High Court · 2007

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATE : 05.11.2007CORAMTHE HONOURABLE MR. JUSTICE S.J.MUKHOPADHAYAANDTHE HONOURABLE MR. JUSTICE N.PAUL VASANTHAKUMARW.P. NOS. 27557, 26631, 25382, 25383 OF 2007W.P. NO. 29611 OF 2005ANDM.P. NOS. 1 OF 2007W.P.M.P. NO. 35458 OF 2005W.P. Nos. 27557 & 26631 of 2007 :M/s. Indian BankEsplanade BranchNo.6, Esplanade RoadEsplanadeChennai 600 108... Petitioner- Vs -1. M/s.Mona Packaging Products rep. by its Partner Mr. Shahul Hameed No.S-40, Chettiar Agaram Road Behind Kumaran Theatre Vanagaram, Chennai 602 102.2. Mr. M.M.Shahul Hameed3. Mr. S.M.Sheik Dawood4. Mr. M.S. Md. Al Ameen5. M/s.ICMC Packings Ltd. rep. by its Partner No.36, Ambattur Industrial Estate Ambattur, Chennai 600 058.6. The Debts Recovery Appellate Tribunal No.55, Ethiraj Salai Chennai 600 008... RespondentsW.P. Nos. 25382 & 25383 of 2007 :M/s.ICMC Packings Ltd.rep. by its PartnerNo.36, Ambattur Industrial EstateAmbattur, Chennai 600 058... Petitioner- Vs - https://hcservices.ecourts.gov.in/hcservices/

1. M/s.Mona Packaging Products rep. by its Partner, Mr. Shahul Hameed No.S-40, Chettiar Agaram Road Behind Kumaran Theatre Vanagaram, Chennai 602 102.2. Mr. M.M.Shahul Hameed3. Mr. S.M.Sheik Dawood4. Mr. M.S. Md. Al Ameen5. M/s. Indian Bank Esplanade Branch No.6, Esplanade Road Esplanade, Chennai 600 108.6. The Debts Recovery Appellate Tribunal No.55, Ethiraj Salai, Chennai 600 008... RespondentsW.P. No. 29611 of 2005 :M/s.Mona Packaging Productsrep. by its Partner, Mr. Shahul HameedNo.S-40, Chettiar Agaram RoadBehind Kumaran TheatreVanagaram, Chennai 602 102... Petitioner - Vs -1. The Recovery Officer Chennai Debts Recovery Tribunal – II 4th Floor, “Spencer Plaza” No.770-A, Anna Salai Chennai 600 002.2. M/s. Indian Bank Esplanade Branch No.6, Esplanade Road Esplanade, Chennai 600 108... RespondentsW.P. Nos.27557 & 25382 of 2007 filed for the issuance of a writof certiorarified mandamus calling for the records pertaining to theorder dated 01.03.2007 passed in M.A. No.214 of 2007 by the DebtsRecovery Appellate Tribunal, Chennai and quash the same andconsequently direct the respondents 1 to 4 to hand over the vacantpossession of the property and the movables sold as stated therein.W.P. Nos. 26631 & 25383 of 2007 for the issuance of a writ ofcertiorarified mandamus calling for the records pertaining to theorder dated 23.05.2007 passed in I.A. No.450 of 2007 in IN No.307 of2007 by the Debts Recovery Appellate Tribunal, Chennai and quash thesame and consequently direct the respondents 1 to 4 to hand over thevacant possession of the property and the movables sold as statedtherein. https://hcservices.ecourts.gov.in/hcservices/ W.P. No.29611 of 2005 filed for the issuance of a writ ofcertiorarified mandamus calling for the records of the 1strespondent's auction sale notice under Recovery of Debts due toBanks and Financial Institutions Act, 1993, fixing the auction saleof the petitioner's property comprised of land and building inChettiar Agaram Road and Village, No.95, Siva Boodham Village,Vanagaram, Saidapet Taluk, Chengai MGR District, measuring an extentof 7269 Sq.ft., comprised in survey No.40, New Survey No.40/4,situated within the sub-Registration District of South-Madras on14.09.2005 at 2.30 p.m. And to quash the same as illegal and invalidand to direct the 2nd respondent to extend the time till 30.11.2005for the petitioner to pay of the sum of Rs.19 lakhs under the OneTime Settlement (OTS) sanctioned by the 2nd respondent.For Petitioners: Mr. Jayeesh Dolia for M/s.Aiyar & Dolia in W.P. Nos. 27557 & 26631 of 2007 Mrs. Narmada Sampath in W.P. No.25382 & 25383 of 2007 Mr. Ashok Menon for M/s.Menon & Goklaney Associates in W.P. No.29611 of 2005For Respondents : Mr. A.Muralidharan for RR-1 to 4 in W.P. Nos. 27557, 26631, 