Madras High Court
Indian Bank vs M/S. Poonachi Estate on 19 June, 2012
Equivalent citations: AIR 2013 MADRAS 64, (2012) 3 MAD LW 881, (2013) 1 ICC 80, (2012) 4 BANKCAS 358, (2012) 117 ALLINDCAS 574 (MAD)
Bench: D.Murugesan, K.K.Sasidharan
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED:19.06.2012
CORAM
THE HONOURABLE MR.JUSTICE D.MURUGESAN
AND
THE HONOURABLE MR.JUSTICE K.K.SASIDHARAN
C.R.P.(NPD) No.1715 of 2005
& C.M.P.No.15201 of 2005
Indian Bank
rep.by its Senior Manager
Pollachi Branch
Pollachi. .. Petitioner
Versus
1. M/s. Poonachi Estate
rep.by Dr. V.S.Kathirvel.
2. Pankajam Kathirvel
3. A. Ravichandran .. Respondent
Civil Revision Petition filed under Article 227 of the Constitution of India against the order dated 17.5.2005 in U.R.A.No.7 of 2005 on the file of Debts Recovery Appellate Tribunal, Chennai against the order dated 5.1.2000 made in T.A.No.918 of 1997 on the file of Debts Recovery Tribunal No.1, Chennai.
For petitioners : Mr.Jayesh Dolia
for M/s.Aiyar & Dolia
For Respondents : Mr.R. Muthukumarasamy
Senior Counsel
for Mr.A.Jenasenan for RR1 & 2
Mr.AR.L. Sundaresan
Senior Counsel
for M/s. Chennai Law Associates
for R.3
-------
O R D E R
K.K.SASIDHARAN, J This Civil Revision Petition is directed against the order dated 17 May, 2005 in U.R.A.No.7 of 2005 on the file of Debts Recovery Appellate Tribunal, Chennai setting aside the ex parte decree dated 5 January, 2000 in T.A.No.918 of 1997 and directing the Debts Recovery Tribunal to dispose of the Original Application afresh on merits.
The facts:
2. M/s. Indian Bank, Pollachi Branch - the revision petitioner herein sanctioned financial assistance to respondents 1 and 2 under term loan scheme for raising coffee crops and other plantation crops in their estate at Pollachi. The Bank disbursed a sum of Rs.3,08,000/- on 3 November 1980 after securing equitable mortgage of the property, which is the subject matter of the revision petition.
3. The respondents 1 and 2 (hereinafter referred to as "borrowers") failed to honour their commitments. This made the Bank to file a suit before the learned Subordinate Judge, Udumalpet in O.S.No.295 of 1995 claiming a decree for a sum of Rs.13,08,286.75 with interest at 18.50% per annum. The borrowers entered appearance in the said suit and took time to file written statement. Since written statement was not filed before the prescribed date, the learned Subordinate Judge was pleased to declare the borrowers ex parte on 5 July 1996.
4. The borrowers thereafter filed an application on 9 July, 1996 in I.A.No.817 of 1996 to set aside the ex parte decree. The application was kept pending. In the meantime, the parliament enacted Recovery of debts due to Banks and Financial Institutions Act, 1993 and after coming into force of the said Act, the proceedings before the Subordinate Judge, Udumalpet was transferred to the Debts Recovery Tribunal at Chennai. The application filed by the borrowers to set aside the ex parte decree was also transmitted to the Debts Recovery Tribunal along with the material papers in O.S.No.295 of 1995. The matter was kept in cold storage. Finally, the Debts Recovery Tribunal (hereinafter referred to as "DRT") was pleased to pass an order on 5 January 2000 granting a recovery certificate in favour of the Bank. The DRT opined that the Tribunal cannot set aside the ex parte decree passed by the Civil Court and as such there was no other option except to accept the decree passed by the Subordinate Court, Udumalpet and to grant a recovery certificate permitting the Bank to recover a sum of Rs.16,58,787.65 with future interest at 18.5% per annum.
