Sunil Arora And Ors. vs Punjab National Bank And Ors.

Ranjit Singh, J

The appellants, who are guarantor/mortgagors in regard to Cash Credit (Hypothecation) facility granted to M/s. Sai Precious Gems and Jewel (respondent No. 2) by the respondent Bank, had filed an application under Section 22 of the RDDBFI Act in their pending S.A., praying for direction to the Bank not to proceed against the property of the appellant/guarantors. The Tribunal below considered the prayer made in this I.A. in an elaborate fashion and found that there was no prima facie case made out in favour of the appellants and that the balance of convenience was also not in their favour and, therefore, declined to grant the interim prayer as made in the application. Aggrieved against this order, the appellants have filed the present appeal before this Tribunal. When this appeal came up for hearing on 21.10.2013, the Counsel for the appellants pointed out that FDRs totalling to Rs. 40.10 lac had been filed with the Registrar of this Tribunal, Taking this amount to be more than 50% of the amount of Rs. 80 lac (approx.) demanded in the notice, the appeal was heard by this Tribunal by holding that the appellants need not make any further deposit.

The appellants, thereafter, pleaded that the entire stock of the borrower was hypothecated with the Bank as primary security and inventory and valuation report of the same were also prepared by the Local Commissioner. The Counsel for the appellants accordingly made a grievance that the Bank was proceeding against the property of the guarantors without taking any action against the stock which was duly hypothecated being the primary security. This Tribunal, while issuing notice in the appeal, issued a direction to the Bank not to disturb the present status of the mortgaged property. This order was passed in the presence of the Counsel for the Bank who had put in appearance as the Bank had filed a caveat.

This appeal, however, was dismissed for non-prosecution on 12.3.2014, but, subsequently, was restored on 21.5.2014. During the course of hearing on 18.12.2014, the Counsel for the Bank stated before the Tribunal that the appellants had given a proposal to the Bank for settlement. Simultaneously, the Counsel for the appellants also pointed out that he would have no objection if the amount was recovered from the primary security, which was jewellery. While adjourning the case, as the OTS proposal being under consideration, this Tribunal made it clear that the Bank would be at liberty to deal with the primary security and dispose of the same to recover the liability standing against the appellants.

When the Bank failed to realize the amount from the primary security, the Bank Manager was summoned to explain the position. The Bank Manager accordingly came present before this Tribunal on 23.1.2015 to point out that though the jewellery was attached, it was in possession of the borrower. The Counsel for the appellants invited the attention of this Tribunal to Sub-section (18) of Section 19 of the RDDBFI Act which empowers this Tribunal to appoint Commissioner for preparation of inventory of the property and for sale thereof. This Tribunal, accordingly, appointed the Bank's Manager as the Commissioner for the purposes of making inventory of the jewellery which was to be secured under the Jocker of the Bank.

Despite being served, the borrower did not choose to appear during the hearing of the appeal. As soon as this order appointing Commission was passed, an application came to be filed by the borrower. On 9.2.2015, notice was issued on this application to the parties for 11.2.2015. On this date, the grievance of the applicant/borrower was considered and noticed. Grievance was that he had not been heard. The borrower was afforded an opportunity to make submission, when he came up with a proposal for making payment of Rs. 1.20 crore which, according to the borrower, was to cover the amount demanded in the notice, with interest. Counsel for the Bank rejected the proposal, as the amount due, according to the Bank, had gone up to the tune of Rs. 2 crore. The Counsel for the applicant urged before this Tribunal that the applicant/borrower would discharge the entire liability by March 2015. He was directed to deposit 50% of Rs. 1.20 crore and the case was adjourned to 2.3.2015 while directing the Commission to go ahead to comply with the order dated 23.1.2015.

