had sought for extension of time for compliance of the terms and conditions of the sale as well as the terms and conditions of the consent terms before the Recovery Officer. Therefore, it is now not open to the appellant to challenge the jurisdiction of the Recovery Officer to entertain the application filed by ARCIL for setting aside the impugned sale. If the Recovery Officer could approve the sale and issue sale certificate, he could also set aside the sale for non-compliance of the terms and conditions of sale as well as terms and conditions of the consent terms, which were mandatorily to be complied with by the appellant to make the sale absolute.
The learned Counsel for the Appellant contended that ARCIL vide its letter dated 16th October, 2007 and SASF vide its letter dated 17th December, 2007 had conveyed their no objection to the DRT Receiver to hand over the possession of the Suit property to the Appellant. They had also informed the DRT Receiver that the appellant had complied with the terms and conditions of the sale. ARCIL and SASF therefore, waived their right to complain that the appellant had not complied with the terms and conditions of the sale. But I do not find any force in her arguments, as the appellants themselves time and again had sought extension of time for compliance of the terms and conditions of the sale as well as the terms and conditions of the consent terms before the Recovery Officer. The Recovery Officer too had allowed them sufficient time for compliance of the terms and conditions of the sale as well as the terms and conditions of the consent terms. In view of these facts, it cannot be held that ARCIL and SASF had waived their right to challenge the impugned sale for non-compliance of the terms and conditions of the sale as well as the terms and conditions of the consent terms.
The learned Counsel for the appellant contended that the impugned sale is confirmed and absolute sale. Therefore, the same cannot be set aside except in exceptional cases only, like, on the ground of fraud and similar grounds. But I do not find any force in the contention of the learned Counsel.
From a perusal of the impugned order passed by the Recovery Officer, it appears that the Recovery Officer on the basis of the materials available on record, had observed that it was not a confirmed sale. The copy of Roznama of R.P. No. 01/2012 shows that the Recovery Officer never had passed any specific order, confirming the sale, rather he had approved the sale in favour of the Crosslink Finlease/Pan India.
Since ARCIL in its M.As. (Exhs. 194 and 146) has admitted that it was a confirmed sale, the learned Presiding Officer keeping in view of the admission of ARCIL observed that it was confirmed sale, subject to compliance of the terms and conditions of the sale and thereafter subject to the terms and conditions provided of the consent terms. At this stage, there is no much quarrel/dispute on the point that it was a confirmed sale, subject to compliance of the terms and conditions of sale as well as terms and conditions of the consent terms.
If the sale was subject to compliance of the terms and conditions of the sale which admittedly, had not been complied with, on the date when the possession of the sold property was handed over by the DRT Receiver to the appellant. ARCIL can therefore, ask for setting aside the sale for non-compliance of the terms and conditions of the sale as well as for non-compliance of terms and conditions provided in the consent terms. There is no quarrel/dispute about the law laid down by the Hon'ble Apex Court in the case cited by the learned Counsel for the appellant, but the law laid down by the Hon'ble Court will not be applicable to the facts of the present case.
The appellants have contended that they had complied with the terms and conditions of the sale as well as the terms and conditions of the consent terms. But from a perusal of the record and the M.A. filed by the appellant, Pan India Motors Pvt. Ltd., it appears that Pan India Motors Pvt. Ltd. time and again had applied before the Recovery Officer for seeking extension of time, for compliance of the terms and conditions of the sale, as well as terms and conditions of the consent terms. The appellant in its M.A. (Exh. 196) itself had sought extension of time for compliance of the terms and conditions of the consent terms. Now, it is not open to the appellant to contend that they have complied with all the terms and conditions provided in the consent terms.
