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2015 DIGILAW 535 (CAL)

Bablu Ghosh v. Amrit Fresh Private Ltd.

2015-06-29

INDIRA BANERJEE, SAHIDULLAH MUNSHI

body2015
JUDGMENT : Indira Banerjee, J. This application filed by the respondent No. 1, is for review of a judgment and order dated 18th February, 2014 passed by the Division Bench comprising Their Lordships the Hon'ble Justice Ashim Kumar Banerjee and the Hon'ble Justice Asim Kumar Mondal (As Their Lordships then were), allowing the appeal being APO No. 307 of 2013, against an order dated 11th September, 2013 passed by the Hon'ble Single Judge in an application being EC No. 288 of 2012 for execution of an arbitral award. 2. By the order dated 11th September, 2013, under appeal in APO No. 307 of 2013, Her Ladyship the Hon'ble Ms. Justice Nadira Patherya held that the applicant for review, being the award holder, was entitled to execute the award, against the appellant, Amrit Fresh Private Ltd., being the purchaser of the properties of the Judgment-debtor, which had been mortgaged and/or hypothecated to Indian Bank, and sold in an auction under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Act, 2002, hereinafter referred to as the SARFAESI Act. 3. On or about 10th July, 2007, the applicant for review, being the respondent No. 1 in the appeal, entered into an agreement with M/s Meadow Feeds Specialties Pvt. Ltd., hereinafter referred to as the Judgment-debtor, for supply of milk to the Judgment-debtor at the agreed price. The said agreement executed on 10th July, 2007, inter alia contained a clause for reference of disputes to arbitration. 4. The applicant respondent No. 1 claims to have supplied milk to the Judgment-debtor, during the period from 11th July, 2007 to 17th March, 2010, pursuant to and/or in terms of the said agreement. According to the applicant respondent No. 1, the milk supplied by the applicant respondent No. 1 to the Judgment-debtor, was received by the Judgment-debtor without demur. 5. The applicant respondent No. 1 claims that, after giving credit to all payments made by the Judgment-debtor to the applicant respondent No. 1, a sum of Rs. 22,48,672/- remained outstanding from the Judgment-debtor to the applicant respondent No. 1. 6. Disputes and differences arose between the applicant respondent No. 1 and the Judgment-debtor by reason of the alleged failure and/or refusal of the Judgment-debtor, to clear the bills raised by the applicant respondent No. 1 on the Judgment-debtor. 7. 22,48,672/- remained outstanding from the Judgment-debtor to the applicant respondent No. 1. 6. Disputes and differences arose between the applicant respondent No. 1 and the Judgment-debtor by reason of the alleged failure and/or refusal of the Judgment-debtor, to clear the bills raised by the applicant respondent No. 1 on the Judgment-debtor. 7. The disputes between the applicant respondent No. 1 and the Judgment-debtor were referred to the arbitration of a sole arbitrator, in terms of the arbitration agreement between the applicant respondent No. 1 and the Judgment-debtor. 8. On 7th October, 2011, the sole arbitrator made and published an award of Rs. 34,20,483/- in favour of the applicant respondent No. 1, in full and final settlement of all claims of the applicant respondent No. 1 against the Judgment-debtor. The award was to carry interest @ 12% per annum from the date of the award till actual payment, in the event, the awarded amount was not paid within 90 days from the date of the award. 9. Section 35 of the Arbitration and Conciliation Act, 1996, hereinafter referred to as the 1996 Act, provides that an arbitral award shall be final and binding on the parties, subject to the provisions of Part 1 of the said Act. 10. Section 36 of the 1996 Act provides that when the time for making an application to set aside an arbitral award has expired, or such application having been made, it has been refused, the award shall be enforced under the Code of Civil Procedure, 1908, in the same manner, as if it were a decree of the Court. 11. The judgment-debtor had obtained finance from the branch of Indian Bank at Russel Street, Kolkata. As security for the loans agreed to be advanced by Indian Bank, to the Judgment-debtor, the Judgment-debtor had mortgaged its immovable properties in favour of Indian Bank. The Judgment-debtor had also hypothecated its movable assets in favour of Indian Bank. 12. As the Judgment-debtor defaulted in repayment of its dues to Indian Bank, the Bank invoked Section 13 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act 2002, hereinafter referred to as the SARFAESI Act, took possession of the secured assets of the Judgment-debtor, and put the same up for sale by auction by publication of advertisements in different newspapers on 27th November, 2011. 13. 