On 2.3.2015, this Tribunal took note of the fact that the borrower had challenged the order passed by this Tribunal, by filing a writ petition instead of complying with the direction to deposit the amount. On that day, another disturbing feature came to the notice of this Tribunal as was pointed out by the Counsel or the appellants. The Counsel for the applicant/borrower, without obtaining the certified copy of the order dated 11.2.2015, filed a writ petition annexing therewith the copy of the order. Alarmed at this position, this Tribunal issued direction to the Registrar of this Tribunal to hold an inquiry. The order passed by this Tribunal on 2.3.2015 is as under:

"On 23rd January, 2015 this Tribunal appointed Mr. A.K. Verma, Bank Manager as one of the Commissioners for making inventory of the jewellery and get it evaluated from the approved valuer of the Income Tax Department. To assist Mr. Verma, an Advocate Mr. Amit Dhall was appointed as a Co-Commissioner. Both the Commissioners were directed to visit the premises where actually the jewellery was lying. The Commissioners were to inform the borrower about the date of their visit and the borrower was directed to remain present at the time of making inventory as well as valuation of the jewellery. It was directed that if the borrower failed to come present, this will not deter the Commissioners to go ahead with the task and after evaluation of the jewellery, the report shall be submitted to this Tribunal. The Bank was directed to take possession of the jewellery items and these were to be secured in a locker of the Bank. Once the jewellery was sealed in the locker, the responsibility for security was fastened on to the Bank where it was ordered to be kept.

At the time of passing of this order, none was present on behalf of the borrower who had hypothecated this jewellery as prime security. This was so noticed and observed but the Counsel for the respondent Bank had submitted that the Counsel for the borrower was not purposely appearing. The Counsel for the parties appearing on that day had also expressed themselves to state that as soon as this order was passed, the borrower would approach this Tribunal.

This is what has exactly happened later.

On 9th February, 2015 the borrower moved an application to challenge the order appointing the Local Commissioners. Primarily the grievance made in this application was that order appointing the Commissioners was passed without affording any opportunity of hearing to the applicant/borrower.

Notice on this application was issued to the parties concerned for 11th February, 2015 a day before the Commission was to visit the premises on 12th February, 2015. The Counsel for the borrower was heard at great length. The Counsel had, on that day, submitted before me that they had given proposal for payment of Rs. 1.20 crores which as per the Counsel was to cover interest payable on the notice amount.

The Counsel for the Bank had then responded immediately to say that this proposal was not acceptable to the Bank. As an interim measure, directions were issued for the appellant to pay 50% of the amount of Rs. 1.20 crores as the Counsel for the borrower had expressed desire of the borrower to discharge the entire liability. The case was adjourned for today i.e. 2nd March, 2015. The Commission was directed to go ahead to comply with the order dated 23rd January, 2015.

Instead of making any deposit, the borrower chose to challenge the orders dated 23rd January, 2015 as well as 11th February, 2015 by filing Writ Petition No. 1432 of 2015. The order passed by the Hon'ble High Court on this Writ Petition has been placed on record of this file on 16th February, 2015 without moving any proper application. It has repeatedly been stressed by giving directions to the Registry of this Tribunal not to accept any document unless there is judicial order permitting the party to place on record any document or proper application is filed for placing on record a particular document. I fail to understand as to how the Registry is disobeying the orders in this regard. These are judicial orders and disobedience thereof may invite action against the responsible official(s), who dare(s) to disobey the same.

Not only this, a very disturbing feature is brought to the notice of this Tribunal by the Counsel for the appellant and the Bank that the borrower had applied for certified copy of the order dated 11th February, 2015 on 13th February, 2015. The copy was supplied on 13th February, 2015 to the Counsel for the respondent/borrower. In the Writ Petition typed copy of this order was filed as an annexure without disclosing in the Writ Petition as to how the copy was available with the Counsel on 12th February, 2015 when mention was made for listing the Writ Petition. It appears that the Counsel has adopted some illegal means to obtain copy of this order, may be with the connivance of some officials of the staff of this Tribunal. This situation is unacceptable. This conduct may expose the person concerned for criminal liability as well.

Before issuing any further direction, it is considered appropriate to direct the Registrar of this Tribunal to hold an inquiry in this regard to find out as to how typed copy was obtained even before supply of certified copy. This could not have been possible unless judicial file was made accessible to the Counsel. The Registrar will submit his report before the adjourned date. The Registrar would be at liberty to record the statement of the Advocates concerned to arrive at proper and appropriate findings. Further direction in this regard would follow once this fact finding report is submitted.

