Case: UCO BANK Vs. NATIONAL TEXTILE CORPORATION LTD. &amp; ANR

claims being put forth. It is further brought to the notice that the present mechanism brought in through the Office Memorandum dated 22.05.2018 is the Administrative Mechanism for Resolution of CPSEs Disputes (AMRCD) wherein a similar consideration as was being made by PMA will be made. 18. The learned Additional Solicitor General while controverting the contentions insofar as the said Office Memorandum providing the forum would contend that the same would not be applicable in the present facts. In that regard it is contended that the very liability of respondent No.1 herein is in dispute as only the Textile Mill is taken over and, in such circumstance, the said mechanism which provides for adjudication in the case of claims inter se between two Public Sector Enterprises would not be applicable herein. In that light it is contended that the Division Bench of the High Court was justified in quashing the notice issued by the Arbitral Tribunal which was seeking to adjudicate the matter in the jurisdiction which it did not possess. 19. As already noticed, since the present examination herein is limited to the aspect relating to forum and when it is seen that the claim initially made by the appellant is against the Shree Sitaram Mills Ltd. and the Respondent No.1 herein is disputing the liability for the same by bringing about a distinction since the take-over was only of Shree Sitaram Mills and not of Shree Sitaram Mills Ltd., an adjudication on that aspect to be made cannot be considered as a dispute as involving only the two public sector establishments as contemplated under the Official Memorandum referred to above. 20. While stating so it cannot also be lost sight that the appellant herein had originally instituted the recovery proceedings against Shree Sitaram Mills Ltd. by filing Suit No.3961/1988 which was thereafter transferred to the Debts Recovery Tribunal I, Mumbai in O.A. No.2526/1999. The said proceeding had concluded by issue of Recovery Certificate dated 05.08.2004 against the other defendants except defendant Nos.3 (a to c) regarding which an appeal in DRTA Appeal No.271/2005 is pending before the Debts Recovery Appellate Tribunal, Mumbai. The said appeal is against the judgment and decree dated 29.03.2005. In the recovery proceedings pursuant to the decree, if in the meanwhile certain change of status relating to the judgment debtor has taken place as in the instant case, namely, the take-over of Shree Sitaram Mills which was a part of Shree Sitaram Mills Ltd. is to be taken note. Upon consideration of evidence adduced by the parties it has to be determined in that light as to whether the Respondent No.1 Corporation has in fact inherited such liability making themselves liable for the decree in existence or on the other hand if such liability has remained and subsisted with Shree Sitaram Mills Ltd. It is a matter to be examined in such recovery proceedings by providing opportunity to the parties to adduce evidence. Further in respect of post take over period a Suit No.4489/96 was filed which was transferred to DRT and registered as O.A.No.1114/2000 which has remained pending as respondent No.2 had proceeded to BIFR. No doubt in that circumstance if the appellant herein had chosen to initiate the proceedings before the PMA, keeping in view that the COD which was subsequently constituted is a mechanism in the nature of pre-litigation mediation, it cannot be said that the step adopted by the appellant is wholly without basis. 21. However, when it is noticed that the Respondent No.1 has serious objections to the liability and nature of take-over of the Textile Mills is to be examined before recoveries are made, the adjudication of the matter in the recovery proceedings would be the appropriate course. Therefore, to that extent the Division Bench no doubt was justified in setting aside the arbitral proceedings by quashing the notice dated 17.11.2011. However, we notice that the Division Bench while arriving at its conclusion has also referred to the decision of the High Court of Madras in Swadeshi Cotton Mills Company Ltd. vs. The Commissioner of Central Provident Fund and the decision of the High Court of Allahabad in U.P State Sugar Corporation Ltd. vs. Dr. Kailash Behari Sharma to hold that the liability would not transfer on takeover. The said consideration is with regard to the Provident Fund dues towards the Provident Fund contribution. In the instant case, the claim is by the lender Bank towards which a decree had already been granted in respect of one claim and the other claim is pending consideration. The fact as to whether in the matter of take over, the liabilities were also included is one aspect of the matter. Further, the aspect which may also require examination by the Court undertaking the recovery proceedings is as to whether in the process of take-over of Shree Sitaram Mills the secured assets for the loan transaction has been taken over by the Respondent No.1 or was it available with Shree Sitaram Mills Ltd. if it had retained its existence and identity after take-over of the Textile Mills and in that circumstance whether the recovery proceedings could still be resorted to against the Respondent No.1 in respect of the liability of Shree Sitaram Mills Ltd., and would the Union of India be liable as Guarantor. This is an aspect which is to be examined after providing opportunity to the parties, if need be, after tendering evidence in that regard. 