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Judgment
S.N.H. Zaidi, J
This appeal impugns the judgement and order dated 4.6.2010 of DRT-II, Delhi passed in O.A. No. 237/96 (Suit No. 141/1994) and M.A. No. 5/2004, whereby the O.A. has been allowed for the recovery of Rs. 16,92,108.36 along with pendente lite and future interest with the direction that the deposits made by the applicants, appellants herein, would be adjusted against the dues with effect from the dates of deposits and the awarded interest would be charged on the balance amount. The facts as emerged from the record, in brief, are that an Original Suit No. 141/1994 was filed before the Delhi High Court by the respondent bank against the appellants for the recovery of Rs. 16,92,108.36 together with interest pendente lite and future @ 20.75% per annum, with the averments that appellant No. 1, a Private Limited Company, of which appellant No. 2 was the Managing Director and appellant Nos. 3 and 4 were the Directors, had obtained a Cash Credit facility from the bank for running their garment export business against the hypothecation of stock-in-trade on interest @ 14% per annum with quarterly rests and appellant Nos. 2 to 5 took personal guarantee for the repayment of the said loan facility The appellant Nos. 1 to 4 also obtained Ad-hoc Packing Credit facility for consigning the foreign shipment against the Letter of Credit and appellant Nos. 2 to 5 again guaranteed the repayment of the outstanding amount. Appellant No. 5 also renewed his guarantee to Cash Credit facility by signing fresh letter of guarantee. The appellants, however, could not maintain the financial discipline and failed to regularize those accounts and despite repeated requests, reminders and demand notice dated 31.8.1993, failed to repay the outstanding amount qua the said loan facilities.
After the enactment of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (for short, the RDDBFI Act), the said Original Suit was' transferred to DRT Delhi and was registered as O.A. No. 237/96. The defendants/appellants 1, 2 and 3 filed a joint written statement challenging the claim of the applicant/respondent bank. However, after filing the written statement, the defendants/appellants entered into negotiations for settlement with the bank and a compromise for payment of Rs. 9.5 lacs qua the loan accounts was arrived at between the parties and the O.A. was disposed of with the following order dated 8.9.1998:--
A certificate be issued for a sum of Rs. 16,92,108.36. The certificate shall be deemed to have been satisfied if the defendants pay a sum of Rs. 8.15 lac in full and final settlement of dues in account of M/s. SSE Overseas and Rs. 1.35 lac in SSE Cats Boutiques. This amount will be paid as under:
Rs. 3.00 lac immediately,
Rs. 35,000/- within two months, and
Rs. 6.5 lac in six equal monthly instalments with interest @ 14.5%
In the event of failure on the part of defendants to pay the settled amounts within the stipulated period, the applicant bank shall be entitled to recover the suit amount from the defendants jointly and severally. The deed of compromise shall form part of this order.
The defendants/appellants paid Rs. 6.35 lacs only up to 7.10.1998 and failed to make any further payment as per compromise order. The respondent bank filed application (M.A. No. 5/2004) for the issuance of the recovery certificate (RC) of the suit amount together with costs, pendente lite and future interest @ 19.75% per annum compounded on quarterly basis. Since despite service of notice, none appeared for the appellants, the DRT, vide order dated 4.1.2005, directed to issue an RC for Rs. 1,21,10,942.36. The appellants thereafter appeared and filed application (M.A. 53/2006) for setting aside the order dated 4.1.2005 along with application (I.A. 350/2006) for condonation of delay. In the meanwhile, the respondent bank also filed an application for the review of the order dated 4.1.2005 and prayed for treating the compromise order dated 8.9.1998 as final. The learned Tribunal below, vide order dated 1.1.2009, after condoning the delay allowed M.A. No. 53/2006 and set aside the order dated 4.1.2005 subject to deposit of Rs. 35 lacs. As the mortgaged property had been sold through auction in the meanwhile, the sale was also set aside subject to the aforesaid payment of Rs. 35 lacs and the auction purchaser was directed to get his money back along with interest.
