State Bank of India vs M/s. Aban Holdings PTE. Ltd

S. Ravi Kumar, Chairperson

This Appeal is against the Order dated 21.01.2019 in IA 869/2018 in OA 196/2018 of DRT-I, Chennai.

Brief facts leading to this Appeal are as follows:-

Appellant Bank herein filed above referred OA for recovery of Rs.670,18,10,000/- as on 07.06.2018 towards SBLC facility availed by 1st Respondent herein with future interest at the rate of 15.10% p.a. with monthly rests, from the date of filing of OA till the date of realization and for costs. In said OA, Appellant Bank filed IA 869/2018 seeking attachment of Schedule mentioned properties; in support of Application, Assistant General Manager of Appellant Bank filed an Affidavit and relevant paras for the purpose of relief claimed in Interlocutory Application is from para 9 onwards. According to Appellant, liability of Respondent No.2 is limited to 100 Million Dollar, which is equivalent to Rs.674,52,60,000/- as on 07.06.2018, and both Respondents have not offered immovable properties in India to secure the loan liability. According to Appellant, they already filed an Application seeking for a direction to Respondent No.2 to disclose his movable and immovable properties, so as to attach them, and pursuant to Orders in said Application, Respondent No.2 filed an Affidavit of declaration before DRT stating that he owned lands at Perungudy Village, within Sub-registrar Office at Penagudi. Appellant contended that on discreet enquiry and investigation through detective agencies, revealed that Respondent No.2 owns various movable and immovable properties, which are shown in Schedule to Application. It is further contended that DRT permitted Respondent No.2 to go abroad as and when required for his business operations, and as Respondent No.2 filed false Affidavit regarding his properties, there is every possibility of settling down at abroad to defeat the legitimate rights of Bank to recover public money running into several crores, therefore, it is just and necessary to attach Schedule mentioned properties, pending disposal of OA. Counter is filed disputing Affidavit averments and relevant counter allegations of Respondent No.2 are that properties given by 1st Respondent are sufficient enough to cover the dues of Appellant Bank. Respondent also contended that there is no evidence to show that mortgaged properties are not sufficient to meet the claim amount of Appellant Bank, and Application is filed on mere assumptions and presumptions. Respondent also contended that power under Sub-section 13 (A) of Section 19 of Recovery of Debts and Bankruptcy Act, 1993, (hereinafter referred to RDB Act, 1993) is akin to provisions of Order 38 Rule 5 of CPC, and such powers are not to be exercised mechanically for mere asking on assumptions and presumptions. It is contended that, without strictly complying with said provision and satisfying the conditions therein, Application and Affidavit, which is filed in a routine manner, cannot be accepted. Tribunal below, on a consideration of contentions and rival contentions of both parties, and also case law cited before him, held that, officials of Appellant Bank have not acted responsibly and diligently with their pursuit to recover huge money from the hand of borrowers, and Application is devoid of merits or substance, and accordingly dismissed it.

Heard Learned Advocates of both parties.

Advocate for Appellant submitted that Bank filed Interlocutory Application for attachment of non mortgaged properties, as security given by Respondents is not sufficient to meet the claim of Bank. He submitted that as no security in India is given for recovery of OA amount, it is in the interest of justice to protect public money, sought attachment of Schedule mentioned properties, but Tribunal below, without considering the same, dismissed Application mainly relying on Order 38 Rule 5 of CPC. It is further submitted, Tribunal has got enormous power to pass orders to prevent borrower from defeating the legitimate rights of Secured Creditor for realizing public money, and as properties are only sought for attachment to secure the claim of Bank, Tribunal below ought to have granted the same, without going in to technicalities. He submitted, Tribunal below ought to have directed Respondent No.2 to furnish security for OA claim, and on failure to do so, ought to have ordered for attachment, but instead of safeguarding the interest of public money, Tribunal below dismissed Application for not following the conditions enshrined in Order 38 Rule 5 of CPC, which is not a correct approach, therefore, Order of Tribunal below is liable to be set aside.

On the other hand, Advocate for Respondents submitted that Sub-section 13 (A) of Section 19 of RDB Act, 1993, is akin to Order 38 Rule 5 of CPC, and in order to get relief under that Section, it is incumbent for Appellant Bank to satisfy the conditions incorporated therein, and in the entire Affidavit, there is no whisper of any kind attracting any of the circumstances or conditions mentioned in Sub-section 13 (A) of Section 19 of RDB Act, 1993. He submitted that, when there is no averment in Affidavit, which is filed in support of Interlocutory Application attracting conditions of Sub-section 13 (A) of Section 19 of RDB Act, 1993, complaining against Tribunal below that Interlocutory Application is dismissed on technicalities, cannot be allowed. He further submitted that attachment cannot be granted for mere asking, and Appellant is bound to place, at least, prima facie material attracting the conditions envisaged in Sub-section 13 (A) of Section 19 of RDB Act, 1993, and without that, any length of argument under the guise of public money, cannot be accepted. He submitted Tribunal below rightly dismissed Application and there are no grounds to interfere with the same.

