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Judgment
P.K. Bhasin, J
The appellant Bank is aggrieved by the two orders passed by the Presiding Officer of Debts Recovery Tribunal-II, Chandigarh (DRT) on 31.8.2015 whereby, the Original Application No. 1260 of 2015 (O.A.) filed by it against all the eight respondents in Appeal No. 426/2015, under Section 19 of Recovery of Debts Due to Banks and Financial Institutions Act, 1993 ('RDDBFI Act' in short) and Securitisation Application No. 433/2015 (S.A.) under Section 17(1) of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 ('SARFAESI Act' in short) against the appellant Bank, were disposed of. Final order passed by the DRT on 31.8.2015 whereby O.A. No. 1260/2015 (which O.A. was earlier registered as O.A. No. 95 of 2012 in DRT-I and after it came to be transferred to DRT-II, Chandigarh as per the order dated 30.7.2015 of High Court of Punjab & Haryana in CWP No. 9805/2015 the same was registered in DRT-II as O.A. No. 1260/2015) was disposed of is re-produced below :
"This file has been transferred by the orders of the Hon'ble High Court of Punjab & Haryana to be decided within four months and parties were directed to appear before today i.e. 31.8.2015.
In the connected S.A. No. 433 of 2015 a detailed order has been passed wherein defendant Nos. 2 and 6 have agreed to pay to the Bank with simple interest @ 10% p.a. the amount as per notice under Section 13(2) of the Act on reducing balance from 18.1.2011 and cost of Rs. 1.00 lac and the same will be cleared by 15.12.2015 subject to payment of Rs. 10.00 lacs on or before 25.9.2015.
In case no payment is done, RC Shall be issued for the amount as per law.
The Bank can approach this Tribunal for issuance of RC in terms of this order.
For the reasons stated above OA is disposed of having been settled on the basis of statement made in S.A. No. 433 of 2015. No further orders are called for.
Code of the order be supplied to the parties as per rule and after due compliance the record be consigned to record room."
Sd/-
(Akshay Bipin)
Presiding Officer
DRT-II, Chandigarh"
Order passed in S.A. No. 433 of 2015 (which was also earlier pending in and registered as S.A. No. 163/2011 in DRT-I and which also later on came to be transferred to DRT-II as per the same order dated 30.7.2015 of High Court of Punjab & Haryana in CWP No. 9805/2015, filed by the respondent Vipin Gupta in Appeal No. 420/2015), on 31.8.2015 by DRT-II, based on which O.A. No. 1260 of 2015 of the appellant Bank was disposed of, is also re-produced below :
"This file has been transferred by the orders of the Hon'ble High Court of Punjab and Haryana to be decided within (sic) months and parties were directed to appear before today i.e. 31.8.2015.
The Counsel for applicant stated that they are ready to pay the amount as per notice Section 13(2) of the Act along with interest and costs. They seek some concession in the rate of interest which Counsel feels that 10% p.a. simple in reducing balance is fair from 18.1.2011 till the date of recovery.
The amount to be cleared by 15.12.2015. Mortgage deeds/papers be returned by the Bank in accordance with law.
The Counsel for applicant on instructions from Shri Vipin Gupta applicant states that they are ready to deposit a sum of Rs. 10.00 lacs on or before 25.9.2015 and the balance amount along with interest @ 10% p.a. simple will be cleared by 15.12.2015. Apart from that amount, he will pay a sum of Rs. 1.00 lac as costs with the final payment.
The Counsel for applicant states that in order to repay the amount they would need to sell first property which is exclusively of the firm. It is ordered that they can enter into agreement to sell and once they receive the money they will deposit the same with the Bank in discharge of their liabilities.
Once the entire liability is discharged the mortgaged properties be released to the concerned mortgaged in accordance with law.
The Counsel for applicant further stated that in order to get a buyer they would need to show the property. They will approach the Bank and give them two working days' notice so that the official of the Bank go to the premises, subject to the cost of Rs. 10,000.00.
With these observations, the SA is disposed of having been settled.
Copy of this order be kept in file of OA No. 1260 of 2015.
Copy of this order be supplied to the parties as per rule and after due compliance the record be consigned to record room."
Sd/-
(Akshay Bipin)
Presiding Officer
DRT-II, Chandigarh"
The relevant facts may now be noticed. Appellant Bank had sometime in the year 2007 granted Cash Credit facility to respondent No. 1 in Appeal No. 426 of 2015, M/s. Dhanpat Rai Mahinder Pal, a partnership Firm carrying on the business of trading in Atta, Maida, Suji, Rice etc. in Karnal (Haryana) with respondent Nos. 2 to 5, Vipin Gupta (who is the sole respondent in Appeal No. 429/2015 and was also the sole applicant in S.A. No. 433/2015), Nitin Gupta, Rahul Gupta and Ravi Gupta, as its partners. Repayment of the money utilised by the said borrower Firm was secured by way of mortgage of two immovable properties in Karnal, one of which was owned by the borrower Firm itself and mortgage in respect of that property was created by way of deposit of title deed. The other property which was owned by respondents 5 to 8 in Appeal No. 426 of 2015 was mortgaged by a registered mortgage deed. Partners of the borrower Firm had given their personal guarantees also. Initially cash credit limit sanctioned was for Rs. 18 lacs and subsequently the limit was enhanced to Rs. 50,00,000/- in 2008 and further to Rs. 90 lacs in 2009 in the shape of C.C. (Hypothecation) Limit of Rs. 55,00,000/- and C.C. (Book Debt) Limit of Rs. 35,00,000/-. An ad hoc limit of Rs. 25,00,000/- was also sanctioned upto 31.11.2009 in September, 2009, the borrower Firm had also hypothecated its stocks in favour of the Bank for the repayment of the loan amount but as per the grievance of the Bank the hypothecated stocks were sold without its permission.
