Allahabad High Court
Union Bank Of India And Another vs Anil Kumar Wadhera And 3 Others on 12 May, 2017
Bench: Arun Tandon, Rajul Bhargava
HIGH COURT OF JUDICATURE AT ALLAHABAD AFR Court No. - 10 Case :- SPECIAL APPEAL No. - 1752 of 2013 Appellant :- Union Bank Of India And Another Respondent :- Anil Kumar Wadhera And 3 Others Counsel for Appellant :- Sanjiv Singh Counsel for Respondent :- P.K. Mishra,Amit Kumar,Madhukar Dixit,Pankaj Barman,Renu Rajat with Case :- SPECIAL APPEAL No. - 1754 of 2013 Appellant :- Pashupati Nath Pandey Respondent :- Anil Kumar Wadhera And 4 Others Counsel for Appellant :- Bharat Pratap Singh,Amit Kumar,Ashwani K. Mishra,Renu Rajat Counsel for Respondent :- K.M. Asthana,P.K. Mishra,Sanjiv Singh Hon'ble Arun Tandon,J.
Hon'ble Rajul Bhargava,J.
These two Special Appeals arise out of a common judgement of the Learned Single Judge.
These intra court appeals are directed against the judgement and order of the learned Single Judge dated 1.10.2013. The auction purchaser has filed Special Appeal no. 1754 of 2013. While the Union Bank of India has filed Special Appeal no. 1752 of 2013. Since both the appeals raise common question of facts and law they have been clubbed together and are being decided by means of this common judgement.
Facts relevant for deciding these appeals are as under:
M/s Bahudesshiya Audyogik Utpadan Sahkari Samiti Limited and M/s Janta Udyog Samiti had obtained cash credit facility from the Union Bank of India. Writ petitioner namely Anil Kumar Wadhera's mother was one of the guarantors for the said loan. The loan account became irregular and was declared a non-performing asset. Approximately a sum of Rs.1.5 crores became due and payable by the borrowers.
The Bank in order to recover the outstanding amount filed two claim applications before the Debt Recovery Tribunal, being O.A. No. 102 of 2004 and O.A. No. 103 of 2004 which, after contest, were decreed by the Tribunal by order dated 19/20.08.2005. Recovery of approximate Rs.1.50 crores alongwith interest was decreed against the borrowers.
At this stage of the proceedings, Anil Kumar Wadhera intervened and a One Time Settlement, agreement was entered into by the borrowers with the Bank commonly called OTS on 22.08.2006. Under the written OTS it was agreed that the borrower/guarantor shall pay to the bank Rs. 75 lacs out of which Rs.10 lacs were to be paid within a week and balance Rs.65 lacs by 20th September, 2006. The defaulter only deposited Rs.7.50 lacs on 22.08.2006, Rs.2.50 lacs on 23.08.2006.
The borrowers failed to honour the OTS so entered into between the parties.
The bank accordingly issued a letter dated 11.01.2007 whereby the guarantor was informed that the money in terms of the OTS has not been deposited, it has, therefore, become defunct. The guarantor was called upon to pay the outstanding dues with interest. The benefits earlier granted were withdrawn.
The action so taken by the bank was subjected to challenge by means of writ petition no. 8566 of 2007. This writ petition was decided at the admission stage vide order dated 19.02.2007 and it was provided that the bank shall issue a letter of permission to the guarantor to sell one of the mortgage property no. 128/130/10 K Block, Kidwai Nagar, Kanpur. On sale of this property the petitioner was required to deposit a sum of Rs.30 lakhs and the balance amount of Rs.35 lakhs was required to be deposited within three months thereafter. It was also provided that in case of default the guarantor would be liable to pay the cost of Rs.1.3 lakhs. This order was further modified vide order dated 02.03.2007 whereby it was provided that on deposit of Rs.30 lakhs, the title deeds of the property would be returned to the guarantor so that he may execute the sale deed.
The records reflect that the bank issued a letter dated 18.06.2007 calling upon the guarantor to do the needful in terms of the order of the Court.
The records further reflect that the guarantor deposited a sum of Rs.30 lakhs on or before 18.06.2007. He was granted permission to sell the remaining two mortgaged properties with a reminder to deposit the balance amount of Rs.35 lakhs within three months. At this stage the guarantor revised his stand and insisted that the bank itself may sell the property. Since the bank did not accept the proposal. The guarantor filed writ petition no. 34598 of 2007. This writ petition was disposed of vide order dated 31.07.2007 directing the guarantor to deposit a sum of Rs,10 lakhs within a month and the balance amount in four equal quarterly instalments . In case of default the order would stand vacated automatically.
