Bombay High Court
Anand Jayant More vs Bank Of India on 17 September, 2009
Equivalent citations: 2010 (1) AIR BOM R 375, 2010 A I H C 1867, (2010) 2 BANKCAS 227, (2009) 6 ALLMR 187 (BOM), (2010) 3 BANKCAS 378, (2010) 2 BOM CR 484
Bench: Swatanter Kumar, A.M.Khanwilkar
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
WRIT PETITION NO.1697 OF 2009
Anand Jayant More,
Proprietor Anand Poultry Farm,
Gat No.319, 322, 325 and 326
of PO Sasawane, Tal: Alibag. ...Petitioner
Versus
1.Bank of India,
Alibag Branch, 818 K, Tilak Road,
Balaji Naka, Alibag.
2.A.K.Anandeswaran,
Zonal Manager, Bank of India,
Adm.Building Sector 11,
Plot No.11, CBD, Belapur,
Navi Mumbai 400 614.
3.Shashank Shah,
Residing at 11/A, Embassy Apartment,
46, Nepean Sea Road,
Mumbai - 400 036.
4.Hemant Kumar Garg,
Residing at 11/A, Embassy Apartment,
46, Nepean Sea Road,
Mumbai - 400 036. ...Respondents
......
Mr.S.U.Kamdar with Mr.Rishabh Shah i/b Raval Shah & Co. for Petitioner.
Mr.A.B.Shinde for Respondent No.1.
Mr.Birendra Saraf with Mr.T.N.Tripathi for Respondents 3 & 4.
......
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CORAM : SWATANTER KUMAR, C.J. AND
A.M.KHANWILKAR, J.
JUDGMENT RESERVED ON : 31st August, 2009 JUDGMENT PRONOUNCED ON : 17th September, 2009 P.C. (Per A.M.Khanwilkar, J.) :
1. Heard Counsel for the parties.
2. Rule. Rule made returnable forthwith. Mr.Shinde waives service for Respondent No.1. Mr.Tripathi waives service for Respondents 3 and 4.
3. This Writ Petition under Article 226 of the Constitution of India takes exception to the Judgment and Order passed by the Debts Recovery Appellate Tribunal at Mumbai dated June 18, 2009 in Misc.Appeal No.138 of 2009, thereby dismissing the Appeal preferred by the Petitioner and affirming the order passed by the Presiding Officer, DRT-III, Mumbai dated May 13, 2009 below Exhibit 21 in Securitisation Application No.86 of 2007 rejecting the application preferred by the Petitioner for amendment of the original securitisation application.
4. Briefly stated, the Respondent Bank invoked the provisions of Securitisation and Reconstruction of Financial Assets and Enforcement of ::: Downloaded on - 09/06/2013 15:05:31 ::: : 3 : Security Interest Act, 2002. A notice dated 17th December 2005 was issued under Section 13(2) of the Act by the Respondent Bank. The Petitioner preferred securitisation application which was numbered as Securitization Application No.86 of 2007 some time on 8th October 2007, amongst others, questioning the validity of the notice issued by the Bank. The reliefs claimed in the original securitisation application were as follows :
"(a) this Hon'ble Tribunal may be pleased to declare the notice issued under section 13(2) of the SARFAESI Act, is being bad in law illegal, unlawful and null and void.
(b) That this Hon'ble Tribunal may be pleased to declare that the measures adopted under section 13(4) of the SARFAESI act, are violative and are contrary to Rule 8 of the Securitization Interest (Enforcement) Rules, 2002 and hence the taking possession be declared as null and void.
(c) That the purported sale affected on 01.10.2007 by Respondent No.2 in favour of the Respondent No.3 be declared as null and void.
(d) That this Hon'ble Tribunal may be pleased to declare that there is One Time Settlement duly arrived at and acted upon between the parties and Respondent No.1 be acted to honor and comply with the same."
