W.P.(C) 4538/2005 & CM Appls 3256/2005, 3872/05, 5625/05. Case: Kunth Securities Pvt. Ltd Vs Punjab & Sind Bank Ltd. & Ors. High Court of Delhi (India)
| Case Number | W.P.(C) 4538/2005 & CM Appls 3256/2005, 3872/05, 5625/05 |
| Counsel | For Appellant: Mr. Sudhir Nandrajog, Senior Advocate with Mr. Vinay Gupta, Mr. K.K. Mishra and Mr. Mahender Singh, Advocates and For Respondent: Rajinder Wali, Advocate, Mr. Amit Sibal, Mr. Vinay Tripathi, Advocates |
| Judges | S. Muralidhar, J. |
| Issue | DRT Act - Section 22; Recovery of Debts due to Banks & Financial Institutions Act, 1993 |
| Citation | 2010 (IV) BC 461, 2010 (172) DLT 289, 2010 (119) DRJ 258 |
| Judgement Date | September 07, 2010 |
| Court | High Court of Delhi (India) |
Judgment:
S. Muralidhar, J.
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The Petitioner, Kunth Securities Private Limited (KSPL), through its Director Mr. R.K. Gupta, filed this petition on 19th February 2005 against the Respondent Punjab & Sind Bank (Bank.) seeking two reliefs. The first is for a writ of mandamus to the Respondent to issue No Objection Certificate. (NOC.) releasing one-fourth portions of the property at 7-A, Rajpur Road, Delhi (property in question.) under the lien of the Bank on the Petitioner depositing three equivalent sums of ` 1,62,50,000/- each respectively and for a writ of mandamus to the Bank "to instantly and immediately direct the owners of the subject property to execute the sale deed" in respect of the property in question at 7-A, Rajpur Road, Delhi admeasuring 4200 sq.yds in favour of the Petitioner on their being provided with the copies of all the four NOCs as may procured by the Petitioner and to abide by the orders passed by this Court in Writ Petition (Civil) No. 6088 of 2003. The third prayer is for a mandamus to the Bank to receive and appropriate "an amount to be so deposited by the Petitioner in a specific period of time" as part consideration for the sale of the property in question; and upon receiving the entire sale consideration of ` 6.50 crores, to hand over the original deed of the title in respect of the property in question so deposited by the owners with the Bank with an intent to create an equitable mortgage, free from its charge of the Bank in all respects.
Background facts
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The narration of facts set out in the petition are that the property in question admeasuring 8800 sq.yards was purchased on 19th January 1956 from Mr. Inder Narain Seth in the joint names of Mr. Ramesh Chand Jain, Mr. Sudesh Chand Jain, Mr. Umesh Chand Jain, Mr. Subhash Chand Jain and Mr. Prabhash Chand Jain for a total sale consideration of ` 1 lakh. At that point of time Mr. Ramesh Chand Jain was 19 years old and the remaining four were minors under the guardianship of their father late Mr. P.S. Jain son of Late Mr. Jayanti Prasad Jain. On 22nd March 1957, a deed of partition was executed between Mr. P.S. Jain, Smt. Illaichi Devi wife of Mr. P.S. Jain, Mr. Ramesh Chand Jain, aged about 20 years and four other minor sons of Mr. P.S. Jain. It is stated that the partition deed provided that the movable properties mentioned in the First Schedule thereto were the joint properties of the said family, part of which was ancestral and part acquired through earnings of the individual members including that of the Hindu Undivided Family (HUF.) thrown into common stock. The Petitioner claims that the property in question had been equally partitioned in terms of the aforementioned deed of partition among the brothers. In the site plan attached to the First Schedule, the respective shares of all the five brothers had been earmarked and reflected in different colours.
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Upon the expiry of Mr. P.S. Jain in November 1965, his share in the property went to the share of his wife Smt. Illaichi Devi. The said position continued till 31st August 1976. On 3rd September 1976, all the owners are stated to have jointly mortgaged the property in question in favour of the Bank in lieu of a term loan of ` 10 lakhs. The petition proceeds to narrate how a default was committed in the repayment of loan which resulted in the Bank initiating the proceedings for recovery. It is stated that the owners preferred not to contest these proceedings but to suffer a consent decree and undertook to repay the decretal amount in equal instalments. The Respondent No. 1 Bank instituted execution proceedings against the firms, companies (of which the borrowers were partners or directors) for recovery of the decretal amount.
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Civil Suit No. 707 of 1983 was filed by the Bank in this Court for recovery of ` 20,57,658.33 representing the amount of principal due together with interest and other charges. A compromise was entered between the parties and a decree was passed in terms of the compromise. After paying the instalments of ` 25,000/- per month for some time, defaults were again committed by the Judgment Debtors (JDs.). Subsequently, the Bank filed an Execution Petition No. 128 of 1994 in this Court. It is stated that the JDs could not honour their commitments to repay the balance amount in instalments. Meanwhile, the execution petition was transferred to the Debt Recovery Tribunal (DRT.), New Delhi on 13th December 1995 in terms of the Recovery of Debts due to Banks & Financial Institutions Act, 1993 (DRT Act.).