Despite the letter of the bank dated 07.08.2007, the guarantor did not deposit the money.
The bank being left with no other alternative proceeded with the enforcement/execution of decree passed by the Debt Recovery Tribunal as detailed above. A sale certificate was issued by the Debt Recovery Tribunal for auction of the mortgage property. Auction did take place on 28.08.2009. Pashupati Nath Pandey-respondent no. 5 offered the highest bid of Rs.75.55 lakhs. This auction was confirmed subsequently by the Tribunal.
Against the order of the Debt Recovery Tribunal, the guarantor filed appeal no. R-1163 of 2009. Since no Presiding Officer was available, his interim application in the appeal was not being considered. The guarantor, therefore, filed writ petition no. 70481 of 2009. Interim protection was granted. The writ petition came to be finally dismissed vide judgment and order dated 19.01.2010 on the ground that the Appellate Tribunal has become functional. The writ Court directed that guarantor may pursue his application before the Appellate Tribunal and in the event he deposits a sum of Rs.35 lakhs, the guarantor shall not be dispossessed till his stay application is decided by the Appellate Tribunal.
The guarantor deposited a sum of Rs.35 lakhs with the respondent-bank on 29.01.2010. The Appellate Tribunal dismissed the appeal vide order dated 25.11.2011. Review Application No. 01 of 2012 was filed before the Appellate Tribunal which was also rejected vide order dated 12.01.2012. It is against these orders that the guarantor approached the High Court under Article 226 of the Constitution of India by means of Writ Petition No. 40181 of 2012.
The learned Single Judge, vide judgement impugned dated 1.10.2013 has allowed the writ petition. The Writ Court has held that since the One Time Settlement as arrived at between the parties on 22.8.2006, pursuant to the guidelines issued by the Reserve Bank of India is still in existence, as it had not been cancelled, the Bank was not justified in proceeding with the auction of the mortgaged property. It has been held that the OTS was issued by higher authority while the letter dated 12.01.2007 was made by the Chief Manager of the Bench who was not shown to be the authorized officer.
The Writ Court has held that even if it is assumed that the order for cancellation of the OTS was made by the Bank as per letter dated 11-01-2007, the same would not survive in view of the order passed by the writ court dated 19.02.2007, passed in writ petition no. 8566 of 2007, whereby time for deposit of the money in terms of the OTS was extended. The earlier order of cancellation of OTS will not survive, especially in view of letters of the Bank itself dated 18.6.2007 and dated 7.8.2007 whereby time for deposit of OTS amount was extended.
The Writ Court has further held that vide order dated 19.2.2007, the Court had provided that in case of default, the Bank would be entitled to cost of Rs. 1.30 lacs, it had not passed any order that in case of default, the order shall stand vacated automatically. Therefore, the One Time Settlement still survives and Bank should not have proceeded with the auction. The Writ Court has held that there is nothing on record to establish that Bank cancelled the OTS at any time for non-compliance of the orders of the Writ Court.
Learned Single Judge has also referred to the judgement of the Apex Court in case of Mardia Chemicals Ltd. and others Vs. Union of India and others, 2004 (4) SC C311 Supreme Court cases page 311 and M/s Sardar Associates and others Vs. Punjab and Sindh Bank, AIR 2010 SC 218 for the proposition that the guidelines issued by the Reserve Bank of India are binding. It has been concluded that part of the One Time Settlement was paid by the petitioner within time and part after some delay.
The Writ Court has gone on to direct that the delay of more than two and half a years in depositing the complete OTS amount would be taken care of by requiring the petitioner to deposit a further sum of Rs. 15 lacs on or before 30.10.2013 and in addition thereto, to pay the cost of Rs. 1.3 lacs as imposed by the Court vide its order dated 19.02.2007. On satisfaction of the above condition the title deeds of the mortgaged property have been directed to be returned to the guarantor by the Bank.
The court has further directed that the money deposited by the auction purchaser may be returned with interest @ 10% p.a. within four weeks from the date of the presentation of the certified copy of this order.
Neither the bank is satisfied nor the auction purchaser with judgement of the learned Single Judge. Hence, these two intra court appeals.
On behalf of the appellants, it is vehemently contended before us that the Writ Court has exceeded its authority in rewriting the terms of the contract between the parties as reflected from the OTS. The parties had entered into the settlement with open eyes, writ proceedings cannot be resorted to wriggle out of the terms of the contract entered into with open eyes.
