TMI Blog2016 (7) TMI 1629X X X X Extracts X X X X X X X X Extracts X X X X ..... te occurring in Rule 12 (5), according to the learned counsel, would mean that only in certain contingencies, the issuance of certificate could get delayed /postponed and a party to the proceeding may independently challenge issuance of certificate itself - A recovery certificate would amount to formal expression of the adjudication. The Act and the Rules do not contemplate separate proceedings to be initiated, much less, adjudicated for getting the recovery certificate issued. The process of adjudicating is required to be gone into, may be to limited extent or on an interim application, to find out the quantum of money to be due. Ordinarily, the final adjudication would take place upon conclusion of proceeding filed under Section 19 of the RDDBI Act. But, there could be interim adjudication of part of the claim, while the remaining adjudication of the balance of the claim is determined in a final judgment or order - It would not be permissible to read provisions of Rule 12(5) in a way to defeat the object of Sections 19 and 21 of the RDDBI Act. The Rules would not override the statutory provisions. It is elementary that the rules prescribed by a subordinate legislation cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 notice dated 1st July, 2011 under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as SARFAESI Act, 2002). On 20th September, 2011 respondent no.2 took possession of factory premises of petitioner no.1 at Plot No.62, Seepz, Andheri (W), Mumbai 400 092 with stocks and movable assets lying therein under Section 13(4) of the said Act. The petitioners claim that on 29th December, 2011 the petitioner no.1 paid ₹ 75 lacs to respondent no.1 by way of direct remittance from the overseas buyer. By letter dated 22nd February, 2011 and 18th August, 2011 the petitioner no.1 sought permission for sale of said property. On 24th March, 2012 respondent no.1 Bank ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 submitted that the Debt Recovery Tribunal did not apply its mind to the facts and the pleas raised by the contesting parties before it. It was submitted that the Appellate Tribunal failed to appreciate the issue raised before it by the appellants. The Tribunal did not accord any reasons for ordering payment of ₹ 2 Crores for entertaining the appeal. There is no application of mind by the Appellate Tribunal according to learned Counsel. Learned Counsel placed reliance on the judgment of the Division Bench consisting of Justice D.Y. Chandrachud (as His Lordship then was) and Justice A.A. Sayed in the case of Sterlite Technolligies Ltd. V/s. Union of India ors. {2012(2) Mh. L.J.)} . In the facts the Di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ordance 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 under Rule 12(5) of the Act of 1993 is of interim nature and is not an order under Section 19. The application was titled interim application with no reference to Section 19 of the Act. In the submissions of Counsel, Section 19 of the Act contemplates the final determination by the Tribunal of the original application itself. In the facts no Recovery Certificate was issued. There is a mere direction in the DRT order that it will be issued on failure to pay. Learned Counsel placed reliance on the judgment in the case of M/s. Kavita Pigments and Chemicals (Pvt.) Ltd. And ors. v/s. Allahabad Bank and ors. {AIR 2000 Patna 43} . Paragraph 40 reads as under: 40. This requirement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ₹ 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 filed by Principal Debtor and Guarantors. The Principal Debtors and Guarantors had filed Writ Petition (L) No. 2932/2015 jointly. After withdrawal of the said petition, separate writ petitions have been filed now. Learned Counsel submitted that order passed under Rule 12(5) of the Rules of 1993 has to be read alongwith provisions of Section 19 of the RDDBI Act as the Recovery Certificate is ordered to be issued in accordance with Section 19 of the RDDBI Act. In the facts in deciding the interim application the Tribunal thus determined the issue. Hence, it cannot be argued that in deciding interim application, there is no determination by the Tribunal. 17. Lear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 main application under Section 19(1) at this stage. Hence, this relief for impleadment cannot be granted. (emphasis supplied) Reliance is also placed on the judgment in the case of Ultramatix Systems Pvt. Ltd. v/s. State Bank of India ors. {2007 (6) ALL MR 327} . In paragraph 8 it is observed as under: 8. Having come to the conclusion that the amounts set out in the profit and loss account are an admission of amounts due by the petitioner to respondent no.1, the question that has to be answered is whether the admission has to be in the course of the proceedings. We may refer to the judgment of the Supreme Court in Uttam Sin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eir 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 can be proved against the company. It is for the company to establish by relevant facts that the admission would not be an admission in the eyes of law. In the instant case, the petitioner has been unable by any relevant fact to displace the admission made in the balance sheet. In our opinion, therefore, the admission in the balance sheet has been proved against the petitioner and as we have held earlier that such an admission even other than in the pleadings before the Tribunal can be proved against the party in making the admission. We have, therefore, no hesitation in holding that the expression 'admission' in Rule 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use 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 the defendant. (22) The Presiding Officer shall issue a certificate under his signature on the basis of the order of the Tribunal to the Recovery Officer for recovery of the amount of debt specified in the certificate. Section 20 refers to Appeal to the Appellate Tribunal. It reads as under: Section 20 - Appeal to the Appellate Tribunal. (1) Save as provided in sub-section (2), any person aggrieved by an order made, or deemed to have been made, by a Tribunal under this Act, may prefer an appeal to an Appellate Tribunal having jurisdiction in the matter. (2) No appeal shall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 ₹ 3,99,05,735/-. The DRT considered the pleas raised by the contesting parties and reached conclusion to pass order under Section 12(5) by directing the defendants, including borrowers and Guarantors to pay the admitted debt. The Presiding Officer of DRT-III, Mumbai passed the following order: 1. The application (Exh. 17) is allowed. 2. The Defendants shall pay a sum of ₹ 3,99,05,735/- to the Applicant within one month failing which recovery certificate for the said amount with interest @ 20.75% per annum with monthly rests from 15.09.2014 till realization shall be issued. 3. The O.A. shall proceed further on merits. 21. A simple, litera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 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 petitioners are raising a legal ground in respect of interpretation of provisions of Section 21 of the RDDBI Act. We are of the considered view that the petitioners must be permitted to raise this ground in the present proceedings. 24. Mr. Cama, learned counsel appearing for the petitioners submitted that Rule 12(5) of the Rules of 1993 is in two parts. In the first part, the Tribunal would pass order where defendant makes an admission of the full or part of the amount of debt due to a bank or financial institution. In t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m 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 provisions of Sub-clause (22) of Section 19 speaks that the Presiding Officer shall issue a certificate under his signature on the basis of the order of the Tribunal to the Recovery Officer for recovery of the amount of debt specified in the certificate. Therefore, the order passed, on admission of defendant, by the Tribunal would be under Section 19 read with Rule 12(5) of the Rules of 1993. Upon Tribunal passing order under Rule 12(5) and on non payment by defendant what follows is the issuance of recovery ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nterest) 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 find out the quantum of money to be due. Ordinarily, the final adjudication would take place upon conclusion of proceeding filed under Section 19 of the RDDBI Act. But, there could be interim adjudication of part of the claim, while the remaining adjudication of the balance of the claim is determined in a final judgment or order. Under the scheme of the relevant provisions, as quoted above, it is clear that Section 21 of the Act applies to an order which could be an interim order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ₹ 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 the impugned order dated 11/9/2015 of the DRAT comes to ₹ 4.89 Crorers. DRAT had, however, directed only ₹ 2 Crores as pre-deposit, which is 40.89% of the said amount. In the facts, the petitioners were directed to deposit an amount which was much less than the mandatory pre-deposit of 75%. 37. The petitioners, alternatively, submitted that for want of appropriate reasoning by the DRAT, the impugned order be quashed and set aside and matter ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
