SCA/7687/2005 1/33 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD SPECIAL CIVIL APPLICATION No. 7687 of 2005 For Approval and Signature: HONOURABLE MR.JUSTICE M.R. SHAH =================================== 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? =================================== INDIAN ELECTRO CHEMICALS LTD. & 1 - Petitioner(s) Versus UNION BANK OF INDIA & 5 - Respondent(s) =================================== Appearance : MR RS SANJANWALA for Petitioner(s) : 1 - 2.MR TV SHAH for Petitioner(s) : 1 - 2. None for Respondent(s) : 1, MS NALINI S LODHA for Respondent(s) : 1, NOTICE SERVED BY DS for Respondent(s) : 2, NOTICE SERVED for Respondent(s) : 3 - 4. M/S THAKKAR ASSOC. for Respondent(s) : 5, MR DN PANDYA for Respondent(s) : 6, =================================== SCA/7687/2005 2/33 JUDGMENT CORAM : HONOURABLE MR.JUSTICE M.R. SHAH Date : 11/06/2007 ORAL JUDGMENT By way of this petition under Article 226 of the Constitution of India, the petitioners, original judgment debtor have prayed for an appropriate writ, direction and/or order quashing and setting aside the order passed by the Recovery Officer, Debts Recovery Tribunal (DRT) dated 29-10-2004 passed below Exh-D/157, orders dated 29-10-2004 and 29-11-2004 passed in Review Petition No.918; common order passed by the DRT dated 25-1- 2005 passed in Appeal Nos. 74/04, 78/04 and Misc. Application No.441 of 2004; common judgment and order passed by the Debts Recovery Appellate Tribunal, (Western Region) (DRAT) dated 22-2/3-2005 passed in Appeal No.129 of 2005 and 135 of 2005. It is also further prayed to quash and set aside the award passed by the DRT passed in A.O. No.165 of 1999 and the recovery certificate issued thereon. It is also further prayed for an appropriate order holding that the judgment creditor SCA/7687/2005 3/33 JUDGMENT respondent No.1 bank is entitle to receive the amount from the petitioner as per the contract of settlement dated 4-7-2001 with interest at the rate of P.L.R. on the reducing balance and to direct the respondent No.4 Recovery Officer, DRT to determine the balance legitimate dues of the bank as per the contract of settlement dated 4-7-2001 after giving set off for the amount received by the respondent No.1 bank against the dues of the petitioner. It is also further prayed to direct to issue new certificate on depositing the balance amount in DRT by the petitioner. It is also further prayed to set aside all the proceedings pertaining to the sale of the land of the petitioner and for an appropriate direction to hand over the vacant and peaceful possession of the land of the factory of the petitioner bearing survey Nos.36 to 42 of Odhav and survey No.74, 75/1, 75/2, 79/1, 79/2 and 80 of village Nikol, Odhav and to set aside any action taken by the respondent No.5 or its nominee, who is claiming to derive any right, title or interest in the above land. It is also further prayed for an appropriate direction to hand over the vacant and peaceful possession of the land of the factory of the petitioner to the petitioner. SCA/7687/2005 4/33 JUDGMENT 2. The facts leading to the present Special Civil Application are as under: The respondent No.1 Union Bank of India (hereinafter referred to as “the certificate holder”) filed Original Application No.165 of 1999 for recovery of the dues under section 19(1) of the Recovery of Dues Due to Banks and Financial Insitutions Act, 1993 (RDBFI Act) against the petitioner M/s Indian Electrochemicals Limited (hereinafter referred to as the “certificate debtor”). It appears that the certificate debtor did not contest the original application; did not file any written statement and the said original application was proceeded further ex parte and came to be decided on 10-9-2001 by the DRT and the certificate debtor was ordered to pay a sum of Rs.4,19,32,380.72paisa to the certificate holder. It was also ordered that the certificate holder shall be entitled to sale the hypothecated and mortgaged properties belonging to the certificate debtor. Accordingly, recovery certificate came to be issued. The certificate holder then filed recovery certificate 918 before the Recovery Officer, DRT, Ahmedabad and hypothecated properties came to be SCA/7687/2005 5/33 JUDGMENT sold in the recovery proceedings. The properties were purchased by one PBSM and Co. The amount realized was appropriated towards the dues of the certificate holder. Since, the decretal amount was very huge, the certificate holder then requested the recovery officer for selling the mortgaged properties. Public auction has taken place and ultimately the respondent No.5 Bileshwar Industrial Estate Development Pvt. Ltd. (the auction purchaser) was held to be highest bidder and he offered an amount of Rs.4.51 crores. There were claims by the sale tax department as well as