Partly allowed

Ifci Ltd. v. Rainbow Papers Ltd.

DRAT17 Apr 2024REGULAR APPEAL/48/2022

Case brief

AI extract

What is this about?

The DRTA allowed the appeal partly, holding that the Debts Recovery Tribunal lacked jurisdiction to impose exemplary costs for delayed document production or issue unsolicited directions to the RBI, bank association, and Finance Ministry. While the ₹50,000 cost payment was not disturbed, the directions to these external bodies were expunged.

What did the court decide?

The direction to send copies of the order to the CMD of the India Bank Association, RBI, and the Finance Ministry was expunged. The imposed cost of ₹50,000 was not set aside despite having been paid.

Ifci Ltd. versus Rainbow Papers Ltd. — Banking and Recovery | DRAT (2024)

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

¶2

Appeal No. 48/2022

Between

IFCI Bank Ltd.

… Appellant/s

V/s.

Rainbow Papers Ltd. & Ors.

¶8

…Respondent/s

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Mr Vinay Deshpande along with Ms Shobha Chavan, i/b M/s V. Deshpande & Co., Advocate for Appellant.

¶10

The Appellant IFCI Ltd. is the Government of India undertaking engaged in financing. The appeal is filed challenging the order of the Debts Recovery Tribunal-I, Ahmedabad (D.R.T.) dated 07.09.2018 in Original Application (O.A.) No. 524 of 2016.

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The facts in brief essential for the disposal of this Appeal are thus:

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The first Respondent availed a loan from the Appellant with Respondents Nos. 2 and 3 as guarantors. The repayment of the debts was defaulted and the aforesaid O.A. was filed for recovery of the amount due.

¶13

When the O.A. came up for a hearing before the D.R.T. on 09.07.2018, the law officer of the Appellant FI agreed to produce documents within 15 days. The request was granted with a rider that failing to produce the document within 15 days would attract costs of ₹50,000/- to the National Defence Fund.

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On 25.07.2018, when the matter was taken up again for consideration, the FI had still not produced the documents and sought further time by producing a communication addressed to the Head Office by the law manager on 09.07.2018 about the production of the documents. Irked by the attitude of the FI, the Ld. Presiding Officer invoked the earlier order and imposed the cost of ₹50,000/-. The copies of the order were directed to be forwarded to the India Bank Association, RBI and the Finance Ministry.

¶16

The Appellant filed I.A. 1057 of 2016 for recalling the order dated 25.07.2018. The D.R.T. was not inclined and dismissed the I.A. vide order dated 07.09.2018. The Appellant is aggrieved and hence, in appeal.

¶17

The Respondent did not appear. The Ld. Counsel appearing for the Appellant was heard. Records perused.

¶18

The Ld. Counsel appearing for the Appellant is aggrieved by the impugned order and submits that it was harassed on the part of the D.R.T. to have taken such a punitive action. The Ld. Counsel relied upon several decisions in support of his argument. In Ashok Kumar Mittal Vs. Ram Kumar Gupta & Ano. (2009) 2 SCC 656 , the Hon’ble Supreme Court observed that compensatory cost under Sec. 35 A of the CPC not exceeding ₹3,000/- is imposed for vexatious claims and defences to the opposite party. It is also observed that huge costs of ₹50,000/- or ₹1,00,000/- are normally awarded in writ proceedings and public interest litigation. Again in Satyapal Singh vs. Union of India (2010) 12 SCC 70 , it was observed that exemplary costs are levied where a claim is found to be false or vexatious or where a party is

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found to be guilty of misrepresentation, fraud or suppression of facts. In the absence of such a finding, it will be improper to punish a litigant with exemplary costs. It was also observed that at all events, the power to levy exemplary costs should be used sparingly to advance justice. It should not be threatening and oppressive.

¶21

In the instance case, the Ld. Presiding Officer has not only imposed the costs of ₹50,000 for not producing the documents supporting the claim on time but also directed copies of the order to be dispatched to the RBI, Indian Bank Association and the Finance Ministry.

¶22

The Division Bench of the Hon’ble High Court Punjab and Haryana had in Abhinav Kejriwal Vs Jagmohan Kejriwal & Ors 2015 SCC OnLine P&H 13868 while considering a writ challenging the imposition of costs of ₹5 lakhs in an S.A. by the D.R.T.-I, Chandigarh observed thus:

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“2. We find that the above observation of the Ld. Presiding

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Officer, Debts Recovery Tribunal-I, Chandigarh cannot be sustained as it is the bank who has to see whether any action should be taken against the borrower or the Applicant or not. The Tribunal while exercising jurisdiction under Sec. 17 of the SARFAESI Act is not exercising the powers of writ court. We are afraid as to whether such directions can be issued even by the writ court. A statutory Tribunal is vested with limited power to decide the grievance of an aggrieved person. It has no jurisdiction to issue directions against the persons, who approached the Tribunal for relief. The Tribunal can dismiss

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or allow an application but unsolicited advice or directions are

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not part of the jurisdiction vested in the Tribunal.”

¶28

In the instance case, the D.R.T. was exercising jurisdiction under the provisions of the RDB Act. The powers conferred on a Tribunal under the SARFAESI Act or RDB Act are similar. 11. The Ld. Counsel appearing for the Appellant fairly submits that the cost has already been deposited with the National Defence Fund and therefore, need not be undone. However, the other directions to send copies of the order to the CMD of India Bank Associations, RBI and the Finance Ministry may be ordered to be expunged.

¶29

The Presiding Officer of D.R.T. cannot impose exemplary costs in the event of not producing documents within time or for not getting with the arguments. Limited costs can be levied in cases where the opposite side is inconvenienced because of the laches on the part of a party. Imposing a cost of ₹50,000/- is penal and unwarranted. However, given the submission made by the Ld. Counsel appearing for the Appellant, the imposition of the cost which has already been paid is not set aside or reversed. However, the direction issued by the Tribunal to send copies of the order to the CMD of the India Bank Association, RBI and the Finance Ministry is to be expunged.

¶30

The appeal is allowed in part as above.

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Sd/Chairperson

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mks-01

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Ifci Ltd. v. Rainbow Papers Ltd.

Case brief

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Ifci Ltd. v. Rainbow Papers Ltd.

Case brief

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