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Judgment
J.M. Malik, J
The Hon'ble High Court, vide its order dated 10.5.2011 partially remanded this case to this Court. Accordingly, the following observations were made by the Hon'ble High Court.
Insofar as the submission of the petitioners with regard to failure on the part of Bank to take due insurance was concerned, we find ourselves in the agreement with the conclusion of the Tribunal. As rightly held in terms of Clause 14 of the consent terms, it is crystal clear that the obligation to insure the goods was that of the petitioners. However, what impact it would have on the monetary adjustment will have to be clearly delineated.
Similarly, as regards adjustment on account of monies received from Swastik Motors, we are ad idem with the approach of the Tribunal whereupon the Tribunal noticing the order dated 24.1.1909, passed by this Court, it has accorded an adjustment of Rs. 10.55 lacs.
In these circumstances, we propose to remand the matter to the Tribunal as agreed to Counsel for both the petitioners and the respondent with respect to the following aspects-
(i) Whether time was of the essence in issuance of the NOC by the Bank as contemplated in Clause 9 of the consent terms?
(ii) Whether time continued to remain of the essence till the issuance of the NOC by the Bank?
(iii) If the answer to the issue Nos. (i) and (ii) is in the affirmative, then what would be the monetary adjustment, if any, that would accord in favour of the petitioners?
(iv) Whether the petitioners had sought release of the goods falling in Clauses 5(b) or 5(c) of the consent terms or both? If so, whether it would entail monetary adjustments to be made in arriving at the liability of the petitioners?
(v) Whether the goods falling in Clause 5(c) of the consent terms had disappeared as alleged by the petitioners?
(vi) If the answer to issue No. (v) is in the affirmative, who was responsible for the same?
(vii) If the, issue Nos. (v) and (vi) are found against the Bank, to what extent the pecuniary liability of the petitioner would stand adjusted?
(viii) Whether the Bank would be entitled to a recovery certificate in terms of a consent decree dated 15.11.1991? If so, to what extent.
9.1. We would expect the Tribunal to return the findings on the aforesaid issues within a period of eight weeks from today.
9.2. To begin with, there was a consensus between the Counsel for the parties that both the rate of interest and period of interest as found by the Tribunal in the impugned judgment, is in order. We note, however, that after arguments in the matter were concluded and the matter was listed on Court on 2.5.2011 for directions. Mr. Mehra has submitted a short note seeking to contest the interest awarded by the Tribunal. We cannot countenance this approach. Nevertheless, in any event we are of the view that award of simple interest, both pendente lite and for the further period at, the rate of 70% p.a. is reasonable. Furthermore, the period of commencement of interest w.e.f. 13.11.1998 is also in order, as the Bank approached the DRT only on that date by way of an application for initiation of action on its consent decree. The Bank, therefore, correctly was made to suffer for the inertia shown between the date of the consent decree and date on which the said application was moved before the Tribunal. Therefore, findings in this regard have not been disturbed by us.
9.3. We are also making it clear that insofar as the NOC is concerned, the remand is restricted to the issues culled out above. We find nothing wrong with the NOC by itself, contrary to what the DRT had held. However, what impact it would have in the Tribunal coming to the conclusion as to whether time was or was not of the essence is a facet on which the Tribunal will dwell in returning a finding on the issues crystallized above.
It may also be mentioned here that the Hon'ble High Court also made the following observation in para 10, which is reproduced as follows:
Before we conclude, we must refer to one last aspect of the matter which is, Mr. Mehra during the course of his arguments had submitted that the petitioner would want to deposit the decretal amount with the Bank as per the judgment of DRT and obtain release of all securities available with the Bank, pending the decision of the Tribunal, on remand. We have no doubt view that if an application of this nature is made to the Tribunal, it would consider the request of the petitioners in accordance with law.
Mr. Rajeeve Mehra for the appellants submitted that he did not make such submission before the Hon'ble High Court and he was not ready to move any application in this context.
I have heard the Counsel for the parties and have also perused written submissions submitted by them. The consent decree is dated 15.11.1991. Its Clause 9 runs as follows:
The plaintiff agrees to grant its 'No Objection Certificate' in favour of the 1st defendant immediately within two days of passing of the Consent Decree with a view to enabling the 1st defendant to avail loans and/or Banking facility from other Banks and Financial Institutions.