Gujarat Kamdar Panchayat (on behalf of the labourers). They submitted their objections which came to be rejected by the recovery officer. It appears that at the time of auction, the certificate debtor raised certain objections with regard to the reserve price etc., which were rejected by the recovery officer and the certificate debtor preferred appeal No.8 of 2003 before the DRT and the DRT by its order dated 23-5-2003 partly allowed the said appeal and the order dated 6-3-2003 of the recovery officer for fixing the reserve price, particularly lot No.I (land) came to be set aside. It appears that certain directions were issued by the DRT with regard to proposal SCA/7687/2005 6/33 JUDGMENT for settlement and the OTS which will be referred to and dealt with hereinafter. It appears that Special Civil Application No.7106 of 2003 came to be filed by the buyer of the movable properties, before this Court granted the interim stay of the order passed by the DRT in appeal No.8 of 2003. It appears that the certificate debtor submitted an application Exh-D/157 with the recovery officer in recovery proceeding No.918 on 7-10-2004 to review and recall all the orders passed in connection with the sale of the land of the factory of the company and issue No Due Certificate for the dues of the certificate holder alleging inter alia that a settlement has been arrived at between petitioner and the bank on 4-7-2001 informing that dues of the company has settled as per the OTS for Rs.1,42,55,117.72paisa out of which part payment is already made and that company is ready and willing to pay the balance amount. The Recovery Officer by its order dated 23-11-2004 dismissed the application Exh-D/157 and further passed an order that if the certificate debtor want to retain the immovable properties sold on 6-7-2004 and want to settle the matter with the Bank, they are directed to deposit Rs.4.51 crores within a period of 7 days and may approach the bank for a SCA/7687/2005 7/33 JUDGMENT compromise proposal. It appears that against the order passed by the Recovery Officer dated 6-5-2003, the labour union filed appeal No.26 of 2003 before the Tribunal challenging the rejection of the applications T/24 and T/45. Similarly Sales Tax department preferred appeal No.72 of 2004 before the Tribunal challenging the order dated 5-10- 2004 rejecting the application Exh T/82 and T/49. Appeal No.74 of 2004 came to be filed by the certificate debtor challenging the order passed by the Recovery Officer dated 29-11-2004 passed below Exh-D/157. Appeal No.75 of 2004 came to be filed by the certificate holder against the order passed by the Recovery Officer dated 5-10-2004 and 29-11-2004 passed below H/169. Appeal No.78 of 2004 came to be filed by the certificate debtor challenging the order dated 23-11-2004, 29-11-2004 and 1-12-2004 passed by the Recovery Officer. Simultaneously, the certificate debtor also preferred Misc. Application No.441 of 2004 for condonation of delay caused in filing the Civil Misc. Application for setting aside the ex parte judgment in OA No.165 of 1999 decided on 10-9-2001. All the aforesaid appeals and Misc. Application No.441 of 2004 came to be heard and disposed of by the DRT by common judgment SCA/7687/2005 8/33 JUDGMENT and order dated 25-1-2005. By the aforesaid common judgment and order, the Tribunal allowed the appeal Nos.26 of 2003 and 72 of 2004 i.e. appeal preferred by the Labour Union and Sales Tax department and the orders passed by the Recovery Officer in Recovery Proceedings No.918 which was against the labour union and the Sales Tax Department came to be set aside. The Tribunal dismissed Appeal Nos.74 of 2004, 75 of 2004 and 78 of 2004. The Tribunal also dismissed civil miscellaneous application for setting aside the ex parte judgment and award. It appears that thereafter appeals came to be filed before the DRAT, Mumbai being Appeal Nos.48 of 2005 and 62 of 2005 which also came to be dismissed by the Appellate Tribunal by common judgment and order dated 22-3-2005. Being aggrieved by and dissatisfied with the aforesaid orders, the petitioner certificate debtor has preferred the present Special Civil Application for the aforesaid reliefs. 