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Messrs Eminent Agencies & Another v/s Bank of Baroda & Others

    Writ Petition No. 1726 of 2013

    Decided On, 17 October 2015

    At, High Court of Judicature at Bombay

    By, THE HONOURABLE MR. JUSTICE S.C. DHARMADHIKARI & THE HONOURABLE MR. JUSTICE B.P. COLABAWALLA

    For the Petitioners: Dinesh Purandare, Rafeeq Peer Mohideen, T.N. Tripathi, Sapna Rachure, Advocates. For the Respondents: R1, Anant B. Shinde, Advocate.



Judgment Text

B. P. Colabawalla, J.

1. This Writ Petition under Article 226 of the Constitution of India challenges the order dated 28th June, 2013 passed by the Debts Recovery Appellate Tribunal (for short, the “DRAT”) in Miscellaneous Appeal No.184 of 2010. By the impugned order, the Appeal filed by the Petitioners was dismissed by the DRAT.

2. The brief facts giving rise to the present controversy are that, Respondent No.1 – Bank granted various facilities to Petitioner No.1 in the year 1999. The credit facilities availed by the Petitioners were secured by an equitable mortgage of three properties situated at Andheri(E) and Vasai, District Thane. These properties were owned by Mr. Jujee A. Poonawala, Mr. Moiz A. Poonawala and Fatima M. Baxamusa, the guarantors of Petitioner No.1.

3. In view of the fact that Petitioner No.1 failed to pay its dues, the Respondent Bank filed an Original Application before the Debt Recovery Tribunal (for short, the “DRT”) being Original Application No.389 of 2002. This Original Application was filed against Petitioner No.1, its partners and the guarantors. Petitioner Nos.1 and 2 herein contested the Original Application while the guarantors and other partners of Petitioner No.1 did not contest the same.

4. During the pendency of this Original Application, on 9th June, 2006 Petitioner No.1 submitted a compromise/settlement proposal in the sum of Rs.65.77 lacs. This proposal was duly accepted by the Respondent Bank on the terms and conditions set out in its letter

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dated 26th June, 2006. Despite the Respondent Bank giving several opportunities and extensions to settle their entire dues for a sum of Rs.65.77 lacs, admittedly, the Petitioners defaulted in adhering to the terms and conditions of the said settlement proposal. In these circumstances, the Original Application filed by the Respondent Bank was proceeded with, and by an order dated 20th November, 2008 this Original Application was allowed and the Petitioners were directed to pay to the Respondent Bank a sum of Rs.87,48,616.06/- together with simple interest @ 10% per annum from the date of filing of the Original Application till payment. A Recovery Certificate was also issued accordingly.

5. After the aforesaid Original Application was decreed in favour of the Respondent Bank, the Petitioners once again, on 19th December, 2008 approached the Respondent Bank and submitted a proposal to settle the matter for a sum of Rs.75 Lacs. This proposal was accepted by the Respondent Bank and the same was duly communicated to the Petitioners by letter dated 16th February, 2009. The terms and conditions of this settlement inter alia provided that (a) Rs.50 lacs would be payable within 10 days of sanction and the documents in respect of one of the mortgaged properties (in the name of Mr Abbasbhai Poonawala) would be released; and (2) the balance amount of Rs.25 lacs would be payable on or before 28th February, 2009 and thereafter, the documents in respect of the mortgaged property in the names of Mr Moiz A. Poonawala and Mr Jujer A. Poonawala would be released.

6. Admittedly, the Petitioners could not adhere to the time frame set out in the said letter. Despite this, vide its letter dated 10th June, 2009 the Respondent Bank gave one more opportunity to the Petitioners to pay the amount of Rs.75 lacs, failing which the Petitioners were informed that it would take over possession of the mortgaged properties and recover its dues. Since the payment was not made, the Respondent Bank vide its letter dated 25th June, 2009 informed the Petitioners that it had withdrawn the compromise proposal as they have failed to abide by the terms and conditions of the settlement.

7. In view of the fact that the Petitioners did not pay the settlement amount within the stipulated period, the Recovery Officer proceeded to execute the Recovery Certificate issued in favour of the Respondent Bank to recover the decretal amount. Accordingly, the Recovery Officer on 30th April, 2010 published a sale notice in the newspaper (Free Press Journal) fixing 31st May, 2010 as the date for conducting the sale of the mortgaged properties. The auction sale was accordingly conducted on the said date. It is not disputed that these mortgaged properties have been sold in the public auction for an amount of Rs.52,00,000/- and 37,50,000/- respectively to the auction purchaser and the sale has been confirmed in their favour.

