Allowed

State Bank of India v. Ms S R Worth Ltd. And Ors.

DRAT3 Aug 2022REGULAR APPEAL/33/2022

Case brief

AI extract

What is this about?

The Debts Recovery Appellate Tribunal allowed an appeal challenging an interim order passed by the DRT that restrained the bank from taking further steps pending a hearing without recording reasons. The holding relies on precedents stating that reasoned decisions are indispensable for judicial accountability.

What did the court decide?

Impugned order restraining the bank is set aside. DRT directed to disposes of IAs after hearing parties.

State Bank of India versus Ms S R Worth Ltd. And Ors. — Banking and Recovery | DRAT (2022)

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Appeal No. 33 of 2022-DRAT-Kolkata

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IN THE DEBTS RECOVERY APPELLATE TRIBUNAL AT KOLKATA

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Appeal No. 33 of 2022

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(Diary No. 241 of 2022)

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(Arising out of S.A. 118 of 2015 in DRT-2, Kolkata)

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THE HON’BLE MR. JUSTICE ANIL KUMAR SRIVASTAVA

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CHAIRPERSON

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State Bank of India, represented by its Authorised Officer, State Bank of India, Stressed Asset Management Branch-II. Jeevandeep Building, 1^st Floor, Middleton Street, Kolkata – 700 001, commonly known as State Bank of India, SAMB-II, Kolkata.

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… Appellant

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-Versus-

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M/s. S.R. Worth Limited, 268, G.T. Road, 1^st Floor, Narayani Complex, Liluah, Howrah – 711 204;

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Sri Akhilesh Singh, 268, G.T. Road, 1^st Floor, Narayani Complex, Liluah, Howrah – 711 204;

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Sri Vivek Kumar Singh, 268, G.T. Road, 1^st Floor, Narayani Complex, Liluah, Howrah – 711 204;

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Smt. Chitra Singh, 268, G.T. Road, 1^st Floor, Narayani Complex, Liluah, Howrah – 711 204;

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Sri Sashi Bhusan Singh, 268, G.T. Road, 1^st Floor, Narayani Complex, Liluah, Howrah – 711 204.

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… Respondents

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Counsel for the Appellant … Mr. Pankaj Kumar Mukherjee Counsel for Respondents … Mr. Nimish Mishra with Mr. Debabrata Basu Ray, Mr. Gaurav Singh and Ms. Sharmistha Poddar Respondents No. 3 & 4 … Not represented JUDGMENT : 03 .08.2022

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THE APPELLATE TRIBUNAL :

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Instant appeal has arisen against an order dated 2^nd May, 2022 passed by Learned DRT-2, Kolkata in S.A. 118 of 2015.

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2. It appears that an application under Section 17 of the SARFAESI Act, 2002 was filed by the Respondents before the Learned DRT

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Appeal No. 33 of 2022-DRAT-Kolkata challenging the Possession Notice issued by the Bank on24th January, 2015, 28^th January, 2015 and 30^th January, 2015. Pending SARFAESI Application, Respondents filed a Put-up application, being I.A. 454 of 2022 and an application for cancellation of sale scheduled to be held on 22^nd March, 2022. Another application was also filed for cancellation of sale scheduled to be held on 29^th April, 2022 under sale notice dated 4^th April, 2022. I.A. 701 of 2022, a Put-up application and I.A. 702 of 2022 for cancellation of sale dated 29^th April, 2022 were also filed. Affidavit-in-opposition was filed by the Appellant in appeal. Matter was fixed on 2^nd May, 2022 for hearing of the petition I.A. 639 of 2022. On 2^nd May, 2022 following order was passed by the Learned DRT:

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“ Heard the Ld Counsel for the SARFAES! Applicants. I.A. No. 701 of 2022, being put up application, and I.A. No. 702 of 2022 arising out of S.A. No. 118 of 2015 has been filed by the SARJAESI Applicants for hearing of I.A. No. 639 of 2022 and prays for interim protection in the event of receipt of any bids. Ld Junior Counsel for the defendant Bank prays for pass over. Ld. Counsel for the SARFAESI Applicants who filed the instant applications prays time since the SARFAESI Applicant's Counsel could not appear today due to his personal reasons. Such prayer of the Applicant is considered and allowed. Let the matter be heard on 13 May, 2022 for hearing I.A. No. 639 of 2022 In the event of receipt of any bids by the defendant Bank, defendant Bank is directed not to take any further steps till the next date of hearing. In view of the previous order dated 18 April, 2022 and 29 April, 2022. It is also observed that the defendant Bank has not complied the orders of this Tribunal dated 18 April, 2022 in respect of filing an affidavit on the status of the compromise proposal made by the Applicants and the upfront amount said to have been paid by the Applicant to the tune of Rs 62.50 lacs for adjudication of the matter. I.A. No. 701 of 2022 put up application and I.A. No. 702 of 2022 are disposed of.

