Punjab-Haryana High Court
Asset Reconstruction Company (India) ... vs M/S Pml Industries Limited And Others on 21 April, 2011
Bench: Jasbir Singh, Rakesh Kumar Garg
IN THE HIGH COURT OF PUNJAB AND HARYANA
AT CHANDIGARH
Letters Patent Appeal No.142 of 2010
Date of decision: 21.04.2011
Asset Reconstruction Company (India) Limited (ARCIL)
.....Appellant
versus
M/s PML Industries Limited and others
......Respondents
CORAM: Hon'ble Mr.Justice Jasbir Singh
Hon'ble Mr.Justice Rakesh Kumar Garg
Present: Mr.Ashok Aggarwal, Senior Advocate with
Mr.Sumeet Goel, Advocate for the appellant
Mr.A.K.Chopra, Senior Advocate with
Ms.Rupa Pathania, Advocate for the respondent No.1
Mr.Manohar Lall, Addl.A.G.Punjab for the State
Jasbir Singh, J.
This order will dispose of three Letters Patent Appeals bearing Nos.142 of 2010, 1120 of 2010 and 1542 of 2010, between the same parties and arising out of a commercial transaction of loan raised by M/s PML Industries Limited (in short, the company), in the year 1995. LPA No.142 of 2010
This appeal has been filed by the Asset Reconstruction Company (India) Limited (in short, ARCIL) to impugne an order passed by a learned Single Judge on 11.1.2010 in CWP No.58 of 2010 allowing that writ petition, filed by the company against an order passed by Debt Recovery Appellate Tribunal (DRAT) on 23.12.2009, directing the company to deposit 50% of the amount shown in the demand notice, before the Debt Recovery Tribunal, by 7.1.2010.
Letters Patent Appeal No.142 of 2010 2LPA No.1120 of 2010
After passing of an order by the learned Single Judge in CWP No.58 of 2010 on 11.1.2010, the matter was taken up by the Debt Recovery Tribunal (DRT) and vide order dated 13.1.2010, RA No.5 of 2009 filed by the ARCIL was dismissed as having been become infructuous. On 15.1.2010, DRT allowed RA No.4 of 2009 filed by the company, orders passed by the Tehsildar on 23.1.2006, to take over possession of the assets of the company, at the instance of the ARCIL and also notice issued under Section 13(2) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (in short SARFAESI Act) dated 21.1.2003, were set aside. Action of the ARCIL, to initiate action under Section 13(2) of the SARFAESI Act against the company, was declared illegal and without any jurisdiction. The ARCIL went in appeal and the DRAT at Delhi, vide order dated 21.5.2010, quashed an order passed by the DRT on 15.1.2010 and ordered that the ARCIL is not precluded to proceed under the SARFAESI Act to recover the amount from the company. The company has filed CWP No.10312 of 2010 to impugne an order passed by the DRAT. On 20.8.2010, the learned Single Judge restrained the ARCIL (respondent No.2) not to take coercive steps to recover the disputed amount from the company. It was further ordered that during pendency of that writ petition, the company shall not alienate or encumber its secured or unsecured assets without prior permission of the Court. Against order dated 20.8.2010, the ARCIL filed LPA No.1120 of 2010.
LPA No.1542 of 2010
The ARCIL has filed this appeal against an order dated 9.11.2010 passed by the learned Single Judge in CM No.14915 of 2010 in Letters Patent Appeal No.142 of 2010 3 CWP No.10312 of 2010. Vide that order, the ARCIL was directed to produce Deed of Assignment/ Deed of Acquisition and further the individual through whom reply/ affidavit was filed by the ARCIL, to show his authority, the ARCIL was directed to file those documents. In this appeal, notice of motion was not issued, however, it was ordered to be heard along with LPA No.1120 of 2010 and continued to be adjourned from time to time with that appeal.
The orders, which are under challenge in LPA No.1120 of 2010 and 1542 of 2010, came into existence after passing of an order by a Single Judge in CWP No.58 of 2010 on 11.1.2010. That order is under challenge in LPA No.142 of 2010 and decision in this appeal is likely to affect so far as proceedings in other two appeals are concerned. Accordingly, we have decided to take up this appeal for disposal in the first instance. Some admitted facts In 1990, M/s Punjab Meats Limited was floated as a joint venture with the Punjab Agro Industries Corporation Limited. The industrial unit of the company is situated at village Behra, Derabassi, district Mohali. The name of the company was changed to M/s PML Industries in April 1995. To run its meat processing unit, the company raised a loan of Rs.17.70 crores, in the month of June 1995, from AFIC of Australia @ 6% simple interest. The amount was to be repaid in 16 half early installments upto 15.12.2002. IDBI Bank, ICICI Bank and State Bank of Hyderabad were the guarantors. When the company failed to repay the loan, as per the terms and conditions agreed upon between the parties, all the three guarantors were made to make the payment of the loan amount to AFIC, against the guarantee(s) furnished by them. Some additional loan facility was also advanced by ICICI Bank to the company and as per figure given by Letters Patent Appeal No.142 of 2010 4 its counsel, total amount payable by the company to the financial institutions, mentioned above, was to the extent of Rs.31.52 crore. On adding the amount of additional loan facility, the total liability had arisen to Rs.39.68 crore. Subsequent thereto, ICICI sold its interest to the ARCIL for an amount of Rs.4.2 crore.
In the year 1995, on account of some religious agitation, the Deputy Commissioner, Patiala ordered the closure of industrial unit of the company. Accordingly, production was stopped. The company challenged that order by filing CWP No.8924 of 1995. This Court granted interim protection to the petitioner and on 30.8.1995 that writ petition was admitted for regular hearing and as per information supplied, it is still pending for adjudication. Thereafter the company's unit became functional.
By stating that it had suffered losses, the company went before the Board of Industrial and Financial Reconstruction (in short, the BIFR), where its reference was registered on 18.12.1998. On 14.5.1999, the petitioner company was declared a sick unit by the BIFR and IDBI was appointed as its operating agency. On 30.4.2001, BIFR directed the operating agency (IDBI) to prepare a draft rehabilitation scheme. Vide order dated 30.4.2001, BIFR directed the IDBI to change the management of the company, which was unsuccessfully challenged by the company. Then the company went to the Supreme Court and order passed by the BIFR was stayed.
The ICICI Bank, holder of 33% of the total secured debts, issued a notice under Section 13(2) of the SARFAESI Act to the company on 21.11.2003 for recovery of an amount of Rs.56,64,08,506.37. The company filed its reply to the notice. The company also came to this Court by filing CWP No.19042 of 2003 to impugne that notice, however, Letters Patent Appeal No.142 of 2010 5 remained unsuccessful. On 30.9.2004, IDBI Bank holder of 32% of the total secured debts and working as an operating agency, assigned/ transferred its debts to Stressed Assets Stabilization Fund (SASF). On 30.12.2004, ICICI also assigned its debts to the ARCIL and intimation was sent to the company on 11.1.2005. Before the Hon'ble Supreme Court on 6.12.2005, it was submitted on behalf of SASF that a final settlement for an amount of Rs.12.5 crore payable in three installments within six months towards full and final settlement has been arrived at between the parties. The Hon'ble Supreme Court directed the company to deposit an amount of Rs.one crore with its Registrar on or before 2.1.2006, which was deposited. The Supreme Court then vide order dated 15.2.2006 gave liberty to the company to approach the BIFR disclosing name of the investors along with detail of the funds. It was further ordered that if the BIFR was satisfied then a scheme for revival/ rehabilitation be initiated. The company accordingly submitted an intimation regarding the investors to the BIFR on 9.3.2006. During pendency of the revival proceedings, Assets Reconstruction Company moved an application under Section 14 SARFAESI Act before District Magistrate, SAS Nagar, Mohali to take possession of the secured assets, on 7.9.2006. The District Magistrate directed the Tehsildar to take over possession of the assets of the company. The Tehsildar sent a notice on 23.11.2006 to the company for delivery of possession of its unit. The petitioner filed reply and also filed CWP No.19406 of 2006 to lay challenge to the above said notice. Vide order dated 14.12.2006, this Court ordered the parties to maintain status quo.
