Gujarat High Court
Kotak Mahindra Bank Ltd vs Shree Narmada Aluminium Industries Ltd on 10 March, 2025
Author: Biren Vaishnav
Bench: Biren Vaishnav
NEUTRAL CITATION
C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025
undefined
Reserved On : 19/02/2025
Pronounced On : 10/03/2025
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/O.J.APPEAL NO. 143 of 2008
In R/COMPANY PETITION NO. 166 of 2006
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR. JUSTICE BIREN VAISHNAV
and
HONOURABLE MR. JUSTICE HEMANT M. PRACHCHHAK
==========================================================
Approved for Reporting Yes No
==========================================================
KOTAK MAHINDRA BANK LTD
Versus
SHREE NARMADA ALUMINIUM INDUSTRIES LTD
==========================================================
Appearance:
TIRTH NAYAK(8563) for the Appellant(s) No. 1
MR.ASHOK L. SHAH, ADVOCATE with ADITYA A GUPTA(7875) with
MOHIT A GUPTA(8967) for the Opponent(s) No. 1
==========================================================
CORAM:HONOURABLE MR. JUSTICE BIREN VAISHNAV
and
HONOURABLE MR. JUSTICE HEMANT M.
PRACHCHHAK
Date : 10/03/2025
CAV JUDGMENT
(PER : HONOURABLE MR. JUSTICE BIREN VAISHNAV)
1. This appeal at the hands of the Kotak Mahindra Bank has been filed under Section 483 Page 1 of 72 Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025 NEUTRAL CITATION C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025 undefined of the Companies Act, 1956 ('Companies Act' for short) against the oral judgement dated 16.05.2008 passed by the Company Judge in Company Petition No.166 of 2006. By the judgement so passed, the learned Judge has sanctioned the scheme of arrangement in the nature of compromise between the respondent Shri Narmada Aluminum Industries Limited and its secured creditors, unsecured creditors and share holders.
2. Facts in brief are as under:
2.1 The respondent no.1 company which was incorporated on 15.04.1981 was facing winding up proceedings having faced financial difficulties.
In order to pay statutory and contractual dues, the respondent company proposed a scheme of compromise and/or arrangement between the Page 2 of 72 Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025 NEUTRAL CITATION C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025 undefined company and its members (share holders, its secured creditors and unsecured creditors). The scheme of compromise and arrangement was required to be sanctioned under Section 391(2) of the Companies Act. The company therefore filed Company Petition No.166 of 2006 for obtaining a sanction and by the impugned judgment, such scheme was sanctioned. It was the case of the appellant Kotak Mahindra Bank that it had been assigned the debts owed by the company to ICICI Bank by a deed of assignment dated 29.09.2004 and therefore it was entitled to participate in the proceedings vis-a-vis the scheme of compromise and arrangement as being a secured creditor. Objections were raised by Kotak Mahindra Bank. The learned Single Judge by the impugned order negated the objections and in para 20 of the order under challenge held as under:
Page 3 of 72 Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025
NEUTRAL CITATION C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025 undefined "20. In light of the above controversy between the parties the Court is of the view that the objections raised by Kotak Mahindra Bank Ltd., cannot be taken into account as the Kotak Mahindra Bank Ltd., is an assignee of the debt. Since the issue regarding assignment of debt is pending before the Division Bench, whether the assignee can be considered to be secured creditor is a question to be decided by the Division Bench. If the value of the votes stated to have been held by Kotak Mahindra Bank Ltd., is ignored, it cannot be said that the scheme has not been approved by the requisite majority of secured creditors.
Since the scheme has been approved by secured creditors, unsecured creditors and workers and it is beneficial to the interest of the Members and it is not contrary to public interest and the scheme is hereby sanctioned and prayer made in the Company Petition vide para 19 of the petition is hereby granted."
2.2 In short the learned Single Judge held that the objections raised by the Kotak Mahindra Bank Limited cannot be taken into account as it is an assignee of the debt. Since the issue regarding assignment of debt was pending before a Division Bench, it cannot be said that Page 4 of 72 Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025 NEUTRAL CITATION C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025 undefined the scheme has not been approved by the majority of the secured creditors. 2.3 It appears that the issue traveled before the Hon'ble Supreme Court on a Special Leave Petition filed by the bank as the Division Bench by an order dated 16.07.2022 in the present appeal passed certain orders adjourning the O.J. Appeal. The Hon'ble Supreme Court by its order dated 02.12.2022 requested the High Court to hear the pending appeal and the submission was made by the learned counsel for the appellant that the issue was covered by a decision in the case of ICICI Bank v. Official Liquidator of APS Star Industries Limited and others reported in 2010 (10) SCC 1.
3. Mr.Tirth Nayak learned counsel for the appellant-bank made the following submissions: Page 5 of 72 Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025
NEUTRAL CITATION C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025 undefined 3.1 On the issue of assigning of debts vis-a-vis the company by ICICI Bank to the appellant-
Kotak Mahindra Bank, Mr.Nayak would submit that the same is no longer res-integra in light of the decision in the case of ICICI Bank (supra). He would submit that in the aforesaid judgement, the Supreme Court has upheld assignment of debts and held that transfer of debts/NPAs inter-se between banks as an activity cannot be said to be impermissible under the Banking Regulation Act, 1949 (hereinafter to be referred to as 'the BR Act, 1949' for short). In other words therefore Mr.Nayak would submit that since the deed of assignment dated 29.09.2004 between the two banks in the present proceedings was also a part of the proceedings before the Supreme Court in Civil Appeal No.8427 of 2010, in a matter pertaining to Balaram Cements Limited, once the Supreme Page 6 of 72 Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025 NEUTRAL CITATION C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025 undefined Court has held that the debts could be assigned, the appellant automatically became a secured creditor entitled to lodge objections to the scheme.
3.2 Mr.Nayak would submit that after the judgement of the Hon'ble Supreme Court, Division Bench of this Court in OJ Appeal No.156 of 2007 dated 30.09.2014 held that the bank has become entitled to recover the amount from the borrowers and therefore their prayers for substitution cannot be rejected. Even thereafter the learned Single Judge in Company Petition No.489 of 2006 has clearly observed that in light of the decision of the Supreme Court, such situation is permissible in law and therefore the controversy is put to rest. Having therefore established that a bank can assign a debt with the other bank is a settled question of law this Page 7 of 72 Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025 NEUTRAL CITATION C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025 undefined Court should exercise similar jurisdiction and hold that Kotak Mahindra Bank - the appellant was a valid objector being a secured creditor having stepped into the shoes of the ICICI Bank. 3.3 Mr.Nayak would further submit that the scheme of compromise was liable to be rejected as it was unfair. Referring to the deed of assignment and the scheme of compromise and arrangement, Mr.Nayak would submit that the bank admittedly bought 26.35% of the debt and therefore since it was holding more than 25% of the debt, the scheme could not have been approved as the appellant had objected to the same.
