Disposed

Mstc Limited v. Standard Chartered Bank

DRAT22 Jun 2022IA/49/2021

Case brief

AI extract

What is this about?

In an application for waiver of pre-deposit, the DRAT held that despite the appellant being a public entity, the mandatory Section 21 deposit requirement applies. The Tribunal ordered a total pre-deposit of Rs. 90 Crores, directing an additional balance to be deposited barring automatic dismissal of the appeal.

What did the court decide?

Order disposed of with direction to deposit an additional balance of Rs. 34,37,25,000/- to make a total pre-deposit of Rs. 90,00,00,000/-. Failure to deposit within six weeks would entail automatic di

Mstc Limited versus Standard Chartered Bank — Company and Corporate | DRAT (2022)

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BEFORE THE DEBTS RECOVERY APPELLATE TRIBUNAL, AT: MUMBAI Present: Mr. Justice Ashok Menon, Chairperson I.A. No. 49/2021 (WoD)

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Appeal on Diary No. 146/2021

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Between

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MSTC Limited … Appellant/s V/s.

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Standard Chartered Bank …Respondent/s

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Mr. Tushar Mehta, Ld. Solicitor General along with Mr. Amar Dave, Mr. Rohit Gupta, Mr. Amit Jajoo, Ms. Anamika Singh and Mr. Darpan Bhatia, i/b M/s. Indus Law, Advocates for Appellant.

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Mr. Tushad Cooper, Sr. Advocate, along with Mr. Kingshuk Banerjee, Ms. Radhika Gupta, Mr. Taha Mirza and Ms. Devangana Khatau, i/b M/s. Khaitan & Co., Advocate for Respondent.

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-: Order dated: 22/06/2022:-

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This Interlocutory Application is filed under Section 21 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (RDDB&FI Act for short) which now stands amended and rechristened as Recovery of Debts and Bankruptcy Act, 1993 (RDB Act for short) seeking waiver of mandatory pre-deposit. The Appellant /Applicant MSTC Ltd has filed this Appeal filed u/s 20 of the RDDB&FI Act, impugning order dated 16.09.2017 passed by the Debts Recovery Tribunal-I, Mumbai (D.R.T. for short) in Interlocutory Application (I.A.) No. 302/2017 in Original Application (O.A.) No. 43/2012, filed by the Respondent Standard Chartered Bank(SCB for short) seeking a decree on admission for

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realization of a sum of Rs.222,51,00,000/-. The Ld. Presiding Officer, D.R.T., had directed the Appellant to pay the aforesaid sum to the Respondent following which an Interim Recovery Certificate was also issued.

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The Appellant has filed the appeal with I.A. No. 43/2021 to condone the delay of 819 days. That application is pending consideration. The Appellant has in the application contended that under pre-amended provision of Section 21 which is applicable to the instant case, this Tribunal can order complete waiver in accordance with the statute as stood then, as the Original Application was filed in 2012 and the impugned order was also passed prior to the amendment of Section 21 of RDBB&FI Act.

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The Appellant had insisted upon taking up for hearing the application for condonation of delay first. However, the Respondent Bank wanted the waiver application to be taken first on the ground that the Appeal or any application filed in the Appeal could only be entertained provided the Appellant has complied with the requirement of pre-deposit to be made under the provision of Section of 21 of the RDB Act. The Respondent relied on the decision of the Hon’ble High Court of Judicature at Bombay in M/s. Deluxe Cotton Corporation & Ors. Vs. Bank of Baroda 2016 SCC OnLine 2629 which categorically holds that the bar under Section 21 of the RDB Act will apply even at the stage of consideration of the application for condonation of delay accompanying an Appeal u/s 20 of the RDB Act, and unless the mandatory condition precedent prescribed in the Section 21 of the RDB Act were complied with, the

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Tribunal can entertain neither the application for condonation of delay nor the Appeal. After hearing submissions of both sides this Tribunal decided to take up the issue of waiver before considering the application for condonation of delay.