The company entered into a one time settlement with ARCIL and agreed to pay Rs.13.25 crore towards settlement of debts due to all the secured creditors. The settlement was acknowledged and approved by Letters Patent Appeal No.142 of 2010 6 ARCIL on 20.3.2007. In response to that settlement, the company paid Rs.2 crore. This Court, vide order dated 4.4.2008, dismissed CWP No.19406 of 2006 filed by the company, however, liberty was granted to the company to avail the statutory remedy under Section 17 of the SARFAESI Act. Relevant portion of the order reads thus:-
"26. In fact the petitioner is fully aware of this legal position because it has earlier approached this Court by filing C.W.P. No. 19042 of 2003 in which prayer was made that respondents therein be restrained from taking any action under Section 13 (2) of the Act. That petition was disposed of in terms of Division Bench judgment rendered in C.W.P. No. 19657 of 2003, decided on 25.5.2004. The Division Bench has also followed the view taken by Hon'ble the Supreme Court in the case of Mardia Chemicals case (supra).
27. The argument of the learned counsel for the petitioner that an express order under Section 13(3A) of the Act was required to be passed, has been effectively met by the respondents, inasmuch as, order under Section 13(2) of the Act was passed by the secured creditors on 21.11.2003 (P-14), which was almost a year before the provisions of Section 13(3A) were incorporated in the Act by way of amendment dated 11.11.2004. In any case, the petitioner has been granted personal hearing as is the admitted fact by it, which is evident from a perusal of para 21 of the petition alongwith a perusal of document attached with the petition at page 145.
28. The other argument that the principles of estoppel would apply against the ARCIL-respondent No. 6, would also be of Letters Patent Appeal No.142 of 2010 7 no avail because the period granted by their Lordships' of Hon'ble the Supreme Court in order dated 15.2.2006 has worked itself out and it has already expired long back. The situation would be the same if order dated 20.11.2006, passed by their Lordships' is perused. Moreover, the period fixed by Dr. A.S. Bhinder in his affidavit dated 23.4.2007, undertaking to make payment, as already noticed in the preceding para, has expired long back. Dr. A.S. Bhinder has given an undertaking in para 3 of his affidavit (at page 248 of the paper book) that in the event of non-payment by the petitioner of Rs. 375 lacs by 29.6.2007, ARCIL-respondent No. 6 would have a right to recover further amount as calculated by the ICICI bank at prevailing PLR on overdue amount in the next 90 days and that if the payment of Rs. 1,325 lacs is not made then ARCIL-respondent No. 6, SASF respondent No. 7 and SBH- respondent No. 3 were entitled to continue with the exercise of their rights for recovery of dues in accordance with law. The argument of learned counsel for the respondents truly gains credibility that the petitioner are merely whiling away time. Accordingly, we have no hesitation to reject the arguments raised by the learned counsel for the petitioner.
29. As a sequel to the above discussion this petition fails and the same is dismissed. However, the petitioner shall be at liberty to avail remedy under Section 17 of the Act as observed above. The respondents are entitled to their cost which we assessed at Rs. 10,000/- for each one of the respondent Nos. 1 to 9.
Letters Patent Appeal No.142 of 2010 8Company went to the Hon'ble Supreme Court by filing Civil Appeal No.2432 of 2009. Without adverting to the merits of the case, the company was directed to approach the Debt Recovery Tribunal by invoking the provisions of Section 17 of the SARFAESI Act within six weeks i.e. 13.4.2009. It was further directed that the DRT shall decide the matter without being influenced by any observations made by the High Court in its order dated 4.4.2008. Liberty was also granted to the company to apply for an interim relief. Thereafter, the company filed one M.A. before the Hon'ble Supreme Court and vide order dated 20.4.2009, it was directed that in case Tehsildar seeks to get possession, 48 hours notice shall be granted to the company and it will be open to the company to take appropriate remedy in the meantime. The company then moved an application under Section 17 of the SARFAESI Act. The Debt Recovery Tribunal dismissed an application filed by the company vide order dated 31.8.2009. Relevant portion of the order reads thus:-
"22. I have carefully gone through the orders of the Hon'ble Supreme Court and considered the submissions made on behalf of the parties at bar. With all respect to the learned senior counsel, I am not able to accept his submissions that the matter has already been decided by the Hon'ble Supreme Court and nothing remains to decide on the question of maintainability. Rather, according to my humble opinion the matter has been left open by the Hon'ble Supreme Court to consider this point on maintainability. Therefore, let us examine if the application is maintainable under Section 17(1) of SARFAESI Act. The learned counsel appearing on behalf of respondents No.6 and 7 submits that on a bare reading of Letters Patent Appeal No.142 of 2010 9 Section 17(1) of SARFAESI Act, it would appear that any person including the borrower aggrieved by any of the measures referred to in Sub Section (4) of Section 13 of SARFAESI Act, taken by the secured creditor or its authorized officer, may make an application to the DRT having jurisdiction in the matter within 45 days from the date such measures have been taken. Thus, on a careful reading of aforesaid section, it transpires that any person including borrower, can file an appeal who is aggrieved by any measures referred to in sub section (4) of section 13 of SARFAESI Act to challenge the legality of the action under Section 13(4) of SARFAESI Act. In that event, an appeal can be filed by aggrieved person. Learned counsel on behalf of respondents no.6 & 7 submitted with emphasis that since the secured creditors have not taken any of the four measures prescribed under sub section (4) of section 13 of SARFAESI Act, the appeal filed under Section 17(1) of SARFAESI Act is without jurisdiction for the reasons that it is pre-measured at this stage. The fact that possession of the secured assets is still lying with the applicant company is not disputed. Learned counsel on behalf of the applicant company submitted that Section 13(4) of SARFAESI Act provides for various measures to recover the secured debt. One of the measures interalia is to take possession of secured assets under Section 14 of SARFAESI Act. The secured creditor can itself take the possession or seek the help of District Magistrate under Section 14 of SARFAESI Act. According to his submission, Letters Patent Appeal No.142 of 2010 10 since the respondents sought the possession by seeking help of District Magistrate, it would amount to taking measures provided under Section 13(4) of SARFAESI Act. Thus, the only question remains for consideration is as to whether the action of the District Magistrate comes within the purview of Section 13(4) of SARFAESI Act. There are materials on record that even after the directions issued by the District Magistrate, the Naib Tehsildar has refused to take possession, meaning thereby that possession was still not taken over at the instance of Tehsildar. I have very carefully gone through the provisions of Section 14 of SARFAESI Act, which clearly provides that as to how the secured creditor may request in writing to the C.M.M. or D.M. to take possession thereof or otherwise sub section (3) of Section 17 prescribes that if DRT after examining the facts and circumstances of the case and evidence produced by the parties, comes to the conclusion that any of the measures referred to in sub section (4) of section 13 of SARFAESI Act taken by the secured creditor, are not in accordance with the provisions of this Act and the rules made thereunder, it may restore the possession of the secured asset to the borrow or restore the management of the secured assets to the borrow. On a careful reading of sub section (3) of section 17 of SARFAESI Act, it would be clearly established that any person including the borrower can make an application under Section 17(1) of SARFAESI Act and the Tribunal after examining the evidence alongwith facts and circumstances if finds that any illegality has been committed Letters Patent Appeal No.142 of 2010 11 while taking the measures under sub section (4) of section 13 of SARFAESI Act it may restore the possession of secured assets or may restore the management of secured assets to the borrower. In the instant case, the possession of the secured assets is still lying with the borrower and the secured creditors have not taken over any measures under Section 13(4) of SARFAESI Act till this day. Thus, on a consideration of provisions of Section 17(1) of SARFAESI Act alongwith submissions made at the bar, I am of the considered view that the appeal will only lie after the secured creditors have taken measures that have been enumerated under sub-section (4) of section 13 of SARFAESI Act and not before that, in other words, I am of the firm view that making a request by the secured creditor in writing to the District Magistrate, will not amount to measures that have been prescribed under sub section (4) of section 13 of SARFAESI Act. At the cost of repetition, it may be stated that direction of the District Magistrate was not carried out by his subordinate. So possession could not be taken over. In that view of the matter, the action of the District Magistrate does not include the measures under Section 13(4) of SARFAESI Act. No authority has been placed before me to establish that the impugned action of the secured creditors through District Magistrate is to be treated as one of the measures under sub section (4) of section 13 of SARFAESI Act. Matter can also be examined from another point of view which has been submitted by the learned counsel on behalf of respondents no.6 and 7. His Letters Patent Appeal No.142 of 2010 12 submission is that supposing the application under Section 17 (1) of SARFAESI Act is allowed, this Tribunal cannot restore the possession or management of the secured assets to the borrower as the same is already there with the applicant company. I find much force in the submission made on behalf of respondents no.6 & 7.