As I have already referred to above, Appellant Bank filed OA for recovery of Rs.670 Crores and odd, and to safeguard that amount, sought for attachment of properties mentioned in Schedule to Application. Learned Advocate for Appellant Bank cited the following rulings to support his arguments that Tribunal has power to grant interim Orders both on merits and on ex parte basis:

I Judgements of Hon’ble Supreme Court of India in the case of;

i Allahabad Bank Vs. Radha Krishna Maity and Ors., reported in MANU/SC/0554/1999; and

ii Industrial Credit and Investment Corporation of India Ltd. Vs. Grapco Industries Ltd. & Ors., in Case No. Appeal (Civil) 3167/1999.

II Judgements of Hon’ble High Court of Madras in the case of ;

i) M/s. Ranjith Impex Vs. State Bank of India, in CRP Nos. 2680 & 2681/2009 dated 1st October, 2009; and

ii) B. Poornima & Anr. Vs. State Bank of Travancore, reported in CDJ 2009 MHC 390.

On the other hand, Learned Advocate for Respondents submitted that those decisions are in no way relevant to the case on hand, since the issue involved is not as to the powers of Tribunal below, and Tribunal below not declined the relief on the ground that it has no power, but it declined on the ground that Appellant Bank has not made out any case as required under the provisions of RDB Act, 1993.

On a scrutiny of above referred judgements, I have to accept the arguments of Learned Advocate for Respondents since Tribunal below has not refused the relief to Appellant on the ground that it has no power to grant such relief, but for reasons detailed in its Order, mainly not fulfilling requirements of Sub-section 13 (A) of Section 19 of RDB Act, 1993.

One of the arguments of Advocate for Appellant Bank is that Tribunal below refused the relief on the ground that Appellant has not complied with requirements of Order 38 Rule 5 of CPC, but that provision is not applicable to the claims made under RDB Act, 1993, therefore, the observation of Tribunal below is not correct.

In reply, Advocate for Respondents submitted that Tribunal below has not recorded a finding that Appellant Bank has not complied with Order 38 Rule 5 of CPC, but it only recorded as provisions of Sub-section 13 (A) of Section 19 of RDB Act, 1993, are akin to Order 38 Rule 5 of CPC, and as Appellant Bank has not complied with statutory requirements of Sub-section 13 (A) of Section 19 of RDB Act, 1993, by quoting some judgements as to the compliance under Order 38 Rule 5 of CPC, held that Appellant has not made out any case.

Now, it is not necessary to examine whether provisions of Sub-section 13 (A) of Section 19 of RDB Act, 1993, are similar to Order 38 Rule 5 of CPC, and suffice to examine Sub-section 13 (A) of Section 19 of RDB Act, 1993, to decide whether those requirements are fulfilled or not. In fact, Tribunal below, in its Order itself, extracted the provisions of Sub-section 13 (A) of Section 19 of RDB Act, 1993, and held that Appellant Bank has not placed any prima facie material attracting those requirements, and Affidavit filed in support of Application is not even referred to any of those conditions indicated in Sub-section 13 (A) of Section 19 of RDB Act, 1993. Even at the cost of repetition, it may be relevant to examine said provision, which is as follows:-

“19. Application to the Tribunal -(1)……………..

……………

……………..

(13) (A) Where, at any stage of the proceedings, the Tribunal is satisfied, by affidavit or otherwise, that the defendant, with intent to obstruct 18 or delay or frustrate the execution of any order for the recovery of debt that may be passed against him,--

(i) is about to dispose of the whole or any part of his property; or

(ii) is about to remove the whole or any part of his property from the local limits of the jurisdiction of the Tribunal; or

(iii) is likely to cause any damage or mischief to the property or affect its value by misuse or creating third party interest, the Tribunal may direct the defendant, within a time to be fixed by it, either to furnish security, in such sum as may be specified in the order, to produce and place at the disposal of the Tribunal, when required, the said property or the value of the same, or such portion thereof as may be sufficient to satisfy the certificate for the recovery of the debt, or to appear and show cause why he should not furnish security.

(B) ……………………………….”

From a reading of above provision, it is clear that, at any stage of proceedings, on Application made by Applicant, Tribunal may direct Defendant, to furnish security, or issue a show cause notice why should not furnish security, and failing to furnish security within the time fixed by Tribunal, may order for attachment of the whole or such portion appears sufficient to satisfy any Certificate for recovery of debt to be issued, but such an Order can be passed on fulfilling certain conditions namely, where Defendant is about to dispose of the whole or any part of the property; or is about remove the whole or any part of the property from the local limit of the jurisdiction of Tribunal; or is likely to cause any damage or mischief to the property or affect its value by misuse or creating third party interest. Appellant is also expected to disclose estimated value of property, and also to establish that Defendant is contemplated to do above acts with intent to obstruct or delay or frustrate the execution of any order for the recovery of debt that may be passed against him. So, these are specific requirements to be pleaded and proved prima facie in order to get an Order of attachment.