8. In the meanwhile, the Petitioners on 24th May, 2010 filed Miscellaneous Application No.101 of 2010 under Section 19(25) of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (for short, “the RDDB Act, 1993”) before the DRT inter alia praying that the Respondent Bank be ordered and directed to accept the balance OTS amount of Rs.64.50 lacs together with interest at the rate of 10% p. a. from 16th February, 2009 or such other rate as the DRT deems fit. In other words, by the said Miscellaneous Application, the Petitioners sought enforcement of the settlement proposal dated 19th December, 2008. This Miscellaneous Application was heard by the DRT-III, Mumbai and by its detailed order dated 26th July, 2010 dismissed the same.

9. Being aggrieved by the aforesaid dismissal, the Petitioners preferred Miscellaneous Appeal No.184 of 2010 before the DRAT, Mumbai. The DRAT also, by an elaborate and reasoned order dated 28th June, 2013 dismissed the Petitioners' Appeal. It is in these circumstances the Petitioners are before us questioning the validity and legality of the order dated 28th June, 2013 passed by the DRAT in Miscellaneous Appeal No.184 of 2010.

10. In this factual background, Mr Purandare, learned counsel appearing on behalf of the Petitioners submitted that the OTS proposal given by the Petitioners to the Respondent Bank was a bonafide one and the Petitioners could not adhere to the time schedule of the said OTS as there were genuine difficulties in raising the money in time. He submitted a chart inter alia indicating how the payments have been made, though belatedly, and therefore as per the OTS, only an amount of Rs.99,690.08 was outstanding as on 9th October, 2015. The Petitioners, having shown their willingness to pay interest for the delayed period, no prejudice was likely to be caused to the Respondent Bank, was the submission of Mr Purandare. In these circumstances, he submitted that the DRT ought to have directed the Respondent Bank to accept the OTS amount by extending the time and not recover the amounts in terms of the judgment and order dated 20th November, 2008 passed in Original Application No.389 of 2002. In light of the facts highlighted above, according to Mr Purandare, the DRT and the DRAT, had both gone wrong in dismissing the Miscellaneous Application as well as the Appeal of the Petitioners which require our interference under Article 226 of the Constitution of India.

11. On the other hand, Mr Shinde, learned counsel for the Respondent Bank, sought to support the impugned order on all counts. He firstly submitted that the Petitioners are guilty of suppression in as much as, the Petitioners in their Miscellaneous Application filed before the DRT, did not disclose the first settlement proposal submitted by them in the year 2006. Admittedly, the Petitioners do not adhere to the aforesaid settlement proposal and it was in these circumstances, that the Original Application filed by the Respondent Bank came to be allowed and the Petitioners were directed to pay a sum of Rs.87,48,616.06/- to the Respondent Bank with simple interest calculated at the rate of 10% p. a. from the date of the Original Application till payment. After the Original Application was decreed in favour of the Respondent Bank, the Petitioners once again approached the Respondent Bank for settling its dues and submitted the Settlement Proposal dated 19th December, 2008. In the said proposal, the Petitioners agreed to pay a sum of Rs.75 lacs. Even the time frame set out in this settlement proposal was not adhered to by the Petitioners. It is in these circumstances, that the Recovery Officer proceeded to execute the Recovery Certificate and has in fact sold the mortgaged properties in favour of the auction purchasers and recovered the amounts. According to Mr Shinde, even after giving credit of all monies paid by the Petitioners as well as the monies received from the sale of the mortgaged properties, there is still an amount of Rs.1,07,83,232.06/- outstanding as on 22nd August, 2013. In these circumstances, Mr Shinde submitted that enough indulgence has been shown to the Petitioners and it is too late in the day for them to contend that the Respondents be ordered and directed to accept the amounts as per the settlement proposal dated 19th December, 2008 together with interest at the rate of 10% p. a. from 16th February, 2009 till payment. He, therefore, submitted that there was no merit in this Writ Petition and the same ought to be dismissed with costs.

12. With the help of the learned counsel, we have perused the papers and proceedings in this Writ Petition along with the impugned order dated 28th June, 2013. At the out set, we must mention that even though several authorities/decisions are referred to in the Writ Petition, apart from the above argument, no other argument was advanced on behalf of the Petitioners and neither were any of these authorities/decisions cited before us. It is in these circumstances, that we have not been called upon to deal with the same.

13. Having said this, we shall now deal with the arguments as canvassed by Mr Purandare. The facts of this case clearly reveal that in the year 2006 (and while the Original Application was pending) the Petitioners approached the Respondent Bank, with a settlement proposal to pay a sum of Rs.65.77 Lacs. This proposal was accepted by the bank vide its letter dated 26th June, 2006 which envisaged that the Petitioners pay a sum of Rs.65.77 lacs towards full and final settlement of its dues on the terms and conditions set out therein. The terms and conditions inter alia stipulated that the settlement amount would be paid in the following manner:- (a) 10% of the settlement amount on or before 28th June, 2006; (b) another 10% of the settlement amount on or before 15th July, 2006; and (c) the balance 80% would be paid in 17 equal monthly installments of Rs.2.93 lacs and the 18th installment would be of Rs.2.85 lacs. The first installment was due on 15th August, 2006 and so on.