23. Thus on the submissions made at bar on behalf of the parties and going through the provisions of section 17(1) of SARFAESI Act, I have to take a view that taking measures under Section 13(4) by the secured creditor is a sine qua none and since no such measures have been taken by the secured creditors under section 13(4) of SARFAESI Act, the present application under Section 17(1) of SARFAESI Act being premature is not maintainable.(Emphasis supplied) In view of the discussions made above, I did not find merit in the application. Consequently, the SA stands dismissed, but in the facts situation, no cost. Interim order of status quo passed by this Tribunal dated 27.5.2009 is vacated. All pending IAs stands disposed off."
Within two days of order passed by the DRT, on 2.9.2009, the company filed MA No.36 of 2009 with a prayer that execution of the judgment dated 31.8.2009 be stayed. Vide order dated 4.9.2009, the DRT stayed execution of the order dated 31.8.2009 till 26.9.2009. I.A. No.324 of 2009 filed by the company was also disposed of vide that order. In that application, it was prayer of the company that direction be issued to the ARCIL to honour one time settlement entered into between the parties and the ARCIL be directed to accept the settlement amount of Rs.13.25 crore Letters Patent Appeal No.142 of 2010 13 less the amount already paid. Regarding that application, in order dated 4.9.2009, it was observed as under:-
"11. From the submissions made by the learned counsel for the parties, I find there is a bonafide and sincere intention with the applicant company to pay the dues of the ARCIL as per direction of the OTS. Admittedly, the applicant company is being run with financial constraints, but nonetheless, when the large number of people are employed and being helped with their livelihood, if applicant company would be allowed to comply with the terms of the OTS and to pay back the dues of the ARCIL, interest of justice shall be better served if this application will be allowed. I, therefore, allow this application and direct the ARCIL to respect the terms of the OTS already entered between them for a sum of Rs.1325 lakhs. By this, not only the amount shall be recovered by the ARCIL but the applicant company shall be in a position to provide employment to so many people which will be in the public interest and policy as well as in the interest of justice. The ARCIL would also be more benefited thereby if payment is revived. Accordingly, IA No.324 / 2009 stands disposed off. (Emphasis supplied)
12. In view of above, MA stands disposed off."
Without disclosing that any application has been filed for stay of the order dated 31.8.2009 and also regarding application filed by the company, claiming the direction to the ARCIL to accept OTS amount, the company filed CWP No.13853 of 2009, impugning the order dated Letters Patent Appeal No.142 of 2010 14 31.8.2009 and another order dated 23.9.2006. On 5.9.2009, following order was passed by this Court in that writ petition:-
"After arguing for sometime, counsel for the petitioner wishes to withdraw this writ petition with a view to move an application for review before Debts Recovery Tribunal.
Ordered accordingly."
Thereafter, the company filed Review Petition No.4 of 2009 on 14.9.2009 before the DRT. The ARCIL also filed Review Application No.5 of 2009 to review order dated 4.9.2009 stated above. Those applications were disposed of vide order dated 5.10.2009 by observing as under:-
"I have considered the submissions made by the learned counsel for the parties. The sole objective of the RDDBFI Act, 1993 is to have speedy recovery of the dues of the banks and financial institutions. Having considered the submissions, the objective of the RDBFI Act, 1993 and taking the facts and circumstances into consideration, I am of the considered view that interest of justice shall be better served if one month's time is allowed to the PML Industries to approach the ARCIL and to make OTS. (Emphasis supplied) Since, it was submitted on behalf of PML Industries that it is prepared to deposit Rs.2.00 crores to show their bonafide, I allow the applicant company one month's time to approach the ARCIL for OTS. Accordingly, stay is extended till 5.11.2009 subject to deposit of Rs.2.00 crores with the ARCIL on or before 27.10.2009. The ARCIl shall consider the proposal of OTS given by the PML as indicated above."Letters Patent Appeal No.142 of 2010 15
Thereafter on 11.11.2009, the company offered an amount of Rs.one crore through a bank draft, which was accepted by the ARCIL. By taking note of offer made by the company that it is ready to settle the matter, the ARCIL was directed to come present before the Tribunal for some settlement. Relevant portion of the order dated 11.11.2009 reads thus:-
"I, therefore, direct that the senior officers, who are having their power to take decision on this matter, should come before this Tribunal on 19.11.2009 so that the matter can again be agitated and some constructive decisions may be taken in presence of both the parties.
Accordingly, the Senior Officers are directed to attend the Tribunal on 19.11.2009 at 2.30 PM to explore the possibility of resolving the dispute in the interest of both the parties, but this order is not passed in consequence to the application filed by the appellant in IA No.39 of 2009. Stay is to continue till then."
Assets Reconstruction Company (ARCIL) laid challenge to the above said order by filing Misc. Appeal No.290 of 2009. The appeal was admitted on 17.11.2009 and further proceedings before the DRT were stayed. Thereafter, by stating that the ARCIL has made an attempt to take possession of the unit of the company, the matter was brought to the notice of the DRT who granted interim stay till 24.11.2009, enabling the company to approach the Appellate Tribunal. The company then filed IA No.597 of 2009 before the Appellate Tribunal, claiming stay of dispossession and on 25.11.2009, after noting that total amount payable was Rs.56 crore and odd in the year 2003 and by the time matter kept on pending before the DRAT it has increased upto Rs.300 crore, it was ordered that let 50% of the amount Letters Patent Appeal No.142 of 2010 16 i.e. approximately about Rs.28 crore be deposited by the company to save its possession. Four weeks time was given to the company to do the needful. Matter was adjourned to 25.1.2010. The company filed CWP No.18912 of 2009 impugning order dated 25.11.2009. This Court, vide order dated 9.12.2009, directed the DRAT to pre-pone the date from 25.1.2010 to 15.12.2009 and to make an attempt to dispose of the same finally before 23.12.2009. The company, thereafter filed an application in the above said writ petition for recalling of the order. The same was disposed of vide order dated 22.12.2009.
The Debt Recovery Appellate Tribunal vide judgment dated 23.12.2009 allowed appeal filed by the ARCIL, State Bank of Hyderabad and SASF. Relevant portion of the order reads thus:-
"Keeping in view the facts and circumstances of this case, I hereby maintain my order dated 25.11.2009. However, the respondent no.1 would deposit demand draft in the sum of Rs.2 crores only till 29.12.2009 with the Registrar, DRT concerned and the rest of the amount out of 50% of the demand notice under Section 13(2) of SARFAESI Act be deposited with the Registrar, DRT by 7.1.2010 subject to this condition, the dispossession of respondent No.1 from the premises in dispute is stayed till the final order is passed by the learned DRT. The appellants are at liberty to withdraw the said amounts from the Court. Parties are directed to appear before the learned DRT on the date already fixed by it for disposal of review petitions. The appeal stands disposed of." Letters Patent Appeal No.142 of 2010 17
The company then filed CWP No.58 of 2010, which was allowed by the learned Single Judge vide the impugned judgement dated 11.1.2010. Hence, this appeal.
