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Industrial Development Bank of India Ltd V/S Vinayak Industries Ltd. and Others.

    Appeal No. 204 of 2010

    Decided On, 19 November 2010

    At, Debt Recovery Appellate Tribunal At Delhi



Judgment Text

1. The Industrial Development Bank Ltd. (in short IDBI) filed the O.A. against all the four Respondents before the learned DRT.

2. The operative portion of the impugned order dated 07.09.2006 passed by the learned Trial Court runs as follows:

I allow O. A. of the Bank and direct Defendant No. 1 to 3 to pay a sum of Rs. 1,79,05,589/- jointly and severally alongwith costs, pendente lite and future interest @ 12% p.a. with quarterly rests w.e.f. 29/12/1999 (the date of filing of O. A.) within 30 days failing which same shall be recovered from the sale of hypothecated stocks and securities, etc. and in case of short fall, from the personal assets/properties of Defendants. No relief is allowed against Defendant No. 4. However, in the interest of justice, Defendants No. 4 is directed to pay to the Bank the surplus of proceeds of securities of Defendant No. 1 after satisfying its claims.
3. Respondent Nos. 1, 2 and 3 did not appear. The main contest is between IDBI and Rajasthan Industrial Investment Corporation Ltd. (in short RIICO), Respondent No. 4.

4. The learned Trial Court upheld the contention raised by Respondent No. 4 that they have first charge on the immovable and moveable assets of Defendant No. 1 to the exclusion of Appellant Bank. Respondent No. 4 had sanctioned a total amount of Rs. 42 lacs to Respondent No. 1 but Respondent No. 1 failed to liquidate the outstanding of Defendant No. 4 which amounted to Rs. 54,28,657/- inclusive of interest. Thereafter, all the assets of Respondent No. 1 were taken over by Respondent No. 4 on 22.3.1996. Respondent No. 4 had also spent a sum of Rs. 4,48,246/: as costs for the sale of plant and machinery, etc. The Defendant No. 4 denied that there was pari passu charge or the equitable mortgage was ever created.

5. The Counsel for the Appellant agreed that no document was executed in their favour. The learned Counsel for the Appellant contended that execution of deed of hypothecation by Respondent No. 1 means that the first charge was created in favour of the Bank. It is further submitted that Respondent No. 1 had agreed to create equitable mortgage in favour of the Appellant of its movable properties. However, it failed to do so. The learned Counsel for the Appellant also invited my attention towards the letter written by Respondent No. 4 Exhibit PW-1/4 dated 17.9.1994. The said letter is reproduced as under:

We refer your letter No. VIL/RKJ/94/1486A dated August 8th 94 which was received by us on August 19, 1994 via fax and subsequent delivery of the copy of IDBI's letter dated July 12th 94 on August 24th 1994.

Your request for issuing a NOC in the matter of your seeking financial assistance from IDBI & IRBI was examined. I am directed to inform you that the Corporation has no objection in your company seeking FCL equivalent to Rs. 270/- lacs from IDBI and Rupees loan of Rs. 140 lacs from IRBI for your expansion project.

6. It was contended that it tantamounts to pari passu charge.

7. The Counsel for the Appellant also referred to Annexure A-3 i.e. the letter dated 08.06.1998 written by RIICO. The same is reproduced as under:

No: F&R/R-641/98 Dt: 8th June, 1998

DCM Shriram Leasing & Finance Ltd. 2nd Floor, 8-E Jhandewalan Press Area New Delhi-110055.

Reg: M/s. Vijayak Industries Ltd., Bhiwadi.

Dear Sir,

This refers to your letter dated 20th May, 1998 wherein you have informed us about the finance amount of Rs. 20,00,000/- under a hire purchase agreement to M/s. Vinayak Industries Ltd. and also your desire to register you claim on the assets financed by you and take back the same. In this connection we wish to inform you as under:

1. Though the unit happens to be in RIICO's possession being 100% Export Oriented Unit (EOU), the Deptt. of Central Excise & Customs, Government of India also have their seals/locks on the premises of the unit.

2. Your finance of Rs. 20,00,000/-to the unit has been brought to our notice through your letter for the first time. Prior to this we were not aware of it. Whether other participating financial institutions namely IDBI, IRBI & Bank of Baroda are aware about this, is also not know to us.

3. Prior to accepting your claim, permission/approval of all participating institutions would be necessary as all assets of the unit happen to be under pari passu first charge of the participating financial institutions.

4. Even after resolving the issue after verification of your claim of ownership jointly by all the participating institutions i.e. RIICO, IDBI IRBI & Bank of Baroda, permission of Deptt. of Central Excise & Customs, Government of India would also be necessary for your claim.

Keeping the above in view it would be appropriate if the company or promoters take up the issue with respective institutions and seek release by co-operation of all including the Deptt. of Central Excise & Customs. We hope this clarifies the matter.

Thanking you,
Yours faithfully,
(B.K. Rathi) Manager (F) F&R.

8. In its letter dated 13.11.1997, Chief Manager RIICO mentioned to the Commissioner of Customs and Central Excise Department that the corporation in association with IIBI and IDBI had financed the captioned project for shoes at Bhiwadi. RIICO, IIBI and IDBI are holding the charge on the fixed assets of this unit. The learned Counsel for the Appellant submits that it therefore means that Respondent No. 4 admitted that Appellant has charged over the property in dispute.

9. It was also argued that Respondent No. 4 in the joint meeting held on few occasions as well as on 17.8.2006 has not conflicted that the sale proceeds of the assets of Respondent No. 1 should be distributed on pro rata basis with the Appellant IDBI and Bank of Baroda.

10. I find force in the arguments urged by learned Counsel for the Appe

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llant in a measure. The Counsel for the Appellant himself stated that the equitable mortgage of the property was not created for one reason or the other. He also failed to prove the existence of pari passu agreement between the parties. All the facts detailed above clearly go to show that the Appellant has a charge over the property in dispute but it is clear that the first charge lies with the Respondent No. 4. Consequently, I see no flaw or defect in the order passed by the learned Trial Court. The appeal is, therefore, dismissed with costs. 11. Copies of this order be furnished to the parties as per law and one copy be sent to the learned DRT forthwith.