3. Thus, basically what is challenged in the present Special Civil Application is the order passed by the Recovery Officer passed below Exh-D/157 confirmed by SCA/7687/2005 9/33 JUDGMENT DRT and further confirmed by the DRAT, Mumbai; the order passed by the DRT in rejecting the application for condonation of delay of 1180 days in preferring Misc. application for setting aside the ex parte judgment and award confirmed by the DRAT, Mumbai. It appears from the pleading and the submission on behalf of the learned advocate appearing on behalf of the petitioners that talks for settlement were going on after the ex parte judgment and award as per the settlement and the OTS. By communication dated 4-7-2001, the senior Branch Manager of the respondent No.1 bank has informed the petitioners with regard to the acceptance of the settlement proposal for Rs.1,42,55,117.72paisa and it is the case on behalf of the petitioners that in spite of the aforesaid communication dated 4-7-2001 and in spite of the fact that an amount of Rs.1,34,67,780/- was already paid in the bank against the dues of the petitioner company and balance amount of Rs.4,77,377.72paisa was due and payable, still the respondent No.1 bank did not act as per the same. It is submitted that by communication dated 4-7-2001, the respondent No.1 bank has accepted one time settlement proposal submitted on SCA/7687/2005 10/33 JUDGMENT behalf of the petitioners and therefore, it is prayed to grant the relief as prayed for and issue the declaration accordingly. By relying upon certain documents/correspondence annexed with the petition, the learned advocate appearing on behalf of the petitioner has submitted that the respondent No.1 has accepted the OTS settlement submitted by the petitioners for a sum of Rs.1,42,55,177.72paisa. It is also further submitted that as the petitioners were initially not aware of the ex parte judgment and award of the DRT dated 4-7-2001 and that they were subsequently prosecuting other proceedings before the Recovery Officer, they could not prefer the application for setting aside the ex parte judgment and decree and therefore, it is submitted that all the authorities below inclusive of the Tribunal and the Appellate Tribunal have materially erred in not condoning the delay in preferring the application for setting aside the ex parte judgment and decree. 4. Petition is strenuously opposed by the respondent No.1 Bank. At the outset, it is submitted that there are mis-statements made on behalf of the petitioner in the SCA/7687/2005 11/33 JUDGMENT present Special Civil Application and certain vital documents deliberately not produced on record on behalf of the petitioner and they have tried to mislead the Court by making false statement and not producing the relevant documents. It is submitted on behalf of the respondent No.1 that the present petition is required to be dismissed on the ground of delay and laches, estoppel waiver. It is also further submitted that the present petition has been filed with mala fide intention with a view to further delaying the proceedings and recovery of decretal dues of the respondent No.1 Bank. It is submitted that though ample opportunity was given and the orders were passed by the DRT, the petitioners did not contest the original application; did not file written statement and therefore, the DRT was justified in proceedings further with the O.A. ex parte. It is also further submitted that the certificate Debtor did not even thereafter challenge the ex parte judgment and decree for more than three years, though they have participated in the recovery proceedings and they have aware of the ex parte judgment and decree passed by the Tribunal. So far as the alleged settlement dated 4-7-2001 is concerned, it is submitted on behalf of SCA/7687/2005 12/33 JUDGMENT the respondent No.1 bank that even as per the communication dated 4-7-2001, the petitioners were required to make the payment as per the conditions mentioned in the said letter dated 4-7-2001 and the petitioners never complied with the conditions prescribed in the communication dated 4-7-2001 and therefore, when the petitioners themselves have not acted as per the communication dated 4-7-2001, they were not entitled to any settlement and therefore, the respondent No.1 bank has rightly initiated the recovery proceedings for the entire decretal amount. It is submitted that some of the documents which are produced in the petition are not correctly produced and in some of the correspondence, though the correspondence by the respondent No.1 bank was “without prejudice”, in the correspondence, word “without prejudice” has not been typed. Thus, the petitioners have tried to mislead the Court. It is submitted that no jurisdictional error has been committed by the Recovery Officer, the DRT and/or the DRAT while passing the impugned orders. It is submitted that the petitioners have tried to exploit the situation and was involved into unnecessary litigation and has tried its best to delay the SCA/7687/2005 13/33 JUDGMENT recovery proceedings and has misused the proceedings. 