25382 & 25383/07 Mr.Jayeesh Dolia for M/s. Aiyar & Dolia for R-2 in WP 29611/05 for R5 in WP 25382/07 & 27383/07 WP 26631/07 Mrs. Narmada Sampath for R5 in WP 26631/07 & in WP 27557/07COMMON ORDERS.J.MUKHOPADHAYA, J.As all these writ petitions arise out of a common proceedinginitiated by the Debts Recovery Tribunal (hereinafter referred to as'DRT'), they were heard together and disposed of by this commonorder.2. In two writ petitions, W.P. No.27557/07 (petitionerM/s.Indian Bank) and W.P. No.25382/07 (petitioner M/s.ICMC PackagingLtd.), the petitioners have challenged order dated 1st March, 2007,passed by Debts Recovery Appellate Tribunal, Chennai, (hereinafterreferred to as 'DRAT') in M.A. No.214/06. Further prayer has beenmade to direct the concerned respondents 1 to 4 to hand over vacantpossession of the property and the movables sold.Aforesaid two petitioners, M/s.Indian Bank and M/s.ICMCPackaging Ltd., are also petitioners in W.P. Nos.26631 and 25383/07.In these cases, they have challenged order dated 23rd May, 2007,passed by DRAT, Chennai, in I.A. No.450/07 in I.N. No.307/07 withfurther prayer to direct respondents 1 to 4 to hand over vacant https://hcservices.ecourts.gov.in/hcservices/ possession of the property and movables sold.W.P. No.29611/05 has been preferred by M/s.Mona PackagingProducts (Borrower), challenging auction sale notice issued underthe Recovery of Debts due to Banks and Financial Institutions Act,1993 (hereinafter referred to as 'RDDB & FI Act') fixing auctionsale of said petitioner's property comprised of land and building inChettiar Agaram Road and Village, No.95, Siva Boodham Village,Vanagaram, Saidapet Taluk, Chengai MGR District, covering an extentof 7,269 sq.ft., comprised in survey No.40, new survey No.40/4,constituted within the Sub-Registration District of Saidapet andRegistration District of South Madras. Further prayer has been madeto direct the 2nd respondent of the said case (M/s.Indian Bank) toextend the time for petitioner to pay the sum of Rs.19 Lakhs underthe one time settlement as was earlier sanctioned by the said 2ndrespondent Bank.3. By impugned order dated 1st March, 2007, in M.A. No.214/06,having noticed that the borrower, M/s.Mona Packaging Products and 3others, who were appellants before DRAT, Chennai, had deposited asum of Rs.40 lakhs, they were granted opportunity to prosecute theapplication, which were pending before DRT, Chennai and the appealwas allowed. The auction purchaser, i.e., M/s.ICMI Packaging Ltd.,who is the petitioner in other two cases, has been allowed towithdraw the amount already deposited by it.By subsequent order dated 23rd May, 207, in I.A. No.450/07 inI.A. No.307/07, DRAT, Chennai, at the instance of the borrower,M/s.Mona Packaging Products and 3 others, granted interim stay offurther proceeding on the condition that the appellant (borrower)shall deposit a sum of Rs.10 lakhs with the bank in an interestearning no lien account on or before 8th June, 2007.4. The case having a chequered history, it is desirable tonotice relevant facts and the manner in which the parties acted andthe case proceeded.M/s.Mona Packaging Produces and 3 others (borrowers), who arerespondents 1 to 4, preferred by bank, availed open cash creditfacility to the limit of Rs.35,000/=; clean supply bill purchasefacility to the limit of Rs.4.75 lakhs and minimum term loan to thelimit of Rs.2,10,626.15 for which they executed security documentsand created the mortgage. On 23rd March, 1995, the aforesaidborrowers (respondents 1 to 4) availed additional credit facility.Further credit facility was availed by those borrowers from the bankon 19th March, 1988, as acknowledged by the borrowers.The 1st respondent, M/s.Mona Packaging Products (petitioner inone of the case) is a partnership firm of which respondents 2, 3 