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Alka Tiwari & Another v/s Oriental Bank Of Commerce & Another

Company & Directors' Information:- ALKA INDIA LIMITED [Active] CIN = L99999MH1993PLC168521

Company & Directors' Information:- ALKA INDIA PVT LTD [Strike Off] CIN = U99999DL1982PTC014262

Company & Directors' Information:- THE BANK OF COMMERCE LTD [Strike Off] CIN = U65923WB1929PLC006511

Company & Directors' Information:- TIWARI PRIVATE LIMITED [Strike Off] CIN = U34105UP1952PTC002459

Company & Directors' Information:- ORIENTAL COMMERCE PVT LTD [Strike Off] CIN = U15209WB1996PTC079017

Company & Directors' Information:- BANK OF COMMERCE LIMITED [Dissolved] CIN = U65110KL1901PLC000124

Company & Directors' Information:- ORIENTAL BANK OF INDIA LIMITED [Dissolved] CIN = U65191KL1920PLC000830

Company & Directors' Information:- ORIENTAL BANK LIMITED [Dissolved] CIN = U65191KL1929PLC000832

Company & Directors' Information:- BANK OF COMMERCE LTD. [Dissolved] CIN = U99999MH1921PTC000917

Company & Directors' Information:- ALKA CORPORATION PRIVATE LIMITED [Amalgamated] CIN = U99999MH1957PLC010823

Company & Directors' Information:- ORIENTAL BANK OF COMMERCE LIMITED [Active] CIN = U65191DL1901PLC002036

    Appeal No. 143 of 2019

    Decided On, 01 August 2019

    At, Debts Recovery Appellate Tribunal at Allahabad


    For the Appellants: S.K. Gupta, Advocate. For the Respondents: S.K. Pandey, Advocate.

Judgment Text

1. This appeal has been preferred by the appellants under Section 18 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short “the SARFAESI Act”) against the order dated 10.4.2019 passed by the Presiding Officer, DRT, Allahabad, whereby the S.A. filed by the appellants was dismissed.

2. Brief facts of the case are, that the respondent-Bank granted housing loan to the appellants, which was secured by equitable mortgage of the house. The appellants defaulted in repayment of the loan, hence the Bank issued demand notice dated 10.4.2012 followed by the possession notice dated 9.4.2013. Thereafter, the matter was settled between the Bank and the appellants on 23.11.2013 before the Lok Adalat for a sum of Rs. 12.00 lacs against the outstanding dues of Rs. 15,02,272. Certain terms for payment were also set out. In compliance of the settlement, the appellants deposited whole amount as settled between the parties. However, the Bank issued the sale notice dated 22.11.2014 and the property was put for auction on 22.12.2014. The appellants challenged the sale notice by filing securitization application before the DRT stating inter alia the factum of settlement through Lok Adalat amongst other objections.

3. The Tribunal below vide order dated 28.7.2016 dismissed the S.A., which was challenged in Appeal Sr. No. 241/2016 by the appellants. The matter was remanded back by this Tribunal vide order dated 25.2.2019 to decide the same afresh after considering the issue of settlement through Lok Adalat. The Tribunal below vide impugned order dismissed the S.A. observing that the settlement of Lok Adalat is not binding, as it was passed without jurisdiction. Being aggrieved the said order, the present appeal was filed by the appellants.

4. Learned Counsel for the appellants submitted that the Bank had filed application before Lok Adalat, Lucknow and the appellants had also appeared and the matter was settled at pre litigation stage. As the award of the Lok Adalat was equivalent to the decree passed by the Civil Court, both the parties are bound by that award. If any of the parties was aggrieved by the said award, it could be challenged only before the Hon’ble High Court. The appellants have deposited the whole amount as settled and there is nothing due against the appellants to be paid to the Bank. However, the Tribunal below has not considered this aspect and has treated the award as nullity, which is not within the domain of the Tribunal below. In support of his contentions, the learned Counsel has relied upon the following judgments:

A. Harshad Chiman Lal Modi v. DLF Universal & Anr., VII (2005) SLT 240=IV (2005) CLT 45 (SC)=2006(3) JCR 222 (Hon’ble Supreme Court).