5. The order passed by the DRT was challenged before this Court in W.P.No.24497 of 2001. The said writ petition was dismissed on the ground of alternative remedy. However, the borrowers were given two weeks' time to file an appeal before the Debts Recovery Appellate Tribunal (hereinafter referred to as "DRAT") and the parties were given liberty to raise all grounds before DRAT. Accordingly, the borrowers filed an appeal before DRAT in U.R.A.No.7 of 2005.
6. The DRAT found that the borrowers have filed the application before the learned Subordinate Judge, Udumalpet within the time permitted by law to set aside the ex parte decree invoking Order IX Rule 13 of the Code of Civil Procedure. It was only during the pendency of the said petition, Recovery of debts due to Banks and Financial Institutions Act, 1993 (hereinafter referred to as "RDDBI Act") came to be passed with effect from 24 June, 1993. According to DRAT, Section 31(1) of RDDBI Act gives jurisdiction to the DRT to pass appropriate orders consequent to the transfer of proceedings. Therefore, DRT was within the jurisdiction to take up the application filed by the borrowers to set aside the ex parte decree. DRAT also found that, in the meantime, the mortgaged property was sold by the Bank in favour of third respondent and confirmation was also made not withstanding the pendency of appeal before DRAT filed by the borrowers pursuant to the order dated 24 January 2005 in W.P.No.24497 of 2001. The DRAT has given a factual finding that the sale in favour of the third respondent was not bona fide. Accordingly, the DRAT set aside the ex parte decree and the consequential sale made by the Bank, pursuant to the ex parte decree. The DRAT directed the DRT, Chennai to take up the matter in T.A.No.918 of 1997 and dispose of the same on merits. The said order is the subject matter of this revision under Article 227 of the Constitution of India.
7. The Bank was aggrieved only on account of the order passed by DRAT setting aside the ex parte decree. The Bank has not raised any ground with regard to the setting aside of sale made in favour of the third respondent during the pendency of proceedings. Both the Bank and the third respondent accepted the order with regard to the sale made during the pendency of the proceedings.
Submissions:
8. The learned counsel for the Bank contended that the borrowers have not taken any earnest attempt to bring the application filed them to set aside the ex parte decree for hearing and it was long after the passing of ex parte decree, the application was taken up for consideration. In the meantime, the Bank sold the property to the third respondent. The DRAT failed to consider the matter on merits and set aside the decree not withstanding the fact that the order impugned was only the order of dismissal of application filed to set aside the ex parte decree on the ground of want of jurisdiction.
9. The learned Senior Counsel appearing on behalf of the borrowers by placing reliance on the connected proceedings, including the order passed by the Division Bench in W.P.No.20887 of 2001 contended that the DRT erred in rejecting the request to set aside the ex parte decree on the ground of want of jurisdiction, not withstanding the specific provision as contained under Section 31(1) of the RDDBI Act. According to the learned counsel, the order passed by the DRT was rightly set aside by the DRAT. Even though the Civil Revision Petition was filed early against the order passed by DRAT, the fact remains that no stay was granted. The matter was taken up by DRT pursuant to the order passed by DRAT and the original application is now in the trial stage. Therefore, no interference is called for in the said order at this point of time.
10. The learned Senior counsel for the third respondent/auction purchaser contended that the third respondent was a bona fide purchaser and as such his interest should be protected. According to the learned Senior Counsel, the third respondent earlier filed a petition before this Court in C.M.P.No.2458 of 2006 for a direction to the Bank to return the amount deposited by him with interest at 12% per annum. The said application was dismissed by this Court. According to the learned Senior Counsel, the third respondent deposited his hard earned money before the Recovery Officer and as such the dispute between the Bank and the borrowers should not cause prejudice to him. The learned Senior Counsel prayed for an order to save the sale made in favour of the third respondent so as to enable him to take possession of the property.