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It is stated that while the execution proceedings were pending, the Recovery Officer of the DRT, New Delhi issued a proclamation of sale in respect of the property in question and fixed the date for auction as 17th December 1998. The reserve price of the property was initially kept at ` 1 crore, which was subsequently enhanced to ` 6.50 crores. It is stated that objections were preferred by the Certificate Debtors (CDs.) against the order of proclamation of sale in R.C. No. 5/98 under Part III of Appendix B. of the DRT Act. The Petitioner states that "meanwhile flats were constructed and sold out to various prospective buyers on the vacant half portion within the knowledge of the banks." The Bank had not included the portion of the flats in the proposed auction. It is stated that despite the above assurance the property in question was put to public auction on 17th December 1998. However, no prospective purchaser turned up to bid on the date of auction and resultantly the auction had to be abandoned. Thereafter on 26th April 1999 at the instance of the Decree Holder (DH.) Bank, the Recovery Officer of the DRT, New Delhi issued attachment order as regards the movable assets of Mr. R.C. Jain located in the property in question. It is stated that under the garb of attaching the said movable properties, the Bank officials ransacked the house and on strong exception having been taken by the borrowers in the matter, the DRT, New Delhi withdrew the Recovery Certificate.
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An FIR and a charge sheet was also filed at the instance of the Bank against the borrowers at Police Station Civil Lines, Delhi. The Bank, aggrieved by the withdrawal of the Recovery Certificate as aforesaid, preferred an appeal before the Debt Recovery Appellate Tribunal (DRAT.), Mumbai. During the course of arguments on 17th February 2000 before the DRAT, its Chairman was informed by learned counsel appearing for the CDs that the auction sale did not fetch any prospective purchaser at the reserved price fixed. It was brought to the notice of the Chairman that the property can be sold by private negotiations. While disposing of the said appeal on 17th December 2000, the Chairman, DRAT ordered as under: "In view of this statement, I think that Recovery officer can very well exercise powers conferred by Rule 66 of Procedure for recovery of Tax Rules which are required to be followed for recovery of dues under recovery certificate issued by the Presiding Officer. As such, instead of deciding this appeal on merits, I direct the Certificate Debtors to make application before Presiding Officer, Debts Recovery Tribunal, Delhi seeking permission to sell property by mentioned in Rule 66 (1) and for that purpose order of the Presiding Officer withdrawing recovery certificate is set aside. Recovery Officer shall grant such certificate to the Certificate Debtors on the terms and conditions as stated above namely amount recovered by sale shall be deposited with Debts Recovery Tribunal to the extent of dues of the certificated creditor Bank. The Recovery Officer shall act under directions, control, superintendence and supervision of the Presiding Officer in this behalf. The Recovery Officer shall grant permission as stated above within period of two weeks from the date of receipt of this order by him, and private sale by the certificated debtors shall be completed within four weeks." The appeal was disposed of by the DRAT without expressing any opinion on merits.
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The writ petition then states that in the Execution Petition No. 126 of 1994 pending in this Court, the question of the property in question had cropped up and in the said proceedings, this Court had "equally permitted sale of the property" in the sum of ` 6.5 crores. Enclosed with the petition are copies of the orders dated 24th November 1999 passed by the learned Single Judge of this Court in the Execution Petition No. 126 of 1994 recording the statement of learned counsel for the JD that there is a purchaser for property No. 7-A, Rajpur Road, Delhi who is willing to purchase it for ` 6 crores and 20 lakhs and that in order to demonstrate his bonafides, he is willing to deposit ` 10 lakhs. The JD was asked to contact the DH Bank. This was reiterated by this Court on 25th January 2000. On 9th August 2000, the Court was informed that the Bank was agreeable for the private sale by the JD of half of the mortgaged property for ` 6.75 crores subject to deposit of ` 20 lakhs in advance in the Court. The JD was asked to seek instructions. On 20th September 2000, the Court was informed that the DH is agreeable to sale of half of the property for ` 6.50 crores subject to deposit of ` 20 lakhs by the JD.
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It is stated in the petition that meanwhile Mr. R.C. Jain, one of the JDs, had been pursuing the matter with the Respondent Bank for one time settlement (OTS) in accordance with the guidelines issued by the Reserve Bank of India (RBI.) in relation to non-performing asset (NPA) accounts. In response to a communication dated 17th December 2000, the Bank wrote to the legal advisor of the CDs on 26th February 2001 providing a list of 176 accounts. The Bank offered to settle all the cases as a compact and package OTS calling upon the CDs to pay ` 11,24,99,000/-. The CDs are stated to have submitted their acceptance of such proposal on 5th March 2001. On 19th March 2001, the CDs wrote to the Bank seeking its response and sent a reminder on...
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