* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment Reserved on: 17th Feburary, 2011
Judgment Delivered on: 7th March, 2011
+ W.P.(C) 852/2011
SAND PLAST (INDIA) LTD. ..... Petitioner
Through: Mr.Abhinav Vashisht, Senior Advocate
with Mr.Dheeraj Malhotra and
Mr.Sanyam Saxena, Advocates.
versus
PUNJAB NATIONAL BANK & ANR. .....Respondents
Through: Mr.M.U.Khan, Advocate for R-1.
Mr.Ashok Jain & Mr.Amit Kasera,
Advocates for R-2.
CORAM:
HON'BLE MR. JUSTICE PRADEEP NANDRAJOG
HON'BLE MR. JUSTICE SURESH KAIT
1. Whether the Reporters of local papers may be allowed
to see the judgment?
2. To be referred to Reporter or not?
3. Whether the judgment should be reported in the Digest?
PRADEEP NANDRAJOG, J.
1. The writ petitioner, M/s.Sand Plast (India) Ltd. has
challenged the order dated 24.1.2011 passed by the Debt
Recovery Appellate Tribunal in Misc.Appeal No.137/2010, in
which Appeal order dated 9.3.2010 passed by the Debt Recovery
Tribunal was challenged.
W.P.(C) No.852/2011 Page 1 of 8
2. Order dated 9.3.2010, is an interim order passed by the
Debt Recovery Tribunal in an appeal filed by the petitioner under
Section 17 of the Securitization and Reconstruction of Financial
Assets and Enforcement of Security Interest Act 2002
(hereinafter referred to as ‘Act No.54 of 2002’), in which appeal
challenge is to action initiated by PNB as per notice dated
11.1.2008 to proceed under Section 13 of Act No.54 of 2002. By
and under the order dated 9.3.2010 the Debt Recovery Tribunal
has prima facie recorded that the recovery of the dues by the
two secured creditors before it i.e. PNB and HUDCO approximates
about `70 crores and that even the petitioner was admitting
liability approximating about `10 crores. It has thus been
directed that the petitioner would pay `5 crores each to PNB and
HUDCO by 31st March 2010 and thereafter would deposit `50
lakhs per month with PNB and HUDCO as a condition of the stay
of the notices issued by PNB under Section 13 of Act No.54 of
2002. The order in appeal has resulted in partial success to the
petitioner. The condition of `50 lakhs per month being deposited
with PNB and HUDCO has been waived. The requirement to
deposit `5 crores each with PNB and HUDCO has been
maintained.
3. Relevant facts are that the petitioner company availed a
term loan from HUDCO in sum of about `3.95 crores in the year
1990 and availed a credit of `1.09 crores from PNB in the year
1992. Right from the inception, the petitioner company
defaulted and by 31.3.1994 debts were classified in the category
of ‘Non Performing Assets’. On 22.4.1994 PNB recalled the credit
and by said date amount due to PNB was approximately `2.45
crores. HUDCO recalled the credit on 5.9.1994 and by said date
the amount due to it was approximately `5.88 crores.
4. In the year 1995, PNB initiated action for recovery of its
dues by moving an Original Application before the Debt Recovery
Tribunal under the Recovery of Debts Due to Banks and Financial
W.P.(C) No.852/2011 Page 2 of 8
Institutions Act 1993 and laid a claim to a decree in its favour in
sum of `2.94 crores with pendente-lite interest as per the
agreement between the parties. HUDCO initiated similar action
before the Debt Recovery Tribunal in the year 1997 and sought a
decree in sum of `8.51 crores together with pendente lite interest
as per the agreement between the parties.
5. Unfortunately, the two proceedings initiated in the year
1995 and 1997 respectively remained pending for over a decade,
when in the year 2008, as noted herein above, PNB took resort to
an action under Section 13 of Act No.54 of 2002.
6. In between, the petitioner company took recourse remedy
under the Sick Industrial Companies (Special Provisions) Act
1985. On 14.11.2002 the petitioner was declared a Sick
Industrial Company and PNB was appointed as an Operating
Agency.
