TMI Blog2011 (12) TMI 772X X X X Extracts X X X X X X X X Extracts X X X X ..... td., could not be made a ground to challenge the assignment of the debt by IFCI Ltd. in favour of Kotak Mahindra Bank Ltd. since the proper forum to raise said plea was BIFR. B. An identical issue raised was decided by a Division Bench of this Court in the decision reported as AIR 2007 Delhi 65 Haryana Steel Alloys Ltd. Vs. IFCI Ltd., against which Petition seeking Special Leave to Appeal was dismissed by the Supreme Court and hence the learned Single Judge was bound by the decision of the Division Bench. C. In the absence of any mala fide alleged in the pleadings against the decision makers in IFCI Ltd. to assign the debt to Kotak Mahindra Bank Ltd. it would be impermissible to take cognizance of the arguments relatable to mala fide. D. There was lack of bona fide in the conduct of the 'Company' to settle the debt to the satisfaction of IFCI Ltd. and being a defaulter, equity denuded the 'Company' from seeking any discretionary relief from the Court in exercise of the Court's power under Article 226 of the Constitution of India. 2. Relevant facts to be noted are that the 'Company' set up a manufacturing unit in Dasna, District Ghaziabad, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Continuing with a narration of the relevant facts, the 'Company' submitted a revised draft rehabilitation scheme on 15.06.2006, and as against the earlier figure of 55% of the principal amount offered to the first charge holders, offered to pay 70% of the principal amount. This draft revised rehabilitation scheme was considered at a joint meeting held on 30.06.2006 and the secured creditors desired a better offer to be made. The 'Company' agreed to look into the issue and try and possibly increase the settlement offer. It revised the offer on 24.07.2006 by offering 85% of the principal sum due to the first charge holders within 6 months. The revised offer was rejected on 07.08.2006 and at this stage the 'Company' entered into a dialogue with Kotak Mahindra Bank Ltd. seeking its assistance in settling the debts to the secured creditors and the 'Company' claims that in this manner, Kotak Mahindra Bank Ltd. came under a fiduciary obligation towards it, since vital and intrinsic information was received by it from the 'Company. 7. Being relevant, since learned counsel for Kotak Mahindra Bank Ltd. heavily relied upon the terms under which Kotak Ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k Ltd. The same was accepted. 13. The 'Company' not only questions the manner of the bid being accepted but imputes mala-fide, both in law and on fact, on the plea that the bids were invited as per terms notified to the bidders when the notice inviting bids was published on 11.05.2006 and relatable to the term of payment, vide clause 12 it was made clear that the successful bidder shall deposit 25% of the consideration money including EMD within three days after adjustment of EMD and vide clause 17, it was clearly mandated that balance 75% amount would be required to be paid within 7 days of the issue of the Letter of Assignment (LOA). As against that, IFCI Ltd. wrote to Kotak Mahindra Bank as under: Re: Sale of NPAs through Assignment Route - Bidding Held on 14.9.2006 - Acceptance of Bid of in respect of M/s.Hindon River Mills Ltd. Please refer to your bid submitted on the 14th September, 2006 in respect of the above mentioned 'Company'. In this connection, we have to advise that your bid in respect of the above mentioned 'Company', at ₹ 3551 lakhs is acceptable to us subject to approval of the Competent Authority. In the meantime, you ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent and makes the grievance of mala-fide writ large; in that, neither was 25% of the bid amount insisted to be deposited within three days of the bid being accepted nor was it insisted that within seven days the balance should be paid. 18. On 06.10.2006 an order requiring status quo to be maintained was passed by the learned Single Judge. On 09.10.2006 Kotak Mahindra Bank Ltd. deposited the balance 75% bid amount and in this manner by said date IFCI Ltd. got ₹ 35.51 crores from Kotak Mahindra Bank Ltd. 19. The 'Company' reads mala-fide in said receipt of money by IFCI Ltd. by urging that it breaches the order requiring status quo to be maintained. 20. In the writ petition originally filed, Kotak Mahindra Bank Ltd. was not impleaded as a respondent. But was subsequently so impleaded. 21. The respondents filed counter affidavits to which rejoinder affidavits were filed and suffice would it be to highlight that in the pleadings by way of rejoinder affidavits, the 'Company' raised pleas of mala-fide against IFCI Ltd. and Kotak Mahindra Bank Ltd., which have been noted by us herein above, and rejected for the reasons already stated and hence we do not b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, the 'Company' settled the dues with the other four secured creditors i.e. EXIM Bank, Punjab National Bank, Indian Bank and State Bank of India between 17th December, 2007 and 29th December, 2007 and paid 100% of the principal amount to EXIM Bank, i.e. the second first charge holder and as against principle sum of ₹ 8.73 crores, ₹ 5.05 crores and ₹ 14.22 crores payable to Punjab National Bank, Indian Bank and State Bank of India respectively, ₹ 2.50 crores, ₹ 1.60 crores and ₹ 6.04 crores respectively was paid to them. 25. On 28.12.2007 the learned Single Judge extended time by 4 days to enable the 'Company' to pay the amount to IFCI Ltd. as per the terms noted in the order dated 19.12.2007. On 04.01.2008 the 'Company' sought further extension of time which was declined by the learned Single Judge. 