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Judgment
P.K. Bhasin, J
The appellant is aggrieved by the order passed by the Debt Recovery Tribunal (DRT) whereby after striking off the defence of the respondents (borrowers/guarantors) vide order dated 16.10.2015 in the Original Application (being O.A. No. 149/2012) filed against them under Section 19 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (for short, 'the RDDBFI Act') for a joint and several recovery certificate for the recovery of a huge loan amount of Rs. 5,33,39,173.11 with interest the DRT has allowed vide order dated 4.2.2016 the application moved by them (being I.A. No. 1286 of 2015) for recall of the earlier order dated 6.8.2015 striking off their defence and permitting them to file their written statement. The facts of this case to be narrated hereinafter demonstrate how borrowers after taking crores of rupee as loan from the Banks flout with impunity the terms and conditions of the loan and avoid repayment as well as sale of mortgaged assets by adopting clever tactics with which sometimes even the recovery Tribunals established by the Government for the speedy recovery of the dues of Banks and other financial institutions also get entrapped and swayed resulting in enormous delay in the culmination of recovery proceedings. Sometimes even the Bank officials also contribute to the delay in recovery of Bank's dues from the borrowers and in the facts of the present case it can be said that the Bank itself has also been contributory to unavoidable delay in the recovery steps which were expected to be taken by its officials promptly but were not taken by its officials which comprise of legal managers also in not showing them the right path to be followed.
The Catholic Syrian Bank Limited (hereinafter to be referred as 'the Bank') had granted loan facility in the form of ODBD Limit of Rs. 350 lacs to respondent No. 1 Company (hereinafter to be referred is 'the borrower Company') sometime in the year 2009 against assignment of its book debts and creation of equitable mortgage of first and second floors with roof rights of house No. S-257, Greater Kailash-I, New Delhi by defendant 4 in the O.A., Shri Rajinder Kumar who has expired and now is being represented by his legal heirs arrayed as respondents 4 (a-d) in this appeal. The said deceased Shri Rajinder Kumar was the father of respondent No. 2 herein and father-in-law of respondent No. 3 herein and besides his said son the other legal heirs of the deceased mortgagor are his widow, two sons and one daughter. Necessary loan documents were also executed at the time of grant of loan. An additional ODBD Limit of Rs. 30 lacs was also sanctioned by the Bank which was also secured by the equitable mortgage of the said two floors of the house in Greater Kailash.
As per the case of the applicant Bank before the DRT, the borrower Company became a defaulter in repayment of the loan and since the loan account was not regularized despite the Bank having called upon it to do so, a notice dated 29.10.2010 under Section 13(2) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short 'the SARFAESI Act') was served upon the borrowers/guarantors and they were called upon to clear the outstanding payment of Rs. 4,04,50,601.11 along with interest at the contractual rate. Thereafter it appears that thereafter the Bank obtained an order for taking over of the possession of mortgaged property from CMM. Then late Shri Rajinder Kumar, the mortgagor, without losing any time entered into an agreement to sell on 6.1.2011 in respect of the mortgaged property with three persons. As the mortgaged property referred to above was also sought to be taken over and auctioned the mortgagor and other guarantors, who were his family members, then filed a petition under Section 17 of the SARFAESI Act before the DRT-I, Delhi (being S.A. No. 23/2011). However, it appears that before the applicants in the S.A. could get any relief from the DRT they moved an application (being I.A. No. 584/2011) on 14.11.2011 accepting the liability to the extent of Rs. 3,70,00,000/- and requested the DRT to exercise its jurisdiction under Section 19(20) of the RDDBFI Act and treat the NPA amount as Rs. 3,70,00,000/- as against the amount of Rs. 4,04,50,601.11 as on 30.9.2010 claimed by the Bank in its notice dated 29.10.2010 under Section 13(2) of the SARFAESI Act and the rate of interest to be 6% per annum simple on reducing balance w.e.f. 1.10.2010 and for clearing the said liability six months' time was sought. The relevant paras of that application are reproduced below:
"That the present application is pending securitization application/appeal has been preferred by appellants and whereas the appellant No. 1 (the deceased mortgagor) is aged about 77 years old who happens to be father of appellant No. 2. Further appellant Nos. 2 and No. 3 are husband and wife.