The borrower Firm defaulted in clearing the Bank's dues in the two accounts and even the guarantors/mortgagors did not pay the Bank's money due from the borrower despite service of the demand notice dated 26.11.2010 and another demand notice dated 17.1.2011 under Section 13(2) of SARFAESI Act after classification of borrower's account as Non Performing Asset. (NPA) on 26.10.2010.
The appellant Bank after the expiry of sixty days time given to the borrower/guarantors/mortgagors in its notice under Section 13(2) for clearing the Bank's dues and upon their failure to clear the dues took physical possession of both the mortgaged shops in March, 2011 and thereafter sought to sell them by way of auction. At that stage one of the partners of borrower Firm, Vipin Gupta, who is the respondent in appeal No. 426 of 2015, filed a petition on 23.9.2011 under Section 17(1) of SARFAESI Act before DRT-I, Chandigarh (S.A. No. 163/2011) challenging the Bank's action in putting the mortgaged properties to auction for which purpose tenders had been invited for 28.9.2011. The Bank's action was impugned inter alia on the grounds that no notices under Section 13(2) & (4) of SARFAESI Act were given and the possession of the mortgaged properties was illegally taken by the Bank. Proposed sale of the mortgaged properties was also illegally inter alia on the grounds that no notices under Section 13(2) & (4) of SARFAESI Act were given and the possession of the mortgaged properties was illegally taken by the Bank. Proposed sale of the mortgaged properties was also challenged as being in violation of Rules 4 to 8 of the Security Interest (Enforcement) Rules, 2002. Rate of interest being claimed by the Bank was also challenged as being excessive. Some inter se disputes between the partners of the borrower Firm were also highlighted in the S.A. by the Applicant by claiming that one partner Ravi Gupta had illegally obtained additional limit of Rs. 14 lacs from the appellant Bank without involving all the partners and for that even one FIR had also been got registered.
The following prayers were made in the S.A.:
"It is therefore, most respectfully prayed that this Hon'ble Tribunal be graciously pleased :
(a) To set aside the illegal actions of the respondent Bank under Section 13(2) and (4) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Act, 2002, the copy of the same has not yet been supplied to the applicant and to issue orders and directions to the respondent Bank to return back the possession of the property to the applicant Bank.
(b) To restrain the Bank from alienating/selling or creating third party right in the property.
(c) To impose a penalty upon all the guilty persons involved in the illegal acts as the provisions of Chapter V of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Act, 2002 have not been complied with properly.
(d) To grant any other relief, which this Hon'ble Tribunal may deem fit and proper in the facts and circumstances of the case and to which, the applicant is found entitled in the eyes of law, justice and equity may also be granted.
(e) To allow the costs of the application in favour of the applicant and against the respondent-Bank."
When S.A. No. 163/2011 was taken up for the first time by the DRT-I on 27.9.2011 the following order had been passed :
"This is an application under Section 17(1) of the Securitisation and Reconstruction of Tribunal Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as 'SARFAESI Act' in short) filed on behalf of the applicant/appellant praying therein to set aside the notice dated 26.8.2011 (Annexure A/1) and incidental proceedings under the SARFAESI Act.
The applicant/appellant has also prayed by way of interim relief to stay the proceeding of tender proposed to be opened on 28.9.2011.
Registry is directed to issue notices to the respondents inviting their reply fixing 21.10.2012. Notice be issued Dasti as well as by Registered Post. Applicant/appellant shall collect the notices from the Registry and serve the same upon the respondents and shall also file service report.
Heard on interim relief.
The learned Counsel for the applicant stated that no notice under Section 13(2) was received and therefore they could not made representation under Section 13(3-A). It is further stated that vide Annexure A/1 the respondent Bank has invited tender for sale of movable property whereas under description for sale the immovable properties have been mentioned. It is further stated that as per statement of account, placed on record during hearing, pertaining to period from 1st April, 2010 to 30th September, 2010 the applicant firm has paid more than Rs. 23.00 lacs on different dates and on 14th July, 2010 the outstanding amount is only Rs. 54,98,232.17 whereas in then notice for sale dated 26.8.2011 amount outstanding has been mentioned as Rs. 98,54,054. The learned Counsel for the applicant also stated that since there is dispute between the partners and other partner is not cooperating the liquidating the outstanding dues of the respondent Bank it is difficult for applicant to pay any further amount till disputes between the partners are resolved.
Considered the submissions. There is prima facie case in favour of the applicant. Status quo to be maintained between the parties till 21.10.2011.
"Order Dasti"
Be listed on 21.10.2011 for further proceedings.
Sd/-
(A.K. Jain)
Residing Officer, DRT-I
Chandigarh"
Thereafter neither the Security Applicant sought any opportunity to substantiate his case nor the learned Presiding Officer fixed the case for adducing evidence by the parties. The Presiding Officer kept on adjourning the matter from time-to-time totally ignoring the time limit prescribed under Section 17(5) of SARFAESI Act within which such like matters are required to be disposed of finally. All this becomes amply clear from a reading of various orders passed in the S.A. and to demonstrate that some of the orders are being reproduced.
