Allowed

Indian Overseas Bank v. Ms Lakshmi Lavanya Cold Storage Private Limited

DRAT10 Jan 2023

Case brief

AI extract

What is this about?

The Appellate Tribunal allowed the appeal against an order directing a bank to enter a One Time Settlement scheme. It held the Tribunal exceeded its jurisdiction and the order was bad in law for lacking reasons, setting aside the impugned order.

What did the court decide?

Impugned order dated 4th April, 2022 is set aside. Impugned order dated 4th April, 2022 is set aside. Ld. DRT is directed to proceed to decide the S.A. in accordance with law.

Indian Overseas Bank versus Ms Lakshmi Lavanya Cold Storage… — Banking and Recovery | DRAT (2023)

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IN THE DEBTS RECOVERY APPELLATE TRIBUNAL AT KOLKATA

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(Dy No.124 of 2022 )

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(Arising out of S.A. No. 120 of 2022 in DRT Visakhapatnam)

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THE HON’BLE MR. JUSTICE ANIL KUMAR SRIVASTAVA

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CHAIRPERSON

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10.01.2023

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Indian Overseas Bank … Appellant -VsMs. Lakshmi Lavanya Cold Storage Private Limited. & Ors ….Respondents Mr. N. Debnath, Learned Counsel, Mr. Saswata Chatterjee, Learned Counsel for the Appellant None for the Respondent

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THE APPELLATE TRIBUNAL :

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Heard the Learned Counsel for the Appellant and perused the record. The instant appeal has arisen against an order dated 4^th April 2022 passed by Ld. DRT Visakhapatnam in I.A. No. 299 of 2022. Ms. Lakshmi Lavanya Cold Storage Pvt. Ltd. Vs. Authorised Officer Indian Overseas Bank whereby the Ld. Presiding Officer has stayed all further proceedings regarding confirmation of the sale and further directing the Bank to enter into one time settlement scheme and the SARFAESI Applicant was given a liberty to pay 25% of the O.T.S. amount of Rs. 3 crore and remaining balance in equal monthly instalment scheme.

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Feeling aggrieved, Appellant Bank preferred an appeal.

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Learned Counsel for the Appellant submits that the instant appeal is bad in law. Ld. DRT has not shown any reason for arriving at a conclusion. Further, Ld. DRT has acted beyond its jurisdiction in directing for settlement under the O.T.S. scheme which could not be done by the DRT. It is further mentioned that the impugned order is devoid of reasons. Hence, it could not stand the test of law.

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Notices were issued to the Respondents which were duly served. But none appeared for the Respondents.

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On bare perusal of the impugned order, it is revealed that Ld. DRT has recorded that it considered the facts and circumstances of the case and passed the impugned order. However, no reasons are assigned for arriving at a conclusion. Further, even pleadings of the parties were not discussed. Whether any opportunity of filing objections were provided to the Appellant or not is also not clear from the order.

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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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“22. On the aspect of the duty to accord reasons for a decision arrived at by a court, or for that matter, even a quasijudicial 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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(a) 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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(b) Recording of reasons also operates as a valid restraint on any possible arbitrary exercise of judicial and quasijudicial or even administrative power.

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

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(d) 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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(e) 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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(f) 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 is important for sustaining the litigants’ faith in the justice delivery system.

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(g) Insistence on reason is a requirement for both judicial accountability and transparency.

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(h) 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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(i) 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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(j). 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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(k) 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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“24. 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.”

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Hence, a judicial order should always be a reasoned order. An order without assigning any reasons is nothing but an arbitrary exercise of powers by the authority. In the

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impugned order no reasons are assigned by the Ld. DRT. Accordingly, this order is bad in law.

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As far as directions for O.T.S. are concerned, reliance has been placed by the Ld. Counsel on a judgment of Hon’ble Supreme Court in Civil Appellate Jurisdiction, Civil appeal No. 7411 of 2021 The Bijnor Urban Cooperative Bank Limited, Bijnor and ors vs. Meenal Agarwal and ors passed on 15.12.2021 wherein it was held that –

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“The sum and substance of the aforesaid discussion would be that no writ of mandamus can be issued by the High Court in exercise of powers under Article 226 of the Constitution of India, directing a financial institution/ bank to positively grant the benefit of OTS to a borrower. The grant of benefit under the OTS is always subject to the eligibility criteria mentioned under the OTS Scheme and the guidelines issued from time to time. If the Bank/ financial institution is of the opinion that the loanee has the capacity to make the payment and/or that the bank/financial institution is able to recover the entire loan amount even by auctioning the mortgaged property/secured property, either from the loanee and/ or guarantor, the bank would be justified in refusing to grant the benefit under the OTS Scheme. Ultimately, such a decision should be left to the commercial wisdom of the Bank whose amount is involved and it is always to be presumed that the financial institution/bank shall take a prudent decision whether to grant the benefit or not under the OTS Scheme, having regard to the public interest involved and having regard to the factors which are narrated hereinabove.”

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Hon’ble Apex Court has specifically held that the decision for entering into an O.T.S. scheme should be left to the commercial wisdom of the Bank whose amount is involved and it is always to be presumed that the Financial Institutions / Bank shall take a prudent decision whether the

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grant of benefit or not under the O.T.S. scheme having regard to the public interest involved and having regard to the factors which are narrated hereinabove.

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Hence, the Ld. DRT should not have imposed the conditions for O.T.S. scheme to be entered by the parties in the matter.

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On the basis of the discussion made above, I am of the view that the Ld. DRT has exceeded its jurisdiction in passing the impugned order which is devoid of merits and is liable to be set aside.

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Appeal deserves to be allowed.

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ORDER

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Appeal is allowed. Impugned order dated 4^th April, 2022 is set aside. Ld. DRT Visakhapatnam is hereby directed to proceed to decide the S.A. in accordance with law.

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Copy of the order be supplied to Appellant and Respondents and the copy be also forwarded to the concerned DRT. File be consigned to Record Room.

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Order dictated, signed, dated and pronounced in open Court.

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(Anil Kumar Srivastava,J) Chairperson

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Dated: 10^th January, 2023 16/tp

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Indian Overseas Bank v. Ms Lakshmi Lavanya Cold Storage Private Limited

Case brief

What is this about?

What did the court decide?

Indian Overseas Bank v. Ms Lakshmi Lavanya Cold Storage Private Limited

Case brief

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What did the court decide?

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