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Judgment
This appeal has been preferred under section 20 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (for short "the RDDBFI Act") against the order dated 24.09.2016 passed by the Presiding Officer, DRT, Ranchi, whereby the claim filed by the Bank was dismissed being barred by limitation.
The undisputed facts of the matter are that the respondent No. 1- a limited company was granted certain credit facilities by the appellant-Bank through its directors in the year 1987-88 and was enhanced in the year 1995. The loan was secured by the personal guarantee of the directors/guarantors. However, no mortgaged security was created. The revival letters were obtained from the borrowers/Guarantors from time to time, last being on 12.03.1998. It appears that the borrower company could not perform properly, therefore, a reference was made in the year 1999 for rehabilitation before the Board of Industrial and Financial Reconstruction (BIFR) under the provisions of the Sick Industrial Companies (Special Provisions) Act, 1995. (SICA). The BIFR after applying due process reached to the conclusion that the company could not be revived, hence recommended winding-up of the company vide letter dated 12.07.2002. The said order was challenged before the Hon'ble Calcutta High Court. The Hon'ble Calcutta High Court vide order dated 14.01.2003 appointed the official liquidator for taking further steps.
The appellant-Bank issued a legal notice on 06.03.2003 invoking the personal guarantee and called upon the respondents to repay the total loan outstanding in the accounts together with interest. Since no heed was paid to clear the outstanding dues, therefore, the Bank filed original application on 27.03.2003 claiming a sum of Rs. 4,70,39,700.81 together with interest, cost and other reliefs. The defendants of the O.A. filed written statements taking categorical stand that the O.A. was filed beyond the period of limitation. A counter claim was also filed against the Bank. During the pendency of O.A., the Official Liquidator had paid an amount of Rs. 2,22,69,596/- to the Bank out of total sale-proceeds received from the sale of the properties belonging to the borrowers.
The Tribunal below vide impugned order dismissed the O.A. as time barred holding that the appellant-Bank is not entitled to get the advantage of the period, for which the proceedings remained pending before BIFR relying upon a judgment passed by the Hon'ble Supreme court in the Inderjeet Arya and Anr. Vs. ICICI Bank Ltd. (2014) 2 Supreme Court Cases 229. The counter claim of the defendants was also dismissed. Being aggrieved by the said order, the present appeal has been filed by the appellant-Bank.
Learned counsel for the appellant submitted that the reference was pending before the BIFR from the year 1999 to 12.07.2002, during which the O.A. was not maintainable before the DRT in view of the provisions of Section 22 (1) of the SICA, which prohibits any suit under any law before any court. After excluding that period, the O.A. was filed within stipulated period of three years from the date of last revival letter dated 12.03.1998.
Learned counsel has also contended that the balance confirmation letter dated 31.03.2001 was also obtained from the borrower-company, which extended the period of limitation and further, the demand notice was also served on 6.3.2003. Thereafter, the S.A. was filed on 27.03.2003, which was within three years from the balance confirmation letter dated 31.03.2001 and the demand notice dated 06.03.2003. The Tribunal below has failed to appreciate all these aspects in right perspective, therefore, the order impugned be set aside.
On the contrary, the learned counsel for the respondents submitted that the Tribunal below had dealt with each and every aspect and decided the matter on the basis of the judgments passed by the Hon'ble Supreme Court. The Bank was required to file the O.A. upto 12.03.2001. Alleged balance confirmation letter dated 31.03.2001 was not filed with the original documents nor it was taken from all the borrowers and guarantors. Thus, the same was rightly discarded by the Tribunal below.
I have given my thoughtful consideration to the rival contentions of the learned counsels for the parties and perused the record.
As stated above, the core controversy in the matter is with regard to limitation period. Admittedly, no mortgage security was created in favour of the Bank and it was only personal guarantee and the hypothecation of goods, therefore, limitation for filing O.A. was three years. Last revival letter from all the defendants was taken on 12.03.1998. Thus, the limitation to file O.A. was upto 12.03.2001. O.A. was filed on 21.03.2003, therefore, it was beyond the period of limitation.
