Appeal No. 156 of 2015 and Misc. Appeal Nos. 240, 243 and 377 of 2014. Case: State Bank of India and Ors. Vs Veetee Fine Foods Ltd. and Ors.. Delhi DRAT DRAT (Delhi Debt Recovery Appellate Tribunals)
| Case Number | Appeal No. 156 of 2015 and Misc. Appeal Nos. 240, 243 and 377 of 2014 |
| Counsel | For Appellant: Sanjiv Kakra and A.K. Singh, Advocates and For Respondents: C.S. Gupta and Kritika, Advocates |
| Judges | Ranjit Singh, J. (Chairperson) |
| Issue | Code of Civil Procedure, 1908 (CPC) - Order XXIII Rule 1(4), 23, 3, 3(A); Section 96, 96(3); Constitution Of India - Article 276(2); Indian Income-tax Act, 1922 - Section 66(2); Indian Partnership Act, 1932 - Section 4; Punjab General Clauses Act, 1898 - Section 2(40); Punjab Municipal Act, 1911 - Sections 61, 61(1), 61(1)(b), 84, 84(1), 86; ... |
| Judgement Date | April 04, 2016 |
| Court | Delhi DRAT DRAT (Delhi Debt Recovery Appellate Tribunals) |
Judgment:
Ranjit Singh, J. (Chairperson)
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It may sound a bit strange to notice that State Bank of India has come up with this Appeal to challenge the order passed by the Tribunal below declining the prayer of the borrower Veetee Fine Foods Ltd. (for short, Veetee) to stay the action for sale of mortgaged property initiated by respondent Punjab National Bank under the SARFAESI Act. How State Bank of India being part of the consortium of Banks consisting of Punjab National Bank and Oriental Bank of Commerce would have grievance against the order declining the prayer of the borrower to stay the action under the SARFAESI Act is not easy to understand. When State Bank of India filed this Appeal, the borrower had not come up with any grievance against the impugned order. Confronted with this position, the Counsel for the Bank referred to some observation made by the Tribunal below against the Bank officials to justify its cause in taking lead to file its Appeal. The Tribunal below had asked the Bank to provide the names of the officers who have recommended the OTS of the borrower and name of those who had approved the OTS besides directing the General Manager (Recovery) of the Bank to remain present before the Tribunal below. The prayer in the Appeal may not stand in support of this purpose as advanced by the appellant Bank. Apart from seeking setting aside of the directions requiring the officials of the Bank to appear etc., the Bank has also prayed for setting aside of the impugned order vide which the Tribunal has declined the prayer of the borrower. Another prayer made in the Appeal is to seek a direction that the respondent Punjab National Bank could not put the secured assets to sale for its debt alone without including the debt of the appellant Bank. This prayer, in a way, was contradictory to the earlier relief claimed for setting aside the order declining the interim prayer. The claim of the appellant Bank, if any, could have easily been otherwise settled from the sale of the property once it was put to sale by a lead Bank of the consortium. The impression that may appear is that this Appeal apparently was filed to somehow assist the borrower with whom the appellant State Bank of India had entered into a one Time Settlement while sacrificing a substantial sum of money which was recoverable from the borrower.
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While declining the prayer of the borrower to stay the action initiated by Punjab National Bank under the SARFAESI Act, the Tribunal below has observed that the appellant State Bank of India had entered into a One Time Settlement with the borrower, and had informed the respondent Punjab National Bank through its letter dated 11th March, 2014 that it would no more be interested to initiate any action because of the OTS with the borrower. The record would show that the appellant Bank had entered into a compromise with the borrower who had offered a sum of Rs. 20.90 crores towards full and final settlement against the claim of the Bank, which was to the tune of Rs. 42,18,54,402.68.
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Total exposure of the three Banks constituting the consortium was Rs. 139,20,94,010.13. The borrower had obtained a limit of Rs. 168 crores. To secure this Working Capital Limited, the borrower had mortgaged factory, land and building, plant and machinery at village Larsauli, Tehsil Kannaur, District Sonepat (Haryana).
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Following State Bank of India, Oriental Bank of Commerce also came up with an Appeal (No. 243/2014) to challenge the same order as was challenged by appellant State Bank of India in Appeal No. 240/2014. In this Appeal, Oriental Bank of Commerce had claimed same reliefs as were claimed by State Bank of India in Appeal No. 240/2014. One of the reliefs which both the Banks claimed in their respective Appeal is as under:-
To order that the appellant Bank is competent and well within its rights to take commercial decisions at its absolute discretion to enter into OTS with the Borrower on the terms the appellant Bank deem fit in the facts and circumstances of the case.
Whether such a declaratory relief can competently be considered and granted may be a separate issue, but this issue raised has invited serious debate. While issuing notice in these Appeals a part of directions issued by the Tribunal below was stayed.