Order dated 21.10.2011, passed after grant of ex parte relief to the borrower on 27.9.2011, reads as under :
"In response to notice dated 27.9.2011 the learned Counsel for the respondent Bank has filed short reply to SA vide diary No. 5395 dated 21.10.2011 which is on record. Interim stay vide order dated 27.9.2011 stands vacated.
Be listed on 22.11.2011 for further proceedings. 'Order Dasti'."
Order dated 22.11.2011 reads as under:
"The learned Counsel for the respondent Bank has filed short reply to SA, which is on record. Replication, if any be filed within one week.
Be listed on 21.12.2011 for arguments."
Then on 21.12.2011 the following order was passed :
"Replication is not on record. Right to file replication stands closed.
Be listed on 28.3.2012 for arguments."
The matter was taken up before 28.3.2012 on 11.1.2012 when the following order was passed:
"IA No. 25/2012
This application has been filed by the applicant for preponement of the matter from 28.3.2012 to today, the date of receiving tender. Issue notice Notice accepted by the learned Counsel for respondent Bank. Copy supplied.
The learned Counsel for the applicant stated that the applicant has made on OTS offer of Rs. 70.00 lacs with the Bank which according to the learned Counsel for the respondent Bank is not acceptable, however so far no reply rejected the said offer has been communicated to the applicant.
Applicant is directed to deposit Rs. 35.00 lacs within one week with the Bank and respondent Bank shall receive bides in pursuance to sale notice fixed for today but not open the same for one week. Applicant shall file affidavit-cum-undertaking to comply as aforesaid by tomorrow with the Registrar of this Tribunal. In case of non-compliance either of filing affidavit-cum undertaking or deposit of amount as aforesaid, the respondent Bank will be at liberty to open the tender and proceed further as per law.
Be listed on 28.3.2012 the date already fixed for further proceedings.
"Order Dasti"
Thus, on 11.1.2012 the interim relief which the Presiding Officer had earlier withdrawn was again granted to the applicant. On 28.3.2012 the following order was passed:
"The learned Counsel for the applicant stated that order dated 11.1.2012 has been complied and placed on record proof of payment, which has also been confirmed by the learned Counsel for the respondent Bank.
The learned Counsel for the respondent Bank further stated that OTS proposal of the applicant has been rejected by the Bank and the same has been communicated to the applicant on 20.1.2012.
I.A. No. 376/12 has been filed on behalf of one Shri Ravi Gupta, partner of M/s. Dhanpat Rai Mahender Pal seeking impleadment in the present S.A.
Notice accepted. Copy be supplied during the course of the day. Reply be filed within one week with advance copy to the applicant in IA who may file rejoinder within one week thereafter.
Be listed on 21.5.2012 for further proceedings. Interim order to continue."
On 19.9.2012 the following order was passed impleading another partner of borrower Firm Ravi Gupta as a respondent in the S.A.:
"IA No. 376/12
The learned Counsel for the respondent Bank stated that no reply is being filed to above IA and they have no objection for impleading the applicant in IA as respondent in SA. Accordingly, IA stands allowed. Amended memo of parties be filed before next date of hearing.
Replication to reply filed in SA is not on record in spite of order dated 21.5.2012. Right to file replication stands closed.
Be listed on 25.10.2012 for final arguments."
Final arguments were however not heard on the next date. Then on 21.2.2013 the following order was passed :
"The learned Counsel for the respondent Bank stated that in present SA no legal infirmity has been pointed out by the learned Counsel for the applicant and earlier stay was granted on the allegation that notice under Section 13(2) was not received by the applicants whereas the notice under Section 13(2) was duly received by the applicants (Ann. R.8). Admittedly, more than Rs. 1.00 crore is due as on date against the applicant out of which the applicant has only paid Rs. 35.00 lacs in pursuance to order dated 11.1.2012.
Applicant is directed to deposit another Rs. 20.00 lacs with the respondent Bank within four weeks. In case of default stay granted vide order dated 11.1.2012 will stand vacated automatically.
Be listed on 24.5.2013 for further proceedings."
On 24.5.2013 the following order was passed :
"IA No. 333/13
Reply to aforesaid IA is already on record. Replication if any be filed within two weeks with advance copy to the opposite Counsel.
The learned Counsel for the applicant stated that along with this application he has annexed proposal for settlement along with which he has submitted cheques of Rs. 54,98,000.00 which are still lying with the Bank and he has no objection if the said cheques are encashed. The said proposal is still pending.
The learned Counsel for the respondent Bank stated that the proposal for settlement has already been declined as mentioned in reply.
The respondent Bank will be at liberty to encash the cheque for Rs. 14.98 lacs which is said to have been deposited by applicant with the respondent Bank and applicant shall pay balance to complete payment of Rs. 20.00 lacs within four weeks as prayed for. Accordingly, application stand disposed of. In case applicant fails to deposit the aforesaid amount order dated 21.2.2013 will stand vacated automatically.
Be listed on 11.9.2013 for further proceedings."
On 17.1.2004 the following order was passed :
"The learned Proxy Counsel for applicant stated that arguing Counsel is not available due to personal difficulty.
Be listed on 25.4.2014 for further proceedings.
(A.K. Jain)
Presiding Officer,
DRT-I, Chandigarh
Subsequently Mr. H.P. Singh, Advocate for applicant appeared and prayed for issuance of notice on IA No. 74/14.
