Uco Bank Vs Assam Financial Corporation

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Page No.# 1/11

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GAHC010142632017

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THE GAUHATI HIGH COURT (HIGH COURT OF ASSAM, NAGALAND, MIZORAM AND ARUNACHAL PRADESH)

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Case No. : WP(C)/5960/2017

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UCO BANK

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A BANKING COMPANY AND A BODY CORPORATE CONSTITUTED UNDER THE BANKING COMPANIES TRANSFER OF UNDERTAKING ACT, 1970 HAVING ITS REGISTERED OFFICE AT 10 BTM SARANI, BRABOURNE ROAD, KOLKATA DOING BANKING BUSINESS, THROUGH OUT INDIA THROUGH DIVERSE ZONAL OFFICES AND BRANCH OFFICE AND ONE OF ITS ZONAL OFFICE SITUATE AT GUWAHATI ZONAL OFFICE AND BRANCH OFFICE KNOWN AS UCO BANK SILPUKHURI, GUWAHATI -03.

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VERSUS

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ASSAM FINANCIAL CORPORATION VITTIYA BHAWAN, MAHAMMAD SHEIKH ROAD, PALTAN BAZAR, GUWAHATI - 781008.

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Advocate for the Petitioner : MR.M SHARMA,

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Advocate for the Respondent : , MS. T GOSWAMI,MR P K KALITA,SC, AFC

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B E F O R E

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Hon’ble MR. JUSTICE SANJAY KUMAR MEDHI

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Advocate for the petitioner : Shri GN Sahewalla, Sr. Adv.

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Shri M. Sharma, SC-UCO Bank

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Advocate for the respondents : Shri PK Kalita, Sr. Adv.

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Ms. T. Goswami, SC-AFC

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Dates of hearing : 04.09.2025 & 05.09.2025 Date of Judgment : 10.09.2025

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Judgment & Order

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The tussle in this writ petition instituted under Article 226 / 227 of the Constitution of India is between two financial institutions. While the petitioner is the UCO Bank which is a body corporate under the Banking Companies (Transfer of Undertaking) Act 1970, the respondent is the Assam Financial Corporation Limited which has been formed under the State Financial Corporation Act, 1951.

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As per the facts projected, the petitioner herein had instituted title suit being T.S. No. 9/1992 against one M/s. Eastern Steel & Alloys Pvt. Ltd. and two others for realization of loan amount of Rs.1,82,38,424/- along with interest as well as for sale of mortgage properties. In the said suit, the present respondent was the proforma defendant no. 4. The suit was decreed by the learned District Judge, Bongaigaon vide judgment and order dated 24.08.1994 holding that the petitioner was entitled for a preliminary decree with cost of realization of loan amount of Rs.1,82,38,424/- with future interest and cost. The contesting defendants were directed to pay the amount within a year, failing which the petitioner would be entitled to a final decree. It was also held that the present respondent which was a proforma defendant was entitled for a preliminary decree and cost of realization of a loan amount of Rs.23,15,258.86 with future interest. It was also stipulated that the contesting defendants would pay the said amount within a year failing which the proforma defendant would be entitled to a final decree and Pari Passu charges in the ratio of 22::37.5. Accordingly, the decree was prepared on 05.09.1994.

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As the decretal amount was not paid within the time as directed, the

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petitioner had filed Petition No. 449/1996 with a prayer to pass final decree. Accordingly, the final decree was passed on 27.06.1996, whereafter the petitioner had filed Title Execution No. 8/1996 before the learned Court of the District Judge, Bongaigaon. However, in the meantime, the Recovery of Debts and Bankruptcy Act, 1993 (hereinafter the DRT Act) came into being and, accordingly the execution proceeding before the learned District Judge was transferred to the Debt Recovery Tribunal, Guwahati (hereinafter DRT, Guwahati) under Section 31 of the Act. The petitioner had accordingly approached the DRT, Guwahati for execution of the decree passed in the aforesaid title suit by preferring an application being OA/39/2002. The Presiding Officer, DRT, Guwahati had accordingly passed an order dated 27.03.2003 whereby Recovery Certificate was issued in favour of petitioner. Subsequent thereto, DRT, Guwahati vide its Recovery Officer had held an auction sale of the hypothecated and mortgaged properties whereby a recovery of Rs.1,08,50,000/- was made and the same was released in favor of the petitioner on 21.03.2008.

