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Judgment
The appellant bank has challenged the order dated 02.08.2019 passed by the tribunal below(DRT-II, Delhi) in Securitisation Application(S.A.) filed under Section 17(1) of SARFAESI Act by the defaulting borrowers of erstwhile Corporation Bank which now stands amalgamated with Union Bank of India. S.A. was filed by the S.A. applicants to save their property(which at one time was 'Filmistan' Cinema in Delhi which they had mortgaged with Corporation Bank to secure the repayment of loan granted by that bank to respondents 2 and 3 herein. Corporation Bank had taken recourse to the provisions of SARFAESI Act to sell its secured asset(Filmistan Cinema) to recover its dues of over 20 crores. The said cinema had been put up for auction with a reserve price of 39 crores odd although the grievance of the borrowers was that its real value was almost seventy crores a couple of years back and the bank officials were trying to sell it at a throwaway price to their own person.
During the pendency of the S.A. the borrowers/mortgagor had at one stage offered to pay undisputed amount of Rs. 28 crores and had confined its fight to the claim of interest which was to the tune of Rs. four crores odd. The DRT had stayed auction subject to the borrowers paying to the bank Rs. 28 crores in four instalments of Rs. seven crores each. However, the borrowers had failed to pay any instalment. Then they brought into the scene one third party Mukesh Garg who offered to buy the property in question for 20.55.crores. He also failed to pay the money within the period of four months granted by DRT except one instalment of Rs. four crores paid on 30.07.2018. The borrowers had sought extension of time but that request was turned down by DRT and then the bank took physical possession of the Cinema. Mukesh Garg then moved an application for refund of the amount of four crores and the impugned order was passed on the application filed by the said third party Mukesh Garg, respondent no.5 herein, for return of four crores of rupees, without any interest, which he had paid to Corporation Bank as a part of sale consideration of Rs. 20.55 crores. His application was allowed vide order dated 02.08.2019 of DRT and the bank was directed to return his money though without any interest.
The facts leading to the filing of the application for refund of Rs. four crores have been noticed by the DRT in the impugned order whereby Corporation Bank was directed to refund the said money to Mr. Mukesh Garg. To avoid repetition of narration of facts I am re- producing the relevant portions of the impugned order 02.08.2019 which read as under:-
"2. Third party/applicant Mr. Mukesh Garg son of Late Shri G.S. Garg, resident of 61/6, Ramjas Road, Karol Bagh, New Delhi-110005 has filed the present Interlocutory Application for return of Rs.4 crores deposited by him with the respondent bank, alongwith interest @18% per annum under Section 17(7) of the SARFAESI Act with the averments that the security applicant / guarantor in the abovementioned S.A. No.93 of 2018, had approached him with a proposal to sell out the suit property to him upon which he made requisite enquires and was told that the suit property is mortgaged with the respondent Corporation Bank and proceedings qua the same are pending before this Tribunal. The security applicant/ guarantor had further told him that the borrower for whom he stood surety has defaulted in his loan account and demands were raised by the respondent bank against the security applicant and borrower. The security applicant/guarantor had further informed him that the property shall be released to the applicant herein alongwith the original property papers on payment of Rs.20.55 crores to the respondent bank and thereafter the applicant herein filed an affidavit dated 26th July, 2018 before this Tribunal mentioning the timeline of payment of Rs.4 crores each on 30th July, 30th September and 31st November, 2018 and Rs.8.30 crores on 31st January, 2019 to which the security applicant / guarantor had agreed and making compliance of his affidavit, the applicant herein made the payment of 1st instalment of Rs.4 crores to the respondent bank and the said affidavit was filed by the security applicant /guarantor before this Tribunal but at the time of passing of order dated 30th July, 2018 the security applicant had agreed upon a different schedule payment without the knowledge and consent of the applicant herein. The security applicant /guarantor had then assured that they will again move an application for modification of the order for rescheduling of the payment but the security applicant/guarantor kept on lingering the aforesaid issued and belatedly filed an application bearing I.A. No.1459 of 2018 in September, 2018 for modification of the order dated 30th July, 2019 but the same was rejected vide order dated 28th September, 2018. Subsequently, the respondent bank obtained physical possession of the suit property on 4th October, 2018 without any communication to the applicant herein. According to the applicant herein, upon deposit of Rs.4 crores with the respondent bank, he has become a party to the proceedings and acquired right over the property in question and, thence, a prayer has been made to refund the amount of Rs.4 crores alongwith interest @18% per annum as the respondent bank has already taken possession of the property in question and put the same to auction sale.