I.A. No. 74/14
This application has been filed by the applicant for permission to sell one mortgage property to seek the release of other secured assets.
Issue notice. Notice accepted. Copy be supplied during the Counsel of the day. Reply be filed within two weeks with advance copy of the applicant who may file rejoinder within two weeks thereafter.
Affidavit dated 16.1.2014 filed vide diary No. 541 is also on record wherein the applicant has submitted calculation of amount payable after applying 10% p.a. simple interest.
It appears that matter can now be settled with the respondent Bank. Accordingly matter be listed in Lok Adalat on 22.1.2014 failing settlement on 25.4.2014 for further proceedings. The learned Counsel for the applicant undertook to inform the learned Counsel for the respondent Bank.
Sd/-
(A.K. Jain)
Presiding Officer, DRT-I,
Chandigarh"
On 22.1.2014 following order was passed :
"The calculation by way of affidavit vide diary No. 541 dated 16.1.2014 has been submitted by the applicant.
Let the respondent Bank submit their calculations by calculating the amount after applying interest @10% simple within two weeks with copy to the applicant.
Be listed on 25.4.2014 for further proceedings."
On 4.12.2014, by which time the earlier Presiding Officer had demitted office and the Presiding Officer of DRT, Chandigarh had been given additional charge of DRT-I also, the following order was passed by the new Presiding Officer:
"Today case was fixed for proper orders as the applicant has pressed for fixing the case in Lok Adalat which was otherwise objected by the Counsel for the respondent Bank pointing out towards the conduct of the applicant and previous proceedings before previous Lok Adalat.
Before parting with the order, proceeding sheet reflects that status quo was Wanted on 27.9.2011 in favour of the applicant which was ultimately vacated on 21.10.2011 but on 11.1.2012 partial stay was granted in favour of the applicant by staying the confirmation of sale. Not only this the applicant has not complied with earlier orders and an his request matter was also fixed in Lok Adalat whereby directions were issued to decide the case on the basis of OTS arrived at in the year 2012. In fact the Counsel for the respondent Bank seems to be annoyed with the previous order dated 22.1.2014 which was passed in Lok Adalat compelling the Bank to submit their calculations by calculating the amount for a specific percentage of interest which was otherwise not acceptable to the Bank.
After perusing the proceedings sheet the orders of the Lok Adalat were actually not appreciable and moreover watching the conduct of the applicant from the past as reflected from the previous proceedings, the prayer of the applicant for fixing the case in Lok Adalat particularly with the objection by the opposite party, is hereby declined and accordingly stay granted earlier is hereby vacated.
Be listed on 5.2.2014 for further proceedings.
Sd/-
(Harcharan Singh)
Presiding Officer,
DRT-I, Chandigarh
Additional charge"
Feeling aggrieved by the sudden withdrawal of interim protection the Security Applicant Vipin Gupta filed writ petition No. 9805 of 2015 in High Court of Punjab & Haryana which was disposed of vide order dated 30.7.2015 which is re-produced below:
"The grievance of petitioner is that the interim relief granted to the petitioner stands vacated by the Debt Recovery Tribunal without assigning any reason. This has happened twice.
Mr. Doabia, learned Counsel for respondent-Bank suggests that an application filed by the petitioner under Section 17 of the Securitisation and Reconstruction of Financial and Enforcement of Security interest Act, 2002 can be transferred to another Debt Recovery Tribunal so as to avoid any allegation of impropriety on the part of the Presiding Officer of the Debt Recovery Tribunal-I, Chandigarh.
Keeping in view the interim orders passed earlier and vacation thereof without assigning any reason, we deem it appropriate that an application i.e., S.A. No. 163 of 2011 filed by the petitioner shall stand transferred to Debt Recovery Tribunal-II, Chandigarh.
The parties shall appear before the transferee Tribunal on 31.8.2015 for further proceedings, in accordance with law. The transferee Tribunal shall decide the original application filed by the petitioner within a period of four months after considering all the contentions raised before the Tribunal as well as before this Counsel and also pass an appropriate order for interim relief.
In the meantime, the offers received in pursuance of advertisement published by the respondent Bank shall abide by the decision of the transferee Tribunal. Disposed of."
It appears that during the pendency of the S.A. the appellant Bank had also in February, 2012 filed one Original Application in DRT-I, Chandigarh under Section 19 of RDDBFI Act (being O.A. No. 95/2012) for the recovery of its outstanding dues amounting to Rs. 83,05,040.24 against the borrower Firm, its four partners, who were guarantors also and had also mortgaged one property of their Firm in favour of appellant Bank, and three other persons also had given guarantees, namely, Sat Narain Gupta, Jai Narain Gupta and Smt. Moorti Devi who had also mortgaged one property in Karnal to secure the repayment of the dues of the Bank. Besides praying for issuance of Recovery Certificate against all the eight defendants in the O.A. the Bank had also prayed for a direction for sale of the mortgaged properties. The following prayers were made in the O.A.:
"(i) It is, therefore, respectfully prayed that this application may kindly be allowed and certificate of Recovery may be issued jointly and severally against all the defendant Nos. 1 to 8 for recovery of Rs. 83,05,040.25 as per latest statement of accounts dated 22.2.2012 (Annexure Ex. A/34 to Ex. A/37) along with pendente lite and future interest @ 18.25% per annum with monthly rests in the cash credit (Hypothecation & Book Debt) limit accounts together with costs, charges and all incidental expenses from the date of filing of the application till its realization.
