IN THE HIGH COURT OF JUDICATURE AT PATNA CWJC No.7025 of 2008 M/s Silverson Tea Company Pvt.Ltd. Having its Office at 41, N.S.Road, 4th Floor, Room No.404, Kolkata-700 001, West Bengal, represented through its Authorized signatory Sri Govind Dalmia. (Petitioner above was intervener in Appeal No. 10 of 2006 before the Hon‟ble Chairperson,Debt Recovery Appellant Tribunal at Kolkata ) ……………..Petitioner Versus 1. The Union of India through the Secretary, Ministry of Finance (Banking Division) Government of India, New Delhi. 2. The Hon‟ble Chairperson, Debt Recovery Appellate Tribunal,7th Floor,9 Old Post Office Street, Kolkata-700 001. 3. The Hon‟ble Presiding Officer, Debt Recovery Tribunal 339,East Boring Canal Road Patna-800 001. 4. The Learned Recovery Officer, Debt Recovery Tribunal 396, East Boring Canal Road Patna-800 001. ………….Respondents 1st set. 5. The Central Bank of India, A body corporate constituted under the Banking Companies (Acquisition and Transfer of Undertaking ) Act 1970, having its Head Office at Chander Mukhi, Nariman Point, Mumbai-400 021 and one of its Zonal Office at Maurya Lok Complex, Dak Banglow Road, Patna and one of its Branch Office amongst other places at Katihar Min Branch, Dist-Katihar (Bihar) represented through its Chief Manager. [ Respondent No.5 above is Respondent in Appeal No. 10 of 2006 before the Hon‟ble Charirperson, Debt Recovery Appellate Rribunal, Kolkata ] 6. The Zonal Manager, Central Bank of India , Zonal Office, 2nd Floor,B Block, Mouryalok Complex Dist.-Patna-800 001. 7. The Chief Manager, Central Bank of India, Katihar Main Branch Dist.- Katihar … … …. … Respondent 2nd Set. 8. M/s Katihar Flour Mills Pvt. Ltd. represented through its Directors i) Registered Officer at-62 Bentic Street, 2nd floor Kolkata-700069, West Bengal. ii) Factory at-Binodpur, Katihar 2 9. Sri Binod Kumar Jeloka, Director, M/s Katihar Flour Mills Private Limited, Son of Late Mohan Lal Jeloka, Resident of 62, Bentic Street Kolkata- 700 069. 10. Sri Raj Kumar Jeloka, Director M/s Katihar Flour Mikks Pvt. Ltd. Son of Late Mohan Lal Jeloka, Resident of 4, lake view Road, Kolkata-700 029. [ Respondents No. 9 and 10 above are the Appellants in Appeal No. 8 of 2005 ( arisen out of R.P. No.160/2002) before the Hon‟ble Presiding Officer, Debt Recovery Tribunal at Patna and also in Appeal No. 10 of 2006 before the Hon‟ble Charirperson, Debt Recovery Appellate Tribunal at Kolkata ( arisen out of Appeal No.8/2005)] 11. Sri Gajraj Jain, Director M/s Katihar Flour Mills Pvt. Ltd. Son of Shri Poonam Chand Jain, 11, Jhanshi Road, New Delhi. 12. Sri Dilip Kumar Jain, Director M/s Katihar Flour Mills Pvt. Ltd. Son of Sri Poonam Chand Jain 159, Ravindra Sarahi, 6th Floor, Kolkata. [Respondents No. 11 and 12 above are the Intervener in Appeal No.8 of 2005 before the Presiding Officer, Debt Recovery Tribunal at Patna ] .. ….. Respondent 3rd Set. -------------- For the petitioner: M/s. Y.V.Giri, Senior Advocate and Raju Giri, Advocate For Resp. Bank : Mr. Ajay Kumar Sinha, Advocate For Resp. Nos. 8,9 & 10:M/s. S.D.Sanjay, Shabir Rusab & Gautam Kejariwal, Advocates --------------- O R D E R 5. 18.11.2010 1. The petitioner-company has assailed the order dated 20.2.2008 passed by the Debts Recovery Appellate Tribunal (DRAT) at Kolkata in Appeal No. 13 of 2007/Claim Petition No. Appeal Case 8 of 2005/ Application No. 10 of 2006 by which 3 the Appellate Tribunal has set aside the impugned order dated 16.1.2006 of the Debts Recovery Tribunal, Patna and directed that the objection petition of the appellants (respondent nos. 9 and 10), the Certificate Debtor No.4 as well as the interveners (respondent nos. 11 and 12) against the order of attachment of the property dated 4.8.2004 by the Recovery Officer be decided afresh on merits by the Debts Recovery Tribunal, Patna instead of by the Recovery Officer. It has further held that the auction sale which has been held on 20.1.2006 shall stand cancelled and the parties who participated in the auction sale shall be at liberty to withdraw the deposits, if there be any. The petitioner- company, being the purchaser at the auction sale held on 20.1.2006, is aggrieved by the said order and has challenged the same. 2. The petitioner has also challenged the compromise entered into between the certificate holder-Bank, respondent no. 5 and the certificate debtor-defendant/respondent before the Debts Recovery Tribunal and have further challenged the order dated 6.7.2009 passed by the Debts Recovery Tribunal granting simple interest at the rate of 6% per annum and penalty at the rate of 3% per annum to the petitioner-company on the amounts deposited by it towards purchase