The Counsel for the appellant as well as for the Bank have also invited my attention to the order passed by the High Court. Even before the High Court, it was submitted by the Counsel for the borrower that they had submitted OTS proposal and had deposited a sum of Rs. 10 lacs. As per the Counsel for the Bank, even this statement was not correct as only a sum of Rs. 5 lacs has been deposited by the borrower. The Hon'ble High Court found that the order dated 23rd January, 2015 was passed ex parte and since issue of settlement was pending, the Court has granted the interim order in the following terms:

'In the circumstances, by way of seizure and sale of the jewellery and other articles in the petitioner's property i.e. A-14, Lower Ground Floor, New Friends Colony, New Delhi is hereby stayed till the next date of hearing. The Local Commissioner is free, however, to prepare an inventory of the articles (with the assistance of valuer as directed by DRAT) which the petitioner shall not dispose of in the meanwhile.

Notice and order dasti under the signatures of Court master.'

Accordingly, action by way of seizure and sale of the jewellery was stayed till the next date of hearing and the Local Commissioner was free to prepare an inventory of the articles with the assistance of the valuer as was directed by this Tribunal.

The Local Commissioner has submitted his report which is also on record. A perusal of this report would reveal that both the Commissioners had visited the premises of the respondent/borrower on 12th February, 2015. The approved valuer of the Income Tax Department was also taken along for the purpose of evaluation of the jewellery lying in the premises of the borrower. The borrower was required to co-operate in making inventory of the jewellery. When the Commissioners reached, the premises i.e. property bearing No. A-14, Lower Ground Floor, New Friends Colony, New Delhi was identified by one of the Commissioners. The main gate of the premises was lying locked. The main entrance of the property has three entrance gates - one front main gate, second entrance from the main building/common passage which was going to the other floor of the same property and the third entrance from the back lane. These three entrances were duly identified. The Government approved valuer had also reached the premises. Shri A.K. Verma, Branch Manager, made an attempt to contact Shri Kunal Arora, proprietor, on cell phone No. 98118-24343. However, there was no response. They continued make attempts to get in touch Shri Kunal Arora, but were unsuccessful. The Commissioner then sent SMS on the mobile phone of Shri Kunal Arora requiring him to come present so that inventory could be made. Inquiries were even made from the neighbourers of the premises. It could be found that the premises had remained locked since February 11, 2015. The premises were got photographed and the Commissioner kept on waiting till 14.30 hours. Sport report was also prepared which is annexed with the final report submitted by the Commissioners. Photographs have also been attached with this report.

Even contact was established with the Counsel for the principal borrower when she informed the Advocate Commissioner that the Hon'ble High Court had stayed the order passed by this Tribunal. By then the Commissioners had left the premises.

It seems that the Counsel for the borrower has even made an attempt to mislead the Local Commission. It can be expected from a Counsel to remain fair in disclosing at least order passed by the High Court.

It is noticed that the High Court had never granted stay about the task of evaluation assigned to the Commission and had stayed the seizure and sale. The Counsel for respondent borrower has attempted to overreach the Court despite being fully aware of the directions issued by this Tribunal. The borrower is seen interfering in administration of justice and has purposely not allowed the commission to carry out the task assigned. A clear case of disobedience on the part of the respondent/borrower is made out.

Let notice issue to respondent No. 2 as to why appropriate action for disobeying the order passed by this Tribunal be not initiated against him.

The Counsel who is appearing for the said respondent No. 2 has declined to accept the notice and states that the notice be sent to the respondent/borrower Shri Kunal Arora.

Let notice be issued to respondent/borrower Shri Kunal Arora for 10th March, 2015. Notice be issued dasti as well. The Counsel for the appellant as well as Bank has assured this Tribunal to effect service of this notice on Mr. Kunal Arora before the next date of hearing.

The conduct of the respondent/borrower may be brought to the notice of Hon'ble High Court as well.

Adjourned to 10th March, 2015 for further proceedings. Interim order to continue."

It would be thus seen that the borrower failed to cooperate and hence the Local Commission could not carry out the assigned task though the Hon'ble High Court had not restrained the Commission from carrying out its duty. The borrower was seen in interfering in the administration of justice. Notice was issued to the borrower to show cause as to why appropriate action for disobeying the order passed by this Tribunal be not initiated.

On 10.3.2015, it was pointed out before this Tribunal that the inquiry as ordered by this Tribunal had been suspended by the Hon'ble High Court. The Hon'ble High Court had finally disposed of the writ petition by passing following directions:

"(i) On the petitioner depositing a sum of Rs. 50 lakh on or before 30.4.2015, the respondent shall not take any action towards securing possession of the assets or put it on the sale.

