IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED:26.11.2009 CORAM THE HONOURABLE MR.JUSTICE D.MURUGESAN AND THE HONOURABLE MR.JUSTICE K.VENKATARAMAN Writ Petition No.14090 of 2004 ICICI Bank Limited rep. by its Assistant General Manager Mr. P.Ananda Krishna Kumar ... Petitioner vs. 1. The Presiding Officer DRT, Coimbatore 2. K.B.Ramasubramania Raja Proprietor of Sri Vairalakshmi & Co., 3. Sajjan Textile Mills Limited rep. by its Official Liquidator O/o. The Official Liquidator High Court, Bombay 5th Floor, Bank of India Building M.G.Road, Fort Bombay – 400 001 .. Respondents Writ Petition filed under Article 226 of the Constitution of India, praying for issuance of a writ of Mandamus, directing the first respondent to proceed with the Recovery of amounts in pursuance of Recovery Proceedings No.117 of 2003 and pass all incidental orders necessary for such recovery. For petitioner : Mr.A.L.Somayaji Senior Counsel for Mr.V.Perumal & Mr.R.Shankaranarayanan For Respondents : Mr.P.S.Raman Advocate General assisted by Mrs.Pushpa Menon for R2 Mr.Ajit K.Sinha https://hcservices.ecourts.gov.in/hcservices/ Senior Counsel for Mr.R.Parthasarathy for R3 Mr.S.R.Sundar Asst. Official Liquidator for Official Liquidator (Bombay) (impleaded party) O R D E R D.MURUGESAN, J. The petitioner has come up with the present writ petition for a mandamus directing the first respondent to proceed with the recovery of amounts in pursuance of the Recovery Proceedings No.117 of 2003 and pass all incidental orders necessary for such recovery. 2. The facts leading to the filing of the writ petition as put forth in the affidavit in support of the writ petition are set out hereunder:- 2.1. The petitioner (hereinafter referred to as "the bank") is a banking company and carrying out banking business. In that process, the third respondent, Sajjan Textile Mills Limited (hereinafter referred to as "the Mill") had availed term loan facilities from the bank to the tune of Rs.580 lakhs. To secure the same, the Mill hypothecated and created equitable mortgage in favour of the bank in respect of its movable and immovable properties situate at Nilakottai, Dindigul. The Mill committed default in re- payment of the loan availed by it. 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 17.4.2003. 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. 2.2. 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 ("the RDDBFI Act", in short) 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. https://hcservices.ecourts.gov.in/hcservices/ 2.3. 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. 2.4. 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. 2.5. 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. 2.6. 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. https://hcservices.ecourts.gov.in/hcservices/ 2.7. 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. " 2.8. 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. 2.9. For completion of narration of facts, we may also state that in the present writ petition, this Court by order dated 2.8.2004 directed Sri Vairalakshmi & Co., to deposit a sum of Rs.50 lakhs immediately and the balance amount to be paid in instalments or in one lot, however within 2 months (i.e) on or before 02.10.2004. The Mill filed SLP No.22658 of 2004 challenging the said order and the Apex Court by order dated 29.10.2004 directed status quo. 2.10. In the meantime, on 13.8.2004, the Presiding Officer, DRT, Chennai, at the instance of the bank as well as Sri Vairalakshmi & Co., directed the Recovery Inspector, Coimbatore to go with the bank officials with approved valuer and segregate the machinery into five lots and also segregate the machinery at the first instance for Rs.50 lakhs and to file a compliance report before 08.09.2004. Between 24.8.2004 and 26.10.2004, Sri Vairalakshmi & Co., removed lot 'P' machinery. On 1.9.2004, Sri Vairalakshmi & Co., moved another application before the Presiding Officer, DRT, Chennai to remove other lots and deposited Rs.60.36 lakhs. However, the Presiding Officer, DRT, Chennai directed Sri Vairalakshmi & Co., to remove lot 'K'. Thereafter, Sri Vairalakshmi & Co., removed certain lots. On 5.10.2004, the bank filed an application before the Presiding Officer, DRT, Chennai in I.A.No.407 of 2004 for appropriation of proceeds. By order dated 26.10.2004, the Presiding Officer, DRT, Chennai, confirming that the entire sale proceeds were paid by Sri Vairalakshmi & Co., and had removed the machinery as on 26.10.2004, ordered for appropriation of sale proceeds. https://hcservices.ecourts.gov.in/hcservices/ 2.11. On 16.5.2008, the Apex Court allowed the Civil Appeal filed questioning the order of the Division Bench of this Court and remanded the same to this Court on the ground that the Mill was not given an opportunity of being heard and ordered the status quo to be maintained. 