7. It is unfortunate that proceedings under Sick Industrial
Companies (Special Provisions) Act 1985, which commenced in
the year 2001 have meandered aimlessly and till date we do not
have either an order sanctioning a scheme for the rehabilitation
of the petitioner, nor do we have an order requiring the company
to be wound up.
8. We wonder whether Tribunalization and constitution of
specialized Tribunals has served any purpose? But since the
issue before us is not to render an opinion on the efficacy of
Tribunalization, we leave the question unanswered.
9. Reverting to the facts, it may be noted that a
memorandum of understanding was arrived at on 12.12.2004
between the existing promoters of the petitioner company and
two persons named Dr.Ram S.Garg and Mr.Rajesh Gupta, as per
which the latter two, agreed to bring in `8 crores to prop up the
petitioner and bring it on rails. For reasons best known to these
two gentlemen and the existing promoters of the company, these
two gentlemen shrouded the MOU with the cloak of secrecy and
W.P.(C) No.852/2011 Page 3 of 8
never brought forth the same before any forum i.e. neither
before DRT nor before BIFR. Its existence was not even brought
to the notice of the creditors.
10. What was being brewed under cover of the MOU between
the existing promoters and these two gentlemen is not known to
us and indeed would never see the light of the day, but
apparently the existing promoters and these two gentlemen fell
foul and we are informed that the two groups are in inter-se
litigation. It was only in the year 2007 that before BIFR, the new
promoters were recognized as having a stake in the matter.
11. The credits had become sticky. The assets securing the
credits had apparently fallen in value. It made sense for the
secured creditors to seek a one-time settlement, and which PNB
did when on 1.8.2007 it accepted petitioner’s one-time
settlement proposal to receive `2.75 crores in full and final
settlement of its dues, payable in instalments as per schedule set
out in the letter of acceptance dated 1.8.2007. Suffice would it
be to state the petitioner defaulted and did not even deposit the
sum of `15 lakhs required to be deposited within 15 days of
acceptance of the proposal; the first instalment as also the
second in sum of `31.25 lakhs were not paid.
12. It can thus safely be said that by offering to settle the claim
of PNB, the petitioner had accepted liability in sum of `2.75
crores. Qua PNB it cannot be said that it accepted its entitlement
limited to `2.75 crores, for the reason PNB was giving a
concession and the sum agreed to be accepted by it was the
discounted value of the debt due to it. On 9.10.2007, intimating
defaults committed by the petitioner the one-time settlement
accepted by PNB was withdrawn.
13. It was under these circumstances PNB proceeded under
Section 13 of Act No.54 of 2002.
14. Three issues were raised before us during arguments in the
writ petition. It was firstly urged that the mortgage of the
W.P.(C) No.852/2011 Page 4 of 8
immovable property of the petitioner, which asset is being
proceeded against under Section 13 of Act No.54 of 2002 was
created in the year 1992 in favour of PNB as the second charge-
holder and the first charge in favour of HUDCO was created in the
year 1990 and hence the action initiated by PNB under Section
13 in the year 2008 was barred by limitation. It was highlighted
that the action was initiated beyond 12 years of the mortgage i.e.
beyond the period prescribed as per the law of limitation.
15. The argument has prima facie no force and no legs to stand
on, for the obvious reason, PNB took recourse to action for
recovery of the debt by moving the Debt Recovery Tribunal in the
year 1995 and HUDCO followed in the year 1997. The cause of
action had accrued to PNB on 22.4.1994 when the credit was
recalled, and to HUDCO on 5.9.1994, when the credit was
recalled by HUDCO. The right was enforced well within limitation
by filing Original Applications before the Debt Recovery Tribunal
well within three years of the facility being recalled and prima
facie the question of the debts being time barred would not arise;
nor would the enforceability of the right under Section 13 of Act
No.54 of 2002.
16. It has to be noted that the issue pertaining to a secured
asset being proceeded against by a secured creditor under Act
No.54 of 2002 during pendency of proceedings under the
Recovery of Debts Due to Banks and Financial Institutions Act
1993 was a subject matter of consideration before the Supreme
Court in various appeals filed in the year 2006 against decisions
of the Madras High Court pronounced in the year 2005 and the
issue attained finality when the decision reported as 2008 (1)
SCC 125 Transcor vs. UOI & Anr. was pronounced. View taken
was that a secured creditor had an independent remedy under
Act No.54 of 2002. Thus, none can blame PNB and HUDCO not to
proceed under Act No.54 of 2002 till the year 2008.