That the main securitization application is pending adjudication and the contents of the same may kindly be read as part of this application as the same has not been produced for the sake of brevity. The present application is without prejudice to the rights and contentions of the main securitization application and does not amount to any admission of alleged debt claimed by the Bank.
That the respondent Bank has filed reply to the main securitization application along with the statement of accounts.
That in para No. 2 under the heading of preliminary objections; the respondent Bank has admitted the date of NPA being 30.9.2010 and from the perusal of the statement of accounts filed by the Bank; an amount of Rs. 3,70,00,000/- has been shown as Non-Performing Asset (NPA) amount being alleged from the applicants herein.
That on account of conduct, behavior, illegal action and dealings of the Bank; it is pertinent to mention herein that the cheque issued by the appellant No. 4 in favour of IATA was not honoured by the respondent Bank; though well within the discretionary power of the Bank and which led to closure of the business of the appellants No. 4. The relevant papers/documents/communications and/or letters in this regard are collectively marked and annexed as ANNEXURE A-1/1. That the appellant No. 4 suffered closure of business and the appellant Nos. 2 and No. 3 are virtually hand to mouth and with great difficulty running life with merely bread and butter.
That the appellants are not willful defaulters and bona fide and genuineness of the appellants is proved that the appellants also complied the order dated 25.4.2011 by depositing Rs. 40.00 lacs.
That the appellants have no liquid means except the alleged secured asset to pay the alleged NPA amount of Rs. 3,70,00,000/- minus Rs. 40,00,000/- i.e. Rs. 3,30,00,000/-; without prejudice to the rights and contentions raised in the present application and main securitization application.
That the appellants are entitled to judicial discretion under Section 19(2), DRT Act, 1993 of the with regard to the rate of interest post NPA i.e. the amount found due date i.e. 30.9.2010 as per Bank's own case; and thus the present application for passing final order in this regard.
MAIN PRAYER/RELIEF(S)
In view of the above facts and circumstances of the present case it is most respectfully prayed that this learned Tribunal may kindly be pleased to:
(a) Pass final order under Section 19(20) of DRT Act, 1993 with regard to NPA amount of Rs. 3,70,00,000/- alongwith interest w.e.f. 1.10.2010 at the rate of 6% per annum simple on reducing balance till realization of the said debt due from the appellants;
(b) Grant six months time to make the above adjudicated amount from the date of passing the final order as mentioned in prayer Clause (a)".
The learned DRT vide its order dated 29.6.2012 accepted this application of the borrowers/guarantors and passed the following direction while disposing of the said application of borrowers/guarantors:
"8. In view of the discussion above the respondent Bank is directed to supply to the respondent within one month from the date of this order, the re-casted statement of account treating the NPA amount as Rs. 3,70,00,000.00 on 30.9.2010 and rate of interest as 11% from the date of NPA i.e. 30.9.2010. The adjustment of Rs. 40,00,000.00 deposited by the appellant with the respondent Bank during the pendency of the SA shall be given to the appellants and the interest shall be calculated on the reducing balance. The respondent is directed to make payment as per the re-casted statement of account within two months positively from the date, the re-casted statement of account is received by the appellants. It is made clear that this consideration of the rate of interest is subject to this condition that the payment is made within the stipulated time failing which the Bank will be at liberty to proceed further under the SARFAESI Act and also to recover the interest as mentioned in the notice dated 29.10.2010 on the NPA amount of Rs. 3,70,00,000/-. With the passing of this order the SA filed by the appellant also comes to an end."
Feeling aggrieved by the reduction of the NPA amount from Rs. 4,04,50,601.11 to Rs. 3,70,00,000/- and award of interest @ 11% the Bank approached the Appellate Tribunal with an appeal. That appeal (being Appeal No. 308/2012) came to be disposed of by this Tribunal vide order dated 2.6.2015 whereby the order of the DRT was modified and the NPA amount was directed to be treated as Rs. 4,04,50,601.11.