and4 are the partners. The 2nd respondent, Mr.M.M.Shahul Hameed is thefather of respondents 3 and 4, namely, Mr.M.S.Sheikh Dawood andMr.M.S.Md. Al Ameen. https://hcservices.ecourts.gov.in/hcservices/ The bank filed a claim case, O.A. No.2081/01 before DRT-II,Chennai, for Rs.45,62,659.26 together with interest @ 18.50% p.a.with quarterly rest from the date of application till the date ofrealisation in full with cost of the application. Initiallyrespondents 3 and 4 were set ex-parte on 12th Feb., 2002 andsubsequently respondents 1 and 2 were also set ex-parte on 2nd May,2002. The borrowers, who were defendants 1 to 4, filed I.A.No.500/02 for setting aside the ex-parte decree, which was dismissedon 15th Sept., 2003 for non-prosecution. O.A. No.2081/01 was decreedfor Rs.45,62,659.26 together with interest @ 18.50% p.a. withquarterly rest by order dated 11th May, 2004. Defendants 1 to 4, whoare respondents 1 to 4 in the connected writ petitions, were alsomade personally liable with a right to enforce the mortgage. DebtRecovery certificate No.83/04 was issued on 13th July, 2004 forRs.76,14,942.18, comprising of Rs. 45,62,659.26 as principal amount,Rs.30,04,277.92 towards interest and Rs.48,005/= as costs. TheRecovery Officer issued notice under Rule 2 of the Income Tax Act on19th July, 2004 and issued an order of attachment on 21st Dec., 2005.The 23rd of March, 2005 was the date fixed for auction sale, but thesaid auction could not take place as the 1st respondent, M/s.MonaPackaging Products filed a writ petition, W.P. No.9738/04 beforethis Court and obtained interim order on 22nd March, 2005. Theinterim order was passed with a condition to deposit Rs.20 lakhswithin eight weeks. The Court made it clear that order ofinjunction shall stand vacated on failure to comply with the Court'sdirection. Having obtained injunction order, the 1st respondentstalled the auction sale, but did not choose to deposit the amountof Rs.20 lakhs. Thereafter, another date of auction was fixed, which wasscheduled to be held on 14th Sept., 2005. This time, again to stallthe auction, the 1st respondent, M/s.Mona Packaging Productspreferred another writ petition, W.P. No.29611/05 and obtainedanother interim order on 27th Sept., 2005, on condition that it willdeposit a sum of Rs.40 lakhs within eight weeks failing with theBank can proceed with the auction. In this way, the auction, whichwas to take place on 14th Sept., 2005, was stalled, but the amount ofRs.40 lakhs was not deposited by the said respondent. The Recovery Officer, thereafter, took steps to bring theproperty on auction sale on 1st March, 2006. To stall suchproceeding of auction sale, which was to take place for the thirdtime, this time, respondents 1 to 4 (borrowers) preferred I.A.Nos.98 to 100/06 in O.A. No.2081/01 before DRT. Prayer was made toset aside the exparte decree dated 11th May, 2004; to condone thedelay in filing application and for interim injunction to restrainthe bank from bringing the property for auction on 1st March, 2006.On 1st March, 2006, DRT-II, Chennai, again directed the borrowers todeposit a sum of Rs.40 lakhs within 7 days. The Recovery Officerwas allowed to proceed with the auction, but it was ordered not toconfirm the sale. After obtaining such order, the respondents 1 to4 (borrowers) again did not choose to comply with the order nordeposited the amount of Rs.40 lakhs. They again filed one I.A.No.113/06 seeking extension of time till 31st March, 2006, for https://hcservices.ecourts.gov.in/hcservices/ depositing the amount. The DRT having noticed the aforesaid fact,by its order dated 20th March, 2006, directed the Recovery Officer toproceed in accordance with law. The Recovery Officer, accordingly,issued sale certificate on 31st March, 2006 for Rs.55.10 lakhs, tothe auction purchaser, M/s.ICMC