5. Shri Mihir Joshi, learned senior advocate appearing for the respondent No.1 bank has pointed out the following mis-statements/suppression etc. made by the petitioners. (i) The petitioner has incorrectly stated in the Synopsis (page G), petition paragraphs 16(page 13), paragraph 17 (page 14) and paragraph 46 (page 32) that the hearing of the original application took place on 3-8-2001 i.e. before the period of one month for down payment was over, while in fact the hearing had taken place on 30-8-2001. In fact, the original application had been notified for hearing on the regular board of DRT on 30-8-2001. (ii) The petitioner has incorrectly stated in the Synopsis (page G) that on 25-9-2001, the petitioner was not informed about the ex parte award in the original application by the Bank,similarly on page-H, it has been stated against 29-9-2001 that the payments were accepted unconditionally by the Bank and it never informed the petitioner about the ex parte award and also against 24-10-2001, it has been stated that nowhere was it mentioned that the Bank had already obtained ex-parte SCA/7687/2005 14/33 JUDGMENT decree. On page J, the petitioner has indirectly stated that it came to know of the ex parte award when notice was served by the Recovery Officer on 7-5-2002. The petitioner has reiterated its contention made before the Tribunals that the petitioner was not aware of the decree dated 10- 9-2001 and came to know of the same for the first time when notice was received from the Recovery Officer on 7- 5-2002 (paragraph 46, 47 and Ground N; pages 32, 33 and 41). The petitioner states that the award dated 10-9-2001 cannot be said to be an ex parte award. In fact the original application had been notified for final hearing on the regular board of the DRT on 30-8-2001. Moreover by letter dated 22-9-2001 (page 505) the petitioner had been informed by the Bank regarding passing of the decree, which letter has been acknowledged by the petitioner vide letter dated 28-9-2001 (page 90). Even subsequent correspondence indicates the fact of the passing of the award by the DRT. In letter dated 22-12-2001 (page 517A) addressed by the Bank to the petitioner it was directed that payment of balance amount and installment due in November 2001 with interest failing which OTS proposal SCA/7687/2005 15/33 JUDGMENT would be null and void and since DRT had already issued a recovery certificate based on the judgment of the presiding officer, the Bank would request DRT to issue a demand notice. This letter has been acknowledged by the petitioner vide letter dated 26-12-2001 (page 519A). (iii) The petitioner has referred to letter dated 21-10-2001 addressed by the Bank to it in paragraph 20 of the petition (page 15) and has annexed the letter to the petition (at page 92). The existence of the letter has been reaffirmed in the rejoinder at paragraph 19. No letter dated 21-10- 2001 is presently available with the Bank. The petitioner has not produced the original letter dated 21-10-2001 received by it. The contents of the said letter have been conveyed by the Bank vide letter dated 24-10-2001 (page 515). However, the words 'without prejudice' have not been incorporated in the typed copy of the letter dated 21- 10-2001 annexed to the petition. (iv) The principal grievance of the petitioner appears to be that a settlement was arrived at between the parties, which was not being adhered to by the Bank and that the Bank continued to proceed further with its original application and recovery proceedings keeping the SCA/7687/2005 16/33 JUDGMENT petitioner in the dark. However, correspondence which indicates contrary facts has been suppressed by the petitioner being as under: a. Letter dated 17-7-2001 (page 503) addressed by the petitioner to the Bank not accepting the amount of settlement or even the period within which the payment was to be made. b. Letter dated 22-9-2001 (page 505) addressed by the Bank to the petitioner conveying that the DRT had passed an order allowing the Bank's claim of Rs.4.19 crores with interest and that unless payment was made, recovery proceedings would be initiated. c. Letter dated 24-10-2001 (page 515) addressed by the Bank to the petitioner conveying that unless the quarterly installments were paid the benefit of approval of settlement would be lost and the bank would be entitled to recovery full dues with interest. d. Letter dated 22-12-2001 (page 517A) addressed by the Bank to the petitioner directing payment of balance amount and SCA/7687/2005 17/33 JUDGMENT installment due in November 2001 with interest failing which OTS proposal would be null and void and since DRT had already issued a recovery certificate based on the judgment of the presiding officer, the Bank would request DRT to issue a demand notice. e. Letter dated 28-12-2001 (page 520) addressed by the Bank to the petitioner reiterating that the settlement amount was Rs.1.42 crores and not Rs.1.40 crores and in the absence of positive response, the Bank would proceed with legal remedy. f. Letter dated 29-12-2001 (page 520A) wirrten by the petitioner to the Bank objecting to the amount of settlement and payment schedule. g. Letter dated 