The aforesaid order dated 1.1.2009 was challenged by the appellants in Miscellaneous Appeal No. 30/2009 before this Tribunal. During the pendency of this appeal, an amount of Rs. 20 lacs was deposited by the appellants. This Tribunal, vide order dated 3.12.2009, disposed of the said appeal with the observation that since the appellant had already deposited Rs. 20 lacs, therefore, the other portion of the order would remain undisturbed and directed the DRT to dispose of the matter expeditiously.
The DRT, after re-opening and restoring the O.A., permitted the parties to file evidence and after hearing them, by the order impugned, allowed the O.A. for the recovery of Rs. 16,92,108.36 together with interest pendente lite and future @ 14.5% per annum simple with effect from the date of filing of OS/OA until realisation with the direction that defendant Nos. 1, 2 and 4 and legal representatives of defendants Nos. 3 and 5 shall be liable to pay that amount jointly and severally and the liability of the legal representative shall be limited to the extent they had inherited the property from defendant Nos. 3 and 5. It was further directed that Rs. 6.35 lacs deposited under the consent decree as well as the subsequent deposit of Rs. 20 lacs would be adjusted against the dues and the adjustment would be given with effect from the dates of its deposits and the awarded interest would be charged on the balance amount only. It was also directed that the balance amount inclusive of interest, if any, would be paid within 90 days, failing which the Recovery Officer would proceed to recover the amount from the hypothecated/mortgaged assets and/or from personal assets and if any surplus amount is left with the bank after appropriating the said amounts, the same would be refunded along with interest @14.5% per annum. Feeling aggrieved with that order, the defendants have this appeal.
Mr. Vivek Malik, learned counsel appearing for the appellants, submitted that the DRT had erred in reopening and restoring the O.A. and deciding it afresh as the OA had already been disposed of finally by compromise order dated 8.9.1998 and had attained the finality as it was not challenged by any of the parties. He further submitted that though the appellants had paid Rs. 6.35 lacs up to 7.10.1998 and had also issued a cheque of the balance amount of Rs. 3.15 lacs as per the compromise order, but since in the meanwhile they had migrated to U.S. where appellant No. 3 suffered heart ailment and other appellants got involved in her treatment, therefore, they could not know that the cheque was not encashed and they sincerely believed that the cheque would have been cleared and the account would have been settled. He also submitted that it was only in 2005 that they learnt that the bank was selling their properties and had put the properties of appellant No. 5 (the guarantor and father of appellant Nos. 2 and 4 and husband of appellant No. 3) to auction sale after filing application M.A. 5/2004 and obtaining ex-parte order dated 4.1.2005 thereon by grossly misrepresenting about the dues before the DRT and also got an RC dated 10.1.2005 issued for the recovery of Rs. 1.21 crores as against the earlier RC for Rs. 16,92,108.36.
Mr. Malik also submitted that the balance amount of Rs. 3.15 lacs was offered to the bank but it refused to accept the same. He pointed out that the appellants got the application MA No. 53/2006 filed through their attorney for setting aside the ex-parte order dated 4.1.2005 and the bank had also filed an application for review of the said order with a prayer in its clause (a) for treating the compromise order dated 8.9.1998 as final. He pointed out that though the DRT allowed the application MA No. 53/2006 and set aside the order dated 4.1.2005 but subjected it to a stringent condition of the deposit of Rs. 35 lacs in its order dated 1.1.2009, but that order was not disturbed by this Tribunal in Miscellaneous Appeal No. 30/2009 filed by the appellants against it with the observation that an amount of Rs. 20 lacs had already been deposited by the appellants.
Mr. Malik further submitted that the appellants had only challenged the ex-parte order dated 4.1.2005 passed on MA No. 5/2004 through its application (M.A. No. 53/2006) and had not disputed the order dated 8.9.1998 but the DRT has wrongly reopened the OA and disturbing the final order dated 8.9.1998 has allowed the OA by the order impugned. Placing reliance upon the judgment in Deepa Bhargava and Anr. v. Mahesh Bhargava and Ors. (2009) 2 SCC 294, he has contended that unless the order dated 8.9.1998 is set aside it shall remain valid and required to be acted upon.