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The seat of the Chairperson of this Tribunal was lying vacant and hence, the Appellant approached the Hon'ble Bombay High Court for reliefs against the impugned Order in Writ Petition (L) No. 24630 of 2021, and vide Order dated 02.12.2021 the Hon’ble High Court, owing to the vacancy of the post of Chairperson of this Appellate Tribunal, permitted the Appellant to deposit a sum of Rs.55,62,75,000/-(purported to be 25% of the decretal amount) on 06.12.2021 before the Hon’ble High Court, and in consequence to that, the Recovery Proceedings were stayed. The Writ Petition was disposed of on 22.02.2022 consequent to the appointment of the Chairperson in this Appellate Tribunal and the above mentioned pre-deposit was transferred to the Registry of this Tribunal.

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The contention of the Appellant is that they are entitled to a total waiver in view of the pre-amended provision of Section 21 of the RDBB&FI Act, but even post-amendment, since the statutory pre-deposit of 25% is already made, this Tribunal may be indulgent enough to accept that as sufficient.

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The Appellant states that the Appellant is a Government of India Enterprise / Public Sector undertaking, and therefore, it cannot be equated with a chronic or unscrupulous defaulters attempting to escape the clutches of law and being a Government

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Enterprise, the Appellant is justified in pressing for waiver of pre-deposit since the amounts involved are public monies. It is urged that the transaction between the Appellant and the Respondent Bank is not a usual loan transaction. The transaction is under a Receivable Purchase Agreement (RPA) dated 29.08.2008, the Bank had approved some customers abroad who had received the goods supplied through the Appellant, and thereafter, defaulted payment, in consequence of which the Respondent seeks to realize the amount from the Appellant. Another angle which needs to be decided in this Appeal is to whether in case the Receivable Purchase Transaction is insured by ICICI Lombard, and since the Respondent Bank has filed a suit against ICICI Lombard challenging the repudiation of the claim of the insurance claim, and is pursuing the same, what would be the implication under the RPA between the Appellant and the Respondent Bank. The Appellant had already challenged the illegal conversion of debt before the Alipore Court. The Appellant would, therefore, contend that the very fact that the cross suits are filed and are pending, it speaks volumes of the tenability of the alleged admission as erroneously held by the D.R.T. in the impugned order. The Appellant has serious contentions to be agitated and the Appellant has filed the Appeal not with any intention to defer or delay the payment of the claim raised by the Respondent Bank. It is also alleged that the very aspect of whether the amount due to the Respondent Bank is coming within the purview of the RDB Act also needs to be considered. The I.A in which the impugned Order was made, seeks a decree on admission, and was filed only in the year 2017 in the said O.A. that was pending since 2012. The Appellant

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had also challenged the jurisdiction of the D.R.T. in entertaining the OA.

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The Appellant states that it has a strong prima facie case on merits in view of the fact that the D.R.T. had failed to consider the application on merits. The Balance Sheet relied upon for upholding admission, was not read as a whole and it would have been evident that the claim in the O.A. is not admitted but specifically disputed. Although the Balance Sheet reflects the amount as outstanding, the same is with a caveat which is set out in the Balance Sheet itself. Hence the impugned order which is based solely on the admission of the outstanding amount in the Balance Sheet is unsustainable and is liable to be reversed in appeal, submits the Appellant. The DRT failed to consider judicial precedents which were relied upon by the Appellant. The amount claimed in the O.A. was Rs.191.23 Crores but the impugned order allows a decree on admission for an amount of Rs.222.51 Crores. Interest has been compounded illegally. The principal amount would come to only Rs.144,16,24,008.39 and if that to be taken as the amount due, the deposit made by the Appellant would come to 38% of the principal amount. However, the Appellant having already deposited 25% of the total amount decreed, this Tribunal may not insist of payment of more amount, submits the Appellant.

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The Respondent Bank filed a detailed Affidavit in Reply to both the condonation application as well as waiver application.