3.4 Mr.Tirth Nayak would further submit that it is an admitted fact that during the pendency of the original application filed under the provisions Page 8 of 72 Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025 NEUTRAL CITATION C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025 undefined of the Recovery of Debts and Bankruptcy Act, 1993 (hereinafter to be referred to as 'the RDB Act' for short), a scheme under Section 391 of the Act could not be floated since the provisions of RDB Act overrides the Companies Act, 1956. In support of his submission, he would rely on the following decisions:
(I) In case of IMP Powers Limited rendered in Company Petition No.395 of 2006 in the High Court of Judicature at Bombay (II) In case of Allahabad Bank v. Canara Bank and another reported in (2000) 4 SCC 406 (III) In case of Raghunath Rao Bareja and others v. Punjab Bank reported in (2007) 2 SCC 230.Page 9 of 72 Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025
NEUTRAL CITATION C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025 undefined 3.5 Reading relevant paras of the said decision, Mr.Nayak would submit that as indisputably held in the case of Allahabad Bank (supra) when it comes to a special law i.e. RDB Act which gave an overriding effect, the RDB Act would prevail. He would therefore submit that pending the proceedings of recovery filed by the banks in the Debt Recovery Tribunal where the application for substitution was accepted and though it was a subject matter of an appeal, a scheme for compromise and arrangement in light of the decision in case of Allahabad Bank (supra) could not be accepted. Only on this ground the scheme was liable to be set aside as a company Court did not have the jurisdiction to hear and decide the scheme under Section 391. 3.6 Mr.Nayak would therefore submit that in light of the decision in the case of Allahabad Page 10 of 72 Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025 NEUTRAL CITATION C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025 undefined Bank (supra) and also in the case of ICICI Bank (supra), the issue is no longer in doubt that on the twin grounds i.e. (i) that the deed of assignment is valid and a bank can assign its debts to the other and (ii) in light of the pendency of the recovery proceedings before the DRT when the RDB Act has an overriding effect, the learned Company Judge would not have sanctioned the scheme in question. He also relied on the decision in case of Tata Motors Limited vs. Pharmaceutical Products of India Limited reported in 2008 (7) SCC 619. 3.7 Mr.Nayak would further submit that if the scheme which is approved is later found to have not complying with the provisions of the scheme, can also be set aside. Merely because substantial time has lapsed and the appeal has remained pending, it cannot be a ground to oust the Page 11 of 72 Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025 NEUTRAL CITATION C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025 undefined appellant.
4. Mr.Ashok L. Shah learned advocate assisted by Mr.Aditya Gupta for the respondent company would make the following submissions:
4.1 According to Mr.Shah, the appellant has no locus-standi. The bank claims to be a creditor on the basis of deed of assignment dated 29.09.2004. The deed of assignment is not valid and does not and cannot assign any rights of the ICICI Bank in favour of the appellant.
4.2 Mr.Shah learned counsel would take us through the relevant paras of the decision in case of ICICI Bank (supra) and seek to distinguish the judgement on the ground that the deed of assignment in the case before the Supreme Court was that of 31.03.2006. It was a deed of Page 12 of 72 Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025 NEUTRAL CITATION C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025 undefined assignment post the RBI guidelines dated 13.07.2005.
4.3 According to the learned counsel the issue before the Supreme Court was the interpretation of a deed of assignment post the RBI Guidelines and therefore the legality of the two banks entering into the deed of assignment was considered in light of the guidelines of the RBI and not in isolation with the provisions of the Banking Regulation Act, 1949. He would submit that since in the present case the deed of assignment was 29.09.2004, the judgement in the case of ICICI Bank (supra) would never be applicable.
4.4 Moreover, even assuming for the sake of argument that the Supreme Court had opined that entering into a deed of assignment was part Page 13 of 72 Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025 NEUTRAL CITATION C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025 undefined of banking business and the Courts were to hold the assignment of debts between the ICICI Bank and the Kotak Mahindra Bank, in the present case as an activity permissible under the Act, the other issues which arose for determination of the Company Court including the applicability of the Registration Act, the Stamp Act etc. were kept open. The Supreme Court remitted the matters to the Division Bench for consideration of other issues.
4.5 Based on this window being open, Mr.Shah would submit that the deed of assignment dated 29.09.2004 was not duly stamped as required under Section 5 of the Gujarat Stamp Act 1958 and as mandated by Section 34 of the Act. He would submit that the deed of assignment was comprising of 114 distinct matters and therefore the stamp duty payable on such deed of Page 14 of 72 Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025 NEUTRAL CITATION C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025 undefined assignment be required to be calculated and aggregated and paid on the basis as if each such matter is a distinct matter and was a separate instrument. The present deed of assignment bore a stamp duty of Rs.1 lakh only and therefore it was not duly stamped. Relying on paras 29 to 31 and 33 of the decision in the case of Chief Controlling Revenue Authority v. Coastal Gujarat Power Limited reported in 2015 (10) SCC 700, Mr.Shah would submit that in the case before the Supreme Court, 13 banks had given separate loans. It was in this case that the Supreme Court held that the stamp duty had to be on each transaction of loan.
4.6 Relying on the decision in case of Arunachalam Mutthu v. State Bank of India reported in 2009 SCC Online ALL 592, he would reiterate his submission.Page 15 of 72 Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025
NEUTRAL CITATION C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025 undefined 4.7 Relying on the notification dated 06.05.2002 of the Maharashtra Government produced with the Civil Application, Mr.Shah would submit that the stamp duty of Rs.1 lakh was not sufficient inasmuch as, the word used in the notification was 'the duty with which an instrument of 'Securitization of Loans' was expressly stated. A single instrument therefore as in the present case was inefficiently stamped. 4.8 Mr.Shah would further submit that since the decision in the case of ICICI (supra) was in context of RBI Guidelines dated 13.07.2005, it cannot in any way apply to the present deed of assignment. In support of his submission, he would rely on the decision of the Gujarat High Court in the case of Kotak Mahindra Bank v. Balaram Cements Limited reported in 2010 SCC Online GUJ 13830.
Page 16 of 72 Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025
NEUTRAL CITATION C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025 undefined 4.9 Mr.Shah would further submit that deed of assignment was never produced by the appellant before the learned Single Judge and it is the company which by way of the Civil Application has produced the same. Reading the endorsement on the deed he would submit that the instrument which seeks to declare, create, assign, distinguish any interest has to be registered compulsorily as per the provisions of Section 17 of the Registration Act. The deed is not so registered. The deed ought to have been registered within four months as per Section 23 of the Act by 28.01.2005. The delay for registration even otherwise could not have been condoned. Even if the deed of confirmation to the deed of registration is seen, the same is executed on 26.10.2005, long time after 28.01.2005. Registry therefore even otherwise has no power to register a document which is Page 17 of 72 Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025 NEUTRAL CITATION C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025 undefined barred by limitation. It was not a case of delayed registration due to urgent necessity of unavoidable extent. The registrar has expressly observed on the deed of assignment and the confirmation deed that the annexure is not registered. Relying on the decision in case of Ajaykumar M. Singh v. Basant Bhoruka reported in 2016 SCC Online Bom 6960, Mr.Shah would submit that in absence of registration and even after having not so registered after the statutory period having expired, the deed of assignment was invalid. Reliance was also placed on the decision of the Andhra Pradesh High Court in case of Smt. G. Kadambari W/o G. Kesuvulu v. District Registrar and others in Writ Petition No.4079 of 2004. In other words, it is clear that the deed of assignment having not been registered, no security interest was legally Page 18 of 72 Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025 NEUTRAL CITATION C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025 undefined created. Even the decisions on which the learned counsel Mr.Nayak had relied upon held that the issue of substitution was concluded. Other issues were kept open i.e. the validity of the deeds of assignment from the point of view of the Stamp Act and the registration. 4.10 Mr.Shah would further submit that the deed of assignment was hit by the mandatory provisions of Section 28 of the Registration Act inasmuch as though the deed of assignment was registered in Andheri (Mumbai), the property was situated in Bharuch and therefore it was not the place where the land was situated. In support of his submission, he relied on a few decisions of coordinate High Courts. 4.11 Mr.Shah would further submit that the contention of Mr.Nayak that since substitution Page 19 of 72 Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025 NEUTRAL CITATION C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025 undefined proceedings have already been allowed by DRT, that the principle of resjudicata would apply to a company is not correct. He would submit that against the judgement of the Debt Recovery Tribunal on the substitution of the appellant bank, an appeal has been filed and the appeal is pending before the Debt Recovery Tribunal. There are decisions of the Hon'ble Supreme Court which suggest that in a judgement which is under challenge in an appeal, principle of res- judicata will not apply.
4.12 Mr.Shah would further submit that the DRT at Mumbai cannot decide issues with regard to the statutory provisions under relevant sections of Gujarat Stamp Act, Registration Act etc. He would rely on the decision in the case of Canara Bank v. N.G. Subbaraya and another reported in (2018) 16 SCC 228. He would submit that Page 20 of 72 Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025 NEUTRAL CITATION C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025 undefined the substitution is allowed only as an interim measure on prima-facie satisfaction and not conclusive.
