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Modi Industries Ltd. and ors. Vs. Allahabad Bank and anr. - Court Judgment

LegalCrystal Citation
CourtDRAT Allahabad
Decided On
Judge
Reported inI(2008)BC113
AppellantModi Industries Ltd. and ors.
RespondentAllahabad Bank and anr.
Excerpt:
.....filed along with copy of the application for modification of that order moved on behalf of the bank. learned d.r.t. by passing the impugned order on 5th october, 2006 disposed of above controversy, hence this appeal.4. in t.a. no. 278/02 an application under section 22(1) of the s.i.c.a. was moved on behalf of defendant company eggro paper moult limited praying for staying the proceedings of t.a. against the borrower defendant-company as well as against any of its guarantee in respect of loan in question for want of mandatory permission under section 22(1) of s.i.c.a. for initiating the proceedings of recovery filed in the form of t.a. no. 278/02. plaintiff-bank opposed above application filing an objection wherein it was contended that the suit was filed on 13th march, 2000 the.....
Judgment:
1. By filing Appeal No. R-735/06 the order dated 5th October, 2006 passed by the D.R.T., Lucknow in Original Application No. 41/05 is under challenge at the instance of Modi Industries Limited and others, appellant-defendants (hereinafter to be called as defendants in this appeal for the purposes of this judgment). By order dated 5th October.

2006, learned D.R.T. observed that vide order dated 2nd August, 2002 passed by B.I.F.R. the required permission under Section 22(a) of S.I.C.A. has been granted to the Bank applicant-respondent (hereinafter to be denoted as plaintiff in this appeal for this judgment). In this appeal the learned D.R.T. directed to continue the proceedings of Original Application No. 41/05 declining to stay the proceedings as prayed by the defendants, who had also prayed for dismissal of the suit for want of permission under Section 22(1) of the S.I.C.A. In Appeal No. R-769/07 feeling aggrieved by an order dated 4th December, 2006 passed by the D.R.T., Lucknow in T. A. No. 278/ 02 appellant-defendants (to be called as defendants in this judgment henceforth). The learned D.R.T. on an application of the defendants moved under Section 22(1) of the S.I.C.A. observed that the reference of the company having been registered with B.I.F.R., the proceedings of T.A. No. 278/02 shall remain stayed against the principal borrower, whereas the same will continue against the guarantors.

2. As the controversy raised in both the appeals relate to scope and ambit of Section 22(1) of S.I.C.A. in respect of filing/continuing suits for recovery against the borrower and guarantors, the above two appeals requiring decision on a common point of controversy, these are being decided together by this common judgment.

3. Considering the scope of questions raised and required to be decided in above two appeals in short, the history of both these cases is being given as under: In Original Application No. 41/05 the Bank plaintiff initiated the suit for recovery against the borrower company and guarantors in the year 2005, whereas defendant-company borrower preferred a reference under the provisions of S.I.C.A. and this reference was registered even then according to the company defendant, the Bank plaintiff continued the proceedings of recovery without any prior permission as required under Section 22( 1) of the S.I.C.A. for filing such suit. Therefore, company defendant by moving an application before the D.R.T. for dismissal of Original Application requested for dismissal of the suit. This application of the defendant-company was opposed by the plaintiff Bank before the D.R.T. contending that the required permission under Section 22(1) of the S.I.C.A. to continue the suit, has been granted vide order dated 20th August, 2002 of B.I.F.R. and application for modification of above order dated 20th August, 2002 according to the Bank plaintiff had been moved and that is still pending. The copy of the order dated 20th August, 2002 has been filed along with copy of the application for modification of that order moved on behalf of the Bank. Learned D.R.T. by passing the impugned order on 5th October, 2006 disposed of above controversy, hence this appeal.

4. In T.A. No. 278/02 an application under Section 22(1) of the S.I.C.A. was moved on behalf of defendant company Eggro Paper Moult Limited praying for staying the proceedings of T.A. against the borrower defendant-company as well as against any of its guarantee in respect of loan in question for want of mandatory permission under Section 22(1) of S.I.C.A. for initiating the proceedings of recovery filed in the form of T.A. No. 278/02. Plaintiff-Bank opposed above application filing an objection wherein it was contended that the suit was filed on 13th March, 2000 the reference with B.I.F.R. had not been registered. Learned D.R.T. by disposing of above application vide order dated 4th December, 2006 decided above application moved in T.A. No.278/02.