(ii) That this Hon'ble Tribunal be pleased to put the mortgaged properties mentioned in Para 5(v) and (xiii) on sale by auction. In case the sale proceeds are not sufficient to pay the fully amount of award/decretal amount, the balance of the amount be allowed to be recovered from the sale of personal and private property and assets of all the defendant Nos. 1 to 8, who are liable to pay the dues and debts jointly and severally.
(iii) That the entire costs of the application along with all expenses, which may be, incurred hereafter may also be awarded in favour of the applicant Bank.
(iv) Any other relief additional or in the alternative to which the applicant Bank may be found and entitled under law and equity may be granted in favour of the applicant Bank and against the defendant Nos. 1 to 8."
None of the defendants in the O.A. had filed any reply to the claim statement of the Bank despite opportunities having been granted to them by the DRT and consequently their defence was struck off. Thereafter, the DRT recorded the evidence of the Bank but the O.A. was not decided and the matter remained pending and it was simply tagged with the S.A. and finally, as noticed already both the S.A. and O.A. came to be transferred to DRT-II and taken up on 31.8.2015 on which date the same were finally disposed of by separate orders which have already reproduced.
The Presiding Officer of DRT-II, before whom both the matters came to be put up on 31.8.2015 for consideration as per the directions of the High Counsel and which were also directed to be decided within four months, though showed promptness which earlier was not being shown and disposed of the O.A. as well as the S.A. same day but the disposal cannot be said to be in accordance with the laid down procedure inasmuch as instead of fixing the matter for arguments the Presiding Officer proceeded to dispose of the cases finally same day. That disposal was not on merits and as in the past the borrowers once again projected before the Presiding Officer that they were keen to clear the outstanding dues of the Bank and as far as interest part was concerned the earlier Presiding Officer had already expressed his mind in his orders dated 17.1.2014 and 22.1.2014 that interest @ 10% p.a. simple was to be charged from the borrowers and Presiding Officer who finally decided the matters also awarded interest at the same rate and that too on reducing balance.
Since the grievances raised by the appellant Bank were common in both the appeals and the same were heard also analogously I am disposing them of by this common order.
Learned Counsel for the appellant Bank had submitted that the Bank had obviously to feel aggrieved by the two final orders of DRT since the manner in which the same were passed by the learned Presiding Officer, who was expected to dispose of the Bank's O.A. as well as borrower's S.A. after following due procedure prescribed for the disposal of such like cases under the RDDFBI Act and SARFAESI Act and applying mind to the factual and legal controversies involved in the two petitions, the legal attempts of the Bank to recover over a crore of rupees from the respondents/borrowers/guarantors, have virtually been rendered meaningless despite the fact that the borrowers had all along been not disputing the liability towards the Bank and had not pursued their challenge against any action of the Bank before the DRT. The procedure to be followed was thrown to the winds and in a slip shod manner both the petitions were disposed of as 'settled' while in fact that was no settlement of any kind accepted by the Bank and the Presiding Officer on his own showed indulgence to the defaulting borrowers and stalled the recovery proceedings and sale of mortgaged assets and that too without returning any findings at all on the respective cases of the Bank and borrowers. Everything had been left to the discretion of the defaulters, namely, the amount payable to the Bank, the period within which it was to be paid, when the mortgaged properties which fortunately the Bank was able to take over from the possession of the mortgagors before the DRT could prevent that action also of the Bank, were to be sold and on top of it interest rate was also scaled down substantially without giving an iota of justification for grant of that relief to the defaulters who had abandoned their fight for getting a judicial finding in their favour from the DRT that the actions of the Bank initiated were illegal. They had simply volunteered to clear the dues of the Bank and instead of issuing Recovery Certificate straightaway against the defendants in the O.A. on the basis of their admissions the learned Presiding Officer of the DRT deferred the issuance of Recovery Certificate while giving all the reliefs to the defaulters without even having any consent from the side of the Bank. Learned Counsel for the Bank also submitted that the entire proceedings throughout before the DRT were virtually being regulated by the defaulting borrowers and the different Presiding Officers have simply been adding to the delay in the recovery process by adjourning the proceedings at the instance of the borrowers. It was also argued that even though on a couple of dates matters were fixed for final arguments but the borrowers never wanted to have the matters disposed of on merits and so have simply been filing applications showing their keenness to clear their liability and in that process they were being able to avoid addressing final arguments on the basis of undisputed facts and documents on record and this is what they did on 31.8.2015 also knowing that this time High Court had fixed the outer limit for the disposal of the O.A. as well as the S.A. and they succeeded in that attempt also by persuading the Presiding Officer to dispose of the matters by keeping everything open and not adjudicating the rival contentions on merits with the result the matters came to be disposed of in a manner not recognized either under the RDDBFI Act or under the SARFAESI Act. Further submission was that the High Court while withdrawing the matter from DRT-I and transferring the same to DRT-II had directed that the transferred Tribunal shall decide the case within four months after considering all the contentions raised before the Tribunal but the DRT did not follow that direction and instead like has predecessor Presiding Officers only examined the submission of the borrowers that they were ready to clear the Bank's dues and their request for reduction in interest rate. The impugned orders, Counsel contended, do not reflect the submissions made from the side of the Bank opposing the disposal of the two cases as settled when in fact there was no acceptance of any settlement from the side of the Bank at all and in fact the settlement offered by the borrowers on an earlier occasion had been categorically rejected by the Bank. Learned Counsel for the Bank finally submitted that by showing indulgence to the defaulting borrowers to an extent which has caused loss of public money of more than half a crore of rupees by accepting the defaulters' plea that they were ready to pay to the Bank the amount mentioned in its 13(2) notice and that too not with contractual rate interest but simple interest @ 10% p.a. on reducing balance without even the borrowers making any attempt to show that any of the measures taken by the Bank were in any way illegal. In case, Counsel contended, such like decisions taken in a slip shod way which show total leaning of the DRT towards defaulting borrowers get approval of appellate authority also the very object behind the enactment of SARFAESI Act and RDDBFI Act will be defeated by quasi judicial Tribunals which were basically established to ensure speedy recovery of Banks' money, albeit, in accordance with law and not for showing undue indulgences to defaulting borrowers who have no intentions of clearing their liabilities towards Banks/Financial Institutions. No doubt, DRTs can pass any orders to secure the ends of justice but certainly not in the manner the DRT in the present cas has been passing Counsel submitted.