4.13 The contention of Shri Nayak that since the bank holds more than 26% of the total dues, is not tenable. In accordance with the provisions of Section 391(2) of the Companies Act only if a majority in number representing three fourths in value of the creditors, present and voting have to be present at the meeting. It is evident from the mandates of the meeting that the appellant bank had not deposited with the company at his registered office 48 hours before the time of the meeting a resolution of its board authorizing the person to attend and vote. This was in clear violation of Rule 70(2) of the Company Court Rules. He would submit that even otherwise, the resolution authorizing one Mr.Bandish Dixit was Page 21 of 72 Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025 NEUTRAL CITATION C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025 undefined a resolution by the share transfer and routine transactions committee of the Board of Directors and there was no resolution of the Board of Directors and therefore it was not a valid resolution.
4.14 With regard to the judgement of IMP Powers Limited (supra), Mr.Shah would submit that the Indusind Bank in other case was the only creditor out of eight secured creditors who had objected. In the present case the appellant's very status as a creditor, that too a secured creditor, is in dispute.
4.15 Relying on a decision in case of Core Health Care Limited v. Nirma Limited reported in 2007 SCC Online Guj 235, the Supreme Court has held that even if a creditor has approached DRT, there is no bar for Page 22 of 72 Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025 NEUTRAL CITATION C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025 undefined sanctioning the scheme. On these submissions, Mr.Shah would submit that the appeal be dismissed.
5. In rejoinder, Mr.Nayak would submit that it is not open for the respondent to object to assignment deed on the grounds of registration etc as they have not challenged nor filed any suit or an application. Relying on a decision in case of Hindustan Steel Limited v. M/s.Dilip Construction Company reported in 1969 (1) SCC 597 and other decisions submit that when the document is registered and the same has not been challenged, the same is presumed to be valid unless challenged.
5.1 Mr.Nayak would submit that the decisions relied upon by the respondent in case of Balaram Cements Limited (supra), Coastal Page 23 of 72 Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025 NEUTRAL CITATION C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025 undefined Gujarat Power Limited (supra) and other judgements do not apply to the facts of the case. ANALYSIS
6. Having considered the submissions of the respective counsels, we need to consider the several issues that have been argued before us. 6.1 Issue of Assignment: The learned counsel for the appellant referred to the case of ICICI Bank Limited (supra) and had submitted that in light of the decision, the issue that a bank cannot assign its debts to the other bank has been settled inasmuch as the Supreme Court has upheld an assignment and held that the same is part of the credit appraisal mechanism and part of banking business under the Banking Regulation Act, 1949. While it is the case of the Page 24 of 72 Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025 NEUTRAL CITATION C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025 undefined respondent company that the judgement would not apply to the present appeal inasmuch as any issue before the Supreme Court was an assignment deed dated 31.06.2006 which was a deed of assignment post the guidelines of the Reserve Bank of India dated 31.03.2006. It was therefore the submission of the respondent company that the judgement would not cover the issue of assignment and it was still open for the company to suggest that the appellant could not be the secured creditor as the debt could not have been assigned to it.
6.2 We have extensively been taken through by both the learned counsels for the respective parties through the decision in the case of ICICI Bank (supra). We would agree with the submission of the learned counsel for the appellant that the issue whether a bank could Page 25 of 72 Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025 NEUTRAL CITATION C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025 undefined assign its debts to the other is a covered issue. Though the learned counsel for the respondent would want us to accept his submission that the judgement is only in context of deed of assignment dated 31.03.2006, what we note in the heading of the judgement is that before the Supreme Court also was a Civil Appeal No.8427 of 2010 and therefore though the Supreme Court was considering the facts of Civil Appeal @ SLP
(c) No.2240 of 2009, we cannot shut our eyes to the fact that the question of law cannot be read in isolation in context of the deed of assignment dated 31.03.2006.
6.3 The Company Judge before the Gujarat High Court whose judgement was a subject matter of challenge in the Supreme Court had framed a number of questions of law viz. whether the Company Court was justified in holding that a Page 26 of 72 Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025 NEUTRAL CITATION C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025 undefined separate documentation of assignment of each loan was required to be registered; whether the Company Court was justified in concluding that the deed was not registered and whether the rights could be assigned. However, since the High Court upheld the order of the Company Court only on the question of assignment of debt by the banks holding that it is not an activity which is permissible under the BR Act, 1949, other questions were not examined and the only question that was examined was whether Kotak Mahindra Bank could be substituted in place of ICICI Bank. Reading the decision in case of ICICI Bank (supra) whether the analysis of Banking Regulation Act, 1949 was carried out, the Supreme Court held that the Act basically seems to regulate banking business and assignment of debts is not an activity impermissible under the BR Act, 1949. Paras 37 Page 27 of 72 Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025 NEUTRAL CITATION C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025 undefined to 39 of the decision in case of ICICI Bank (supra) read as under:
"37. The point we are trying to make is that apart from the principal business of accepting deposits and lending the said 1949 Act leaves ample scope for the banking companies to venture into new businesses subject to such businesses being subject to the control of the Regulator, viz. RBI. In other words, the 1949 Act allows banking companies to undertake activities and businesses as long as they do not attract prohibitions and restrictions like those contained in Sections 8 and 9. In this connection we need to emphasize that Section 6(1)(n) enables a banking company to do all things as are incidental or conducive to promotion or advancement of the business of the company. Section 6(1) enables banking companies to carry on different types of businesses. Under Section 6(1), these different types of businesses are in addition to business of banking, viz., core banking. The importance of the words "in addition to" in Section 6(1) is that even if different businesses under clauses (a) to (o) are shut down, the company would still be a banking company as long as it is in the core banking of accepting deposits and lending so that its main income is from the spread or what is called as "interest income". Thus, we may broadly categorise the functions of the banking company into two parts, viz., core banking of accepting deposits and lending and miscellaneous functions and services.Page 28 of 72 Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025
NEUTRAL CITATION C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025 undefined Section 6 of the BR Act, 1949 provides for the form of business in which banking companies may engage. Thus, RBI is empowered to enact a policy which would enable banking companies to engage in activities in addition to core banking and in the process it defines as to what constitutes "banking business".
38. The BR Act, 1949 basically seeks to regulate banking business. In the cases in hand we are not concerned with the definition of banking but with what constitutes "banking business". Thus, the said BR Act, 1949 is an open-ended Act. It empowers RBI (regulator and policy framer in matter of advances and capital adequacy norms) to develop a healthy secondary market, by allowing banks inter se to deal in NPAs in order to clean the balance sheets of the banks which guideline/policy falls under Section 6(1)(a) r/w Section 6(1)(n). Therefore, it cannot be said that assignment of debts/NPAs is not an activity permissible under the BR Act, 1949. Thus, accepting deposits and lending by itself is not enough to constitute the "business of banking". The dependence of commerce on banking is so great that in modern money economy the cessation even for a day of the banking activities would completely paralyse the economic life of the nation. Thus, the BR Act, 1949 mandates a statutory comprehensive and formal structure of banking regulation and supervision in India.
39. The test to be applied is - whether Page 29 of 72 Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025 NEUTRAL CITATION C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025 undefined trading in NPAs has the characteristics of a bona fide banking business. That test is satisfied in this case. The guidelines issued by RBI dated 13.7.2005 itself authorizes banks to deal inter se in NPAs. These guidelines have been issued by the Regulator in exercise of the powers conferred by Sections 21 and 35A of the Act. They have a statutory force of law. They have allowed banks to engage in trading in NPAs with the purpose of cleaning the balance sheets so that they could raise the capital adequacy ratio. All this comes within the ambit of Section 21 which enables RBI to frame the policy in relation to Advances to be followed by the banking companies and which empowers RBI to give directions to banking companies under Section 21(2). These guidelines and directions following them have a statutory force. When a delegate is empowered by the Parliament to enact a Policy and to issue directions which have a statutory force and when the delegatee (RBI) issues such guidelines (Policy) having statutory force, such guidelines have got to be read as supplement to the provisions of the BR Act, 1949. The "banking policy" is enunciated by RBI. Such policy cannot be said to be ultra vires the Act. The idea behind empowering RBI to determine the Policy in relation to Advances is to enable banking companies to expand their business of banking and in that sense such guidelines also define - as to what constitutes banking business." 6.4 It is in this context that the Supreme Court Page 30 of 72 Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025 NEUTRAL CITATION C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025 undefined held while concluding that the assignment of debt by the banks inter-se is an activity permissible under the Act. On the other issues viz. those where the deed required registration or it was sufficiently stamped were left open. Paras 53 and 54 of the decision in case of ICICI Bank (supra) read as under:
"53. As stated above, by the impugned judgment, the Division Bench of the Gujarat High Court upheld the order of the Company Court only on one ground, namely, assignment of debts by the banks inter se is an activity which is impermissible under the Banking Regulation Act, 1949. However, the Division Bench did not go into other issues which arose for determination before the Company Court, including applicability of the provisions of the Registration Act, 1908.
