Case: Bank of India Vs. Yadav Consultancy Services (P) Ltd. &amp; Others

2. The matter has a chequered history of two decades. Brief facts which led to filing of this appeal are as follows:The appellant Bank filed suit in Special Suit No. 628 of 1998 for recovery of Rs. 9.55 lakhs along with interest against one M/s Sona Aluminium Finishers (P) Ltd. The said suit was decreed on 30.01.1999. Since the decreed amount exceeded rupees ten lakhs, in view of SectionA of Recovery of Debts due to Banks and Financial Institutions (RDDBFI) Act, 1993, the recovery proceedings were transferred to the Recovery Officer, Debt Recovery Tribunal (DRT), Pune and registered as R.P. No. 06/2002. After attachment of the property, the property was auctioned on 08.03.2006. By order of DRT dated 14.07.2006, certificate of sale was issued in favour of auctions No. 3 to 5. Since the Certificate Debtors (Mortgagor/Guarantor) were said to be creating obstruction in delivery of possession of the property to the auction purchasers, by order dated 26.07.2006, the Recovery Officer, DRT, Pune appointed respondent No.1 as Court Commissioner. The appellant Bank was directed to pay service charges to the first respondent. Respondent No. 1 took possession of the property on 09.11.2006. Auction purchasers filed an application in R.P. No. 06 of 2002 on 13.11.2006 and DRT, Pune on the same date i.e. 13.11.2006 directed respondent No. 1 to hand over the possession of the subject property to the auction purchasers.        3. There was then a dispute between the appellant Bank and M/s Sona Aluminium Finishers (P) Ltd.Certificate Debtor and the same came to be compromised; however the same failed due toe of the terms and conditions of the compromise. Appellant Bank sent letter dated 04.05.2007 informing the first respondent that they had decided to discharge the Court Commissioner with effect from 08.05.2007 and the Bank also paid the charges of respondent No. 1 up to 08.05.2007. However, the Recovery Officer by his order dated 12.06.2007 directed the appellant Bank to continue to pay the charges to respondent No. 1 which was challenged by the appellant Bank before the Presiding Officer, DRT, Pune by preferring Appeal No. 25 of 2007. In Appeal No. 25 of 2007, vide order dated 24.07.2008, DRT set aside the order of the Recovery Officer and directed the first respondent to take steps for recovery of its charges from the auction purchasers from 08.05.2007. Be it noted, respondent No. 1 had not challenged the order dated 24.07.2008; but filed an application on 07.11.2008 in R.P. No. 06/2002 seeking for direction to the auction purchasers to pay its charges. Only the auction purchasers challenged the order of DRT dated 24.07.2008 before Debt Recovery Appellate Tribunal (DRAT), Mumbai in Appeal No. 589 of 2008 wherein respondent No. 1 was one of the respondents. When the said appeal filed by the auction purchasers was pending before DRAT, the first respondent filed Writ Petition No. 10259 of 2011 seeking direction from the High Court to expedite hearing of the said appeal and dispose the same at an early date. The said writ petition was disposed of by order dated 16.01.2012 directing DRAT, Mumbai to decide the appeal within a period of three months and accordingly, the said Appeal No. 589 of 2008 was dismissed for default on 30.05.2012.        4. After so pursuing the matter before DRT, DRAT and the High Court, the first respondent instead of challenging the order dated 30.05.2012, sought arbitration before Micro, Small and Medium Enterprises Development Facilitation Council (MSMEDF Council), Pune under Micro, Small and Medium Enterprises Development (MSMED) Act, 2006. The MSMEDF Council passed an ex parte award on 12.09.2012 directing the appellant Bank to pay a sum of Rs. 1,62,82,079/to respondent No. 1 within the period of one month from the date of award i.e. 12.09.2012 with interest at the rate of 24%. In the incidental proceedings arising out of the award passed by the MSMEDF Council, by order dated 19.03.2013 in Writ Petition No. 2877 of 2013 filed by the appellant Bank, the High Court stayed the order of the District Judge, Pune passed in DKT No. 1741 of 2012, subject to deposit the entire decretal amount that is Rs. 1,93,22,590/within one week with the Registrar, High Court of Judicature at Bombay and the appellant Bank had deposited the said amount. Appeal filed by the appellant Bank under Section 34 of the Arbitration and Conciliation Act, 1996 being Civil Application No. 352 of 2013 was dismissed by the District Judge, Pune vide order dated 16.06.2014. Further appeal filed by the appellant Bank under Section 37 of the Arbitration and Conciliation Act, 1996 in Arbitration Petition No. 15 of 2014 came to be dismissed by the High Court inter alia on various grounds:(i) DRT has no jurisdiction to entertain the appeal and therefore order dated 24.07.2008 would be non est; (ii) MSMED Act, 2006 was specially enacted to deal with dispute of delayed payments to service providers and the MSMEDF Council had jurisdiction to adjudicate the dispute; and (iii) Bank has not taken any step to take possession from Court Commissioner after paying the charges; but it has simply refused to pay the charges and dragged the litigation. Being aggrieved, the appellant Bank preferred this appeal.

