2023 Supreme(Cal) 1141

IN THE HIGH COURT AT CALCUTTA
SABYASACHI BHATTACHARYYA, J.
Shaun Automobiles Private Limited – Petitioner
Versus
State Bank of India and Others – Respondents
WPA Nos. 13667, 13979 of 2023
Decided On : 30-06-2023

The Recovery Officer's jurisdiction to modify a compromise settlement is limited to the terms of the settlement and the law, and any modification beyond such scope is without jurisdiction.

Headnote:

RECOVERY OF DEBTS AND BANKRUPTCY ACT, 1993 - SECTIONS 2(K), 7, 26, 27, 30, 30A - COMPROMISE SETTLEMENT - RELEASE OF PROPERTY - SUBROGATION - EQUITABLE MORTGAGE - REOPENING OF DECISION - JURISDICTION OF RECOVERY OFFICER - REVIEW - RES JUDICATA - ALTERNATIVE REMEDY - WRIT JURISDICTION: - Where the terms of the compromise settlement between the bank and the borrower clearly stipulated that the rights of the bank prior to the compromise settlement would revert once the compromise amount was not paid, and the release of securities would take place only upon full and final payment being received by the bank, the Recovery Officer had no jurisdiction to release the attachment on the property in question. - The subsequent order of the Recovery Officer, interpreting the compromise agreement correctly and modifying the previous order by directing attachment of the released properties as well, was not barred by res judicata, since the same was in the nature of a final consideration, keeping in view the default in payment of subsequent installments by the certificate debtor. - The Recovery Officer could not be said to have acted without jurisdiction to such extent that the writ court ought to interfere under Article 226 of the Constitution. - Even if there were certain errors in the ratio of the Recovery Officer in its order, in the absence of any challenge to the same within the statutory period and in view of the conclusion thereof being in consonance with law, there is no occasion to set aside the same in a writ petition.

Fact of the Case:

Shaun Automobiles Private Limited (Shaun) had taken a loan from the State Bank of India (SBI). Being unable to repay the same, the SBI initiated proceedings before the Debts Recovery Tribunal (DRT). Pursuant to the award of the Tribunal, recovery proceedings were initiated by the Bank, in which Shaun entered a One-Time Settlement (OTS) which culminated in a compromise between the judgment debtor and the Bank. Citystar Infrastructures Limited (Citystar) paid the first tranche on behalf of the award debtor Shaun in due time and the property was accordingly released in favour of Citystar. Upon Shaun's failure to repay the subsequent tranches of installment in terms of the settlement, the SBI moved the Tribunal by making an application for modification of award passed by the Presiding Officer. By the order dated May 19, 2023 passed in RC/IA/218 of 2022, the Recovery Officer passed an order directing half share of Shaun and Citystar in 25, Rakhal Das Auddy Road, Kolkata to be put on e-auction sale for the recovery of certificate dues. Being thus aggrieved, Citystar preferred WPA 13667 of 2023. On the other hand, Shaun has also challenged the order dated May 19, 2023 and the consequent Sale Notice dated May 20, 2023 in WPA 13979 of 2023.

Finding of the Court:

The Recovery Officer could not be said to have acted without jurisdiction to such extent that the writ court ought to interfere under Article 226 of the Constitution. Even if there were certain errors in the ratio of the Recovery Officer in its order, in the absence of any challenge to the same within the statutory period and in view of the conclusion thereof being in consonance with law, there is no occasion to set aside the same in a writ petition.

Issues: 1. Whether the Recovery Officer had jurisdiction to release the attachment on the property in question in view of the terms of the compromise settlement between the bank and the borrower? 2. Whether the subsequent order of the Recovery Officer, interpreting the compromise agreement correctly and modifying the previous order by directing attachment of the released properties as well, was barred by res judicata? 3. Whether the Recovery Officer could be said to have acted without jurisdiction to such extent that the writ court ought to interfere under Article 226 of the Constitution?

Ratio Decidendi: 1. The Recovery Officer had no jurisdiction to release the attachment on the property in question in view of the terms of the compromise settlement between the bank and the borrower, which clearly stipulated that the rights of the bank prior to the compromise settlement would revert once the compromise amount was not paid, and the release of securities would take place only upon full and final payment being received by the bank. 2. The subsequent order of the Recovery Officer, interpreting the compromise agreement correctly and modifying the previous order by directing attachment of the released properties as well, was not barred by res judicata, since the same was in the nature of a final consideration, keeping in view the default in payment of subsequent installments by the certificate debtor. 3. The Recovery Officer could not be said to have acted without jurisdiction to such extent that the writ court ought to interfere under Article 226 of the Constitution.

Final Decision: WPA No. 13979 of 2023 and WPA No. 13667 of 2023 are dismissed on contest, without any order as to costs.