-1- IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION NO. 3069 OF 2006 Small Industries Development Bank of India, ) a Corporation established under the Small Industries ) Development Bank of India Act, 1989, and having its Head ) office at SIDBI Tower, 15 Ashok Marg, Lucknow 226 001 ) and one of its branch offices at SME Development Centre, ) C11, G Block, Bandra Kurla Complex, Bandra (East), ) Mumbai-400 051 through its General Manager ) Shri P.T. Jagtap, authorised official. )..Petitioner (Orig. Applicant) versus Maharashtra State Financial Corporation, ) a Corporation established under the State Financial ) Corporation Act, 1951, and having its Head Office at United) India Building, 1st floor, Sir P.M. Road, Fort, ) Mumbai-400 001. )..Respondent (Orig. Defendant) Mr. S.U. Kamdar, Senior Advocate, assisted by Mr. Rishabh Shah, Mr. Darshan R. Mehta and Mrs. V.R. Hombalkar, instructed by M/s. Dhruve Liladhar & Company, for the petitioner. Dr. A.K. Barthakur with Mr. Aditya Barthakur for the respondent. CORAM: P.B. MAJMUDAR & R.M. SAVANT, JJ. DATE: JUNE 10, 2009. ORAL JUDGMENT: (Per P.B. Majmudar, J.) In this petition, the petitioner, Small Industries Development Bank of India, has invoked the jurisdiction of this Court under Article 226 of the -2- Constitution of India by challenging the order passed by the Debts Recovery Appellate Tribunal (DRAT) dated 14th July, 2006 in Misc. Appeal No. 149 of 2006. By the said impugned order, the DRAT partly allowed the appeal preferred by the present respondent and modified the order dated 29th June, 2006, passed by the Debts Recovery Tribunal-III at Mumbai (DRT), in Original Application No. 40 of 2006. 2. The petitioner herein is the original applicant before the DRT. The petitioner herein has preferred Original Application No. 40 of 2006 against the present respondent. In the aforesaid application, the petitioner submitted an interlocutory application for interim relief at Exh.C. By the said application, the petitioner prayed that the respondent be restrained by an order of injunction from appropriating the recoveries made by the respondent from its constituent borrowers or realizing the securities accepted in terms of the agreement. It is also prayed that the respondent (original defendant before the DRT) be directed to declare on monthly basis, the amounts received by them from their constituents and pay over the same to the applicant towards the applicant’s dues. 3. It is the case of the present petitioner before the DRT that huge amount to the extent of more than Rs. 3 crores are outstanding. The respondent had agreed that any sum received by the respondent in repayment or realization of the loans and advances refinanced either wholly or partly by their application -3- shall to the extent of the accommodation granted by the applicant and remaining outstanding to be deemed to have been received by the respondent in trust for the applicant. It is also the case of the petitioner herein that the application of the respondent regarding the maintainability of the suit was rejected and though the appeal is pending against that order before the appellate authority, no stay is granted. The DRT by its order dated 29th June, 2006 partly allowed the said application and the respondent was restrained from appropriating the amount so recovered by the respondent. The respondent was also restrained from further dealing with the assets of the respondent which is prejudicial to the interest of the petitioner. 4. The said order of the DRT was challenged by the respondent by way of an appeal being Misc. Appeal No. 149 of 2006. The DRAT by the impugned order partly allowed the said appeal to the extent that injunction granted by the DRT will not be operative so far as the liability of the respondent for payment of interest and the amount due on the Statutory Liquidity Ratio Bonds is concerned. The petitioner, original applicant before the DRT, has preferred this petition under Article 226 of the Constitution of India challenging the said order of the Tribunal. 5. Mr. Kamdar, learned senior Counsel appearing for the petitioner, submitted that before the Tribunal, at the time when the original application was -4- heard, the respondent had not filed any reply on merits on the application submitted by the petitioner. Mr. Kamdar further submitted that the respondent is not paying the amount to the petitioner and as per the provisions of Section 37- A of the Small Industries Development Bank of India Act, the respondent can be said to be holding the money in trust on behalf of the petitioner. Mr. Kamdar has invited our attention to the provisions of Section 37-A of the aforesaid Act which reads as under: “37A. Amounts and securities to be held in trust - (1) Any sums received by a borrowing institution in repayment or realisation of loans and advances refinanced either wholly or partly by the Small Industries Bank shall, to the extent of the accommodation granted by the Small Industries Bank and remaining outstanding, be deemed to have been received by the borrowing institution in trust for the Small Industries Bank, and shall accordingly be paid by such institution to the Small Industries Bank, as per the repayment schedule fixed by the Small Industries Bank. (2) Where an accommodation has been granted to a borrowing institution, all securities held, or which may be held, by such borrowing institution, on account of any transaction in respect of which such accommodation has been granted by the Small Industries Bank, shall be held by such institution in trust for the Small Industries Bank.” Mr. Kamdar further submitted that the respondent, inspite of receiving substantial dues from its borrowers/constituents, has not disclosed the source from which they have received the monies to the petitioner. According to the learned counsel, if any amount is received by the respondent from the debtors whom the loan is paid, that amount is required to be paid to the petitioner in -5- view of the understanding that the amount will be required to be paid back to the petitioner that the petitioner had advanced loan to the respondent. It is submitted that the DRAT has not considered various other aspects of the matter and the order of the DRAT is a cryptic one as detailed reasons have not been given in the order. 