2009 Supreme(Mad) 5102

High Court of Judicature at Madras
THE HONOURABLE MR. JUSTICE D. MURUGESAN & THE HONOURABLE MR. JUSTICE K. VENKATARAMAN
ICICI Bank Limited rep. by its Assistant General Manager Mr. P. Ananda Krishna Kumar
Versus
The Presiding Officer DRT, Coimbatore & Others
Writ Petition No.14090 of 2004
Decided On : 26-11-2009

The provisions of Section 22 of SICA will prevail over the provisions of RDDBFI Act.

Headnote:

RECOVERY OF DEBTS DUE TO BANKS AND FINANCIAL INSTITUTIONS ACT, 1993 - SECTION 19(23) - TRANSFER OF RECOVERY CERTIFICATE - JURISDICTION - NULLITY OF PROCEEDINGS - SECTION 22 OF THE SICK INDUSTRIAL COMPANIES (SPECIAL PROVISIONS) ACT, 1985 (SICA) - WAIVER - INCOME TAX ACT, 1961 - SCHEDULE II AND III - SALE OF MOVABLE PROPERTY - PUBLIC AUCTION - RE-SALE.

Fact of the Case:

The petitioner, a banking company, had availed term loan facilities from the third respondent, a textile mill. The mill committed default in repayment of the loan. Therefore, the bank filed two civil suits before the High Court, Bombay, in the year 1999 for recovering the sum of Rs.8,36,15,087/-. One suit was laid against the mill and another against the guarantors. Those suits were transferred to DRT III Mumbai, as by that time DRT at Mumbai was constituted. They were assigned O.A.No.1631 of 1999 and O.A.No.1526 of 1999. The tribunal adjudicated the dispute and found that the mill was liable to pay the claim amount with interest at 16% per annum by its order dated 14. 2003. A Final Recovery Certificate was issued to the Recovery Officer on 10th June 2003 for a sum of Rs.5,90,32,753/-. The said certificate was issued for its execution and realisation of dues to the bank by way of sale of movable and immovable assets of the mill. The bank filed an application before the Recovery Officer DRT III, Mumbai under Section 19(23) of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 for transfer of the Recovery Certificate to DRT, Coimbatore, as the properties of the mill were situated within its jurisdiction, and an order to that effect was passed. The Recovery Officer DRT, Coimbatore on 20.09.2003 issued demand notice and warrant of attachment of movables including all machineries and finally the Recovery Officer, Coimbatore passed an order on 30.09.2003 ordering attachment of the machineries. The mill filed an application before the Recovery Officer DRT, Coimbatore challenging the authority of the Recovery Officer DRT, Mumbai to transfer the Recovery Certificate to Coimbatore. The said application was dismissed on 12.01.2004 and the said order became final, since neither the mill nor the guarantors challenged the same. The bank thereafter requested the Recovery Officer DRT, Coimbatore to proceed with the sale of the machineries of the mill. The Recovery Officer DRT, Coimbatore thereafter invited sealed tenders for the sale of machineries of the mill. A sum of Rs.1,75,00,000/- was fixed as upset price and the date of inspection was fixed on 29.01.2004. He also invited the prospective tenders on or before 30.01.2004. The tenders were to be opened on 03.02.2004 in the presence of the bidders. One Shree Maruthi Textiles submitted its tender and offered to pay a sum of Rs.2,50,99,999/-. It was the highest offer and hence the Recovery Officer declared the said textile mill as the highest bidder. The said mill was directed to remit the full purchase money together with the poundage fee within 15 days from the date of sale. The textile mill did not remit the amount within the stipulated time and submitted a letter dated 18.02.2004 seeking extension of time. The said application was consented by the bank. However, the Recovery Officer passed an order dated 27.02.2004 directing the said textile mill to pay 25% of the bid amount less EMD on or before 05.03.2004 and the balance of 75% on or before 10th March 2004 along with the poundage fee of Rs.2,51,000/-. The said textile mill did not pay 25% as directed and submitted a letter dated 08.03.2004 for extension of time by one more month stating that the labourers were preventing its representatives from entering into the place where the machineries were installed. The Recovery Officer declined to grant time and on 17.03.2004, he declared Shree Maruthi Textiles as defaulter and held that the machineries would be resold and the second highest bidder viz. Sri Vairalakshmi and Co., would be given opportunity to bid the machinery for Rs.2,50,99,999/-. The second respondent, in pursuance to the said order, submitted a letter agreeing to deposit the EMD amount of Rs.17,50,000/-and also willing to pay the purchase price of Rs.2,50,99,999/-. It was accepted by the Recovery Officer. The second respondent paid the EMD amount of Rs.17,50,000/-. On 25.03.2004, Sri Vairalakshmi & Co., filed a letter before the Recovery Officer, DRT, Coimbatore requesting him for extension of time and accordingly he granted extension of time till 16.04.2004 for making payment of the full purchase money. While the matter stood thus, during the first week of April, 2004, the Recovery Officer, DRT Coimbatore went back to his parent department and the office of the DRT became vacant with effect from 01.04.2004. Since, the Presiding Officer of DRT, Coimbatore was also transferred, the Presiding Officer DRT II, Chennai was appointed as the Presiding Officer holding concurrent charge of DRT, Coimbatore. In view of the request made by the petitioner-bank to proceed with the recovery proceedings, the first respondent took up the recovery proceedings on 07.05.2004. However, he passed the following order in the docket:- "Since no regular R.O is available in this Tribunal the EMD deposited by the second bidder has to be returned. Further, the matter should be returned to DRT III, Mumbai for further NA." As the first respondent declined to deal with the matter and directed the Registry to return all the papers to DRT, Mumbai, the bank has come up with the present writ petition for the relief set out earlier.

Finding of the Court:

The court held that the Mill had participated in all the proceedings, invited orders and thereafter for the first time raised such a plea and that too, in a writ petition filed by the bank. Even now the Mill did not question the jurisdiction of the High Court of Bombay and the DRT by initiating appropriate proceedings. The court further held that the plea of nullity of the proceedings was not available to the Mill and that the provisions of Section 22 of SICA will prevail over the provisions of RDDBFI Act. The court also held that the sale conducted was not in contravention of Schedule II and III to the Income Tax Act, 1961 as made applicable to the sale by the Debt Recovery Tribunal under Section 29 of the RDDBFI Act, 1993.

Issues: 1. Whether the Mill can question the entire proceedings on the ground of nullity? 2. Whether the provisions of Section 22 of SICA will prevail over the provisions of RDDBFI Act? 3. Whether the sale conducted was in contravention of Schedule II and III to the Income Tax Act, 1961?

Ratio Decidendi: 1. The court held that the Mill had participated in all the proceedings, invited orders and thereafter for the first time raised such a plea and that too, in a writ petition filed by the bank. Even now the Mill did not question the jurisdiction of the High Court of Bombay and the DRT by initiating appropriate proceedings. The court further held that the plea of nullity of the proceedings was not available to the Mill and that the provisions of Section 22 of SICA will prevail over the provisions of RDDBFI Act. 2. The court held that the provisions of Section 22 of SICA will prevail over the provisions of RDDBFI Act. 3. The court held that the sale conducted was not in contravention of Schedule II and III to the Income Tax Act, 1961 as made applicable to the sale by the Debt Recovery Tribunal under Section 29 of the RDDBFI Act, 1993.

Final Decision: The court allowed the writ petition and directed the Presiding Officer, DRT, Coimbatore to proceed further with the recovery proceedings without reference to the return.