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Appeal No. 33 of 2022-DRAT-Kolkata The matter is posted to 13 May, 2022 for hearing of I.A. No. 639 of 2022.”

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3. Feeling aggrieved by the order to the effect that “in the event of receipt of any bid by the Defendant Bank, Defendant Bank is directed not to take any further steps till the next date of hearing.”

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I have heard Learned Counsel for the parties and perused the record.

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4. Learned Counsel for Appellant submits that on the date fixed, i.e. 2^nd of May, 2022, there was a request for adjournment from both sides, as would appear from perusal of the record. Matter was also adjourned on 13^th May, 2022. But without assigning any reason an interim order was passed against the Bank; which is bad in law.

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5. Learned Counsel for Respondents submits that the order was passed by the Learned Tribunal keeping in view the fact that the I.A.s were pending and there is a challenge regarding the sale notice and the date fixed for sale. Impugned order was passed after considering the Provisions of Rule 8 (6) and Rule 9(1) of Security Interest Enforcement Rule, 2002. Provisions of Section 13 (8) of the SARFAESI Act, 2002 were considered. Learned Counsel further submits that appeal is continuation of the suit. Even if reasons are not assigned by the Learned DRT, Appellate Tribunal would have the jurisdiction to decide the matter after assigning reasons.

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6. Matter was listed for disposal before the Learned DRT on 2^nd May, 2022. As would appear from the order sheet, Learned Junior Counsel for the Defendant Bank prayed for pass over. Learned Counsel for SARFAESI Applicant, who filed the I.A.s, also prayed for time since Learned Counsel for SARFAESI Applicant could not appear on the date fixed due to his personal reasons; accordingly, Learned DRT adjourned the matter to 13^th of May, 2022. Thereafter, an interim order was passed against the Bank to the effect that “ in the event of receipt of any bid by the Defendant Bank, Defendant Bank is directed not to take any further steps till the next date of hearing.” No reasons are

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Appeal No. 33 of 2022-DRAT-Kolkata assigned while passing the interim order. In Brijmani Devi -vs- Pappu Kumar and Another, reported in (2022) 4 SCC 497, The Hon’ble Apex Court held as under:

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“32. On the aspect of the duty to accord reasons for a decision arrived at by a court, or for that matter, even a quasi-judicial authority, it would be useful to refer to a judgment of this Court in Kranti Associates (P) Ltd., v. Masood Ahmed Khan, (2010) 9 SCC 496 wherein after referring to a number of judgments this Court summarised at para 47 the law on the point. The relevant principles for the purpose of this case are extracted as under:

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32.1. Insistence on recording of reasons is meant to serve the wider principle of justice that justice must not only be done it must also appear to be done as well.

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32.2. Recording of reasons also operates as a valid restraint on any possible arbitrary exercise of judicial and quasi-judicial or even administrative power.

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32.3 Reasons reassure that discretion has been exercised by the decision-maker on relevant grounds and by disregarding extraneous considerations.

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32.4. Reasons have virtually become as indispensable a component of a decision making process as observing principles of natural justice by judicial, quasi-judicial and even by administrative bodies.

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325. The ongoing judicial trend in all countries committed to rule of law and constitutional governance is in favour of reasoned decisions based on relevant facts. This is virtually the lifeblood of judicial decision-making justifying the principle that reason is the soul of justice.

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32.6. Judicial or even quasi-judicial opinions these days can be as different as the Judges and authorities who deliver them. All these decisions serve one common purpose which is to demonstrate by reason that the relevant factors have been objectively considered. This

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Appeal No. 33 of 2022-DRAT-Kolkata is important for sustaining the litigants’ faith in the justice delivery system.

