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Judgment
S.N.H. Zaidi, J
The instant application has been filed by the appellants for waiver of the condition of pre-deposit for the entertainment of the accompanying appeal filed under Section 20 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (for short, the RDDBFI Act). The respondent No. 1 has filed reply dated 8.2.2012 praying for the dismissal of the application,.
I have heard Mr. Rajeeve Mehra, learned Senior Advocate for the appellants/ applicants as well as Mr. V.K. Sharma, learned Counsel for the 1st respondent and perused the record.
Mr. Mehra pointed out that the O.A. was filed for the recovery of Rs. 5,74,11,149/- due as on 28.8.2000 against defendants 1 to 6 and by the impugned order the amount claimed was decreed in full against the said defendants jointly and severally together with cost and pendente lite and future interest @ 14% per annum compounded quarterly from the date of filing of the O.A. He further pointed out that during the pendency of the O.A. the mortgaged property was sold and a sum of Rs. 6,18,90.535/- had been realised, as is evident from the order impugned itself and as such the claimed amount has already been recovered and only the amount of pendente lite and future interest is remained to be paid.
Pointing out to the prima facie case of the appellants for the waiver of pre deposit, Mr. Mehra submitted that though the learned Tribunal below had noted the points of defence in the order impugned, but it had neither properly discussed them nor answered. He pointed out that as per the facts of the case Sree Venkateshwara Tourist Home (Private) Limited, of which the appellants were the Directors, had availed rupee term-loan of Rs. 306 lacs from Tourism Finance Corporation of India Limited (TFCI) in participation with Industrial Finance Corporation India Limited (IFCI), which had sanctioned a loan of Rs. 204 lacs, for setting up a 3-Star hotel at Bangalore; that the said company also availed of loans from Karnataka State Industrial Investment and Development Corporation Limited (KSIIDC), Karnataka State Financial Corporation (KSFC) and Canara Bank to the tune of Rs. 90 lacs, Rs. 60 lacs and Rs. 40 lacs respectively; that all the said Bank/financial institutions had pari passu charge over the mortgaged properties of the company; that the appellants had allegedly executed the deed of guarantee in their personal capacity in favour of TFCI and aforesaid Bank/financial institutions; that on 27.2.1996 a meeting had taken place amongst the appellants, the representatives of the Bank/ financial institutions and Bhojwani group (respondents 3 to 5) wherein the Bank and financial institutions unanimously agreed for the take over of the management of the company by Hotel Krishna International (India) Ltd. (HKIL), a company of respondents 3 to 5, who were allowed to be inducted as new Directors of the company on the condition that the assets and liabilities, including the personal guarantees of the old Directors (the appellants), would be taken over by them and the personal guarantees of the appellants would be substituted by the personal guarantees of the new Directors, besides furnishing corporate guarantee by respondents 3 to 5; that the controlling interest/management of the erstwhile company was taken over by HKIL on 10.9.1996, which was duly approved by TFCI; that accordingly respondents 3 to 5 executed fresh deeds of guarantee in their personal capacity in favour of TFCI and other financial institutions and Bank substituting the earlier guarantees of the appellants. Mr Mehra submitted that the learned Tribunal below had failed to consider these facts and to appreciate the legal implication of the substitution of the personal guarantees of the appellants by the new Directors of the company and did not give any reason for not accepting the appellants' contentions in respect of those guarantees. According to him, the appellants stood discharged from their guarantees/contract under Section 62 of the Contract Act and the earlier contract had extinguished. Mr. Mehra further submitted that admittedly thereafter TFCI and other Bank and financial institutions started dealing with respondents 3 to 5 with respect to the existing limits and enhancement thereto and other loans availed of by respondents 3 to 5 and the appellants did not sign or execute any document either in favour of TFCI or in favour of other Bank/ financial institutions after the said takeover and as such the order impugned is bad in law, so far as it had made the appellants personally liable for the payment of the decretal amount, which stood extinguished.
Mr. Mehra also pointed out that IFCI had also initiated recovery proceedings by filing O.A. No. 179/2000 before DRT, Bangalore wherein the appellants had rightly been not made parties and the proceedings were initiated only against HKIL and its Directors, respondents 3 to 5 herein, which stood allowed. Mr. Mehra further pointed out that Canara Bank had also filed O.A. No. 528/2000 before DRT, Bangalore for the recovery of its outstanding amount wherein the appellants were also made defendants like the present O.A. but the DRT, vide its reasoned judgment and order dated 19.10.2009, dismissed the said application against the appellants and this fact was duly brought to the notice of the learned Tribunal below, but while making the order impugned, the Tribunal failed to consider and appreciate the import of the said order. Mr. Mehra also pointed out that the hearing of the arguments written submissions wore also filed as per direction of the DRT, but without properly considering those submissions and meeting them in the order impugned, the learned DRT allowed the O.A. directing the respondents 1 to 6, including the appellants, to pay the amount found to be due along with interest.
Mr. Mehra further contended that the appellants are not in a financial position to make the deposit of the amount envisaged under Section 21 of the RDDBFI Act for the entertainment of the appeal, as they do not possess sufficient financial means and wherewithal and they are retired senior citizens aged 70-71 years and have no source of income since last 10 years and are presently going through financial crisis.
Mr. V.K. Sharma, learned Counsel for the 1st respondent, opposed the application and submitted that the loans in question were taken some time in the 1990's and the appellants themselves had siphoned off the loan amount which was public money and despite the fact that the copy of the letter dated 10.9.1996, sent by respondent No. 1 to HKIL for re-schedulement of the outstanding amount, was handed over to the appellants for compliance, but the appellants did not make any payment and avoided their liability under the R.C. issued in pursuance of the order impugned. Mr. Sharma also pointed out that being a senior citizen cannot be a ground for waiving the requirement of law and the appellants are liable to make the deposit of 75% of the amount of debt due for the entertainment of the appeal.
Considering the submissions of the parties' Counsel and giving my anxious thought to it, I am of the view that it would not be proper for this Tribunal to express any opinion on the issues pointed out/raised by Mr. Mehra at this stage as it may prejudice the rights and interest of the parties. However, considering the circumstance that more amount than claimed in the O.A. had already been recovered during the pendency of O.A. by sale of the mortgaged property and only the amount of interest is to be realized and going through the deeds of guarantee executed by respondents 3 to 5, who had admittedly taken over the control and management of the erstwhile company and also considering the circumstance that respondent No. 1 is admittedly controlled by IFCI, respondent No. 9 herein, which had not impleaded the appellants in its O.A. filed for the recovery of its dues before DRT, Bangalore against HKIL and its Directors and the said DRT had also dismissed the O.A. filed by Canara Bank, respondent No. 8 herein, against the appellants and also considering the circumstance that respondent No. 1 could not show that the appellants possess sufficient means with which they can comply with the requirement of pre-deposit and looking to the financial condition of the appellants and the peculiar circumstances of this case, the appellants appear entitled for the waiver of deposit of the amount required under Section 21 of the RDDBFI Act. The application is accordingly allowed and the deposit of the amount for the entertainment of the appeal is accordingly waived under the proviso to Section 21 of the RDDBFI Act. Let appeal be entertained and listed on 23.8.2012 for hearing on admission.