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2022 Supreme(Bom) 939
IN THE HIGH COURT OF JUDICATURE AT BOMBAY, AURANGABAD BENCH
MANGESH S. PATIL, SANDEEP V. MARNE, JJ.
Dena Bank - Petitioner
Versus
M/s Siddharth Pulses, through Proprietor and others - Respondents
Writ Petition No. 4221 of 2019
Decided On : 15-09-2022
For the Petitioner: Shri S.V. Adwant.
For the Respondents:Shri P.S. Gaikwad, Advocate h/f Shri A.G. Talhar, Shri V.D. Sapkal, Senior Advocate i/by Shri Vijay Patil.
The main legal point established in the judgment is that the petitioner bank failed to establish the hypothecation and that the goods were not free from encumbrances at the time of the agreement. The D.R.A.T. corrected the errors of the D.R.T. and did not commit any jurisdictional error in its judgment and order.
Headnote:
Hypothecation - Competing Claims over Goods - Maharashtra Co-operative Societies Act, 1960 - [Section 101 of the Maharashtra Co-operative Societies Act, 1960] - The court considered the competing claims of two banks over the sale proceeds of the same goods, based on a hypothecation deed and a pledge executed by the respondent. The D.R.T. initially upheld both the pledge and hypothecation but accorded priority to the pledge, allowing the respondent bank to withdraw a specific amount from the sale proceeds. The D.R.A.T. set aside the relief granted to the respondent bank and rejected the claim of the petitioner bank over the hypothecated goods. The court found that the petitioner bank failed to establish the hypothecation and that the goods were not free from encumbrances at the time of the agreement. The D.R.A.T. corrected the errors of the D.R.T. and did not commit any jurisdictional error in its judgment and order.
Fact of the Case:
The dispute arose from competing claims of two banks over the sale proceeds of goods belonging to the respondent. The petitioner bank extended a cash credit facility to the respondent, secured by a hypothecation agreement. The respondent No. 4 bank filed an objection based on a pledge of the same goods executed in its favor before the hypothecation agreement. The D.R.T. allowed the original application against the respondents, directing them to pay the petitioner bank. The claim of the respondent No. 4 bank in respect of the sale proceeds was also allowed. Both banks filed appeals, and the D.R.A.T. set aside the relief granted to the respondent bank and rejected the claim of the petitioner bank over the hypothecated goods.
Finding of the Court:
The court found that the petitioner bank failed to establish the hypothecation and that the goods were not free from encumbrances at the time of the agreement. The D.R.A.T. corrected the errors of the D.R.T. and did not commit any jurisdictional error in its judgment and order.
Issues: The issues involved competing claims of two banks over the sale proceeds of the same goods, based on a hypothecation deed and a pledge executed by the respondent. The court had to determine the enforceability of the hypothecation and the priority of the claims of the two banks.
Ratio Decidendi: The court held that the petitioner bank failed to establish the hypothecation and that the goods were not free from encumbrances at the time of the agreement. The D.R.A.T. corrected the errors of the D.R.T. and did not commit any jurisdictional error in its judgment and order.
Final Decision: The petition filed by the petitioner bank was dismissed without any orders as to costs. The request for stay was rejected.
ORDER :
Sandeep V. Marne, J.
1. By the present petition, petitioner bank challenges the judgment and order dated 11 January 2019 passed by the Debt Recovery Appellate Tribunal, Mumbai (for the sake of brevity hereinafter referred as to the "D.R.A.T.") in Appeal Nos. 136 of 2017 and 107 of 2010 to the extent it sets aside paragraph Nos. 6, 7 and 8 in the operative part of the judgment and order dated 20 April 2010 passed by the Debt Recovery Tribunal, Aurangabad (for the sake of brevity hereinafter referred as to the "D.R.T.") in Original Application No. 26 of 2008.
2. The dispute has arisen on account of competing claims of the petitioner bank and the respondent No. 4 bank over the goods belonging to the respondent Nos. 1 to 3. Both banks extended credit facilities to the respondent Nos. 1 to 3 against security of inter alia same stock and movable goods. The stock and the goods have been sold in pursuance of the permission granted by the D.R.T. and which bank is entitled to claim sale proceeds, is the issue which arose before the D.R.T. and the D. R. A. T. and which again arises for our consideration.
FACTS
3. A brief factual narration as prologue to our judgment would be necessary. The petitioner bank had made available cash credit facility of Rs.4 crores to the respondent No. 1. Towards security, an agreement of hypothecation dated 05 December 2007 was executed in favour of the petitioner bank thereby hypothecating the stock consisting of Moong and Moong Dal (Pulses) as well as movable properties as more particularly detailed in the agreement. On 10 June 2008, the petitioner bank filed Original Application No. 26 of 2008 against the respondent Nos. 1 to 3 before the D.R.T. Aurangabad for recovery of dues of Rs.4,07,42,396.49 paise.
4. By way of interim order dated 11 June 2008, the D.R.T. issued conditional attachment order of hypothecated goods of the respondent No. 1 that were stacked and stored with the Maharashtra State Warehousing Corporation, Jalgaon. In the meantime, the respondent No. 4 bank filed its objection before the D.R.T. to register its own claim premised on pledge of same goods executed in its favour before execution of the hypothecation agreement with the petitioner bank. The respondent No. 4 bank filed Writ Petition No. 5267 of 2008 before this Court, in which it was directed that the D.R.T. would decide the rights of the respondent No. 4 bank as pledgee and thereafter issue appropriate directions for the release of the money. This is how the respondent No. 4 bank was permitted to participate in the proceedings filed by the petitioner bank before the D.R.T. By order dated 30 July 2008, the D.R.T. granted permission for sale of hypothecated movable goods lying at the warehouse through a three member committee consisting of members of both the banks and the borrower. The stock has accordingly been sold and sale proceeds came to be deposited with the D.R.T.
5. By judgment and order dated 20 April 2010, the D.R.T. allowed the original application against the respondent Nos. 1 to 3 directing them to jointly and severally pay the amount of Rs.4,07,42,396.49 to the Petitioner bank along with future interest at the rate of 12%. The original application against the respondent No. 4 bank was dismissed. The claim of the respondent No. 4 bank in respect of sale proceeds of pledged goods was allowed to the extent of Rs.19,65,185/- along with future interest @ 18% and the respondent No. 4 bank was allowed to withdraw the said amount out of the sale proceeds. The hypothecation claim of the petitioner bank in respect of sale proceeds was allowed, however, it was allowed to withdraw only the balance amount of sale proceeds.
6. Aggrieved by the order of the D.R.T. Aurangabad, both the banks filed their respective appeals bearing Appeal No. 136 of 2017 and Appeal No. 107 of 2010. By judgment and order dated 11 June 2019, which is impugned in the present petition, the D.R.A.T. has disposed of both the appeals by common judgment and o