2.12. In the meanwhile, BIFR, Mumbai recommended the winding up of the company, and by order dated 28.3.2008, the High Court of Bombay directed the winding up of the third respondent Mill in C.P.No.395 of 2003. The third respondent Mill filed an appeal and the order of winding up was confirmed on 8.8.2008. SLP No.22300 of 2008 filed by the Mill was also dismissed by the Apex Court on 22.9.2008. 3. We have heard Mr. A.L.Somayaji, learned Senior Counsel appearing for the petitioner, Mr.P.S.Raman, learned Advocate General appearing for the second respondent assisted by Mrs.Pushpa Menon, Mr.Ajit K.Sinha, learned Senior Counsel appearing for the third respondent and Mr.S.R.Sundar, learned Assistant Official Liquidator appearing for Official Liquidator (Bombay). 4. Mr.A.L.Somayaji, learned Senior Counsel for the petitioner-bank would submit that the Presiding Officer, DRT, Coimbatore has not passed any judicial order on the proceedings relating to the Recovery Certificate. By order dated 7.5.2004, he has only made an endorsement in the docket that in view of want of Recovery Officer in the said Tribunal, the matter should be returned to DRT III, Mumbai for further necessary action. In these circumstances, it is not necessary for the bank to question the said order and on the other hand, the writ petition seeks for a direction to the DRT, Coimbatore to proceed further with the Recovery Certificate based upon the order of DRT III, Mumbai directing the DRT, Coimbatore to proceed with the Recovery Certificate, which order has become final, as the appeal filed by the Mill was dismissed. He would also submit that subsequent to the filing of the writ petition, the bank also filed an application before the DRT, Chennai for completion of sale on the basis of the order of the Division Bench of this Court and thereafter further proceedings were held and in fact, Sri Vairalakshmi & Co., was permitted to remove lot 'K' of the machineries. Thereafter, by further orders, the said Sri Vairalakshmi & Co., was allowed to remove lot 'D', lot 'L' and lot 'T' machineries. The said Sri Vairalakshmi & Co., also has paid the entire money representing the sale price of machineries and the Recovery Inspector, DRT, Coimbatore also submitted a report to the Presiding Officer, Chennai confirming the payment. On 5.10.2004, the bank also filed an application before the Presiding Officer, DRT, Chennai in I.A.No.407 of 2004 for appropriation of proceeds to be paid to the bank towards security charges. The DRT, Chennai has also passed such an order on 26.10.2004. In this background, the writ https://hcservices.ecourts.gov.in/hcservices/ petition seeking for a direction can be entertained even when the docket order dated 7.5.2004 passed by the DRT, Chennai is not questioned. 5. On the other hand, Mr.Ajit K.Sinha, learned Senior Counsel for the third respondent-Mill would firstly submit that unless the order of DRT, Chennai dated 7.5.2004 in returning the papers to DRT III, Mumbai is questioned, the writ petition in the nature seeking for a direction alone is not maintainable. By that order, in fact the DRT, Chennai has also directed the refund of EMD paid by the Mill. Hence the learned Senior Counsel submitted that the writ petition is liable to be rejected. That apart, he would submit that the entire proceedings both before the High Court of Bombay followed by the proceedings before the DRT, Mumbai and the consequential proceedings of DRT, Coimbatore and Chennai are a nullity since the matter was already pending before BIFR. He would rely upon the provisions of Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 (for short, "the SICA"). The core contention of the learned Senior Counsel is that in the absence of consent from BIFR, the decree passed by Court or any other forum is a coram non judice and is without jurisdiction and it is a nullity. He would also submit that the provisions of Section 34 of the RDDBFI Act will only be in addition and not in derogation of SICA. Therefore, the provisions of Section 22 of SICA will prevail over the provisions of RDDBFI Act. He would further submit that the entire sale proceedings are illegal, since the proceedings are in contravention of Schedule II and III of the Income Tax Act. He also added that a fraud has been played in the sale. 6. In response to the above submissions, Mr.A.L.Somayaji, learned Senior Counsel for the bank would submit that the Mill had participated in the proceedings right from the inception of the two suits before the High Court of Bombay. The Mill has also filed written statement after the transfer of the suits to DRT III, Mumbai. The Mill had participated in the entire proceedings. Even after the Recovery Certificate was issued and the same was transferred to DRT, Coimbatore for further action, as the properties of the Mill were situated within the jurisdiction of that Tribunal, the Mill participated in the proceedings and allowed the DRT, Coimbatore and subsequently DRT, Chennai to proceed with the sale proceedings. Hence