Bank Of India vs Yadav Consultancy Services (P) … on 5 December, 2017

                                                             REPORTABLE

                  IN THE SUPREME COURT OF INDIA
                   CIVIL APPELLATE JURISDICTION
                    CIVIL APPEAL NO. 5150 OF 2017
BANK OF INDIA                                           …Appellant
                                 Versus

YADAV CONSULTANCY SERVICES (P) LTD.
AND ORS.                                             ....Respondents

                            JUDGMENT

R. BANUMATHI, J.

This appeal is preferred against the judgment dated 19.11.2015

passed by the High Court of Judicature at Bombay in ARA No. 15 of

2014 dismissing the appeal of the appellant Bank thereby affirming

the judgment of the District Judge, Pune and the award passed by

the MSMEDF Council directing the appellant Bank to pay

Rs.1,62,82,079/- with interest at the rate of 24% to respondent No. 1

and also pay cost of Rs. 5,00,000/- to respondent No. 1.

2. The matter has a chequered history of two decades. Brief facts

which led to filing of this appeal are as follows:- The appellant Bank

filed suit in Special Suit No. 628 of 1998 for recovery of Rs.9.55 lakhs

along with interest against one M/s Sona Aluminium Finishers (P) Ltd.

The said suit was decreed on 30.01.1999. Since the decreed amount

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exceeded rupees ten lakhs, in view of Section 31-A of Recovery of

Debts due to Banks and Financial Institutions (RDDBFI) Act, 1993,

the recovery proceedings were transferred to the Recovery Officer,

Debt Recovery Tribunal (DRT), Pune and registered as R.P. No.

06/2002. After attachment of the property, the property was

auctioned on 08.03.2006. By order of DRT dated 14.07.2006,

certificate of sale was issued in favour of auction

purchasers-respondents No. 3 to 5. Since the Certificate Debtors

(Mortgagor/Guarantor) were said to be creating obstruction in delivery

of possession of the property to the auction purchasers, by order

dated 26.07.2006, the Recovery Officer, DRT, Pune appointed

respondent No.1 as “Court Commissioner”. The appellant Bank was

directed to pay service charges to the first respondent. Respondent

No. 1 took possession of the property on 09.11.2006. Auction

purchasers filed an application in R.P. No. 06 of 2002 on 13.11.2006

and DRT, Pune on the same date i.e. 13.11.2006 directed respondent

No. 1 to hand over the possession of the subject property to the

auction purchasers.

3. There was then a dispute between the appellant Bank and M/s

Sona Aluminium Finishers (P) Ltd. – Certificate Debtor and the same

came to be compromised; however the same failed due to
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non-compliance of the terms and conditions of the compromise.

Appellant Bank sent letter dated 04.05.2007 informing the first

respondent that they had decided to discharge the Court

Commissioner with effect from 08.05.2007 and the Bank also paid the

charges of respondent No. 1 up to 08.05.2007. However, the

Recovery Officer by his order dated 12.06.2007 directed the appellant

Bank to continue to pay the charges to respondent No. 1 which was

challenged by the appellant Bank before the Presiding Officer, DRT,

Pune by preferring Appeal No. 25 of 2007. In Appeal No. 25 of 2007,

vide order dated 24.07.2008, DRT set aside the order of the

Recovery Officer and directed the first respondent to take steps for

recovery of its charges from the auction purchasers from 08.05.2007.

Be it noted, respondent No. 1 had not challenged the order dated

24.07.2008; but filed an application on 07.11.2008 in R.P. No.

06/2002 seeking for direction to the auction purchasers to pay its

charges. Only the auction purchasers challenged the order of DRT

dated 24.07.2008 before Debt Recovery Appellate Tribunal (DRAT),

Mumbai in Appeal No. 589 of 2008 wherein respondent No. 1 was

one of the respondents. When the said appeal filed by the auction

purchasers was pending before DRAT, the first respondent filed Writ

Petition No. 10259 of 2011 seeking direction from the High Court to
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expedite hearing of the said appeal and dispose the same at an early

date. The said writ petition was disposed of by order dated

16.01.2012 directing DRAT, Mumbai to decide the appeal within a

period of three months and accordingly, the said Appeal No. 589 of

2008 was dismissed for default on 30.05.2012.

