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2018 DIGILAW 380 (CAL)

Jupiter Trading Company v. Union Bank of India

2018-05-16

SABYASACHI BHATTACHARYYA

body2018
JUDGMENT : Sabyasachi Bhattacharyya, J. 1. The present application under Article 227 of the Constitution of India has been preferred at the instance of borrowers against a judgment and order dated March 23, 2018 passed by the Debts Recovery Appellate Tribunal at Kolkata in Appeal No. 198 of 2012/2009/385/ 142, whereby Order No. 47 dated April 20, 2009 passed by the Debts Recovery Tribunal in O.A. No. 6 of 2004 was affirmed. 2. Upon the borrowers having failed to repay a debt to the opposite party no. 1Bank, the latter instituted the aforesaid recovery proceedings before the Debts Recovery Tribunal and vide Order No. 47 dated April 20, 2009, the Tribunal allowed such application, inter-alia holding that all the defendants, that is, the borrowers and the guarantors, were jointly and severally liable to pay to the applicant - Bank a sum of Rs. 25,91,105.30 p(Rupees Twenty Five Lakh Ninety One Thousand One Hundred Five and Thirty paise) together with simple interest at the rate of six per cent per annum, that the applicant-Bank should deduct the payments received by it during the pendency of the litigation, and that the future interest granted should be calculated in the manner of reducing balance system from the date of filing of the original application till the date of realization. Further consequential directions were given, including a direction upon the applicant-Bank to deduct the payments received by it during the pendency of the litigation. The Registrar of the Tribunal was directed to place the recovery certificate in terms of the order for the issuance of the same in favour of the applicant-Bank under Section 19(22) of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (subsequently renamed as Recovery of Debts and Bankruptcy Act, 1993). 3. Being aggrieved by the order, the borrowers, who are the present petitioners, preferred Appeal No. 198 of 2012/2009/385/142 before the Debts Recovery Appellate Tribunal at Kolkata. The Appellate Tribunal, by its judgment and order dated March 23, 2018, dismissed such appeal, thereby affirming the order of the Debts Recovery Tribunal. 4. Being aggrieved by such judgment of affirmance, the petitioners have preferred the instant revisional application. 5. The Appellate Tribunal, by its judgment and order dated March 23, 2018, dismissed such appeal, thereby affirming the order of the Debts Recovery Tribunal. 4. Being aggrieved by such judgment of affirmance, the petitioners have preferred the instant revisional application. 5. The first ground of challenge urged by the petitioners is that, despite the direction of the Debts Recovery Tribunal as to deduction of the payments received by the Bank during the pendency of the litigation, a certificate of recovery was issued in respect of the entire dues as awarded, that is, Rs. 25,91,105.30 p (Rupees Twenty Five Lakh Ninety One Thousand One Hundred Five and Thirty paisa) and the substantial amounts already paid by the petitioners to the Bank during pendency of the litigation were not given credit to. 6. In this context, the petitioners relied on the provisions of Section 2(g) of the Recovery of Debts and Bankruptcy Act, 1993 (hereinafter referred to as the “Act”) read with Section 19(22) of the said Act, trying to impress upon this Court that the term “debt” under the said Act includes within its connotation adjustments given for any amounts which have been paid in part satisfaction of the award during pendency of the litigation. 7. Petitioners also relied on a judgment reported at M/s Unique Butyle Tube Industries Private Limited vs. U.P. Financial Corporation and Others, AIR 2003 SC 2103 for the proposition that the Tribunal is to adjudicate the liability of the defendant for the purpose of recovery and only then to issue a certificate under Section 19(22) of the said Act. 8. The petitioners next argue that the Tribunal committed a jurisdictional error in directing the Registrar, instead of the Recovery Officer, as contemplated in Section 19(22) of the said Act, to place the recovery certificate. As such, it is argued, the judgment of the Appellate Tribunal affirming the said direction is also vitiated and ought to be set aside. 9. The third point canvassed by the petitioners is that, despite the valuation of the property in question as arrived at for the purpose of issuing the certificate being challenged, neither of the Tribunals took such objection into consideration. 10. Lastly the petitioners argued, the balance consideration amount of sale proceeds was accepted in violation of an order of stay passed by the Appellate Tribunal on May 14, 2013. 10. Lastly the petitioners argued, the balance consideration amount of sale proceeds was accepted in violation of an order of stay passed by the Appellate Tribunal on May 14, 2013. As such, the entire proceeding for sale is vitiated as being violative of an order of the Appellate Tribunal and thus, ought to be set aside. 