it is not now open to the Mill to question the entire proceedings on the ground they are a nullity. That apart, even on facts, the Mill was declared sick on 6.8.98 even before the suits were filed. The bank was also appointed as an operating agency. On 30.10.2000, BIFR permitted the banks and financial institutions to continue the suits filed before the DRT. On 5.10.2001, BIFR recommended for winding up of the company and based upon the recommendations of BIFR, the Mill was wound up by the orders of High Court of Bombay made in C.P.No.395 of 2003 dated 28.3.2008. The https://hcservices.ecourts.gov.in/hcservices/ appeal preferred by the Mill was dismissed by the High Court of Bombay on 8.8.2008 and thereafter, the SLP filed by the Mill was also dismissed by the Apex Court on 22.9.2008. In the meantime, a provisional liquidator was appointed on 28.9.2007. In these circumstances, the challenge to the above proceedings on the ground of nullity is not available to the Mill. Further, as on today, the Mill cannot question the proceedings, as the provisional liquidator was appointed and subsequently, the Official Liquidator, Bombay has taken over charge of the Mill. In these circumstances, on the question of waiver, the Mill is not entitled to raise the non- compliance of the provisions of Section 22 of SICA. 7. Mr.P.S.Raman, learned Advocate General appearing for the second respondent has also submitted that the Mill, which has slept over the matter for several years without questioning the filing of the suits filed by the bank and without questioning the proceedings before the Debts Recovery Tribunals at Bombay and Coimbatore and the orders passed thereunder, cannot now raise for the first time before this Court that the suits filed before the High Court of Bombay and the proceedings before the Debts Recovery Tribunals at Bombay and Coimbatore and the orders passed thereunder are non est in law. Having failed to take the plea at the earliest point of time, now the Mill cannot take such a plea that too, in the writ petition filed by the bank. 8. Mr.S.R.Sundar, learned Assistant Official Liquidator for the Official Liquidator (Bombay) has submitted that the question of waiver does not arise on the given facts and circumstances of the case, especially when Section 22 of SICA is pressed into service. In this context, he relied upon a judgment of the Apex Court in Harshad Chiman Lal Modi v. DLF Universal Ltd., and another, (2005) 7 SCC 791. 9. We have carefully considered the submissions made on either side. 10. The primary objections of the Mill are that the writ petition for a mandamus is not maintainable, when the order of the DRT, Chennai dated 7.5.2004 in returning the papers relating to the proceedings pending before the Recovery Officer to the DRT, Mumbai is not questioned. We have carefully gone through the endorsement made by the Presiding Officer, DRT, Chennai dated 7.5.2004. The papers were returned only on the ground that since no Recovery Officer was available in the DRT, the papers were sought to be returned to the DRT, Mumbai for further action. By the said endorsement, it could not be said that final orders were passed as to the recovery proceedings on any ground. The said order only directed DRT III, Mumbai to take further action. Subsequent to the above, the Presiding Officer, DRT, Chennai considered the request of Sri Vairalakshmi & Co., which was the second highest bidder, and directed the Recovery https://hcservices.ecourts.gov.in/hcservices/ Inspector, Coimbatore to go with the bank officials with approved valuer and segregate the machineries into five lots and to file a compliance report on or before 8.9.2004. Pursuant to the said direction, the machineries were segregated into five lots and the report fixing the valuation of each lot was filed by the valuer on 20.8.2004. In fact the Recovery Inspector, Coimbatore himself visited the factory with the valuer and ensured the segregation of machineries on 23.8.2004, who later submitted his report to the DRT, Chennai on 27.8.2004. Subsequent to the report, Sri Vairalakshmi & Co., was allowed to remove lot 'P' machineries between 24.8.2004 and 26.10.2004. Thereafter, Sri Vairalakshmi & Co., deposited a sum of Rs.60.36 lakhs before the Presiding Officer, DRT, Chennai, who again directed the said Sri Vairalakshmi & Co., to remove lot 'K' by his order dated 1.9.2004. Accordingly, the machineries were removed and the bank also filed an application before the Presiding Officer, DRT, Chennai in I.A.No.407 of 2004 for appropriation of the sale proceeds. 