It is an indisputable fact that NOC was issued on 30.1.1993, i.e., after lapse of two years. The stand taken by the respondent Bank is that the appellants themselves sought issuance of the NOC only on 24.1.1993 and consequently it was sent within six days.
The Counsel for the appellants has invited the attention of the Court towards various letters written by the appellants to the Bank. The short facts mentioned in these letters are these. One of such letters is dated 28.11.1991. In this letter, it was requested that the goods be released to the appellants. There is no mention of NOC. Then, the letter dated 11.12.1991 was sent wherein it was specifically mentioned that the appellants had withdrawn the case and the Bank was required to comply with Clauses 9,10,11 (c) and 11 (d) of the Consent Decree. Another letter was sent on 6.12.1992 wherein same request was repeated. In their another letter dated 2.6.1992, the appellants stated that in view of the failure on the part of the Bank to comply with the terms of Consent Decree, appellants would be constrained to take remedial measures. Similar request was made through two other letters dated 24.4.1992 and 21.12.1992. It was also argued that the Bank has made false statement that they had issued the NOC, which the appellants did not like its language. If the NOC was issued, where did it vanish? The learned Counsel for the appellants submitted that the time was the essence of the decree.
The learned Counsel for the appellants vehemently argued that due to delay in issuing the NOC, the appellants had to suffer a lot. The other Banks were not in a position to advance as much loan as could have been advanced in November, 1991. No amount of difference between the two amounts was specified. No order can be passed on guesswork. In his written synopsis, the Counsel for the appellants has raised many arguments, the relevant of those are reproduced as under:
The time period of two days from the date of consent decree to issue the NOC was inserted in this clause because the company would revive and start the production after obtaining facilities from another Bank/FI and in absence of the requisite NOC as envisaged within the express consent of the respondent Bank to cede second charge in favour of the new Bank or FI, no Bank or FI was willing to grant any facilities.
Had this NOC been issued Within 2 days, it would have enabled the Appellant Company to accelerate the payment of the compromised and settled amount by restarting its production and in any event meet the dead lines of payments.
It must be recalled that as per the consent decree, the first instalment towards the compromise amount was payable only after (6) six months from the date of the decree and further interest at simple rate of 13.5% was to be charged only after 30 months from the consent decree.
The Bank failed to comply with this important clause thereby making the appellant company fail in its object of revival by obtaining loan from other Bank(s) and complying with other terms and conditions of the consent decree.
The appellants must be held to be discharged to fulfill any other terms and conditions of the consent decree including repayment of any further amounts under the compromise release of goods against payment and all other conditions."
"Non-issuance of the NOC strictly in terms of the consent decree which is really the backbone of the performance of the obligations by the appellants and thus warranted the equitable reliefs of discharge and interference by the Tribunal below.
In the written submission filed after the remand, at page 5, almost all these arguments were reiterated.
Clause 5(b) and (c) of the of the consent decree are produced as follows:
Agreed, declared and ordered that repayment of the decretal claim mentioned in Clause 1 above is hereby validly created to secure in favour of the plaintiffs.
(a) xxx xxx xxx
(b) By pledge of the stock of defendant No. 1 in possession of the plaintiff as per the statement of stocks annexed hereto as Schedule No. 2 for securing repayment to the extent of Rs. 35,39,524.58. Out of the said amount, the defendant No. 1 has deposited an amount of Rs. 7,49,720.00 till date.
(c) By pledge of the stock (covered under Bills recalled) of defendant No. 1 in possession of the plaintiff as per the statement of stocks annexed hereto as Schedule No. 3 and securing repayment to the extent of Rs. 26,53,392.98.
It was submitted that in the meantime, the goods pledged under Clauses 5(b) and 5(c) became scrap. The pledge value in respect of goods under Clause 5(b) was Rs. 35,39,524.58 and that of goods under Clause 5(c) was Rs. 26,53,392.58. It was explained that as a matter of fact, its actual value was Rs. 1.5 crores and Rs. 3 crores respectively. Applications before civil Court were also filed and the Bank was asked to comply with the terms and conditions of the consent decree.
In their written synopsis, the Counsel for the appellants, has submitted:
Page 256 -- Clear that goods worth Rs. 10,010/- despite deposit dated 15.12.1992; Rs. 15,000/- despite deposit dated 31.3.1993 and Rs. 20,000/-despite deposit dated 12.7.1993; not released [these were goods under Clause 5(c) of the Consent Decree].
However, in his affidavit before the learned DRT Mr. S.S. Sahni, Director of the appellant company mentioned the following facts:
That total stocks held by the Union Bank of India as per Clause 5(b) and (c) of the Consent Decree dated 15.11.1991 against goods recalled by them is of Rs. 26,53,392.98 and goods held by them in their lock and key is of Rs. 35,39,524.58 of the advance value.
That out of the goods held by them of the value of Rs. 35,39,524.58, goods worth Rs. 12,85,048.81 were delivered to the Company against cash payment.
That, thereafter, the Bank had not delivered stocks to us in spite of Cash Deposits of Rs. 10,010/-, Rs. 15,000/- and Rs. 20,000/- by us on date 14.12.1992, date 31.3.1993 and date 12.7.1993 and inspite of numerous reminders and visits and Regd. A/D letters sent on 21.12.1992, 23.1.1993 and 16.11.1993.
It, therefore, clearly means that goods worth Rs. 12,85,048.81 were delivered to the company against cash payment. However, other goods were not released despite cash deposits of Rs. 10,010/- on 14.12.1992, Rs. 15,000/- on 31.3.1993 and Rs. 20,000/- on 12.7.1993 under Clause 5(c) of the Consent Decree.
It was also pointed out that as per Local Commissioner's report, of goods under Clause 5(c), only 60 boxes were recovered out of 3,000 boxes. The Bank could not give account for 2,940 boxes. Rest of the goods under Clause 5(c) of the Consent Decree disappeared and were pilfered. The Counsel for the appellants argued that he would feel satisfied in case full compensation is allowed in respect of the said two accounts.
The learned Counsel for the appellants further submitted that he would be satisfied in case the Court also grants Rs. 3 lakh goods under the category of 5(b) which have lost their total value by virtue of inaction by the Bank despite demands and further given total adjustment of goods under Clause 5(c) pilfered and stolen while under the admitted possession of the Bank. The appellants want adjustment in the sum of Rs. 46,06,558/- out of the total amount adjudicated by the DRT vide order dated 4.4.2007. It was further argued that the appellants are ready to deposit total amount payable with interest on the sum of Rs. 46,06,558/- plus interest @ 10% from 3.11.1998 till 31.7.2011 (Rs. 54,10,497/-), total being Rs. 1,00,17,055/-. He further submitted that the appellants should be permitted to deposit the said amount within a period of two months and title deeds, personal guarantees, stocks, charge created with the Registrar of Companies be released and 'No Dues Certificate' be issued simultaneously by the Bank.
It was also argued that in the alternative, 50% adjustment be given in both the categories of goods. Goods under Clause 5(b), 50% of Rs. 35,39,524.58 comes to Rs. 17,69,762/- and goods under Clause 5(c), 50% of Rs. 26,53,392.98 comes to Rs. 13,26,696/-. In that category, Rs. 12 lakh has been granted. A further sum of Rs. 1,26,696/- if granted, would make the adjustment equivalent to 50% of total value. Consequently, 50% total adjustment in both categories would, be Rs. 17,69,762/- + Rs. 1,26,696/-, i.e., Rs. 18,96,458/-. In case adjustment of Rs. 18,96,854/-, 50% adjustment of both categories, is granted, the total liability would be Rs. 63,59,951.19 (--) Rs. 18,96,458.00, total being Rs. 44,63,493/-, Adding interest of Rs. 52,42,469/- (@ 10% from 3.11.1998 till 31.7.2011) to the amount after reduction, Rs. 44,63,493/-, the grant total would be Rs. 97,05,962/-
I find force in the arguments urged by the learned Counsel for the appellants to a large extent. However, other factors also require consideration. It is clear that the appellant was to take out insurance policy with respect to the two types of stocks. Taking insurance policy would have gone a long way to assess the correct value of the property in dispute. Insurers would have thoroughly investigated this case. A duty was cast upon the appellants to do the needful. It did not care to do the needful. Para 14 of the consent terms between plaintiff and defendants 1 to 3 in the suit pending between them runs as follows:
The defendant Nos. 1 to 3 undertake to this Hon'ble Court to insure to the satisfaction of the plaintiff and keep insured all the properties movables and immovables constituting the plaintiffs securities hereunder against fire and all other risks in a sum equivalent to their full market value with Insurance Company approved the plaintiff in the joint names of the plaintiff may require and shall duly and punctually pay all premium and shall not do or suffer to be done by any thing which may invalidate or avoid such Insurance and shall deposit the Insurance Policy and all other notes, premium receipts and other documents connected with the plaintiff. Any monies realised from such insurance shall at the option of the plaintiff be applied whether in reinstating the security or, in payment of the loan advanced and interest.