54. In the circumstances, we set aside the impugned judgment(s) on the question of assignment of debts as an activity permissible under the Banking Regulation Act, 1949. However, we remit these matters to the Division Bench of the High Court(s) for consideration of other issues raised in this batch of cases. Subject to above, the impugned judgment(s) is set aside and the civil appeals are allowed with no order as to costs."Page 31 of 72 Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025
NEUTRAL CITATION C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025 undefined 6.5 We therefore are unable to agree with the submission of the learned counsel Mr.A.L.Shah for the respondent company that on the issue of assignment, the decision in the case of ICICI Bank (supra) would not help the appellant. 6.6 When we in that context appreciate the decisions relied upon by Mr.Tirth Nayak in O.J. Appeal No.156 of 2007 in case of Kotak Mahindra Bank v. OL of M/s APS Star India Limited and 19 opponents dated 30.09.2014, by which, the Division Bench remanded the matter to the Company Judge and the decision in Company Application No.489 of 2006 and others dated 28.01.2015. In the aforesaid case, what is evident is that the other issues as to whether the individual deeds of assignment met the requirements of other enactments like the Registration Act, the Stamp Act etc. did not arise Page 32 of 72 Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025 NEUTRAL CITATION C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025 undefined in the applications and the Court held that as and when such issues are raised at an appropriate stage, the same would be decided by the concerned forum. Para 14 of the decision in case of Kotak Mahindra Bank Ltd. v. O.L. of M/s. APS Star India Ltd. & 20 rendered in Company Application No.489 of 2006 dated 28.01.2015 reads as under:
"14. From the submissions advanced by the learned counsel for the respective parties, it is apparent that the common refrain of the learned counsel is that these applications are limited to the prayer for substitution, which stand allowed by the Supreme Court as well as by the Division Bench by holding that such substitution is permissible in law and hence, the matters come to an end. The other issues as to whether the individual deeds of assignment meet with the requirements of other enactments, like the Registration Act, the Stamp Act, etc., do not arise in the present applications and that as and when such issues are raised at an appropriate stage before the appropriate forum, the same would be decided by the concerned forum."
6.7 In other words, the question whether the Page 33 of 72 Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025 NEUTRAL CITATION C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025 undefined deed of assignment was sufficiently stamped and/ or not registered and breach of other provisions of the Registration Act was left open to be decided for an appropriate forum at an appropriate time.
6.8 Since these issues are raised by the learned counsel for the respondent extensively in the written submissions so filed i.e. as to the validity of the assignment deed being questioned on the ground of it being in breach of the Stamp Act and the Registration Act, these questions will have to be dealt by us as they have not been so dealt with in the similar matters in the earlier rounds before this Court.
6.9 We have been taken through the orders passed by the Debt Recovery Tribunal from time to time. We note that initially an order was Page 34 of 72 Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025 NEUTRAL CITATION C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025 undefined passed below Exh.22 by the Debt Recovery Tribunal in Original Application No.229 of 2003 dated 25.01.2007 allowing the substitution of Kotak Mahindra Bank in Original Application No.229 of 2003. That was challenged by the respondent company by filing Misc. Appeal No.60 of 2007. The Debt Recovery Appellate Tribunal by its oral judgement dated 17.01.2013 where the Company raised the very same objections as to the validity of deed of assignment on the ground of it being insufficiently stamped, not being registered etc., quashed the order of 25.01.2007 and remanded the matter to the Debt Recovery Tribunal to consider these issues afresh. The Debt Recovery Tribunal on remand by an order dated 20.09.2013 extensively considering various case laws and submissions set out by the respective parties, negated the submissions made on similar Page 35 of 72 Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025 NEUTRAL CITATION C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025 undefined grounds by the company with regard to the breach of the Stamp Act and the Registration Act etc. and allowed the application. We are informed that against the said order passed by the DRT, Misc. Appeal No.43 of 2014 has been filed by the Company before the Debt Recovery Appellate Tribunal and the same is pending for hearing. In other words, the issues that we are called upon to decide on the validity of deed of assignment on the aspect of insufficient stamp and non-registration have been decided below Exh.22 by the Debt Recovery Tribunal which was a subject matter of appeal before the Appellate Tribunal and the same is pending. The question therefore is, whether it is open for the company to raise the very same issues which have been concluded against it albeit a subject matter of appeal before the Debts Recovery Appellate Tribunal.
Page 36 of 72 Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025
NEUTRAL CITATION C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025 undefined 6.10 Mr.Nayak learned counsel for the appellant had during the course of his submissions argued that once the issues have validly been decided by a competent forum, on the principle of res- judicata, it is not open for the company to raise very same issues. On the other hand, Mr.Shah would want us to hold otherwise. True it is that as far as the issue of whether a bank can assign its debts to the other is a concluded issue in light of the decision in case of ICICI Bank (supra), merely because on the issues of insufficiency of stamp on the assessment deed and non registration thereof etc., the Debt Recovery Tribunal by its order dated 20.09.2013 has held against the company. That is a subject matter of an appeal before the Appellate Tribunal. In case of N.G. Subbaraya and another (supra), the Supreme Court has held that the principle of resjudicata will not apply when the decision on Page 37 of 72 Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025 NEUTRAL CITATION C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025 undefined the first suit is erroneous or is a subject matter of appeal. After discussing the case law on the issue the Supreme Court has held that in the case where an appeal is filed against the judgement, the principle of resjudicata will not apply. Paras 18 to 20 of the decision in case of N.G. Subbaraya and another (supra) read as under:
"18. As to what happens when an appeal is filed against a judgment in the first proceeding, a Full Bench of the Allahabad High Court in Balkishan v. Kishan Lal, (1888) ILR 11 All 148 (at 159-161), is most instructive. Mahmood, J., speaking for the Full Bench, referred to Explanation IV to Section 13 of the Code of Civil Procedure, as it then stood. The learned Judge referred to the said explanation in the following terms:
"The latter part of the Explanation IV of that section has been framed in somewhat unspecific language, and runs as follows:
"A decision liable to appeal may be final within the meaning of this section until the appeal is made."
The language of the section is silent as to what happens when an appeal has been Page 38 of 72 Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025 NEUTRAL CITATION C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025 undefined preferred; and no doubt much depends upon the interpretation of two vague words "may" and "until" as they occur in the sentence which I have just quoted. I may perhaps say that more has been aimed at by that sentence than the few words of which that sentence consists could convey. What has been left unsettled by that sentence is the difficulty pointed out by a juristic Judge of such eminence as Mr. Justice Holloway of Madras in Sri Raja Kakarlapudi Suriyanarayanarazu Garu v. Chellamkuri Chellamma [5 M.H.C.R. 176] when that learned Judge said:
"In the lower Court it seems to have been taken for granted that the former judgment could not be conclusive because an appeal was pending. This is not in accordance with English law, as the judgment on the rejoinder in Doe v. Wright [10 A. & E. 763] shows. It would, however, be perfectly sound doctrine in the view of other jurists (Unger Oct. Priv. Recht, II, 603, Sav. Syst., 297, Seq. Waihier, II, 549). As an Englishman I should be sorry to invite a comparison between the reasons given by these great jurists for their and those embodied in the English cases for the contrary doctrine." xxx xxx xxx I hold that the views thus expressed by Pothier and, as Mr. Justice Holloway has indicated, adopted by other continental jurists as to the doctrine of res judicata, are consistent with the interpretation which I place upon Explanation IV of s. 13 of the Code of Civil Procedure in relation to the Page 39 of 72 Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025 NEUTRAL CITATION C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025 undefined authority of judgments still liable to appeal. Such judgments are not definitive adjudications. They are only provisional, and not being final cannot operate as res judicata. Such indeed seems to be the view adopted by the learned Judges of the Bombay High Court when they said, in Nilvaru v. Nilvaru [ILR 6 Bom. 110.], "We consider that when the judgment of a Court of first instance upon a particular issue is appealed against, that judgment ceases to be res judicata and becomes res sub judice." In this case, therefore, both the Courts below were wrong in law in holding that the previous judgment of the 10th March, 1886, which at the date of the institution of this suit was still liable to appeal, and which at the date of the decision of this suit by the first Court, as also at the date of the decision by the lower appellate Court, was the subject of a second appeal pending in this Court (S.A. No. 973 of 1886) could operate as res judicata in favour of the plaintiff in regard to his title as to the malikana.