From a perusal of the impugned judgment and order passed by the learned Presiding Officer in Appeal No. 39/2012, it appears that the learned Presiding Officer at Page Nos. 15 to 21 has dealt with the terms and conditions of the consent terms which were to be complied with by the appellant, but they did not comply with those terms and conditions. The relevant observation of the learned Presiding Officer is being extracted below:
"The following clauses of the consent terms would inter alia show not only that the appellants had not complied certain conditions of the sale till that date, but had undertaken to comply them within the time schedule provided in the following clauses:
Respondent No. 2 do and hereby agree and undertake to comply with the terms and conditions of sale of the Suit properties as awarded by this Hon'ble Tribunal vide its order dated 16th October, 2007, including, by issuance of Redeemable Secured Non-Convertible Debentures (NCDs) efface value of Rs. 267.75 crores (Rupees two hundred sixty-seven crores and seventy five lacs only) and Redeemable Secured Optionally Convertible Debentures (OCDs) of face value of Rs. 229.5 crores (Rupees two hundred twenty-nine crores and fifty lacs only) towards balance payment consideration For the Suit properties. Respondent No. 2 do agree and undertakes that NCDs and OCDs, as stated above shall be secured by first charge by way of mortgage and hypothecation of the Suit properties (description of which is attached hereto as Sch. 1 hereto) and shall be subject to other terms and conditions contained in the order of this Hon'ble Tribunal vide the orders dated 16th October, 2007 and 17th October, 2007. Annexed hereto and marked as Annexures 1 and 2 are the copies of the orders dated 16th October, 2007 and 17th October, 2007 and in conj unction with other documents relevant to the said orders in time bound manner as agreed hereinbelow.
Respondent No. 2 shall within 30 days from the date of filing of these consent terms and order in terms thereof passed by this Hon'ble Tribunal issue fresh Letter(s) of Allotment in lieu of earlier Letter(s) of Allotment dated 16th October, 2007 for NCDs and OCDs as mentioned above, in favour of applicant and Stress Asset Stabilization Fund (SASF). The appellant and SASF shall and so entitled to convert OCDs of Rs. 229.5 crores into 6.68 crores (six crores sixty-eight lacs) number of fully paid up equity shares of face value of Rs. 10/- each, upon exercising their right of conversion. The capital structure of respondent No. 2 as on 10th November, 2009 certified by auditor and letter of respondent No. 2 dated 11th November, 2009 certified by C.F.O. are annexed hereto and marked collectively as Annexure 3.
Respondent No. 2............
Respondent Nos. 1 and 2, additionally do agree and undertake to comply with the following terms and conditions in a time bound manner, time being the essence of these consent terms:
(a) Disclose to the applicant of its plan to raise any capital and utilization thereof, by way of issuance of any further shares of any class (preference, equity or any other) over and above the capital structure marked as Annexure 3 (excluding 6.68 crores number of equity shares, as mentioned in Clause 2 above, arising out of exercising of conversion of OCDs of Rs. 229.5 crores by the Applicant and SASF) of equity shares, prior to any such issuance.
(b) Within a period of 60 days from the date of these consent terms and order passed in terms thereof, respondent Nos. 1 and 2 shall and do effect transfer of the leasehold right of the Suit properties in the records of Uttar Pradesh State Industrial Development Corporation (UPSIDC) in favour respondent No. 2 and also obtain specific permission for creation of mortgage and charge in favour of Debenture Trustee (Indl. Development Bank of India Trusteeship Services Limited)/Applicant and SASF over Suit properties.
(c) In case of any delay in receipt of permission for transfer of the leasehold right of the Suit properties in the records of UPSIDC in favour of respondent No. 2 and obtaining specific permission for creation of mortgage and charge of the Suit properties beyond 60 days as above, upon representation made by respondent No. 2 with detailed reason for such delay, the respondent No. 2 shall be entitled for further 90 days to complete the process as contemplated.
(d) Shall complete stamping, adjudication, execution and registration of conveyance deed in respect of Suit properties within 30 days from the date of UPSIDC clearance/transfer of the Suit properties-in favour of respondent No. 2 as mentioned in Clauses (b) and (c) above, and shall and do also simultaneously therewith create mortgage of Suit properties in favour of Debenture Trustee/Applicant and SASF on first charge basis in the form and manner acceptable to Applicant and SASF.