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32.7. Insistence on reason is a requirement for both judicial accountability and transparency.

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32.8. If a Judge or a quasi-judicial authority is not candid enough about his/her decision-making process then it is impossible to know whether the person deciding is faithful to the doctrine of precedent or to principles of incrementalism.

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32.9. Reasons in support of decisions must be cogent, clear and succinct. A pretence of reasons or "rubber-stamp reasons" is not to be equated with a valid decision-making process.

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32.10. It cannot be doubted that transparency is the sine qua non of restraint on abuse of judicial powers. Transparency in decision-making not only makes the Judges and decision-makers less prone to errors but also makes them subject to broader scrutiny.

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32.11. In all common law jurisdictions judgments play a vital role in setting up precedents for the future. Therefore, for development of law, requirement of giving reasons for the decision is of the essence and is virtually a part of "due process".

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“34. The Latin maxim “cessante ratione legiscessat lex” meaning “reason is the soul of the law, and when the reason of any particular law ceases, so does the law itself, is also apposite.” 7. Further in Industrial Credit and Investment Corporation of India Limited -vs- Grapco Industries Limited & Others, reported in AIR 1999 SC 1975, The Hon’ble Apex Court held as under:

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“13. An ex parte order is only of short duration and it is granted to safeguard the interest of the applicant, but, at the same time, such an order cannot be granted as a matter of course. A Court or Tribunal has also to consider the consequences of such an order if ultimately the order evoked after hearing the defendant. In such circumstances, the Tribunal must put the applicant on terms while granting an ex parte order and compensate the defendant in case the ex parte order

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Appeal No. 33 of 2022-DRAT-Kolkata

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was obtained without any justification and harm has been caused to the defendant. It must be remembered that an ex parte order can also affect the reputation of the person against whom it is issued and sometimes it may be difficult to undo the damage caused by an interim order. A Tribunal while granting ex parte order of stay or injunction must record reasons, may be brief one, and cannot pass a stereo-typed order in terms of the prayer made. Then an ex parte order cannot be allowed to continue indefinitely and the continuance of interim order has to be decided without undue delay when the defendant puts in his appearance. It is not necessary to hear long drawn arguments. Principles on which an interim order can be granted are well settled. Sub-section (a) of Section 19 requires that application for recovery of debt itself is to be disposed of finally within a period of six months from the date of receipt of the application. That also shows the urgency to decide is an interim order of injunction or stay granted ex parte is to be continued or not. In our view, the High Court was not correct in holding that a Tribunal under the Act has no power to grant an ex parte order of injunction or stay.”

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8. Insistence on recording of reasons is meant to serve the wider principle of justice that justice must not only be done it but must also appear to be done as well. Insistence of reasons is a requirement for both judicial accountability and transparency. Transparency in decision making not only makes the Judges and decision makers less prone to errors but also makes them subject to broader scrutiny.

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9. Learned DRT has failed to record any finding or reasons while passing the impugned order of restrain against the Bank. Admittedly, both the parties sought adjournment on the date fixed and request was also accepted by the Learned DRT. Thereafter, if the Learned DRT was of the opinion that there exists some prima facie case in favour of the SARFAESI Applicants, then Learned DRT was under an obligation to record the reasons for arriving at the conclusion while issuing the directions. An order passed without reasons is nothing but a nullity.

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Appeal No. 33 of 2022-DRAT-Kolkata Hence, I am of the view that the impugned order to the extent of restraining the Appellant Bank is bad in law which could not sustain in the eyes of law and is liable to be set aside. Accordingly, the appeal deserves to be allowed.

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O R D E R

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Accordingly, the appeal is allowed. The impugned order to the extent “in the event of receipt of any bid by the Defendant Bank, Defendant Bank is directed not to take any further steps till the next date of hearing.” is hereby set aside. However, Learned DRT-2, Kolkata, is directed to dispose of the I.A.s, after giving opportunity of hearing to the parties, in accordance with law.

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No order as to costs.

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File be consigned to Record room.

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Copy of the order be supplied to Appellant and the Respondents and a copy be also forwarded to the concerned DRT.

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Copy of the Judgment/Final Order be uploaded in the Tribunal’s Website.

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Order dictated, signed and pronounced by me in the open Court on this the 3^rd day of August, 2022.

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(Anil Kumar Srivastava,J) Chairperson