The learned Single Judge, in his judgment dated 11.1.2010, has basically took note of a fact that the company, which is not in a position even to deposit an amount of Rs.13.25 crore, settled in the year 2003 (OTS) how that company can deposit about Rs.28 crore as is directed by the DRAT. Relevant portion of the order reads thus:-
5. For a Company that is unable to raise the resources to pay even at Rs.13.5 crores to be directed to pay Rs.28 crores as an interim measure to retain its possession and prosecute the review application before the Debt Recovery Tribunal, was indeed a tall order. The issue before the Appellate Tribunal was whether the Debt Recovery Tribunal was competent to entertain a review application and whether it had exceeded its brief in directing the parties to settle and provide to it a reprieve against dispossession. An application for review was possible in law and keeping the petition entertained and giving the parties a time to settle was not illegal probably, though it was inexpedient to push the parties to a settlement, if they were not willing. The Appellate Tribunal ought to have therefore merely sent back the matter to the Debt Recovery Tribunal for an immediate disposal without compounding the problems further by giving directions for more payments to be made to retain its possession. It was for the Debt Recovery Tribunal to decide on the equities when it had before it a review application for disposal. The debtor Company is at the Letters Patent Appeal No.142 of 2010 18 end of the tether; it has to either show that the notice under Section 13(2) and further proceedings relating to possession taken by the creditor as not valid in law or fail totally. The decision of the Debt Recovery Tribunal will consider the observations of this Court already made in Civil Writ Petition No.19406 of 2006 and consider all the relevant objections that the respective parties have taken. In a case where the petitioner's claim is that the entire proceedings are legally vitiated, to give a direction for deposit of Rs.28 crores could be a stiff and a tall order. The petitioner has but paid so far only Rs.4 crores but its own conduct will determine in future whether it can survive or not. An ultimate decision to be given by the Debt Recovery Tribunal on the contentions raised in the review application will seal or open a new chapter."
Heard.
Counsel for the appellant, Mr.Ashok Aggarwal, Senior Advocate has vehemently contended that the proceedings before the learned Single Judge were akin to the money recovery proceedings. The loan was raised in the year 1995-96. It was to be returned in 16 half yearly installments upto 15.12.2002. When the company failed to discharge its liability, the guarantors were forced to make payment to the tune of Rs.35 crore. In the year 2007, even one time settlement, for an amount of Rs.13.25 crore was settled. Despite having filed an affidavit of its Director Mr.A.S.Bindra, the respondent company failed to make payment of that amount. The notice was issued for recovery of an amount of Rs.56 crore which has wrongly been noted by the Learned Single Judge as Rs.300 crore. (It is stated by Mr.Aggarwal that even if, by claiming simple interest, the Letters Patent Appeal No.142 of 2010 19 amount is calculated it definitely will come to more than Rs.300 crore). The respondent company is using money of the appellant in crores since the year 1995, except making payment of Rs.4 crore only, that too under orders by the Hon'ble Supreme Court and this Court, nothing more has been paid. It is a case of failed promises made by the respondent. The learned Single Judge has accepted contention of the company regarding its inability to make payment of the amount in dispute as a gospel truth. The company in the writ petition has stated that the unit is running, thousands employees are working for it and if possession is taken by ARCIL those employees will be thrown out of service. The company was not asked to put on record its financial position to see whether it is possible for the company to make payment of an amount of Rs.28 crore as directed by DRAT or not. He argued that even now nothing has been brought on record in the shape of balance sheet etc. to show that company is running in losses. He further argued that during pendency of this appeal, an attempt was made to settle the dispute, taking a figure of Rs.13.25 crore as settled money between the parties. Despite directions issued, the respondent company failed to make any payment except Rs.one crore. Thereafter, many opportunities were granted to the company to make the payment, when failed an order dated 27.8.2010 was passed directing the company to pay an amount of Rs.32.25 crore less amount of Rs.5 crore already paid. That order has become final, as such, there is no option left with the company except to comply with that order.
As against this, Mr.A.K.Chopra, Senior Advocate, appearing on behalf of the respondent company has vehemently argued that in the face of pendency of CWP No.10312 of 2010 to await the decision of which, this appeal was adjourned, it will be in the interest of justice to defer this mater Letters Patent Appeal No.142 of 2010 20 till such time an order is passed, in the above said writ petition by the learned Single Judge. He further argued that this appeal has become infructuous because after passing of the impugned order by the learned Single Judge on 11.1.2010, the Debt Recovery Tribunal heard and allowed an application filed by the company. The ARCIL went in appeal, which was allowed and now matter is pending in CWP No.10312 of 2010 in this Court. His prayer is to dismiss this appeal. He further argued that the very entitlement of the ARCIL to recover the amount is in dispute and until and unless that is decided, at the instance of the ARCIL, no adverse order can be passed against the company. Regarding the interim order passed by this Court in this appeal, he argued that only effort was made to settle the matter, if not settled in view of a fact that this appeal has become infructuous those orders will have no affect whatsoever. Regarding LPA No.1120 of 2010 and 1542 of 2010, it is argued that these appeals having been filed against the interim orders are not maintainable.
Perusal of the order, under challenge passed by the learned Single Judge on 11.1.2010, indicates that no material was available with the Court to say that the company does not have any resources to make payment of Rs.28 crore. Rather to the contrary, it was case of the company that if the industrial unit is closed at this stage, thousands employees will become jobless. Neither statement of account nor balance sheet was produced when CWP No.58 of 2010 was decided. no such evidence has been brought on record of this Court. Without adverting to the act and conduct of the company/ its Directors in taking different stand at different stages and also failed promises by the company, the learned Single Judge reversed the order passed by DRAT on 23.12.2009. The learned Single Judge has also not Letters Patent Appeal No.142 of 2010 21 looked into an act of the company defaulting in making payment of the debt amount, which was raised in the year 1995.
It is apparent from the record that the company raised a loan of Rs.17.70 crore in the month of June 1995. It was to be repaid in 16 half yearly installments upto 15.9.2002. The amount was not paid. The company also availed some additional loan facility and the total loan amount had gone upto Rs.39.68 crore. The company went before the BIFR. Reference was registered on 18.9.1998. It was declared a sick unit on 14.5.1999 and IDBI was appointed as its operating agency. Vide order dated 30.4.2001, BIFR directed the operating agency to change management of the company. The company went to the Hon'ble Supreme Court and that order was stayed. In the interregnum the company came to this Court twice/ thrice without any success. When the matter was pending before the Hon'ble Supreme Court, a final settlement for an amount of Rs.12.5 crore payable in three installments within six months was entered into between the parties and statement was made before the Hon'ble Supreme Court on 6.12.2005. The company deposited an amount of Rs.one crore with the Registrar of the Hon'ble Supreme Court in the month of January 2006. The matter was then disposed of and liberty was granted to the company to approach the BIFR for its revival. The company failed to fulfill its promises. The Asset Reconstruction Company initiated process to recover the defaulted amount. The District Magistrate Mohali ordered Tehsildar to take possession of secured assets of the company. The Tehsildar sent a notice on 23.11.2006 to the company for delivery of possession of the unit. The company came to this Court by filing CWP No.19406 of 2006 to lay challenge to the above said proceedings. In the meantime, the Company again entered into a one time settlement with ARC and agreed to pay an Letters Patent Appeal No.142 of 2010 22 amount of Rs.13.25 crore towards settlement of debts due to all the secured creditors. The settlement was approved by the ARC on 20.3.2007. The company deposited an amount of Rs.2 crore in response to that settlement. The Court vide order dated 4.4.2008, dismissed CWP No.19406 of 2006, however, liberty was granted to the company to avail a statutory remedy under Section 17 of the SARFAESI Act.
The above facts clearly indicate that the company at no time had disputed its liability to make repayment of the debt amount to the appellant or its predecessor in interest. It is contention of Mr.Chopra that entitlement of the appellant ARCIL to recover the amount in dispute deserves rejection.
During pendency of CWP No.19406 of 2006, to honour settlement entered into between the parties, Mr.A.S.Bindra, Managing Director of the company filed an additional affidavit dated 23.4.2007 in which company's liability to make payment of the settled amount was admitted and consequences of defaults were mentioned. Relevant contents of the affidavit read thus:-
"1. That I had already filed my affidavit in the abovementioned writ petition alongwith Civil Misc. No.6365 of 2007 in CWP No.19406 of 2006. The said application was taken on record along with the affidavit by the Hon'ble High Court vide order dated 20.4.2007. The said affidavit was filed on the basis of the letter dated 20th March, 2007 given to M/s PML Industries by Arcil by way of One Time Settlement.
2. That on the said date i.e. 20.4.2007 an objection was taken by the counsel for Arcil (respondent no.6) before the Hon'ble High Court that some facts and undertaking was not Letters Patent Appeal No.142 of 2010 23 incorporated in the affidavit filed. Therefore the present additional affidavit is being filed giving undertaking of the omission on the part of the Deponent. That the Hon'ble High Court on 20.4.2007 gave permission to the petitioner to file additional affidavit on the record of the Civil Writ Petition.