It appears that even though the borrowers/guarantors had not made payment even in terms of the order dated 29.6.2012 of the DRT in the S.A. of the borrowers/guarantors the Bank did not take any steps for sale of the mortgaged property and before its appeal against the order in the S.A. could be disposed of it had also filed an Original Application (O.A. No. 149/2012) under Section 19 of the RDDBFI Act (out of which this present appeal has arisen) against the borrowers/guarantors on 8.10.2012 for a joint and several recovery certificate for a sum of Rs. 5,33,39,173.11, which was the amount that had become due as on 8.10.2012, together with interest thereon @ 15.25% plus 1% penal interest from 8.10.2012 compounded with monthly rests till payment and realization. It appears that during the pendency of the said O.A. the Bank assigned its claim against the borrowers/guarantors to the present appellant Phoenix ARC Pvt. Ltd. and the same, thereafter, stepped into the shoes of the Bank and is now pursuing the O.A. which is still pending since the year 2012.
In the O.A. the defendants had instead of filing their written statement moved one application under Order 7 Rule 11, C.P.C. for rejection of the claim of the Bank of the ground that the same was not maintainable since their liability towards the Bank had already stood adjudicated in their S.A. with the passing of the order dated 29.6.2012 by the DRT and there could be no fresh adjudication of the defendants' liability in a separate O.A. of the Bank in which the claim was for the amount claimed in Section 13(2) notice under the SARFAESI Act, However, it appears that the defendants did not choose to pursue that application and did not file written statement also. As already noticed, the learned DRT had struck off their defence vide its order dated 6.8.2015 but despite that order and not taking any cognizance of the admission of their liability by the defendants in their S.A. the DRT kept the O.A. pending instead of issuing recovery certificate at least on the basis of admitted liability of the defendants and that inaction of the DRT emboldened the defendants and they thought of taking a chance to wriggle out of the admissions made by them in their S.A. and to derail the entire recovery process and with that objective in mind and which objective they have been able to achieve by the DRT showing indulgence to them by passing the impugned order, the defendant Nos. 1 to 3 in the O.A. (defendant 4, mortgagor, appears to have died by that time) moved another application on 30.11.2015 in the O.A. (being I.A. No. 1286/2015) seeking permission to take on record their written statement alleging therein that they could not file the written statement earlier owing to serious family problems and sad demise of Shri Rajinder Kumar (mortgagor). That application was opposed by the appellant herein in whose favour the Bank had in the meanwhile assigned the debt against the defendants (respondents herein) and which had come on record. The learned DRT, after hearing the Counsel for the parties, passed the impugned order dated 4.2.2016 which is re-produced below:
"Dated 4.2.2016
Present:
Ms. Sonaakshi Dhiman Counsel for applicant Bank.
Mr. Sanjeev Bhandari Counsel for defendant Nos. 1 to 3 and 4(a) and (b)
Defendant Nos. 4(c) and (d) are ex-parte since 6.8.2015.
I.A. No. 1286/2015
This application has been filed on behalf of defendant Nos. 1 to 3 praying therein that WS filed separately be taken on record and/or Order dated 6.8.2015 be recalled.
Learned Counsel for applicant Bank vehemently opposed the prayer made in the I.A.
Looking to the facts and circumstances of the case and in the interest of justice, this I.A. is hereby allowed subject to payment of cost of Rs. 10,000/- to be paid by the defendants. It is clarified that out of total cost of Rs. 10,000/- a sum of Rs. 5,000/- shall be paid to learned Counsel for applicant Bank and remaining Rs. 5,000/- in favour of DRT Bar Association, Delhi.
Now the WS filed on behalf of defendant Nos. 1 to 3 is taken on record.
IA stands disposed of accordingly.
OA
Now last opportunity is allowed to the defendants to file their evidence and exhibition of documents before learned Registrar.
Case be listed before learned Registrar on 16.3.2016 for completion of pleadings and thereafter before this Tribunal on 3.5.2016 for final arguments."
