The court ruled that a compromise allowing a private entity to assume a loan account of a corporate debtor was unlawful under RBI Directives, which prohibit such transfers to ineligible transferees.

JUDGMENT :

A. THE CHALLENGE

1) Liquidator of Vasantdada Shetkari Sahakari Bank Ltd. (the Bank) has filed Interim Application No. 13400 of 2024 seeking recall of order dated 21 October 2022, which is passed in view of Minutes of Order dated 20 October 2022. Review Petition No.85 of 2024 is filed by Mr. Amit Prabhakar Kore, suspended director of M/s. Shaila Clubs & Resorts Private Limited (Shaila Clubs) seeking review of Order dated 21 October 2022. Shaila Clubs has filed Review Petition No. 38 of 2023 seeking review of the Order dated 21 October 2022.

2) Thus, the Interim Application and the two Review Petitions essentially seek either recall or review of order passed by this Court on 21 October 2022 disposing of Writ Petition No.11610 of 2022 based on Minutes of Order tendered on 20 October 2022. Since all the three proceedings seek either recall or review of the same order, the same are decided by this common judgment.

B. FACTS

3) Considering the narrow controversy involved in the present application and review petitions, it is not necessary to narrate the chequered history of the case. Shaila Clubs owns and operates a recreational club at Plot No. NA/164(Pt) CTS No.C/12/A, Everest Cooperative Housing Society Limited, 151, Hill Road, Bandra (West), Mumbai 400 050. For the purpose of setting up and commencing the recreational club, Shaila Clubs applied for loan from the Bank as well as from the Greater Bombay Co-operative Bank. On 2 May 2005 both the Banks agreed to sanction credit facilities in favour of Shaila Clubs, which were duly secured by the Shaila Clubs by mortgaging its property at Bandra vide registered Deed dated 27 May 2005. It appears that Shaila Clubs repaid entire loan amount disbursed by Greater Bombay Co-operative Bank and the Bank remained the sole mortgagee in respect of the Shaila Clubs premises since the Bank’s loan was not fully repaid.

4) By Conducting Agreement dated 18 May 2007, Shaila Clubs permitted M/s. Savannah Lifestyle Private Limited (Savannah) to operate the recreational club for a period of 15 years and 6 months in consideration of monthly royalty and compensation. It is Bank’s case that since Shaila Clubs defaulted in repayment of loan disbursed by the Bank, its account was classified as NPA and the Special Recovery Officer of the Bank initiated recovery proceedings against Shaila Clubs. The Bank obtained recovery certificate from Deputy Registrar of Co-operative Societies, Mumbai, under Section 101 of the Maharashtra Co-operative Societies, 1960 (M.C.S. Act, 1960) and filed an application before the Additional Chief Metropolitan Magistrate, Esplanade, Mumbai, seeking physical possession of the Shaila Clubs’ land and property. By order dated 22 October 2018, the learned Additional Chief Metropolitan Magistrate allowed the Application preferred by the Bank and authorised the recovery officer to take over possession of the properties of Shaila Clubs under police assistance. Savannah filed Writ Petition No.14517 of 2018 in this Court challenging the Magistrate’s order dated 22 October 2018. By order dated 20 December 2018, this Court granted interim stay to the Magistrate’s order on condition of deposit of amount of Rs.50,00,000/- by Savannah. It appears that Savannah filed application bearing C.C. No.1052/MA/2019 before the Chief Metropolitan Magistrate seeking recall of the order dated 22 October 2018. The application was however rejected by the learned Magistrate by order dated 19 June 2019. Savannah filed Writ Petition No.7542 of 2019 before this Court challenging Magistrate’s order dated 19 June 2019. For showing bonafides, Savannah was made by this Court to deposit an amount of Rs.2 crores. On condition of such deposit, this Court stayed possession order passed by the learned Magistrate. By order dated 17 January 2020, Writ Petition No.7542 of 2019 was allowed by setting aside Magistrate’s order dated 19 June 2019 and the matter was remanded before the learned Magistrate for fresh decision in a