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Allahabad High Court · body

2010 DIGILAW 1887 (ALL)

JYOTI EXTRACTION PVT LTD v. UNION BANK OF INDIA

2010-06-25

J.M.MALIK

body2010
JUDGMENT : J.M. MALIK, J. 1. This appeal is directed against the order dated 11.6.2010 passed by the learned Presiding Officer DRT, Allahabad. By the impugned order, the learned Trial Court refused to restrain the Bank from proceeding further under the SRFAESI Act. 2. The auction of the case property is scheduled to be held on 28.6.2010. The learned Counsel for the appellants submitted that the sale of the property should be postponed and the appellants are ready to deposit Rs. 30 lakh as per the agreement entered into on 15.12.2003. The appellants have already deposited a sum of Rs. 60 lakh as per the order passed by the Hon'ble High Court. The attention of the Court was invited towards the agreement dated 15.12.2003. Its terms and conditions run as follows: 1. Out of compromise amount of Rs. 105.00 lacs you are required to deposit an amount of Rs. 5.00 lac immediately. Rest Rs. 100 lacs to be paid within 12 months without interest. 2. Post-dated cheques to be obtained for future payment of instalments. 3. Consent decree to be filed in DRT in the Account of Jyoti Extraction P. Ltd. and with Lok Adalat in case of S.K. Anand & Co. with default clause that in the event you fail to honour this OTS as per terms and conditions of sanction then the Bank has liberty to recover full amount with up-to-date interest without any relief/concession. 4. Four parties agreement amongst Jyoti Extraction P. Ltd., S.K. Anand and Co. (Borrower), M/s. Shri Gurukripa Construction Co., owners of the mortgaged properties in their personal capacity and the Bank to be entered into. M/s. Shri Guru Kripa Construction Co. to undertake to pay the instalments of OTS on due date. 5. NOC would be issued by the Bank for construction of offices/shops/flats on the mortgaged land by M/s. Shri Gurukripa Construction Co. with a condition to deposit proceeds of offices/shops/flats with the Bank against the OTS amount, Bank's charge will be released only after entire settlement amount is received within 12 months. 6. You would take all necessary steps to make the leased land freehold and after becoming the land freehold the fresh deed which would be executed by the Government in favour of the owners of land will have to be deposited with the Bank to create fresh equitable mortgage in favour of the Bank. (Emphasis supplied) 3. 6. You would take all necessary steps to make the leased land freehold and after becoming the land freehold the fresh deed which would be executed by the Government in favour of the owners of land will have to be deposited with the Bank to create fresh equitable mortgage in favour of the Bank. (Emphasis supplied) 3. The learned Counsel for the appellants vehemently argued that the Bank cannot go behind this compromise. He invited my attention towards Sections 62 and 63 of the Indian Contract Act. He further explained that the cause of action in this case arose on 25.3.2008 when the leased land was declared freehold. It was pointed out that the Bank has failed to crystallise as to how much amount is to be paid by the appellants. He further argued that the Bank did not take action for the last seven years and no fault can be attributed to the appellant in this regard. It was also pointed out that one of the guarantors died on 29.5.2010. 4. The learned Counsel for the appellants also invited my attention towards a few authorities in order to buttress his arguments. In 274056 , in para 51 it was held that to a very limited extent jurisdiction of Civil Court can also be invoked, where for example, the action of the secured creditor is alleged to be fraudulent. Again, the mortgagor can come to the Court before sale with an injunction for staying the sale if there are materials to show that the power of sale is being exercised in a fraudulent or improper manner. He argued that the Bank has committed a fraud by not sticking to the above said agreement. 5. Secondly, it is not yet known as to how much amount is to be paid by the appellants and consequently stay should be granted as per 896161. The appellants must know as to what is the exact amount they have to pay. 6. 5. Secondly, it is not yet known as to how much amount is to be paid by the appellants and consequently stay should be granted as per 896161. The appellants must know as to what is the exact amount they have to pay. 6. The learned Counsel for the appellants also pointed out that the Hon'ble Calcutta High Court in 9027, was pleased to hold that failure of borrower to pay amount under earlier scheme or delay in payment would not terminate agreement between parties in absence of stipulation in that regard under agreement and as such the Bank would be entitled to charge only interest at Bank's PLR I.C. at rate of 11.5% p.a. on the settled sum for delay in making payment. 7. All these arguments have left no impression upon the Court. In the abovesaid agreement it was clearly, specifically and unequivocally stated that "in the event the appellants fail to honour the OTS as per the terms and conditions of sanction, then the Bank would have the liberty to recover the full amount with up-to-date interest without any relief or concession". Condition No. 5 of the agreement specifically states that the Bank's charge would be released only after the entire settlement amount is received within 12 months. The needful was not done. The appellants did not live up to the commitment made in the agreement. 