Case: Kotak Mahindra Bank Limited Vs. State Bank of Patiala &amp; Others

2. It is the case of the petitioner that the petitioner is a Banking Company and is registered under the Companies Act, 1956. The respondent No.1, State Bank of Patiala, is also a Banking Company which has advanced facilities to one Unikol Bottlers Limited (in liquidation) (hereinafter referred to as the Company). Respondent Nos. 3 and 4, Industrial Development Bank of India and Industrial Finance Corporation of India, are the public financial institutions, which had advanced facilities to the said Company. ICICI Bank Ltd. (ICICI) had also given certain facilities to the said Company for which ICICI had filed proceedings in the Bombay High Court. Subsequently, ICICI assigned its debts due from the said Company in favour of the petitioner. A deed of assignment dated 29th September, 2004, was executed in this behalf whereby all right, title, interests and benefit of ICICI in respect of the claim against the said Company was assigned to the petitioner. Theallowed the petitioner to be impleaded as applicant in place of ICICI. 3. The Company in liquidation had taken loan from respondent No.1 by creating mortgage of their factory premises situate at Sahibabad, Dist. Ghaziabad, U.P., and also by hypothecating movables including plant, machinery, stockintrade, raw material and finished goods. The mortgage was created by a deed dated 16th June, 1990, while movables were hypothecated by a deed of hypothecation dated 20th October, 1990. As the said Company did not pay the dues, a suit being Suit No. 2170 of 1993 was filed by respondent No.1 in the Delhi High Court for the recovery of dues due to it. The said suit was subsequently transferred toand was numbered as OA No. 292 of 1995. The said Company had also taken loan from consortium of Banks viz. ICICI, IDBI an IFCI. ICICI Bank filed proceedings being Suit No. 1671 of 1995 in the Bombay High Court for recovery of an aggregate sum of Rs. 2,49,04,890/, specific performance of an agreement/undertaking to create mortgage in respect of the said immovable property and to enforce the said mortgage and enforcement of the hypothecated properties. Respondent No.1 was also a party to the said proceeding. By an order dated 16th June, 1997, the Court Receiver, High Court, Bombay, was appointed as Receiver with a direction to take physical possession of the properties and accordingly Court Receiver took the possession. The said suit was subsequently transferred to the DRTMumbai, and numbered as Original Application No. 335 of 2001.hi decreed the suit preferred by respondent No.1 on 31st March, 1997, whereby the mortgaged property viz. Factory land, building and machinery situate at Sahibabad, Dist. Ghaziabad, U.P. was ordered to be sold along with the hypothecated goods and raw materials and the net sale proceeds should be appropriated for the outstanding of the respondent No.1 Bank. 5. Subsequently,passed a decree in favour of the present petitioner on 30th March, 2005. So far as IFCI an IDBI are concerned, they had also filed separate suits for recovering their dues against the said Company before theThe application filed by IFCI was decreed against the Company in May, 2004 and the application filed by IDBI was decreed against the Company in June, 2004. The properties of the Company which were situated at Sahibabad, Dist. Ghaziabad, U.P. were sold by thewhich included both movables and immovables. The same was put to sale as a composite lot. After the properties were sold, respondent No.1 Bank filed Miscellaneous Application No. 36 of 2005 in Original Application No. 335 of 2001 before the DRTI, Mumbai, for modifying the decree dated 30th March, 2005, passed in Original Application No. 335 of 2001, and a direction was also sought for to the effect that the entire sale proceeds should be paid first to the respondent No.1 Bank which had obtained the mortgage decree against the Company. The said application was allowed by thevide its order dated 2nd December, 2005. The aforesaid order was challenged before the DRAT, Mumbai, being Appeal No. 108 of 2006. The DRAT by the impugned order dismissed the said appeal which order is impugned at the instance of thein this petition.

Reasoning:
So far as the petitioner is concerned, there was no mortgage deed executed in its favour in respect of the immovable property but there was merely an agreement executed by the borrower Company to create an equitable mortgage. The Company in liquidation had agreed to create mortgage in favour of the petitioner. The petitioner had filed suit for specific performance of the agreement to create mortgage in which Court Receiver, High Court, Bombay, was appointed as Court Receiver in respect of the properties of the Company. No mortgage was created in favour of the petitioner or itsbut there was only an agreement to create a mortgage, which was sought to be enforced.The main prayer is regarding declaration that the immovable property described inof the application is exclusively mortgaged in favour of the respondent No.1. Considering the documentary evidence on record, the tribunal by its order dated 2nd November, 2005 modified the order dated 30th March,against that, respondent No.1 is already a decree holder in connection with the mortgaged properties. It is required to be noted that the learned counsel for respondent No. 1 has given particulars regarding sending necessary instructions to the advocate with all documents showing that respondent No. 1 was having the first claim over the mortgaged property and that even the written statement duly signed was forwarded to the Advocate for filing the same before the High Court, Mumbai. On 20th May, 1998 the same was sent back by the Advocate on the ground that it was required to be attested by the Notary at Mumbai. Considering the factual aspect of the matter, it cannot be said that the Bank was negligent, though of course, the advocate of the Bank had not taken appropriate care to file the written statement as ultimately the Bank was under the impression that the written statement has already been filed in the suit. Subsequently, respondent No. 1 came to know that the DRT, Mumbai had not recognized their charge on the immovable property in question and in view of the same Miscellaneous Application No. 36 of 2005 was preferred before the Tribunal.Considering the aforesaid aspect of the matter, in our view, the Tribunal was justified in amending the original decree to the extent of declaring that the immovable property described inwas validly mortgaged in favour of respondent No.our view, the DRT, Mumbai, has rightly found that the Tribunal was not sitting in appeal over the order