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TMI Blog2016 (7) TMI 1629X X X X Extracts X X X X X X X X Extracts X X X X ..... (India) Limited submits that petitioner no.1 is a company incorporated under the Companies Act, 1956. Petitioner no.2 is an Indian Citizen and Director of petitioner no.1 - company. The respondent nos. 1 and 2 are Banks carrying on business of banking. Respondents nos. 3 and 4 are companies under the Companies Act, 1956 and respondent no.5 is an Indian inhabitant. The brief facts as stated by the petitioners are that by a sanction letter dated 3rd February, 2006, respondent no.1 claims to have sanctioned to petitioner no.1 various Working Capital facilities aggregating to Rs. 632 lacs to take over certain liabilities of petitioner no.1 from INC Vyasya Bank Limited. On 16th February, 2006 respondent no.1 claims to have got various loan and security documents executed from petitioners. On 9th November, 2006 various consortium documents were executed including memorandum of entry substituting respondent no.1 in place of ING Vyasya Bank Limited. By a sanction letter dated 5th January, 2010 the credit facilities were revised and reduced to 480 lacs with interest at the rate of 12% per annum. 3. The petitioners submit that respondent no .2 as a Lead Bank of consortium issued demand not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Financial Institutions Act, 1993 (hereinafter referred to as RDDBI Act). 10. By an order dated 11th September, 2015 the learned Chairperson directed the petitioners to deposit Rs. 2 Crores within eight weeks in two equal installments of Rs. One Crore each. The Miscellaneous Application No. 147/2015 was disposed of. It was further ordered that in case of default in payment of any installment, the appeal shall stand dismissed automatically. 11. Learned Senior Counsel Shri Dhond appearing for Guarantors in Writ Petition (L) No. 3096 of 2015 referred to various provisions of RDDBI Act, 1993, SARFAESI Act, 2002 and the relevant documents on record. The learned Counsel submitted that the interim application was filed against the borrower and not against the Guarantors, therefore, the Guarantors are not liable to face the recovery proceedings which were directed to be initiated against the borrower. By referring to Rule 12(5) of the Rules of 1993, learned Counsel submitted that in rule 12(5) the Tribunal was entitled to order such defendant to pay the amount which would not include the Guarantor. In the present case the Guarantor had denied their liability to pay. Learned Counsel subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sitory of such power. There is nothing like a power without any limits or constraints. That is so even when a court or other authority may be vested with wide discretionary power, for even discretion has to be exercised only along well-recognised and sound juristic principles with a view to promoting fairness, inducing transparency and aiding equity." 12. Learned Counsel Shri Cama appearing for the petitioners in Writ Petition No. 3071/2015 submitted that for Section 21 to apply there must be determination under Section 19 of the RDDBI Act. The determination in this case was made under Rule 12(5) of the Rules of 1993. Merely because a Recovery Certificate may later be issued in accordance with Section 19, it does not make the "determination" one which is contemplated under Section 19. Learned Counsel without prejudice submitted that Rule 12(5) of the Rules of 1993 is in two parts. The impugned order relates to first part directing payment. Such order is not an order under Section 19 of the RDDBI Act as there is no final determination and nor is there any Recovery Certificate issued in accordance with Section 19 of the RDDBI Act. 13. Learned Counsel submitted that an order passed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... overy proceedings under RDDBI Act. In the facts the debtor is required to deposit 75% of the debt adjudicated to be due and payable. Learned Counsel submitted that amount for which Recovery Certificate has been directed to be issued by DRT by the order dated 14th August, 2014, as on the date of impugned order passed by the DRAT dated 11th September, 2015, is Rs. 4,89,13,785.27. The DRAT has directed to deposit only Rs. 2 Crores. According to learned Counsel the same is just 40.89% of adjudicated amount. Hence, the petitioner cannot be aggrieved by reasons not being given by DRAT in the impugned order. Without prejudice the learned Counsel submitted that DRAT has given reasons for passing impugned order. Learned Counsel Shri Balsara submitted that the only two points pressed before DRAT were that there was no admission by the Guarantors and that there was offer of Rs. 6.5 Crores. Learned Counsel submitted that a common written-statement was filed by the Principal Debtor and Guarantors and common reply to the interim application was filed by the Principal Debtor and the Guarantors. A common Miscellaneous Application for waiver of pre-deposit under