money and kept with the 4 certificate holder-Bank. 3. The facts of this case lie within a narrow compass. The respondent no. 5, Central Bank of India filed O.A. No. 2/2001 before the DRT, Patna against the respondent No.8, M/s. Katihar Flour Mills Pvt. Ltd., being the borrower-company and respondent nos. 9 to 12, its Directors who were guarantors of the loan and had mortgaged their personal assets to the Bank towards the same, for recovery of debt of Rs. 1,47,32,687.45 up to 15.1.2001. The original application was decreed on 22.7.2002 against all the ten defendants including the respondents 3rd set (respondent nos. 8 to 12) jointly and severally, holding that the respondent-Bank is entitled to receive the said loan amount and interest amount up to 15.1.2001 with pendentelite and future interest at contractual rate with quarterly rests till its realization. Pursuant to the certificate issued under the said order the Recovery proceeding being R.P. No. 160/2002 was initiated. By the order of the Recovery Officer the properties of the Banks as also of the respondent-guarantors were attached. The guarantors filed objection against the attachment on 30.8.2004 taking the plea that the plot nos. and immovable property of the principal debtor was mentioned in the schedule of the property attached by the order dated 4.8.2004 but subsequently it became apparent 5 that only the property of the guarantors were in particular attached in the recovery proceedings. The Recovery Officer while taking up the objection petitions held that the order of attachment had not been challenged by the appellants and therefore disposed of the objection petitions with a direction for auction sale of the properties attached by order dated 12.9.2005, which the concerned respondents challenged before the DRT at Patna in Appeal No. 8/2005. 4. The DRT by its order dated 12.9.2005 held that the Recovery Officer neither heard the objections nor disposed of them by speaking order although the investigation by the Recovery Officer upon the objection petition is not a mere formality but it is mandatory as per law and he ought to have adjudicated upon the objections in accordance with the provisions of law. More so because the said order is appealable and if the same is not by speaking order then the valuable right of appeal of the objector shall be frustrated and hampered. He accordingly partly allowed the appeal by order dated 16.1.2006 remanding the case back to the Recovery Officer but further directing that the public auction shall be conducted as per programme and as per rules on 20.1.2006 but no order shall be passed under Rule 63 of the Second Schedule of the Income Tax 6 Act till all the four objection petitions of the appellants and one objection petition filed by the certificate debtor no.4. are disposed of. The guarantors got a public notice of the order dated 16.1.2006 of the DRT published in daily newspaper on 19.1.2006 and also made a prayer before the Recovery Officer on 20.1.2006 to stay the bid and first decide the objections of the respondent Nos. 9 and 10 but the Recovery Officer proceeded with the auction in which the petitioner was the highest bidder at Rs. 1.91 crores and had deposited 25% of the bid amount on 23.1.2006 and the rest amounts on 2.2.2006 along with Rs. 1.91 lacs towards poundage fee which was kept in a No lien account of the certificate holder-Bank. Aggrieved by the order dated 16.1.2006 passed by DRT, Patna, the respondent nos. 9 and 10 filed the aforesaid appeal before the Debts Recovery Appellate Tribunal at Kolkata in which the respondent nos. 11 and 12 also joined as interveners. The petitioner was also permitted to intervene in the said appeal. The appeal was disposed of by the aforesaid impugned order dated 20.2.2008. Aggrieved by the same the petitioner has come to this Court. 5. After the order of remand by the DRAT, Kolkata before the objection could be adjudicated by the DRT, Patna, respondent-Bank and Respondents Third Set entered into a 7 compromise on the basis of which the borrower deposited Rs. 2 crores 65 lacs which the Bank accepted in full and final settlement of its claims. The Bank had also filed a writ petition being CWJC No. 7645/08 against the order dated 20.2.2008 of the DRAT at Kolkata. In view of the compromise it prayed for withdrawal of the writ petition which was permitted to be withdrawn. It also prayed for withdrawal of the recovery proceedings before the Debts Recovery Tribunal in terms of the compromise. By order dated 6.7.2009 of the DRT, Patna it was directed that the recovery proceedings shall stand withdrawn and the recovery proceedings shall be disposed of with