4. After so pursuing the matter before DRT, DRAT and the High

Court, the first respondent instead of challenging the order dated

30.05.2012, sought arbitration before Micro, Small and Medium

Enterprises Development Facilitation Council (MSMEDF Council),

Pune under Micro, Small and Medium Enterprises Development

(MSMED) Act, 2006. The MSMEDF Council passed an ex parte

award on 12.09.2012 directing the appellant Bank to pay a sum of

Rs. 1,62,82,079/- to respondent No. 1 within the period of one month

from the date of award i.e. 12.09.2012 with interest at the rate of

24%. In the incidental proceedings arising out of the award passed

by the MSMEDF Council, by order dated 19.03.2013 in Writ Petition

No. 2877 of 2013 filed by the appellant Bank, the High Court stayed

the order of the District Judge, Pune passed in DKT No. 1741 of

2012, subject to deposit the entire decretal amount that is

Rs. 1,93,22,590/- within one week with the Registrar, High Court of

Judicature at Bombay and the appellant Bank had deposited the said
Page No. 4 of 15
amount. Appeal filed by the appellant Bank under Section 34 of the

Arbitration and Conciliation Act, 1996 being Civil Application No. 352

of 2013 was dismissed by the District Judge, Pune vide order dated

16.06.2014. Further appeal filed by the appellant Bank under Section

37 of the Arbitration and Conciliation Act, 1996 in Arbitration Petition

No. 15 of 2014 came to be dismissed by the High Court inter alia on

various grounds:- (i) DRT has no jurisdiction to entertain the appeal

and therefore order dated 24.07.2008 would be non est; (ii) MSMED

Act, 2006 was specially enacted to deal with dispute of delayed

payments to service providers and the MSMEDF Council had

jurisdiction to adjudicate the dispute; and (iii) Bank has not taken any

step to take possession from Court Commissioner after paying the

charges; but it has simply refused to pay the charges and dragged

the litigation. Being aggrieved, the appellant Bank preferred this

appeal.

5. We have heard at length Mr. Dushyant Dave, learned senior

counsel appearing for the appellant Bank and Mr. Prakash

Wamanrao Yadav-the first respondent who appeared in-person. We

have carefully considered the rival contentions and perused the

impugned judgment and the materials on record.

Page No. 5 of 15

6. Upon consideration of the rival contentions, the following points

arise for consideration in this appeal:-

i. When the obligation of the appellant Bank to pay the charges

expired on 30.11.2006, when the physical possession of the subject

property was handed over to the auction purchasers and when the

order dated 24.07.2008 of Debt Recovery Appellate Tribunal, Pune

has attained finality, can the first respondent claim charges for

security services from the appellant Bank?

ii. Whether the High Court was right in saying that DRT had no

jurisdiction to entertain the appeal and that the order dated

24.07.2008 would be non est?

iii. When the first respondent was appointed as Court Commissioner

through the order of the Recovery Officer in the proceedings before

DRT in R.P. No. 06/2002 and when the parties were vigorously

pursuing the matter before DRT, DRAT and also before the High

Court, whether the first respondent was right in approaching the

Micro, Small and Medium Enterprises Development Facilitation

(MSMEDF) Council, Pune;

-and-

iv. Whether the award passed by the Micro, Small and Medium

Enterprises Development Facilitation (MSMEDF) Council, Pune

affirmed by the District Court and also by the High Court is

sustainable?

7. The auction of the property was conducted on 08.03.2006 and

the sale of the auctioned property was confirmed on 14.07.2006 and

Page No. 6 of 15
the sale certificate was issued in favour of the auction purchasers on

the same date. The Recovery Officer appointed the first respondent

as Court Commissioner on 26.07.2006 and the fees of the first

respondent to be directly paid by the Certificate Holder Bank. On

13.11.2006, the appellant Bank filed purshis praying to hand over the

possession of subject property (Pavitra Hall) to the auction

purchasers and on the same date i.e. 13.11.2006, on the application

filed by the auction purchasers, possession of the subject property

was handed over to the auction purchasers and they have also

issued acknowledgement of possession. On the same date i.e.

13.11.2006, purshis on behalf of the auction purchasers was also

filed in R.P. No. 06 of 2002 before DRT in and by which the auction

purchasers undertook to pay all expenses as required to protect their

possession. Purshis of expenses filed by the auction purchasers

reads as under:-

“Purshis of expenses
Purshis on behalf of auction purchaser is as under:

a) That from the time of taking possession i.e. 13.11.2006 of auctioned property
as purchased i.e., “Pavitra Hall”, the Auction Purchaser shall bear all the
expenses as may be required to protect their possession, including
payments if required to be made to the security personnel. That the Auction
Purchaser shall be liable accountable duty bound to safeguard the
possession to the exclusion of all others

b) Hence this purshis.”