19. The Privy Council, in an early judgment in S.P.A. Annamalay Chetty v. B.A. Thornhill AIR 1931 PC 263 (at 264), was faced with the question as to whether the filing of an appeal would by itself take away the res judicata effect or whether a matter heard and finally decided by the first Court was res judicata until it was set aside on appeal. The Privy Council held:
"Section 207 of the Civil Procedure Code, Page 40 of 72 Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025 NEUTRAL CITATION C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025 undefined 1889, provides as follows:
"All decrees passed by the Court shall, subject to appeal, when an appeal is allowed, be final between the parties; and no plaintiff shall be non-suited."
The appellant maintained that, under this provision, no decree, from which an appeal lies and has in fact been taken, is final between the parties so as to form res judicata, while the respondent contended that such a decree was final between the parties and formed res adjudicata until it was set aside on appeal. In their Lordships' opinion the former view is the correct one, and where an appeal lies the finality of the decree on such appeal being taken, is qualified by the appeal and the decree is not final in the sense that it will form res adjudicata as between the same parties. The opinion of the learned Judges of the Supreme Court clearly inclined to the same view, and their Lordships have a difficulty in appreciating why the learned Judges found it unnecessary to decide this point, for this view still leaves it open to the Court to see that the appellant does not get decree twice over for the same sum, and it is inconsistent with the other ground expressed by them for their decision that the appellant's cause of action had been merged into the decree in Action No. 4122, since, according to this view, that decree was not final. Their Lordships regret that the second action was not adjourned pending the decision of the appeal in the first action, as that would have simplified procedure and saved expense." Page 41 of 72 Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025
NEUTRAL CITATION C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025 undefined
20. Our law, therefore, is different from the American law - a decree from which an appeal lies and has in fact been filed would render the res sub judice and not judicata. This judgment of the Privy Council has been repeatedly followed by the High Courts in this country. See, Parshotam Parbhudas v. Bai Moti AIR 1963 Gujarat 30 at para 8, Bhavani Amma v. Narayana Acharya AIR 1963 Mysore 120 at para 2, Satyanarayan Prosad Gooptu v. Diana Engineering Company AIR 1952 Calcutta 124 at para 10 and Venkateswarlu v. Venkata Narasimham AIR 1957 Andhra Pradesh 557 at para 3." 6.11 Since the subject matter of DRT decision is in appeal, in our opinion therefore, the objection of the learned counsel for the appellant that it is not open for the company to take up the very same issue before us is negated.
6.12 We therefore will now examine the issue of the deed of assignment whether being in compliance of the provisions of Gujarat Stamp Act and that whether it is in compliance of the Registration Act as argued by the learned Page 42 of 72 Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025 NEUTRAL CITATION C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025 undefined counsel for the respondent company? By relying on Section 5 of the Gujarat Stamp Act, 1958, Mr.Shah would submit that the deed of assignment dated 29.09.2004 purports to assign claims of ICICI Bank from 114 different independent distinct companies to the Civil Application filed in appeal. We have been taken through the deed of assignment with these 114 companies. He would therefore submit that these are distinct loans from these distinct companies and as per Section 5 of the Stamp Act, they are several distinct matters and therefore, a consolidated amount of stamp duty cannot be accepted.
6.13 In the decision in case of Coastal Gujarat Power Limited (supra), the Supreme Court was considering the issue of stamp duty on the instrument of mortgage where 13 banks had Page 43 of 72 Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025 NEUTRAL CITATION C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025 undefined given separate loans. Before the Supreme Court an issue arose out of a reference answered by the Full Bench of the Gujarat High Court. By the impugned judgement before the Supreme Court, the reference was answered against the revenue holding that the company was not required to pay deficit stamp duty. Considering the submission made by the revenue that the High Court had failed to appreciate that the banks had formed a consortium and financial assistance had been availed through its consortium through 13 lenders which were distinct matters and therefore each has to be separately assessed for the stamp duty was accepted by the Supreme Court. Discussing the scope of Sections 4, 5 and 6 of the Stamp Act, the Supreme Court held as under:
"33. Answering the Reference, the Constitution Bench of this Court elaborately discussed the scope and object of Sections Page 44 of 72 Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025 NEUTRAL CITATION C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025 undefined 4,5, and 6 of the Stamp Act and finally allowed the appeal. Their Lordship held:-
"We are unable to accept the contention that the word "matter" in section 5 was intended to convey the same meaning as the word "description" in section 6. In its popular sense, the expression "distinct matters" would connote something different from distinct "categories". Two transactions might be of same description, but all the same, they might be distinct. If A sells Black-acre to X and mortgages White-acre to Y, the transactions fall under different categories, and they are also distinct matters. But if A mortgages Black-acre to X and White-acre to Y, the two transactions fall under the same category, but they would certainly be distinct matters. If the intention of the legislature was that the expression 'distinct matter' in section5 should be understood not in its popular sense but narrowly as meaning different categories in the Schedule, nothing would have been easier than to say so. When two words of different import are used in a statute in two consecutive provisions, it would be difficult to maintain that they are used in the same sense, and the conclusion must follow that the expression "distinct matters" in section 5 and "description" in section 6 have different connotations."
6.14 What therefore becomes evident when we examine the present deed of assignment is that it Page 45 of 72 Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025 NEUTRAL CITATION C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025 undefined was in connection with 114 distinct matters and therefore the stamp duty had to be paid in accordance with the provisions envisaged under Section 5 of the Stamp Act. Section 5 of the Stamp Act reads as under:
"Section 5 - Instruments relating to several distinct matters:
Any instrument comprising or relating to several distinct matters distinct matters or distinct transactions shall be chargeable with the aggregate amount of the duties with which separate instruments, each comprising or relating to one of such matters or distinct transactions] would be chargeable under this Act."