5. In the light of above background both the appeals have come up for hearing before this Tribunal.

6. I have heard at length Mr. Naveen Sinha, learned Senior Advocate and Mr. Amit Negi, Advocate appearing on behalf of Modi Industries Limited-defendants in Appeal No. R-735/06 and Mr. Madhukar Dixit, Advocate who appeared on behalf of Kaushal Kishore Srivastava and other defendants in Appeal No. 769/07. Also I have given patient hearing to Mr. Arun Kumar and Mr. P.N. Tripathi, Advocates, who appeared on behalf of Allahabad Bank and Mr. D.K. Pathak, Advocate, who represented State Bank of India-plaintiff in the other appeal.

7. The records available relating to these two appeals have also been perused carefully. In Appeal No. 735/06 from the side of the company defendant, the learned Counsel for the company has argued that there is no permission either express or implied in the order dated 20th August, 2002 of B.I.F.R. as well as in the order dated 30th January, 2004 available as Annexure Nos. 1 and 6 respectively on the file of memo of appeal. Learned Senior Counsel Mr. Sinha took this Tribunal through Annexure No. 1 of the memo of appeal to point out that in para No. 13 of this document, the words "representative of Allahabad Bank B.K.Sharma stated that they may be permitted to file suit against the company". Further he has drawn the attention of this Tribunal towards para No. 32 of above Annexure No. 1 itself to argue that para No. 13 gets support from para No. 32 wherein there is clear mention that nobody had filed suit before the company came to B.I.F.R. The learned Counsel drew the attention of this Tribunal towards observations made by the learned Tribunal in the impugned order that "there is no clear mention of granting permission for filing suit or continuing with suit" and despite specific observations of the D.R.T. that "it is fact that applicant Bank has not obtained specific prior permission from B.I.F.R.to file this original application before filing of the same". Even then on the strength of an application for modification/clarification of the aforesaid order moved in the year 2003 available on the record, inferences have been drawn by way of presumption that B.I.F.R. has rectified the action of filing suit by the Bank permitting the Bank to continue with the suit with the condition that if any decree or award is obtained, the same should not be executed without prior specific approval of the Board. Learned Senior Counsel has submitted that above conditional order of the Board cannot amount to the conditional permission as required under Section 22(1) of the S.I.C.A. His submission is that the inferences and presumptions drawn by the learned D.R.T. are without any basis, when the order dated 20th August, 2002 and 30th January, 2004 available as Annexure 1 and Annexure 6 respectively with the memo of this appeal and they make it clear that no such permission was ever granted through above orders. It is also contended from the side of the appellants that the learned Tribunal misdirected itself in favour of the Bank plaintiff without considering the fact that the application for modification/clarification moved on behalf of the Bank was still pending and Board had noted the fact that the representative of plaintiff Allahabad Bank was present and there is clear observations of the Board that no suit had been filed against defendants by then. It is also argued that plaintiff Bank had filed the suit much after the passing of the order dated 20th August, 2002.

Therefore, it cannot be taken that in the year 2002 the suit was pending for permission to continue the proceedings of the same. Learned Counsel for the appellants has also taken this Court through the provisions of Section 22(1) of the S.I.C.A., 1985. Reliance has been placed on a judgment passed by the D.R.A.T., Delhi in Miscellaneous Appeal No. 150/03 decided on 11th December, 2006 in between Modi Industries Limited v. I.F.C.I. Copy of the judgment has been furnished.

Other rulings cited from the side of the appellants arc Patheja Bros.

Forgings and Stamping v. I.C.I.C.I. Ltd. ; Real Value Appliances Ltd. v. Canara Bank ; Rishabh Agro Industries Ltd. v. P.N.B. Capital Services Ltd. A.I.R. 2000 S.C. 1583.

Against this, the argument from the side of the Allahabad Bank-plaintiff is that on account of some confusion with regard to mention of specific permission to continue with the suit, the Bank had to apply for modification/clarification of the order and that application is pending for disposal before the Board. Learned Counsel for the Bank has argued before this Tribunal that in the order dated 20th August, 2002 copy of which is available with the memo of appeal it is clear that the Allahabad Bank had contended before the Board for filing the suit against the company contending that the copy of the suit had been given as shown in para No. 31 of the said order. His submission is that in the light of above in para No. 36(a) of order of Board mentioning the name of Allahabad Bank, it had been ordered that the suit filed against the company shall continue with a condition that if any decree is passed, the same should not be executed without prior specific approval of the Board. According to the learned Counsel for the Allahabad Bank, there was nothing on part of the Bank to mislead the D.R.T. and the impugned order is justified or in the light of prevailing circumstances pendency of modification/clarification application of the Bank before the Board justifies the order of D.R.T.in the light of above all. Counsel for the Bank has also argued that in case the suit is dismissed for want of permission under Section 22(1) of S.I.C.A., and the period for filing the suit having expired, the company would go scot-free when there is no provision for filing a fresh application, the interest of the Bank is certainly going to suffer in connection with huge amount said to be due.

