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TMI Blog2016 (10) TMI 1347X X X X Extracts X X X X X X X X Extracts X X X X ..... rned Tribunal has further directed to send the copy of the loan documents available in the case on records to the Collector of Stamp, Gujarat and has directed to send copy of the Assignment Agreement to the Chief Controlling Revenue Authority, Gandhinagar and the Collector of Stamp and Chief Controlling Revenue Authority are directed to call upon the original documents / loan documents and the original Assignment Agreement dated 28.03.2014 from the original applicant for further process, the original applicant - Asset Reconstruction Company (India) Limited has preferred the present Special Civil Application No.10621/2016 under Article 226 of the Constitution of India. [2.1] Feeling aggrieved and dissatisfied with the similar order passed by the learned Tribunal on 10.06.2016 in Original Application No.180/2012 by which the learned Tribunal has dismissed the said original application and by which the learned Tribunal has issued the similar directions issued in Original Application No.154/2012, the original applicant - Asset Reconstruction Company (India) Limited has preferred the present Special Civil Application No.10622/2016 under Article 226 of the Constitution of India. [3.0] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dit Facility of Rs. 6.50 Crores (Non-Fund Based) facility totaling to Rs. 39.37 Crores by State Bank of India and Fund Based Cash Credit Hypothecation Credit facility of Rs. 27.00 Crorers and Rs. 3.50 Crores of Non-Fund Based L/C Facility by Allahabad Bank, the Allahabad Bank totaling to Rs. 30.50 Crores, the borrower company executed necessary documents in favour of State Bank of India including Working Capital Consortium Agreement, (2) Joint Deed of Hypothecation, (3) General Undertaking etc. in favour of State Bank of India on 10.10.2009. That by the aforesaid documents, borrower Company had hypothecated all its current assets including plant and machinery, both present and future, all present and future stocks, raw materials, semi finished and finished goods, book debts, vehicles and all other movable assets of the borrower company including the receivables, documents of titles to goods, outstanding monies, bills, invoices, documents, contracts, insurance policies, guarantee, engagements, acknowledgements, securities, investments and rights, present machinery and all other current assets of the borrower company with State Bank of India. That the charge by way of hypothecation w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re the learned Tribunal for recovery of the amount due and payable by the respondent Nos.2 to 4 herein - borrower and the guarantors. [3.5] It appears that after the filing of the aforesaid Original Application No.154/2012 by State Bank of India, the State Bank of India entered into an Assignment Agreement with the petitioner Asset Reconstruction Company Private Limited (hereinafter referred to as "ARCIL") by which the original banker unconditionally and irrevocably sold, assigned, transferred and released in favour of the ARCIL its right, title and interest in respect of the various financing documents relating to the present case and loan towards the original borrower. Therefore, according to the ARCIL by virtue of the terms and conditions stipulated in the Assignment Agreement and by operation of law entitled to pursue the proceedings of Original Application No.154/2012 to recover its dues, which were initiated by State Bank of India. That therefore ARCIL in its capacity as a Trustee of ARCILASTIV Trust, moved an application before the learned Tribunal for substitution of its name in place of State Bank of India. That the learned Tribunal allowed the said application for substi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 16, the learned Tribunal has dismissed the aforesaid Original Application mainly on the following grounds:" 1. That the documents relating to the Assignment Agreement in favour of the ARCIL executed by State Bank of India are found to be insufficiently stamped and not admissible in evidence and lost its enforceability. 2. That by the Assignment Agreement, State Bank of India has assigned debts and securities in favour of ARCILASTIV Trust and therefore, considering the provisions of Sections 2(d), 2(h), 17 and 19 of the Recovery of Debts Due to Banks and Financial Act, 1993 (hereinafter referred to as "RDB Act"), the said Agreement is not enforceable in the eyes of law as the aforesaid provisions do not permit a Trust to file / conduct and move Original Application before the learned Tribunal for recovery of its dues. 3. Subsection (5) of section 5 of the Securitization Act permits the Bank to assign NPA account in favour of a Reconstruction Company, but not in favour of a Trust. That thereafter while dismissing the Original Application on the aforesaid grounds, the learned Tribunal has directed the Registry to send a copy of the loan documents available in the case of records ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t all. It is submitted that no application would lie to compel a party to produce a document or for a direction to impound the same or to declare the documents enforceable at law or to dismiss the Original Application on such finding. It is further submitted that such an application