The necessity of securing non-mortgaged properties and the personal liability of property owners in debt recovery cases.

ORDER :

Ruma Pal, J.

Leave granted.

2. The respondent appears on caveat and has made arguments before us.

3. We are of the view, that the order impugned in this case dated 16-4-2003 cannot be sustained. The undisputed facts appear to be that the appellant Bank had filed an application before the Debts Recovery Tribunal (for short "the Tribunal") for recovery of a sum of Rs. 11.87 crores together with interest thereon against the respondents. An application was also filed for interim relief. An ex parte interim order had been passed on 22-10-2001 by the Tribunal in terms of Prayer 7(b) of the application of the appellant for interim relief. Prayer (b) reads as follows:

"That pending hearing and final disposal of the suit, by an order of injunction of this Hon’ble Court, the defendants be restrained from in any manner dealing with, realising, alienating, parting with or creating any encumbrance over the hypothecated/mortgaged securities, hypothecation of goods and book debts described in Exts. B-5 and B-6 hereto and the mortgaged immovable property, more particularly described in Exts. F, G, H, I and J hereto."

4. An application was filed by the respondents contending that Exts. I and J mentioned in Prayer (b) described the properties which had not been mortgaged to the appellant Bank. The Tribunal disposed of the application of the respondents by the order dated 17-5-2002 in which it said:

"It is true that the two flats were not mortgaged with the applicant Bank; there is no law which says that the injunction can be granted only in respect of mortgaged property. On the contrary, as per law, if the property is mortgaged it cannot even otherwise be alienated or encumbered and there is in fact no need of such injunction in respect of mortgaged property. However, in order to secure property which is not mortgaged, it is all the more necessary to pass such order so as to safeguard the interest of the applicant Bank.

Be that as it may, presuming that Defendants 4 and 5 are exclusive owners of their respective flats, they are personally liable to repay those dues which were existing till the date of their retirement. Huge amount of over Rs. 11.00 crores is to be recovered and, therefore, the properties of Defendants 4 and 5 would also be liable to be attached if the recovery certificate is ultimately issued and other available properties are found insufficient to satisfy the claim. If these properties are not secured by an order of injunction, there would be hardly anything to recover from Defendants 4 and 5."

5. In the circumstances, the order of injunction granted on 22-10-2001 was confirmed. The respondents preferred an appeal before the Debts Recovery Appellate Tribunal (for short "the Appellate Tribunal") and the Appellate Tribunal heard the matter in some detail and thereafter dismissed the appeal. The respondents then approached the High Court by way of a writ petition. The High Court admitted the writ petition and issued rule nisi on 16-4-2003. The High Court issued an order granting interim relief in terms of Prayer (b) of the writ petition which virtually allowed the writ application. In Prayer (b), the respondents had asked that the order dated 22-10-2001 insofar as it related to Exts. ?I? and ?J? should be vacated.

6. We are of the view that the High Court erred in passing an ad interim order which effectively disposed of the writ application of the respondents. Besides, the only reason given for passing the order dated 16-4-2003, and virtually setting aside the decision of the Appellate Tribunal as well as that of the Tribunal, was that the appellant Bank had "knowingly made a misstatement regarding mortgage of property Exts. ?I? and ?J? and even now there is no regret or apology for the same". While the misstatement in Prayer 7(b) by the appellant may have warranted the refusal to grant ad interim relief, in the circumstances of the case, the Court should have gone into the merits of the matter and decided whether the Tribunal and