The argument that the period be reckoned from the date of alleged balance confirmation letter dated 31.03.2001 and the demand notice dated 6.3.2003, is not tenable. Firstly, the so-called balance confirmation letter dated 31.03.2001 was not produced at the time of filing of O.A. and secondly, it was alleged to have been executed only by the borrowers. Thus, it cannot be treated as balance confirmation letter on behalf of all the borrowers/guarantors. Thirdly, the right to file O.A. expired on 12.03.2001. Thus, on 31.03.2001, the claim was not alive nor it was alive on 6.3.2003, when the demand notice was issued. The period of limitation can only be extended, when the revival letter and balance confirmation letter are taken within the limitation. Once the period has expired, the loan cannot be revived. No person can put life into the mouth of a dead horse. Thus, the period cannot be calculated from the date of balance confirmation letter dated 31.03.2001 and the demand notice dated 6.3.2003. This view is fortified by the principle laid down by the Hon'ble Supreme Court in Margaret Lalita Samuel Vs. Indo Commercial Bank Ltd, AIR 1979 SC 102, which was rightly relied upon by the Tribunal below.
The contention with regard to exclusion of time under section 22 of SICA is equally devoid of force. Although section 22(1) of SICA provides for suspension of legal proceedings against the industrial company that "no suit for the recovery of money or for the enforcement of any security shall lie during the enquiry pending before the BIFR except with the consent of the Board or Appellate Authority, as the case may be", but the term "suit" used in this provision has been interpreted by the Hon'ble Supreme Court in Inderjeet Arya and Anr. Vs. ICICI Bank Ltd. (supra) and in KSL and Industries Ltd. Vs. Arihant Threads Ltd. (2008) 9 SCC 763 and it has been held in those judgments that the provisions of section 22(1) of the SICA are applicable, only if, the action filed by the Bank comes within the ambit of the term "suit". If the action filed by the Bank is in the nature of "proceedings" and not a "suit", then protection under section 22 (1) of the SICA would not be available. It has further been elaborated that the term "suit" would apply only to the proceedings in Civil Court and not actions or recovery proceedings filed by the Banks and financial institutions before a tribunal such as DRT.
Thus, in view of the principle laid down by the Hon'ble Supreme Court, the protection of section 22(1) of the SICA is not applicable in the recovery proceedings filed before the DRT. Both these cases squarely cover the controversy of the present matter. Learned counsel for the Bank has not brought to the notice of this Tribunal any other interpretation of this provision or any case law contrary to it in this regard.
Secondly, the provisions under section 22(1) of the SICA are not absolute to restrict the financial institution, even for suit or proceedings. It provides that the same may be initiated after obtaining the consent of the Board i.e. BIFR or Appellate Authority. Further, these provisions are not at all applicable on the guarantors. As such the Bank was required to obtain the consent of the Board to file the O.A. even during the pendency of reference, if it thought that this provision was any hurdle in filing the recovery proceedings. This is not the case of the Bank that they have ever approached before the BIFR and consent was not accorded or withheld in this regard.
Thus, it is a clear case of lapses on the part of the Bank officials, who had not observed due diligence for initiation of legal proceeding in time against the borrowers/guarantors to recover the huge public money. Be that as it may, but the O.A. was not filed within limitation, therefore, the claim was rightly rejected by the Tribunal below and there is no infirmity in the impugned order warranting any interference.
In view of the above, the appeal is dismissed with no order as to costs.
A copy of this judgment be sent to the parties as well as the DRT concerned and be also uploaded on the e-DRT portal.
A copy of this judgment be also sent for information and necessary action to the General Manager, State Bank of India, Corporate Centre Office, Madam Cama Road, Nariman Point, Mumbai and the Joint Secretary (DRT), Ministry of Finance, Department of Financial Services, Jeevan Deep Building, New Delhi.