13. On or about 31st December, 2011, that is after the award was made and published, but before it could be put to execution, the properties of the Judgment-debtor mortgaged and/or hypothecated in favour of Indian Bank, were sold to the appellant, Amrit Fresh Private Limited, the successful bidder at an auction sale, held pursuant to the sale notice dated 27th November, 2011. 14. The appellant, Amrit Fresh Private Limited, purchased the mortgaged immovable properties of the Judgment-debtor, for consideration of Rs. 1,51,11,000/- and the hypothecated movable properties of the Judgment-debtor, for consideration of Rs. 1,18,00,000/-, under the SARFAESI Act. 15. Thereafter, Indian Bank issued two separate sale certificates in favour of the appellant, one in respect of the immovable properties of the Judgment-debtor, mortgaged to Indian Bank, and the other in respect of the movable properties of the Judgment-debtor hypothecated to Indian Bank. After execution and registration of the sale certificate in respect of the immovable properties, the name of the appellant, Amrit Fresh Private Limited was mutated in the Block Land and Land Revenue office records. The appellant, Amrit Fresh Private Limited claims to have been paying taxes in respect of the said property. 16. On 31st January, 2012 the applicant respondent No. 1, through his advocate, demanded payment of Rs. 34,29,583/- along with interest at the rate of 12% per annum in terms of award, from the appellant, Amrit Fresh Private Limited. 17. On or about 1st October, 2012, the respondent No. 1 filed an application in this Court under Section 36 of the 1996 Act, being EC 288 of 2012 for execution of the award dated 7th October, 2011. 18. By an order dated 11th September, 2013 in EC 288 of 2012, the learned Single Bench (Nadira Patherya, J.) held that the applicant respondent No. 1 was entitled to execute the decree dated 7th October, 2011 against the appellant Amrit Fresh Private Ltd., being the purchaser of the properties of the judgment-debtor under the provisions of the SARFAESI Act. A receiver was also appointed to take possession of the assets and properties of the appellant company. 19. A receiver was also appointed to take possession of the assets and properties of the appellant company. 19. The relevant part of the said order dated 11th September, 2013 of the learned Single Bench is set out here in below: "Having considered the submissions of the parties, there is no doubt that the Indian Bank, the mortgagee became entitled to sell the assets of the judgment debtor and sale notice was issued in November, 2011 under the 2002 Act. Prior to the sale notice on 7th October, 2011 an award was passed against the judgment debtor from which no application under Section 34 of the 1996 Act was filed. On the date of issuance of sale notice it was specifically stated that the sale was made on "as is where is and as is what is basis" and that the bank made no representation and guarantee regarding any encumbrance or statutory liability. Admittedly, the claim of the decree holder was not a statutory liability payable by the judgment debtor but was an encumbrance, which was attached to the property of the judgment debtor on 7th October, 2011 prior to sale of the asset. Therefore, it was the duty cast on the purchaser to ascertain the encumbrances, if any and in not doing so has acted to its prejudice. The sale has been effected under a special law and it was specifically stated in the letter dated 31st December, 2011 that claims, disputes or litigation, if any relating to the property would be the responsibility of the purchaser. This is one such litigation and the purchaser cannot avoid its liability by taking the plea of either Section 35 or Section 37 of the 2002 Act. Therefore, as the sale was made on "as is where is and as is what is basis" and the decree had already been passed prior to the sale notice, the same was an encumbrance and the purchaser is liable for payment of the liabilities of the judgment debtor and, cannot therefore, shirk its responsibility. Accordingly, the decree holder is entitled to execute the decree dated 7th October, 2011 against the purchaser and for such purposes Mr. Sujit Saha, advocate, Bar Association Room No. 7 is appointed Receiver to take possession of the assets and properties of the purchaser. The Receiver will be entitled to an initial remuneration of 300 GMs. Accordingly, the decree holder is entitled to execute the decree dated 7th October, 2011 against the purchaser and for such purposes Mr. Sujit Saha, advocate, Bar Association Room No. 7 is appointed Receiver to take possession of the assets and properties of the purchaser. The Receiver will be entitled to an initial remuneration of 300 GMs. Let a report be filed by the Receiver on the next date of hearing. Matter to appear in the list on 3rd October, 2013. Prayer for stay made is considered and rejected." 20. Being aggrieved by the Order dated 11th September, 2013 of Nadira Patherya, J. whereby the appellant Amrit Fresh Private Ltd. had been held liable for the dues of the Judgment-debtor to the respondent No. 1, the appellant filed an appeal being APO 307 of 2013, which was allowed by the judgment and Order dated 18th February, 2014 of the Division Bench of A.K. Banerjee and A.K. Mondal, J.J., of which review has been sought by the respondent No. 1. 