8. Again, the appellants have suppressed material facts. The appellants have written a letter dated 6.12.2005 wherein they had prayed for further extension of time to enable them to honour the OTS. Vide letter dated 27.1.2006, the appellants were informed that the central management had approved the subject OTS proposal and the appellants were directed to deposit Rs. 100 lacs by February 2006 as mentioned in their OTS proposal. However, the needful was not done. As per the new OTS proposal, the OTS dated 15.12.2003 stood washed out. The appellants had themselves submitted another OTS proposal before the Bank, which is discernible from the reply filed by the Bank. The Regional Office, Allahabad vide its letter dated 23.2.2010 had accepted OTS offer submitted by the appellant. The terms and conditions of the said OTS are reproduced as under: 1. Bank is ready to settle your account under OTS for Rs. 300.00 lacs. Out of Rs. 300 lacs, Rs. 60.00 lacs has already been paid by you and balance Rs. The Regional Office, Allahabad vide its letter dated 23.2.2010 had accepted OTS offer submitted by the appellant. The terms and conditions of the said OTS are reproduced as under: 1. Bank is ready to settle your account under OTS for Rs. 300.00 lacs. Out of Rs. 300 lacs, Rs. 60.00 lacs has already been paid by you and balance Rs. 240.00 lacs is to but paid as per the following schedule: Rs. 60.00 to be paid within a week from the date of receipt of this letter. Rs. 90.00 lacs to be paid on or before 31.3.2010. Balance Rs. 90.00 lacs to be paid on or before 30.4.2010. 2. If you pay Rs. 300.00 lacs as per the aforesaid schedule, the remaining dues of Bank, i.e., Rs. 522.50 lacs as of 30.11.2009 will be waived by Bank. i.e. Rs. 522.50 lacs as of 30.11.2009 will be waived by Bank. (Emphasis supplied) 3. It may please be noted that in the event of non-payment of any of the aforesaid instalments, the offer of Bank for payment of Rs. 300.00 lacs will be automatically cancelled and Bank shall be at liberty to enforce its security interest by sale of the secured assets under Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 to recover Bank's entire contractual dues in the account of M/s. Jyoti Extraction Pvt. Ltd. and M/s. S.K. Anand & Co. and take other recovery measures. The needful was not done. This fact was never disclosed before the Court. 9. It may be mentioned here that the Hon'ble High Court vide its order dated 29.4.2010 was pleased to hold: Submission of the learned Counsel for the petitioner is that huge amount even after the offer of waiver is being demanded which on the facts may not be permissible and the earlier one time settlement which was approved in the year 2006 can always be taken care by the petitioner but the respondents are not seeking those terms rather huge amount is sought to be recovered. There is no dispute about the fact that notice under Sections 13(2), 13(4) of the Securitization Act has been given. There can also be no dispute about the fact that remedy is available to the petitioner to file objection under Section 13(3-A) of the Act within a statutory period with a further rider to the authorities for its disposal. 10. There is no dispute about the fact that notice under Sections 13(2), 13(4) of the Securitization Act has been given. There can also be no dispute about the fact that remedy is available to the petitioner to file objection under Section 13(3-A) of the Act within a statutory period with a further rider to the authorities for its disposal. 10. On 16.9.2009 the following order was passed by the learned Tribunal: Learned Counsel Mr. Ramji Shukla is present on behalf of the applicant. Learned Counsel Mr. V.D. Chauhan is present on behalf of the respondent Bank. This is an application under Section 17(1) of the SRFAESI Act. The applicant is a company against whom recovery proceeding vide T.A. 131/00 is pending in the Tribunal for adjudication where the company is being represented by the O.L. The Counsel for the Bank has the company has submitted that the company has been liquidated and Liquidator has been appointed to represent the company. He further states that the enforcement of security in the case relate to the properties of guarantors/directors and does not relate to the company. This factual aspect is not disturbed by the Counsel for the applicant. In view of this the Counsel for the Bank submits that the present application filed by the company is not maintainable. I have considered the arguments tendered on behalf of the Bank. The directors/guarantors who are presently under a notice under Sections 13(2), 13(4) of the Act have not come up with this application. No part of company's property is being sold by the Bank as given to understand by the Counsel for the Bank. In view of this granting interim relief to the company is refused. The respondent Bank shall file its objection in the meantime. Fix 25.11.2009 for further orders. 11. The present appeal has been filed by the above detailed two appellants. Mr. Surendra Kumar Gupta was not a party before the lower Court. An application for amendment is still lying with the Trial Court. The same is yet to be decided. Consequently, the appellant No. 2 should not have been arrayed as an appellant in this appeal. Again, the company is in liquidation. Mr. Surendra Kumar Gupta was not a party before the lower Court. An application for amendment is still lying with the Trial Court. The same is yet to be decided. Consequently, the appellant No. 2 should not have been arrayed as an appellant in this appeal. Again, the company is in liquidation. Prima facie, this appeal or the application under Section 17 of the SRFAESI Act should have been filed by the Official Liquidator as per the judgments in S. Duleep Singh v. O.L. 1990 (69) CC 791 and KSP Shanmugam v. Maharashtra State Co-operative Cotton Growers 1991 (70) CC 440 . In this case it was held that the Board of Directors become functus officio from the date of winding up order and, therefore, they are not competent to make reference and represent the company in winding up. It appears that this appeal has not been filed by the proper parties. Prima facie, all these questions are yet to be decided by the DRT during the final disposal of the case. 12. Keeping all these facts and circumstances, the auction proceedings may be postponed in case the appellants deposit Rs. 2.40 crores through a Bank draft before the learned DRT, without prejudice to the rights of the parties, before the auction is conducted. 13. The appeal stands disposed of. 14. Copies of this order be furnished to the parties as per law and another copy be sent to the learned DRT.