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
J U D G M E N T
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
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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;
-andiv.
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
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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
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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