3. That the deponent further undertakes that in the event of non payment by the PML Industries to pay Rs.375 lacs by 29th June, 2007 Arcil will have a right to recover further amounts calculated at ICICI Bank prevailing PLR on the amount overdue for the period of delay in the next 90 days which Arcil would allow for making such overdue payment.
4. That the deponent further undertakes that in the event of failure of PML Industries Ltd. to make the payment of Rs.1325 lacs, then in that eventuality ARCIL, SBH would be entitled to terminate the settlement and adjust payment made towards the dues of PML Industries Ltd.
5. That further ARCIL, SAF and SBH would be entitled to continue with the exercise of their rights for recovery of dues as per the provisions of law." (Emphasis supplied) Entitlement of the appellant to recover the amount was also not disputed when CWP No.58 of 2010 was filed. Before Debt Recovery Tribunal also the company made a prayer that directions be issued to the appellant to honour one time settlement by accepting the settled amount, as mentioned above. This aspect was not looked into by the learned Single Judge when order under challenge was passed.
Against an order passed by a Division Bench of this Court in CWP No.19406 of 2006 (mentioned in earlier part of this order), the Letters Patent Appeal No.142 of 2010 24 company went to the Hon'ble Supreme Court by filing Civil Appeal No.2432 of 2009, which was disposed of by the Hon'ble Supreme Court, giving liberty to the company to approach the Debt Recovery Tribunal as per provisions of Section 17 of the SARFAESI Act. The DRT was directed to decide the dispute between the parties without being influenced by an order passed on 4.4.2008 by this Court in CWP No.19046 of 2006.
The Debt Recovery Tribunal dismissed application filed by the Company under Section 17 of the SARFAESI Act vide order dated 31.8.2009. It was opined that the measures taken by the secured creditors under Section 13(4) of the SARFAESI Act are the sine qua none to invoke the provisions of Section 17 of the SARFAESI Act and since no measures have been taken by the secured creditors the application under Section 17(1) of the SARFAESI Act was not maintainable.
Thereafter, in a very surprising manner and without any justification, the DRT took a summer-sault and within two days of passing of an order on 31.8.2009, on an application moved by the company on 2.9.2009, execution of the order dated 31.8.2009 was stayed till 26.9.2009. This Court is of the opinion that once DRT has disposed of the matter, ordinarily it ceased to have any jurisdiction to entertain review application that too without referring to any legal flaw in the order earlier passed. In the application moved by the company, referred to above, a prayer was made that the directions be issued to the appellant to honour one time settlement earlier entered into between the parties and accept Rs.13.25 crore (relevant portion of the order has been reproduced at pages 8 to 12 of this order). Vide order dated 4.9.2009, the appellant ARCIL was directed to accept money in terms of OTS already entered into between the parties. The application was disposed of in an ex-parte manner (relevant portion of the Letters Patent Appeal No.142 of 2010 25 order passed by the DRT on 4.9.2009 is reproduced at page 13 of this order). The company is in the habit of misstating the facts. Without disclosing facts about the above said application, against order dated 31.8.2009, the company filed CWP No.13853 of 2009 in this Court, which was dismissed as withdrawn on 5.9.2009, with a view to move an application for review before the DRT. The learned Single Judge without noticing the above said fact had given findings against the appellant by stating that the appellant is bent upon to take possession of the secured assets of the company without any justification.
The company again filed a review application No.4 of 2009 before the DRT. The ARCIL also filed a review application No.5 of 2009 to review order dated 4.9.2009, mentioned above. In those applications, on 5.9.2009, the company was directed to deposit an amount of Rs.2 crore with ARCIL and the company was given liberty to approach the ARCIL for OTS within one month. The ARCIL was directed to consider proposal of OTS made by the company. The company offered only Rs.one crore on 11.11.2009, taking note of the same the officers of ARCIL were directed to come present in Court to explore possibility of resolving the dispute between the parties on 11.11.2009. The ARC laid challenge to the above said order by filing an appeal. Proceedings before DRT were stayed on 17.11.2009. Despite pendency of proceedings before DRAT the company moved an application before DRT on a pretext that an attempt has been made to seize its industrial unit, a prayer was made for grant of interim stay, which was granted till 24.11.2009. The company then filed an application before the DRAT claiming stay of dispossession. DRAT noted that total amount payable was Rs.56 crore as in the year 2003, it was ordered that the company should pay 50% of the amount (approximately Rs.28 crore) to Letters Patent Appeal No.142 of 2010 26 save its possession. The company immediately came to this Court by filing CWP No.18912 of 2009. Vide order dated 9.12.2009, the Debt Recovery Tribunal was directed to decide the appeal finally before 25.1.2010 i.e. the date which was fixed for making payment of Rs.28 crore. Appeal filed by the ARCIL was allowed by the DRAT on 23.12.2009, which order was challenged by the company in CWP No.58 of 2010.
Learned Single Judge has wrongly noted that the DRAT was of the opinion that the loan amount by company is about Rs.300 crore. A reading of the order clearly indicates that only a reference was made by the DRAT that if the original amount with simple interest is taken without referring OTS it would then gone upto Rs.300 crore. The DRAT had taken the loan amount only at Rs.56 crore which fact is perfectly justified, in view of the proceedings referred to in earlier part of this order and also virtually admitted by the parties.
When this appeal came up for hearing before this Court after issuance of notice of motion on 4.2.2010, the company was restrained from dealing with the secured assets of the company. On 23.2.2010, counsel for the ARCIL made a statement that though amount was settled at Rs.13.25 crore in the month of March 2007, yet in fact, the actual amount of loan is more than Rs.40.90 crore. Counsel made a prayer that to determine equities between the parties, let counsel for the company be directed to file an affidavit regarding its assets and also evaluation of its property from an independent evaluator. To the statement made, counsel for the company stated that some time be given to the company to ensure that payment of substantial amount be made to balance the equities. The DRAT was also directed to dispose of the pending appeal filed by the ARCIL before the next date. Against order dated 23.2.2010, the company filed SLP No.8614 Letters Patent Appeal No.142 of 2010 27 of 2010, which was dismissed as withdrawn on 19.3.2010. Thereafter, the company filed CM Nos.1116-1117 of 2010 with a prayer to review the order, mentioned above. Those applications were also got dismissed as not pressed on 27.5.2010.
On 27.5.2010, this Court after making reference to an earlier order passed, observed that the disputed amount was settled at Rs.13.25 crore in the month of June 2006. The Court also noted that in CM No.1975
-LPA of 2010, it was stated by the company that the company has got released 137 bighas of land situated in Derabassi and earnest efforts will be made to find a suitable buyer and after selling that property, the amount shall be paid to the ARCIL. By taking note of the above said averments, the company was directed to bring an amount of Rs.13.25 crore less the amount already paid plus interest @ 9% per annum on the balance amount for repayment of debt as per terms settled in June 2006. The Court further ordered that the amount of penalty and compensation payable to the appellant shall be considered on the next date of hearing. This order, as per information supplied, had become final between the parties.
On the next date of hearing, the following order was passed by this Court:-
"CM No.2568 of 2010
Notice.
Mr.Sumit Goel, Advocate accepts notice on behalf of the non-applicant-appellant and states that he does not wish to file any reply to the application. Accordingly, the application will be considered alongwith the appeal on the next date of hearing.
LPA No.142 of 2010 Letters Patent Appeal No.142 of 2010 28 Mr.Verma, learned Senior Counsel appearing on behalf of the applicant-respondent has stated that while he had made efforts which are indicated in CM No.2567 of 2010, respondent No.1 has not been able to secure the amount as directed by this Court and now respondent No.1 has approached the Kotak Mohindra Bank to get the loan for repay the debt in question.
List again on 19.8.2010." (Emphasis supplied) In CM No.2568 of 2010, after narrating its inability to arrange the amount, an offer was made by the company that to settle the dispute by stating that the company is ready to transfer title of the land measuring 45 bighas in favour of the ARCIL. Prayer was made that the ARCIL be directed to accept 45 bighas of land for an amount of Rs.10,60,12,500/- .