Reasoning: The above order of the Recovery Officer makes it clear that the continuance of respondent No. 1 for safeguarding the auctioned property was solely on behalf of auction purchasers and the first respondents duty as Court Commissioner had ceased to exist on 13.11.2006. After 13.11.2006 or at least after 24.07.2008 (Order of DRT), for the services of respondent No. 1, if any, were availed by the auction purchasers, only the auction purchasers are liable to pay the said chargesappellant Bank, therefore, was under no obligation to pay the charges to the first respondent in any case after 24.07.2008. The High Court has not kept in view the order of DRT dated 24.07.2008 and the order of the Recovery Officer dated 25.03.2009. The High Court was not right in saying that DRT had no jurisdiction to entertain the appeal and, therefore, the order dated 24.07.2008 would be non est11. After the above order of the Recovery Officer, respondent No. 1 filed MA No. 35 of 2009 before DRT seeking payment of charges for security services from the auction purchasers as directed by DRT in its order dated 24.07.2008 which clearly indicates that the first respondent had accepted the said order of DRT and also acted upon it. Be it noted, the proceedings of the Recovery Officer dated 25.03.2009 in which all the parties participated proceeded mainly on the basis of the order of DRT dated 24.07.2008. But, strangely, respondent No. 1 made submission before the High Court that ....DRT had no jurisdiction to entertain Appeal No. 25/2007 against the order of the Recovery Officer dated 12.06.2007......... The said submission of respondent No. 1 was accepted by the High Court and it was held that .........DRT had no jurisdiction to entertain Appeal No. 25/2007, the order dated 24.07.2008 passed by it ...... would be non est and hence must be ignored. In our view, the High Court did not keep in view that the respondent No. 1 had not challenged the order of DRT dated 24.07.2008; and had acquiesced to the said order dated 24.07.2008 and also acted upon it. As discussed earlier, the subsequent proceedings clearly show that respondent No. 1 and other parties have accepted the order of DRT dated 24.07.2008 and acted upon it. The findings of the High Court that DRT had no jurisdiction to entertain the appeal against the order of Recovery Officer cannot be sustainedAs discussed earlier, the proceedings were conducted before DRT under RDDBFI Act, 1993 which finally culminated in DRTs order dated 24.07.2008 and had become final and binding and was also accepted and acted upon by respondent No.As per Section 5 of the RDDBFI Act, the Debt Recovery Tribunal is headed by the Presiding Officer who is or has been or is qualified to be a District Judge. Likewise, as per Section 10 of the said Act, the Appellate Tribunal is headed by the Chairperson who is or has been or is qualified to be a judge of a High Court. DRT and DRAT are not merely having the trappings of the courts but also vested with the powers of ordinary civil court including the power to summon and examine the witnesses on oath, the power to order inspection of the documents etc. When the proceedings were lawfully conducted before thel authorities like DRT and DRAT, having trappings of the civil court, MSMEDF Council had no jurisdiction to entertain the application filed by the first respondent; more so, when the orders passed by the DRT were accepted and acted upon by respondent No.1. The High Court did not consider the question of lack of jurisdiction of MSMEDF Council13. The High Court mainly seems to have proceeded with the matter as if it is a regular appeal arising out of the award passed by the MSMEDF Council and commenting upon the conduct of the Bank in not seriously pursuing the matter in challenging the award. The High Court did not consider the earlier proceedings before DRT, DRAT and before the High Court except merely referring to certain proceedings before DRT and DRAT. The High Court did not consider various orders passed by DRT and DRAT and the conduct of the parties who have been vigorously pursuing the matter before DRT, Recovery Officer and DRAT. The High Court also did not keep in view that the parties were bound by the earlier orders passed by DRT and Recovery Officer which clearly held that charges towards security services are payable only by the auction purchasers. The impugned order passed by the High Court thus suffers from serious infirmity and is liable to be set aside14. Pursuant to the order dated 19.03.2013 passed by the High Court, an amount of Rs. 1,93,22,590/was deposited by the appellant Bank. By an order dated 30.03.2016 passed by DRT, Pune, respondent No.1 has withdrawn an amount of Rs. 1,22,00,000/plus accrued interest). The balance amount of Rs. 93,22,590/is lying in deposit with the District Court, Pune. By order dated 22.04.2016, this Court has granted interim stay of the impugned order of the High Court. However, by order dated 24.10.2016, respondent No.1 was permitted to withdraw 50% of the said amount Rs. 93,22,590/on furnishing a bank guarantee. The first respondent has not withdrawn the said 50% amount of Rs. 93,22,590/as he has failed to furnish bank guarantee.