w w w . L a w y e r S e r v i c e s . i n



Galvanotek Industries Private Ltd. v/s Coventry Spring & Engineering Company Ltd. & Others


Company & Directors' Information:- COVENTRY SPRING & ENGINEERING CO LTD [Active] CIN = L28112WB1952PLC020423

Company & Directors' Information:- D P ENGINEERING INDUSTRIES LIMITED [Active] CIN = U27310DL2008PLC176856

Company & Directors' Information:- GALVANOTEK INDUSTRIES PVT LTD [Active] CIN = U31300WB1995PTC075564

Company & Directors' Information:- B P SPRING & ENGINEERING CO PVT LTD [Active] CIN = U27109WB1987PTC041773

Company & Directors' Information:- SPRING INDUSTRIES PRIVATE LIMITED [Active] CIN = U51101MH2014PTC255647

Company & Directors' Information:- A K ENGINEERING INDUSTRIES (INDIA) PRIVATE LIMITED [Active] CIN = U25206DL1997PTC085204

Company & Directors' Information:- G L ENGINEERING INDUSTRIES PRIVATE LIMITED [Active] CIN = U28920MH1981PTC023662

Company & Directors' Information:- B V M ENGINEERING INDUSTRIES LIMITED [Active] CIN = U28111DL1972PLC005983

Company & Directors' Information:- G N SPRING PRIVATE LIMITED [Active] CIN = U31300GJ1986PTC008542

Company & Directors' Information:- R R R ENGINEERING INDUSTRIES PRIVATE LIMITED [Strike Off] CIN = U74899DL1993PTC055069

Company & Directors' Information:- A. V. ENGINEERING INDUSTRIES PRIVATE LIMITED [Strike Off] CIN = U99999DL1974PTC007360

Company & Directors' Information:- SPRING ENGINEERING PRIVATE LIMITED [Active] CIN = U29253WB2015PTC206585

Company & Directors' Information:- G D R ENGINEERING INDUSTRIES PVT LTD [Strike Off] CIN = U27109UP1971PTC003388

Company & Directors' Information:- L S ENGINEERING INDUSTRIES PRIVATE LIMITED [Strike Off] CIN = U74899DL1977PTC008484

Company & Directors' Information:- I B I ENGINEERING INDUSTRIES PRIVATE LIMITED [Strike Off] CIN = U45202PB1974PTC003422

Company & Directors' Information:- A H B ENGINEERING INDUSTRIES PVT LTD [Strike Off] CIN = U35999WB1988PTC044786

Company & Directors' Information:- O K ENGINEERING INDUSTRIES PRIVATE LTD [Active] CIN = U74899DL1987PTC027660

Company & Directors' Information:- R P ENGINEERING INDUSTRIES PRIVATE LIMITED [Strike Off] CIN = U99999DL1973PTC006781

Company & Directors' Information:- S V ENGINEERING INDUSTRIES PVT LTD [Under Liquidation] CIN = U74210TG1981PTC003174

    Writ Petition No. 1006 of 2014

    Decided On, 15 April 2019

    At, In the High Court of Bombay at Nagpur

    By, THE HONOURABLE MR. JUSTICE R.K. DESHPANDE & THE HONOURABLE MR. JUSTICE S.M. MODAK

    For the Petitioner: M.G. Bhangde, Senior Advocate, Rahul Bhangde, A. Agarwalla, Advocates. For the Respondents: Umesh Shetty, R.V. Malviya, R7, S.N. Kumar, R9, Dr. R.S. Sundaram, Advocates.



Judgment Text

Oral Judgment: (R.K. Deshpande, J.)

1. Heard. Rule. Rule is made returnable forthwith. Heard finally by consent of parties. Shri Umesh Shetty, learned Adv., waives service of notice for respondent nos. 1 to 6, Shri S. N. Kumar, learned Adv., for respondent no.7 and Dr. R.S. Sundaram, learned Adv., for respondent no.9.

2. The respondent no.1, Coventry Spring & Engineering Company Ltd., was the original borrower of the loan from the State Bank of India, fully secured by mortgage of the property in question. The respondent nos. 2 to 6 are the guarantors. The respondent no.1, borrower, defaulted in making repayment of loan. The State Bank of India assigned its debts due from the respondent no.1 to the respondent no.7, M/s. Assets Reconstruction Company of India Ltd., which sold the property in question to the petitioner by a private treaty on 12th October, 2007. The Sale Certificates were issued on 23rd and 24th October, 2007.