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Against the aforesaid order, the present respondent had preferred an appeal being Appeal No. 6/2010 before the DRT, Guwahati. The said appeal was however dismissed, vide order dated 09.01.2012. However, certain observations were made for sharing of the proceeds as per the Pari Passu Agreement. The said order dated 09.01.2012 was the subject matter of challenge by the present petitioner in an appeal preferred before the learned DRAT, Kolkata which was registered as Appeal no. 64/2012. However, the learned Appellate Tribunal, Kolkata vide order dated 12.12.2013 had dismissed the appeal whereafter the respondent had filed an application being P. No.74/14 in OA/39/2002 before the DRT for a

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direction to the petitioner to pay an amount of Rs.99,55,613/- towards the sale proceeds of mortgaged property. The petitioner had filed its objection on 30.06.2014. The Recovery Officer - II, DRT, Guwahati vide order dated 28.08.2014 had dismissed the application. However, direction was given to the petitioner to deposit the excess amount out of the sale proceeds along with interest at the rate of FDR to a non-lien interest bearing account having interest at the rate of the FDR.

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The petitioner thereafter preferred an appeal in the DRT, Guwahati being Appeal No. 5/2014 under Section 30(1) of the DRT Act, 1993 against the said order dated 28.08.2014. The appeal was however dismissed, vide order dated 04.07.2017. Thereafter, the Recovery Officer, DRT, Guwahati had passed an order dated 27.07.2017 directing the petitioner to deposit the entire sale proceeds in favour of the Recovery Officer. The said order was however modified on 16.08.2017 to the extent that instead of the words ‘entire sale proceeds’, it would be ‘excess amount of sale proceeds’. On 15.09.2017, the Recovery Officer, DRT, Guwahati had directed the Deputy General Manager / Zonal Manager of the petitioner - Bank to appear in person on the next day and to show cause as to why appropriate proceedings should not be initiated against him and costs be recovered from the salary and also to disclose the other immovable property owned by the Certificate Holder Bank in the region of Guwahati.

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Accordingly, the instant writ petition has been filed challenging inter alia the order dated 12.12.2013 passed by the DRAT, Kolkata in Appeal No. 64/2012, order dated 04.07.2017 passed by the DRT, Guwahati in Appeal No. 5/2014 and order dated 15.09.2017 passed by the DRT, Guwahati.

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I have heard Shri G.N. Sahewalla, learned Senior Counsel assisted by

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Shri M. Sharma, learned counsel for the petitioner - UCO Bank. I have also heard Shri PK Kalita, learned Senior Counsel assisted by Ms. T. Goswami, learned counsel for the respondent - AFC.

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Shri Sahewalla, learned Senior Counsel for the petitioner – UCO Bank has submitted that the petitioner was the plaintiff in the original title suit being T.S. No. 9/1992 in which a preliminary decree was passed on 24.08.1994. Thereafter, the petitioner had taken steps for passing a final decree which was accordingly done whereas the present respondent did not file any application for passing of final decree. He has submitted that the impugned order is not sustainable in law inasmuch as, it is the petitioner which will have a first claim as it is in its favour where a final decree was passed which is the basis of the execution proceeding which was transferred to the DRT, Guwahati after enactment of the DRT Act. He has submitted that the aspect of limitation would also come into operation and the impugned order is not sustainable in law. He has also assailed the subsequent order dated 15.09.2017 of being extraordinarily harsh whereby the Officers of the petitioner – Bank were directed to appear. He has informed this Court that while entertaining the writ petition vide order dated 20.09.2017, an interim order was passed staying the impugned order dated 15.09.2017.

