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2019 DIGILAW 3476 (MAD)

Vijayalakshmi Ginning Factory v. Syndicate Bank

2019-12-20

M.SATHYANARAYANAN, R.HEMALATHA

body2019
ORDER : R. HEMALATHA, J. PRAYER : Writ Petition filed under Article 226 of the Constitution of India praying for issuance of a writ of certiorarified mandamus calling for the records of the sixth respondent pertaining to the order dated 30.09.2019 passed in AIR.No.491 of 2018 and quash the same and consequently, direct the sixth respondent to hear the appeals in AIR.Nos.491 of 2018, 492 of 2018 and 493 of 2018 on merits, without directing the petitioner to make pre-deposit. This petition has been filed by the petitioner, M/s.Vijayalakshmi Ginning Factory, Rajapalayam aggrieved over the order of Debts Recovery Appellate Tribunal, Chennai dated 30.09.2019, requiring to make a pre-deposit of Rs.17,00,00,000/- on or before 29.10.2019. 2. The Debts Recovery Appellate Tribunal in its impugned order had insisted on the pre-deposit of Rs.17,00,00,000/- (Rupees Seventeen Crores only). The appeal before Debts Recovery Appellate Tribunal was against the Debts Recovery Tribunal order of rejecting the application at the SR stage itself for impleading the writ petitioner as a party in all the proceedings pending before the Debts Recovery Tribunal including the OA.No.475 of 2015. 3. M/s.Vijai Spinners (RJPM) Private Limited, Rajapalayam, the second respondent in the present Writ Petition is the principal borrower who had availed many credit facilities from Syndicate Bank, Rajapalayam Branch during 2004 to 2014 for which the third, fourth and fifth respondents were guarantors and the third and fifth respondents were mortgagors too. Since repayments were not forthcoming, the loans sanctioned to the second respondent were classified as Non Performing Assets in 2015. Therefore, the Bank had filed OA.No.475 of 2015 on 15.04.2015 for recovery of a sum of Rs.35,22,29,100.13/- along with subsequent interest in Debts Recovery Tribunal, Madurai. There were also three Interlocutory Applications filed by the Bank in IA.Nos.1837 of 2015, 1838 of 2015 and 1839 of 2015 along with OA.No.475 of 2015 (i) to attach the property of the fifth respondent (ii) to pass an order of ad-interim injunction restraining the fifth respondent from alienating or encumbering the said property and (iii) to direct the concerned Sub Registrar to cause an entry of the order of attachment in the Register. An ex-parte order directing the fifth respondent to furnish security for Rs.36,00,00,000/- (Rupees Thirty Six Crores only) by 04.12.2015 and an order of ad-interim injunction restraining the fifth respondent from alienating or encumbering the property were passed by the Debts Recovery Tribunal. An ex-parte order directing the fifth respondent to furnish security for Rs.36,00,00,000/- (Rupees Thirty Six Crores only) by 04.12.2015 and an order of ad-interim injunction restraining the fifth respondent from alienating or encumbering the property were passed by the Debts Recovery Tribunal. Apart from that, the concerned Sub-Registrar was also directed to cause entry in the Register. 4. Subsequently, the present writ petitioner who claimed to be the owner of the property attached in IA.No.1837 of 2015, filed IA.SR.No.7881 of 2016 in IA.No.1837 of 2015, IA.SR.No.7880 of 2016 in IA.No.1838 of 2015 and IA.SR.No.7883 of 2016 in IA.No.1839 of 2015 praying to implead them as a party in all the three Interlocutory Applications and in the Original Application in OA.No.475 of 2015. According to them, they had purchased the said property vide sale deed dated 03.08.2015 in Document No.3536 of 2015 on the file of the Sub-Registrar, Rajapalayam from the fifth respondent M/s.Subhashini Mills Private Limited. It was also pleaded by them that they were in no way liable for the debts in the name of M/s.Vijai Spinners (RJPM) Private Limited or any of the other respondents who had guaranteed the loans. It was also admitted by them that the fifth respondent, M/s.Subhashini Mills Private Limited, as one of their partners had contributed the said property towards capital thereby conveying the said property in favour of the petitioner vide sale deed dated 03.08.2015 and as such as on 14.09.2015, the fifth respondent retired from the partnership firm, due to which, the petitioner firm had to reconstitute the partnership by inducting a new partner. In fact on 14.09.2015, there was retirement of two partners one of whom was the fifth respondent and the other one by name Pareekshith. All the three IA.SR.Nos.7880 of 2016, 7881 of 2016 and 7883 of 2016 were dismissed by the Debts Recovery Tribunal vide orders dated 29.06.2018, stating that they were not maintainable due to the manner in which the sale of the attached property was effected by the fifth respondent and the malafide intentions of both the writ petitioner as well as the fifth respondent. 5. 5. Aggrieved over these orders, the petitioner filed appeals in AIR.Nos.491 of 2018, 492 of 2018 and 493 of 2018 before the Debts Recovery Appellate Tribunal and the Debts Recovery Appellate Tribunal vide its orders dated 30.09.2019, directed the petitioner to make pre-deposit of Rs.17,00,00,000/- (Rupees Seventeen Crores Only) within a period of four weeks to entertain the appeals, failing which, the appeals would stand dismissed for want of compliance. Now, the Writ Petition is filed against the order passed by the Debts Recovery Appellate Tribunal. 