B. Ace Media Advertisers Pvt. Ltd. and Others v. Bank of Baroda & Ors., IV (2009) BC 356 (DB).

5. On the other hand, the learned Counsel for the respondent-Bank submitted that the property was situated at Kanpur, hence there was no territorial jurisdiction to the Lok Adalat, Lucknow. Besides, the amount was more than Rs. 10.00 lacs, so even otherwise, the pecuniary jurisdiction was that of DRT only and not of any Civil Court or Lok Adalat. Thus, the award passed by the Lok Adalat was without jurisdiction. No decree can be executed, which has been passed without jurisdiction nor the Court can confer the jurisdiction itself or by the consent of the parties, as held by the Hon’ble Allahabad High Court in Saurabh Gupta v. Union of India & Another, 2018 (1) DRTC 715 (All.). Since the borrowers have not complied with the award of the Lok Adalat, therefore, the Bank was free to proceed further under the SARFAESI Act and the Tribunal below has rightly dismissed the S.A.

6. I have considered the rival contentions of the learned Counsel for the parties and perused the record.

7. It is undisputed from the pleadings and arguments that the respondent-Bank filed an application before the Lok Adalat as applicant and one joint settlement was arrived at between the Bank and the appellants. The respondent-Bank is not disputing the factum of this compromise and the terms and conditions as set out in the award passed by the Lok Adalat on 23.11.2013. At that time, no litigation was pending between the borrowers and the Bank. As such, this settlement was at the pre-litigation stage.

8. Accordingly, the settlement in question is covered under the Regulation 12 of the National Legal Services Authorities (Lok Adalat) Regulations, 2009. The Lok Adalat passes the award under Section 21 of the Legal Services Authorities Act, 1987. Section 21 of the Act mandates that every award of the Lok Adalat shall be deemed to be a decree of a Civil Court or as the case may be, an order of any other Court. It further provides that every award made by a Lok Adalat shall be final and binding on the parties to the dispute and no appeal shall lie to any Court against the award. The Regulation 12 of the Regulations envisages that in pre-litigation matter, it may be ensured that the Court, for which a Lok Adalat is organized, has territorial jurisdiction to adjudicate in the matter and Sub-clause (3) provides that an award based on settlement between the parties can be challenged only on violation of procedure prescribed in Section 20 of the Act by filing a petition under Articles 226 and 227 of the Constitution of India.

9. A conjoint reading of both the provisions makes it clear that the award passed by the Lok Adalat cannot be challenged in any Court. However, a writ may be filed before the Hon’ble High Court, if there is any procedural infirmity.

10. In the instant case, the core defence of the Bank is that the Lok Adalat, Lucknow was having no territorial and pecuniary jurisdiction. Firstly, the objection with regard to jurisdiction was required to be raised at the earliest, but no objection was raised by the Bank at the time of settlement or thereafter till the borrowers filed the S.A. challenging the actions of the Bank. Instead, the Bank itself appeared before the Lok Adalat as applicant and applied for settlement at pre-litigation stage. Thus, it is presumed that after considering all aspects including jurisdiction, the Bank had filed the application. The Lok Adalat had also ensured for having territorial jurisdiction to adjudicate the matter and accordingly, the award was passed, so it cannot be said that the Lok Adalat was having no jurisdiction to entertain the said pre litigation.

11. Secondly, the Bank has not placed any significant proof on record that what was the pecuniary and territorial jurisdiction of Loka Adalat, Lucknow held on 23.11.2013 and what were the compelling reasons that the Bank approached before the Lok Adalat, Lucknow for settlement of the case.

12. Thirdly, if the Bank had any grievance with regard to jurisdiction, then it ought to have challenged the award before the Hon’ble High Court by filing writ, but no other Court can declare this award as nullity, as it is clearly barred by the Act. The Bank has neither challenged the award at earlier point of time nor till today before the Hon’ble High Court and the Tribunal below is not competent to declare the award passed by the Lok Adalat as nullity and not binding upon the respondent.