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Per contra, Shri PK Kalita, learned Senior Counsel for the respondent - AFC has submitted that the facts projected by the petitioner are not wholly correct. He has submitted that the present respondent was only a proforma defendant in the suit and it is for the plaintiff to apply for a final decree as the payment was not done in terms of the preliminary decree. He has brought the attention of this Court to the Pari Passu Agreement, as per

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which the sharing pattern was 22::37.5 and the said agreement has to be taken into consideration in the impugned orders. By drawing the attention of this Court to the affidavit-in-opposition filed by the respondent on 04.01.2018, he has submitted that the issue has attained finality vide the order dated 12.12.2013 passed by the DRAT, Kolkata in Appeal No. 64/2012 whereby the observations made by the DRT, Guwahati in its order dated 09.01.2012 were confirmed. He has submitted that after such dismissal, the respondent had filed an Petition No. 74/2014 in OA/39/2002 in which the petitioner Bank was directed to deposit the excess amount out of the sale proceeds with interest vide order dated 28.08.2014. The petitioner Bank had thereafter preferred an appeal being Appeal No.5/2014 under Section 30 (1) of the DRT Act which was also dismissed by the DRT vide order dated 04.07.2017 along with cost of Rs.50,000/-. Thereafter, no action was initiated by the petitioner so far as the aspect of complying with the said order but on 16.08.2017 had simply sought for time. It was under that context that on 15.09.2017, the DRT had passed the order for requiring the GM of the petitioner to appear before the Court.

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The learned Senior Counsel for the respondent - AFC has submitted that the interest of his client is only to get its entitlement as per the Pari Passu Agreement and the directions for personal appearance had to be made by the learned DRT only because of the fact that the orders passed earlier were not complied with.

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The rival submissions have been duly considered and the materials placed before this Court have been carefully examined.

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From the materials placed on record, it transpires that the petitioner had instituted the Title Suit No.9/1992 for recovery and enforcement of the

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mortgage in which the present respondent was a proforma defendant. It is also not in dispute that so far as the suit for recovery is concerned, the same is preceded by a Pari Passu Agreement wherein there was a ratio of 22::37.50. The suit had culminated in passing of a preliminary decree and as the amount in question was not paid by the contesting defendants in the said suit, the petitioner had filed application for passing final decree.

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This Court has also taken consideration the contention advanced by Shri Kalita, the learned Senior Counsel for the respondent that it is for the plaintiff to file application for passing final decree and the present respondent which was a proforma defendant could not have made such an application. This Court is also of the view that mere passing of final decree would not per se entitle only the present petitioner for the decretal amount and the same would have to be divided as per the Pari Passu Agreement which is on record.

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This Court has also noticed that while the DRT had dismissed the Appeal No. 6/2010 preferred by the present respondent vide order dated 09.01.2012, the following observations were made:

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“However, in view of the facts and circumstances of this case and also issuance of the Certificate by the learned Presiding Officer in accordance with the terms of the decree passed by the District Judge (Civil Court) on 24/8/1994 the respondent No. 1 is entitled to their share on 22:37:5 % basis only in the sale proceeds of the mortgaged property and as such, excess amount received by the respondent no. 1 over and above their share in the auction sale proceeds is to be refunded to the learned Recovery Officer. The learned Recovery Officer will receive back the above said excess

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amount along with interest at the rate of FDR for the intervening period and put the same in the Nationalized Bank in an interest bearing account. The learned Recover Officer will hold the amount till other assets of the certificate debtors are sold out and the amount under the Certificate is realized. In the meantime, if the appellant bring any orders from the competent Court of law for release of their share at the ratio of 22:37:5 basis, the same will be released in their favour otherwise, this amount will be released in favour of the respondent No. 1 if the amount so received by the respondent no. 1 is found short in terms of the Certificate issued, but not earlier than three months from receiving back the said amount by the learned Recovery Officer from the respondent No. 1 Bank.”

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The said observations were the subject matter of challenge in Appeal No. 64/2012 preferred before the learned DRAT, Kolkata by the present petitioner which was however dismissed on 12.12.2013 and it is only thereafter that the present respondent had filed P. No. 74/2014 in OA/39/2002 for a direction to the petitioner to pay an amount of Rs.99,55,613/- towards sale proceeds of the mortgage property. Though the petition was dismissed, the petitioner was directed to deposit the excess amount. It may be mentioned that the judgment dated 12.12.2013 passed by the learned DRAT, Kolkata in Appeal No.6/20 was however not put to challenge at that time. But in the guise of challenging the order dated 15.09.2017 of the DRT, Guwahati, the same has also been sought to be collaterally challenged. In the P. No. 74/2014 filed by the respondent, the DRT, Guwahati had passed an order on 28.08.2014 whereby the

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application was disposed of directing the petitioner to deposit the excess amount received by the petitioner out of the sale proceeds along with the interest at the FDR rate. The further appeal preferred by the petitioner being Appeal No. 5/2014 was also dismissed vide judgment dated 04.07.2017 whereafter the present impugned order was passed on 15.09.2017 requiring personal appearance of the Officers of the petitioner.

