Dismissed

M/S Clarity Gold Pvt. Ltd., and Anr. v. State Bank of India and Ors.

Bombay HC8 Jun 2011WP/3232/2011

Case brief

AI extract

What is this about?

In a writ petition challenging the Debts Recovery Appellate Tribunal's finding that a bank took peaceful possession of secured assets, the High Court refused to reappreciate evidence or substitute a pure finding of fact, dismissing the petition under Article 226.

What did the court decide?

The writ petition was dismissed as the Court found it inappropriate to interfere with the pure finding of fact that possession was peaceful.

M/S Clarity Gold Pvt. Ltd., and Anr. Vs State Bank of… — Banking and Recovery | Bombay HC (2011)

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IN THE HIGH COURT OF JUDICATURE AT BOMBAY APPELLATE SIDE

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WRIT PETITION NO.3232 OF 2011

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M/s.Clarity Gold Pvt. Ltd. & Anr. ...Petitioners.

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Vs. State Bank of India & Ors.

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...Respondents.

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Mr.Rajneesh Agarwal with Ms.Swati Deshpande, Mr.Avinash Singh Gautama and Mr.Prakash Shinde i/b. M.Dhruva and Partner for the Petitioners.

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Mr.Nitin G.Thakkar, Senior Advocate with Mr.Vivek Sawant and Mr.Jaynendra Navlani i/b. Kusumakar Kaushik for Respondent Nos.1 and 2.

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CORAM : DR.D.Y.CHANDRACHUD AND ANOOP V. MOHTA, JJ.

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June 8, 2011 .

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P.C. :

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The challenge in these proceedings is to an order passed

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by the Debts Recovery Appellate Tribunal on 16 March 2011. By the impugned order, the Appellate Tribunal has, in terms of the order passed by this Court on 20 January 2011, entered a finding of fact that the First Respondent, the State Bank of India, has taken possession of the secured assets without any force or coercion.

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Briefly stated, the facts show that on 6 May 2010, a

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notice of recall was issued by the First Respondent in respect of its dues which amounted to Rs.28.02 crores. The Fourth Respondent made a proposal for settlement. On 17 May 2010, the Bank issued a notice under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. On 18 May 2010, a letter was addressed by the Fourth Respondent (who is the spouse of the Second Petitioner), admitting that the dues outstanding in respect of the Cash Credit Account and the Term Loan Account were in excess of Rs.27.63 crores. By the letter dated 18 May 2010, the Fourth Respondent submitted a proposal to the Bank for the repayment of its dues. The Bank responded by its letter dated 25 May 2010. On 26 May 2010, the Fourth Respondent agreed to repay an amount of Rs.12 crores in the Cash Credit Loan Account of the Petitioners and an amount of Rs.3 crores together with interest in the account of a sister concern. An undertaking was furnished that before 31 July 2010, a further payment of Rs.6 crores would be made in the account of the First Petitioner. The Bank responded by its letter dated 3 June 2010 and sought acceptance of the terms which were indicated in the letter. On 9 June 2010, a reply was addressed by

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which, however, the legality and validity of the notice under Section 13(2) was sought to be questioned. The Bank responded by its letter dated 25 June 2010.

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On 28 July 2010, a notice of possession was addressed upon which possession of the secured asset which is a residential flat, was taken. Possession was thus taken of the secured asset under Section 13(4). Against the measure that was taken by the Bank under Section 13(4), the Petitioners moved the Debts Recovery Tribunal at Mumbai. The Tribunal by its order dated 1 September 2010 allowed the application and came to the conclusion that the taking over of possession of the secured asset was contrary to law. The order of the Tribunal was challenged before the Appellate Tribunal by the Bank.

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By a judgment dated 6 October 2010, the Appellate Tribunal allowed the appeal. The action of the Bank upto the stage of publication of the possession notice under Rule 8(2) was upheld. The Appellate Tribunal came to the conclusion that (i) There was valid service of the possession notice; (ii) The publication of the

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possession notice in the newspapers was lawful; and (iii) The publication of the sale notice on 3 August 2010 was not lawful. In this view of the matter, the Appellate Tribunal permitted the Bank to proceed in the matter from the stage contemplated by Rule 8(5) of the Rules framed under the Act.

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The order of the Appellate Tribunal was challenged before this Court in an earlier round of proceedings. By a judgment of this Court dated 20 January 2011, the Court confirmed the findings of the Debts Recovery Appellate Tribunal that (i)There was a valid service of the possession notice under Rule 8(1); and (ii) There was a valid notice of publication under Rule 8(2). The Bank informed the Court that it had not challenged the findings of the Appellate Tribunal that the sale notice was not published in accordance with law.

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In that view of the matter, that part of the finding was not disturbed. In its judgment dated 20 January 2011, this Court noted that the finding of the Debts Recovery Tribunal that possession was taken from the Petitioners forcibly and without

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seeking recourse to the remedy under Section 14, had not been dealt with by the Debts Recovery Appellate Tribunal. In this view of the matter, the Court remanded the proceedings back to the Appellate Tribunal to render a finding on this issue after hearing all the parties. Following the order of this Court, the Debts Recovery Appellate Tribunal has come to the conclusion that possession was not taken forcibly. That order is now questioned in these proceedings before the Court.