Page No. 7 of 15

8. The appellant Bank sent the communication to the first

respondent on 04.05.2007 calling upon him to get his bill cleared for

Rs. 30,866/- being the charges for security services at “Pavitra Hall”

up to 08.05.2007. In the said communication, Bank had made it clear

that “…..no further payment will be made to you (Yadav Consultancy)

by the Bank…..”; however, the Recovery Officer by his letter dated

12.06.2007 directed the appellant Bank to continue to pay the

charges for security services to the first respondent. Appellant Bank

challenged the said order of Recovery Officer dated 12.06.2007

before DRT in Appeal No. 25 of 2007. DRT set aside the said order

of the Recovery Officer and directed the Recovery Officer to recover

Court Commissioner charges from 08.05.2007 from the auction

purchasers. We may usefully refer to the said order of the DRT dated

24.07.2008 which reads as under:-

“…….The Court Commissioner was appointed at the instance of the
Recovery Officer and the Recovery Officer has wrongly saddled the
appellant to pay the charges. The Court Commissioner should not suffer
in the present proceeding and, therefore, Recovery Officer is directed to
recover Court Commissioner charges from 08.05.2007 till his discharge
from the auction purchasers……..”

9. The first respondent has not challenged the order of DRT dated

24.07.2008; but even filed application on 07.11.2008 before DRT,

Pune seeking for direction to the auction purchasers to pay the Court

Page No. 8 of 15
Commissioner charges to the first respondent. The first respondent

had also filed contempt petition against the appellant Bank and the

auction purchasers. The Recovery Officer had heard all the parties

including the Certificate Debtor (CD) who prayed for setting aside the

sale of the auction property “Pavitra Hall”. The Bank inter alia prayed

that the auction purchasers be directed to pay the Court

Commissioner charges only up to 13.11.2006 and discharge the

Court Commissioner from that date. After considering the rival claims

of all the parties, by order dated 25.03.2009 in R.P. No. 06/2002, the

Recovery Officer held that the continuation of respondent No. 1 for

safeguarding the auctioned property was solely on behalf of auction

purchasers and his duty as “Court Commissioner” had ceased to

exist on 13.11.2006.

10. Order of the Recovery Officer dated 25.03.2009 makes it clear

that the continuation of the services of the first respondent was only

on behalf of auction purchasers and that only the auction purchasers

were bound to pay the charges for security services to the first

respondent. The relevant portion of the order of the Recovery Officer

reads as under:-

“8……The Auction Purchasers have not filed any application to discharge
the said Agency, therefore, they have opted to continue the services, of
the said Agency, in exercise of their discretion and in furtherance of their

Page No. 9 of 15
Exh 225. This Tribunal would therefore not be inclined to accept the
prayer of CH to discharge the said Agency, as doing so is likely to
prejudice the Auction Purchaser’s rights, in the matter of preservation and
protection of the auctioned property, and violation of their rights, and
discretion, as the CH has no concern in the preservation or protection of
the auctioned property from 13.11.2006 i.e., since the Auction Purchasers
having filed Undertaking at Exh 225.

9……….The status of the said Agency as “Court Commissioner” appears
to be lost from 13.11.2006, as thereafter the “Court Commissioner”
appears to have continued to safeguard the auctioned property for and on
behalf of the Auction Purchasers, in furtherance of their private
arrangement, particularly in light of Exh 225 of the Auction Purchaser.
The term “Court Commissioner” as used by CH in its application Exh 308
therefore is a misnomer. The said Agency from 13.11.2006 does not
appear to have rendered services to the Auction Purchasers as “Court
Commissioner” but as a private agency………… The order of the Hon’ble
PO dated 24.07.2008, passed in Misc. Civil Appeal 25/2007 whereby, it
appears, relief is granted to the Auction Purchasers, who have been
directed to pay the Court Commissioner charges w.e.f. 08.05.2007.
Therefore, I am not required to go into the said aspects again, as the
same having reached finality, as from the available record and papers, no
appeal appears to be filed against the said order dated 24.07.2008….”

The above order of the Recovery Officer makes it clear that the

continuance of respondent No. 1 for safeguarding the auctioned

property was solely on behalf of auction purchasers and the first

respondent’s duty as “Court Commissioner” had ceased to exist on

13.11.2006. After 13.11.2006 or at least after 24.07.2008 (Order of

DRT), for the services of respondent No. 1, if any, were availed by the

auction purchasers, only the auction purchasers are liable to pay the

said charges to respondent No. 1. The appellant Bank, therefore, was

under no obligation to pay the charges to the first respondent in any

case after 24.07.2008. The High Court has not kept in view the order

of DRT dated 24.07.2008 and the order of the Recovery Officer dated

Page No. 10 of 15
25.03.2009. The High Court was not right in saying that DRT had no

jurisdiction to entertain the appeal and, therefore, the order dated

24.07.2008 would be non est.