On the other hand, learned Counsel for the borrowers had half heartedly supported the manner of disposal of the two cases by the DRT but without making any serious effort to enter any further legal tussle with the Bank he cited some decisions of High Court and some orders of earlier learned predecessor Chairpersons of this Tribunal whereby the borrowers were granted relief in rate of pendente lite and future interest and it was submitted that the long standing trend of High Court and DRTs has been to award pendente lite and future interest @10% p.a. simple only and, therefore, me DRT in the present case committed no illegality in warding simple interest of 10% p.a. on reducing balance to the borrowers. It was also argued that the Bank's Counsel had not raised any objection before the DRT on 31.8.2015 that it was wrongly being recorded that the cases were being disposed of as settled and so now in appeal the Bank cannot be permitted to urge that thee was no settlement.
I have considered the rival submissions and also gone through the records of the DRT of the Bank's O.A. as well as the borrower's/guarantor's S.A.
When these two appeals were taken up for preliminary consideration on 15.1.2016 my learned predecessor had passed the following order when the borrower Ravi Gupta (who is respondent No. 5 in Appeal No. 426/2015 and who had got himself impleaded in the S.A. also of co-partner) was also present as a caveator:
"Under the orders of the Hon'ble High Counsel, S.A. filed by the respondent and the O.A. filed by the Bank were transferred to Debts Recovery Tribunal-II at Chandigarh from Debts Recovery Tribunal-I at Chandigarh. The Tribunal was directed to dispose of the S.A. and O.A. within a period of four months.
When the S.A. and O.A. were listed on 31st August, 2015 the Tribunal below disposed of the S.A. on the statement made by the respondent herein that it will deposit a sum of Rs. 10 lacs on at before September 25, 2015 and would deposit the balance amount with interest @10% p.a. simple by 15th December, 2015. In view of this order passed in S.A. the Tribunal below disposed of the O.A. in terms of the said order passed in the S.A. Instead of issuing 'RC' the Tribunal has observed that in case no payment is done, 'RC' then shall be issued.
This manner of deciding the claim of the Bank in the O.A. and disposing of the S.A. primarily on the statement made by the respondent is not only strange but is rather scanty. Once the Bank had filed this O.A., the Tribunal below could be expected to determine the claim made by the Bank. Unless the Bank had agreed and consented for disposal of O.A. or S.A. in this manner, the Tribunal could not have disposed of the cases in this manner. The Counsel for the appellant Bank is justified in making a grievance that the Bank had never agreed for disposal of the S.A. or O.A. in this manner and these were decided merely on the statement made by respondent here. The Tribunal below had passed the order directing payment of Rs. 10 lacs or interest which has been arbitrarily allowed just on the asking of the respondent. The Counsel would further state that no payment has been made by the respondent. In the absence of default clause, the Bank is finding itself stuck to proceed in the matter.
Let notice issue in both the appeals to the respondents.
Respondent Mr. Ravi Gupta, who is on caveat, is present and accepts the notice. The caveat shall stand discharged. Mr. Gupta prays for time to file reply.
Adjourned to 17th February, 2016. Notice to the other respondents be issued for the adjourned date by all three modes. Notice on the applications seeking condonation of delay be also issued for the same date. Notice in the appeals shall be subject to the order being passed on the applications seeking condonation of delay. Affidavit of service be filed two days in advance. Reply, if any, may be filed by respondent Mr. Ravi Gupta before the adjourned dated.
Operation of both the impugned orders shall remain stayed."
After giving my due consideration to the entire aspects of the matters I am also now of the view that the borrower's S.A. as well as the Bank's O.A. could not have been summarily disposed of as 'settled' when in fact the Bank had not agreed for any kind of settlement but it had already during the pendency of the cases categorically rejected the settlement proposal which was submitted by the borrowers.
The S.A. was filed by one partner of borrower Firm under Section 17(1) of the SARFAESI Act, as it stood before its recent amendment in 2016, and it reads as under:
"17. Right to appeal-(1) Any person (including borrower), aggrieved by any of the measures referred to in Sub-section (1) of Section 13 taken by the secured creditor or his authorised officer under this Chapter, may make an application along with such fee, as may be prescribed to the Debts Recovery Tribunal having jurisdiction in the matter within forty five days from the date on which such measure had been taken.