Section 21 of the RDDBI Act was file ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... being recovered by way of revenue recovery certificate, the provision of section 21 is attracted and we see no error in the order passed by the Appellate Tribunal in applying the provisions of section 21." Learned Counsel also placed reliance on the Supreme Court judgment in the case of Allahabad Bank v/s. Canara Bank & anr. {(2000) 4 SCC 406}. In paragraph 52 it is observed as under: "52. Before we go to Section 19(19), we would like to dispose of another minor point raised by the respondent on the basis of Section 19(2). That sub-section permits other banks or financial institutions to be impleaded in the main application filed under Section 19(1) by a bank or a financial institution. Question is whether Canara Bank can be impleaded in the main application under Section 19 at this stage. We may point out that Section 19(2) permits such impleadment "at any stage of the proceedings before a final order is passed". The final order here is the order of adjudication under Section 19(1) as to whether the debt is due or not. In the present case, the adjudication order in respect of the debt has already been long back and therefore Section 19(2) does not permit any impleadment in the m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not lend itself to that construction, as the expression does not require that the admission must be made by the defendant in the pleadings before the Tribunal. The expression 'defendant' has to be considered in the context of the opponent in the proceeding. The language used is to order such defendant to pay the amount to the extent of such admission. The language, therefore, used is susceptible of a wider meaning to include any admissions by the defendant. In other words, in proceedings either before the Tribunal or also in any other document. The object of the Act being to enable financial institutions to recover their debts expeditiously. Any other construction would defeat the very object of the Act. The language used in Order XII, Rule 6 of Civil Procedure Code is in the pleadings or otherwise, unlike the language of Rule 12(5) of the Rules. As we have noted, the statement contained in the profit and loss account duly certified by the auditor is based on the records of the company. Once the balance sheet/profit and loss account shows the amount and that as a statutory requirement of the Companies Act, we fail to understand as to how that cannot be an admission which ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9. Application to the Tribunal.-(1) Where a bank or a financial institution has to recover any debt from any person, it may make an application to the Tribunal within the local limits of whose jurisdiction-- (a) the defendant, or each of the defendants where there are more than one, at the lime of making the application, actually and voluntarily resides or carries on business or personally works for gain; or (b) any of the defendants, where there are more than one, at the time of making the application, actually and voluntarily resides or carries on business or personally works for gain; or (c) the cause of action, wholly or in part, arise. Sub-sections (20A), (21) and (22) of Section 19 of RDDBI Act, read as under:- (20A) Where it is proved to the satisfaction of the Tribunal that the claim of the applicant has been adjusted wholly or in part by any lawful agreement or compromise in writing and signed by the parties or where the defendant has repaid or agreed to repay the claim of the applicant, the Tribunal shall pass orders recording such agreement, compromise or satisfaction of the claim. (21) The Tribunal shall send a copy of every order passed by it to the applicant and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llate Tribunal may, for reasons to be recorded in writing, waive or reduce the amount to be deposited under this section. We may refer to certain provisions of Debts Recovery ( Procedure ) Rules, 1993. Rule 12(5) reads as under:- "12. Filing of reply and other documents by the defendant.- (1) .......... (2) .......... (3) ......... (4) ......... (5) Where a defendant makes an admission of the full or part of the amount of debt due to a bank or financial institution, the Tribunal shall order such defendant to pay the amount, to the extent of the admission, by the applicant within a period of one month from the date of such order failing which the Tribunal may issue a certificate in accordance with section 19 of the Act to the extent of amount of debt due admitted by the defendant." 