11. After the above order of the Recovery Officer, respondent No. 1

filed MA No. 35 of 2009 before DRT seeking payment of charges for

security services from the auction purchasers as directed by DRT in

its order dated 24.07.2008 which clearly indicates that the first

respondent had accepted the said order of DRT and also acted upon

it. Be it noted, the proceedings of the Recovery Officer dated

25.03.2009 in which all the parties participated proceeded mainly on

the basis of the order of DRT dated 24.07.2008. But, strangely,

respondent No. 1 made submission before the High Court that

“….DRT had no jurisdiction to entertain Appeal No. 25/2007 against

the order of the Recovery Officer dated 12.06.2007……..”. The said

submission of respondent No. 1 was accepted by the High Court and

it was held that “………DRT had no jurisdiction to entertain Appeal No.

25/2007, the order dated 24.07.2008 passed by it …… would be non

est and hence must be ignored.” In our view, the High Court did not

keep in view that the respondent No. 1 had not challenged the order

of DRT dated 24.07.2008; and had acquiesced to the said order

dated 24.07.2008 and also acted upon it. As discussed earlier, the
Page No. 11 of 15
subsequent proceedings clearly show that respondent No. 1 and

other parties have accepted the order of DRT dated 24.07.2008 and

acted upon it. The findings of the High Court that DRT had no

jurisdiction to entertain the appeal against the order of Recovery

Officer cannot be sustained.

12. Next question falling for consideration is whether in the facts of

this case, the Micro, Small and Medium Enterprises Development

Act, 2006 would apply. As discussed earlier, the proceedings were

conducted before DRT under RDDBFI Act, 1993 which finally

culminated in DRT’s order dated 24.07.2008 and had become final

and binding and was also accepted and acted upon by respondent

No.1. As per Section 5 of the RDDBFI Act, the Debt Recovery

Tribunal is headed by the Presiding Officer who is or has been or is

qualified to be a District Judge. Likewise, as per Section 10 of the

said Act, the Appellate Tribunal is headed by the Chairperson who is

or has been or is qualified to be a judge of a High Court. DRT and

DRAT are not merely having the trappings of the courts but also

vested with the powers of ordinary civil court including the power to

summon and examine the witnesses on oath, the power to order

inspection of the documents etc. When the proceedings were

lawfully conducted before the quasi-judicial authorities like DRT and
Page No. 12 of 15
DRAT, having trappings of the civil court, MSMEDF Council had no

jurisdiction to entertain the application filed by the first respondent;

more so, when the orders passed by the DRT were accepted and

acted upon by respondent No.1. The High Court did not consider the

question of lack of jurisdiction of MSMEDF Council.

13. The High Court mainly seems to have proceeded with the

matter as if it is a regular appeal arising out of the award passed by

the MSMEDF Council and commenting upon the conduct of the Bank

in not seriously pursuing the matter in challenging the award. The

High Court did not consider the earlier proceedings before DRT,

DRAT and before the High Court except merely referring to certain

proceedings before DRT and DRAT. The High Court did not consider

various orders passed by DRT and DRAT and the conduct of the

parties who have been vigorously pursuing the matter before DRT,

Recovery Officer and DRAT. The High Court also did not keep in

view that the parties were bound by the earlier orders passed by DRT

and Recovery Officer which clearly held that charges towards security

services are payable only by the auction purchasers. The impugned

order passed by the High Court thus suffers from serious infirmity and

is liable to be set aside.

Page No. 13 of 15

14. Pursuant to the order dated 19.03.2013 passed by the High

Court, an amount of Rs.1,93,22,590/- was deposited by the appellant

Bank. By an order dated 30.03.2016 passed by DRT, Pune,

respondent No.1 has withdrawn an amount of Rs.1,22,00,000/-

(Rs.1,00,00,000/- plus accrued interest). The balance amount of

Rs.93,22,590/- is lying in deposit with the District Court, Pune. By

order dated 22.04.2016, this Court has granted interim stay of the

impugned order of the High Court. However, by order dated

24.10.2016, respondent No.1 was permitted to withdraw 50% of the

said amount Rs.93,22,590/- on furnishing a bank guarantee. The first

respondent has not withdrawn the said 50% amount of

Rs.93,22,590/- as he has failed to furnish bank guarantee. We have

set aside the impugned judgment of the High Court and resultantly

the award passed by the MSMEDF Council is also set aside.

15. The impugned order is set aside and this appeal is allowed.

The appellant Bank is free to recover the amount of Rs.1,22,00,000/-

withdrawn by the first respondent after adjusting the payments due

upto 24.07.2008. The bank is permitted to withdraw the amount of

Rs.93,22,590/- along with accrued interest. So far as the charges

towards security services payable to the first respondent after

24.07.2008, liberty is granted to the first respondent to proceed
Page No. 14 of 15
against the auction purchasers-respondents No. 2 and 3 in

accordance with law. No order as to costs.

…….……………………J.

[KURIAN JOSEPH]

…………….……………J.

[R. BANUMATHI]
New Delhi;

December 5, 2017

Page No. 15 of 15

Article source: Supreme Court

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