That application was disposed of by this Court vide order dated 27.8.2010, which reads thus:-
"1. This order will dispose of C.M. No.2568-LPA of 2010 filed in LPA No.142 of 2010.
2. This case has a long and chequered history. The applicant/ respondent No.1 (in short the Company) raised a loan from various banks/ financial institutions in the year 1995-96. As per information supplied, loan amount was to be repaid in 16 half yearly installments. With the amount raised, the Company set up a meat processing plant. However, as per stipulation of the loan agreement(s), it failed to fulfill its promise to repay the loan amount with interest. The Company filed a reference before the Board of Industrial and Financial Reconstruction (in short, the BIFR) under Section 15(1) of the Letters Patent Appeal No.142 of 2010 29 Sick Industrial Companies Act, 1985 (in short SIC Act) and vide order dated 14.5.1995, it was declared as a sick industrial unit. Thereafter, IDBI was appointed an operating agency on 30.4.2001. Reconstruction proposal was continued to be processed before one forum or the other. Matter went upto the Hon'ble Supreme Court and vide order dated 15.2.2006, the Hon'ble Supreme Court permitted the Company to re- approach the BIFR with a fresh proposal for its rehabilitation. The mater then went before the BIFR.
3. In the meantime, in the year 2003, ICICI issued a notice under Section 13(2) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (in short SARFAESI Act), for recovery of an amount of approximately Rs.56 crores. It is coming out from the records that appellant acquired the debt from ICICI and IDBI etc. and became a party in the pending proceedings before the Hon'ble Supreme Court. It is not necessary for us to give further detail of pending litigation between the parties and of the Company in various forums.
4. In June 2006, One Time Settlement was offered to the Company, for an amount of Rs.13.25 crores. The Company failed to fulfill its promise and committed default in repayment of the agreed amount.
5. The Company thereafter again agitated the matter in various forums, including this Court. In the meantime, the competent authority passed an order in favour of the appellant/ non-applicant for taking possession of the secured Letters Patent Appeal No.142 of 2010 30 assets. The Company went to the Appellate Tribunal and vide order dated 25.11.2009, interim stay was granted against order of possession subject to the Company's depositing an amount of Rs.28 crores within a stipulated time. At that stage, the Company filed CWP No.58 of 2010, which was allowed on 11.1.2010. The appellant then filed this appeal.
5. As is apparent from the perusal of order passed by the learned Single Judge, when notice under Section 13(2) of the SARFAESI Act was issued, the amount involved was to the extent of more than Rs.56 crores, however, when possession of the secured assets was sought to be obtained, the total amount, including interest, had gone upto Rs.300 crores.
6. When this appeal came up for hearing on 4.2.2010, notice of motion was issued to the Company and in the meantime, the Company was directed not to deal with the property, in question, till further orders. The Company then put in appearance on 22.2.2010 and the matter was adjourned to 23.2.2010, on which date, the following order was passed:-
"Learned counsel for the appellant made a statement that according to him, though the amount settled on March 2007 was at Rs.13.25 crores, the principal amount payable to the appellant as well as SBH, SASF and Arcil amounted to Rs.40.90 crores and in fact the settlement was made in respect of the said principal amount of Rs.40.90 crores. He further states that in order to determine the equities in the present case, counsel for respondent No.1 be directed to file an Letters Patent Appeal No.142 of 2010 31 appropriate affidavit on assets as well as having property evaluated by an independent evaluator.
Mr.A.K.Chopra, learned Sr. Counsel, states in reply that the appeal has now become infructuous, in view of the order passed in Review application by Debt Recovery Tribunal(for short "the DRT") on 15.1.2010.
Mr.Ashok Aggarwal, learned Senior counsel for the appellants states that the order passed in Review application stands challenged before the DRAT in appeal.
Mr.A.K. Chopra, learned Sr.Counsel has also prayed for more time to enable his clients to ensure that payment of substantial amount is made to balance the equities.
In the meanwhile, DRAT is directed to dispose of the appeal filed by the appellant by 24th March, 2010. The prayer made by Mr.Ashok Aggarwal, Sr.Advocate for having an affidavit qua assets of the guarantor of the property and the evaluation to be made by an independent evaluator, shall be considered on the next date of hearing depending on the response of the respondents.
List on 25.3.2010."
7. Perusal of order indicates that counsel for the Company made a prayer that reasonable time be granted to the Company to make payment of substantial amount to balance the equities.
Letters Patent Appeal No.142 of 2010 32
8. It appears that the Company remained unsuccessful against order, mentioned above in the Hon'ble Supreme Court.
9. The matter was then adjourned to 6.4.2010, 9.4.2010 and 25.5.2010.
10. In response to the order passed on 23.2.2010, the Company paid an amount of Rs.one crore to the appellant on 27.5.2010, on which date, the following order was passed by this Court:-
"CM Nos. 1116-1117 of 2010 Heard. Learned counsel for respondent No.1 submits that both these applications may be dismissed as not pressed. Accordingly, both the applications are dismissed as having not pressed.
CM No. 1975 of 2010 and LPA No. 142 of 2010 (O&M) On 23.02.2010, the following order was passed by this Hon'ble Court:-
" Learned counsel for the appellant made a statement that according to him, though the amount settled on March, 2007 was at Rs. 13.25 Crores, the principal amount payable to the appellant as well as SBH, SASF and Arcil amounted to Rs. 40.90 crores and infact the settlement was made in respect of the said principal amount of Rs. 40.90 crores. He further states that in order to determine the equities in the present case, counsel for respondent No.1 be directed to file an appropriate affidavit on assets as Letters Patent Appeal No.142 of 2010 33 well as having property evaluated by an independent evaluator.
Mr. A.K.Chopra, learned Sr.Counsel states in reply that the appeal has now become infructuous, in view of the order passed in Review Application by Debt Recovery Tribunal (for short "the DRT") on 15.1.2010.
Mr. Ashok Aggarwal, learned Senior Counsel for the appellants states that the order passed in Review Application stands challenged before the DRAT in appeal.
Mr. A.K.Chopra, learned Sr. Counsel has also prayed for more time to enable his clients to ensure that payment of substantial amount is made to balance the equities.
In the meanwhile, DRAT is directed to dispose of the appeal filed by the appellant by 24th March, 2010. The prayer made by Mr. Ashok Aggarwal, Sr. Advocate for having an affidavit qua assets of the guarantor of the property and the evaluation to be made by an independent evaluator, shall be considered on the next date of hearing depending on the response of the respondents.
List on 25.3.2010."
2. The aforesaid order dated 23.2.2010 was challenged by respondent No.1 before the Hon'ble Supreme Court and the S.L.P. was eventually dismissed as withdrawn. Thereafter, we find that Letters Patent Appeal No.142 of 2010 34 Appellate Authority pronounced the order on 21.5.2010 and the said order stands challenged before the learned Single Judge.
3. The admitted facts of this case are that in this matter, the settlement was arrived at between the contesting parties in the month of June, 2006 which settlement stipulated that the amount of Rs. 13.25 Crores would be payable and the first instalment was due on 20.03.2007.
4. It is the case of respondent No.1 company that till date pursuant to the said settlement, though belatedly, they have paid a sum of Rs. 4 Crores upto date and today learned counsel has brought two bank drafts, though in the name of Registrar of this Court, totaling Rs. One Crore. Learned counsel for respondent No.1 contends that if the bank drafts brought today are taken into reckoning, as per the said settlement, a sum of Rs. 5 Crores would now stand paid. When this matter came up on 23.2.2010 before this Court, we were informed that owing to some restraints in securing back the land which was mortgaged with INDUSIND bank Ltd., the sale of the property which was to be sold to clear the debts of the appellant, has been delayed. Thereafter, Civil Misc. Application No. 1975-LPA of 2010 has been filed by respondent No.1 and in paras No. 3 to 5, the following averments have been made by respondent No.1:-
Letters Patent Appeal No.142 of 2010 35
"3. That on behalf of the applicant/respondent No.1, Dr. A.S.Bindra and Mrs. Kawarjit Kaur had mortgaged their land measuring about 136 bighas at Dera Bassi, with theIndusind Bank which was expected to be released, but could not be released during the relevant period.