It is further stated that it is manifest on record that the terms of the One Time Settlement had not been satisfied by the guarantor within specified time as a result of which the settlement stood cancelled automatically. The letter dated 12.1.2007 was only a communication of the said legal effect. Even this letter was subjected to challenge in Writ Petition No. 8566 of 2007. The Writ Court had not interfered with the letter of cancellation. It only provided that the outstanding amount may be deposited in two instalments fixed by the Court. The petitioner admittedly violated the said conditions also. It would necessarily lead to a conclusion that the benefit granted under the order of the Writ Court stood diluted, and that the cancellation of the One Time Settlement stood unaffected.
Even otherwise it is pointed out that the learned Single Judge has not recorded any reasons for arriving at the conclusion as to how the order passed by the Debt Recovery Tribunal and Debt Recovery Appellate Tribunal confirming auction sale was bad in any manner. The orders of Statutory Authorities cannot be set aside without referring to what is recorded therein and without disclosing the reasons for the conclusion arrived at.
Sri T.P. Singh, Senior Advocate, counsel for the guarantor in reply submits that the judgement and order passed by the High Court is equitable in nature and that the interest of the Bank is protected. He therefore submits that this Appellate Court may not interfere with the order.
We may record that what is provided by the nationalized banks as financial assistance to private entrepreneurs is nothing but public money. Special provisions have been made under the Debt Recovery Tribunal Act for enforcing the recovery of the dues to the nationalized banks/financial institutions. There is limited scope for the Writ Court to intervene in such proceedings. The Writ Court need not rewrite the terms of the contract for financial assistance, or for One Time Settlement entered between the parties with open eyes [Reference State of Haryana versus Jage Ram; (1980) 3 SCC 599].
It is to be kept in mind that the legislature has provided a different mechanism under the Debt Recovery Tribunal Act for enforcing the recovery from the borrowers of nationalized Banks/financial institutions. The mechanisms provided therein is a completely code in itself. We may at the very outset record that order passed by the Debt Recovery Tribunal and that passed by the Debt Recovery Appellate Tribunal are statutory orders, made after affording opportunity to the parties concerned. Such orders cannot be set aside by a Writ Court without adverting to the merits of the orders and without recording reasons as to how the orders are bad. Equity follows law, Writ Court cannot pass orders contrary to law.
The Court has no competence to issue a direction contrary to law nor the Court can direct an authority to act in contravention of statutory provisions. In State of Punjab v. Renuka Singla, AIR 1994 SC 595: 1994 AIR SCW 330: (1994) 1 SCC 175, dealing with a similar situation, Supreme Court observed as under:
"We fail to appreciate as to how the High Court or Supreme Court can be generous or liberal in issuing such directions which in substance amount to directing the authorities concerned to violate their own statutory rules and regulations...."
The facts on records establish beyond doubt that what was due against the borrower in terms of the order of the Debt Recovery Tribunal made in the year 2005 was a sum of Rs. 1.50 Crores. This money had to be recovered in terms of the order of the Tribunal with interest which had to be calculated in terms of the order of the Tribunal itself. We further find that in normal course of things, this money would have at least multiplied four times within a span of 12 years, having regard to the interest @ 10% p.a. as has been provided under the order of the learned Single Judge to the auction purchaser. It is only because of interference by the Writ Court from time to time that the Bank has not been able to recover the entire money even after a decade from the date of the decree of the Tribunal.
The very purpose of the Legislature in framing an Act for recovery of finances of the Bank and financial institutions is frustrated because of such proceedings. The petitioner had approached Writ Court repeatedly and at every time he was granted a facility to deposit the outstanding dues. Every time he committed default. Persons like the petitioner who fail to comply with the conditions imposed by the High Court in its order granting protection to the borrower are not entitled to any relief under Article 226 of the Constitution of India.
We may record that the guidelines notified by the Reserve Bank of India under letter dated 29th January, 2003 providing for recovery from non-performing assets of Public Sector Banks itself contains that amount of settlement arrived at between the parties should be preferably paid in one lumpsum and where borrower is unable to pay the entire amount in lumpsum, at least 25% should be deposited in lumpsum and the balance amount of 75% should be recovered in instalment within a period of one year together with interest at the existing Prime Lending Rates from the date of settlement upto the date of final payment. A copy of the guidelines is enclosed at page 103 of the paper book.