11. The judgment cited by the petitioners, being M/s Unique Butyle Tube Industries Private Limited vs. U.P. Financial Corporation and Others, although lays down a well settled proposition of law, has no direct relevance to the proposition at hand. The said decision does not throw light on whether subsequent payments made by the award debtors during litigation would have to be adjusted with the debt due. As such, the said citation does not apply to the instant case. 12. The guarantors supported the arguments of the borrowers/petitioners and added that an application for putting up the guarantors’ challenge to the valuation was overlooked by the Appellate Tribunal in finally deciding the appeal without disposing of such challenge. As such, the guarantors submit, the judgment of the Appellate Tribunal ought to be set aside on the said ground alone, if not also on the other grounds. 13. While controverting the allegations of the petitioners and the guarantors, it is argued on behalf of the opposite party no. 1-Bank that the question of deduction of the amounts paid by the borrowers during pendency of the litigation would only arise at the time of distribution of the sale proceeds. The question of such deductions at the stage of sale would be premature according to the opposite party no. 1. 14. The opposite party no. 1 next argues that merely because a direction was given to the Registrar to place the recovery certificate in terms of the order for issuance of the same in favour of the applicant-Bank, the direction itself could not be said to be vitiated. The Registrar was an Officer of the Tribunal, who was directed only to do a ministerial job in placing the recovery certificate. The issuance of such certificate would, in any event, be under Section 19(22) of the said Act, as directed by the Tribunal. As such, the said objection of the petitioners was, according to the opposite party no. 1, frivolous and technical. 15. The next submission of the opposite party no. The issuance of such certificate would, in any event, be under Section 19(22) of the said Act, as directed by the Tribunal. As such, the said objection of the petitioners was, according to the opposite party no. 1, frivolous and technical. 15. The next submission of the opposite party no. 1 was that there had been no violation of the order of stay passed by the Appellate Tribunal since the certificate was issued much prior to such order and no positive act was done subsequent to the stay order in furtherance of the sale. 16. Lastly, the opposite party no. 1 submits that the objection raised as to the valuation was finally settled vide order No. 38 dated May 10, 2013 by the Recovery Officer of the Tribunal. Relying on such order, a copy of which was filed in Court, the opposite party no. 1submits that it was categorically held therein that the property was correctly valued for the purpose of issuing the certificate and the award debtors were merely trying to stall fruition of the award by such frivolous objections. As such, the same objection could not be repeated by the award debtors over and over again. 17. This apart, it was submitted by the opposite party no. 1 that it would be evident from the order sheet of the Tribunal that repeated chances were given to the borrowers to enter into a compromise with regard to debts due from them. The borrowers failed to deposit the amounts according to the agreed terms at least 3 to 4 times, compelling the Tribunal to come to the finding that the award debtors were not serious in their efforts to liquidate the dues as per the agreed terms. Ultimately there was no other option for the Tribunal but to dispose of the matter by holding that, in view of the failure of the award debtors to deposit the dues as per agreed terms, an award was to be passed in respect of the entire dues. 18. Upon hearing such submissions, the Tribunal has arrived at the following decisions. 19. 18. Upon hearing such submissions, the Tribunal has arrived at the following decisions. 19. The term “debt” as defined in Section 2(g) of the said Act, is as follows: “debt” means any liability (inclusive of interest) which is claimed as due from any person by a bank or a financial institution or by a consortium of banks or financial institutions during the course of any business activity undertaken by the bank or the financial institution or the consortium under any law for the time being in force, in cash or otherwise, whether secured or unsecured, or assigned, or whether payable under a decree or order of any civil Court or any arbitration award or otherwise or under a mortgage and subsisting on, and legally recoverable on, the date of the application and includes any liability towards debt securities which remains unpaid in full or part after notice of ninety days served upon the borrower by the debenture trustee or any other authority in whose favour security interest is created for the benefit of holders of debt securities. The portion in italics inserted by Act 44 of 2016 with effect from September 1, 2016. 20. It is evident from such definition that the adjudication of debt has to be referable to the debt of the application itself. 21. Section 19(22) of the said Act, on the other hand, stipulates that the Presiding Officer shall issue a certificate of recovery along with the final order under Sub-Section (20) for payments of debt with interest under his signature to the Recovery Officer for recovery of the amount of debt specified in the certificate. 22. Sub-Section (20) of Section 19 of the said Act says that the Tribunal may, after giving the applicant and the defendant an opportunity of being heard in respect of all claims, set off or counter-claim, if any and interest on such claims, within thirty days from the date of conclusion of the hearing pass interim or final order as it deems fit, which may include order for payment of interest from the date on which payment of the amount is found due up to the date of realization or actual payment. 