However, the debt of Indusind Bank has been paid by Mr. Abhinav Bindra, son of Dr. A.S.Bindra. The land has now been released and the documents also have been returned.
4. That earnest efforts are being made to find for buyers and to sell the land to be able to clear the debts of the appellant, even though the price of the land has dropped considerably.
5. That the applicant/respondent No.1 had paid another Rs. 2 Crores to the appellant and hence so far it has paid Rs. 4 Crores and a demand draft of Rs.
1 Crores will be deposited in this Hon'ble Court."
5. It is not in dispute that a sum of Rs. 13.25 Crores was settled between the contesting parties in the month of June, 2006 leading to the payment of first instalment in March, 2007. The appropriate course in balancing the equities Letters Patent Appeal No.142 of 2010 36 between the parties would be to ascertain the bonafides of respondent No.1 company and to find out as to whether it is serious in honouring its commitment made in June, 2006. However, this would be subject to accrual of vested rights in favour of the appellant to claim interest, penalty and compensation owing to the default committed by the respondents. Before we determine the exact quantum payable by respondent No.1 under the orders of this Court, we would like to ascertain the bonafide of the respondents and since land measuring 136 Bighas in Derabassi, District SAS Nagar, Mohali is now available with the respondents, we are giving one time extension to respondent No.1 company to bring a sum of Rs. 13.25 Crores less the amount already paid plus interest at the rate of Rs. 9% per annum on the balance amount for repayment of debt as per the terms settled in June, 2006. The further amount of penalty and compensation payable to the appellant shall be considered on the next date of hearing.
Since two bank drafts for a sum of Rs. One Crore have been brought by respondent No.1 in the name of the Registrar of this Court, we direct that the said amount of Rs. One Crore shall be paid to the respondent No.1 through Mr. Sumit Goel, Advocate for respondent No.1 not later than 10 days from today after getting the drafts redrawn in the name of the appellant. This order is passed without any prejudice to the pleas of the parties only as an interim measure.
Letters Patent Appeal No.142 of 2010 37
List again on 30.07.2010.
Since the matter has been heard at length, it be treated as part heard."
11. Instead of making any effort to deposit the amount, on the next date of hearing i.e. 30.7.2010, the Company filed this application bearing C.M. No.2568-LPA of 2010, stating therein that despite best efforts made, it has failed to sell its land measuring 136 bighas situated in Derabassi district Mohali and a prayer was made that instead of asking the Company to pay rest of the amount in cash, directions be issued to the appellant to accept transfer of land measuring 45 bighas (equal to Rs.10,60,12,500/-) towards full and final settlement of its dues. It is apparent from the records that on 30.7.2010, it was also stated before this Court by the Company that to raise amount, to be paid to the appellant, the Company has contacted Kotak Mohindra Bank. At the time of hearing of this application on 19.8.2010, nothing was shown as to what has happened to the proposal of the Company to raise loan from above said Bank.
12. Sequence of events, mentioned above, clearly indicates that the Company is only buying the time by putting up one excuse or the other. After giving a clear undertaking before this Court on 23.2.2010 that a reasonable time be granted to the Company to make payment of substantial amount, despite lapse of about six months, nothing has been done in that regard except deposit of an amount of Rs.one crore only. It appears that the Company is putting up the Letters Patent Appeal No.142 of 2010 38 successive applications to prolong the proceedings. Taking note of various facts and the undertaking earlier given, on 27.5.2010, this Court made it very clear that as a measure of one time extension, the Company is permitted to sell its land measuring 136 Bighas situated in Derbassi district Mohali and bring an amount of Rs.8.25 crores along with interest @ 9% per annum towards repayment of debt as per the terms settled in June 2006. It was made very clear that further amount of penalty and compensation payable to the appellant shall be considered on the next date of hearing. Thereafter, nothing was done except burdening the Court file with the applications.
13. It is apparent from the records that a very reasonable One Time Settlement was offered to the Company in the year 2006 and against an amount of Rs.41 crores, the Company was asked to pay an amount of Rs.13.25 crores, which was not paid.
14. As per contention of counsel for the appellant, amount due at the time of One Time Settlement was Rs.40.90 crores, whereas to the contrary, counsel for the Company states that due amount was only Rs.32.25 crores.
15. Be that as it may, by way of an interim measure, we accept the figure given by counsel for the Company. Taking note of act and conduct of the Company, we are of the opinion that it does not deserve any further concession from this Court. Under the circumstances, the Company is directed to pay an amount of Rs.32.25 crores less an amount of Rs.five crores already paid. The Company may sell its land of its own Letters Patent Appeal No.142 of 2010 39 and pay that amount to the appellant within four weeks from today subject to further orders which may be passed by this Court.
16. With the above mentioned observations, this application stands disposed of." (Emphasis supplied) This order has become final between the parties. Vide the above order, taking note of company's conduct, it was observed that it does not deserve any further concession from this Court and the company was directed to pay an amount of Rs.13.25 crore less the amount of Rs.5 crore already paid. The company was directed to sell its land of its own and pay the amount to the appellant within four weeks from that date subject to further orders, as may be passed by this Court.
There is no compliance to the order passed. At the time of final arguments, Mr.Chopra has tried to argue that in view of disposal of appeal by DRAT, as ordered by this Court and due to pendency of CWP No.10312 of 2010, impugning order passed by the DRT on 21.5.2010, above said order has become redundant.
The argument raised is totally irrational, disrespectful and amounts virtually to a contempt of this Court. However, taking note of facts and circumstances of this case, we are restraining ourselves from taking any further serious action against the respondent company.
The facts mentioned above clearly indicate that at every step by twisting the facts and under the umbrella of technicalities of law, an attempt has been made by the company to defeat rights of the appellant-ARCIL to recover the due amount. Once, the interim orders passed by this Court on 23.2.2010, 27.5.2010 and 27.8.2010 had become final, the order passed by the learned Single Judge cannot be sustained. The learned Single Judge has Letters Patent Appeal No.142 of 2010 40 failed to appreciate a fact that the proceedings before DRT and DRAT were like a recovery suit. Object of the SARFAESI Act is to expedite recovery of the default loan amount, unless there are special reasons process of recovery cannot be slowed down by the Courts simply on the basis of technicalities which was done by the learned Single Judge when passing the impugned order. The learned Single Judge was impressed only by an argument of the company that it is not possible for it to make payment of the OTS amount then how an amount of Rs.28 crore can be arranged. There was no evidence on record to substantiate above said argument of the company. Even before this Court, no such evidence has been brought on record to say that the company is running in losses. The Directors of the company were also hesitant in disclosing their assets. It is also on record that 136 bighas of land is available with the Directors of the company and if they were sincere the land could have been sold and loan amount in dispute would have been paid to the ARCIL. The principal amount of loan was Rs.17.70 crore. Thereafter, additional facility of loan was availed by the company for an amount of about Rs.8 crore. The total amount of loan comes to more than Rs.25 crore, which was raised way back in the year 1995. On asking of the Court, in installments only an amount of Rs.5 crore has been paid by the company. Only by adding simple interest @ 9%, as directed by this Court vide interim order dated 27.5.2010, amount of loan due from the company would run into more than hundred crore. There is no effort on the part of the company to make payment of loan amount. Such a litigant is not entitled to get equitable relief from this Court when exercising powers in writ jurisdiction. These facts escaped notice of the learned Single Judge, when order under challenge was passed.
Letters Patent Appeal No.142 of 2010 41
Not only as above, by filing CWP No.10312 of 2010, the company has laid challenge to an order passed by the DRAT on 21.5.2010. (That order was passed during pendency of this appeal i.e. LPA No.142 of 2010). The learned Single Judge, vide order dated 20.8.2010 restrained the ARCIL from taking coercive steps to recover its amount. The company was also restrained from alienating or encumbering the secured/ unsecured assets without permission of the Court. The ARCIL filed LPA No.1120 of 2010, impugning the order dated 20.8.2010.
In the meantime, in CWP No.10312 of 2010, following order was passed on 24.9.2010:-
"Adjourned to 13.10.2010 for arguments.
Meanwhile, it is clarified that the order dated 20.8.2010 shall have no bearing on the implementation and/ or compliance of the order dated 27.8.2010 passed by the Division Bench in LPA No.142 of 2010."
