Allowed

Azure Auto Ind Pvt. Ltd. v. Bank of Baroda

DRAT10 Sept 2024IA/624/2024

Case brief

AI extract

What is this about?

The Tribunal considered an appeal under Sec. 21 of the RDB Act seeking waiver of the mandatory pre-deposit. The court rejected the request, finding no prima facie case or proof of financial strain, and directed the appellants to deposit ₹3.96 crores in three instalments.

What did the court decide?

Appellants directed to deposit ₹3.96 crores in three instalments; failure to do so results in automatic dismissal of the appeal.

Azure Auto Ind Pvt. Ltd. versus Bank of Baroda — Banking and Recovery | DRAT (2024)

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BEFORE THE DEBTS RECOVERY APPELLATE TRIBUNAL, AT: MUMBAI Present: Mr Justice Ashok Menon, Chairperson

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I.A. No. 624/2024 (WoD) In Appeal on Diary No. 1951/2024

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Between

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Azure Auto Ind. Pvt. Ltd. & Ors. … Appellant/s

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V/s.

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Bank of Baroda …Respondent/s

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Mr Pratap Sampal along with Ms Aarti Suvarna, Advocate for Appellants.

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Mr A.R. Bamne, i/b M/s A.R. Bamne & Co., Advocate for Respondent Bank.

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-: Order dated: 10/09/2024 :-

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This is an application filed under Sec. 21 of the Recovery of Debts & Bankruptcy Act, 1993 (“RDB Act”, for short) for getting a waiver of the mandatory pre-deposit for entertaining the appeal.

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The facts and brief are thus:

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The appellants are in appeal impugning the order dated 21/07/2023 in Misc. Application (M.A.) No. 65 of 2023 in Original Application (O.A.) No. 1659 of 1999 on the files of the Debts Recovery TribunalII, Mumbai (D.R.T.)

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The respondent Bank of Baroda (formerly, Dena Bank) had filed the O.A. mentioned above for recovery of ₹1.89 crores from the appellants. The O.A. was allowed and a Recovery Certificate (RC) was issued. The bank filed Recovery Proceedings (RP) No. 148 of 2004

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for executing the decree. In 2005, the bank (CH) approved a settlement proposal by the Certified Debtors (CDs). Consent terms were filed before the Ld. Recovery Officer on 18/01/2006. As per the consent terms, ₹85 lakhs was agreed to be paid to the bank in three tranches. The first two tranches totalling ₹69 lakhs (₹45 lakhs and ₹24 lakhs) were paid. On receipt of the two tranches, the two items of secured properties were to be discharged. Clause 7 of the consent terms provided that in case of default in payment, the concessions granted by the CH would automatically stand withdrawn and the full amount as per the RC would become payable by the CDs. As per the consent terms, ₹16 lakhs was payable on or before 31/03/2006. The CDs did not pay the amount. The CH therefore filed an application (Exhibit 32) for continuing the execution proceedings in the RP.

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On the application filed by the CH for continuation of the RP, the Ld. Recovery Officer observed that on receipt of the amount of ₹69 lakhs, the bank had through the Receiver Mr N.J. Thakkar, handed over possession of the secured assets on 24/02/2006 to the CDs together with the title deeds concerning the properties. The money paid to the bank had come from M/s Techcon Engineers Pvt. Ltd. to whom the CDs had agreed to sell the properties. On the presentation made by the CDs, the Receiver under authority from the bank, attended the Sub-Registrar’s office and executed a certificate of possession, which the bank later realised was a deed of conveyance in favour of M/s Techcon Engineers Pvt. Ltd.

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Instead of reopening the RP, the Ld. Recovery Officer vide order dated 16/12/2010 directed the CH to file an application under

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Sec.19 (25) of the RDB Act before the Presiding Officer, D.R.T. Aggrieved by that, the bank filed an appeal under Sec.30 of the RDB Act as Appeal No. 10 of 2011 challenging the order of the Ld. Recovery Officer.