Analysis and conclusion:
11. The proceedings in question was pending originally before the learned Subordinate Judge, Udumalpet. The Bank in their suit in O.S.No.295 of 1995 prayed for a money decree. The suit was posted specifically on 25 June, 1996 for filing written statement. The borrowers neither appeared before the learned Subordinate Judge nor filed their written statement. Therefore they were set ex parte on 5 July, 1996 and subsequently an ex parte decree was passed against the borrowers on the very same day. The borrowers filed an application in I.A.No.817 of 1996 under Order IX Rule 13 of the Code of Civil Procedure to set aside the ex parte decree dated 5 July, 1996 within four days. In the meantime, RDDBI Act came in to force with effect from 24 June, 1993. The Bank thereafter filed an application before DRAT, Chennai for issuance of a recovery certificate, pursuant to the ex parte decree. The ex parte decree along with the application in I.A.No.817 of 1996 was considered by the DRT. The borrowers wanted the Tribunal to set aside the ex parte decree and to abstain from issuing recovery certificate in favour of Bank.
12. The DRT pleaded helplessness and opined that a Tribunal constituted under RDDBI Act cannot set aside an ex parte decree passed by a Civil Court and as such, he has no other option except to accept the decree passed by the learned Subordinate Judge. This was followed by a recovery certificate. The said order was set aside by DRAT.
13. The core question is as to whether DRT was correct in its finding that the Tribunal Constituted under RDDBI Act has no jurisdiction to take up an application to set aside the ex parte decree passed by the Civil Court prior to transfer of proceedings.
14. The RDDBI Act was introduced by the parliament with a view to provide for the establishment of Tribunals and Appellate Tribunals for expeditious adjudication and recover the debts due to Banks and Financial Institutions. The legislature found that the existing procedure consumed considerable time and the Banks and financial institutions were not in a position to recover the dues within a reasonable time. Accordingly ,the Act was passed during the year 1993 and it came into force on 24 June, 1993. The DRT at Chennai was constituted on 31 October, 1996. Subsequent to the constitution of DRT, suits and other proceedings pending before various Civil Courts were transferred to the Tribunal for adjudication.
15. The ex parte decree passed by the learned Subordinate Judge on 5 July, 1996 was transferred to DRT at Chennai along with the application filed by the borrowers in I.A.No.817 of 1996 to set aside the ex parte decree.
16. Section 31 of RDDBI Act deals with transfer of pending cases. The provision reads thus:
" 31. Transfer of pending cases (1) Every suit or other proceeding pending before any court immediately before the date of establishment of a Tribunal under this Act, being a suit or proceeding the cause of action where on it is based is such that it would have been, if it had arisen after such establishment, within the jurisdiction of such Tribunal, shall stand transferred on that date to such Tribunal:"
Provided that nothing in this sub-section shall apply to any appeal pending as aforesaid before any court.
(2) Where any suit or other proceeding stands transferred from any court to a Tribunal under sub-section (1),
(a) the court shall, as soon as may be after such transfer, forward the records of such suit or other proceeding to the Tribunal; and
(b) the Tribunal may, on receipt of such records, proceed to deal with such suit or other proceeding, so far as may be, in the same manner as in the case of an application made under section 19 from the stage which was reached before such transfer or from any earlier stage 1[***] as the Tribunal may deem fit."
17. The Tribunal without considering the scope and ambit of Section 31(1) of RDDBI Act, rejected the application on the ground of lack of jurisdiction.
18. Section 31 of RDDBI Act not only deals with suits but also with proceeding pending before any Court immediately before the date of establishment of the Tribunal under RDDBI Act. Therefore, the provision not only speaks about suits but also other proceedings. By virtue of Section 31(1) of RDDBI Act, every suit or other proceeding pending before the Civil court would stand transferred automatically to the Tribunal.
19. The word "proceeding" would include even interlocutory applications. We cannot give a restrictive meaning to the word "proceeding" in view of the language used by the Legislature while introducing Section 31(1) of RDDBI Act. There is no point in saying that DRT would be entitled to take up only suits and not the interlocutory applications in a suit which has already been disposed of. By virtue of Section 3 of RDDBI Act civil jurisdiction is impliedly barred. Section 31-A of RDDBI Act gives jurisdiction to DRT to issue recovery certificate on the basis of the decree or order passed by a Civil Court before the commencement of the Act. A combined reading of these provisions would make the position very clear that DRT would have jurisdiction to try any suit or other proceeding which was pending before any Court immediately before the date of establishment and transferred thereafter. The proceeding would necessarily include an interlocutory application filed under Order IX Rule 13 of the Code of Civil Procedure to set aside the ex parte decree.