Packaging Ltd. An advocatecommissioner was appointed by the Recovery Officer on 22rd March,2006 to evict respondents 1 to 4 for giving possession in favour ofthe auction purchaser.This time, respondents 1 to 4 moved before DRAT in M.A.No.214/06 and sought to set aside the order dated 20th March, 2006,passed in I.A. No.113/06 with further prayer to grant extension oftime to them to comply with the order dated 1st March, 2006. Suchprayer was allowed by DRAT without discussing the aforesaid fact,mainly on the ground that the borrowers have deposited the amount ofRs.40 lakhs. What is the effect of the auction sale; whether suchauction sale could be set aside without following the provision oflaw and without asking to set aside such auction sale, thesequestions were never discussed nor deliberated by the DRAT.5. So far as the interlocutory application Nos.98 to 100/06 andI.A. Nos.222 and 223/06 are concerned, they were taken up by DRT-II,Chennai. Having noticed the fact that no explanation for condoningthe delay had been given, the Tribunal rejected the application forcondition of delay. Consequent upon I.A. Nos.98 to 100/06, I.A.Nos.222 and 223/06 were also dismissed by common order dated 14thMay, 2007.The DRAT, by impugned order dated 23rd May, 2007, in I.A.No.450/07 in I.N. No.302/07, passed interim stay of all proceedingon condition that the borrowers (appellants before DRT) deposit asum of Rs.10 lakhs with the bank in an interest earning no lienaccount on or before 8th June, 2007. 6. Learned counsel for the borrowers – petitioner in W.P.No.29611/05, fairly conceded that in view of subsequent proceeding,including sale certificate issued on 31st March, 2006, no orderpassed by DRT, the said writ petition has lost its importance.Counsel appearing on behalf of the bank and auction purchaseralso informed that W.P. No.27557/07 preferred by bank and W.P.No.25382/07 preferred by auction purchaser against order dated 1stMarch, 2007, passed by DRAT, Chennai, have become infructuous inview of the subsequent order dated 23rd May, 2007.7. In the present case, the only question that arises forconsideration is whether it was a fit case for DRAT to allow andextend further time in favour of the borrowers to deposit certainamount.8. In the case of Smt. Periyakkal – Vs – Smt. Dakshyanireported in AIR 1983 (2) SC 428, the Supreme Court held that formere asking for extension of time, it should not be extendedordinarily. It will be granted in rare cases to prevent manifestinjustice. https://hcservices.ecourts.gov.in/hcservices/

9. It will be evident that the borrowers were not agreeable topay the amount as decreed. In the writ petition preferred by them,W.P. No.26911/05, prayer has been made to extend time to pay a sumof Rs.19 lakhs under the one time settlement. When the originalapplication was taken up, initially the Tribunal had to set expartetwo of the respondents (respondents 3 and 4) in Feb., 2002 and afterthree months, the other two respondents (respondents 1 and 2) wereset exparte. Though respondents 2, 3 and 4 are blood relations,i.e., father and sons, they acted in the manner as if the 2ndrespondent (father) had no knowledge that the case was set exparteagainst his sons, respondents 3 and 4. After the decree, whennotice for recovery under Rule 2 was issued on 19th July, 2004, noaction was taken by the borrowers. It is only when the date ofauction sale was fixed, a writ petition (W.P. No.9738/05) waspreferred and after interim order was obtained, they allowedcancellation of the date of auction, but, thereafter, the order ofthe Court was not complied with; Rs.20 lakhs was not deposited andthe said W.P. No.9738/05 was allowed to be made infructuous.Similarly, when the second date of auction was fixed, i.e., 14thFeb., 2005, by filing another writ petition, W.P. No.29611/05, thedate of auction sale was deferred again by obtaining an interiminjunction and again the condition of deposition of Rs.40 lakhs wasnot complied with and the said writ was also allowed to be madeinfructuous. The modus operandi of the borrowers continued eventhereafter when they moved against the 3rd date of auction. Thistime, instead of moving before this Court, having moved twiceearlier, moved before DRT by filing IA Nos.98 to 100/06 and prayedfor interim injunction restraining the bank from bringing theproperty for auction on 1st March, 2006. This time also the borrowerbecame successful in obtaining a conditional order of depositingRs.40 lakhs, but auction sale was allowed to proceed, and it wasordered not to confirm. Again, after obtaining such order, theborrowers did not choose to deposit the amount of Rs.40 lakhs tillsale certificate was issued on 31st March, 2006 in favour of theauction purchaser for a sum of Rs.55.10 lakhs. When the matter wastaken up to give possession of the property in favour of the auctionpurchaser, a miscellaneous appeal was preferred before DRAT.10. The aforesaid fact clearly shows the intention of theborrowers that they neither intended to pay the amount within thetime and always intended to defer the auction sale taking advantageof interim order passed by one or other court and then to get thecases infructuous. In the circumstances, on mere asking for time, the DRAT shouldnot have granted time to the borrowers. On the other hand,explanation should have been asked for from the borrowers as to whyit did not choose to deposit the amount within time when the HighCourt directed to deposit such amount of Rs.20 lakhs and Rs.40 lakhsby its order dated 22nd March, 2005 and 27th Sept., 2005 respectively.Without ascertaining such position, the Tribunal should not haveextended the time, which otherwise amounts to extension of time aswas allowed by High Court by its order dated 27th Sept., 2005. As https://hcservices.ecourts.gov.in/hcservices/ the borrowers, respondents 1 to 4 in the connected writ petitionshad not come earlier with clean hands either before this Court orbefore the Tribunal, or before the Appellate Tribunal, it was not afit case for extension of time. We, accordingly, set aside the order dated 1st March, 2007 and23rd May 2007 passed by DRAT and allow the writ petitions, W.P. Nos.26631 & 25383/07 preferred by the bank and the auction purchaser anddismiss the writ petition, W.P. No.29611/05 preferred by theborrowers. W.P. No.27557/07 preferred by bank and W.P. No.25382/07preferred by auction purchaser against order dated 1st March, 2007,passed by DRAT, Chennai, having become infructuous are disposed of.Consequently, connected miscellaneous petitions are closed. In thefacts and circumstances, we impose a cost of Rs.10,000/= (Rupees TenThousand only) on the borrowers to be paid in favour of the IndianRed Cross Society, Tamil Nadu Branch, Egmore, Chennai 600 008,within two months. Let a copy of this order of this order be communicated to theIndian Red Cross Society, Tamil Nadu Branch, Egmore, Chennai 600008, for its information.GLNSd/Asst.Registrar (C.S-I)6.11.2007Corrected as per order of this Court daed 10/12/2007Sd/Asst. Registrar/true copy/Sub Asst.Registrar To1. The Debts Recovery Appellate Tribunal/No.55, Ethiraj Salai,Chennai 600 008./2. The Recovery Officer,/The Debts Recovery Tribunal – II,/4th Floor Spencer Plaza,Anna Salai,/Chennai-2./TO BE SUBSTIUTED TO THE3. M/s. Indian Bank/DESPATCHED ON 15/10/07Esplanade Branch,No.6,/Esplanade Road,Esplanade, /Chennai 600 108./4.The Indian Red Cross Society,/Tamil Nadu Branch, Egmore,/Chennai-8./+1cc to M/s. Aiyar & Dolia, Advocate SR72675/KM (CO)km/7.11. W.P. NOS. 27557, 26631, 25382 & 25383 OF 2007 AND W.P. NO. 29611 OF 2005Pronounded on 05.11.2007