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2024 DIGILAW 117 (KER)

Aryanet Trust v. Dhanlaxmi Bank Ltd.

2024-01-30

N.NAGARESH

body2024
JUDGMENT : The petitioners, who have availed credit facilities from the 1st respondent-Dhanalakshmi Bank, have invoked Article 227 of the Constitution of India to impugn Ext.P10 order dated 05.01.2024 in IA No.510 of 2021 in SA No.382/2018 of the Debts Recovery Tribunal-I, Ernakulam. 2. The 1st petitioner is a Trust running educational institutions and other petitioners are its Trustees. The Bank sanctioned Term loans and vehicle loans to the petitioners. When the loan repayments were defaulted and maintenance of credit accounts failed, the Bank invoked the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and issued Section 13(2) notice. The Bank issued possession notice and invoked Section 14 also. The Advocate Commissioner appointed by the court also issued notice to the petitioners to take over possession of secured assets. 3. The Bank later issued a notice of sale by public auction of the secured assets. The petitioners submitted a One Time Settlement proposal. When the Bank refused to consider the OTS proposal and proceeded with sale of the secured assets, the petitioners filed Ext.P1 SA No.382/2018 in the DRT challenging the proceedings. When the Bank issued fresh possession notices, the petitioners filed Ext.P4 IA No.1125/2019 for amendment and Ext.P5 IA No.1124/2019 for stay. As the Bank failed to file counter affidavit, the DRT passed Ext.P6 interim order dated 02.07.2019 directing to defer the scheduled sale on 03.07.2019. 4. The petitioners state that after lapse of two years of Ext.P6 interim order, the 1st respondent-Bank filed Ext.P8 IA No.510/2021 seeking to vacate Ext.P6 interim order. The petitioners filed Ext.P9 counter affidavit in IA No.510/2021. The Tribunal, however, vacated Ext.P6 interim order as per Ext.P10 order. The petitioners seek to set aside Ext.P10 order. 5. The counsel for the petitioners argued that Ext.P10 order is highly illegal and unsustainable for many reasons. Ext.P10 order has been passed vacating an interim order, after more than two years of grant of the interim order. When an interim order is left to operate for a period of two years and when the main SA itself was ripe for hearing, the Tribunal ought not have vacated the interim order after two years. 6. The counsel for the petitioners pointed out that Ext.P6 interim order, which is now vacated, is not an ex-parte interim order. It was an order passed after hearing all the parties. 6. The counsel for the petitioners pointed out that Ext.P6 interim order, which is now vacated, is not an ex-parte interim order. It was an order passed after hearing all the parties. There is no change of circumstances warranting variation of interim order now. Hence, the Tribunal committed a grave error in vacating the interim order. 7. The counsel for the petitioners relied on Rule 5A of the Debts Recovery Tribunal (Procedure) Rules, 1993 and argued that once an IA is allowed and finally disposed of, the order therein cannot be varied or reversed otherwise than by filing a review application or through an appeal under Section 18 of the Act, 2002. Ext.P8 application to vacate the interim order itself is not maintainable. 8. The Standing Counsel representing the 1st respondent-Bank resisted the OP(DRT). On behalf of the respondents, it is submitted that the petitioner was given a loan of Rs.12 Crores which, due to the default of the petitioners, has accumulated into a liability of about Rs.27 Crores. The loan account was declared as NPA in the year 2016 itself. The SA was filed in the year 2018. The secured assets were put to sale in the years 2018 and 2019. The sale did not fructify at that time. 9. Ext.P6 interim order staying further proceedings was passed by the Tribunal on 02.07.2019. A counter affidavit was filed immediately thereafter, on 10.07.2019. By that time, Covid-19 pandemic broke out. In view of the Covid-19 restrictions and multiple orders regulating the loan accounts of banking institutions, the respondents could not file an application to vacate the interim order during that time. The respondents filed interim application to vacate Ext.P6 order in the year 2021. The Tribunal finally vacated the interim order on 05.01.2024 as per Ext.P10 order. 10. The Tribunal has ample power to pass interim orders and to modify or vacate interim orders passed by it, in view of Rule 18, contended the Standing Counsel for the respondents. The petitioners will not be put to any kind of prejudice because if a fresh sale is proposed, notice will be issued to the petitioners. The petitioners therefore cannot have any legal grievance as regards Ext.P10 order. The petitioners will not be put to any kind of prejudice because if a fresh sale is proposed, notice will be issued to the petitioners. The petitioners therefore cannot have any legal grievance as regards Ext.P10 order. The Standing Counsel for the respondents relied on the judgment of the Hon’ble Apex Court in Phoenix ARC Private Limited v. Viswa Bharati Vidya Mandir and others [ AIR 2022 SC 1045 ], wherein the Hon’ble Apex Court in somewhat similar circumstances has held that the Court should have considered and disposed of an application for vacating interim order at the earliest when huge amount is outstanding as liability to the Bank. 11. I have heard the learned counsel for the petitioners and the learned Standing Counsel representing the respondents. 