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The Respondent submits that the Appellant is not entitled to

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any relief in the waiver application, much less a total waiver referring to the pre-amended Section 21 of the RDBB&FI Act. The Respondent would contend that in the instant case the amended provision of Section 21 of the RDB Act would apply and relies upon the judgment in Dr. Vijay Mallya Vs. State Bank of India 2018 SCC OnLine Kar 1733 and in Capt. G. R. Gopinath Vs. Syndicate Bank 2018 SCC OnLine 1731 in support of this contention. The Respondent, therefore, submits that only question that needs to be decided in this Application is whether the Appellant needs to deposit 50% of the decretal amount or not. It is also submitted by the Respondent that the fact that matter had a chequered history, and that the Recovery Certificate was issued on the basis of purported admission and that there was no adjudication on merits in the OA as is required, or that the Appellant is a Public Enterprise, cannot be accepted. It is also submitted that the deposit made by the Appellant in pursuance to the orders of the Hon’ble High Court of Judicature at Bombay dated 02.12.2021 cannot be construed as sufficient compliance of Section 21 of the RDB Act for the reason that, that was an order passed by the Hon’ble High Court in exercise of writ jurisdiction and that the RDB Act mandates deposit of 50% of the decretal amount and it cannot be reduced unless by way of a reasoned order. The Appellant has not made out any case for allowing such reduction. The order passed by the Hon’ble Bombay High Court was a common order in respect of several other matters which were pending in view of the vacancy of the Chairperson’s office and the said direction to deposit the amount was without prejudice to the contentions of the parties which were kept open, submits the Respondent.

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The Respondent would further contends that the Appellant's conduct itself would disentitle it from seeking any reliefs. Despite being a government entity, it has time and again, engaged in directory tactics to derail the recovery proceedings initiated by the Respondent Bank and avoid payment of its legitimated dues. The conduct of the Appellant deserves to be strongly deprecated. It is pointed out that the Applicant had filed a suit before the Alipore District Court and obtained and ex-parte injunction against the Respondent from giving effect to its demand notice dated 10/03/2012 in furtherance of which the OA was filed before the DRT. Frivolous objections, such as maintainability of the OA and lack of territorial jurisdiction for the DRT in the light of the ex-parte injunction order obtained from the Alipore Court was also relied upon by the Appellant. IA No. 33 of 2013 was also filed by the Appellant before the DRT raising the aforesaid contentions of maintainability. The question of maintainability, was answered by the DRT against the Appellant and I A. No. 33 of 2013 was dismissed. Aggrieved by that the dismissal, the Appellant filed miscellaneous appeal No. 29 of 2014 before this Tribunal and the on 03/02/2017, this Tribunal disposed Appeal No. 29 of 2014 upholding the decision of the DRT in IA No. 33 of 2013. The order of this Tribunal in Appeal No. 29 of 2014, was challenged by filing Writ Petition No. 1804 of 2017. The SCB filed IA No. 302 of 2017 in the OA, seeking a decree on admission under Rule 12 (5) of DRT (Procedure) Rules, 1993, read with Section, 19 (5 B) of the Act. It is only in the reply filed by the Appellant on IA No. 302 of 2017 that the fact regarding filing of Writ Petition No. 1804 of 2017 was revealed. However, it is submitted that no attempt was made to