11. Before adverting to the rival contentions, it will be useful to extract the operative portion of the order of the Apex Court made in Civil Appeal No.573 of 2005 dated 16.5.2008 questioning the earlier order passed by this Court in the present writ petition. Paragraphs 5, 6, 7 and 8 of the said order are usefully extracted here under:- "5. Mr.Singhvi, the learned senior counsel for the appellant, has at this stage raised only one argument before us. He has pointed out that the appellant was respondent No.3 in the writ proceedings in the High Court and though a Vakalatnama had been filed by a counsel on its behalf, the name of the counsel had not appeared in the cause list on the 2nd August, 2004 nor on the date preceding that date with the result that the appellant had suffered serious prejudice on account of remaining unrepresented on being unaware of the proceedings. 6. Mr.Andhyarujina, the learned senior counsel for the respondent bank has, however, taken us through the entire sequence of events and the history of the litigation and pointed out that the appellant was only a formal party in the writ proceedings, and as all the orders pertaining to the recovery and the sale had become final as some had not been challenged by the appellant and in some others, the challenge had failed, no useful purpose would be served in interfering in this matter. He has also pointed out that the property had been sold and removed https://hcservices.ecourts.gov.in/hcservices/ from the appellant's mill under the orders of this Court and nothing now remained to be decided and that the efforts of the appellants to prolong the litigation any further should be discouraged. 7. We have heard the learned counsel for the parties and gone through the record very carefully. It is true that the litigation has had a chequered career in several forums including this Court. However, in the present proceedings, we are not called upon to take a decision on the ultimate effect of the earlier set of proceedings as Mr.Singhvi has limited his claim to the fact that the appellant had not been heard at the time when the High Court had made the impugned order on 2nd August 2004. We are unable to accept Mr.Andhyarujina's plea that as the sale proceedings had attained finality, there was no need to have heard the appellant / company as it had been impleaded as a mere formality. We feel that once having made the appellant a party in the writ proceedings, it does not lie on the Bank to contend that the appellant was not entitled to a hearing. We, accordingly, set aside the order of the High Court dated 2nd August 2004, and remit the case for a fresh decision in accordance with law. We also direct that till such time the High Court takes its decision in the matter, the status quo order passed by this Court on 29th October 2004 will continue to operate. We also request the High Court, in the background that the matter has been pending for a very long time to render its decision as expeditiously as possible. 8. The appeal is allowed. There will, however, be no order as to costs." 12. A careful reading of the judgment of the Apex Court would show that the history relating to the litigation was brought to the notice of the Court and after noting the history, the Apex Court observed as above. It is also clear that the submission of Mr.Andhyarujina, the learned Senior Counsel for the bank that no useful purpose would be served in interfering in the matter, as the property had already been sold and removed from the Mill under the orders of the Court and nothing remained to be decided and that the efforts of the Mill were only to prolong the litigation and accordingly the same should be discouraged, did not find favour, as https://hcservices.ecourts.gov.in/hcservices/ the Apex Court did not accept the said contention, but rather remitted the matter for fresh consideration. In these circumstances, we are called upon to consider all the contentions raised by either side and decide the same. 13. On the above factual background, the question for consideration is as to whether the bank will be justified in approaching this Court for continuance of the proceedings without challenging the docket order? In our opinion, the Presiding Officer, DRT, Coimbatore did not decide the dispute between the parties vide the docket order dated 7.5.2004 and such order did not give any cause of action for the parties to question it's validity. The docket order, as already indicated, is only directing the return of the papers to the DRT, Mumbai for want of regular Recovery Officer. Later on, the DRT itself has taken up the application and much water has flown by now. In these circumstances, the bank cannot be denied the relief solely on the ground that it had not questioned the docket order. In matters like this, the Court is bound to consider the justification in the relief, rather than finding a reason on technicalities to reject the claim, if such claim is otherwise justifiable. Hence the first contention of the Mill that the writ petition for a mandamus cannot be entertained in the absence of challenge to the docket order has no substance and accordingly, the same is rejected. 14. The next submission is relating to the challenge to the entire proceedings on the ground of nullity. Before we delve upon the