(e) Within 30 days from the date of signing of these consent terms and order in terms thereof passed by this Hon'ble Tribunal pending creation of mortgage, to the Suit properties, shall execute and register Debenture Trust Deed by creating legal mortgage in English form of its property situated at Gujarat (description of which is attached hereto as Sch. 2), in favour of Debenture Trustee/Applicant and SASF and issue Debenture Certificates in favour of applicant and SASF.
(f) (1) Shall within period of 30 days from the date of execution of these consent terms and order in terms thereof passed by this Hon'ble Tribunal execute fresh documents fresh documents as listed below, the drafts of which are initiated by the applicant and respondent Nos. 1 and 2 are attached hereto as Annexure 4 collectively.
(i) Letter of Allotment of Redeemable Secured Optionally Convertible Debenture(s) in favour of applicant;
(ii) Letter of Allotment of Redeemable Secured Optionally Convertible Debenture(s) in favour of SASF;
(iii) Letter of Allotment of Redeemable Secured Non-Convertible Debenture(s) in favour of applicant;
(iv) Letter of Allotment of Redeemable Secured Non-Convertible Debenture(s) in favour of SASF;
(v) Unattested Memorandum of Hypothecation;
(vi) Pledge Agreement;
(vii) Draft of Debenture Trust Deed (will be Suitably modified, if required by the Debenture Trustee);
(viii) Deed of Conveyance (in respect of Suitably properties), which is attached hereto as Schedule 3; and
(ix) Draft of Mortgage Deed for mortgage in English form (will be Suitably modified, if required by the Debenture Trustee).
(2) Respondent Nos. 1 and 2, additionally do agree and undertake to execute subsequent supplemental pledge agreement to create pledge of shares issued (other than as envisaged under the above Pledge Agreement) consequent upon issuance of non-equity capital/instruments of whatsoever nature having voting rights within period of 30 days from the date of its issuance.
(g) Within a period of 45 days from the date of these consent terms and order in terms thereof passed by this Hon'ble Tribunal, submit to the applicant detailed business plan of respondent No. 2 for the next 5 years including future projections of revenue, expenses, profit and loss account, cash flow and balance sheet.
(h) Shall keep the Suit properties fully insured by renewing the insurance policies with hypothecation/endorsement in favour of the Applicant and SASF on timely basis and shall provide documentary proof in that respect. Respondent No. 2 shall ensure that endorsement of the existing insurance policies in favour of the applicant and SASF, if not already endorsed, shall be completed within a period of 15 days from the date of these consent terms and order in terms thereof passed by this Hon'ble Tribunal and shall and do provide documentary proof thereof.
(i) Respondent No. 2 shall inform Applicant of any sale/transfer of equity shares of Respondent No. 2 by one or more pledgers namely, Mr. Ajay Singh, Mr. Ashish Deora and Mr. BVR Subbu to any one or forfeiture of any of the pledge shares pledged with applicant (acting for itself and as agent of SASF) on account of failure of pledger to make the equity shares fully paid up upon call made by respondent No. 2.
Applicant (acting for itself and as agent of SAF) shall have no objection to the same provided the respondent No. 2 cause to replace the pledged shares being forfeited or sold so as to ensure that at any time the pledged shares represents at least 26% of the total voting capital (equity and non-equity) of the respondent No. 2. In case pledged shares are sold by one pledger to another, Applicant shall facilitate the transaction by de-pledging such shares of the selling pledger temporarily provided that such shares are concurrently re-pledged by the buying pledger.
It is........
Undertakings of the applicant and respondent Nos. 1 and 2 is accepted."