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serve SCB with a copy of the Writ Petition. While the order on IA 302 of 2017 was awaited, the Appellant filed a letter on 10/08/2017, and served the copy of the Writ Petition upon the SCB. The Appellant had earlier filed Miscellaneous Appeal (L) No. 460 of 2017 (finally numbered as Miscellaneous Appeal No. 1 of 2018) before this Tribunal challenging the impugned order dated 16/09/2017 of the DRT in IA No. 302 of 2017. In the meanwhile on 18/12/2017, the Appellant also filed an application to review the impugned order dated 16/09/2017 in IA No. 302 of 2017. There was a delay of 28 days in filing the review application, and the Appellant sought that delay to be condoned by filing a application at a later point in time. The Appellant sought leave of this Tribunal to withdraw MA No. 1 of 2018 in order to file a review application before the DRT( which was actually already filed while the Appeal as pending). Appeal No. 1 of 2018, was thus dismissed as withdrawn on 02/01/2018. When the respondent bank initiated recovery proceedings in IA No. 302 of 2017 before the Recovery Officer, the respondent was informed that the review application No. 1 of 2018 would be coming up for hearing on 5th of February 2018. The Appellant sought adjournments in the Recovery Proceedings before the Recovery Officer on one pretext or the other. On 21/04/2018, the Application for condonation of delay in filing the Review application was dismissed, and in consequence, the Review Application itself got dismissed. The Appellant thereafter filed Writ Petition No. 2765 of 2018 before the Hon'ble Bombay High Court challenging the dismissal of the condonation application by the DRT, which was allowed and the delay in filing the Review Application before the

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DRT was condoned. The SCB challenged the order of the Hon'ble Bombay High Court before the Supreme Court by way of Special Leave Petition No. 20093 of 2019 and the same was allowed confirming the dismissal of the condonation and the Review Application by the DRT. The Hon'ble Supreme Court had also refused to grant any reliefs in favour of the Appellant with regard to a stay of recovery proceedings pending before the Recovery Officer. After having exercised all options available to stall the Recovery Proceedings, the Appellant has now filed this appeal challenging the impugned order in IA No. 302 of 2017 belatedly, with an application for condoning delay. The Respondent Bank has pointed out to the details of the intervening proceedings consequent to the impugned order to impress upon this Tribunal the conduct of the Appellant and to insist that the Appellant does not require any indulgence of getting the mandatory pre-deposit reduced.

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Heard the Ld Solicitor General Mr. Tushar Mehta assisted by the Ld Advocate Amar Dave and others appearing for the Appellant and the Ld Senior Counsel Mr. Tushad Cooper instructed by Mr. Kingshuk Banerjee and others for the Respondent Bank. Records perused.

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The Ld Solicitor General made a submission that the application for waiver has to be decided on the basis of the pre-amended provision, and relied upon the judgment of the Hon'ble Supreme Court in Garikapati Veeraya v. Subbiah Choudhry and Ors AIR 1957 SC 540, wherein it was held that right of an appeal is vested substantive right and accrues to the litigant and exists as on and from

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the date the lis commences and although it may be actually exercised when the adverse judgment is pronounced, such right is to be governed by the law prevailing at the date of the institution of the suit and not by the law that prevails at the date of its decision or at the date of the filing of the appeal.

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The learned counsel for the applicant submits that while considering the waiver application the Tribunal is required to evaluate the case of the Appellant and has to give a prima facie finding. The learned counsel relies on the decision of the Hon'ble Bombay High Court in Sterlite Technologies Ltd vs. Union of India and Ors 2012 (4)MR 784 , wherein it is held thus:

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"Now, at this stage when it considers an application for dispensing with the condition of deposit, the Appellate Tribunal is not expected to render a final finding on the merits of the contentions urged in regard to the judgment of the Tribunal. That has to await the final determination of the appeal. But, it is a well settled principle of law that even at that stage, the question as to whether a prima facie case has been made out, has to be evaluated by the Appellate Tribunal. For the limited purpose of considering whether a dispensation should be granted, the Appellate Tribunal has necessarily, to evaluate as to whether a prima facie case is made out and the reasons which are to be formulated have to be confined only to that determination."

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The learned counsel for the Appellant has also submitted that the question of maintainability can be decided only after the delay in filing the appeal has been condoned, and therefore, for the purpose of condonation of delay the merits of the case cannot be gone into. In support of this argument, the learned counsel relies on the decision of the Hon'ble Supreme Court in State of Jharkhand vs. Ashok Kumar Chokhani 2009(2) SCC667 and that of the Hon'ble Karnataka

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High Court in Marigouda Chana Basappa Marigouder v. Sattepa Veerappa Koujalagi through Lrs 2014 SCC OnLine Kar 12701.