3. On 03rd June, 2011, the Debts Recovery Tribunal at Nagpur, dismissed T.S.A. No. 73 of 2010, filed by the borrower, and the operative portion of which order is reproduced below:-

“[01] T.S.A. No. 73/10 is dismissed.

[02] The action of respondent no.1 is confirmed. The action for sale of properties by respondent no.1 in favour of respondent no.6 is also confirmed.

[03] Respondent no.6 is allowed to deal with these properties and carry on its business in whatsoever manner as per their desire. Respondent no.6 is declared absolute owner of these properties situated at Alampur as well as at Nagpur as respondent no.6 had already paid sale proceeds.

[04] All the charges and claims are satisfied by this order in favour of respondent no.6 in respect of movable and immovable properties of Alampur Unit as well as Nagpur Unit.

[05] I.A. No. 166/11 filed by the proposed intervener, M/s. Coventry Springs Ltd., is decided by passing separate order, whereby I.A. No. 166/11 is rejected. [06] No order as to costs.”

4. The aforesaid decision was the subject-matter of challenge in Appeal No. 135 of 2011 filed by the borrower as well as guarantors under Section 18 of the Securitisation & Reconstruction of Financial Assets & Enforcement of Security Interest Act, 2002. On 11th April, 2012, the Debts Recovery Appellate Tribunal passed an order of a total waiver of deposit which was the subject-matter of challenge before this Court in Writ Petition No. 5005 of 2012 filed by the present petitioner. The matter was admitted on 1st November, 2012, and on the same date, the Court passed an interim order permitting the proceedings before the Debts Recovery Appellate Tribunal to proceed further, subject to the result of the Writ Petition. This Writ Petition was dismissed in default on 21st August, 2013.

5. The Debts Recovery Appellate Tribunal, which was permitted to proceed further in the matter, delivered its judgment on 13th January, 2014 allowing the appeal and setting aside the Certificates of Sale dated 23rd and 24th October, 2007. The operative portion of the order passed by the Debts Recovery Appellate Tribunal is reproduced below:-

“The appeal is allowed with costs.

The impugned judgment and order dated 03.06.2011 passed by the Ld. P.O., DRT, Nagpur, in T.S.A. No. 73/2010 [S.A. No. 71/2007] [M/s. Coventry Spring & Engineering Company Ltd. & 5 Ors. Vs. M/s. Assets Reconstruction Company (India) Ltd. (ARCIL) & 5 others) is set aside.

Consequently, T.S.A. No. 73/2010 [S.A. No. 71/2007] filed by the appellant is allowed. The measures taken by the Authorized Officer / holder of power of attorney of the respondent no.1 in taking over possession of the secured assets, i.e., Alampur [Howrah] and Nagpur properties are quashed. The impugned sale of the secured assets i.e., Alampur property [Howrah] and Nagpur property [Maharashtra] conducted by the Authorized Officer of die respondent no.1 in favour of the respondent no.6 is also quashed.

The respondent nos. 1 and 6 are directed to restore the possession of the secured assets back to the appellant no.1 within 30 days from the date they receive copy of this order.”

6. Writ Petition No.1006 of 2014 was filed before this Court challenging the decision of the Debts Recovery Appellate Tribunal rendered on 13th January, 2014 on merits. It is this Writ Petition which we are adjudicating.

7. Writ Petition No. 5005 of 2012 dismissed in default on 21st August, 2013 was restored by this Court on 27th February, 2014. It was ultimately allowed by the Division Bench of this Court on 9th March, 2015. This Court set aside the order dated 11th April, 2012 passed by the Debts Recovery Appellate Tribunal granting complete waiver of deposit, and directed the parties to appear before the Debts Recovery Appellate Tribunal on 15th April, 2015. The Tribunal was permitted to pass appropriate orders keeping in view the provisions of Section 18 of the Securitisation & Reconstruction of Financial Assets & Enforcement of Security Interest Act, 2002. We are informed that the present Writ Petition was listed along with Writ Petition No. 5005 of 2012 and this Court was aware of the order dated 13th January, 2014 passed by the Debts Recovery Appellate Tribunal allowing the appeal on merits. But, we do not find any reference to the said order in the ultimate decision of this Court rendered in Writ Petition No. 5005 of 2012.