Mr. Malik also submitted that as the order dated 8.9.1998, which has attained finality, did not provide for payment of any interest on the claimed amount, therefore, the award of pendente lite and future interest on the suit amount by the order impugned is bad in law. He has relied upon the judgment in Rajasthan Financial Corporation v. M/s. Man Industrial Corporation Ltd., AIR 2003 SC 4273, wherein the decree was also passed in terms of the compromise, it has been held that the executing Court cannot go beyond the decree and as such the appellants are not liable for payment of any interest in the event of their failure to comply with the compromise order.
Mr. Vipin Pillai, learned counsel for the respondent bank, however, submitted that the DRT had inadvertently termed its order dated 4.1.2005 as final order whereas by that order, interim application (M.A. No. 5/2004) filed by the bank for issuance of the RC on account of failure of the appellants to comply with the order dated 8.9.1998, was only disposed of. He further submitted that the DRT had actually restored the MA No. 5/2004 by order dated 1.1.2009 and not the O.A. as has been mentioned by it in paragraph 24 of the said order, as the DRT has specifically observed in the same paragraph that the issue could only be adjudicated upon after setting aside the subsequent order dated 4.1.2005 and restoring the M.A. No. 5/2004 and thus the mention of re-opening and restoring the O.A. in the impugned order is an inadvertent mistake, which does not make the entire order bad in law. He has pointed out that the DRT has raised several issues in the order impugned, namely, whether the defendants (appellants herein) were entitled to get the benefit of the order dated 8.9.1998; and whether they be allowed to make the payment of the balance of the compromise amount or whether they be allowed to pay the entire amount claimed along with pendente lite and future interest. He further pointed out that the DRT, while observing that the RC dated 10.1.2005 issued in pursuance of the order dated 4.1.2005 was not correct, set aside the order dated 4.1.2005 and restored the M.A. No. 5/2004 subject to payment of Rs. 35 lacs within the given time. Mr. Pillai also pointed out that by order dated 3.12.2009 passed in Miscellaneous Appeal No. 30/2009, the said order was not disturbed by this Tribunal which has only directed the DRT to dispose of the matter within the given time.
Mr. Pillai also submitted that in clause 2 of the letter dated 20.3.199 (Annexure P-1) sent to the appellants, the bank had intimated its approval to the appellants' compromise proposal in Rs. 9.50 lacs, with the following terms and conditions inter alia that:
Rs. 3 lacs to be paid immediately on conveying the said sanction,
Rs. 0.35 lacs to be paid within two months of conveying the sanction,
Rs. 6.15 lacs to be paid in six equal monthly instalments with interest @ PLR, which at that time was R. 14.5%, and the interest would be calculated from the date of conveying the sanction of full compromise amount.
According to Mr. Pillai, since the appellants have failed to honour the terms of the compromise order dated 8.9.1998 and did not pay the entire compromise amount as above, therefore, the DRT has rightly allowed the suit amount by invoking the default clause and allowing it along with pendente lite and future interest subject to the adjustment of the payments already made by the appellants.
Mr. Pillai, relying upon the judgments of the High Courts in Central Bank of India, Kutch v. M/s. P.R. Garments Industries Pvt. Ltd., Surendranagar and others AIR 1986 Guj 113 and M/s. S.K. Engineering Works, Batala and others v. New Bank of India, Batala AIR 1987 P and H 90 has also submitted that the DRT was well within its right to award pendente lite and future interest in favour of the bank.