13. Lastly, there is no dispute on the proposition of law that the Court cannot derive jurisdiction by itself or with the consent of the parties and also that judgment passed without jurisdiction is nullity, as laid down by the Hon’ble Allahabad High Court in Saurabh Gupta v. Union of India (supra) and by the Hon’ble Supreme Court in Kiran Singh v. Chaman Paswan, 1954 (SLT SOFT) 100=(1955) 1 SCR 117. However, the Hon’ble Supreme Court in Harshad Chiman Lal Modi v. DLF Universal (supra) has held that the objection of jurisdiction is not taken at the earliest, so it cannot be allowed to be taken at the subsequent stage (para 21 of the judgment). In the case at hand, the Bank has never raised the issue of jurisdiction and it is not the case of any Court having defined territorial, pecuniary or matter-wise jurisdiction, but the award was passed by the Lok Adalat with the explicit consent of the parties, which was adduced in writing, so this cannot be termed as a case, where any jurisdiction was invoked by the consent, but it is a case where the award was passed by the Lok Adalat with the consent of the parties, from which the Bank cannot back out at later stage.

14. It is worthwhile to mention here that even without any involvement of the Court or the Lok Adalat, the Banks used to settle the cases with the borrowers in one time settlement (OTS), in which some sacrifice of the dues is made and that OTS is binding on the Bank and borrower, of course as per the terms and conditions incorporated in the OTS, but the Bank cannot take the defence that it would not abide the OTS agreement. The award in question has been passed by a statutory body constituted under the Act passed by the Parliament, so the Bank is bound to honour this award, unless it is declared null and void by the competent Court.

15. The terms of the award reveal that the total outstanding as on 23.11.2013 was Rs.15,02,272/-, out of which waiver of Rs. 3,02,272/- was allowed and the borrowers had to pay Rs. 12.00 lacs. The condition was that the borrowers would deposit Rs. 1.20 lacs by 23.11.2013 and the remaining amount up to 23.1.2014. Further stipulation is that if the borrowers fail to pay the amount as agreed, the Bank shall be at liberty to execute the said consented order without resorting to any other legal action. The exact term is as under:

“ijkns; o vfxze Hkqxrku djkj dh ’krksZ ds vuqlkj vnk djus esa fdlh izdkj dh dksbZ pwd ugha djsxk vkSj djkj i= ds fu;ekuqlkj mDr fnukad 23-1-14 rd ijkns; /kujkf’k dk Hkqxrku dj nsxk@fn;k gSA foi{kh ;fn cdk;k o vfxze dk Hkqxrku ugha dj ldsxk rc vkosnd] foi{kh ls gj izdkj dh py&vpy laifRr ls fcuk fdlh vU; oS/kkfud dk;Zokgh ls bl le>kSrk fu.kZ; dk fu’iknu djkdj olwy dj ysu dk iw.kZ vf/kdkjh gksxkA”

16. Since the Bank has agreed on the above terms, so even if the appellants failed to adhere to the terms scheduled for payment, the Bank had to proceed for execution of the remaining amount due only as per award passed with the consent of the parties and not for the whole outstanding, which was due from the borrowers. Since the award is equivalent to a decree and once the decree is passed by the Court or any competent statutory body, the amount determined in such decree can only be recovered and the claim under the Securitization Act remains confined to that extent, as laid down by the Hon’ble High Court in M/s Ace Media Advertisers Pvt. Ltd. v. Bank of Baroda (supra).

17. As soon as the award was passed, the Bank was under obligation to drop the SARFAESI proceedings instituted against the appellants. The only legal recourse, after award, remained with the Bank was the exec

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ution of the award in accordance with the rules and procedures. Thus, the action of the Bank for issuing sale notice and putting the property for auction was not justified and the S.A. challenging the said auction was liable to be allowed. As such the impugned order is not sustainable and the appeal is liable to be allowed. 18. Accordingly, the impugned order dated 10.4.2019 is set aside and the appeal is allowed. Consequently, the S.A. No. 05 of 2015 also stands allowed. However, the borrowers are directed to deposit the remaining amount as per terms of the award and the Bank is entitled to recover the interest on contractual rate from the borrowers on the unpaid amount for the delayed period from 23.1.2014 till payment. The amount already paid by the appellants and lying with the Bank shall be adjusted against the outstanding and the Bank will convey the interest component to the borrowers within 15 days and the borrowers would pay the same within 15 days thereafter, failing which, the Bank shall be at liberty to proceed further for recovery of the amount due in accordance with law. No order as to costs. 19. A copy of this judgment be forwarded to the parties as well as to the DRT concerned.