Responding to the notice issued, the respondent bank filed its reply contending that The present application for refund of Rs.4 crores alongwith interest @18% per annum has been filed on flimsy grounds and, as such, the same is not maintainable and is liable to be rejected on the sole ground.
In the present application, the contention of the applicant/third party Mr.Mukesh Garg is that the security applicant, who is a guarantor, had informed him that the property in question will be released to him (Mr. Mukesh Garg) along with its papers on payment of Rs.20.55 crores to the respondent bank and on the assurance of the security applicant, he filed an affidavit dated 26th July, 2018 before this Tribunal mentioning the timeline of payment of Rs.4 crores each on 30th July, 30th September and 31st November, 2018 and Rs.8.30 crores on 31st January, 2019 and he paid the first instalment of Rs.4 crores to the respondent bank as per undertaking given in the affidavit. Then the security applicant had asserted that he will file an application for modification o the order for rescheduling the payment, but the security applicant / guarantor kept on lingering on the aforesaid issue and belatedly filed an application bearing I.A. No.1459 of 2018 in September 2018 for modification of the order, but the same was rejected and subsequently the respondent bank obtained the physical possession of the property on 4th October, 2018 without any communication to the applicant and as he paid the amount of Rs.4 crores, the amount may be returned to him as the respondent bank has taken possession of the property in question.
No doubt, the applicant /3rd party came forward to pay Rs.20.55 crores at the instance of the security applicant / guarantor and filed an affidavit and this Tribunal passed the following order on 30th July, 2018:
"Heard both sides. It is submitted that so far as the dues in two loan accounts of Roshini Jewelers Pvt. Ltd. and J.B. Gold Pvt. Ltd. are concerned, they are quantified at Rs.10,35,77,071.64 and Rs.10,18,60,853.88 as on 30.6.2018 are concerned. The counsel for the respondent bank submits that due of two loan accounts are Rs.20.55 crs. The 3rd party undertakes to pay the said amount of Rs.20.55 crs within 5 months whereas the counsel for the respondent bank submits that the respondent bank agrees for three months tenure. In the interest of justice this Tribunal is granting four months time to the third party to clear the sum of Rs.20.55 crs. Out of which the first instalment o Rs.4.00 crs will be paid today itself, the second instalment of Rs.4.00 crs will payable on or before 25.8.218, 3rd installment of Rs.4 crs on or before 20.9.2018, 4th instalment on or before 15.10.2018 and 5th instalment of Rs.4.55 crs will be payable on or before 30.11.218 along with interest 8% p.a. simple on reducing balance basis from 1.7.2018......... In case the 3rd party Sh. Mukesh Garg deposits Rs.20.55 crs along with interest as ordered above within time as stated above the mortgaged property i.e.8356, Model Basti, Bara Hindu Rao, Delhi will be released to him."
While so, by filing applications bearing I.As. No.1459 & No.1458 of 2018, the security applicant requested for extension of time for payment. Subsequently in I.A. No.1496 of 2018 this Tribunal declined the relief prayed therein for extension of time and permitted the respondent bank to take the physical possession of the property in question and accordingly took the physical possession of the property in question. While so, the present applicant/third party who came forward to purchase the property in question, at the instance of the security applicant, filed the present Interlocutory Application No.1872 of 2018 for refund of the amount deposited by him with the respondent bank. As the possession of the property in question was taken by the respondent bank, the respondent bank can proceed with the sale of the property for realization of its dues.