I have considered the submissions of the parties' counsel. They are not in dispute that the O.A. filed by the bank for the recovery of Rs. 16,92,108.36 along with pendente lite and future interest was finally disposed of by the compromise order dated 8.9.1998. A perusal of the said order, which has already been reproduced above, would show that the RC for the recovery of the entire claimed amount was ordered to be issued, which would be deemed to have been satisfied if the defendants pay a total sum of Rs. 9.5 lacs as per the payment schedule mentioned in the order and the amount of Rs. 6.15 lacs was to be paid in instalments with interest @ 14.5% per annum. It is also an admitted case of the parties that the appellants had not paid Rs. 9.5 lacs as per that order and only an amount of Rs. 6.35 lacs was paid by them up to 7.10.1998: There is nothing on record to show that the appellants had given any cheque of Rs. 3.15 lacs, as alleged by them. The record, however, shows that the ex-parte order dated 4.1.2005 allowing the miscellaneous application (M.A. 5/2004) filed by the bank for the recovery of the RC amount was set aside by the DRT on the application (M.A. 53/2006) of the appellants and the said miscellaneous application (M.A. No. 5/2004) was restored after condoning the delay by order dated 1.1.2009. In the appeal (No. 30/2009) filed against the said order, this Tribunal did not disturb that order. The learned DRT, after hearing the parties on miscellaneous application M.A. No. 5/2004, has wrongly observed in the order impugned that the OA was re-opened and restored, because by order dated 1.1.2009, only the ex-parte order dated 4.1.2005 passed on M.A. No. 5/2004 was set aside and the said miscellaneous application was restored and not the OA, which had already been finally disposed of on 8.9.1998, as the application dated 4.12.2006 filed by the bank for review of the order dated 4.1.2005, also indicates. The learned PO has since wrongly observed about the restoration of the OA instead of application (M.A. No. 5/2004), therefore, it has wrongly disposed of the OA again.
The DRT, while making the order dated 8.9.1998, had not allowed any pendente lite and future interest qua the entire suit amount but had provided that the payment of Rs. 6.15 lacs, which was to be made in instalments, shall be made with interest @ 14.5% p.a. The said order also contained a default clause that in the event of failure of the payment of the settled amount within the stipulated period, the bank would be entitled to recover the suit amount jointly and severally from the defendants. The contention of Mr. Malik that since the appellants had deposited Rs. 6.35 lacs, therefore, they are required to deposit only the balance amount of Rs. 3.15 lacs as per that order is not tenable as they had admittedly defaulted in making the payment of the entire amount in accordance with it and thus as per the default clause they are liable to pay the entire suit amount. The appellants could have taken the benefit of the aforesaid compromise order only if the entire payment would have been made in accordance with the said order. The default clause can, therefore, be invoked which entitles the respondent bank to recover the suit amount from the defendants/appellants jointly and severally.
A question now arises as to what constitutes the 'suit amount'? A perusal of the record would show that the respondent bank had claimed Rs. 16,92,108.36 together with pendente lite and future interest @ 20.75% per annum from the date of filing of the suit till the final realisation in Suit No. 141/94 filed before the Delhi High Court, which was transferred to the DRT, Delhi and registered as O.A. 237/96 after the enactment of the RDDBFI Act. In my opinion, 'suit amount' constitutes the amount claimed as due together with interest. As the interest was claimed in accordance with the loan agreement, therefore, the amount of interest accrued during the pendency of the proceedings and up to its realisation also forms part of the suit amount and the defendant/appellants are liable to pay the same as per the default clause of the order dated 8.9.1998.
Section 19(20) of the RDDBFI Act empowers the DRT to order for payment of interest from the date on or before which payment of amount is found due up to the date of realisation or actual payment. The learned Tribunal below has also ordered for the payment of pendente lite and future interest with effect from the date of filing of the Suit/O.A. until realisation @ 14.5% per annum simple. In the instant case, the agreed rate of interest was 20.75% per annum, but since the parties had agreed to pay interest @14.5% per annum on the balance amount of Rs. 6.15 lacs, as per the compromise order dated 8.9.1998, therefore, in my opinion, the award of pendente lite and future interest at such rate cannot be said to be unreasonable.