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The Ld Senior Counsel, Mr Tushar Cooper for the SCB submits that in view of the decisions in Dr Vijay Mallya and Capt G.R Gopinath (supra), only the amended provisions of the RDB Act would apply and hence, it is incumbent upon the applicant to deposit 50% of the amount determined by the DRT. Relying on the decisions in Malini Sreenivasan vs. Canara Bank 2009 (2) CTC 289, Satinder Kapoor and others vs. IFCI Ltd and others, 2011 SCC OnLine DEL1466 and Sterlite Technologies Ltd (supra), the Mr Cooper argues that the Appellant has not pleaded hardship or inability to pay, and therefore the grant of waiver or reduction of the pre-deposit cannot be allowed. To bolster his argument that the Appellant is not entitled to any concession on being a public entity, Mr Cooper relies on the decision, University of Delhi vs. Union of India (2020) 13 SCC 745 , wherein it is held that merely because it is a government entity, it cannot be treated differently. The learned senior counsel also submits that the appeal itself is not maintainable for the reason that the earlier appeal filed by the Appellant as M. A. No. 1 of 2018, was withdrawn without reserving the liberty to file a fresh appeal. Consequent to the dismissal of that appeal challenging the very same impugned order without reserving a right to file a fresh appeal precludes the Appellant from filing this appeal with the very same cause of action. In support of his argument, Mr Cooper relies on the decision in Sarguja Transport Service Vs. State Transport Appellate Tribunal, MP Gwalior and others, (1987) 1 SCC 5, wherein it is observed

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that the permission under Order 23 of the CPC is required in order to prevent litigants from abusing the process of the Court on the same cause of action without good reason, and further observed that " whoever waives, abandons or disclaims right will lose it."

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Mr Cooper also draws attention of this Tribunal to the balance sheet, notes to accounts, auditor's comments and the observation of the Comptroller and Auditor General of India (CAG) indicating to purported the admissions made by the Appellant regarding the existence of outstanding dues to be paid to the SCB. On the basis of these arguments, the Ld. Senior Counsel, Mr Cooper submits that the Appellant has no prima facie case worth mentioning and because of the dilatory tactics and conduct of the Appellant reflected from the various steps taken by the Appellant to thwart the recovery proceedings, it is not entitled to any relief, much less a relief of waiver of pre-deposit in this case.

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On an anxious consideration of the entire facts and circumstances of this case and the submissions made on either sides, I find that despite the Appellant being a public entity much effort has been made by the Officers to abuse the process of law. The Appellant has filed a Suit against the SCB before the Alipore Court for getting over the provisions of the RDBB&FI Act contending that it is not the dues as contemplated within the provisions of the Act. The question of maintainability was raised before the D.R.T. at the earliest opportunity and the Appellant suffered an adverse order,which was challenged in vain. Thereafter, the Appellant contested the application on merits and suffered an adverse order

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which is impugned. Though the Appellant approached this Tribunal with an Appeal, an application for review was also preferred before the D.R.T., which at the very outset is not sustainable in cases where an Appeal is preferred. The Appellant thereafter chose to withdraw the Appeal under the pretext that a Review Application would be proceeded with. When the Review Application failed to get admitted after condonation of delay, it was challenged before the Hon’ble High Court. Although the Appellant got a favourable order from the Hon’ble High Court, in the S.L.P. before the Hon’ble Apex Court reversed that favourable order and restored the dismissal of the DRT. After having exhausted all that remedy, and on being unsuccessful, the Appellant has approached this Tribunal in Appeal, once again, a second time, belatedly. Before the Appellant approached this Tribunal with the present Appeal, a Writ Petition was filed the Hon’ble High Court of Judicature at Bombay got a stay to the Recovery Proceedings on deposit on an amount purported to be 25% of the amount due, and thereafter, pursued the remedy before this Tribunal. The Appellant has attempted to impress upon this Tribunal that being a public sector undertaking, the Appellant cannot be compared with any chronic unscrupulous borrower attempting to escape the clutches of law. A public entity is as good as the State itself and the State has responsibility to avoid unnecessary litigation. The Appellant has not left any remedy unused, most of which ended in failure. The Recovery Proceedings have been stalled long since. The provisions of the RDB Act and the SARFAESI Act were introduced by the Legislature to bring solace to recovery of public money without much hindrance. The cumbersome procedural

