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2010 Supreme(Bom) 1682
High Court of Judicature at Bombay
THE HONOURABLE DR. JUSTICE D.Y. CHANDRACHUD & THE HONOURABLE MR. JUSTICE ANOOP V. MOHTA
M/s. Inteltek Automation Pvt.Ltd. & Others
Versus
Indusind Bank Ltd. & Another
WRIT PETITION NO. 5309 OF 2010
Decided on: 01-12-2010
For the Petitioners:S.K. Jain, Advocate.
For the Respondents:R1, Mrs. Vandana D. Jaisingh, Advocate.
The main legal point established is that Rule 12(5) of the Debts Recovery Tribunal (Procedure) Rules, 1993 can only be applied in cases of plain admission of liability, and a dispute over interest and principal repayment indicates no unequivocal admission of liability.
Headnote:
Admission of Liability - Debts Recovery - Rule 12(5) of the Debts Recovery Tribunal (Procedure) Rules, 1993 - [Rule 12(5)]
Fact of the Case:
The First Respondent sought recovery of an amount from the petitioners. The petitioners disputed the liability based on the notes appended by the Auditors to the balance-sheet, indicating a dispute with the bankers over interest and principal repayment.
Finding of the Court:
The court found that there was no unequivocal admission of liability on the part of the petitioners, and the provisions of Rule 12(5) could not be applied as there was a dispute both in regard to the interest charged and on the repayment of the principal.
Issues: The main issue was whether the petitioners made an admission in full or part of the amount of debt due to the First Respondent.
Ratio Decidendi: The court held that Rule 12(5) could only be applied where there is a plain admission, and in this case, the audit report clearly noted a dispute with the bankers over interest and principal repayment, indicating no unequivocal admission of liability.
Final Decision: The court set aside the impugned order and dismissed the application for an order of deposit and the issuance of an interim recovery certificate. The Tribunal was directed to hear and dispose of the Original Application independently on its own merits.
ORAL JUDGMENT: (Dr. D.Y. Chandrachud,J.)
The First Respondent filed an application before the Debts Recovery Tribunal at Pune against the petitioners for the recovery of an amount of Rs.2.12 crores together with future interest. On 3 February 2010, the First Respondent moved an application under Rule 12(5) of the Debts Recovery Tribunal (Procedure) Rules, 1993 on the basis that in their balance-sheet for the year ending 31 March 2005, the Petitioners had admitted an outstanding liability of Rs.1.58 crores to the First Respondent. Consequently, an order was sought that pending hearing and final disposal of the Original Application, the Petitioners be directed to deposit an amount of Rs.1.58 crores, failing which a Recovery Certificate for the admitted amount be issued. The Petitioners filed a reply to the application. In the reply, the Petitioners specifically set up a defence that the notes appended by the Auditors to the balance-sheet clearly showed that there was a dispute on the liability of the Petitioners, both with respect to the claim of interest and principal. Hence, according to the Petitioners, there was no admission in the balance-sheet on the basis of which an order of deposit could be passed or a Recovery Certificate could be issued. The Petitioners inter alia relied upon the following notes contained in the report of the Auditors which forms a part of the balance-sheet:
“There is dispute between the company and its bankers Indusind Bank Ltd over the issue of charging of interest and payment to bankers of interest and principal on Term Loan Rs. 1.50 crores. The company has not provided for interest on these bank borrowings. The bankers have approached appropriate court of law for recovery of its due.”
Also Para F of the Auditors report also states –
“There is a dispute between the company and its Bankers Indusind Bank Ltd over the issue of charging of interest and payment to Bankers of Interest and Principal on Term Loan Rs. 1.50 crores. The Company has not provided for interest on these bank borrowings. The Bankers have approached appropriate court of law for recovery of its due.”
2. The Debts Recovery Tribunal, by its order dated 23 April 2010, directed the petitioners to deposit an amount of Rs.1.58 crores within one month failing which, it directed that an interim recovery certificate would be issued. The Tribunal, while dealing with the notes of the Auditors, was of the view that it was only the element of interest which had not been ascertained and provided for. In other words, the view of the Tribunal was that the figures reflected in the balance-sheet as of 31 March 2005 reflect the outstanding dues towards the principal payable by the Company to the First Respondent. This, according to the Tribunal, was an admitted amount. Relief was accordingly granted as prayed. In Appeal, the Debts Recovery Tribunal has confirmed the view of the Tribunal.
3. Counsel appearing for the Petitioners submitted that the Tribunal could not have read one part of the balance-sheet in isolation and if the report of the Board of Directors and the Auditor’s report are properly appreciated, it would be apparent that there is no admission of liability. Counsel submitted that the Tribunal and the Appellate Tribunal ignored the principles of law laid down by the Supreme Court under which it is only where there is a plain admission that a decree analogous to that under Order XII, Rule 6 of Code of Civil Procedure, 1908 can be passed.
4. Rule 12 (5) of the Debts Recovery Tribunal (Procedure) Rules, 1993 provides as follows:
“Where a defendant makes an admission of the full or part of the amount of debt due to a bank or financial institution, the Tribunal shall order such defendant to pay the amount, to the extent of the admission, by the applicant within a period of one month from the date of such order failing which the Tribunal may issue a certificate in accordance with Section 19 of the Act to the extent of amount of deb