20. Admittedly, the interim application (Exhibit 17) was filed and decided in accordance with the provisions of Rule 12(5) of the Act of 1993 as according to the applicants therein there was an admission in the audited balance-sheet of respondent no.3 - Fine Platinum to the tune of Rs. 3,99,05,735/-. The DRT considered the pleas raised by the contesting parties and reached conclusion to pass orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... age 599 has reiterated this principle by saying that there is a presumption in favour of literal interpretation and saying so the learned author has quoted two learned Judges. The said passage is set out below:- "The presumption in favour of literal interpretation was stated by a nineteenth century Lord Chancellor, Lord Selborne, in the words 'there is always some presumption in favour of the more simple and literal interpretation of the words of the statute.' Judges of the present day show no inclination to abandon the presumption, despite the growing popularity of 'purposive' construction. As Lord Parkar CJ said : "the intention of Parliament must be deduced from the language used." 23. Learned counsel Shri Balsara appearing for the bank submitted that since the petitioners filed waiver application before the DRAT, they were aware that a pre-deposit was mandatory, in the facts of the case and in view of provisions of Section 21 of the RDBBI Act. The petitioners did not argue before the DRAT that in the fact situation, there was no requirement of predeposit. Therefore, they are now precluded from raising a new ground before this court. We find that the petitioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on is required to be conclusive one under Section 19. Perusal of provisions of Section 19 (20) shows that the Tribunal may, after giving the applicant and the defendant an opportunity of being heard, pass such interim or final order, including the order for payment of interest from the date on or before which payment of the amount is found due upto the date of realisation or actual payment, on the application as it thinks fit to meet the ends of justice. This shows that under provisions of Section 19, interim order in the shape of interim determination is contemplated. In our view, the order passed under Rule 12(5) would amount to interim determination. The adjudication done by DRT under Rule 12(5) in directing to pay the admitted amount of debt would be in the nature of final determination to the extent of the admitted amount. Such amount determined under Rule 12(5) would not be subject matter of further adjudication while the DRT proceeds to finally determine the rest of the amount of debt due to a bank or financial institution. 27. Consequent to such interim determination a recovery certificate could be issued under Sub-clause (22) of Section 19 by the Presiding Officer. The pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the learned counsel for the petitioners would go contrary to the letter and spirit of the provisions of Sections 19, 20, 21 of the RDDBI Act and Rules 12(5) of the Rules of 1993. 31. The key words of Section 21 of the RDDBI Act are "debt is due". "Debt" is defined under Section 2 (g) of the RDDBI Act. Section 2(g) reads as under:- "2. Definitions. - In this Act, unless the context otherwise requires,- (a) (b) (c) (d) (e) (f) (g) "debt" means any liability (inclusive of interest) which is claimed as due from any person by a bank or a financial institution or by a consortium of banks or financial institutions during the course of any business activity undertaken by the bank or the financial institution or the consortium under any law for the time being in force, in cash or otherwise, whether secured or unsecured, or assigned, or whether payable under a decree or order of any civil court or any arbitration award or otherwise or under a mortgage and subsisting on, and legally recoverable on, the date of the application." The debt has to be adjudged to be due. The process of adjudicating is required to be gone into, may be to limited extent or on an interim application, to fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l appearing for the respondents placed reliance on Clause (3) of Guarantee Deed wherein it was agreed by the guarantors that any admission or acknowledgement in writing given by borrower in respect of their indebtedness, shall be binding on the guarantors and shall be treated as such on behalf of the guarantors also. 34. In view of the clauses in Guarantee Deed, we are of the view that the guarantors are equally responsible to honour and pay the amount due as determined by the Tribunal. 35. So far as the issue of financial hardship raised by the respective petitioners, we find that only two points were urged before the DRAT, that there was no admission by the guarantors and there was an offer of Rs. 6.5 Crores. It is now well settled that several points may be taken in the pleadings but if they are not urged before the court, the court is not required to adjudicate on the same. Even assuming that any other point raised by the petitioners was not considered by the DRAT, they were required to approach DRAT pointing out this grievance, which the petitioners have failed to do. 36. According to the respondent-Bank, the amount found due under order dated 14/8/2014 as on the date of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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