The appellants want to have benefit of both the worlds. It did not want that the property should be insured and now want damages in that respect. The argument of the appellants that the goods have diminished to scrap with passage of time owing to the negligence is correct to a measure. Had it been insured, so much loss could not have occurred and the insurer should have compensated for the same.
The second aspect is that the Court is trying to compensate the appellants. In the consent decree, it was agreed that interest would be @ 13.5% p.a. simple and such interest was to accrue only after 30 months after the decree. This Court has considerably reduced the interest in order to compensate the appellants. Again, pendente lite interest was not granted for considerable period. Moreover, the order of the Court must be read holistically. Order of the Court should not be read in vacuo to the benefit of one party and to the detriment of the other party. In the interest of equity, I reduced the rate of pendente lite and future interest. There was no specific evidence as to how much loss the appellant suffered and, therefore, it was thought proper that the rate of interest should be reduced, though, otherwise, the appellants were liable to pay higher rate of interest because the credit facility availed of by them were for commercial purposes. Succinctly stated, the Court is not supposed to erase the entire loan. It is an admitted fact that the appellants are defaulters. The respondent Bank initially had sought recovery certificate for Rs. 1,12,00,000/- along with interest @ 13.5% p.a. with effect from 15.5.1994, the total of which comes to Rs. 1,89,07,513/- as on 2.11.1998. Thereafter, some adjustments were granted by the DRT and some adjustments were granted by this Court also. These adjustments are clearly observed by the Hon'ble High Court in para 6.1 of its order.
Again, it must be borne in mind that I have perused para 9 of the consent terms. There is no stipulation with regard to the eventuality of respondent Bank's failing to issue the NOC in the requisite period. It is a case of absence of default Clause.
It is true that the Bank was required to issue the NOC within two days. However, it is apparent that the appellants were still interested in getting the NOC on 24.1.1993. Till then they did not take any remedial measures. Time was partially the essence in issuance of NOC till 30.1.1993.
There is no inkling on the record which may go to show that the Hon'ble High Court issued some guidelines towards this situation. If was argued by the learned Counsel for the appellants that the Hon'ble High Court wanted to give some more compensation to the appellants and that is why the case was remanded to this Court. On second thought, I find that some more compensation has to be granted to the appellants as per the submission made by their Counsel. I, therefore, allow further compensation to the appellants as per alterative claimed above in para No. 13 with certain modifications. Consequently, I grant a sum of Rs. 1,26,696/- which will cover the 50% of the total value in the sum of Rs. 26,53,392.98 and would come to Rs. 13,26,696/-, instead of Rs. 12 lakh.
The appellants are also entitled to 50% of Rs. 35,39,524.58 minus 12,85,048.81 = 22,54,475.77. It comes to Rs. 11,27,237.88. Consequently, the appellants are given adjustment in the sum of Rs. 11,27,237.88 + 1,26,696 totalling to Rs. 12,53,933,88, instead of Rs. 18,96,458/- claimed by the appellants.
The interest be paid as already ordered. As prayed by the appellants, the appellants are given two months' time to pay off the balance amount in two equated instalments. The first instalment will be payable on 16.8.2011 and the second instalment will be payable by 16.9.2011. Interest be paid on reducing balance basis up to 16.9.2011.
Thereafter, 'No Dues Certificate' be issued by the Bank and other formalities be completed within a week.
Appeal stands disposed of. Copies of this order be furnished to the parties as per law and another copy be sent to the learned DRT.