20. The DRT failed to consider the fact that the borrowers would not be in a position to prosecute their application in I.A.No.817 of 1996 before the Civil Court subsequent to the constitution of DRT. The only authority competent to consider such application after the commencement of RDDBI Act is the DRT constituted under Section 3 of the said Act.
21. The word 'Proceeding" in the context of Section 24(1)(b) of the Code of Civil Procedure came up for consideration before the Supreme Court in Ram Chandra Aggarwal v. State of U.P., (AIR 1988 SC1888 = 1966 Supp SCR 393). The Supreme Court observed that it would include all matters coming up for judicial adjudication and as such would not confine to Civil Proceeding alone. The Supreme Court said:
"The expression proceeding used in this section is not a term of art which has acquired a definite meaning. What its meaning is when it occurs in a particular statute or a provision of a statute will have to be ascertained by looking at the relevant statute. Looking to the context in which the word has been used in Section 24(1)(b) of the Code of Civil Procedure it would appear to us to be something going on in a court in relation to the adjudication of a dispute other than a suit or an appeal. Bearing in mind that the term proceeding indicates something in which business is conducted according to a prescribed mode it would be only right to give it, as used in the aforesaid provision, a comprehensive meaning so as to include within it all matters coming up for judicial adjudication and not to confine it to a civil proceeding alone.
22. We are, therefore of the considered view that the proceeding referred to under Section 31(1) of RDDBI Act would include an application filed under Order IX Rule 13 of the Code of Civil Procedure to set aside the ex parte decree. The DRT, therefore, grievously erred in rejecting the application filed by the borrowers to set aside the ex parte decree and the said order was rightly set aside by DRAT.
23. The order impugned in this revision petition was passed on 17 May, 2005. Though the Bank challenged the said order by way of a Civil Revision Petition filed in the year 2005 itself, the fact remains that no stay was granted by this Court. Because of this, the matter was taken up for consideration by DRT. The Bank submitted their proof affidavit. Before DRT, the borrowers have filed an application to permit them to cross examine the witness on the side of the Bank. The said application was contested by the Bank. The application was dismissed by DRT on 1 November, 2010. The said order was challenged before DRAT in M.A.No.669 of 2010. DRAT was pleased to allow the appeal and directed the Tribunal to permit the borrowers to cross examine the officer, who has sworn to the proof affidavit. We are informed that the proceeding is now in the final stage. The background facts clearly gives an indication that the Bank was not very serious in their challenge to the order passed by DRT.
24. The other issue relates to the auction confirmed in favour of the third respondent.
25. The learned Senior Counsel for the auction purchaser submitted that the third respondent being the bona fide purchaser for value, his interest should be protected. The said submission has absolutely no merit in view of the categorical finding given by DRAT against the auction purchaser including the specific finding that he was not a bona fide purchaser.
26. The recovery certificate in question was issued on 5 January 2000. The order dated 5 January 2000 in T.A.No.918 of 1997 was challenged before this Court in C.R.P.No.943 of 2000. The learned Single Judge having found that an appeal is provided under RDDBI Act against such orders, returned the papers giving liberty to the borrowers to file an appeal. The DRAT was directed to exclude the period of pendency of Civil Revision Petition while computing the period of limitation.
27. In the meantime, the Recovery Officer issued the auction notification. The borrowers having found that there is no Presiding Officer at DRAT, Chennai filed a Writ Petition in W.P.No.24497 of 2001 challenging the order. The Division Bench was pleased to dispose of the said writ petition on 24 January 2005 directing the borrowers to file an appeal before DRT in view of the appointment of Presiding Officer to the said Tribunal. It is also a matter of record that the borrowers have promptly filed an appeal before DRT. The filing of such an appeal is found mentioned in the order passed by this Court on 11 April, 2005 in C.R.P.No.252 of 2005. It was only during the pendency of the said appeal, the third respondent filed a memo before the Recovery Officer stating that on verification it was found that no appeal has been filed by the borrowers in the matter. The Bank also informed the Recovery Officer that they have also not received any notice from DRAT. This made the Recovery Officer to pass an order for confirmation of sale. The order dated 8 February 2005 on the file of Recovery Officer would make the position very clear that the auction purchaser suppressed the factum of filing an appeal by the borrowers before DRT and obtained an order of confirmation. The auction purchaser, who obtained an order of confirmation by filing a false affidavit is not entitled for an order to retain the benefits obtained by such fraudulent action.