Before the learned Single Judge, the company started raising some technical objections, which led to the passing of an order by the learned Single Judge on 9.11.2010 against which LPA No.1542 of 2010 is pending.
In LPA No.1120 of 2010, on 29.10.2010, following order was passed by this Court:-
"This case has a chequered history.
The present LPA has been filed against interim order dated 20.8.2010 passed by a learned Single Judge in Civil Writ Petition No.10312 of 2010 challenging the order of Debt Recovery Appellate Tribunal. The said order reads thus:- Letters Patent Appeal No.142 of 2010 42
"Learned Counsel for the parties have been heard on the issue of grant of ad interim relief. Prime facie it appears that some of the contentions raised on behalf of the petitioner require consideration. While the petitioner claims to have paid a sum of Rs. Five crores as against the loan amount of Rs.4.3 crores, this fact is seriously disputed by learned counsel for respondent No.2 who also urges that no 'blanket' ad interim directions can be issued by this court without putting the petitioner to certain terms. He also refers to an undertaking said to have been given by the petitioner before an Hon'ble Division Bench of this Court and which finds mention in the judgment already placed on record.
In my considered view, if the 2nd respondent is permitted to take coercive steps to recover its disputed dues, not only it may render the writ petition infructuous but is also likely to cause irreparable loss. On the other hand the interest of respondent No.2 can be adequately safeguarded by restraining the petitioner from alienating or encumbering its secured or unsecured assets without prior permission of this court.
Both the parties are accordingly restrained from taking their respective actions as noticed above, till further orders.
The matter however, requires urgent final disposal. The Caveator / respondent No.2 may Letters Patent Appeal No.142 of 2010 43 accordingly file its reply/ affidavit, if any, on or before 10th September, 2010 with an advance copy to the counsel for the petitioner, who shall be at liberty to file the rejoinder thereto, if any, a copy of which shall also be handed over to counsel for respondent No.2 on or before 17.9.2010."
The aforesaid order dated 20.8.2010 was challenged in the present LPA No.1120 of 2010. On 7.10.2010 the following order was passed by this Court in this LPA:-
"We have been informed that final hearing of the writ petition before learned Single Judge is fixed for 13.10.2010, we are confident that learned Single Judge shall pronounce the judgment before the next date of hearing."
Prior to filing of present LPA, another LPA No.142 of 2010 has been filed by the appellant herein against the order passed by another Single Judge of this Court in CWP No.58 of 2010 filed by respondent No.1 challenging order dated 23.12.2009 passed by the Debt Recovery Appellate Tribunal granting conditional stay of dispossession to respondent No.1 subject to deposit of demand draft of Rs.2 crore till 29.12.2009 and rest of the amount out of 50% of the demand notice issued under Section 13(2) of the SARFAESI Act by 7.1.2010. In CWP No.58 of 2010 the learned Single Judge set aside the directions given by the Appellate Tribunal with regard to deposit of amount and directed the Debt Recovery Tribunal to take up the matter and examine the contentions within the Letters Patent Appeal No.142 of 2010 44 strict confines of Section 17 of the Act and further directed that till a final decision is given, the debtor company will retain its possession without any further imposition of terms. The said order dated 11.1.2010 was challenged by the appellant herein in that LPA No.142 of 2010. After hearing the learned counsel for the parties on interim relief, the following orders were passed by this court on 27.8.2010:-
"Be that as it may, way of an interim measure, we accept the figure given by counsel for the company. Taking note of act and conduct of the company, we are of the opinion that it does not deserve any further concession, from this Court. Under the circumstances, the company is directed to pay an amount of Rs.32.25 crores less an amount of Rs. Five crore already paid. The company may sell its land of its own and pay that amount to the appellant within four weeks from today subject to further orders which may be passed by this court".
When on 24.9.2010, Civil Writ Petition No.10312 of 2010 came up for hearing, the learned Single Judge considering the directions given by this court in LPA No.142 of 2010 on 27.8.2010, clarified the order dated 20.8.2010 to the following effect:-
"Adjourned to 13.10.2010 for arguments.
Meanwhile it is clarified that the order dated 20.10.2010 shall have no bearing on the implementation and or compliance of the order dated 27.8.2010".
Letters Patent Appeal No.142 of 2010 45Today a request has been made on behalf of Mr.M.L.Verma Senior Advocate appearing for respondent No.1 in LPA 142 of 2010 for adjournment of the appeal on the ground that he is attending a marriage abroad. We are reluctant to grant adjournment on the ground urged but in the interest of justice we do not propose to pass any adverse order against respondent No.1 Learned counsel appearing for the appellant urged that despite this court's order dated 27.8.2010 and undertakings given prior thereto not even a single rupee has been paid by respondent No.1, therefore, appellant may be permitted to take coercive steps for recovery of loan amount. Mr.A.K.Chopra, Senior Advocate appearing for respondent No.1 in this appeal urged that no such direction be given at this stage because the main writ petition itself is coming up for final hearing on 8.11.2010 and will be taken up for hearing on day to day basis till it is decided.
After taking into consideration the conduct of respondent No.1 that despite giving undertaking during the course of hearing of LPA 142 of 2010 and inspite of this court's order dated 27.8.2010 no amount has been paid and coupled with the fact of passage of time and the clarification given by the learned Single Judge on 24.9.2010, we make it clear that it will be open for the appellants in LPA No.142 of 2010 to enforce the directions issued by the Division bench in order dated 27.8.2010 in para No.15, after November 15, 2010, subject to further orders passed in the writ petition by the learned Single Judge.
List again on November 26, 2010."
Letters Patent Appeal No.142 of 2010 46The conduct of the company was deprecated and taking note a fact that despite an undertaking made and order passed on 27.8.2010 in LPA No.142 of 2010, no amount has been deposited by the company, liberty was granted to the ARCIL to enforce directions given by this Court in LPA No.142 of 2010 on 27.8.2010. Vide that order, further breathing time was given to the company to do the needful upto 15.11.2010. Even then nothing was paid. Filing of legal proceedings at every step and at every moment by the company indicates that the company is determined in not making the payment of the defaulted amount. Once order dated 27.8.2010 in this LPA has become final and also interim order passed by us in LPA No.1120 of 2010 on 29.10.2010, which has also become final between the parties, no option is left with us except to allow these appeals.
Accordingly, by allowing LPA No.1120 of 2010, impugned order dated 20.8.2010, granting an interim stay is set aside. In view of the detailed facts given in earlier part of this order and taking note of the conduct of the company, LPA No.1542 of 2010 is also allowed and the impugned order dated 9.11.2010 is set aside. LPA No.142 of 2010 is allowed, impugned order passed by the learned Single Judge, allowing CWP No.58 of 2010 on 11.1.2010, is set aside.
As has been noted by this Court in earlier part of this order, during pendency of this appeal, the DRT, in terms of an order dated 11.1.2010 passed by the learned Single Judge, allowed RA No.4 of 2009 filed by the company on 15.1.2010 and order passed by the Tehsildar on 23.1.2006 to take possession of assets of the company and notice issued under Section 13(2) of the SERFAESI Act on 21.1.2003 were set aside. The appellant went in appeal, which was allowed by the DRAT on 21.5.2010. That order is now under challenge in CWP No.10312 of 2010. Letters Patent Appeal No.142 of 2010 47 Orders, mentioned above, were passed by the DRT and DRAT in response to the impugned order dated 11.1.2010 in this appeal. When that order is set aside by this Court, natural consequence would be that all the proceedings taken thereafter would become redundant. However, this Court is not passing that order and in the interest of justice, even now an opportunity is granted to the respondent -company to make payment of the debt amount as determined by this Court vide order dated 27.8.2010 within a period of one month from today. If the amount is paid as directed, liberty shall remain with the company to continue with its challenge to the order, which is impugned in CWP No.10312 of 2010 and the payment made as directed above, shall be subject to the ultimate order to be passed by the learned Single Judge in that writ petition. If direction is not complied with and amount is not deposited as directed, then CWP No.10312 of 2010 shall be deemed to have been dismissed.
(Jasbir Singh)
Judge
21.04.2011 (Rakesh Kumar Garg)
gk Judge