is not contemplated under any law governing the procedure of hearing matters before the learned Tribunal. [5.2] It is further submitted by Shri Joshi, learned Senior Advocate appearing on behalf of ARCIL that even otherwise the learned Tribunal has completely ignored the provisions of the Gujarat Stamp Act, 1958 (hereinafter referred to as "Stamp Act"), more particularly Sections 33, 34, 37 and 39 which lay down the procedure regarding impounding of documents, adjudication and payment of deficit stamp duty and the learned Tribunal has adopted rather novel procedure of dismissing the Original Application first and then issuing directions to the Stamp Authorities to impound the instruments and adjudicate the stamp duty thereon, which is wholly without jurisdiction. In support of his above submissions, Shri Joshi, learned Senior Advocate appearing on behalf of ARCIL has heavily relied upon the decision of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the finality as the same has not been challenged by the respondents. It is submitted that the contention of non-maintainability of the issue could be raised only after substitution is misconceived since the very issue arises at the stage of substitution as to whether the assignee, if not a bank or financial institution, is at all entitled to be substituted in the Original Application, and once the substitution is permitted the issue of entitlement stands concluded and the attempt to reagitate the issue, particularly at the interim stage is clearly an abuse of law. It is submitted that therefore the learned Tribunal could not and ought not to have allowed the application of the respondents. [5.6] It is further submitted by Shri Joshi, learned Senior Advocate appearing on behalf of ARCIL that even on merits also the finding regarding deficit stamp duty is erroneous. It is submitted that the learned Tribunal could not have undertaken such an exercise at all and therefore, the finding regarding deficit stamp duty is wholly without jurisdiction. It is submitted that as such the aforesaid contention has not been seriously disputed by the learned Counsel appearing on behalf of the respon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... when a Securitization Company frames a scheme, which may be in the nature of a Trust as contemplated under the Securitization Trust, for the purpose of securitization of the financial assets, the same disentitles it to recover the debt or take any steps in relation to the asset on its own account since it purportedly ceases to be the lender in relation to the same. It is submitted that the provisions of the Securitization Act indicate that a Securitization Company is entitled to acquire the financial asset and then offer security receipts to qualified institutional buyers for subscription in accordance with the scheme which may be framed by it or to raise funds from qualified institutional buyers by formulating schemes for acquiring the financial assets, as per subsections (1) and (2) of section 7. It is submitted that in either case the Statute imposes an obligation to ensure that realization of the financial asset is held and applied towards redemption of investments and payment of returns of the investments to institutional buyers under the scheme, which scheme may also be in the nature of a Trust. It is submitted that acquisition of a financial asset and its realization for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he learned Tribunal under Section 19 of the Securitization Act and there is no warrant to restrict it in any other manner. Making above submissions and relying upon above decisions, it is requested to allow the present petitions and quash and set aside the impugned judgment and order passed by the learned Tribunal. [6.0] Both these petitions are vehemently submitted by Shri Kamal Trivedi, learned Senior Advocate and Shri Mihir Thakore, learned Senior Advocate appearing on behalf of the original opponents - borrowers and guarantors. [6.1] It is vehemently submitted by learned Counsel appearing on behalf of the contesting respondents - original borrowers and the guarantors that the present petitions are required to be rejected on the ground of alternative remedy. It is submitted that there is an alternative efficacious remedy available by way of preferring appeal before the Debts Recovery Appellate Tribunal. It is submitted that to avoid payment of Court Fees of statutory appeal, writ is filed. It is submitted that if Writ Court interferes then the statutory provision of Appeal becomes frustrated, meaningless and will also become otiose, nugatory and redundant. In support of their ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bstitution is allowed and order allowing substitution is not challenged, it does not mean that the respondent Nos.2 to 4 had accepted that substituted party as right to carry further the proceedings of the Original Application. It is submitted that it is a right of the respondent Nos.2 to 4 that such question may be raised after substitution is allowed. In support of their above submissions, learned Counsel appearing on behalf of the respondent Nos.2 to 4 have relied upon the decision of the Himachal Pradesh High Court reported in MANU/HP/0019/1976. [6.5] Learned Counsel appearing on behalf of the respondents have submitted that title clause of the Assignment Agreement dated 28.03.2014 