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TMI Blog2020 (3) TMI 379X X X X Extracts X X X X X X X X Extracts X X X X ..... d. It is a matter to be examined in such recovery proceedings by providing opportunity to the parties to adduce evidence. Further in respect of post take over period a Suit No.4489/96 was filed which was transferred to DRT and registered as O.A.No.1114/2000 which has remained pending as respondent No.2 had proceeded to BIFR. No doubt in that circumstance if the appellant herein had chosen to initiate the proceedings before the PMA, keeping in view that the COD which was subsequently constituted is a mechanism in the nature of prelitigation mediation, it cannot be said that the step adopted by the appellant is wholly without basis. In the instant case, the claim is by the lender Bank towards which a decree had already been granted in respect of one claim and the other claim is pending consideration. The fact as to whether in the matter of take over, the liabilities were also included is one aspect of the matter. Further, the aspect which may also require examination by the Court undertaking the recovery proceedings is as to whether in the process of takeover of Shree Sitaram Mills the secured assets for the loan transaction has been taken over by the Respondent No.1 or was it ava ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellant, M/s Shree Sitaram Mills Ltd. was taken over by National Textile Corporation Ltd./Respondent No. 1 under the Textile Undertaking (Takeover of Management) Act, 1983 and was nationalised w.e.f. 01.04.1994 under the Textile Undertakings (Nationalisation) Act, 1995. Said Shree Sitaram Mills Ltd. was enjoying credit facilities with the Appellant Bank and Respondent No. 2, i.e. Ministry of Textiles was the guarantor in respect of the said credit facilities. The last guarantee was issued by the Ministry of Textiles on 23.2.1995, valid up to 31.3.1996. 4. The Appellant filed a recovery suit bearing Suit No.3961/1988 against Respondent No. 1 seeking recovery of an amount of ₹ 3,19,09,000/which was transferred to the Debts Recovery Tribunal on coming into force of the Recovery of Debts Due to Banks Act ( RDDB Act for short) renumbered as O.A.No.2526/1999. On 05.08.2004 DRT I issued a recovery certificate against one of the Company Shri Sitaram Mills Ltd. for a sum of ₹ 11,70,78,726.69. The recovery proceedings are adjourned sine die in view of the application filed by the Respondent that it has been declared a sick company under the provisions of the Sick Industr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gment of the Supreme Court in Electronics Corporation of India Ltd. vs. Union of India (2011) 3 SCC 404 wherein this Court recalled the orders reported in 1995 Supp (4) SCC 541. Thus, it was averred that the arbitral procedure is not based on any statute or consent. 9. Vide order dated 28.6.2012, the Arbitral Tribunal held that the practice of the PMA was to decide all the issues at one time and thus the parties were directed to submit their documents or evidence in support of their claim and counter claim. 10. Aggrieved, Respondent No. 1 filed a writ petition assailing notice dated 17.10.2011 and challenging the jurisdiction of the Arbitrator to proceed further with the matter. The learned Single Judge of the High Court dismissed the writ petition and opined that PMA was constituted by the decision of the Cabinet Secretariat of the Govt. of India as reflected in its Office Memorandum dated 22.01.2004. Though undoubtedly, the Committee of Disputes (COD) was formed based on the judgments of the Supreme Court it has been reversed by the Supreme Court by its subsequent judgment in the case of Electronics Corporation of India Ltd. It did not comment or deal with Constitution of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en over. Moreover, appellant has made the claim for the entire amount before the Commissioner of Payments before whom, as per Section 20 of Textile Undertaking (Nationalisation) Act, only the claims against the earlier owner company were to be made, thereby admitting the liability therefor to be of the earlier owner company only. Concluding that the dues claimed by the appellant being of the period prior to the takeover by the Central Govt. of the textile undertaking earlier owned by Shree Sitaram Mills Ltd., the Division Bench held that Respondent No. 1 cannot be said to be liable therefor and the arbitration proceedings before PMA for recovery thereof against Respondent No. 1 are misconceived. The appeal was accordingly allowed. 12. Heard Shri A.M. Singhvi, learned senior counsel for the appellant, Ms. Pinky Anand and Shri Vikramjit Banerjee, learned Additional Solicitor General for the respondents and perused the appeal papers. 