5. Obviously the said Application was filed only after the Respondent Bank had taken possession of the mortgaged property and proceeded to sell the same. The sale of the mortgaged property was conducted by the Respondent Bank on 12th October 2007 which was confirmed on 15th October 2007. Later on, the Petitioner preferred application for amendment of the original Securitization Application on 5th November 2007. It is ::: Downloaded on - 09/06/2013 15:05:31 ::: : 4 : averred in the said Application that the amendments were necessitated on account of the fact that the new facts and disclosures have become known to the Petitioner only at the time of hearing of the ad-interim application for stay and thereafter. By the said amendment, the Petitioner intended to introduce some new averments in the Securitization Application as also add further reliefs and delete prayer clause 7(c). Significantly, one of the averment which was introduced by the said amendment by way of paragraph K-4 was that the alleged sale in favour of Respondent Nos.3 and 4 herein be declared as bad in law, null and void and the property be restored back to the Petitioner. However, no corresponding relief in this behalf was prayed, although the Petitioner prayed for adding further reliefs to the Securitization Application. Be that as it may, the said Application was allowed, consequent to which, the Petitioner were permitted to add stated paragraphs in the Securitization Application as well as further prayers as also to delete prayer clause (c) of the original Application. The further reliefs inserted by way of this amendment read thus :
"7(b)(i) That this Hon'ble Tribunal may be pleased to order and declare that the Respondent Bank is not entitled to adopt steps under the Securitization Act 2002 after having entered into a settlement and acting thereupon by acceptance of Rs.36 lacs from the Appellant and making him to withdraw S.A.No.160(lodg.) of 2007 and by obtaining consent terms duly signed from the Applicant and his guarantors/ family members.::: Downloaded on - 09/06/2013 15:05:31 ::: : 5 :
7(b)(ii)That the Respondent Bank be ordered and directed to file consent terms in O.A. No.81 of 2003 and to withdraw the same and the Applicant be permitted to deposit the balance amount agreed upon with the Respondent No.1 Bank.
5. Delete prayer 7(c)."
"8(b)(i) That pending the hearing and final disposal of the Securitization Application, Respondent Bank is required to be directed to deposit the alleged sale proceeds in respect of Gat Nos. 319, 322, 325, 326 in this Hon'ble Tribunal and/or to keep such alleged sale proceeds separately and subject to the orders as may passed in respect of the aforesaid property by this Hon'ble Tribunal in the present Securitization Application.
8(b)(ii)that pending the hearing and final disposal of the Securitization Application, the Respondent Nos.3 and 4 be restrained by an order of injunction from selling, transferring, encumbering or otherwise dealing with Gat Nos. 319, 322, 325, 326 or creating any third party rights in respect thereof.
Interim and ad-interim reliefs in terms of paras 8(b)(i) and 8(b)(ii) above be granted."
6. The matter did not rest at that, inasmuch as the Petitioner moved another amendment application on 25th July 2008 (Exhibit 21). For the nature of controversy that needs to be addressed by us, we think it apposite to reproduce the contents of the said Application, which read thus :
1. The Applicant has filed Securitization Application challenging the sale conducted by the Defendant Bank without notice and without following due procedure of law.
2. The Applicant further states that the sale was fixed on 1st October, 2007.
3. The Securitization application was filed on 8th October, 2007 challenging the sale conducted on 1st October, 2007 at Bank Zonal Office, CBD Belapur.::: Downloaded on - 09/06/2013 15:05:31 ::: : 6 :
4. The Applicant further states that after filing of securitization application and going through the affidavit in reply filed by the Defendant Bank to the Securitization Application No.86 of 2007, the Applicant came to know about the private treaty conducted on 15th October, 2007 without notice to the Applicant. The property was sold to Mr. Shashank Shah which is admitted in their reply at para 7 at the said event is subsequent to filing of the securitisation application it is just and necessary that the applicant be permitted to carry out necessary amendment in this regard.
In the circumstances aforesaid, the Applicant humbly pray that :
a) this Hon'ble Tribunal be pleased to grant leave to amend the securitization application in terms of Schedule "A" and "B" annexed herewith under the facts and circumstances of this case.
b) Any other consequential amendment as may be deem fit and proper under the circumstances of this case be allowed;
c) For such further and other reliefs/orders which this Hon'ble Tribunal may deem fit and proper in the facts and circumstances of the case."
7. By this second amendment Application, the Petitioner prayed for permission to add further paragraphs after 5(xx) and further ground after ground 6(L) as also further relief as prayer clause (c). The schedule of amendment reads thus:
Schedule "A"
Para be added after 5(xx) The Applicant state and submit that no intimation of private treaty conducted on 15th October, 2007 was intimated to the applicant by the Defendant Bank. It is mandatory as per Rule 8 and 9(1) of the Act that notice before sale is mandatory, the Defendant Bank has not complied with the mandatory provisions of the Act. It is further submitted that behind the back of the Applicant, the sale was conducted by private treaty which is not permissible under the Act. It is a duty once sale was failed a fresh notice was to be issued to the concerned parties. The ::: Downloaded on - 09/06/2013 15:05:31 ::: : 7 : Defendant Bank suppressed the material fact that the sale failed on 1st October, 2007.
The Applicant was under bonafide belief that the sale has been already conducted on 1st October 2007 only after going through the reply filed by the Defendant Bank, the Applicant came to know that private treaty has been conducted on 15th October, 2007 and the property was sold to one Mr. Shashank Shah. The Purchaser's are brought on record as per the directions. It is just in the interest of justice that the subsequent event be allowed to take on record and necessary directions/orders be given to amend the securitization application in respect of sale conducted on 15th October, 2007 by way of private treaty without notice and following mandatory provisions under the Act.