In Deepa Bhargava and Anr. v. Mahesh Bhargava and Ors. (supra), the Hon'ble Supreme Court has observed in paragraph 8 and 9 of the judgement, that:
The parties had claimed their interest in the lands in suit from a common ancestor. They entered into a compromise. A decree was passed thereupon. A decree, as is well known, remains valid unless set aside. The respondents never challenged the validity or otherwise of the said consent decree. It was acted upon. They had disposed of a property pursuant thereto and, thus, took advantage of a part thereof. It was, therefore, impermissible for them to resile therefrom.
There is no doubt or dispute as regards interpretation or application of the said consent terms. It is also not in dispute that the respondent judgement-debtors did not act in terms thereof. An executing court, it is well known, cannot go behind the decree. It has no jurisdiction to modify a decree. It must execute the decree as it is. A default clause contained in a compromise decree even otherwise would not be considered to be penal in nature so as to attract the provisions of Section 74 of the Contract Act.
The above observations of the Apex Court, in my opinion, do not support the appellants' contention that even after failing to comply with the terms and conditions of the compromise order dated 8.9.1998, they are entitled to get the benefit of that order and the default clause cannot be invoked. The order impugned can only be said to be contrary to the facts and circumstances of the case only to the extent it says about the restoration and disposal of the OA and allows it and not otherwise.
In the cases of Central Bank of India, Kutch v. M/s. P.R. Garments Industries Pvt. Ltd., Surendranagar and others (supra), and M/s. S.K. Engineering Works, Batala and others v. New Bank of India, Batala (supra) relied upon by Mr. Pillai, the Hon'ble High Courts have held that under the proviso to section 34 CPC, the banks are entitled to the contractual rate of interest qua the commercial transactions.
In view of the discussion made above, I am of the considered view that the miscellaneous application (M.A. No. 5/2004) filed by the respondent bank is entitled to be allowed, as the defendant/appellants had defaulted in honouring the terms and conditions of the compromise order dated 8.9.1998 by failing to pay the compromise amount as per the payment schedule mentioned in that order and the respondent bank is entitled to recover the suit amount of Rs. 16,92,108.36 together with interest pendente lite and future @ 14.5% per annum simple with effect from the date of filing of the suit till realisation from the defendants. The order impugned allowing the O.A., being not in accordance with the facts and circumstances of the case, therefore, needs to be modified to the extent that instead of the OA the MA No. 5/2004 is allowed. Except the aforesaid modification, the said order does not appear to be suffering with any legal infirmity and does not require to be interfered with. I am also of the view that the directions in the order impugned that the defendant Nos. 1, 2 and 4 and the legal representatives (L.Rs.) of defendant Nos. 3 and 5 shall be liable to pay the said amount jointly and severally and the liability of the L.Rs. of defendant Nos. 3 and 5 shall be limited to the extent they had inherited the property, deposits of Rs. 6.35 lacs made under the consent order and the subsequent deposit of Rs. 20 lacs and/or any other deposit would be adjusted against the dues and the adjustment would be given with effect from the dates of deposits and the interest awarded would be chargeable on the balance amount only; that the balance amount inclusive of interest, if any, would be paid by the defendants (appellants herein) within 90 days, failing which the Recovery Officer would proceed to recover the amount from the hypothecated/mortgaged assets and/or from their personal assets; and, that if any surplus amount is left with the bank after appropriating the said amounts, the same would be refunded to them along with interest @14.5% per annum within 90 days, do not require any interference and are entitled to be affirmed.
As the defendant/appellants are liable to pay the suit amount as per the order dated 8.9.1998, which includes the amount of pendente lite and future interest, therefore, the payment of similar amount ordered by the DRT vide the order impugned together with such interest at such rate at which the major portion of the compromise amount was to be paid, does not required to be interfered with and the RC is required to be drawn accordingly.
The appeal is disposed of accordingly. The order impugned is modified to the extent that instead of the OA the Miscellaneous Application (M.A. No. 5/2004) is allowed and the rest of the order is maintained and affirmed. The parties shall bear their own cost of litigation through out. Copy of this order be furnished to the parties as per law and be also sent to the DRT concerned.
Reimbursement of TA/DA.