W.P.(C) No.852/2011 Page 5 of 8
17. Prima facie, it has to be held that the proceedings initiated
by PNB are within limitation and we express no conclusive
opinion on the point for the reason, a final decision on the said
issue has to be taken by the DRT and we do not intend to speak a
language which is conclusive of the issue, lest we are accused of
opining finally while exercising a jurisdiction which is to settle an
interim situation.
18. The second plea urged was that proceedings under the Sick
Industrial Companies (Special Provisions) Act 1985 are still
pending and if the secured asset is permitted to be sold, the right
of the petitioner company under Sick Industrial Companies
(Special Provisions) Act 1985 would be rendered otiose.
19. The plea takes us nowhere for the simple reason it is
settled law that secured creditors representing more than 75% of
the secured debt can take recourse to Section 13 of Act No.54 of
2002 notwithstanding any proceeding pending before BIFR.
20. Third plea urged was that there was no material to prima-
facie establish that PNB had the consent of HUDCO to proceed
under Section 13 of Act No.54 of 2002 and since the debt due to
PNB was not representing 3/4th in value of the secured debt,
action initiated by PNB was void.
21. We note that this issue has yet to be decided by the DRT,
but would note that as per HUDCO, it had granted the necessary
consent.
22. It is settled law that an appeal under Section 17 of Act
No.54 of 2002 by a party aggrieved against a measure taken by
a secured creditor under Section 13(4) of the said Act, inheres in
DRT power to pass interim directions and the Tribunal would be
empowered to pass such orders as it may consider appropriate
and necessary in relation to the recourse taken by the secured
creditors under sub-section 4 of Section 13 of the Act. This
power of the Tribunal to pass interlocutory orders is no longer res
integra and is well settled by the decision of the Supreme Court
W.P.(C) No.852/2011 Page 6 of 8
reported as 2004 (4) SCC 311 Mardia Chemicals Ltd. vs. UOI
wherein the Supreme Court observed that the Tribunal in
exercise of its ancillary powers shall have jurisdiction to pass any
stay/interim order subject to such condition as it may deem fit
and proper to impose. Needless to state, appeal filed to the
DRAT under Section 18 of Act No.54 of 2002 would include an
appeal against an interim order passed by DRT and the Appellate
Tribunal would likewise have, in exercise of its ancillary powers,
the jurisdiction to pass such interim orders and subject to such
conditions as it may deem fit and proper to impose.
23. We find that the DRT has exercised an interim jurisdiction
and the same has been premised on a consideration of prima
facie facts and so has been done by the Appellate Tribunal.
24. The main fulcrum of the issue debated was on the issue of
limitation and prima facie the view has to be in favour of PNB.
The other jurisdictional plea of PNB not having the requisite
authority in the absence of a consent by HUDCO is prima facie
negated in view of the stand taken by HUDCO and considering
the claim of PNB and HUDCO, which as per the original
agreements would today be in the vicinity of `70 crores, we see
no scope to interdict the interim measure directed by the DRAT
of maintaining status quo but upon the condition of the petitioner
depositing `5 crores each with PNB and HUDCO. Suffice would it
be to state that the discretion has been exercised within the
ambit of the discretionary power and our job under Article 226 of
the Constitution of India is limited to ensure that the procedure
prescribed by the Tribunal was adhered to and that the Tribunal
has confined itself within the bounds of its jurisdiction. Merits of
the decision has not to be gone into by us.
25. While dismissing the writ petition we extend time for the
petitioner to comply with the directions issued by DRAT and for
which we fix the date 30th April 2011 as the last date by which
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petitioner should comply with the interim directions issued by
DRAT.
26. No costs.
(PRADEEP NANDRAJOG)
JUDGE
(SURESH KAIT)
JUDGE
MARCH 07, 2010
dk
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