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It was contended by the bank that the impugned order of the Ld. Recovery Officer was bad in law because the consent terms submitted by the parties had provided that in case of default, the CDs would be liable to pay the entire amount due, as per the RC. Moreover, the Ld. Recovery Officer had vide order dated 14/02/2006 provided that the bank was at liberty to move for restoration of the RP in case of default in paying the balance amount. It was pointed out that the observation made by the Ld. Recovery Officer in the impugned order that the consent terms amounted to novation of contract and that the same cannot be enforced by continuation of the RP is erroneous. Hence, the bank urged that the Ld. Recovery Officer had gone wrong in not restoring the RP and directing the bank to approach the D.R.T. with an application under Sec. 19 (25) of the RDB Act. Hence, the bank prayed for setting aside the impugned order of the Ld. Recovery Officer and sought restoration of the RP for execution of the debt due in accordance with the consent terms. 7. Per contra, the CDs opposed the appeal stating that the balance amount of ₹16 lakhs was payable by M/s Techcon Engineers Pvt. Ltd. and not by them. The bank was informed about the obligation of the purchaser of the properties to pay the said balance amount. Instead of waiting till the realisation of the entire amount, the bank had through the receiver executed the sale deed in favour of the purchaser

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and discharged the properties of all liabilities. Under the circumstances, the bank had no authority to execute the sale deed in favour of M/s Techcon Engineers Pvt. Ltd. without realising the entire dues. It is further contended that by filing the consent terms, there was a novation of contract and the RP which was closed in accordance with the consent terms, could not have been reopened by the Ld. Recovery Officer. There is no infirmity in the order passed by the Ld. Recovery Officer requiring any interference in appeal.

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After hearing the rival contentions and on examining the records available, the Ld. Presiding Officer allowed the appeal vide order dated 28/03/2013 and the impugned order of the Ld. Recovery Officer dated 16/12/2010 was set aside. It was further directed that in the event the CDs filed an application under Sec. 19 (25) of the RDB Act within two months making out a case as to how and why they are not obliged and the CH bank is not entitled to the amount in the RP, the Ld. Recovery Officer shall stay the Recovery Proceedings until the decision in such application.

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In pursuance to the order of the Ld. Presiding Officer dated 20/03/2013, the CDs filed Misc. Application (MA) No. 65 2013 before the D.R.T. and the same was dismissed vide the impugned order dated 21/07/2023. Aggrieved by that order, the CDs have filed the present appeal under Sec. 21 of the RDB Act. The appellants seek a total waiver of the mandatory pre-deposit contemplated under Sec. 21 for entertaining the appeal. The question that arises for consideration at this stage is whether the appellants are entitled to a total waiver of the mandatory pre-deposit as required by them.

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The Ld. Presiding Officer has in the impugned order observed that the appellants are bound by the consent terms and therefore, they have not made out any case to get over those terms to get exonerated from the obligation cast upon them by the consent terms. Hence, the application under Sec. 19(25) of the RDB Act was dismissed. The relevant section 19(25) reads thus:

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“(25) The Tribunal may make such orders and give such directions as may be necessary and expedient to give effect to its order or prevent abuse of its process or to secure the ends of justice.”

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It is also relevant to go through the consent terms which were submitted before the Ld. Recover Officer signed by the applicant CH and the CDs. To sum up the consent terms, it is noted that defendants 1 to 3 had agreed jointly and severally to pay ₹85 lakhs to the applicant bank as a full and final settlement against the recovery certificate dated 18/02/2004. The amounts were to be paid in three tranches of ₹45 lakhs, ₹24 lakhs and ₹16 lakhs respectively on or before the date of signing of the consent terms, within a week of signing the consent terms on or before 31/03/2006. On the payment of the first instalment of ₹45 lakhs, the bank agreed to release its charge over the factory land building and premises situated in Mhape, Navi Mumbai and discharged the D.R.T. Receiver. On the payment of the second instalment of ₹24 lakhs, the charge over the flat No. 402 situated in Vashi, Navi Mumbai was to be released from the charge as security and the attachment lifted. There is no dispute that the first two instalments were paid on time. As a consequence to that the attachments over both the secured assets were lifted. The last instalment of ₹16 lakhs was due and payable on 31/03/2006. Admittedly, the CDs defaulted in payment of that instalment.