6. Dr. Barthakur, learned counsel for the respondent, on the other hand, vehemently submitted that this petition is in the nature of Article 227 of the Constitution of India and unless there is error of jurisdiction or error apparent on the face of record, this Court should not exercise its jurisdiction under Article 227 of the Constitution by interfering with the impugned order. The learned counsel for the respondent further submitted that as per the direction of the State Government, the amount is required to be paid first towards the SLR bonds and even though the present petitioner had filed a writ petition challenging the direction of the State Government in this behalf, that petition was withdrawn. It is submitted that in view of the guidelines issued by the Reserve Bank of India, the amount is required to be paid towards the SLR bonds and that the respondent cannot be restrained from making such payment. It is further submitted by Mr. Barthakur that the petitioner is one among other creditors of the respondent and, therefore, it cannot get preferential treatment in the matter of receiving payment. The learned counsel further submitted that since the petitioner and respondent are public bodies, the matter is required to -6- be referred to the High Power Committee and the proceedings before the DRT are not maintainable. 7. We have heard the learned counsel appearing for the parties in detail. We have also gone through the voluminous record produced before us. 8. It is required to be noted that before the Tribunal, at the time of deciding the original application preferred by the petitioner, the reply of the present respondent was not on record. It is submitted by the learned counsel for the respondent that since a point regarding maintainability of the application was taken up by the respondent, at the relevant time the respondent had not filed any reply. 9. Be that as it may, it is not in dispute that at the time when the DRT decided the application for interim injunction, the respondent herein had not submitted any reply to the application submitted by the present petitioner. Whether the respondent is having any surplus amount available after making payment of the bonds in question is another question for which no particulars have been produced by the respondent before the Tribunal. The learned counsel for the respondent raised various points when the original application was decided obviously because no reply was filed. Even the DRAT has also observed that the points canvassed by the present respondent before the DRAT was not -7- considered by the DRT. Considering the aforesaid aspect of the matter and with a view to see that appropriate material is available before the DRT at the time of deciding the interim application, we deem it proper to set aside the order of the DRT and the DRAT by remitting the matter to the DRT as, in our view, it would be proper if the DRT decides the application de novo after considering the say of both the sides in detail. 10. It is true, as submitted by Mr. Barthakur, that the powers of this Court under Article 227 are restricted and this Court is not exercising any appellate jurisdiction. However, this petition is filed under Article 226 of the Constitution of India. Apart from that, since before the DRT the respondent had not filed any reply as also in view of the fact that the order of the DRAT is a cryptic one, in our view, it would be just and proper to direct the DRT to decide the interim application preferred by the petitioner de novo. 11. We, therefore, while setting aside the orders of the DRAT and DRT, direct the DRT to decide the application for interim relief preferred by the petitioner de novo. The respondent is directed to file reply to the said application of the petitioner within two weeks from today. If either of the parties wants to produce any other affidavit or documents on record, they are permitted to file the same before the DRT within two weeks from today. It will be open to the respondent to request the DRAT to decide the appeal filed by the respondent on the question of jurisdiction expeditiously. Till the DRT decides the application -8- de novo , the respondent herein is directed to keep 30 per cent of the amount received by them from their borrowers intact in a separate account. Rest of the amount they can disburse towards the SLR Bonds. 12. The DRT is directed to decide the application for interim relief preferred by the petitioner within a period of two months from today without fail. The parties are directed to co-operate with the early hearing of the application. Petition is accordingly partly allowed to the aforesaid extent by setting aside the impugned order below Exh.6 of the DRT dated 29th June, 2006, as well as the order of the DRAT dated 14th July, 2006 passed in Misc. Appeal No. 149 of 2006, and remanding the matter to the DRT to decide the interim application de novo. P. B. MAJMUDAR, J. R.M. SAVANT, J.