the consent of the parties on the basis of the joint compromise. In the said order dated 6.7.2009 the DRT, Patna also considered the interim petition filed by the auction purchaser-petitioner claiming that despite cancellation of sale by the DRAT at Kolkata and direction to return auction money the Bank has not refunded the same and accordingly it was entitled to compensation at the rate of 12% per annum on the amount from the judgment debtor and also penalty of 5% of the purchase money relying upon Rule 61 (1)(b) and Rule 64 of the Second Schedule to the Income Tax Act, 1961. By the said order dated 6.7.2009 it was directed that the petitioner was entitled for getting interest and penalty both 8 and accordingly it was awarded simple interest at the rate of 6% per annum and penalty at the rate of 3% per annum on the auction purchase money of Rs. 1 crore 91 lacs from the date of deposit till the same was realized/refunded. The petitioner has also challenged the said order claiming compound interest at the rate of 18% per annum in addition to penalty. 6. Learned counsel for the petitioner submits that the original decree and certificate has not been challenged by the respondents before any authority nor sale in favour of the petitioner has been challenged although the decree was passed against all the ten defendants including the guarantors, respondent nos. 9 to 12. It is further submitted by learned counsel that the appellate order suffers from a wrong view of law since the liability of the surety is co-extensive with the liability of the principal debtor and thus it was open to the certificate holder-Bank to proceed against the property of the guarantors without first moving against the property of the principal borrower company. In support of the said proposition, learned counsel relies upon two decisions of the Supreme Court; the first one being the case of State Bank of India Vs. M/s. Indexport Registered and others: AIR 1992 SC 1740, in para-13 of which it has been held as follows:- 9 “In the present case before us the decree does not postpone the execution. The decree is simultaneous and it is jointly and severally against all the defendants including the guarantor. It is the right of the decree holder to proceed with it in a way he likes. Section 128 of the Indian Contract Act itself provides that “the liability of the surety is co-extensive with that of the principal debtor, unless it is otherwise provided by the contract.” 7. The other decision relied upon by learned counsel is that of The Bank of Bihar Ltd. Vs. Dr. Damodar Prasad and another : AIR 1969 SC 297, in para 6 of which it has been held as follows: “It is now suggested that under Order 20, Rule 11(1) and Section 151 of the Code of Civil Procedure the Court passing the decree had the power to impose the condition that the judgment-creditor would not be at liberty to enforce the decree against the surety until the creditor has exhausted his remedies against the principal. Order 20, Rule 11 (1) provides that “where and in so far as a decree is for the payment of money, the Court may for any sufficient reason at the time of passing the decree order that payment of the amount decreed shall be postponed or shall be made by instalments, with or without interest, notwithstanding anything contained in the contract under which the money is payable. For making an order under Order 20, Rule 11(1) the Court must give sufficient reasons. The direction 10 postponing payment of the amount decreed must be clear and specific. The injunction upon the creditor not to proceed against the surety until the creditor has exhausted his remedies against the principal is of the vaguest character. It is not stated how and when the creditor would exhaust his remedies against the principal. Is the creditor to ask for imprisonment of the principal? Is he bound to discover at his peril all the properties of the principal and sell them; and if he cannot, does he lose his remedy against the surety? Has he to file an insolvency petition against the principal? The Trial Court gave no reasons for this extra-ordinary direction. The Court rejected the prayer of the principal debtor for payment of the decretal amount in instalments as there was no evidence to show that he could not pay the decretal amount in one lump sum. It is therefore said that the principal was solvent. But the solvency of the principal is not a sufficient ground for restraining execution of the decree against the surety. It is the duty of the surety to pay the decretal amount. On such payment he will be subrogated to the rights of the creditor under Section 140 of the Indian Contract Act, and he may then recover the amount from the principal. The very object of the guarantee is defeated if the creditor is asked to postpone his remedies against the surety. In the present case the creditor is a banking company. A guarantee is a collateral security usually taken by a banker. The security will become useless if his rights against the surety can be so easily cut down. The impugned direction cannot 11 be justified under Order 20, Rule 11(1). Assuming that apart from Order 20, R. 11(1) the Court had the inherent power under Section 151 to direct postponement of execution of the decree, the ends of justice did not require such postponement.” 