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The Debts Recovery Tribunal has relied upon several circumstances in coming to the conclusion that taking over of possession was not forcible. These circumstances are: (i) The entire evidence of forcible possession originated in the employees of the Petitioners. The secured asset is a part of a Housing Society where several persons reside. There was no independent evidence forthcoming to support the case of the Petitioners that possession had been taken over forcibly; (ii) While signing the possession notice, Mr.M.Pillai, Manager (Accounts) of the First Petitioner, who had also signed the panchanama, inventory, possession notice and other documents, had not appended even a note to the effect that

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possession had been delivered under protest; (iii) The allegation of the employees that the officers of the Bank had assaulted them, had not been substantiated by any medical evidence or report; (iv) There was no material on record to suggest that resistance was offered while taking possession, despite which forcible possession was taken; (v) The Bank had denied in its reply the assertion that forcible possession had been taken; and (vi) Significantly, no complaint had been lodged with any senior officers of the Bank that possession had been taken forcibly. The finding of fact that has been recorded by the Appellate Tribunal is that there was no convincing evidence in support of the case of the Petitioners that possession was taken over forcibly.

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Counsel appearing on behalf of the Petitioners has relied upon certain circumstances to buttress the submission that possession was not taken over voluntarily, but was taken forcibly by the Officers of the Bank. Firstly, reliance has been placed on a letter addressed by the Bank on 23 July 2010 to the Commissioner of Police and to the Malabar Hill Police Station seeking the deputing of Constables so as to enable the Bank to take peaceful

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possession. Secondly, on 28 July 2010, a Police complaint was lodged setting out the circumstances in which possession was taken over. Counsel submitted that the Tribunal had erred in finding fault with the Petitioners for not producing independent evidence to indicate what had transpired on 28 July 2010. Counsel submitted that the fact that the Manager (Accounts) did not record any protest when possession was handed over, is not a relevant circumstance, because the contention of the Petitioners is that possession was not handed over and that the Manager (Accounts) was not authorised to hand over possession.

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The submissions now fall for consideration.

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In the judgment of this Court dated 20 January 2011, the

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Debts Recovery Appellate Tribunal was specifically called upon to render a finding on the correctness of the determination made by the Tribunal that possession was taken over from the Petitioners forcibly without seeking recourse to the remedy under Section 14. Significantly, at that stage, there was a concurrent finding of fact both by the Appellate Tribunal and by this Court that Shri M.Pillai,

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Manager (Accounts) was authorised to receive the notice of possession. Both before the Tribunal and before this Court, the Manager (Accounts) and for that matter the Second Petitioner, who is the owner of the secured asset, have not chosen to put their oath to the actual events that transpired on 28 July 2010. The Manager (Accounts) was personally present when possession was taken. The omission on his part to file an affidavit in support of the case that is now sought to be made out assumes a great deal of significance. The Petition before this Court has not been verified even by the Second Petitioner, but by an Officer by the name of Vinay Harlalka. M.Pillai, the Manager (Accounts) has not put his oath to the correctness of the averments that were made on behalf of the Petitioners before the Tribunal or before this Court.

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Now, it is in this back ground that the allegations would have to be scrutinized. In the application that was filed before the Debts Recovery Tribunal, the contention of the Petitioners was that on 28 July 2010, the Officers of the Bank together with certain Police Constables and five “ladies of questionable character” barged into the premises and threatened the employees of the Petitioners

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to implicate them in a criminal case on a charge of molesting the ladies. Significantly, this allegation is absent in the Police complaint which was filed on 28 July 2010 almost contemporaneously with the taking over of possession. The Police complaint, it is admitted in paragraph 12 of the Petition, was drafted on legal assistance provided by an Advocate, who was present at the Police Station. The omission to state a material part of the case which was sought to be set up before the Tribunal from the contemporaneously lodged Police complaint is a significant omission. This is now coupled with the fact that no affidavit was filed before the Tribunal or the Appellate Tribunal after the order of remand, either by M.Pillai or by any of the employees of the Petitioners, who were present when possession was taken.

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The Debts Recovery Appellate Tribunal has rendered a finding of fact that possession was not taken over forcibly, but was peacefully handed over. This Court in the exercise of its jurisdiction under Article 226 of the Constitution, would not be justified in reappreciating the evidence on the record and by substituting a pure finding of fact which is rendered by the

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Appellate Tribunal, particularly in a situation where that finding finds support in the records of the case.

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For all these reasons, we do not consider it appropriate and proper to exercise our jurisdiction under Article 226 of the Constitution to interfere with what is essentially a pure finding of fact. The Petition is accordingly dismissed.

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( Anoop V. Mohta, J.)

M/S Clarity Gold Pvt. Ltd., and Anr. v. State Bank of India and Ors.

Case brief

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M/S Clarity Gold Pvt. Ltd., and Anr. v. State Bank of India and Ors.

Case brief

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