Provided that different fees may be prescribed for making the application by the borrower and the person other than the borrower.
Explanation : For the removal of doubts, it is hereby declared that the communication of the reasons to the borrower by the secured creditor for not having accepted his representation or objection or the likely action of the secured creditor at the stage of communication of reasons to the borrower shall not entitle the person (including borrower) to make an application to the Debts Recovery Tribunal under this sub-section.
(2) The Debts Recovery Tribunal shall consider whether any of the measures referred to in Sub-section (4) of Section 13 taken by the secured creditor for enforcement of security are in accordance with the provisions of this Act and the rules made thereunder.
(3) If, the Debts Recovery Tribunal, after examining the facts and circumstances of the case and evidence produced by the parties, comes to the conclusion that any of the measures referred to in Sub-section (4) of Section 13, taken by the secured creditor are not in accordance with the provisions of this Act and the rules made thereunder, and require restoration of the management of the business to the borrower or restoration of possession of the secured assets to the borrower, it may be order, declare the recourse to any one or more measures referred to in Sub-section (4) of Section 13 taken by the secured creditors as invalid and restore the possession of the secured assets to the borrower or restore the management of the business to the borrower, as the case may be, and pass such order as it may consider appropriate and necessary in relation to any of the recourse taken by the secured creditor under Sub-section (4) of Section 13.
(4) If, the Debts Recovery Tribunal declares the recourse taken by a secured creditor under Sub-section (4) of Section 13, is in accordance with the provisions of this Act and the rules made thereunder, then, notwithstanding anything contained in any other law for the time being to force, the secured creditor shall be entitled to take recourse to one or more of the measures specified under Sub-section (4) of Section 13 to recover his secured debt.
(5) Any application made under Sub-section (1) shall be dealt with by the Debts Recovery Tribunal as expeditiously as possible and disposed of within sixty days from the date of such application.
Provided that the Debts Recovery Tribunal may, from time-to-time, extend the said period for reasons to be recorded in writing, so, however, that the total period of pendency of the application with the Debts Recovery Tribunal, shall not exceed four months from the date of making of such application made under Sub-section (1).
(6) If the application is not disposed of by the Debts Recovery Tribunal within the period of four months as specified in Sub-section (5), any part to the application may make an application, in such form as may be prescribed, to the Appellate Tribunal for directing the Debts Recovery Tribunal for expeditious disposal of the application pending before the Debts Recovery Tribunal and the Appellate Tribunal may, on such application, make on order for expeditious disposal of the pending application by the Debts Recovery Tribunal.
(7) Save as otherwise in this Act, the Debts Recovery Tribunal shall, as for as may be, dispose of the application in accordance with the provisions of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 and the rules made thereunder."
A bare reading of Section 17(2) and (3) shows that the DRT is expected to dispose of an appeal (which the Hon'ble Supreme Court had in Mardia Chemical's judgment described to be an original application and not really an appeal) filed under this section after examining the facts and circumstances of the case and evidence adduced by the parties whether any of the measures taken by a Bank under Section 13(4) were in accordance with the provisions of the SARFAESI Act and the rules made thereunder and if the DRT comes to the conclusion against the Bank it can quash the measures taken by the Bank and even restore back to the borrower/mortgagor the possession of the mortgaged asset taken by it. The DRT cannot spend years and years only in giving time to the borrowers for clearing Bank's dues without even entering into examination of the merits of the case put up before it by the Security Applicant and the defences raised by the Bank like the successive Presiding Officers in the present case have been doing from 2011 onwards till 31.8.2015 when the S.A. and O.A. were disposed of by the Presiding Officer without returning any finding that any of the measures taken by the respondent Bank was illegal. The DRT has not referred to the pleadings of the parties and as far as evidence is concerned no date was ever fixed for that propose and no arguments were also heard. In case the borrowers were not interested in advancing any arguments the Bank at least should have been given opportunity to lead evidence in its O.A. and also to address arguments. I am in full agreement with the submission of the Counsel for the Bank that the borrowers in this case were really not asking for an sympathy from the DRT but have along been conveying it with command to the Presiding Officers that they will pay only the amount shown in 13(2) notice and interest not as per the contract but only @ 10% simple and that too on reducing balance and were successful finally in securing that relief from the DRT leaving that Bank in lurch and requiring it to approach DRT again for issuance of formal Recovery Certificate in case of default in payment by the borrowers. This manner of disposal of an S.A. is unknown in law and unacceptable.
Hon'ble Supreme Counsel had in a judgment rendered on 15th April, 2010 in SLP (C) No. 16466 of 2009, Asstt. Commissioner v. M/s. Shukla & Brothers, III (2010) SLT 565 : II (2010) CLT 204, laid down the guidelines which have to be kept in mind by the Counsel as well as Tribunals while passing judgments. The relevant observations of the Apex Counsel are as under :
"7. As is evident from the facts narrated in the Revision Petition and the grounds raised besides raising the question of law, a factual controversy was also raised going to the very root of the case........Thus, question of law, mixed questions of law and facts were not examined by the High Court in some detail.........