26. The writ petition went into a state of hibernation for the reason the issue whether banks and financial institutions could assign debts to another bank or a financial institution arose. On 12.01.2009 Gujarat High Court held that the debts could not be assigned from one bank or a financial institution to another. Matt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the particulars of the non-performing assets held by it which were intended to be sold. 31. The grievance pertaining to IFCI receiving 25% of the bid amount on 25.09.2006 at 5.15 PM, assuming this to be a matter of fact, qua mala fide is akin to make a mountain out of a mole hill for the reason it hardly matters whether the amount was paid after 5:15 PM and we see no scope to infer any mala-fide if the amount was received after 5:15 PM. 32. The plea of mala fide raised and as noted in para 17 above that IFCI Ltd. granted more than 7 days' time to Kotak Mahindra Bank to pay the full bid amount not only violates RBI guidelines and the conditions of the bid, but additionally is a fact which proved mala fide against the appellant inasmuch as whereas a long rope was given to Kotak Mahindra Bank, to the appellant no such benefit was granted; ignores the reason that vide clause-12, 25% of the bid amount had to be paid within three days of bid acceptance being communicated. Vide letter dated 14.09.2006 an advance intimation was given to Kotak Mahindra Bank Ltd. that its bid was accepted subject to approval by the Competent Authority. The RBI guidelines and the terms of the aucti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d permission from BIFR. Further, even as late as 26.12.2007, with reference to the letter written by YES Bank Ltd. to IFCI Ltd. contents whereof have been noted in para 23 above, it is clear that even till said date YES Bank Ltd. was insisting that payment which it would make would be hedged as per the conditions of its facility letter and clear title of all assets of the appellant; conditions which Kotak Mahindra Bank Ltd. had not stipulated in its bid. 36. Thus, the position would be that patience of IFCI Ltd. may have run out. It needs to be highlighted that the appellant had made the first settlement offer somewhere around November 2005 and had then offered to pay only 55% of the principal sum due and from time to time kept on increasing the offer. The year 2007 was ending, when IFCI Ltd. agreed as a last ditch effect to recover the maximum which it could when in late December 2007 it required that if paid by 31.12.2007 it was willing to settle the matter by receiving the amount offered by Kotak Mahindra Bank Ltd. with interest @ 13% per annum with effect from 21.09.2006. It cannot be ignored that IFCI Ltd. had received ₹ 35.51 crores from Kotak Mahindra Bank Ltd. by 0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bench was on its own facts and hence not binding as no statute was interpreted therein, but the matter takes the appellant no further for the reason the main issue between the parties would be, as would be noted by us hereinafter: Whether at all any right of the appellant had been adversely affected by the assignment of the debt by IFCI Ltd. to Kotak Mahindra Bank Ltd. 39. The fourth reasoning by the learned Single Judge that the conduct of the 'Company' was lacking in bona fide and this denuded it from seeking any discretionary relief under Article 226 of the Constitution of India is not a correct view for the reason it is based only upon the fact that the 'Company' first made an offer to settle the due by paying 55% of the principal sum due and later on increased the offer to 85% of the principal sum due and further improved the same by offering to pay 100% of the principal sum due and then increased the offer to pay the sum offered by Kotak Mahindra Bank Ltd.; from which conduct i.e. of improving the offers from time to time, lack of bona fide has been inferred. The view taken by the learned Single Judge ignores that bona fide or lack thereof has not to be co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14 of the Constitution of India. The contra argument, conceding to the law being as aforesaid, was that this would be contingent upon the action of a State or its instrumentality affecting the right of a person. It was urged vehemently by Sh.T.K.Ganju, learned senior counsel for Kotak Mahindra Bank Ltd. that sale of a Non Performing Asset (NPA) which is nothing but the assignment of a debt does not affect the right of the debtor whose liability remains the same and it hardly matters whether 'A' knocks at its door to ask for return of the debt or 'B' knocks at its door to ask for return of the debt. Learned senior counsel highlighted that all decisions which were cited relate to the sale of the assets of the debtor which are mortgaged with the creditor; and that the decisions highlight the principle of reasonableness and fairness in the action of the creditor to sell the mortgaged asset. Counsel urged that said decisions would have no application where a debt is assigned by a bank or a financial institution; to another bank or a financial institution for the reason such assignment does not have any impact upon the value of the securities held by the creditor or on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... instances of rights with no corresponding duties. The instance, by way of exception to the general rule that every right has a corresponding duty and vice-versa, is explainable that the right and duty cannot be in one person. The right in a person must correspond to a duty in some other. 46. Right and interest are different. 47. We see some logic in the argument by the 'Company' that it has an interest in knowing who is its creditor and thus it could be argued that the 'Company' had an interest in knowing what IFCI Ltd. and Kotak Mahindra Bank were brewing. But, said interest cannot be raised to the status of a right. The situation at hand would be akin to a very apposite discussion by 'Salmond' in 'JURISPRUDENCE' and we quote from the 10th Edn. under Chapter 10 pertaining to Duties and Rights. The learned author opines that 'A duty is an obligatory act, that is to say, it is an act the opposite of which would be wrong.' But, the learned author goes on to draw the distinction between duties and wrongs falling in the category of being moral and being legal as also drawing attention that one should be careful in not confusing an interest ..... X X X X Extracts X X X X X X X X Extracts X X X X
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