(ii) The petitioner shall deposit the remaining amount after the payment of Rs. 50 lakh out of Rs. 80 lakh on or before 15.5.2015.

(iii) The DRT is hereby directed to render its findings limited to the question of appropriate rate of interest and penal interest payable by petitioner having regard to the above developments.

(iv) The petitioner's sole proprietor shall furnish an affidavit/undertaking to comply with the above within a week from today. All rights and contentions of the parties in respect of the controversies before the DRT i.e. interest amount payable by the petitioner are reserved. The Bank is directed - subject to the compliance by the petitioner of the above direction of deposit of Rs. 80 lakh - not to take further action awaiting the decision of DRT in O.A. No. 144/2011."

The Hon'ble High Court accordingly has directed that the proceedings before this Tribunal had become infructuous. The Bank was directed not to initiate any action towards taking possession of the property, moveable or immovable, whether they belong to the petitioner or to the first guarantor and to await the final decision of the DRT for this purpose.

So far as the direction to hold inquiry is concerned, the Hon'ble High Court had taken note of the plea raised on behalf of the Counsel. As per the Counsel for the respondent/borrower, the steno available in the Court had taken note of the order which was dictated in the open Court. The Hon'ble High Court has compared the notes with the order and found that there was no significant difference. The observations made by the High Court have to be respected without any demure. Otherwise, I was just wondering that it would hardly be difficult for any person to prepare such notes by steno at any time to present it before the Court. On the first available opportunity this was not the stand taken through oral submission and was raised later which was soon thereafter. Steno taking notes can easily be noticed. Is such a mode permissible? Benefit of this order has directly accrued to the staff of this Tribunal which might have been responsible for any lapse. Inquiry was primarily to set right the office functioning and had no concern with the Counsel.

This Tribunal would abide by observation made by the Hon'ble High Court and accordingly would treat the issue closed. Streamlining of the working can follow in an appropriate case since the High Court has been kind enough to leave liberty with the Chairperson of this Tribunal to take such action as may be necessary in other cases where it is essential to do so.

The appellants have now filed an application seeking permission to withdraw this appeal primarily due to the order passed by the Hon'ble High Court. Notice on this application was issued to see whether the direction issued by the Hon'ble Court had been complied with or not. Otherwise, the appeal had been rendered infructuous as per the direction issued by the Hon'ble High Court. The effective remedy of appeal invoked by a party against the interim order thus has been rendered infructuous on the approach being made by the respondent borrower. Otherwise, it is stated before me that the respondent/borrower had deposited a sum of Rs. 80 lac as per the direction of the High Court.

In the meantime, the appellants have also filed another application seeking refund of the amount deposited by them to maintain the appeal. Notice in this application was also issued. The Counsel for the parties are heard.

Prima facie, the prayer by the appellant is just and fair. The respondent/borrower had undertaken to discharge the entire liability, the amount deposited by the appellants, who are guarantors, can be ordered to be refunded to them in fairness. This is more so when the appellants had not been able to press their plea in the appeal and the same has been rendered infructuous in view of the order passed by the Hon'ble High Court in a writ petition filed by the respondent. Respondent No. 2, who is the borrower and who had even undertaken to deposit the entire amount before this Tribunal as well, as such cannot be heard to oppose this prayer. Still, I am inclined to take a view that this amount deposited by the appellants may be kept with this Tribunal till the disposal of the S.A. to cover an event of the respondent/borrower failing to discharge the liability determined, it would be easy for the Bank to recover the amount even if the borrower went back on its commitment. Obviously, the issue then would also be whether the amount can be realised from the guarantor when the hypothecated stock is not being allowed to be attached for effecting recovery. This aspect of the case may now have to be decided and determined by the Tribunal below. Accordingly, the prayer of the appellants to withdraw the appeal is allowed. The appeal is dismissed as withdrawn. The appellants are held entitled to seek refund of this amount deposited by them to maintain the appeal after the decision in the S.A. and depending upon the outcome of the recovery. This amount is kept in fixed deposit till the disposal of the S.A. Thereafter, the appellants can move an appropriate application for refund of this amount. The appeal as well as all pending applications are disposed of in the light of the observations made above.