In fact, in the Application filed for interim relief, the provisions referred to by Appellant Bank are Section 19 (3A), 19 (4) (iii) of RDB Act, 1993, but, Tribunal below, while considering the relief claimed in Application, recorded that such relief falls under the provisions of Sub-section 13 (A) of Section 19 of RDB Act, 1993, and relief cannot be declined for quoting wrong provisions of law, and considered Application under the provisions of Sub-section 13 (A) of Section 19 of RDB Act, 1993.

Learned Advocate for Respondents submitted that Section 19 (3-A) of RDB Act, 1993, is a provision enabling Applicant to state particulars of any other properties or assets owned by any of the Defendants, and if estimated value of security is not sufficient to satisfy the debt claim, in which case, Tribunal can direct Defendant to disclose the particulars of other properties or assets, for which an Application is already filed, and Respondent No.2 herein, has already furnished the details, therefore, Tribunal below rightly treated this Application under Sub-section 13 (A) of Section 19 of RDB Act, 1993.

On a scrutiny of material, I have to accept the submissions of Learned Advocate for Respondents, because the relief claimed in Application IA 869/2018 is to attach the Schedule mentioned property and consequently direct the SRO, Periamet, Joint-II Sub Registrar, Thousand Lights, Adyar and Panagudi and ROC, Chennai, Ernakulam not to effect any registration or transfer of shares pending disposal of the above OA. So, when relief of attachment before issuance of Recovery Certificate is prayed, it is incumbent upon Appellant Bank to comply with the requirement of conditions of Sub-section 13 (A) of Section 19 of RDB Act, 1993. In entire Affidavit, except saying that it is just and necessary to attach the Schedule mentioned properties, nothing is whispered attracting requirements of above referred provision. Tribunal below, elaborately dealt with this aspect, and even recorded a finding that officials of Bank are callous and negligent while dealing with the claim running into hundreds of crores.

In the Memorandum of Appeal, it is contended that Learned Presiding Officer has erred in observing that Bank has not mentioned the value of immovable properties sought to be attached, even approximately. It is contended that as Appellant has sought only for attachment of non mortgaged properties, declaration of value is not necessary, and it will be required only in case of sale, but such contentions is absolutely incorrect, when the provision referred to above, mandates mentioning of particulars of property to be attached and estimated value thereof, finding wrong with observations of Tribunal, would only indicate that officials of Bank including its legal department, has not even read the provisions of Sub-section 13 (A) of Section 19 of RDB Act, 1993, either before filing of Application in DRT, or at least, before filing an Appeal before this Tribunal.

In the Memorandum of Appeal, it is also contended that Learned Presiding Officer ought not to have observed that the approach by the officials of Appellant Bank is lackadaisical, callous and against public interest, but said contention cannot be accepted for the simple reason that, when Bank wants to protect public money and public interest, it should have claimed the relief by fulfilling the requirements of statute, and when that is not done, there is nothing wrong in commenting about the attitude of Bank officials. From a reading of grounds and Memorandum of Appeal, the tenor of Appellant appears, as if, when it claims relief, Tribunal has to grant it automatically, because the request of Bank is to protect public money, but that is not the intention of statute. Here, Bank is a party before Tribunal, and as a party, it is expected to fulfill certain conditions and requirements, and when law mandates certain conditions to be fulfilled, without complying with them, claiming relief, and commenting Tribunal for not granting such relief, in my view, amounts to disrespecting the statutory provisions.

In the Memorandum of Appeal, and in grounds, it is contended that Tribunal below ought to have directed Respondent No.2 to furnish security instead of dismissing Application, but giving such direction would only arise when Appellant fulfils the requirement of conditions indicated in Sub-section 13 (A) of Section 19 of RDB Act, 1993, but such direction cannot be given on mere asking.

Learned Presiding Officer, DRT-I, Chennai, has elaborately considered the statutory provision and its non compliance, and came to a right conclusion, and there are absolutely no grounds to interfere with well reasoned Order dated 21.01,2019.

When Learned Presiding Officer specifically recorded and pointed out that, Bank has not fulfilled the requirement of conditions for ordering attachment of Schedule mentioned properties, and pointed out, even Affidavit filed in support of Application is completely silent and not disclosed the circumstances that indicated in the provision, minimum expected from officials of Appellant Bank and its legal department, if they are so diligent, to approach Tribunal below once again with another Application by complying with the requirements of law, if really they are interested in protecting public money. But, for reasons best known to officials of Bank and its legal department, without taking any such recourse, or even without examining whether requirements of Sub-section 13 (A) of Section 19 of RDB Act, 1993, are fulfilled or not, just filed an Appeal before this Tribunal, at the cost of public money, which in my view, is without application of mind.

For the reasons stated above, I am of the considered view that Appeal is absolutely devoid of merits and liable to be dismissed with costs.

In the result; Appeal MA 10/2019 is dismissed with costs. All pending IAs, if any, stand closed.