8. Shri M. G. Bhangde, the learned Senior Advocate, has urged that the order dated 13th January, 2014 impugned in this petition is liable to be set aside on the sole ground that the Debts Recovery Appellate Tribunal had no jurisdiction to proceed further with the appeal and decide it on merits in the absence of pre-deposit of the amount of not less than twenty-five percent of the debts. According to him, the order dated 11th April, 2012 passed by the Debts Recovery Appellate Tribunal was a complete waiver of the deposit and this order has been set aside by the Division Bench of this Court in Writ Petition No. 5005 of 2012 which has attained the finality and, therefore, the order impugned in the petition is liable to be set aside on this sole ground. Reliance is placed upon the findings recorded by this Court in its order passed in Writ Petition No. 5005 of 2012 as well as the decision of the Apex Court in G. Ramegowda, Major & others Vs. Special Land Acquisition Officer, Bangalore [(1988) 2 SCC 142] [para 10] and another decision of the Apex Court in case of Nagesh Datta Shetti & others Vs. State of Karnataka & others [(2005) 10 SCC 383] [paras 7 and 8].

9. The claim in this petition is opposed essentially by the borrower and the guarantors, in whose favour the ultimate decision by the Tribunal on 13th January, 2014 has been passed. It is urged that this Court in Writ Petition No. 5005 of 2012 permitted the Debts Recovery Appellate Tribunal to go ahead with the proceedings, subject to the result of this petition. The petition was dismissed in default on 21st August, 2013 and on the date of passing of the final order on 13th January, 2014 on merits by the Debts Recovery Appellate Tribunal, the Writ Petition was not restored. It was restored on 27th February, 2014. Reliance is also placed upon the decision of the Division Bench of the Gujrat High Court in Pritesh Meghaji Penthani Vs. Union of India & five others [ 2014 SCC OnLine Guj 9175], to urge that if fifty per cent of the amount due has already been recovered by the Bank by sale of the mortgaged property, in that event, there is no necessity of further deposit of any amount as a condition precedent for maintaining the appeal under Section 18 of the Securitisation & Reconstruction of Financial Assets & Enforcement of Security Interest Act, 2002. Our attention is invited to paragraphs 9 and 10 of the said decision to further urge that the provision was read down.

10. The question, which we are required to consider in this petition, is whether the order dated 13th January, 2014 passed by the Debts Recovery Appellate Tribunal on merits of the appeal in violation of second and third provisos below Sub-section (1) of Section 18 of the Securitisation & Reconstruction of Financial Assets & Enforcement of Security Interest Act, 2002, becomes non-est for lack in inherent jurisdiction.

11. Section 18 (1) of the Securitisation & Reconstruction of Financial Assets & Enforcement of Security Interest Act, 2002, dealing with the appeal to the Appellate Tribunal being relevant is reproduced below-

“18. Appeal to Appellate Tribunal.- (1) Any person aggrieved, by any order made by the Debts Recovery Tribunal under Section 17, may prefer an appeal along with such fee, as may be prescribed to the Appellate Tribunal within thirty days from the date of receipt of the order of Debts Recovery Tribunal;

Provided that different fees may be prescribed for filing an appeal by the borrower or by the person other than the borrower:

Provided further that no appeal shall be entertained unless the borrower has deposited with the Appellate Tribunal fifty per cent of the amount of debt due from him, as claimed by the secured creditors or determined by the Debts Recovery Tribunal, whichever is less :

Provided also that the Appellate Tribunal may, for the reasons to be recorded in writing, reduce the amount to not less than twenty-five per cent of debt referred to in the second proviso.”

The Appellate jurisdiction under Section 18(1) is circumscribed by the condition of deposit of fifty percent of the amount of debt due against the borrower as specified in the second proviso. In the third proviso, the Appellate Tribunal has discretion to reduce it to not less than twenty-five percent of the debt due.