22. Therefore, the question of liability could neither have been decided in the writ proceedings before the High Court nor in this appeal. If this aspect is kept in view, the conclusion reached by the Division Bench in paragraph 25 to hold that the respondent herein is not liable for the dues of Shree Sitaram Mills Ltd. and the proceedings is misconceived for such claim is an erroneous conclusion reached in a proceedings where such conclusion ought not to have been recorded. Hence the decision to that effect is liable to be set aside.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]19. As already noticed, since the present examination herein is limited to the aspect relating to forum and when it is seen that the claim initially made by the appellant is against the Shree Sitaram Mills Ltd. and the Respondent No.1 herein is disputing the liability for the same by bringing about a distinction since the take-over was only of Shree Sitaram Mills and not of Shree Sitaram Mills Ltd., an adjudication on that aspect to be made cannot be considered as a dispute as involving only the two public sector establishments as contemplated under the Official Memorandum referred to above20. While stating so it cannot also be lost sight that the appellant herein had originally instituted the recovery proceedings against Shree Sitaram Mills Ltd. by filing Suit No.3961/1988 which was thereafter transferred to the Debts Recovery Tribunal I, Mumbai in O.A. No.2526/1999. The said proceeding had concluded by issue of Recovery Certificate dated 05.08.2004 against the other defendants except defendant Nos.3 (a to c) regarding which an appeal in DRTA Appeal No.271/2005 is pending before the Debts Recovery Appellate Tribunal, Mumbai. The said appeal is against the judgment and decree dated 29.03.2005. In the recovery proceedings pursuant to the decree, if in the meanwhile certain change of status relating to the judgment debtor has taken place as in the instant case, namely, the take-over of Shree Sitaram Mills which was a part of Shree Sitaram Mills Ltd. is to be taken note. Upon consideration of evidence adduced by the parties it has to be determined in that light as to whether the Respondent No.1 Corporation has in fact inherited such liability making themselves liable for the decree in existence or on the other hand if such liability has remained and subsisted with Shree Sitaram Mills Ltd. It is a matter to be examined in such recovery proceedings by providing opportunity to the parties to adduce evidence. Further in respect of post take over period a Suit No.4489/96 was filed which was transferred to DRT and registered as O.A.No.1114/2000 which has remained pending as respondent No.2 had proceeded to BIFR. No doubt in that circumstance if the appellant herein had chosen to initiate the proceedings before the PMA, keeping in view that the COD which was subsequently constituted is a mechanism in the nature of pre-litigation mediation, it cannot be said that the step adopted by the appellant is wholly without basis21. However, when it is noticed that the Respondent No.1 has serious objections to the liability and nature of take-over of the Textile Mills is to be examined before recoveries are made, the adjudication of the matter in the recovery proceedings would be the appropriate course. Therefore, to that extent the Division Bench no doubt was justified in setting aside the arbitral proceedings by quashing the notice dated 17.11.2011. However, we notice that the Division Bench while arriving at its conclusion has also referred to the decision of the High Court of Madras in Swadeshi Cotton Mills Company Ltd. vs. The Commissioner of Central Provident Fund and the decision of the High Court of Allahabad in U.P State Sugar Corporation Ltd. vs. Dr. Kailash Behari Sharma to hold that the liability would not transfer on takeover. The said consideration is with regard to the Provident Fund dues towards the Provident Fund contribution. In the instant case, the claim is by the lender Bank towards which a decree had already been granted in respect of one claim and the other claim is pending consideration. The fact as to whether in the matter of take over, the liabilities were also included is one aspect of the matter. Further, the aspect which may also require examination by the Court undertaking the recovery proceedings is as to whether in the process of take-over of Shree Sitaram Mills the secured assets for the loan transaction has been taken over by the Respondent No.1 or was it available with Shree Sitaram Mills Ltd. if it had retained its existence and identity after take-over of the Textile Mills and in that circumstance whether the recovery proceedings could still be resorted to against the Respondent No.1 in respect of the liability of Shree Sitaram Mills Ltd., and would the Union of India be liable as Guarantor. This is an aspect which is to be examined after providing opportunity to the parties, if need be, after tendering evidence in that regard22. Therefore, the question of liability could neither have been decided in the writ proceedings before the High Court nor in this appeal. If this aspect is kept in view, the conclusion reached by the Division Bench in paragraph 25 to hold that the respondent herein is not liable for the dues of Shree Sitaram Mills Ltd. and the proceedings is misconceived for such claim is an erroneous conclusion reached in a proceedings where such conclusion ought not to have been recorded. Hence the decision to that effect is liable to be set aside.