So far as the third party depositing Rs.4 crore to purchase the property in question is concerned, the same has not been forfeited by this Tribunal and in the absence of the forfeiture, third party is entitled to refund of the amount as he is neither the borrower nor guarantor or mortgagor in this case. Since the third party-applicant Mr. Mukesh Garg came forward at the instance of the security applicant- guarantor to purchase the property in question and in the meanwhile the respondent bank took the possession of the property in question simultaneously, therefore, the respondent bank cannot keep the amount deposited with it by him. In the aforesaid facts and circumstances, the applicant-third party is entitled for the refund of Rs.4 crores but without interest.
In the result, the present Interlocutory Application No.1872 of 2018 is allowed and the respondent bank is directed to refund the amount of Rs.4 crores, without interest, to the applicant / third party Mr. Mukesh Garg forthwith."
Feeling aggrieved, the present appeal was filed by the bank.
It was argued by the learned counsel for the appellant bank that the learned DRT has failed to appreciate that the so called third party Mukesh Garg and the securitisation applicants/borrowers were hands in glove to ensure the recovery of public money gets deferred for as much time as possibly they could defer. Counsel submitted that the so called third party was put up by the defaulters only to gain time since the DRT had directed the borrowers to pay Rs. 28 crores in four instalments vide order dated 27.06.2019 although they were expecting an unconditional stay order against SARFAESI measures initiated by the bank and having failed in that attempt they introduced Mukesh Garg into the scene who had never participated in the open auctions which he would have done if he was actually a genuine person and not a man of borrowers to help them gain time and now Mukesh Garg is abusing the process of law by asking that his four crores should be returned to him. Learned counsel further submitted that the learned Presiding Officer was firstly not empowered in law to divert the legal fight under Section 17(1) of SARFAESI Act to a sale-purchase of public property which is totally within the domain of a secured creditor and no private deals are supposed to be entertained by DRTs. During the ongoing auction proceedings Mukesh Garg had no right to enter the DRT and to offer to buy the property in question without participating in the auction and DRT also ought not to have entertained him bye-passing the statutory Rules governing sales of secured assets by private treaty. It was contended that DRTs have nothing to do with sales by private treaty. Its job was to see if there was any illegality in any of the measures taken by the bank under SARFAESI Act in order to recover over 20 crores.
Learned counsel for the respondent no. 5 Mukesh Garg on the other hand supported the order of the DRT directing the bank to return four crores of rupees to him since it was with the permission and involvement of DRT that that much amount was given to bank and the DRT having itself observed that it had not ordered forfeiture of that money despite Mukesh Garg having failed to make the payment schedule fixed DRT no interference is required in the impugned decision of the DRT and this appeal should be dismissed with costs and interest should also be awarded to Mukesh Garg on the amount of four crores paid by him to bank. It was also argued that the bank itself had agreed to the proposal of third party to buy the property in question though as against the period of five months sought for by him to make the payment of entire consideration of 20.55 crores the bank had stated before the DRT that three months period was agreeable by the bank and the DRT had given him four months time to pay Rs. 20.55 crores in four instalments. Thus, submitted learned counsel, DRT has rightly ordered return of money to the third party Mukesh Garg.
After giving my thoughtful consideration to the rival submissions and after going through the impugned order and other material placed before me digitally since hearing took place through video conferencing due to spread of Corona Virus all over, I find myself in full agreement with the counsel for the third party-respondent Mukesh Garg that this appeal is liable to be dismissed being devoid of merit and the learned DRT has committed no error in the direction given to the bank to return Rs. four crores to third party Mukesh Garg.