14. Admittedly, the Petitioners failed to deposit 10% of the settlement amount on or before 28th June, 2006. The Petitioners therefore approached the Respondent Bank and sought time to deposit the amount up to 5th July, 2006 which was allowed by the Respondent Bank. Even then, the Petitioners did not pay the aforesaid amount. Thereafter, on 13th July, 2006 the Respondent Bank addressed another letter to Petitioner No.1 calling upon them to deposit the amount of Rs.13.15 lacs on or before 15th July, 2006. It was informed to the Petitioners that in case they fail to deposit the aforesaid amount, it would be treated as a default as per the terms and conditions of the settlement proposal. It is not in dispute that the Petitioners could not pay any amount despite seeking extension of time from the bank. It was in these circumstances that this settlement of 2006 was withdrawn and the Original Application was proceeded with and a decree in the sum of Rs.87,48,616.06/- came to be passed.

15. Be that as it may, we find that even the second settlement proposal dated 19th December, 2008 (in the sum of Rs.75 Lacs) has not been adhered to by the Petitioners. This settlement proposal clearly stipulated that Rs. 50 lacs would be paid within 10 days of sanction of the said proposal and the balance 25 lacs would be paid on or before 28th February, 2009. The only amount paid was a sum of Rs.10 lacs on 3rd June, 2009. Despite this, the Respondent Bank, vide its letter dated 10th June, 2009 informed the Petitioners that they could pay the entire settlement amount immediately without any further delay. It was further informed that in case the Petitioners fail to pay the settlement amount, the Respondent Bank would take over possession of the secured assets to recover its dues. Thereafter, further extensions were granted by the Respondent Bank to Petitioner No.1 to make the payments as per the settlement proposal dated 19th December, 2008. Despite this, the payments were not made as per the extensions granted. The details of these extensions have been elaborately set out in paragraphs 28 and 29 of the impugned order and in view of the fact that what is stated therein is undisputed, we did not think it necessary to reproduce the same once again in this judgment.

16. Looking to the totality of the facts of this case and as narrated above, it is clear that the Respondent Bank had taken a very lenient view in the matter. Despite several extensions being granted to the Petitioners, they failed to deposit/pay the settlement amount to the Respondent Bank. In this view of the matter, we do not think that the DRT or the DRAT can be faulted in dismissing Miscellaneous Application No.101 of 2010 or Miscellaneous Appeal No.184 of 2010 respectively. The DRT as well as the DRAT have passed detailed reasoned orders considering the arguments of the Petitioners including the judgments/decisions on which reliance was placed. After considering all the arguments, the DRT and the DRAT dismissed the Miscellaneous Application as well as the Appeal of the Petitioners. On going through these orders, we do not think that they suffer from any patent illegality and/or perversity that would persuade us to interfere in our extraordinary, equitable and discretionary jurisdiction under Article 226 of the Constitution of India. We do not think that in the facts of the present case, justice lies on the side of the Petitioners for us to interfere with the impugned orders.

17. Before parting, we must mention here that we seriously doubt whether the DRT had jurisdiction to entertain the prayer sought for by the Petitioners in Miscellaneous Application No.101 of 2010. In the said Application, the Petitioners, in effect sought enforcement of the settlement proposal dated 19th December, 2008. In view of the fact that the DRT had already decreed the Original Application filed by the Respondent Bank, it had become functus officio and therefore we seriously doubt that at the instance of the debtor such a Misc Application seeking enforcement of the settlement proposal dated 19th December, 2008 could have been entertained by the DRT under section 19(25) of the RDDB Act, 1993. However, since this issue was neither argued nor raised by the parties, we leave this point open to be considered in an appropriate case.

18. In view of our discussion earlier, we find no merit in this Writ Petition. It is accordingly, dismissed. However, in the facts and circumstances of the case, we leave the parties to bear their own costs.

At this stage, Mr Tripathi prays that the ad-interim order passed in this Petition be continued so as to enable the Petitioners to take appropriate steps including challenging this order in a higher court. This request is opposed by Mr. Shinde on behalf of the Secured Creditor-Respondent No.1 – bank. After having heard both sides on this point, we are of the view that taking into account the conduct of the Petitioners in not abiding by all the opportunities to compromise and settle the 1st Respondent's claim, this request cannot be granted. The request is therefore refused.
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