It is therefore, clear that under the guidelines of the Reserve Bank of India, the payment under the OTS had to be made in any case within one year of the settlement and that too where required, alongwith interest at the Prime Lending Rates. We may also record that under the letter of the Bank dated 22.8.2006, it was properly communicated that the money in its entirety under the OTS has to be deposited by 20th September, 2006, which time limit fixed by the OTS was never complied with. The OTS between the Bank and the petitioner would be binding only if the terms and conditions as agreed upon with open eyes between the parties were complied with. It was therefore, mandatory for the borrower/guarantor to deposit the entire money in terms of the OTS by 20th September, 2006. Once this condition is breached by the borrower himself, the entire OTS would fall automatically and there is no need of any fresh order being passed by the Bank in that regard.
In our opinion the learned Single Judge has failed to appreciate the purpose of the OTS scheme in terms of the guidelines of the RBI and the effect of the non-compliance of the terms and conditions of the OTS as agreed upon between the parties within the stipulated period. We have no hesitation that once the borrower fails to comply with the conditions of the OTS within the time specified and there being no order of the Bank to extend the time for deposit, the OTS would fall automatically and it will not be open to the borrower to insist upon the enforcement of such an OTS. We are also of the opinion that no separate orders are required to be passed in the matter of the OTS having become defunct for non-compliance of its conditions by the borrowers and the logical consequence in case of breach of the terms and conditions of the OTS is that the Bank becomes free to recover the money outstanding in accordance with law irrespective of the OTS.
The learned Single Judge has failed to appreciate that time is of essence for deposit of money under the OTS to remain legally binding.
We are therefore of the considered opinion that the learned Single Judge had committed an error in coming to a conclusion that since no further order had been passed for cancelling the OTS by the Bank subsequent to the order passed by the Writ Court, the same would survive inasmuch as in our opinion, no such order is required to be passed under law. We may further record that orders which were passed by the High Court on 19.2.2007 and the letters written by the Bank dated 18.2.2007 and 7.8.2007 at best can be read to mean that the time for depositing of the money in terms of the OTS stood extended upto the date mentioned in the order/letters and nothing beyond it. Admittedly the money was not deposited by the guarantor within the time so extended. This fact is recorded by the learned Single Judge in his order itself.
The Apex Court in the case of M/s Sardar Associates & ors. Versus Punjab and Sindh Bank & ors. AIR 2010 SC 218 has subsequently directed that the compromise between the borrower and the bank is to be in accordance with the RBI guidelines which had necessarily to be followed, and are binding upon the Public Sector Banks.
We are of the opinion that the Writ Court could not have condoned the delay of two and a half years in deposit of the OTS money in its entirety in exercise of powers under Article 226 of the Constitution of India as the same would amount to rewriting of the terms of the contract/settlement entered into between the parties. The logical consequence of non-compliance of the orders of the High Court by the borrower would be that OTS failed to have any legal sanctity and the Bank was therefore free to proceed with the recovery of its dues in terms of degree/recovery certificate issued by the Recovery Officer, Debt Recovery Tribunal. There had been no immaterial irregularity in the auction of the mortgaged property which could have required the High Court to interfere in exercise of powers under Article 226 of the Constitution of India. The Apex Court in case of Ram Kishun Versus State of U.P., (2012) 11 SCC 511 has held that sale confirmation under the Debt Recovery Act need to be set aside except in case of fundamental procedural error or misrepresentation or fraud.
Similarly, the Apex Court in the case of United Bank of India Versus Satyawati Tondon and others AIR 2010 SC 3413 has laid down that special procedures have been provided for recovery of the money to the Banks and financial institutions under the SARFAESI Act (prior to it under Debt Recovery Tribunal Act). It has been explained that the effect of some of the provisions may be a bit harsh for some of the borrowers but are meant to achieve speedier recovery of the dues declared as NPAs and better availability of capital liquidity and resources to help in growth of the economy of the country and welfare of the people in general which would subserve the public interest.
Lastly, it may also be noticed that the learned Single Judge has not recorded any reasons for coming to the conclusion that the orders passed by the Debt Recovery Tribunal and the Appellate Tribunal impugned in the writ petition were bad. The orders are statutory in nature and therefore, cannot be interfered with except after recording cogent reasons in support of the conclusion.
For all the aforesaid reasons the judgement and order of the learned Single Judge cannot be legally sustained and is hereby set aside. The writ petition is dismissed in its entirety.
Sri T.P. Singh, Senior Advocate, at this stage, again comes up with a fresh offer before this Court. Person like the petitioner do not deserve any sympathy from this Court.
These two appeals are allowed. The judgement and order of the learned Single Judge dated 1.10.2013 is hereby set aside.
Order Date :- 12.5.2017 Shalini