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Taking into consideration the issue involved vis-a-vis the submissions and the materials on record, it is to be kept in mind that in exercise of jurisdiction under Article 226 of the Constitution of India this Court would confine its powers to examine the decision making process only. Further, the present case pertains to a proceeding of a Tribunal which has given its findings based on the facts. It is trite law that findings of facts are not liable to be interfered with by a Writ Court under its certiorari jurisdiction. Law is well settled in this field. The Hon’ble Supreme Court, after discussing the previous case laws on the jurisdiction of a Writ Court qua the writ of certiorari, in the recent decision of Central Council for Research in Ayurvedic Sciences and Anr. Vs. Bikartan Das & Ors reported in 2023 INSC 733 has laid down as follows:

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“49. Before we close this matter, we would like to observe something important in the aforesaid context: Two cardinal principles of law governing exercise of extraordinary jurisdiction under Article 226 of the Constitution more particularly when it comes to issue of writ of certiorari.

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The first cardinal principle of law that governs the exercise of extraordinary jurisdiction under Article 226 of the Constitution, more particularly when it comes to the issue of a writ of certiorari is that

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in granting such a writ, the High Court does not exercise the powers of Appellate Tribunal. It does not review or reweigh the evidence upon which the determination of the inferior tribunal purports to be based. It demolishes the order which it considers to be without jurisdiction or palpably erroneous but does not substitute its own views for those of the inferior tribunal. The writ of certiorari can be issued if an error of law is apparent on the face of the record. A writ of certiorari, being a high prerogative writ, should not be issued on mere asking.

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The second cardinal principle of exercise of extraordinary jurisdiction under Article 226 of the Constitution is that in a given case, even if some action or order challenged in the writ petition is found to be illegal and invalid, the High Court while exercising its extraordinary jurisdiction thereunder can refuse to upset it with a view to doing substantial justice between the parties. Article 226 of the Constitution grants an extraordinary remedy, which is essentially discretionary, although founded on legal injury. It is perfectly open for the writ court, exercising this flexible power to pass such orders as public interest dictates & equity projects. The legal formulations cannot be enforced divorced from the realities of the fact situation of the case. While administering law, it is to be tempered with equity and if the equitable situation demands after setting right the legal formulations, not to take it to the logical end, the High Court would be failing in its duty if it does not notice equitable consideration and mould the final order in exercise of its extraordinary jurisdiction. Any other approach would render the

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High Court a normal court of appeal which it is not.”

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This Court is of the considered opinion that the approach of the DRT in the case before it was a balanced one whereby neither the petitioner nor the respondent were given the entire benefit of the decree passed but had directed the maintenance of the Pari Passu Agreement of 22::37.5 which was mentioned in the proceeding before the Trial Court itself.

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This Court is also of the opinion that the approach of the learned DRT in directing the personal appearance of the Officers of the petitioner was justified under the facts and circumstances. It is also seen that all the relevant factors were taking into consideration and no error apparent is found in the decision making process. Accordingly, the writ petition is dismissed. However, taking a holistic view, the order dated 15.09.2017 is modified by dispensing with the requirement of personal appearance of the Officers of the petitioner. Considering that the petitioner – Bank is a Public Sector Bank, the cost imposed by the learned DRT, Guwahati is also reduced to Rs.25,000/- (Rupees Twenty Five Thousand). The petitioner is however directed to comply with the other aspects of order passed by the DRT, Guwahati on 28.08.2014 which had attained finality on dismissal of the Appeal No.5/2014, vide order dated 04.07.2017.

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The writ petition accordingly stands disposed of.

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Interim order passed earlier stands merged with this final order.

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JUDGE

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Comparing Assistant

Uco Bank v. Assam Financial Corporation

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Uco Bank v. Assam Financial Corporation

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