Para to be added after 6 (L) Ground It is mandatory on the part of the Defendant Bank to give notice of the sale by private treaty. It is further submitted that the applicant was never informed about the sale by private treaty conducted on 15th October 2007, the mandatory provisions of the Act are not complied with before putting the property for sale and therefore on this count alone sale by private treaty without notice is liable to be set aside.
Schedule "B"
Prayers to be added after payer (c) Purported sale by way of private treaty conducted on 15th October 2007 by the Defendant Bank be declared as null and void."
8. In substance, the amendment was intended to pray for further relief of declaration that the sale by way of private treaty conducted on 15th October 2007 by the Respondent Bank be declared as null and void. The Tribunal by its decision dated 13th May 2009 was pleased to reject the said Application.
The Tribunal found that what is to be seen is whether the Petitioner is entitled to ask for relief which is proposed by way of amendment. The ::: Downloaded on - 09/06/2013 15:05:31 ::: : 8 : Tribunal held that in view of the decision of the Apex Court in Mardia Chemicals case in 2004(4) SCC 311 and Transcore's case reported in AIR 2007 SC 712 and of the Bombay High Court in UCO Bank vs. M/s.Kanji Manji Kothari & Co. & Ors. reported in 2008 (3) BCR 290, it was not open to the Petitioner to seek relief of declaration that the sale of property conducted by the Respondent Bank was illegal, which sale was consequent to taking over possession of the said property by the Bank. It is on this premise, the Tribunal rejected the Application for amendment (Exhibit 21) preferred by the Petitioner. Against this decision, the Petitioner carried the matter in Appeal being Misc. Appeal No.138 of 2009 before the Debts Recovery Appellate Tribunal at Mumbai. The Appellate Tribunal in the first place has affirmed the opinion recorded by the Tribunal that the relief as prayed by the Petitioner cannot be granted in view of the settled legal position. After having said this, the Appellate Tribunal then proceeded to hold that the Petitioner had filed application for amendment on the earlier occasion, which raised similar plea and the same was not granted by way of amendment and which decision has been allowed to become final. Thirdly, the successive application for amendment filed by the Petitioner was intended to delay the case, as the Petitioner was already enjoying interim protection. On the above said reasons, the Appellate Tribunal dismissed the ::: Downloaded on - 09/06/2013 15:05:31 ::: : 9 : Appeal preferred by the Petitioner. Against this decision, the Petitioner has filed the present Writ Petition.
9. The principal argument canvassed before us was that due to inadvertence, relief as is now prayed by way of second amendment remained to be mentioned in the earlier amendment application. It was a bonafide mistake. As a matter of fact, contended learned Counsel that in the earlier Application, the foundation for praying proposed relief was already laid. It is obvious that it was the mistake of the draftsman of the Application which resulted in non-mentioning of proposed relief now claimed by way of second amendment application. Moreover, the proposed amendment would not give rise to fresh cause of action. According to the Petitioner, not granting permission to amend has resulted in serious miscarriage of justice.
For, the purpose for which the first amendment has been allowed by the Tribunal, would be rendered meaningless in absence of appropriate relief in that behalf. To buttress the above submissions, Counsel for the Petitioner has relied on the decision of the Apex Court reported in 2004 Law Suit (SC) 1376 in the case of Raj Kumar vs. Dipender Kaur Sethi which has taken the view that if the material averment was left out due to inadvertence of the draftsman and if that is sought to be rectified by way of second ::: Downloaded on - 09/06/2013 15:05:31 ::: : 10 : amendment, so as to fill up the missing averment in the plea already introduced, the same ought to be granted.
10. The Counsel appearing for the Respondent, on the other hand, have opposed this Petition on the argument that no fault can be found with the view already taken by the Tribunal as well as the Appellate Tribunal.
Besides, it is not a case of manifest error or the order as passed suffers from jurisdictional error. It is further submitted that assuming that the Petitioner was entitled to claim relief in terms of proposed prayer clause (c), even then, the same should not be entertained in the fact situation of the present case. In that, there is no good reason forthcoming as to why the said relief was not expressly prayed in the former application for amendment. That has the effect of Petitioner having given up the said relief and, therefore, the analogy of provisions of Order II Rule 2 of the Code of Civil Procedure would be attracted. Moreover, having not permitted the Petitioner to ask for relief now pressed and to which he was otherwise entitled to in the context of the averments allowed to be amended by virtue of the first amendment application, on principles analogous to constructive resjudicata, the Petitioner cannot be permitted to ask for the said relief by successive amendment application. Moreover, in the said Application (Exhibit 21), ::: Downloaded on - 09/06/2013 15:05:31 ::: : 11 : there is not even a suggestion, much less, a clear averment that omission to ask for relief in terms of proposed prayer clause (c) was the mistake of the draftsman as such. For all these reasons, the decision pressed into service by the Petitioner in the case of Raj Kumar (supra) will be of no avail.