4-1-2002 (page 524A) addressed to the petitioner by the Bank that the proposal for settlement was for payment of Rs.1.42 crores and no change was tenable and that the installment had to be paid on the due dates and under no circumstances could the same be extended. SCA/7687/2005 18/33 JUDGMENT h. Letter dated 11-4-2003 (referred on page 187) addressed by the petitioner to the Recovery Officer stating inter alia that RBI OTS had expired in September 2002. (v) The petitioner issued notice in the Gujarat Samachar on 14-7-2005 (page 583) that the subject property was of the ownership and in possession of the petitioner company and therefore, no person should deal with the said property. The petitioner also objected against mutation of entry in respect of the land vide letter dated 19-5-2005 (page 582). This advertisement was issued and objection raised though the sale had taken place on 6-7-2004 as stated by the petitioner itself in the Synopsis and order of confirmation of sale had been passed on 23-3-2005 (page 577) and possession of the subject land had been handed over by the Court Receiver to the purchaser on 23-3- 2005(page 581). It is submitted that when the petitioners have not come out with clean hand and have suppressed the material fact and have made mis-statements as stated hereinabove, the petitioners are not entitled to any discretionary relief in a petition under articles 226 and SCA/7687/2005 19/33 JUDGMENT 227 of the Constitution of India. 6. At the outset, it is required to be noted that earlier this matter was heard by this Court (Coram: K.S. Jhaveri, J.) on 7-10-2005, it was pointed out by the learned advocate appearing on behalf of the respondent No.5 that the petitioners have tried to take due advantage of the present proceedings pending before this Court and advertisement has been issued by the petitioners with incorrect facts and/or without disclosing certain facts. It was pointed out that an advertisement was given in the local newspaper on behalf of the petitioners pertaining to the property with regard to the subject matter of the petition, wherein it was cautioned that the ownership and possession of the subject lands were that of the petitioners and the issue is pending before the Court. However, it was pointed out that there is a decree passed against the petitioners by the competent Court. When the present petition was heard on 7-10-2005, a query was put to the learned counsel appearing for the petitioners, whether the property in question is mortgaged or not, a statement was made by the advocate on record through Shri Nanavati, SCA/7687/2005 20/33 JUDGMENT learned senior counsel that the property was not mortgaged. However, it was found from the record that in fact the property has been mortgaged and it was found that a false statement was made by the counsel on behalf of the petitioners and the learned Single Judge found that the above conduct amounts to professional misconduct and the learned Single Judge was of the opinion that the Bar Council of Gujarat is required to take serious view of the matter and accordingly the Registry was directed to refer the matter to the Bar Council of India for appropriate action against Shri TV Shah and Shri Kamlesh J. Vora, learned advocates. However, after the order was signed, both the learned advocates filed affidavits tendering unconditional apology which was accepted by the learned Single Judge and the direction contained in the above order dated 7-10-2005 was recalled and cancelled. That thereafter, the present Special Civil Application came to be heard by this Court time and again and it was pointed out that the aforesaid mis-statement have been made on behalf of the petitioners in the memo of the petition, supporting annexures and there is a suppression of material fact as stated hereinabove. An affidavit is filed by SCA/7687/2005 21/33 JUDGMENT the petitioner No.2 pointing out that she does not know anything about the mis-statement and has submitted that whatever is done is done by her counsel Shri TV Shah and she has put her signature as per the instruction of the advocate and she has also tendered unconditional apology and separate affidavit is filed by the petitioner No.2. Now in the above background, the present Special Civil Application is required to be decided. 7. Heard the learned advocate appearing on behalf of the parties. 8. At the outset, it is required to be noted that in the present Special Civil Application, the petitioner has prayed for various reliefs challenging the various orders passed by the Recovery Officer, DRT, orders passed by the DRT and the orders passed by the DRAT at Mumbai and certain other reliefs in one petition creating confusion and asking for multi reliefs in one petition. As stated above, the petitioners have challenged the order passed by the