passed by DRT, Delhi and it had no jurisdiction, therefore, to comment upon the merits and demerits of the order of the DRT, Delhi. As per the final order of DRT, Delhi, there exist a valid mortgage in favour of respondent No. 1 herein and, therefore, DRT, Mumbai, could not have gone beyond the same and could not have recorded any contrary finding.Considering the aforesaid aspects, in our view, the Presiding Officer of DRT1, Mumbai, has not committed any error or has exceeded his jurisdiction in modifying the earlier order passed by him by amending the said order holding that the immovable property described into the original applicationwas validly mortgaged in favour of respondent No.1 herein i.e. Defendant No.4 in the said original application and that respondent No. 1 alone was entitled for the sale proceeds of the said property in accordance with the provisions of Sections 529, 529A and 530 of the Indian Companies Act, 1956. The DRAT, therefore, has rightly dismissed the appeal preferred by the petitioner before it.pointed out earlier, respondent No.1 admittedly is not a signatory to the agreement. There is nothing on record to show that respondent No.1 had agreed in any manner in connection with creating any document of mortgage in favour of the petitioner. We, therefore, find substance in the argument of the learned counsel for respondent No.1 that the Officers of respondent No.1 Bank had entered into certain correspondence only in connection with the movable property for which there is a pari passu charge in favour of the petitioner. After realizing all these aspects of the matter, DRT, Mumbai ultimately amended the order by interpreting the earlier order to the effect that no mortgage decree was passed in favour of the petitioner Bank. So far as the movable property is concerned, since there is no dispute that the movables were hypothecated to the petitioner also by the deed of hypothecation, the sale proceeds of the movable properties were directed to be shared proportionately by respondent No.1 along with the petitioner and other two banks which were party to theour view, under the provisions of Section 22 (2) of the Act, the Tribunal has the same power as are vested in the Civil Courts while trying the suit. Not only that, when this fact was brought to the notice of the Tribunal, the Tribunal was duty bound to correct its earlier order to give effect to the order of DRT, Delhi. The Tribunal was not only justified but in fact was duty bound to amend the earlier decree. Even under Section 5A of the Debts Recovery Tribunal (Procedure) Rules, 1993, any party aggrieved by an order made by the Tribunal on account of some mistake of error apparent on the face of record desires to obtain a review of the order made against him, may apply for a review of the order to the Tribunal which had made thestated above, when there is already a decree of DRT, Delhi, as well as considering the fact that mortgage was already created by registered document in favour of respondent No.1, petitioner cannot claim any better right only on the basis of agreement to create mortgage. The matter rests purely on documentary evidence and in view of the documentary evidence on record, in our considered opinion, the view taken by the DRAT is the only plausible view in so far as right of respondent No. 1 in connection with the mortgaged property isfar as the facts of the present case is concerned, as pointed out earlier, the facts itself are very clear that the original suit was only for specific performance. The DRT, Mumbai, therefore, could not have granted prayer beyond the prayers in the suit and subsequently having realized that the Tribunal itself found its duty to correct the earlier order, otherwise there would be direct conflict with the earlier order passed by the DRT, Delhi. The Tribunal has given cogent reasons for coming to the conclusion that respondent No.1 had never acted in a negligent manner as respondent No.1 had given instructions to their advocate for filing the writtenis true that point of jurisdiction can always be taken at any stage. However, in our view, on merits the Tribunal was justified in amending the original order as the Tribunal was duty bound to do so and, therefore, it is not possible for us to accept the say of Mr. Saraf that the application of respondent No.1 was not maintainable before the DRT,is true that it is open for the petitioner in the instant case to take objection about maintainability of the application made by respondent no.1 at any stage on the ground of jurisdiction. However, in our view, it cannot be said that the application filed by respondent No.1 was not maintainable and considering the documentary evidence and more precisely the earlier order passed by the DRT, Delhi, the Tribunal found that the original order is required to be amended for which appropriate reasons have been given by the DRT, Mumbai. In our view, this is not a case in which this Court would like to interfere with the same under Article 227 of the Constitution of India as no other view than the one taken by the Tribunal is possible. 23. Considering the aforesaid aspect of the matter, in our view, when it is not in dispute that there is already a mortgage decree in favour of respondent No.1, in view of the direction given by the DRT, Delhi, in the subsequent proceedings no contrary direction could have been given by the DRT, Mumbai considering the fact that the prayer in the original application was only in connection with passing the decree for specific performance. As against that there was already a decree in connection with the mortgaged property in favour of respondent No.1, in our view, DRT, Mumbai, was perfectly justified in correcting the earlier order and by allowing the application preferred by respondent No.1. It is not in dispute that the earlier decree was an ex parte decree and inspite of instructions given by respondent No.1, the advocate for respondent No.1, for reasons best known to him has not filed the written statement and ultimately when this fact came to the notice of respondent No.1 that they preferred an application which application was entertained by the DRT, Mumbai, and having realized the fact that there was already an order of DRT, Delhi, amended the said decree. In our view, the procedure adopted by the DRT, Mumbai, therefore, cannot be said to be without jurisdiction. Considering the facts and circumstances of the case and in view of what is stated above, in our view, this is not a fit case in which the order passed by the DRT, Mumbai, and confirmed by the DRAT is required to be interfered with in our extraordinary jurisdiction under Article 227 of the Constitution of India.