According to the Respondents, the Petition is devoid of merits and the same should be dismissed.
11. Considering the rival submission, the first question is: whether the Debts Recovery Tribunal has jurisdiction to deal with post Section 13(4) situation. Both the Tribunal as well as Appellate Tribunal have proceeded on the basis that it is not open to the borrower to question the sale of the property which is post Section 13(4) situation. This issue has now been authoritatively answered by the Apex Court in the recent decision in the case of Authorized Officer, Indian Overseas Bank & Anr. vs. M/s.Ashok Saw Mill reported in 2009(9) SCALE 649. The main question examined by the Apex Court in this decision was whether the Debts Recovery Tribunal would have jurisdiction to consider and adjudicate with regard to post Section 13(4) events or whether its scope in terms of Section 17 of the Act would be confined to the stage contemplated under Section 13(4) ? The Apex Court has answered the said issue in the ::: Downloaded on - 09/06/2013 15:05:31 ::: : 12 : affirmative. It has held that the consequences of the authority vested in Debts Recovery Tribunal under sub-section (3) of Section 17 necessarily implies that the Debts Recovery Tribunal is entitled to question the action taken by the secured creditors and the transactions entered into by virtue of Section 13(4) of the Act. It has expounded that the Legislature by including sub-section (3) in Section 17 has gone to the extent of vesting the Debts Recovery Tribunal with authority to even set-aside a transaction including sale and to restore possession to the borrower in appropriate cases. It has also noted that the dichotomy in the views expressed by the Bombay High Court and the Madras High Court has in fact been resolved to some extent in the case of Mardia Chemicals (supra) and also by virtue of the amended effected to Sections 13 and 17 of the principal Act. It has thus held that the Debts Recovery Tribunal has jurisdiction to interfere with the action taken by the secured creditor even after the stage contemplated under Section 13(4) of the Act, as the action of the secured creditor is not only open to scrutiny and can be set-aside but it is also open to the Tribunal to restore status-quo ante in a given situation.
12. In the wake of this decision, the basis on which the Tribunal as well as the Appellate Tribunal proceeded to answer the issue, cannot be ::: Downloaded on - 09/06/2013 15:05:31 ::: : 13 : countenanced. Moreover, whether the relief of setting aside the sale as is prayed by the Petitioner should or should not be granted, is a matter to be answered at the final hearing. The power of Debts Recovery Tribunal to even order status-quo ante to be restored is now well recognized. If the Debts Recovery Tribunal in the fact situation of the present case were to accept the grounds putforth by the Petitioner, that would be the inevitable order to be passed at the final hearing. In other words, the inclusion of proposed relief (c) would not cause any prejudice to the Respondents. The fact that the said relief was not specifically prayed in the first amendment application, does not take the matter any further. Indeed, the Respondents may be justified in pointing out that no ground whatsoever has been mentioned in the second amendment application to explain why the amendment now proposed was left out in the first amendment application. It is equally true that the reason now stated by the Petitioner that such omission was on account of inadvertence of the draftsman is not specifically asserted in the second application. Nevertheless, the Petitioner in the main proceedings as well as by subsequent amended reliefs, have questioned the validity of action resorted to by the Respondent Bank under Section 13(4) of the Act. If the said challenge succeeds, the Debts Recovery Tribunal would be competent and obliged to grant such relief as may be ::: Downloaded on - 09/06/2013 15:05:31 ::: : 14 : necessary even to the extent of ordering status-quo ante to be restored. Thus understood, the Respondents would not suffer any prejudice, if the Petitioner is allowed to formally pray for that relief. In view of the legal position now restated by the Apex Court in the case of Authorised Officer, Indian Overseas Bank (supra), we have no hesitation in allowing the Writ Petition.
13. Accordingly, this Petition succeeds. Rule is made absolute. The impugned Judgment and Order passed by the Tribunal dated 13th May 2009 below Exhibit 21 in Securitization Application No.86 of 2007 as well as Judgment and Order dated 18th June 2009 passed by the Appellate Tribunal in Misc.Appeal No.138 of 1999 are quashed and set-aside and instead, the Application Exhibit 21 in SA No.86 of 2007 praying for amendment of the Securitisation Application No.86 of 2007 is made absolute. No order as to costs.
CHIEF JUSTICE A.M.KHANWILKAR, J.
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