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delay under Order XXI of the Code of Civil Procedure in executing a decree was simplified. 150 years ago the Privy Council has rightly said that the malady of a litigant in India begins after he has obtained a favourable decree. That sad state of affair still continues, despite the reforms. In the instant case, it is public enterprise which is litigating incessantly, without much success.

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Being a State agency, and public sector enterprise, I am not inclined to throw the case of the Appellant overboard at the very threshold, although the Appellant has not been quite successful in making out a strong prima facie case. However, for the reasons stated above, I am not satisfied with the 25% deposit made by the Appellant for entertaining this Appeal. I am in agreement with the learned counsel appearing for Respondent in holding that the Appellants get an opportunity of being entertained only after satisfying the mandatory provision u/s 21 of the RDB Act. Application for condonation of delay is also an application which needs to be considered by this Tribunal, for which the mandatory provisions u/s 21 of the RDB Act needs to be complied with. This matter was argued by both sides with the vehemence required for the final hearing of the Appeal. What is required for the purpose of disposing an application for waiver of pre-deposit is only to establish a prima facie case. I am not inclined to go into the details of whether there was an actual admission on the part of the Appellant in their Account Statement or whether the other serious contentious issues that need to be considered in the Appeal. The Appeal cannot be decided before it is even entertained.

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The Appellant has deposited Rs.55,62,75,000/- (purported to be 25% of the decretal amount which comes to Rs.222,51,00,000/-. In view of the decision of the Hon’ble High Court of Judicature of Bombay in M/s MRB Roadconst Pvt. Ltd. Vs. Rupee Co-op. Bank Ltd. AIR 2016 (NOC) 334 (BOM.) , the amount as on the date of filing of the Appeal or the amount determined by the D.R.T, whichever is less has to be considered for the pre-deposit. The D.R.T. has in this case directed to the Appellant to pay an amount of Rs.222,51,00,000/- to the Respondent Bank within 30 days from the date of the order and an Interim Recovery Certificate is also issued. 50% of the decree amount would come to Rs.111,25,50,000/-. The Appellant being a public entity I am not insisting on deposit of 50%, but at least an amount larger than 25% needs to be deposited by the Appellant considering the chronology of the events and the circumstances of this case.

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Hence the application is disposed of with a direction to the Appellant to deposit a total sum of Rs.90,00,00,000/- as pre-deposit under S.21 of the RDB Act. Towards that, sum of Rs.55,62,75,000/has already been deposited. Hence, the balance amount of Rs.34,37,25,000/- shall be deposited within a period six weeks from the date of this order i.e. on or before 03.08.2022. Failure to deposit the above referred amount within stipulated time would entail in automatic dismissal of the Appeal.

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The above amount shall be deposited in the form of a Demand Draft with the Registrar of this Tribunal.

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As and when the said amount is deposited, it shall be invested

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in term deposits in the name of Registrar, DRAT, Mumbai, with any nationalized bank, initially for 13 months and thereafter, it will be renewed periodically.

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Post on 04.08.2022 for reporting compliance.

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Sd/Chairperson

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dpj-1

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Mstc Limited v. Standard Chartered Bank

Case brief

What is this about?

What did the court decide?

Mstc Limited v. Standard Chartered Bank

Case brief

What is this about?

What did the court decide?

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