23. If the said provisions are read together, there is no scope of factoring in any amount paid during legal proceedings by the award debtors to be adjusted from the debt. 24. 23. If the said provisions are read together, there is no scope of factoring in any amount paid during legal proceedings by the award debtors to be adjusted from the debt. 24. As such, the process of issuance of a certificate of recovery, as contemplated in the said Act, cannot take into account such adjustments. 25. However, Section 19(25) confers power on the Tribunal to make such orders and give such directions as may be necessary or expedient to give effect to its orders or to prevent abuse of its process or to secure the ends of justice. As such, the Tribunal was perfectly within its jurisdiction in directing deduction of the payments received by the opposite party no. 1-Bank during pendency of the litigation. Moreover, it would be unjust if such amounts are not considered while satisfying the debt due to Banks. 26. The obvious mode of reconciliation between the two propositions would be that, although the sale certificate and sale proceeds would be in respect of the debt adjudicated by the Tribunal, while distributing the proceeds, the amounts already paid by the award debtors during litigation would be deducted and the balance would be handed over to the award holder/Bank. 27. Hence, there is substance in the contention of the opposite party no. 1 that such deduction would not fetter the Court from passing an award in respect of the entire debt and the issuance of a certificate of recovery for such amount. 28. Regarding the question of the Registrar having been directed to place the recovery certificate, it is clear that such placement of the certificate was directed to be for the issuance of the same under Section 19(22) of the said Act. Since Section 19(22) of the said Act provides that the certificate of recovery would be issued to the Recovery Officer, who would recover the amount of debt specified in the certificate, the preceding step of placing the recovery certificate could very well be delegated to the Registrar, who would act as an Officer of the Tribunal instead of the Presiding Officer directly discharging such function. Hence, the related objection taken by the petitioners is entirely frivolous and hyper technical and does not hold water. 29. Hence, the related objection taken by the petitioners is entirely frivolous and hyper technical and does not hold water. 29. As such, the third objection raised by the petitioners, as to the violation of a stay order in taking steps for sale having vitiated the sale, is also not impressive. A perusal of the said stay order dated May 14, 2013 reveals that the Recovery Officer was directed by the Appellate Tribunal not to proceed with the sale. The certificate was already issued previously and no positive steps were taken by the Recovery Officer thereafter. Even if the proposed purchasers deposited the balance consideration amount of the sale proceeds subsequently, such action did not amount to proceeding with the sale and could not, in any event, vitiate the sale itself. In fact, the sale has not been confirmed as yet. Hence the direction of the Appellate Tribunal, not to proceed with the sale, is being complied with. 30. Next coming to the objection regarding valuation of the property in question for the purpose of sale, the Recovery Officer, after hearing both sides, had passed Order No. 38 dated May 10, 2013, thereby categorically finding that the valuation arrived at for the purpose of issuance of the certificate was justified. Reasons were also given in such order for arriving at such finding. The said order attained finality in view of no successful challenge having been mounted against the same. In such view of the matter, neither the borrower can take such point afresh, nor can the guarantors re - agitate the said issue, at a juncture when the Appellate Tribunal was hearing arguments. Such belated attempt of the guarantors was only a futile attempt to stall the proceedings. 31. To cap it all, the award debtors had not even cared to file any written statement against the claim before the Tribunal. As such, the scope of adjudication in the present proceedings is, in any event, restricted to ascertaining the veracity of the case of the opposite party no. 1-Bank only. Independent objections by award debtors have very little footing to stand on. 32. Although the objection as to valuation arises out of a subsequent development, such objection cannot be permitted to be repeated time without number, in particular since such question was laid at rest by the Recovery Officer long back. 33. 1-Bank only. Independent objections by award debtors have very little footing to stand on. 32. Although the objection as to valuation arises out of a subsequent development, such objection cannot be permitted to be repeated time without number, in particular since such question was laid at rest by the Recovery Officer long back. 33. Hence, upon a consideration of the entire materials on record, there is no justification for interfering with the orders impugned herein. 34. Accordingly, C.O. No. 815 of 2018 is dismissed without any order as to costs.