21. The Division Bench held : "We have considered the rival contentions. The learned Judge rightly held, if the claim had a charge on the property, the responsibility would be on the transferee. We do not, however, find, any charge created on the property. It was a simple claim for goods sold and delivered to the company being a juristic person. We have closely examined the agreement that the respondent no. 1 had with the respondent no. 2. The agreement did not speak of any immovable property. It is unfortunate, the respondent no.2 is avoiding their liability. May be they are not in a position to discharge the same. However, we cannot foist the liability on the purchaser who purchased it in a public auction held by the bank when the bank was in possession of the property in terms of the provisions of SARFAESI Act. The Receiver stands discharged. Filing of accounts is dispensed with. The judgment and order is set aside." 22. The applicant respondent No. 1 filed a Special Leave Petition in the Supreme Court being SLP No. 22419 of 2014 challenging the judgment and order dated 18th February, 2014 of the Division Bench, of which review has been sought. The Receiver stands discharged. Filing of accounts is dispensed with. The judgment and order is set aside." 22. The applicant respondent No. 1 filed a Special Leave Petition in the Supreme Court being SLP No. 22419 of 2014 challenging the judgment and order dated 18th February, 2014 of the Division Bench, of which review has been sought. It appears that on 15th September, 2014, Counsel appearing on behalf of the applicant respondent No. 1 in the Supreme Court, sought permission of the Supreme Court, to withdraw the Special Leave Petition, with liberty to approach the High Court by filing an appropriate review petition. Such leave was granted. 23. The averment in this review petition that the Supreme Court directed the applicant respondent No. 1 to file a review petition in this Court, is misleading. On the prayer made on behalf of the applicant respondent No. 1, the Supreme Court granted leave to respondent No. 1 to withdraw the Special Leave Petition filed in the Supreme Court, with liberty to file an application for review in this Court. The Supreme Court did not consider the question of maintainability of an application for review of the judgment and Order of the Division Bench of A.K. Banerjee and A.K. Mondal, JJ. allowing the appeal against the order of Nadira Patherya, J. 24. Under Order 47, Rule 1 of the Code of Civil Procedure, 1908, any person, considering himself aggrieved by a judgment and order, or a decree, from which an appeal is allowed, but from which no appeal has been preferred, or by a judgment and order or decree from which no appeal is allowed, may apply for review of the judgment and order or decree to the Court which passed the judgment and order or decree, upon discovery of new and important matter or evidence, which after the exercise of due diligence, was not within his knowledge or could not be produced by him, at the time when the judgment and order/decree was passed. An application for review might also be made, when there is an apparent mistake or error in the judgment and order/decree of which review has been sought or for any other sufficient reason. 25. An application for review might also be made, when there is an apparent mistake or error in the judgment and order/decree of which review has been sought or for any other sufficient reason. 25. The words new and important matter refers to evidence or other matter in the nature of evidence and not to legal provisions or legal authorities in existence on the date of the judgment, which were not brought to the notice of the Court. No review can, therefore, be sought on the ground of discovery of new authorities, which would show that the decision is not correct, even though, discovery of an earlier decision between the same parties, which operates as res judicata may be discovery of new and important matter within this rule. 26. It is not open to Court to indiscriminately reopen cases, in which final orders are passed, and it is only where something very grave and very material, has not been pointed out, such as an important position of law or a judicial decision which would virtually go to the root of the matter, that the Court might reconsider its order. 27. An application for review on the ground of discovery of fresh evidence is also to be refused, unless it can be shown that such evidence could not have been produced at the time of hearing, in spite of diligence. It is well settled that an apparent error on the face of the record may be a ground for review. However, it is to be shown that the error is so manifest and clear that no Court would permit such an error to remain on record. It is true that the error is not limited only to facts but may also include errors of law, but the law must be definite and capable of ascertainment. An erroneous view of the law on a debatable point or a wrong exposition of law or a wrong application of the law or a failure to apply the proper law cannot be considered a mistake or error apparent on the face of the record. 