........The administrative authority and Tribunals are obliged to give reasons, absence whereof could render the order liable to judicial chastise. Thus, it will not be far from absolute principle of law that the Courts should record reasons for its conclusions to enable the appellate or higher Courts to exercise their jurisdiction appropriately and in accordance with law. It is the reasoning alone, that can enable a higher or an Appellate Court to appreciate the controversy in issue in its correct perspective and to hold where the reasoning recorded by the Court whose order is impugned, is sustainable in law and whether it has adopted the correct legal approach. To sub-serve the purpose of justice delivery system, therefore, it is essential that the Courts should record reasons for its conclusions, whether disposing of the case at admission stage or after regular hearing.
At the cost of repetition, we may notice, that this Court has consistently taken the view that recording of reasons is an essential feature of dispensation of justice. A litigant who approaches the Court with any grievance in accordance with law is entitled to know the reasons for grant or rejection of his prayer. Reasons are the soul of orders. Non-recording of reasons could lead to dual infirmities, firstly, it may cause prejudice to the affected party and secondly, more particularly, hamper the proper administration of justice. These principles are not only applicable to administrative or executive action, but they apply with equal force and, in fact, with a greater degree of precision to judicial pronouncements. A judgment without reasons causes prejudice to the person against whom it is pronounced, as the litigant is unable to know the ground which weighed with the Court in rejecting his claim and also causes impediments in his taking adequate and appropriate grounds before the higher Counsel in the event of challenge to that judgment. Now, we may refer to certain judgments of this Court as well as of the High Court which have taken this view.
.............The distinction between passing of an order by an administrative or quasi-judicial authority has practically extinguished and both are required to pass reasoned orders. In the case of Siemens Engineering and Manufacturing Co. of India Ltd. v. Union of India & Anr., 1976(SLT Soft) 529 : AIR 1976 SC 1785, the Supreme Counsel held as under :
"6. ............It is essential that administrative authorities and Tribunals should accord fair and proper hearing to the persons sought to be affected by their orders and give sufficiently clear and explicit reasons in support of the orders made by them. Then alone administrative authorities and Tribunals exercising quasi-judicial function will be able to justify their existence and carry credibility with the people by inspiring confidence in the adjudicatory process........."
...........It is not only desirable but, in view of the consistent position of law, mandatory for the Court to pass orders while recording reasons in support thereof, however, brief they may be brevity in reasoning cannot be understood in legal parlance as absence of reasons, while no reasoning in support of judicial orders is impermissible, the brief reasoning would suffice to meet the ends of justice at least at the interlocutory stages and would render the remedy of appeal purposeful and meaningful. It is settled canon of legal jurisprudence that the Courts are vested with discretionary powers but such powers are to be exercised judiciously, equitably and in consonance with the settled principles of law. Whether or not, such judicial discretion has been exercised in accordance with the accepted norms, can only be reflected by the reasons recorded in the order impugned before the higher Court. Often it is said that absence of reasoning may ipso facto indicate whimsical exercise of judicial discretion......."
We would reiterate the principle that when reasons are announced and can be weighed, the public can have assurance that process of correction is in place and working. It is the requirement of law that correction process of judgments should not only appear to be implemented but also seem to have been properly implemented, Reasons for an order would ensure and enhance public confidence and would provide due satisfaction to the consumer of justice under our justice dispensation system. It may not be very correct in law to say, that there is a qualified duty imposed upon the Court to record reasons. Our procedural law and the established practice, in fact, imposes unqualified obligation upon the Courts to record reasons. There is hardly any statutory provision under the Income Tax Act or under the Constitution itself requiring recording of reasons in the judgments but it is no more res integra and stands unequivocally settled by different judgments of this Counsel holding that, the Courts and Tribunals are required to pass reasoned judgments/orders................."
(Emphasis supplied)
Here the Bank is the aggrieved litigant before this Appellate Tribunal according to which the aforesaid views of the Hon'ble Supreme Court have been totally ignored and this Tribunal also feels that the Bank's grievance that the way the DRT has disposed of the two cases by accepting whatever the borrowers were submitting and not even making any reference to the grounds urged in opposition by the Bank a fair trial has been denied to the Bank is very much justified. DRT has not even specified in the impugned orders as to what had persuaded it to shower reliefs of deferred payments and to reduce the rate of interest. The DRT has not given any reason for reducing the rate of interest to 11% simple and that too from 18.1.2011 and on reducing balance. What were the circumstances highlighted by the borrowers for giving them that concession has not been stated in the impugned orders. Why issuance of the Recovery Certificate as had been prayed for by the Bank in its O.A. was being deferred even though O.A. was finally being disposed of has also not been stated by the DRT. Even for exercising discretionary powers the DRT was expected to justify the exercise of the discretion which was exercised by DRT in these cases. In the absence of any justification having been given for exercising discretion for reducing the rate of interest from 18.1.2011 it can be said and as was submitted by the Bank's Counsel also that the learned Presiding Officer exercised discretion whimsically.
In these circumstances, the impugned orders dated 31.8.2015 passed by DRT-II, Chandigarh are set aside and the matters are remanded back with a direction to the DRT-II to decide afresh the Bank's O.A. as well as the borrower Vipin Gupta's S.A. keeping in mind the aforesaid observations of this Tribunal and the irregularities in the manner of disposal of the two cases highlighted in this order. The parties shall appear before the DRT now on 21.1.2017 at 10.30 a.m. and the DRT shall dispose of the cases within two months from that date. There will, however, no stay against the appellant Bank if it decides to proceed further with its measures already initiated under the SARFAESI Act in respect of the mortgaged shops but subject to the final fresh decisions to be taken by the DRT in the O.A. and S.A.