6. A bare perusal of the documents found in the typed set of papers of the first respondent shows that as early as 28.07.2015 itself, it was resolved by M/s.Subhashini Mills Private Limited to promote a partnership firm in the name and style of M/s.Vijayalakshmi Ginning Factory, consisting of three partners namely (i) M/s.Subhashini Mills Private Limited, (ii) A.Pareekshith, son of the third and fourth respondents (Managing Directors of M/s.Subhashini Mills Private Limited) and (iii) M.K. Suresh. Thus, it is clear that M/s.Vijayalakshmi Ginning Factory is an offshoot of M/s.Subhashini Mills Private Limited and the same was registered on 11.09.2015 with the Registrar of firms. Interestingly, the sale deed dated 03.08.2015, executed by the fifth respondent, M/s.Subhashini Mills Private Limited in favour of the writ petitioner was also registered only on 11.09.2015. Subsequently, on 14.09.2015, the fifth respondent as well as Pareekshith retired from the partnership of the writ petitioner firm and a new partner M. Ramesh was inducted simultaneously. It is pertinent to mention here that the exparte orders passed by the Debts Recovery Tribunal in IA.Nos.1837 of 2015, 1838 of 2015 and 1839 of 2015 was dated 04.09.2015. As on 04.09.2015, the fifth respondent was not a partner in the writ petitioner firm. Officially she became a partner in the petitioner firm only on 11.09.2015. The fact that the fifth respondent retired from the writ petitioner partnership on 14.09.2015, that is, just after three days of the sale deed (11.09.2015) and the Registration of the petitioner partnership firm (11.09.2015) also adds to the suspicion of attempt to circumvent the law to protect the attached property. It is also to be noted that the said property attached by the order of the Debts Recovery Tribunal was not mortgaged as a collateral security for the loan availed by the second respondent. 7. It is also to be noted that the said property attached by the order of the Debts Recovery Tribunal was not mortgaged as a collateral security for the loan availed by the second respondent. 7. The contention of Mr.Abdul Wahab, learned counsel for the Bank is that the petitioner after obtaining the attached property in a malafide manner has filed this petition only to prolong the litigation and that if persons like the petitioner and the fifth respondent are added up together in large numbers, it will throw the economy haywire. 8. It is a fact that much tolerance has been provided by the legislature to ensure that the pre-deposit which was 75% of the debt due at the inception of the legislation was reduced to 50% and recently amended to even as low as 25% at the discretion of the Debts Recovery Appellate Tribunal. The significance of such pre-deposit being to substantiate and reinforce the bonafide of the borrower in the matter of repayment of the loan to the secured creditor. Such transfers of the property after the attachment order of the Debts Recovery Tribunal and preplanned exclusion and inclusion of partners, by way of retirement and reconstitution deeds are all clearly an attempt to sabotage the recovery of the dues by the creditors. 9. In the instant case, the fifth respondent being one of the guarantors and mortgagors to the loans availed by the second respondent, was restrained by an order of ad-interim injunction dated 04.09.2015 passed by the Debts Recovery Tribunal, Madurai from alienating, encumbering the property and were also requested to furnish security for Rs.36,00,00,000/- (Rupees Thirty Six Crores Only) before 04.12.2015 and consequent upon non furnishing of security, the said property was attached. 10. Mr.Menon, learned counsel appearing for the writ petitioner relied on the decision in Sree Jeya Soundharam Textile Mills Private Limited vs. Canara Bank and others reported in 2019 (3) CTC 497 and contended that since the writ petitioner is neither a borrower nor a guarantor, he is not liable to make pre-deposits. He also drew the attention of this Court to the guidelines issued by the Division Bench of this Court, wherein, it has been held thus: “22...... He also drew the attention of this Court to the guidelines issued by the Division Bench of this Court, wherein, it has been held thus: “22...... (i) The borrowers and guarantors are liable to make pre-deposit as per the provisions of Section 18 of the SARFAESI Act or under Section 21 of the Recovery of Debts and Bankruptcy Act, 1993 for preferring an appeal before the Debt Recovery Appellate Tribunal. (ii) The 3rd parties, who had purchased the property prior to the date of mortgage or derived/accrued title or right or tenancy right over the property prior to the date of mortgage, are not liable to make any pre-deposit for preferring an appeal before the Debt Recovery Appellate Tribunal, provided that they establish before the Debt Recovery Appellate Tribunal that they derived/accrued title or right or tenancy right over the property prior to the date of mortgage and that the property was mortgaged