28. It is important to remember that the Court cannot, in exercise of its power of review, arrogate power to itself to decide the case over and over again, because it feels that the assessment of evidence etc. done earlier was faulty or even incorrect. 28. It is important to remember that the Court cannot, in exercise of its power of review, arrogate power to itself to decide the case over and over again, because it feels that the assessment of evidence etc. done earlier was faulty or even incorrect. In Chajju Ram v. Neki reported in 26 CWN 697 : (1922) 24 BOM LR 1238, the Privy Council, after reviewing the case law, declared that the expression "any other sufficient reason" should be interpreted as maintaining a reason sufficient on grounds at least analogous to those specified immediately previously. This interpretation has been adopted by the Supreme Court in Raja Shatrunjit (dead) by LRs v. Mohammad Azmat Azim Khan and others reported in AIR 1971 SC 1474 etc.; Moran Mar Basselios Catholicos & Anr. v. Most Rev. Mar Poulose Athanasius & Ors. reported in AIR 1954 SC 526 ; Ajit Kumar Rath v. State of Orissa & Ors. reported in AIR 2000 SC 85 . 29. Of course, even though the expression on any other sufficient reason should be construed ejusdem generis with the other provisions of the rule, imposing limits on the exercise of the power of review, a too narrow interpretation of the words will not be in accordance with equitable principles. A review may be granted on the ground of existence of "sufficient cause" where the decree or order has been passed under some misconception, due to mistake of the counsel, or where a party has not had a fair opportunity of producing his evidence or where there was total non-representation of the party seeking review on grounds not attributable to that party to consider important evidence or relevant material due to mistake of the counsel in not bringing it to the notice of the Court. This proposition finds support from the judgment of the Supreme Court in Board of Control for Cricket in India and another v. Netaji Cricket Club and Others reported in (2005) 4 SCC 741 , cited by Mr. Pal. 30. Thus, an order may be reviewed where the Court has failed to consider important facts on record, or provisions of law, which go to the root of the jurisdiction of the Court, or where the Court fails to consider an important plea or issue, or where the case is an exceptional one, as the point involved is one of general importance. 31. 31. The Court may review its order, where the Court is satisfied that it is necessary to do so for the sake of justice. However, a review cannot be allowed to enable a party to raise issues, which could and ought to have been raised at the time of hearing, just to give another opportunity to the applicant to establish his case or on the ground that the case has been mismanaged by the appellants counsel or where the Court has wrongly decided a question of law or proceeded on a wrong exposition of the law. There can be no review on the ground of a decision being erroneous on merits. A finding given by an Appellate Court is not reviewable even though it may be erroneous. The Review Court cannot re-hear and correct an erroneous judgment. The fact that another view could have been taken having regard to the materials on record would also not be ground for review. 32. The short question raised by Mr. Paul in this review application is whether the movable properties of the Judgment debtor could have been sold to the appellant, Amrit Fresh Private Ltd. under the provisions of the SARFAESI Act, a question which has been considered by the Appeal Court, and answered in the affirmative. 33. The SARFAESI Act inter alia provides:- "Section 13(1) Notwithstanding anything contained in Section 69 or Section 69-A of the Transfer of Property Act, 1882 (4 of 1882), any security interest created in favour of any secured creditor may be enforced, without the intervention of the court or tribunal, by such creditor in accordance with the provisions of this Act. (2) Where any borrower, who is under a liability to secured creditor under a security agreement, makes any default in repayment of secured debt or any instalment thereof, and his account in respect of such debt is classified by the secured creditor as non-performing asset, then, the secured creditor may require the borrower by notice in writing to discharge in full his liabilities to the secured creditor within sixty days from the date of notice failing which the secured creditor shall be entitled to exercise all or any of the rights under sub-section (4). (3) The notice referred to in sub-section (2) shall give details of the amount payable by the borrower and the secured assets intended to be enforced by the secured creditor in the event of non-payment of secured debts by the borrower. (3A) ........ (4) In case the borrower fails to discharge his liability in full within the period specified in sub-section (2), the secured creditor may take recourse to one or more of the following measures to recover his secured debt, namely:- (a) take possession of the secured assets of the borrower including the right to transfer by way of lease, assignment or sale for realising the secured asset; .......... (6) Any transfer of secured asset after taking possession thereof or take over of management under sub-section (4), by the secured creditor or by the manager on behalf of the secured creditor shall vest in the transferee all rights in, or in relation to, the secured asset transferred as if the transfer had been made by the owner of such secured asset." 34. Section 13 of the SARFAESI Act provides that not withstanding anything contained in Section 69 or 69A of the Transfer of Property Act, 1882, any security interest created in favour of any secured creditor may be enforced without the intervention of the Court or Tribunal and by such creditor in accordance with the provisions of the SARFAESI Act. 35. Where any borrower, who is under a liability to a secured creditor under a security agreement, makes any default in repayment of a secured debt or any instalment thereof, and his account in respect of such debt is classified by the secured creditor as non-performing asset, then, the secured creditor may request the borrower, by a notice in writing, to discharge his liabilities to the secured creditor in full, within 60 days from the date of the notice, failing which the secured creditor would be entitled to exercise all or any of the rights under Sub-section (4) of Section 13 of the SARFAESI Act. 36. 36. Sub-section (4) of Section 13 of the SARFAESI Act provides that, in case the borrower fails to discharge his liability in full within the period stipulated in Sub-section (2), the secured creditor may take recourse to inter alia the measure of recovering his secured debt, by taking possession of the secured assets of the borrower, including the right to transfer by way of lease, assignment or sale, for realising the secured debt. 37. Secured asset is defined in Section 2(zc) of the SARFAESI Act to mean property on which secured interest is created, and secured debt has been defined in Section 2(zc) to mean a debt which is secured by any security interest. 38. Section 2(zf) which defines the term "security interest" is set out here in below. "2.(zf). " security interest" means right, title and interest of any kind whatsoever upon property, created in favour of any secured creditor and includes any mortgage, charge, hypothecation, assignment other than those specified in section 31." 39. Section 2(t) defines property to mean (i) immovable property, (ii) movable property, (iii) any debt or any right to receive payment of money, whether secured or unsecured, (iv) receivables whether existing or future, and (v) intangible assets being know-how, patent, copy right, trade mark, licence, franchise or any other business or commercial right of similar nature. 40. Mr. Pal submitted that the definition of "security interest" in Section 2(zf) of the SARFAESI Act means right, title or interest of any kind whatsoever created in favour of any secured creditor other than those specified in Section 31 of the said Act. 41. Mr. Pal argued that the hypothecated movable properties of the Judgment-debtor could not have been sold under the SARFAESI Act, since the same did not constitute "security interest", in view of Section 2(zf) read with Section 31 of the said Act. The Appeal Court had passed the judgment and order of which review is being sought, overlooking the provisions of Section 31(b) of the SARFAESI Act, to which the attention of the Appeal Court had not been drawn. Had the attention of the Appeal Court been drawn to Section 31(b), the decision in the appeal would have been otherwise. 42. Section 31(b) of the SARFAESI Act provides. "31. Had the attention of the Appeal Court been drawn to Section 31(b), the decision in the appeal would have been otherwise. 