Feeling aggrieved, the appellant has again come up in appeal and has challenged the impugned order of the DRT on the ground that there was no justification whatsoever for the DRT to have reopened the matter by allowing the defendants in the O.A. to file their written statement after striking off their defence. It has also been stated in the appeal and argued during the course of arguments also by the learned Counsel for the appellant that the DRT has not even discussed in the impugned order as to why the defendants' application was being allowed. The learned Counsel for the appellant had submitted that if passing of such like orders by the DRT is approved by this Tribunal that would mean that the DRTs can pass any orders at any time at the instance of defaulting borrowers ignoring the legislative mandate of disposal of O.As. within a fixed time frame provided under the RDDBFI Act. The learned Counsel further submitted that in the facts and circumstances of the case the impugned order is liable to be set aside and not only that even a recovery certificate needs to be issued by this Tribunal for the amount of money which had been claimed originally by the Bank in the O.A. since after admitting their liability the defendants cannot now be permitted to turn around and challenge the loan transaction itself on various false and frivolous grounds which have now been taken in the written statement which, in fact, amounts to playing fraud upon the Tribunal inasmuch as earlier in their own S.A. they had categorically admitted their liability and had never challenged the loan transaction while in the written statement which has now been permitted to be filed by the DRT they have totally denied their liability on false and frivolous grounds.
On the other hand, the learned Counsel for the respondents argued that within a short period after the striking off the defence of the defendants by the DRT they had moved an application for an opportunity to contest the case on merits by filing written statement and if in the interest of justice the DRT has permitted them to contest the case on merits no fault can be found with the exercise of that discretion by the DRT and the same cannot be stated to have been exercised arbitrarily. The learned Counsel also submitted that in fact the O.A. is even now liable to be dismissed as being not maintainable since there was no cause for the Bank to have filed the same after the DRT had disposed of the S.A. fixing the liability of the applicants there on the basis of application which had been moved by them and there could not be any fresh adjudication of the liability of the borrowers/guarantors in an independent O.A. under Section 19 of the RDDBFI Act and particularly for the reason that the DRT in the S.A. had passed the final order on 29.6.2012 under Section 19(20) of the RDDBFI Act itself.
After giving my thoughtful consideration to the submissions advanced before me by the learned Counsel for the appellant-assignee and the respondents-borrowers I have unhesitatingly come to the conclusion that the impugned order passed by the learned Presiding Officer of the DRT is not sustainable at all. The learned Presiding Officer while allowing the written statement of the respondents to be taken on record after having earlier striking off their defence because of their failure to file the written statement has failed to give any justification for accepting the request of the defendants before it to recall its earlier order dated 6.8.2015. The impugned order totally ignores the fact that the O.A. of the appellant was based on the categorical admission of their liability made by them in their own S.A. which was got disposed by them after agreeing to pay the admitted loan amount. That admission had been taken cognizance of even by this Tribunal in the appeal filed by the Bank against the order of the DRT whereby it had brought down the NPA amount by some lakh while disposing of that O.A. and this Tribunal has in fact found the admitted liability to be the same which the Bank had claimed in its notice under Section 13(2) of the SARFAESI Act. The least which the learned Presiding Officer of the DRT was expected to do was to ask the respondents as why they were asking for a fresh opportunity for filing written statement when they themselves had admitted their liability in their own S.A. and particularly when the defendants did not even claim that their admission of liability in the S.A. was as a result of any fraud, misconception of any fact etc. and that they wanted to explain the reasons for backing out of those admissions. They just sought the relief of re-opening of the matter and bringing it back to the stage of pleadings and the DRT simply gave them the relief without any changed circumstances during the period of the passing of the earlier order striking off their defence and passing of the impugned order taking their written statement in which they had taken a total somersault from the position which they had taken in their own S.A. All these facts should have persuaded the learned Presiding Officer of the DRT to reject their request for taking on record written statement and to frustrate their attempt to blatantly abuse the process of law with heavy costs instead of showing mercy to such litigants. In the result, this appeal is allowed and the impugned order of the DRT passed on 4.2.2016 taking on record the written statement of the defendants in the O.A. is set aside.