12. The petitioners were sanctioned a loan of Rs.10 Crores in the year 2012-'13. The petitioners were provided with vehicle loan and Term Loan also subsequently. According to the Bank, the total liability is about Rs.27 Crores now. The loan accounts were declared as NPA in the year 2016. 13. The petitioners filed SA No.382/2018 in the year 2018. The respondents had put to sale the secured assets mortgaged for securing the loan accounts, in the year 2018 and 2019. The sale did not fructify at that time. 14. In the meanwhile, the Tribunal in IA No.1124/2019 filed by the petitioners granted an interim order staying the sale schedule on 03.07.2019 and further directed respondents to defer all further proceedings till the disposal of the SA. The SA was posted for hearing on 11.07.2019. 15. The respondents filed counter affidavit in the IA on 10.07.2019 itself. However, the SA could not be finally disposed of on 11.07.2019 or soon thereafter, due to the spread of Covid-19 pandemic. 16. After the pandemic period, the respondents filed IA No.510/2021 to vacate Ext.P6 interim order. The Tribunal, on 05.01.2024, allowed the IA. 17. The Tribunal noted that it was constrained to pass interim order staying further proceedings till disposal of the SA as the Bank did not file counter affidavit in IA No.1124/2019. Counter affidavit was subsequently filed and the petitioners have amended the SA. The Tribunal noted that IA No.1124/2019 was filed challenging the sale notice dated 11.06.2019. 17. The Tribunal noted that it was constrained to pass interim order staying further proceedings till disposal of the SA as the Bank did not file counter affidavit in IA No.1124/2019. Counter affidavit was subsequently filed and the petitioners have amended the SA. The Tribunal noted that IA No.1124/2019 was filed challenging the sale notice dated 11.06.2019. As the sale did not take place pursuant to the sale notice dated 11.06.2019, the respondents will have to issue fresh notice if they propose to conduct sale again. Therefore, the Tribunal vacated Ext.P6 interim order. 18. The argument of the petitioners is that when an interim application is allowed and the said interim application is thus finally disposed of, the order cannot be sought to be varied filing an IA to vacate the interim order. The remedy available to the aggrieved party is to either file a review application or to prefer an appeal. 19. Section 22 of the Recovery of Debts and Bankruptcy Act, 1993 provides that the Tribunal shall not be bound by the procedure laid down by the Code of Civil Procedure, 1908, but shall be guided by the principles of natural justice and subject to other provisions of the Act and of any Rules, the Tribunal shall have powers to regulate their own procedure including the places at which they shall have their sittings. 20. Rule 18 of the Debts Recovery Tribunal (Procedure) Rules, 1993 states that the Tribunal may make such orders to 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. A reading of Section 22 and Rule 18 would show that Debts Recovery Tribunals are not bound by the provisions of the Code of Civil Procedure. The statute gives ample power to the Tribunal to make such orders and to give such directions as may be necessary. 21. A power to grant an interim order would necessarily include power to modify such interim order or to vacate interim order. Rule 18 of the Debts Recovery Tribunal (Procedure) Rules, 1993 specifically states that the Tribunal may pass orders as may be necessary or expedient to give effect to its orders or to prevent abuse of its orders or to secure the ends of justice. 22. Rule 18 of the Debts Recovery Tribunal (Procedure) Rules, 1993 specifically states that the Tribunal may pass orders as may be necessary or expedient to give effect to its orders or to prevent abuse of its orders or to secure the ends of justice. 22. In SA No.382/2018, the Tribunal passed Ext.P6 interim order staying all further proceedings under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. The order was passed at a time and stating that the Bank has failed to file counter affidavit in the case. Subsequently, the Bank filed counter affidavit and sought to vacate the interim order. The stake involved in the case as far as the Bank is concerned, is of more than Rs.27 Crores. The Tribunal noted that IA No.1124/2019 was filed by the petitioner seeking to stay the sale of the property notified to be held on 03.07.2019. The sale was not held on that day. The Bank will be issuing fresh sale notice and the petitioner has a remedy to challenge sale notice as and when it is issued. In the circumstances, I do not find any illegality in Ext.P10 order dated 05.01.2024 of the Debts Recovery Tribunal-I, Ernakulam in IA No.510/2021 in SA No.382/2018. The OP(DRT) is therefore dismissed.