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During the pendency of these Appeals, the Tribunal below passed another order dated 4th July, 2014, while taking notice of the order passed by this Tribunal. G.M. (Recovery) of Oriental Bank of Commerce has appeared before the Tribunal below on this date. The Tribunal below has taken note of the fact that more than Rs. 20 crores of the dues had been sacrificed by the Bank to which G.M. (Recovery) had responded with some impertinence. The Tribunal recorded some more observations about the intentional and deliberate conduct of the respondent while observing that the conscience of the Tribunal did not permit it to let the case off. The Tribunal below thereafter directed the order dated 4th July, 2014 be sent to the Governor, R.B.I., to put check on such officers and to see whether policies made by R.B.I., were duly followed by the Banks who had given rebate of crores of rupees to the borrowers. The Tribunal further directed that the copy of the said order be sent to Indian Banks Association who had published list of top 100 defaulters as to why the name of the borrower has not been included in the list of defaulters. Aggrieved against this order passed by the Tribunal below on 4th July, 2014, State Bank of India filed another Appeal (No. 377/2014) making a grievance against the scathing observation made in this order and for referring the case to R.B.I. Notice in this Appeal was also issued for hearing with other Appeals filed by the Bank.
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Following on the heels of these three Appeals filed by the Banks, the borrower Veetee also filed an Appeal before this Tribunal against the order passed by the Tribunal below for staying the action. This Tribunal declined the prayer of stay as made by the borrower Veetee on the ground that Appeal was not properly constituted for want of pre-deposit. Aggrieved against this order, borrower Veetee, filed Writ Petition No. 13920/2014 before the Hon'ble High Court of Punjab and Haryana. This writ petition came to be dismissed on 18th September, 2014. Since the Appeal of the borrower was pending, the Hon'ble High Court declined to consider the plea of the borrower that the Tribunal could not go into the issue of settlement, it being not an auditor or ombudsman to scrutinise the settlement arrived at between the Bank and the borrower. In support, the borrower had relied on the law laid down by the Hon'ble Delhi High Court in Satish Chander Gupta v. State Bank of India, W.P. (C) 2588/2010, decided on 19th April, 2010. The borrower Veetee then tried its luck before the-Hon'ble Supreme Court, but the SLP was also dismissed requiring the Veetee to make deposit of 25% of the notice amount. Since the borrower failed to make this deposit, the Appeal filed by Veetee was dismissed by this Tribunal being not maintainable. Still, the borrower Veetee, being respondent in all these Appeals filed by the Banks, had been able to espouse its cause through the Banks and to an extent has succeeded as well in its mission.
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Respondent Punjab National Bank which was lead Bank of the consortium having initiated action under the SARFAESI Act seems to have succumbed too and entered into a One-Time Settlement with the borrower. While the Appeals were pending, State Bank of India came up to disclose before this Tribunal that the OTS entered into between the appellant State Bank of India and the borrower had failed as the borrower could not adhere to the terms of the settlement in making the payments. Unlike many other cases, State Bank of India being generous still allowed the borrower to adhere to the One-Time Settlement. Ultimately, all the three Banks have pleaded before this Tribunal that they have entered into settlement with the borrower while sacrificing a substantial sum of money due to each Bank forming part of the consortium.
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Unconcerned with this settlement, the Tribunal below seems to have gone on to decide the S.A. and by taking note of earlier orders dated 9th June, 2014 and 4th July, 2014 has made some observation that the OTS by the appellant State Bank of India and Oriental Bank of Commerce cannot be binding on the third member of consortium. While not appreciating the act of certain Bank officials named in the order, the Tribunal below has ordered to send the copy of the order to the Director, Central Bureau of Investigation as well as to the Central Vigilance Commissioner to check the antecedents of the defaulters so that they may not ruin the economy of the country further for their personal gains and further test their policy of divide and rule amongst the consortium members etc. Aggrieved against this order passed by the Tribunal disposing of the S.A., in this manner, State Bank of India filed yet another Appeal (No. 153/2015) in which also notice was issued and this Appeal was clubbed with the other pending Appeals for hearing.
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Once all the Banks of the consortium have entered into settlement, the Appeals filed by the respective Banks were rendered infructuous. These Appeals could have been disposed of as such but for the fact that Counsel for the parties pleaded before this Tribunal for adjudicating the issue relating to the extent of jurisdiction that Tribunals can exercise in the rights of the Banks to enter into settlement and also in regard to the power and jurisdiction of the Tribunals to issue direction for enquiry or for summoning the officials of the Bank while considering the lis pending before the Tribunals. This issue being of considerable importance, this Tribunal has heard the Counsel for the parties and had even invited the Counsels at the Bar to appear and make submission in this regard. Accordingly, all the four Appeals (Nos...
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