with the Bank without their knowledge. If such 3rd parties file applications for waiver and if they establish that they have purchased the property or that they derived/accrued title, right or tenancy right prior to the date of mortgage and the property was mortgaged with the Bank without their knowledge, the Debt Recovery Appellate Tribunal shall give a finding with regard to the same and give exemption to such 3rd parties from making pre-deposit. (iii) The 3rd parties who had purchased the property either after the date of mortgage or derived/accrued title or right or tenancy right in respect of the property in question or after the initiation of SARFAESI proceedings are liable to make the pre-deposit and they should be treated on par with the borrower and the guarantor as per the provisions of both the Acts for the purpose of making pre-deposit. (iv) The Debt Recovery Appellate Tribunal shall consider the waiver applications filed by the 3rd parties, on merits and in accordance with law, following the principles laid down in this judgment and pass appropriate speaking orders giving findings with regard to the rights of the 3rd parties. (v) The secured creditors viz., the Banks and Financial Institutions or a Consortium or Group of Banks and Financial Institutions are not liable to make any pre-deposit for preferring an appeal before the Debt Recovery Appellate Tribunal. (v) The secured creditors viz., the Banks and Financial Institutions or a Consortium or Group of Banks and Financial Institutions are not liable to make any pre-deposit for preferring an appeal before the Debt Recovery Appellate Tribunal. (vi) The auction purchaser is not liable to make any pre-deposit while preferring an appeal to the Debt Recovery Appellate Tribunal as against the order passed by the Debts Recovery Tribunal. (vii) The appellant who has filed an appeal before the Debt Recovery Appellate Tribunal as against the Interlocutory order passed by the Debts Recovery Tribunal, is not liable to make the pre-deposit if the liability is not determined by the Debts Recovery Tribunal in the interlocutory order. (viii) In any other category other than the categories mentioned above, the Debt Recovery Appellate Tribunal shall decide the waiver application as per the principles laid down in this judgment.” In the instant case, the fifth respondent has sold the property in favour of the writ petitioner, M/s.Vijayalakshmi Ginning Factory despite the order of ad-interim injunction and attachment passed by the Debts Recovery Tribunal in IA.Nos.1837 of 2015, 1838 of 2015 and 1839 of 2015. Therefore, the said ruling may not apply to the facts of the present case. However, in a part of the decision in Sree Jeya Soundharam Textile Mills Private Limited vs. Canara Bank and others (cited supra), it has been held thus: “21.6. Though the appeals are filed under Section 18 of the SARFAESI Act or under Section 20 of the Recovery of Debts and Bankruptcy Act as against the order passed by the Debts Recovery Tribunal, the liability of pre-deposit under Section 18 and Section 21 would attract only when an appeal is filed against an order determining the liability. In other words, it could be said that when a liability is determined by the Tribunal, the aggrieved party can invoke the jurisdiction either under Section 20 of 1993 Act or under Section 18 of the SARFAESI Act. Such party shall be subject to the conditions imposed under the said provisions of the Acts. Other than such an order, if appealed, the provisions under Section 18 of the SARFAESI Act and Section 21 of the 1993 Act are not attracted. Therefore, in respect of the appeals filed as against the Interlocutory orders, where liability is not determined, the appellants are not liable to make the pre-deposit.” 11. Other than such an order, if appealed, the provisions under Section 18 of the SARFAESI Act and Section 21 of the 1993 Act are not attracted. Therefore, in respect of the appeals filed as against the Interlocutory orders, where liability is not determined, the appellants are not liable to make the pre-deposit.” 11. Mr.Menon, learned counsel appearing for the petitioner also relied on the decision of this Court in M/s.Ashok Wood Works and Another vs. Indian Overseas Bank in WP.No.22981 of 2019, dated 30.09.2019, in which it is held that pre-deposit would not be required to be insisted when the appeal in Debts Recovery Appellate Tribunal is against the order of the Debts Recovery Tribunal in the Interlocutory Application, since the amount of liability itself was not determined in OA. In the light of the above decisions, the Writ Petition is allowed with the following observations: (i) The writ petitioner should not alienate, encumber or otherwise deal with the property in any manner whatsoever till the legal proceedings are completed and an affidavit to that effect should be filed. Affidavit dated 16.12.2019 is also filed today. (ii) The Debts Recovery Appellate Tribunal is required to pass an order on merits without insisting on pre-deposit in AIR.Nos.491 of 2018, 492 of 2018 and 493 of 2018, within a period of four weeks from the date of receipt of a copy of this order. Consequently, the connected Miscellaneous Petition is closed. No costs.