6.15 Even otherwise, the perusal of a notification dated 06.05.2002 filed with the Civil Application by the company indicates that the duty has to be paid on the instrument of securitization of loans or the assignment of debt. In other words, the incident of Stamp Duty are loans that are assigned by the deed of assignment by one bank Page 46 of 72 Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025 NEUTRAL CITATION C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025 undefined to the other. There are therefore several separate distinct transactions made by a single instrument and the duty therefore has to be on each loan for one each separate distinct matter. The parties had referred to a decision in case of Arunachalam Mutthu (supra). However, for our purposes, in light of the decision of the Gujarat High Court in case of Coastal Gujarat Power Limited (supra), we deem it necessary to refer to the decision in the case of Arunachalam Mutthu (supra). Even in accordance with the provisions of Section 34 of the Stamp Act therefore the instrument i.e. the deed of assignment cannot be said to be a legal deed and even if we were to accept the legal submission of the counsel for the appellant that the transfer of assignment is legal, on the facts of the case, we hold that the deed of assignment fails the test of it being sufficiently stamped Page 47 of 72 Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025 NEUTRAL CITATION C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025 undefined under the provisions of the Stamp Act. 6.16 The other alternative submission that the respondent company had canvassed was on the issue of deed of assignment being though requiring compulsory registration was not registered at all. Section 17 of the Registration Act provides that certain documents need be compulsorily registered. Admittedly, the deed of assignment is one of such instrument which requires compulsory registration. The registration of such document has to be within the prescribed time limit as so provided under Section 23 of the Registration Act. Section 25 of the Registration Act provides that if there is a delay in presenting a document for registration within four months of its execution on account of its urgent necessity or unavoidable extent, the Registrar can extend the period for a document Page 48 of 72 Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025 NEUTRAL CITATION C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025 undefined for presentation for registration by a further period of four months. For our purposes, Sections 17, 23 and 25 of the Registration Act read as under:
"17. Documents of which registration is compulsory.--(1) The following documents shall be registered, if the property to which they relate is situate in a district in which, and if they have been executed on or after the date on which, Act No. XVI of 1864, or the Indian Registration Act, 1866, or the Indian Registration Act, 1871, or the Indian Registration Act, 1877, or this Act came or comes into force, namely:-- (a) instruments of gift of immovable property; (b) other non- testamentary instruments which purport or operate to create, declare, assign, limit or extinguish, whether in present or in future, any right, title or interest, whether vested or contingent, of the value of one hundred rupees and upwards, to or in immovable property; (c) non-testamentary instruments which acknowledge the receipt or payment of any consideration on account of the creation, declaration, assignment, limitation or extinction of any such right, title or interest; and (d) leases of immovable property from year to year, or for any term exceeding one year, or reserving a yearly rent; 1 [(e) non-testamentary instruments transferring or assigning any decree or order of a Court or any award when such decree or order or award purports or Page 49 of 72 Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025 NEUTRAL CITATION C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025 undefined operates to create, declare, assign, limit or extinguish, whether in present or in future, any right, title or interest, whether vested or contingent, of the value of one hundred rupees and upwards, to or in immovable property:] Provided that the 2 [State Government] may, by order published in the 3 [Official Gazette], exempt from the operation of this sub-section any lease executed in any district, or part of a district, the terms granted by which do not exceed five years and the annual rents reserved by which do not exceed fifty rupees. 4 [(1A) The documents containing contracts to transfer for consideration, any immovable property for the purpose of section 53A of the Transfer of Property Act, 1882 (4 of 1882) shall be registered if they have been executed on or after the commencement of the Registration and Other Related laws (Amendment) Act, 2001 (48 of 2001) and if such documents are not registered on or after such commencement, then, they shall have no effect for the purposes of the said section 53A.] (2) Nothing in clauses (b) and
(c) of sub-section (1) applies to-- (i) any composition deed; or (ii) any instrument relating to shares in a joint stock Company, notwithstanding that the assets of such Company consist in whole or in part of immovable property; or (iii) any debenture issued by any such Company and not creating, declaring, assigning, limiting or extinguishing any right, title or interest, to or in immovable property except in so far as it entitles the holder to the security afforded by a registered instrument whereby the Page 50 of 72 Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025 NEUTRAL CITATION C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025 undefined Company has mortgaged, conveyed or otherwise transferred the whole or part of its immovable property or any interest therein to trustees upon trust for the benefit of the holders of such debentures; or (iv) any endorsement upon or transfer of any debenture issued by any such Company; or
(v) 1 [any document other than the documents specified in sub-section (1A)] not itself creating, declaring, assigning, limiting or extinguishing any right, title or interest of the value of one hundred rupees and upwards to or in immovable property, but merely creating a right to obtain another document which will, when executed, create, declare, assign, limit or extinguish any such right, title or interest; or (vi) any decree or order of a Court 2 [except a decree or order expressed to be made on a compromise and comprising immovable property other than that which is the subject-matter of the suit or proceeding]; or
(vii) any grant of immovable property by 3 [Government]; or (viii) any instrument of partition made by a Revenue-Officer; or (ix) any order granting a loan or instrument of collateral security granted under the Land Improvement Act, 1871, or the Land Improvement Loans Act, 1883; or (x) any order granting a loan under the Agriculturists, Loans Act, 1884, or instrument for securing the repayment of a loan made under that Act; or 4 [(xa) any order made under the Charitable Endowments Act, 1890 (6 of 1890), vesting any property in a Treasurer of Charitable Endowments or divesting any such Page 51 of 72 Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025 NEUTRAL CITATION C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025 undefined Treasurer of any property; or] (xi) any endorsement on a mortgage-deed acknowledging the payment of the whole or any part of the mortgage-money, and any other receipt for payment of money due under a mortgage when the receipt does not purport to extinguish the mortgage; or (xii) any certificate of sale granted to the purchaser of any property sold by public auction by a Civil or Revenue-Officer. 5 [Explanation.--A document purporting or operating to effect a contract for the sale of immovable property shall not be deemed to require or ever to have required registration by reason only of the fact that such document contains a recital of the payment of any earnest money or of the whole or any part of the purchase money.] (3) Authorities to adopt a son, executed after the 1st day of January, 1872, and not conferred by a will, shall also be registered.
23. Time for presenting documents.-- Subject to the provisions contained in sections 24, 25 and 26, no document other than a will shall be accepted for registration unless presented for that purpose to the proper officer within four months from the date of its execution:
Provided that a copy a of a decree or order may be presented within four months from the day on which the decree or order was made, or, where it is appealable, within four months from the day on which it becomes final.
25. Provision where delay in presentation is Page 52 of 72 Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025 NEUTRAL CITATION C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025 undefined unavoidable.--(1) If, owing to urgent necessity or unavoidable accident, any document executed, or copy of a decree or order made, in 2 [India] is not presented for registration till after the expiration of the time hereinbefore prescribed in that behalf, the Registrar, in cases where the delay in presentation does not exceed four months, may direct that, on payment of a fine not exceeding ten times the amount of the proper registration-fee, such document shall be accepted for registration. (2) Any application for such direction may be lodged with a Sub-Registrar, who shall forthwith forward it to the Registrar to whom he is subordinate."
6.17 From the record, the document-the deed of assignment and thereafter the deed of confirmation dated 26.10.2005 are placed before us by way of OJCA No.1 of 2022 by the company.
The deed of confirmation when read indicates that it has rubber stamp in Marathi language. When translated it would read that annexure is not registered. This makes it very clear that the deed of confirmation, to which the deed of assignment annexed was not registered. We Page 53 of 72 Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025 NEUTRAL CITATION C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025 undefined note that the deed of assignment is annexed was not registered. We note that the deed of assignment was dated 29.09.2004. In accordance with the provisions of Section 23 of the Act, the assignment deed ought to have been registered on or before 28.01.2005. Considering the provisions for condoning the delay of four months the time expired on 28.05.2005. Reading the deed of confirmation would indicate that it is dated 26.10.2005 and is registered only on 17.11.2005. Obviously therefore it was beyond the stipulated statutory period under the Registration Act.
6.18 We may also note a decision cited by the learned counsel for the respondent in the case of Ajaykumar M. Singh (supra). Paras 16, 16.2 and 16.3 of the judgement would read as under:
"16. In any event, it is trite that registration Page 54 of 72 Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025 NEUTRAL CITATION C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025 undefined of the Deed of Confirmation would not extend to the enclosures annexed to the said Deed of Confirmation. In other words, by virtue of registration of a Deed of Confirmation, any document annexed thereto does not ipso facto get registered. As also submitted by the Defendant, the said Deed of Confirmation relates to some conditional sale and not to an agreement for creation of charge. Even otherwise the said Document was submitted for registration on 11th March, 1999 i.e. after almost two and half years after its execution. As per Sections 23 and 25 of the Registration Act, a document needs to be tendered within four months of its execution or after explaining sufficient cause within further 4 months thereof and thereafter the Superintendent of Stamps or Sub-Registrar does not have the authority /jurisdiction to even entertain such a request for registration. Both Sections 17 of Registration Act and Section 100 of the Transfer of Property Act make it mandatory for a document creating charge to be compulsorily registered. Section 49 of the Registration Act deals with the effect of non- registration. The same is reproduced hereunder:
"49l Effect of non-registration of documents required to be registered.- No document required by Section 17 or by any provision of the transfer of Property Act, 1882, to be registered shall -
(a) affect any immovable property comprised therein, or KPPNair 41 S-5086/98
(b) confer any power to adopt, or Page 55 of 72 Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025 NEUTRAL CITATION C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025 undefined
(c) be received as evidence of any transaction affecting such property or conferring such power, unless it has been registered.