12. It is an undisputed position that when the Debts Recovery Appellate Tribunal decided the appeal on merits on 13th January, 2014, there was a total waiver of the deposit, which was in contravention of the third proviso below Sub-section (1) of Section 18 of the said Act reproduced above. The question is whether this contravention strikes at the very root of the exercise of jurisdiction by the Debts Recovery Appellate Tribunal to decide the appeal on merits, so as to vitiate the ultimate order passed adjudicating the controversy on merits.

13. In the present case, there is already an adjudication by this Court rendered in Writ Petition No. 5005 of 2012 on 9th March, 2015 to which the petitioner and the respondents in the present case were parties. The question involved was whether the Debts Recovery Appellate Tribunal had jurisdiction to grant a complete waiver of predeposit. After taking into consideration the decision of the Apex Court in Narayan Chandra Ghosh Vs. Uco Bank & others [Civil Appeal No. 2681 of 2011 arising out of Special Leave Petition [Civil] No. 5488 of 2011], this Court has held that though a discretionary power has been conferred on the Debts Recovery Appellate Tribunal under third proviso to Sub-section (1) of Section 18 to determine the amount of deposit as a pre-condition for entertaining the appeal, the discretion is not an absolute one, but a limited one, and the Tribunal is not competent to reduce the amount of deposit below twenty-five per cent of the debt. The Court held that Debts Recovery Appellate Tribunal has misguided itself on the clear mandate of law and wrongly granted complete waiver of pre-deposit of the amount.

14. The learned counsel appearing for the borrower and guarantors has relied upon the decision of the Apex Court in case of Budhia Swain & others Vs. Gopinath Deb & others [ (1999) 4 SCC 396], in which a distinction is made between the orders suffering from lack of jurisdiction and a mere error in exercise of jurisdiction. Para 9 of the said decision is reproduced below:-

“9. A distinction has to be drawn between lack of jurisdiction and a mere error in exercise of jurisdiction. The former strikes at the very root of the exercise and want of jurisdiction may vitiate the proceedings rendering them and the orders passed therein a nullity. A mere error in exercise of jurisdiction does not vitiate the legality and validity of the proceedings and the order passed thereon unless set aside in the manner known to law by laying a challenge subject to the law of limitation. In Hira Lal Patni V. Kali Nath it was held :

“The validity of a decree can be challenged in execution proceedings only on the ground that the court which passed the decree was lacking in inherent jurisdiction in the sense that it could not have seisin of the case because the subject-matter was wholly foreign to its jurisdiction or that the defendant was dead at the time the suit had been instituted or decree passed, or some such other ground which could have the effect of rendering the court entirely lacking in jurisdiction in respect of the subject-matter of the suit or over the parties to it.”

15. Keeping in view the law laid down by the Division Bench of this Court in Writ Petition No. 5005 of 2012 and the law laid down by the Apex Court in Budhia Swain and Others making a distinction between the orders suffering from lack of jurisdiction and a mere error in exercise of jurisdiction, we are of the view that the second proviso below sub-section (1) of Section 18 of the Securitisation & Reconstruction of Financial Assets & Enforcement of Securit

Please Login To View The Full Judgment!

y Interest Act, 2002, is of a mandatory nature. The Debts Recovery Appellate Tribunal does not get its jurisdiction to decide the appeal on merits unless there is a compliance of requirement of at least third proviso below Sub-section (1) of Section 18. If there is a failure to comply with such requirement, the appeal itself becomes incompetent, leaving no jurisdiction with the Debts Recovery Appellate Tribunal to consider and decide it on merits. It is not an error in exercise of the jurisdiction but the Debts Recovery Appellate Tribunal was suffering from inherent lack of jurisdiction to decide the appeal on merits. 16. In view of the aforesaid position, we are of the view that the decision of the Debts Recovery Appellate Tribunal rendered on 13th January, 2014 in Appeal No. 135 of 2011 on merits of the matter cannot be sustained and the same is required to be quashed and set aside. 17. In the result, this Writ Petition is allowed. The order dated 13th January, 2014 passed in Appeal No. 135 of 2011 is hereby quashed and set aside. 18. At the request of learned counsel appearing for respondent nos. 1 to 6, the petitioner shall maintain status quo in respect of the properties in question. Status quo means, we clarify that no third-party interest shall be created, nor the parting of possession shall take place. We record that the petitioners are in possession of the properties in question. The status quo shall come to an end after a period of six weeks from today.
O R