42. Section 31(b) of the SARFAESI Act provides. "31. The provisions of this Act shall not apply to - (b) a pledge of movables within the meaning of section 172 of the Indian Contract Act, 1872 (9 of 1872);" 43. The definition of "security interest" excludes a pledge of movables within the meaning of Section 172 of the Contract Act. In other words, "security interest" does not include the bailment of goods as security for payment of a debt, or for performance of a promise. Bailment has been defined in Section 148 of the Contract Act as delivery of goods by one person to another for some purpose, upon a contract that they shall, when the purpose is accomplished, be returned or otherwise disposed of according to the directions of the person delivering them, i.e., the bailor. A pledge and/or bailment of goods contemplates delivery of possession of the goods by the bailor to the bailee. The bailee is in possession of the goods. In hypothecation there is no delivery of possession, as will be evident from the definition of hypothecation in Section 2(n) of the SARFAESI Act. In this case, the goods remained with the Judgment-debtor, till invocation of Section 13 of the SARFAESI Act. The movable properties of the Judgment debtor were not pledged to Indian Bank, within the meaning Section 172 of the Contract Act. Section 31(b) of the SARFAESI Act was, therefore, not attracted. 44. Section 132 of the Transfer of Property Act, 1882, which provides that the transferee of an actionable claim takes it, subject to all the liabilities and equities to which the transferor was subject, in respect thereof, at the date of the transfer, has no application since the appellant Amrit Fresh Pvt. Ltd. has not acquired any actionable claim. An actionable claim means a claim to any debt other than a debt secured by mortgage of immovable property or by hypothecation or pledge of movable property or to any beneficial interest in move-able property not in the possession, either actual or constructive of the claimant, which the Civil Courts recognise as affording grounds for relief, whether such debt or beneficial interest be existent, accruing, conditional or contingent, in view of Section 3 of the Transfer of Property Act. 45. 45. Section 52 of the Transfer of Property Act, 1882 has no application to the sale of the immovable properties of the Judgment-debtor to the appellant, Amrit Fresh Pvt. Ltd., since there was no suit or proceedings pending in any Court of law with regard to the said properties. Section 52 of the Transfer of Property Act has no application to arbitration proceedings. In any case, even in the arbitration proceedings, no right to any immovable property was directly and specifically in issue. The Single Bench judgment of the Orissa High Court in Smt. Bela Dibya v. Ramkishore Mohanty reported in AIR 1969 Orissa 114 has no application in this case. The Single Bench judgment of the Delhi High Court in Ideal Bank Ltd. (In Liquidation), Applicant v. Pride of India Pictures Ltd. (In Liquidation), Opposite Party reported in AIR 1983 Delhi 546, rendered in the particular facts of the case, where the SARFAESI Act was not in issue, is also not applicable in this case. Moreover, the judgments are not binding on this Court. 46. In view of Section 13 read with Sections 2(zb), 2(zc), 2(ze), 2(zf), 2(t) of the SARFAESI Act, there can be no doubt that hypothecated movable properties might be sold under the provisions of SARFAESI Act. Section 35 of the SARFAESI Act provides that the provisions of the said Act shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force, or any instrument having effect by virtue of any such law. 47. Clause 13 of the terms and conditions of sale of the movable and the immovable properties of the judgment debtor, to which Mr. Pal referred, inter alia, provided that it would be the responsibility of the purchaser to deal with the claims or disputes or litigation, if any, relating to the property, its use or otherwise after acceptance of the tender and the purchaser would meet such claims for charges, damages, penalty etc. at the purchasers own cost. The seller, that is, Indian Bank, would not accept any claim or responsibility on this account, and would not be held accountable or be asked to reimburse any amount in this regard. Clause 13 covers claims, disputes or litigation relating to the property and not money claims against the owner of the property. at the purchasers own cost. The seller, that is, Indian Bank, would not accept any claim or responsibility on this account, and would not be held accountable or be asked to reimburse any amount in this regard. Clause 13 covers claims, disputes or litigation relating to the property and not money claims against the owner of the property. The contention that the appellant, Amrit Fresh Pvt. Ltd. was liable to satisfy the dues of the Judgment-debtor in terms of the award, cannot therefore be sustained. The sale may have been made on "as is where is and as is what is basis" as observed by the learned Single Bench. However, the Hon'ble Appeal Court very rightly found that there was no basis for the finding of the Single Bench that the properties of the Judgment-debtor purchased by the appellant Amrit Fresh Pvt. Ltd. under the SARFAESI Act were encumbered. The Hon'ble Appeal Court rightly held that the appellant, Amrit Fresh Pvt. Ltd., the purchaser in an auction sale, for valuable consideration had no liability to discharge the debts of the Judgment-debtor. 48. There are no grounds for review of the judgment and/or order dated 18th February, 2014. 49. The application for review is dismissed. Sahidullah Munshi, J. - I agree. Application is dismissed.