Provided that an unregistered document affecting immovable property and required by this Act, or the Transfer of Property Act, 1882, to be registered may be received as evidence of a contract in a suit for specific performance under Chapter II of the Specific Relief Act, 1877 or as evidence of any collateral transaction not required to be effected by registered instrument." 16.2. For the reasons set out above, it cannot be said that the Agreement purportedly creating the charge in respect of the suit flats is a registered document. In my view, the same therefore cannot even be looked at by the Court as a piece of evidence in the present Suit.
16.3. Even otherwise, for the same reasons set out whilst answering Issue No. 3, that the Plaintiff has failed to establish that the Deed of Personal Guarantee has been executed by and between the original Plaintiff and the Defendant and the contents of the same are true and correct, I hold that the Plaintiff has failed to establish that the Defendant has executed the Agreement creating a charge in respect of the suit flats (Exhibit-W to the Plaint). Issue Nos. 5 and 7 are therefore answered in the negative. In any event it is already held whilst answering Issue No.4 that no amount is personally Page 56 of 72 Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025 NEUTRAL CITATION C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025 undefined payable by the Defendant to the Plaintiff." 6.19 This therefore indicates that even if the deed of confirmation is registered, that ipso-facto would not make the annexed document registered. Obviously therefore the effect as stipulated under Section 49 of the Registration Act would follow.
6.20 Even in the case of Smt. G. Kadambari (supra) paras 13, 14, 16 and 20 read as under:
"13. Section 23 of the Act envisages that a document shall not be accepted for registration unless it is presented within four months from the date of its execution. Admittedly, the present document was presented within four months from the date of execution. But, it was presented without enclosing the certificate issued by the Urban Land Ceiling Authorities, without which the registration cannot be made, therefore, it can be said that it is not a proper presentation before the Sub-Registrar as required under Section 23 of the Act. Therefore, the Sub-Registrar was right in refusing to register the document without the production of ULC certificate. When the Page 57 of 72 Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025 NEUTRAL CITATION C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025 undefined document is presented for registration after four months from the date of execution, the Sub-Registrar has no authority to register the same and under Section 25 of the Act, the Registrar has no jurisdiction to register the document if it is presented after four months without accounting for the delay. If the presentation of the document for registration has not been made within four months, the delay can be condoned under Section 25 of the Act, provided the Registrar is approached within four months i.e., within eight months of the execution of the document. If the Registrar condones the delay, it can be presented for registration. But, if the Registrar is approached after the expiry of the period of eight months of the execution of the document, the Registrar shall have no jurisdiction to condone the delay under Section 25 of the Act.
14. Where a document which requires registration is not presented for registration within the time prescribed, it will not be open to the parties to have it registered in an indirect manner by simply adopting the device of referring to it or making it a part of a later document which could be presented for registration. Even if there is any agreement between the parties for the postponement of the registration after the execution, it cannot be permitted to be enforced, when the time for presentation has expired.
...Page 58 of 72 Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025
NEUTRAL CITATION C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025 undefined
16. In Changan Lal v. Kashiram 1923 Nagpur 76, the Nagpur High Court held that: Where the object of the agreement to postpone the registration of the deed of lease is obvious enough from the circumstances and scarcely needs specific admission, and is to conceal the actual sivai amdani of the village, and so to reduce the assessment of Land Revenue. Held, this would defeat the provisions of the Registration Act and probably the Transfer of Property Act and the Stamp Act as well; it was fraudulent in that it attempted to conceal the assets of the village and so to reduce the assessment; it involved injury to all other members of the community in that they would get as Land Revenue less than their proper share of the income of the village; and it was obviously opposed to public policy.
...
20. In the present case, the petitioner kept quite for a period of two years, after the Sub-Registrar refusing to register the document. In filing the suit and the decree in the said suit is not binding on the respondents to execute the terms of the decree in violation of the provisions of the Act. When the party fails to present a document for registration within four months after the execution, it cannot be registered and if there is any delay in presentation of the document, an application may be made to the Registrar for condonation of the delay and if the Registrar Page 59 of 72 Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025 NEUTRAL CITATION C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025 undefined condones the delay, when such application is made within a period of further four months, the registration can be done irrespective of the fact whether the process of registration is done beyond the period of eight months. When once the party fails to present the document within eight months, it cannot be presented at any time subsequently. The petitioner once again presented the document after the expiry of 24 years, which is beyond the scope of Sections 23 and 25 of the Act."
6.21 Obviously therefore when a document required to be registered is not presented for registration within the stipulated time, the parties cannot have the same registered in an indirect manner adopting the device by referring it to be a part of a later document. 6.22 We are not addressing the issue on the deed of assignment being registered at Mumbai though the immovable property was situated in district Bharuch and would therefore require mandatory registration in the district of Bharuch Page 60 of 72 Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025 NEUTRAL CITATION C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025 undefined extensively because we have on the first two counts on the document of assignment being insufficiently stamped and not being registered held against the appellant and therefore the deed of assignment is not a deed existing in law. 6.23 Though Mr.Nayak has relied on the decision of the Supreme Court in case of Hindustan Steel Limited (supra) that provisions of the fiscal statute cannot arm a litigant with a weapon of technicality and the instrument cannot be defeated, we would beg to disagree with the submission because in the facts of the present case, the Supreme Court in the case of ICICI Bank (supra) has left it open for this Court to delve into the issue of the validity of such instrument. We also know that before the DRT a prayer was made that the proceedings before the High Court in the Company Application be kept Page 61 of 72 Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025 NEUTRAL CITATION C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025 undefined in abeyance, however, by the final order of the DRT in Exh.22, the DRT categorically permitted the company proceedings before the High Court to go on.