On 27.06.2018 the learned DRT passed the following order in the S.A.:-
"Heard both sides. Counsel for the security applicants in S.A No. 93, 94 &113 of 2018 submits that the only dispute between the securitization applicants charging of the interest, penal interest and charges which amount about Rs. 4 crores and odd and for the rest of notice under Section 13(2) covered by these SAs the applicant s have no grievance and he further approaching the bank for OTS and will repay the entire amount within one year.
On the other hand, the ld. Counsel for the respondent bank submits that there is outstanding about Rs. 32 crores and odd. So far as the amount in the four accounts under which the bank extended the amount is concerned and the bank rejected the settlement proposal made by the security applicants as they are not satisfied with the terms and conditions over the security applicants. As there is no dispute regarding the initiation of the proceedings by the respondent bank and the only grievance of the applicants being the dispute regarding Rs. 4 crores and odd and regarding the excess charging of the interest, penal interest and charges and capitalization of the penal interest, I am of the considered opinion that it is a fir case to direct the security applicants to pay undisputed amount of about Rs. 28 crores. The applicants are asking for a time of 12 months which is very long and untenable.
Heard both sides. In the facts and circumstances of the present case, I am of the considered opinion that it is a fit case to direct the security applicants to deposit a sum of Rs. 28 crores in four equal instalments and they shall deposit the first instalments of Rs. 7.00 crores to show their bonafides on or before 10.07.2018 and the second instalments of Rs. 7.00 crores on or before 10.08.2018 and the third instalments of Rs. 7.00 crores on or before 10.09.2018 and the fourth & last instalments of Rs. 7.00 crores on or before 10.10.2018. In default of payment of any of the instalment as stated above, the same receiver is entitled to take possession of the property in question without further reference to this Tribunal. So far as the disputed amount is concerned, the bank shall file its statement of account as per the ratio laid down in the matter of CBI Vs. Ravindra without capitalization of the penal interest by the next date of adjournment. If the amounts deposits as stated above the respondent bank/receiver is restrained from taking physical possession of the property in question.
For compliance posted on 12.07.2018."
On 23.07.2018 the DRT had passed the following order in the pending S.A.:-
"Present - Sh. Pallav Saxena, Sh. Ashish Sharma, Sh. Ashutosh Shandilya and Sh. Umang Chopra, counsel for the applicant.
Sh. Samarendra Kumar, counsel for the respondent bank.
IA No.1072/18 filed in SA No.93/18, IA No.1074/18 is filed in SA No.94/18 & IA No.1073/18 is filed in IA No.113/18 praying therein for extension of time for payment. Counsel for the applicant submits that they are sourcing funds from third party and intends to pay Rs.4 crores today. For further hearing call on 25.07.2018."
Then on 25.07.2018 the following order was passed by DRT:-
"Today the 3rd party Mr. Mukesh Garg appeared before this Tribunal and undertakes to pay Rs. 20.30 cr. which is the amount involved in two loan accounts. He further undertakes to pay said amount within five months. The 3rd party to file affidavit by Monday with advance copy to the respondent bank, then bank to refer the same to the higher authority. The affidavit shall be filed by tomorrow morning with copy to other side and the respondent bank will revert to the proposal by Monday i.e. 30.07.2018.
For hearing posted on 30.07.2018."