8. In the other Appeal No. R-769/07 the argument from the side of the defendant company guarantors is that once the required reference having been registered with the B.I.F.R. without any permission under Section 22(1) of S.I.C.A. no suit for recovery of the money or for the enforcement of any security against the company or of any guarantee in respect of a loan or advance granted to the company shall lie or be proceeded except with the consent of the Board. Learned Counsel for the company has argued that in the instant case the learned D.R.T. has committed error in drawing the conclusion that despite the registration of the reference of the defendant company borrower with B.I.F.R. the proceedings against the guarantors can be continued. Drawing the attention of this Tribunal towards the provisions of Section 22(1) of S.I.C.A., it is argued that the very wordings of above Section 22(1) make it clear that the proceedings against company as well as against guarantors cannot go on if at all the reference of the borrower company have been registered with B.I.F.R. His interpretation is that even the interest of guarantors is also protected by virtue of above provision.

The learned Counsel for the Bank has cited a ruling Montary Industries Limited v. State Bank of Patiala I (2005) B.C. 221 : 2005(1) Bank C.L.R. 500 (D.R.A.T. Delhi). Against this, the learned Counsel for the S.B.I, has argued that the ruling which was relied upon from the side of the present appellant as Patheja Forgings and Stamping v. I.C.I.C.I.Ltd. (supra), having been discussed in the ruling of the Hon'ble Apex Court subsequently reported as Kailash Natli Agarwal v. Pradeshiya Industries and Investment Corporation of U.P.Patheja Brothers Forgings and Stamping v. I.C.I.C.I. Limited 9. Having considered all above arguments this Tribunal is of the opinion that in the case of Appeal No. R-735/06 the perusal of order dated 20th August, 2002 passed by the Board creates somewhat confusion particularly when in this very order despite having noted attendance of the representative of Allahabad Bank, there is a mention in para No. 31 of a chart, wherein against Allahabad Bank filing of suit and giving of copy to the company is noted, but in the subsequent para No. 32 there is a mention that on being asked by the Board, it was stated that nobody had filed any suit as such. On the other hand in para No. 36(a) disclosing the name of Allahabad Bank it is mentioned that permission to continue with the suit against the company is granted with certain conditions. There is no denial of the fact that the application for modification/clarification of above order at the instance of Allahabad Bank is pending. Under these circumstances, the learned D.R.T. despite having observed that there is no clear specific order of the Board granting permission to continue with the suit against the company, even then certain presumptions and inferences have been drawn by it to conclude that on the basis of presumption it cannot be taken that the B.I.F.R. has granted such permission. In the opinion of this Tribunal it is the Board, who has to pass specific order under Section 22(1) of S.I.C.A. and such permission cannot be drawn on the basis of presumptions particularly when the application for modification is pending. The continuation of proceedings or dismissal of the suit may result in the form of irreparable injustice and prejudice to the party, who is if at all ultimately is to be aggrieved by such order. In the circumstances of this case, this Tribunal concludes that the proceedings of Original Application No. 41/05 should remain stayed till the disposal of the application for modification dated 10th March, 2003 by the Board in connection with order dated 20th August, 2002 and to this extent the impugned order passed in Original Application No. 41/05 deserves to be modified.

10. So far as the case for other Appeal No. R-769/07 is concerned, when we go through the ruling, Kailash Nath Agarwal v. Pradeshiya Industries and Investment Corporation of U.P. (supra), we find that the Hon'ble Apex Court while discussing the observations contained in ruling Patheja Bros. Forcings and Stamping v. I.C.I.C.I. Ltd. (supra) has made it clear that the reference having been registered with B.I.F.R. in connection with a company cannot be taken to be a bar under Section 22(1) of the S.I.C.A. to proceed against the guarantor of the loan advanced to such company. In view of this legal position, the findings of the learned Tribunal directing to proceed against the guarantor has to be upheld as it does not suffer from any illegality.

11. The result of above discussions is that so far as Appeal No.R-735/06 is concerned, the impugned order of this appeal has to be modified to the extent of observations already made in this judgment and proceedings of Original Application No. 41/05 shall remain stayed till the disposal of application moved for modification of the order of the Board and the fate of Original Application No. 41/05 will depend on the order in respect of above modification application. So far as the Appeal No. 769/07 is concerned, in the opinion of this Tribunal as observed above this appeal has no force and it deserves dismissal.

12. Appeal No. R-735/06 is disposed of with the observations that the proceedings of Original Application No. 41/05 shall remain stayed as observed in the body of this judgment. Appeal No. R-769/07 stands dismissed. No order as to costs.


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