28. The third respondent was a party to the proceedings in U.R.A.No.7 of 2005 before DRAT. He was represented by a counsel. The DRAT examined the materials and found that the third respondent was not a bonafide purchaser and therefore there was no other option except to set aside the sale made on 7 December 2001. The DRAT found that the sale was made on 7 December 2001 and it took four years to confirm the sale on 8 February 2005. The DRAT formed an opinion that the auction purchaser was sitting on the fence watching the proceedings and ultimately after the dismissal of the writ petition in W.P.No.24497 of 2001 filed a memo containing false averments before the Recovery Officer and got the sale confirmed. The DRAT was pleased to give liberty to the auction purchaser to withdraw the sale amount deposited by him from the bank with accrued interest.
29. The order passed by DRAT contains a factual adjudication with respect to the auction proceedings. The Tribunal has given a clear and specific factual finding that the sale in favour of the third respondent was not a bonafide sale and he was not a bonafide purchaser. The third respondent has not challenged the said finding. Therefore, the order has become final. Insofar as the auction purchaser is concerned, it was only in accordance with the liberty given to withdraw the amount from the Bank he has filed an application before this Court in C.M.P.No.2458 of 2006. In the affidavit filed in support of the said application, the third respondent has very clearly stated that he lost interest in the property and as such he wanted the Bank to return the amount. It is true that this Court has dismissed the said application considering the fact that the revision petition is yet to be taken up for final disposal.
30. The auction proceedings also indicates that the Recovery Officer fixed the upset price of the property at Rs.29 lakhs. The bid submitted by the third respondent was the only bid and accordingly his offer for a sum of Rs.29,10,000/- was accepted. It is also a matter of fact that even after the disposal of the said application in C.M.P.No.2458 of 2006, the third respondent has not chosen to challenge the order passed by DRAT setting aside the sale in his favour after holding that he was not a bonafide purchaser. In view of the specific finding recorded by DRAT against him, the third respondent cannot be heard to say that he should be given the property considering the amount paid by him way back in the year 2001.
31. The confirmation in question was issued only on account of the false statement made before the Recovery Officer exercising powers under Rule 65 of Second Schedule to the Income Tax Act, 1961. It is also a matter of record that the Bank has not challenged the finding with regard to lack of bonafides in the sale in question. The Bank accepted the said finding and then revision was confined to the factum of setting aside the ex parte decree alone. Therefore it is not open to the third respondent to make a prayer to retain the property in the present revision filed by the Bank without challenging the factual finding rendered by DRAT against him as early as on 17 May 2005. We do not find any merit in the submission made by the learned Senior Counsel on behalf of the third respondent.
32. Therefore on a careful consideration of the entire factual matrix we are of the considered view that the DRAT was perfectly correct in setting aside the ex parte decee passed against the borrowers.
33. The learned Senior Counsel for the third respondent by way of alternative submission made a request to direct the Bank to return the amount with interest at 18% per annum. Even though the request of the third respondent was rejected by this Court earlier, the same would not stand in the way of passing appropriate orders during the time of final disposal of revision petition. Accordingly, we direct the Bank to return the amount deposited by the third respondent with interest at 12% per annum till February, 2006 and thereafter at the rate of 18% per annum. The respondents 1 and 2 are directed to pay the differential interest at 6% for the period from February, 2006. The amount shall be refunded within a period of four weeks from the date of receipt or production of a copy of this order.
34. The Civil Revision Petition is disposed of with the above direction regarding refund of amount to the third respondent. Consequently, the connected MP is closed. No costs.
Tr To The Debts Recovery Appellate Tribunal, Chennai