A bare reading of aforesaid clauses confirms conclusion that the sale, albeit confirmed the sale, was subject to compliance of the conditions which are integral part of the consideration and the sale itself. The sale thus was not confirmed in the fullest sense of the word or had not become absolute. There is thus no embargo for setting aside such confirmed sale although the setting aside cannot be at the drop of the hat or for breach of formal and/or unsubstantial conditions."
From a perusal of the above observation by the learned Presiding Officer, it appears that the learned Presiding Officer has thoroughly gone through the terms and conditions of the sale as, well as the terms and conditions of the consent terms, which has not been complied so far by the appellant, despite availing sufficient opportunities. The aforesaid finding rendered by the learned Presiding Officer is the finding of the fact which cannot be interfered with by this appellate Tribunal, unless there is any perversity. The appellants have failed to show any perversity in the aforesaid finding of the learned Presiding Officer.
It will be worthwhile to mention here that fixed assets of respondent No. 3 was sold by the DRT Receiver, way back in October, 2007. The property was sold to the appellant for an amount of Rs. 765 Crores. They had paid the part sale consideration of Rs. 267.75 Crores to the DRT Receiver which is 35% of the entire sale consideration. Rest of the sale consideration was to be paid in kind i.e. by issuing NCDs/OCDs. The appellants have contended that they had issued NCDs/OCDs which were not accepted by ARCIL and SASF. Since the NCDs/OCDs were not issued in accordance with the terms of the sale, therefore, they were not accepted by ARCIL and SASF. The NCDs were carrying interest @ 10% p.a. redeemable after three years and OCDs were also carrying interest @ 10% p.a. which were redeemable after five years, if not converted within three years from the date of issue. Admittedly, the redeemable period for NCDs and OCDs has expired. Admittedly, the appellants have not paid any amount towards their dues after maturity of NCDs and OCDs. The appellants by paying 35% of the sale consideration are enjoying the Suit property (fixed assets) since 25th October, 2007. They even tried to create third party interest in favour of Argentum Infrastructure Pvt. Ltd. They still want to hold the property without paying the entire sale consideration. They want to enjoy the benefits of their own default, which cannot be permitted.
It will be pertinent to mention here that the workers union has filed M.A. for their impleadment. From a perusal of the order dated 22nd November, 2012 passed by the Recovery Officer, it appears that the workers union as Intervenor had moved Miscellaneous Application (Exh. 159) before the Recovery Officer seeking to set aside the sale on the ground of fraud etc. which was disposed off by him, observing that the same did not survive. Although the learned Counsel for the intervenor has been heard, but since the intervenor has no locus standi to be impleaded in the Appeal, as they had filed separate appeal against the order passed by the Recovery Officer under Section 30 of the RDDBFI Act before the DRT which has been dismissed by the learned Presiding Officer, DRT as barred by time. The union has filed separate Appeal No. 146/2013 before this Appellate Tribunal, therefore, the intervenor is not required to be heard in this matter. The M.A. filed by the workers union is, therefore, rejected.
From a perusal of the impugned judgment and order passed by the Recovery Officer in R.P. 01/2012 and impugned judgment and order passed by the learned Presiding Officer, DRT, in Appeal No. 39/2012 (Crosslink Finlease Pvt. Ltd. v. Pan India Motors Pvt. Ltd.), I do not find any legal or factual error, which do not call for any interference. The Appeal is devoid of any merit and liable to be dismissed with costs.
ORDER
The Appeal is dismissed with costs.
Chairperson
At this stage, the learned Counsel for the appellant requests to postpone the delivery of the judgment for two days.
Since the judgment is already dictated and pronounced in the open Court, therefore, it will not be proper to postpone the delivery of the judgment after its pronouncement. Hence, the request of the learned Counsel for the appellant is rejected.
The learned Counsel for the Appellant further requests that the interim order which is in operation till today, be extended for eight weeks to enable the appellants to approach to the Hon'ble High Court.
In view of the above, the interim order which in operation till today is extended for six weeks from today.