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It is the consequence of this default on the part of the appellants

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that needs consideration. The default clause 7 in the consent terms reads thus:

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“7. Agreed and ordered that in case of any default in making the payments and/or any of them as mentioned above, the concessions granted by the Applicant Bank shall automatically stand withdrawn and cancelled and in that eventuality the Applicant Bank shall be entitled to recover the full decretal amount of Rs.1,89,45,719=43 (Rupees one crore eighty nine lakhs forty five thousand seven hundred nineteen and paise forty three only) with all interest and cost as per the said Recovery Certificate and apart from that the Defendants Nos 1 to 3 shall also be liable to pay to the Applicant Bank with interest @ 18% p.a. all the expenses incurred by the Applicant Bank towards the security agency in respect of the said properties.”

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A reading of this clause would indicate that the properties were

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to be discharged from the attachment on deposit of the first two instalments. The third instalment was defaulted and as a consequence of that the settlement failed and the CH bank was at liberty to realise the entire debt as per the recovery certificate with interest and costs as mentioned in clause 7. However, part of the consent terms was already complied with and cannot be retracted from. The properties were allegedly sold to M/s Techcon Engineers Pvt. Ltd. and the possession was also handed over in consequence to the assignment deed executed. What was defaulted was the payment of the ₹16 lakhs. A reading of the default clause would indicate that in default of payment of any of the instalments the CH could go back to claim the amount awarded as per the Recovery Certificate.

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The Recovery Certificate has decreed realisation of ₹1,89,45,719.43 together with interest @18% per annum. The total amount due inclusive interest would come to ₹2,57,38,148.99 according to the statement filed by the respondent bank. After deducting the amount of ₹69 lakhs paid by the CDs, the balance due

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would be ₹1,88,38,148.99. Subsequent interest due till 26/10/2023 comes to ₹6,03,84,418.47 and thus total amount due and payable under the Recovery Certificate would be ₹7,92,22,567.46.

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The Ld. Counsel appearing for the Appellants contends that ₹16 lakhs payable as on 31/03/2006 was to be paid by the purchaser of the properties M/s Techcon Engineers Pvt. Ltd and not by the appellants. The consent terms, however, do not stipulate any such terms. The obligation was entirely on the appellants to pay the amount and was not conditional to receiving the amount from the purchaser. Hence, the balance debt due calculated by the respondent bank appears to be correct.

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The appellants have not succeeded in establishing any prima facie case in their favour. They have also not proved their financial strain. Hence, the appellants are not entitled to any concession. They are directed to deposit a sum of ₹3,96,00,000/- as per deposit for entertaining this appeal. The said amount shall be paid in three instalments as stated hereinunder.

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Number of Instalments	Payment on or before
1^stInstalment of₹1.00 crore	01.10.2024
2^ndInstalment of₹1.50 crores	22.10.2024
3^rdInstalment of 1.46 crores	12.11.2024

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Failure to pay the instalment/amount within the time stipulated would entail in dismissal of the appeal without any reference to this Tribunal.

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The amount shall be deposited in the form of a Demand

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Draft/RTGS with the Registrar of this Tribunal. Payment by RTGS shall be communicated to the Registry for verification.

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As and when the said amounts are deposited, they shall be invested in term deposits in the name of Registrar, DRAT, Mumbai, with any nationalised bank, initially for 13 months, and thereafter to be renewed periodically.

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With these observations, the I.A. is disposed of. The respondent is at liberty to file a reply in this appeal with an advance copy to the other side.

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Post on 03.10.2024 for reporting compliance regarding the first instalment.

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Sd/Chairperson

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mks-01

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Azure Auto Ind Pvt. Ltd. v. Bank of Baroda

Case brief

What is this about?

What did the court decide?

Azure Auto Ind Pvt. Ltd. v. Bank of Baroda

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

Issues for consideration

Statutes considered

Parties & counsel

Coram

Case details

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