8. On the basis of the aforesaid decisions, learned counsel contends that the reasoning of the DRAT for setting aside the order of the DRT, Patna directing the sale to proceed but not to be confirmed until the disposal of the objections, is wrong and should be set aside. 9. Learned counsel further submits that the petitioner is a bona fide purchaser for value and its rights cannot be defeated by any such action of compromise on the part of the respondents. 10. Learned counsel urges that the petitioner is also entitled to benefit of the doctrine of promissory estoppel and doctrine of reasonable expectation and under the same, the respondent-Bank cannot be allowed to enter into a compromise so as to defeat the rights of the petitioner. 11. Learned counsel in the alternative submits that even if this Court does not interfere with the impugned order dated 20.2.2008 of the DRAT at Kolkata and the order of the DRT, Patna accepting the compromise the petitioner was at the 12 very least entitled to a higher rate of interest of 18% compounded besides the penalty and not 6% simple interest as awarded by the DRT by its order dated 6.7.2009. In support of the same he relies upon a decision of the Supreme Court in the case of Hindi Pracharak Prakashan and another Vs. M/s. G.K.Brothers and others: AIR 1990 SC 221, in paras 2 and 3 of which it has been laid down as follows: “2. The property was sold by auction as early as 1980 and for well for 10 years the auction amount has been in deposit in Court without being invested. It was the duty of the decree- holder as also the auction-purchaser to ensure that the money was put into interest earning deposit. The Court should also have taken care to give appropriate direction. No income in the circumstances has been earned on the amount said to be about rupees one lakh and five thousand. 3. Now that the decree has been satisfied and the sale which has not yet been confirmed is being set aside, the auction-purchaser is entitled to the amount deposited in Court as also to reasonable compensation. We are of the view that reasonable compensation in this case should be 12 per cent per annum of interest on the amount. We accordingly direct that within three months from now the judgment-debtor shall deposit the interest due at 12 per cent in the Executing Court and on that amount being deposited the original amount in deposit together with the interest to be deposited shall be 13 returned to the auction-purchaser. In the event of the amount not being paid as now directed, interest shall be calculated at 18 per cent instead of 12 per cent as ordered above and the amount can be recovered through execution against the very property.” 12. Learned counsels for the respondents, on the other hand, have sought to assail the very maintainability of the writ petition stating that the petitioner being an auction purchaser, no right could accrue to it as the sale itself was subject to the order passed on the objection petitions. It is submitted that the DRT order dated 16.1.2006 was received by the Recovery Officer on 17.1.2006 clearly stating that he may proceed with the auction on 20.1.2006 but the sale would be confirmed subject to disposal of objections by the Recovery Officer and thus the right of the petitioner would be crystallized only on the disposal of the objection petitions. It is further argued that the petitioner had no right to file an appeal against the objections if the same had been allowed and it could come in Court only if the objections were overruled and therefore on a parity of reasoning it cannot be permitted to challenge the order of the DRAT remanding the matter to the DRT, Patna and canceling the sale in the meantime. 