13. It has been contended by the appellant before us that the High Court failed to appreciate that the Office Memorandum dated 22.1.2004 issued by the Central Government provides for a mechanism of PMA which has neither been quashed nor set aside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant who is dissatisfied with the decision of the Commissioner may prefer an appeal against the decision to the principal civil court of original jurisdiction. Next, it has been argued that the arbitral notice dated 17.10.2011 intimated that the forum has been constituted by the cabinet secretariat in compliance with the mandate of the Supreme Court in ONGC vs. Collector of Central Excise 1995 Supp (4) SCC 541 which was recalled by the Apex Court in its order dated 17.02.2011 passed in Electronics Corporation of India Ltd. vs. Union of India and Ors. It has also been alleged that the appellant is forum shopping, having already traversed various courts/tribunals. 15. Though elaborate contentions are urged with regard to the claim put forth by the appellant Bank and the liability for the same being disputed by the respondents namely, Union of India and National Textile Corporation as according to them such liability was not taken over by them, on hearing the learned senior counsel for the parties the contentions would disclose that the consideration required herein is essentially with regard to the forum that is to be provided to the parties for the purpose of appropriate adjudica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ein claiming to be aggrieved preferred the appeal LPA No.808/2012. The Division Bench through order dated 10.02.2014 has set aside the order of the learned Single Judge and while quashing the notice dated 17.10.2011 of the Arbitral Tribunal under the PMA has also decided the aspect of liability and held against the appellant. The appellant, therefore, being aggrieved has preferred this appeal. 17. As noted it is contended by the learned senior counsel for the appellant the liability was that of M/s Shri Sitaram Mills Ltd. and the claim put forth by the appellant herein is due to the fact that the said Shree Sitaram Mills was taken over by the respondents and in that circumstance the liability also is taken over and is to be liquidated. It is in that premise since the respondent is a Public Sector Enterprise and the appellant is also a Public Sector Bank which was nationalized under the Banking Companies (Acquisition Transfer of Undertakings) Act, 1970 the Office Memorandum dated 22.01.2004 was applicable and, therefore, the claim was put forth before the PMA. The reason for which the PMA was brought into existence due to the observations of this Court in the case of ONGC vs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 05.08.2004 against the other defendants except defendant Nos.3 (a to c) regarding which an appeal in DRTA Appeal No.271/2005 is pending before the Debts Recovery Appellate Tribunal, Mumbai. The said appeal is against the judgment and decree dated 29.03.2005. In the recovery proceedings pursuant to the decree, if in the meanwhile certain change of status relating to the judgment debtor has taken place as in the instant case, namely, the takeover of Shree Sitaram Mills which was a part of Shree Sitaram Mills Ltd. is to be taken note. Upon consideration of evidence adduced by the parties it has to be determined in that light as to whether the Respondent No.1 Corporation has in fact inherited such liability making themselves liable for the decree in existence or on the other hand if such liability has remained and subsisted with Shree Sitaram Mills Ltd. It is a matter to be examined in such recovery proceedings by providing opportunity to the parties to adduce evidence. Further in respect of post take over period a Suit No.4489/96 was filed which was transferred to DRT and registered as O.A.No.1114/2000 which has remained pending as respondent No.2 had proceeded to BIFR. No doubt in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings before the High Court nor in this appeal. If this aspect is kept in view, the conclusion reached by the Division Bench in paragraph 25 to hold that the respondent herein is not liable for the dues of Shree Sitaram Mills Ltd. and the proceedings is misconceived for such claim is an erroneous conclusion reached in a proceedings where such conclusion ought not to have been recorded. Hence the decision to that effect is liable to be set aside. 23. In view of the above conclusion, and on the reasonings we have recorded above we hold that the impugned judgment dated 10.02.2014 passed in LPA No.808/2012 to the extent of quashing the notice dated 17.10.2011 of the Arbitral Tribunal under the PMA warrants no interference. However, the conclusion reached by the Division Bench that the respondents are not liable for the amount claimed by the appellant herein is set aside. The question of liability and the manner of recovery is left open to be considered by the appropriate forum. In that regard as noticed above, the proceedings in O.A. No.2526/1999 had concluded by issue of Recovery Certificate in O.A. No.2526/1999 and the R.C. No.269/2004 was initiated towards recovery of amou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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