Allowed

Central Bank of India v. Mr K Prasnna Kumar Reddy

DRAT24 Mar 2023REGULAR APPEAL/35/2021

Case brief

AI extract

What is this about?

Appeal against a DRAT order restraining a bank from registering a sale certificate. The Appellate Tribunal allowed the appeal, holding the interim order was passed without assigning reasons, violating principles of natural justice and transparency. The impugned order was set aside. The DRT was directed to decide expeditiously after hearing parties.

What did the court decide?

Impugned order dated 06.11.2020 set aside; learned DRT directed to decide SARFAESI application expeditiously after affording hearing opportunity.

Central Bank of India versus Mr K Prasnna Kumar Reddy — Banking and Recovery | DRAT (2023)

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Appeal No. 35 of 2021-DRAT-Kolkata

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IN THE DEBTS RECOVERY APPELLATE TRIBUNAL AT KOLKATA

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Appeal No. 35 of 2021 (Arising out of S.A. 262 of 2020 in DRT, Vishakahpatnam)

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THE HON’BLE MR. JUSTICE ANIL KUMAR SRIVASTAVA CHAIRPERSON

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Central Bank of India, a body corporate constituted under the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970, having its Head Office at Central Bank of India, Central Office, Chandermukhi, Nariman Point, Mumbai – 400 021 and, inter alia, having one of its Branches at Central Bank of India, SAM Branch Central Bank Building, 1^st Floor, Koti, Hyderabad – 500 095.

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-Versus-

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Mr. K. Prasanna Kumar Reddy, Son of Padmanabha Reddy, of D. No. 16-3-593A, 2^nd Street, Rama Murthy Nagar, Nellore, District Nellore, P.I.N. – 524 002, Andhra Pradesh. … Respondent

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Counsel for the Appellant … Mr. S.K. Senapati Counsel for Respondent … Not represented JUDGMENT : 24^th March,, 2023

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THE APPELLATE TRIBUNAL :

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Instant appeal has arisen against an interim order dated 6^th November, 2020 passed by Learned DRT, Vishakhapatnam in S.A. 612 of 2020 restraining the Appellant Bank from registering the Sale Certificate in favour of the Auction Purchaser. 2. A SARFAESI Application No. 262 of 2020 was filed by the Respondents against the Bank under Section 17 of the SARFAESI Act. Applicant Bank sanctioned a Cash Credit Limit to the tune of Rs. 15.00 crores on 3^rd March 2014 to the Respondents. Security documents were executed on 5^th March, 2014, Equitable mortgage was created on 12^th March, 2014. Further Cash Credit Limit of Rs.24.00 crore was sanctioned on 5^th April, 2014 and the security documents were

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Appeal No. 35 of 2021-DRAT-Kolkata executed on 22^nd April, 2014 and Equitable mortgage was created. Further Cash Credit Limit of Rs.64.00 crore was sanctioned on10th April, 2017. Further Cash Credit Limit of Rs.64.00 crore was sanctioned on 10^th April, 2017, equitable mortgage was created. Rs. 1.5 crore Cash Credit Limit was availed by the Respondents on 12^th February, 2018, 28^th March, 2018, 12^th April, 2018 and 13^th April, 2018 and necessary documents were executed. Loan Account was classified as N.P.A. Appellant Bank initiated proceedings under the SARFAESI Act. Sale Notice was published in newspapers on 19^th September, 2020; date of sale was fixed on 20^th October, 2020 and was conducted. S.A. 262 of 2020 was filed by the Respondents which was pending before the Learned DRT wherein the impugned order was passed.

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3. Notices were issued to the Respondents which were served but Respondents did not appear in the appeal.

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

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4. As far as the impugned order is concerned, it is a short order which is reproduced below:

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BY ORDER OF HON'BLE PO THROUGH VC ON 06.11.2020 HELD AT 11:00 HRS

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Details of the auction purchaser furnished. For filing implead petition to implead the auction purchaser posted to 11.11.2020. I.A. 1638/20 counter filed. In the meantime Respondent Bank is directed not to register the sale certificate in favour of the auction purchaser. S.A. for hearing posted to 11.11.2020.

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HON'BLE PO (DUPPALA VASUDEVA RAO)”

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5. Learned Counsel for the Appellant submits that Learned DRT passed a blanket order, restraining the Bank from registering the Sale

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Appeal No. 35 of 2021-DRAT-Kolkata Certificate in favour has of the Auction Purchaser, without assigning any reason. Bare perusal of the impugned order will show that this order was passed without assigning any reason. Auction Purchaser was to be impleaded as a party. Without impleadment of the Auction Purchaser, impugned order was passed. Rights of the Auction Purchaser, as well as the Borrower, are affected by the impugned order.

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6. 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 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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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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32.5. The ongoing judicial trend in all countries committed to rule of law and constitutional governance is in favour of

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Appeal No. 35 of 2021-DRAT-Kolkata 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 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.”

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Appeal No. 35 of 2021-DRAT-Kolkata 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 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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Appeal No. 35 of 2021-DRAT-Kolkata

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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. Impugned order suffers from material illegality. No reasons are assigned by the Learned DRT, Accordingly, the appeal is liable to be allowed.

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O R D E R

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Appeal is allowed. The impugned order dated 6^th November, 2020, is set aside. Learned DRT is directed to decide the SARFAESI Application expeditiously after affording opportunity of hearing to the parties.

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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 Respondent 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 24^th day of March, 2023.

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(Anil Kumar Srivastava,J) Chairperson