13. It is also submitted by learned counsels that the petitioner all along was aware that the sale itself was subject to 14 disposal of the four objection petitions and even if one objection was upheld, it would have no right. The said knowledge of the matter is fortified by the newspaper notice dated 19.1.2006 regarding the order dated 6.7.2006 of the DRT. Thus any amount deposited by the petitioner was with full knowledge and at its own peril and it cannot be permitted to object if the matter ultimately concluded against it. In support of the aforesaid propositions learned counsels rely upon a decision of the Apex Court in Ms. Navalkha & Sons Vs. Sri Ramanya Das and others: AIR 1970 SC 2037, in the relevant part of para 6 of which it has been held as follows:- “The principles which should govern confirmation of sales are well established. Where the acceptance of the offer by the Commissioners is subject to confirmation of the Court the offeror does not by mere acceptance get any vested right in the property so that he may demand automatic confirmation of his offer.” 14. Learned counsels also rely upon a decision of the Supreme Court in Allahabad Bank and ors. Vs. Bengal Paper Mills Co. Ltd. And others: (1999) 4 SCC 383, in which observations made in Navalkha & Sons case (supra) was cited with approval and it was further observed in para-25 therein as follows: “It was contended on behalf of the 15 second respondent, the State of West Bengal and the employees that, whatever we might think of the order of sale, we should not interfere. For the reasons that we have stated, we cannot agree. The interests of the creditors of the said Company are paramount, as is the obligation of the Court to them. That the second respondent has incurred expenditure and obligations, which were detailed, subsequent to the passing of the order of sale and up to date cannot, in the circumstances, deter us from setting aside the order of sale. The second respondent knew that the appeals were pending. It should have appreciated that the order of sale was very vulnerable, given what the Division Bench of the High Court had to say about it. It consciously took the risk of incurring the expenditure and obligations and it cannot take shelter behind them.” 15. They also rely upon similar observations made by the Apex Court in the case Valji Khimji & Company Vs. Official Liquidator of Hindustan Nitro Product (Gujarat) Ltd. & ors: 2008(4) PLJR 146 (SC) 16. Learned counsels also contend that the petitioner cannot be considered as a party aggrieved as only the certificate holder-Bank could be an aggrieved party with respect to any action of the private respondents until disposal of their objection petitions. In this regard, learned counsel cites the decision of the Supreme Court in the case of Jasbhai Motibhai Desai Vs. 16 Roshan Kumar, Haji Bashir Ahmed and others: AIR 1976 SC 578, in para-47 of which it has been observed as follows: “In the light of the above discussion, it is demonstrably clear that the appellant has not been denied or deprived of a legal right. He has not sustained injury to any legally protected interest. In fact, the impugned order does not operate as a decision against him, much less does it wrongfully affect his title to something. He has not been subjected to a legal wrong. He has suffered no legal grievance. He has no legal peg for a justiciable claim to hang on. Therefore he is not a „person aggrieved‟ and has no locus standi to challenge the grant of the No Objection Certificate.” 17. They also rely upon two decisions of the Supreme Court on the question of who is aggrieved person, in the case of Thammanna Vs. K. Veera Reddy and others: AIR 1981 SC 116 and that of Anand Sharadchandra Oka Vs. University of Mumbai and others: (2008) 5 SCC 217. It is thus submitted by learned counsels on the strength of these decisions that the petitioner does not come within the category of person aggrieved by the impugned orders of the DRAT and the DRT and it ought not to be permitted to challenge the same in the writ jurisdiction of this Court. 18. It is also submitted by learned counsels for the 17 respondents that both the DRT and the DRAT in their orders dated 16.1.2006 and 22.2.2008 have held that the Recovery Officer had acted illegally in the matter by not deciding the objection petitions filed by the concerned respondents. It is urged that the said order of the DRT had not been challenged by the Bank or any one for disposal of objections and thus it acquired finality. Before the objections could be decided, in terms of the one-time settlement scheme the offer made by the private respondents was accepted and they paid Rs. 2.65 crores on 31.3.2009 and a joint petition was filed for withdrawal in terms of the compromise which was allowed by the DRT. Thus, when the case itself stood concluded by the withdrawal of the recovery proceedings on behalf of the Bank, nothing remains to be challenged and for the said sole