6.24 On the question of overriding effect of the RDDB Act and the Companies Act, Mr.Tirth Nayak has argued on the issue of the overriding effect of the RDDB Act vis-a-vis the Companies Act in light of the decision in case of Allahabad Bank (supra), where the Supreme Court has held that even when two State laws are existing, particularly, in this case the Companies Act v/s. the RDDB Act, the RDDB Act would have an overriding effect in light of the provisions of Section 34. In other words since the remedy of recovery has been invoked, it was not open for the Company Court to enter into a scheme of compromise or arrangement overlooking the Page 62 of 72 Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025 NEUTRAL CITATION C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025 undefined pending proceedings under the RDDB Act. True it is that in the case of Allahabad Bank (supra), considering the provisions of Section 34 of the RDDB Act, the Court has held that the Act would have an overriding effect over the Companies Act. However, these are issues which also have been considered as held in the case of Core Health Care Limited (supra), where one of the objections was raised of proceedings pending before the DRT. The Single Judge of this Court held as under:
"40. One of the objections raised by the objectors is that the objectors have filed their case before the Debt Recovery Tribunal, therefore, this Court would have no jurisdiction to consider the Scheme and by grant of the Scheme as the objectors are to be non-suited by the Debt Recovery Tribunal, present proceedings are illegal. The petitioners have placed their reliance upon the judgment of the Supreme Court in the matter of Allahabad Bank v. Canara Bank and Anr. AIR 2000 SC 1535. So far as the right of the objector to proceed with the case before the Debt Recovery Tribunal is concerned, it would certainly stand if the Page 63 of 72 Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025 NEUTRAL CITATION C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025 undefined Scheme proceedings are not approved by the High Court. Core certainly would have a right to take out proceedings for compromise. If the proceedings ultimately fail and the Scheme is not approved by the High Court, then right to proceed with the proceedings before the Debt Recovery Tribunal would stand, but it cannot be said by any stretch of imagination that Scheme proceedings cannot be approved by the High Court in view of pendency of the proceedings before the Debt Recovery Tribunal. The right to recover through agency of Debt Recovery Tribunal is a statutory right and at the same time, right to get any Scheme approved is also a statutory right under the Companies Act. If no proceedings are taken for the Scheme or its finalization, then, the Debt Recovery Tribunal can proceed with the matter and at the same time, under the SARFAESI Act, ARCIL would be entitled to sell the property. I presume a case where a matter is pending before the Debt Recovery Tribunal and at the same time, ARCIL, exercising its rights under the SARFAESI Act sells the entire property of the Company. After sale proceeds are received would the property be distributed amongst the lenders in accordance with their rights, i.e. proportionate ratio or in accordance with the decrees granted either by the Debt Recovery Tribunal or by some Court or by High Court in some other proceedings. If action of the ARCIL in disposing of the property cannot be condemned and despite decree by Debt Recovery Tribunal, sale Page 64 of 72 Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025 NEUTRAL CITATION C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025 undefined proceeds are to be distributed amongst the lenders, that too, pari passu or in proportion, then pendency of the proceedings before the Debt Recovery Tribunal would not come in the way of the High Court in approving/sanctioning the Scheme. The moment a Scheme is finalized, approved and sanctioned by the High Court, the Scheme would become final and the lenders, whether Class-A or Class-B, secured or unsecured, statutory bodies, shareholders, promoters etc. would be bound by the said Scheme and their right to recover would stand crystallized under the sanctioned scheme. Sections 391 to 394 do not say that the Scheme would be binding upon some only. In fact, the Scheme proceedings bind all persons who are associated with and are interested in the Company, whether they are promoters, shareholders, lenders, employees, workmen. If the High Court approves a Scheme for restructuring or revival of the company and it directs that such company be restructured in its finances or capital or by reduction of share capital or by disposal of the property, then the Scheme would be binding upon all concerned. If the Scheme is approved and the property is sold or is allowed to demerge, then that Scheme would be final and would have a binding effect on all concerned, and once the Scheme binds objectors, then they would not be allowed to say that despite approval of the Scheme by the High Court, they would be entitled to proceed in the Debt Recovery Tribunal. Judgment in the matter of Allahabad Bank Page 65 of 72 Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025 NEUTRAL CITATION C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025 undefined [supra] was in altogether different context, there, the Supreme Court was not considering approval, sanction or rejection of the Scheme. It cannot be denied that in a pending litigation, a borrower can come forward for settlement and it would always be open to the lender to accept the terms of the settlement. If such authority is available to a borrower, then he can always come forward with a Scheme for compromise which is being offered to the creditors individually so also jointly. However, I would agree with the petitioner that if an individual lender can settle, then, there is no reason to hold that the lenders collectively cannot enter into the Scheme of compromise."
6.25 In context of provisions of Section 391 of the Companies Act when a secured creditor deems it fit to enter into a scheme of compromise, as it did in the facts of this case, it does not lie in the mouth of such appellant to contend that such a scheme could not have been finalized when the proceedings against the company were initiated by it for recovery of dues. On this ground also therefore we on the facts of this case hold that Page 66 of 72 Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025 NEUTRAL CITATION C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025 undefined the petition of the learned counsel for the appellant by placing reliance on the decision of the Supreme Court in the case of Allahabad Bank (supra) cannot be accepted. 6.26 Issue of non-compliance of provisions of Section 391 of the Companies Act read with Rule 70(2) of the Companies Rules: From the conspectus of the facts that we have had the occasion to consider, we note that the company had proposed a scheme of compromise between the company and its members (shareholders), its unsecured creditors, its secured creditors etc. In accordance with directions of the Company Judge separate meetings were held of secured creditors, unsecured creditors and members of the company on 10.05.2006. Registrar of the High Court was appointed to preside as Chairman. None of the secured creditors had Page 67 of 72 Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025 NEUTRAL CITATION C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025 undefined filed at the registered office of the company at least 48 hours before the time of the meeting as required by Rule 70(2) of the Companies (Court) Rules, 1959 and due to lack of consent of all the persons, the meeting was terminated. In accordance with the order passed by this Court on 16.06.2006 a fresh meeting was held on 22.07.2006 at 11:30 AM. Only three secured creditors i.e. IDBI Bank, IFCI Limited and Dena Bank find their appropriate authorizations of their Board of Directors. During the course of meeting, one Mr.Bandish Dixit from the appellant company came and presented a resolution passed by "share transfer and routine transfer committee" for the Board of Directors. It was not filed at the registered office of the company at least 48 hours for the time fixed for meeting and therefore the Chairman did not allow him to attend the meeting. When we read Page 68 of 72 Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025 NEUTRAL CITATION C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025 undefined the provisions of Section 391 of the Companies Act, what is evident is that not only have the scheme of compromise and arrangement based on a vote of 3/4th of the members present and voting, what is essential is that they have to be present and vote which was not the case on hand vis-a-vis a representative of the appellant bank. He therefore cannot now cryfoul on the issue of compromise or arrangement entered into by the other secured creditors. There was a clear violation of Rule 70(2) too which is mandatory in nature and as held by the Bombay High Court in the case of Scheme of Arrangement between Mather and Platt Fire Systems Limited and Unsecured Creditors v. Mather and Platt Fire Systems Ltd reported in 2007 SCC Online Bom 427, such failure is a clear violation. Paras 34 and 35 of the decision read as under:
Page 69 of 72 Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025
NEUTRAL CITATION C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025 undefined "34. The report of the Scrutineer contains reasons for the rejection of certain votes.
Now it is common ground before the Court that if the rejection of the ballot filed by AP Genco Ltd. (Sr. No. 5 in Exh. C) is upheld , the resolution would still be carried by the requisite majority even if the other invalid votes were to be treated as votes validly cast against the scheme. The record before the Court shows that the ballot of AP Genco was cast by one Shri Murlidhar. The authorisation in favour of the aforesaid person was signed by the Chief General Manager. Rule 70(2) of the Companies (Court) Rules, 1959 provides as follows:
70(2) Where a body corporate which is a member or creditor (including holder of debentures) of a company authorises any person to act as its representative at the meeting of the members or creditors of the company, or of any class of them, as the case may be, a copy of the resolution of the Board of Directors or other governing body of such body corporate authorising such person to act as its representative at the meeting and certified to be a true copy by a director, the manager, the secretary, or other authorised officer of such body corporate, shall be lodged with the company at its registered office not later than 48 hours before the meeting.
35. In the present case, it is an admitted position that the person who sought to vote Page 70 of 72 Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025 NEUTRAL CITATION C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025 undefined on behalf of AP Genco, did not produce any Board resolution, nor was any resolution filed at the registered office of the Company 48 hours before the meeting. In fact, in the affidavit filed on behalf of AP Genco in these proceedings, even the authorisation, if any, granted by the Board of Directors to the Chief General Manager is not forthcoming at the present stage. The provisions of Rule 70 require that where a body corporate is a member or creditor and such a body authorises a person to act as its representative at a meeting, a resolution of the Board of Directors has to be lodged with the Company at its registered office not less than 48 hours before the meeting. This was admittedly not done. Hence, the rejection of the ballot cannot be regarded as invalid."
6.27 As held by the Supreme Court in case of A.C. Narayanan v. State of Maharashtra reported in 2014 (11) SCC 316, when a meeting of creditors of a company is convened to consider a scheme of compromise, it is not a routine transfer and therefore in absence of any delegated power to represent the Board of Directors, from the resolution that is placed on record what is evident is that it was a resolution Page 71 of 72 Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025 NEUTRAL CITATION C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025 undefined of the share transfer and routine transfer committee and not of the Board of Members. On this count too therefore, the appellant could not have come before this Court objecting the scheme of compromise and arrangement.
6.28 For all these grounds therefore we are of the opinion that the appellant bank has no case now to object to the scheme of compromise and arrangement made and settled by this Court by the judgement impugned before us.
7. The appeal is accordingly dismissed.
(BIREN VAISHNAV, J) (HEMANT M. PRACHCHHAK,J) ANKIT SHAH Page 72 of 72 Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025