On 30.07.2018 the following order was passed in the S.A.:-
"Heard both sides. It is submitted that so far as the dues in two loan accounts of Roshini Jewelers Pvt. Ltd. And J.B. Gold Pvt. Ltd. are concerned, they are quantified at Rs. 10,35,77,071.64 and Rs. 10,18,60,853.88 as on 30.06.2018 are concerned. The counsel for the respondent bank submits that due of two loan accounts are Rs. 20.55 crores. The 3rd party undertakes to pay the said amount of Rs. 20.55 crores within 5 months whereas the counsel for the respondent bank submits that the respondent bank agrees for three months tenure in the interest of justice this Tribunal is granting fourth months time to the third party to clear the sum of Rs. 20.55 crs. Out of which the first instalment of Rs. 4.00 crores will be paid today itself, the second instalment of Rs. 4.00 crores will be payable on or before 25.08.2018, 3rd instalment of Rs. 4.00 crores on or before 20.09.2018, 4th instalment on or before 15.10.2018 and 5th instalment of Rs. 4.55 crs will be payable on or before 30.11.2018 along with 8% p.a simple on reducing balance basis from 01.07.2018. In so far as dues in respect of JMD Commercials Pvt. Ltd. and Excellent Trading Company are concerned the counsel for the applicant submits that they will make proposal within 15 days from today. In the circumstances for next 15 days the respondent bank is restrained from proceeding against the subject matter property/ies. In case of default in payment of any of the instalments(s) directed above the respondent bank will be free to proceed against the property/ies as per law. With this the S.A and connected O.A will be disposed of on the next date of adjournment. In case the 3rd party Sh. MukeshGarg deposits Rs. 20.55 crs along with interest as ordered above within time as stated above the mortgaged property i.e. 8356, Model Basti, Bara Hindurao, Delhi will be released to him.
From these proceedings recorded by the DRT on different dates it becomes clear that the bank never claimed before the DRT that the third party Mukesh Garg and the borrowers were in collusion with each other when the third party had offered to buy the Cinema property. On the contrary it was categorically agreed by the bank on 30/07/2018 that the bank was agreeable to the proposal of the third party that upon payment of Rs. 20.55 crores by the third party to the bank the mortgaged Cinema property will be released in his favour. Thus, in this appeal it cannot be heard to say that there was a collusion between the borrowers and the third party. If that was really so the bank should have straightaway declined the offer of third party. The bank has admitted that Rs. four crores were paid by the third party Mukesh Garg and not by its borrowers. It was also never the case of the bank before the DRT that Mukesh Garg was a dummy person. He had approached the DRT seeking permission to pay the dues of the bank so that the mortgaged property could be released to him The bank raised no objection. Its higher authority considered the proposal and accepted the same. Only thereafter the DRT asked the third party to make the payment of Rs. 20.55 crores to the bank out of which he paid Rs. four crores on 30th July itself, which fact is also admitted by the bank itself. In that order the only consequence provided in case of non-payment by the third party as per the payment schedule fixed in that order was that the bank could take possession of the mortgaged property and to sell the same and not that the instalment(s) paid by the third party will be forfeited. There was a default and the bank took physical possession of the Cinema. The bank could have requested the DRT on 30.07.2018 to include the forfeiture consequence in the order passed on 30.07.2018. It did not make that request. So, in the absence of any forfeiture consequence in the order dated 30.07.2018 provided by the DRT the third party was rightly held entitled for the refund of money paid by him to the bank. Thus, it was not a case for intiation of contempt action also against anyone and particularly the third party because of not honouring the payment schedule referred to in his affidavit given pursuant to the order dated 25.07.2018, as was also the submission of the learned counsel for the bank. Normally the non payment of instalments by the third party might have attracted contempt action against the third party but since the DRT itself had provided the only consequence of non-payment this Tribunal is not inclined to start any proceedings of contempt. No such prayer was made before the DRT by the Bank. That way bank's right to continue with its recovery proceedings under the SARFEASI ACT or under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 has not got affected by the impugned order. It can always request the DRT in its recovery case(O.A.) also pending before DRT to pass stringent directions like attachment before judgment of the assets of its defaulters etc. as provided under Section 19 of the said Act of 1993 which provisions are rarely invoked by the banks these days and the defaulters of bank loans take full advantage of the inaction on the part of the bank officials who prefer to wait for the final decision in the banks' O.As stated to be pending before the DRT.
This appeal is, therefore, devoid of any merit and is consequently dismissed. The bank shall now make the payment of Rs. four crores to Mukesh Garg within fifteen days from today failing which he will be entitled to approach this Tribunal for necessary directions for ensuring compliance of this direction.