is shown assignee (ARCIL) as in dual capacity i.e. (1) ARCIL for own and (2) ARCILASTIVTrust. It is submitted that but careful examination reveal that between the said two capacities, there is a "/". It is submitted that as per the decision of the Delhi High Court in the case of Balsara Home Products Ltd. reported in MANU/DE/8134/2006 = 126 (2006) DLT 391 and the New Shorter Oxford English Dictionary, on Historical Principles, edited by Leslie Brown, explains a "slash" as on oblique, a solidus; whil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Hon'ble Supreme Court in the case of ICICI Bank Limited vs. Official Liquidator of APS Star Industries Limited and Ors. reported in (2010)10 SCC 1, the transfer of debts and security is permissible only inter se banks and as per RBI guideline. It is submitted that therefore the learned Tribunal has rightly and correctly applied and relied upon the said decision. [6.9] It is further submitted by learned Counsel appearing on behalf of the respondents that even otherwise the Assignment Agreement dated 28.03.2014 executed by the Authorized Signatory of the State Bank of India is not enforceable inasmuch as the Power of Attorney / Authorized Signatory of State Bank of India who executed the Assignment Agreement dated 28.03.2014 had no authority and/or power to execute the said Agreement on 28.03.2014. It is submitted that the authority letters dated 23.07.2014 for execution and registration of the said agreement which were annexed with the said Assignment Agreement, clearly state that the authority for execution and registration is given of to be means for future date from the date of said authority letters dated 23.07.2014. It is submitted that therefore the Assignment Agreeme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ill not apply and hence, the jurisdiction of the Regular Civil Court is not executed. Making above submissions and relying upon above decisions more particularly decision of the Hon'ble Supreme Court in the case of ICICI Bank Limited (Supra) and the decision of the Full Bench of the Bombay High Court in the case of Unimers India Limited (Supra), it is submitted that the learned Tribunal has not committed any error in dismissing the Original Application on the ground that the ARCIL as an Assignee and Trustee of ARCILASTIV Trust has no locus to file the suit before the learned Tribunal to recover the dues from the respondent Nos.2 to 4. Therefore, it is requested to dismiss the present petitions. [7.0] Heard learned Counsels appearing on behalf of respective parties at length. We have also considered and gone through the averments in the plaint / original application. We have also considered materials on record. At the outset it is required to be noted that by impugned orders the learned Tribunal has dismissed the respective original applications by allowing the applications submitted by the original defendants on maintainability and enforceability of the original applications. At ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loan documents available in the case record to the Collector of Stamp, Gujarat and to send the copy of the Assignment Agreement to the Chief Controlling Revenue Authority, Gandhinagar and directing the Collector of Stamp, Gujarat to call upon the original documents and directing the Chief Controlling Revenue Authority to call upon the original Assignment Agreement dated 28.03.2014 from ARCIL for further process? [7.2] Now, we shall take and decide the second question first i.e. whether the learned Tribunal has any jurisdiction to issue directions with respect to the loan documents and the Assignment Agreement namely directing the Registry to send the copy of the loan documents available in the case record to the Collector of Stamp, Gujarat and to send the copy of the Assignment Agreement to the Chief Controlling Revenue Authority, Gandhinagar and directing the Collector of Stamp, Gujarat to call upon the original documents and directing the Chief Controlling Revenue Authority to call upon the original Assignment Agreement dated 28.03.2014 from ARCIL for further process? At this stage it is required to be noted and it is an admitted position that the original loan documents and eve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evidence for any purpose by any person having by law or consent of parties authority to receive evidence, or shall be acted upon, registered or authenticated by any such person or by any public offer unless such instrument is duly stamped: 37. Instruments impounded how dealt with : (1) When the person impounding an instrument under section 33 has by law or consent of parties authority to receive evidence and admits such instrument in evidence upon payment of a penalty as provided by section 34 or of duty as provided by section 36, he shall send to the Collector an authenticated copy of such instrument, together with a certificate in writing stating the amount of duty and penalty levied in respect thereof, and shall send such amount to the Collector, or to such person as he may appoint in this behalf. (2) In every other case, the person so impounding an instrument shall send it in original to the Collector. 39. Collectors power to stamp instruments impounded: (1) When the Collector impounds any instrument under section 33, or receives any instrument send to him under subsection (2) of section 37, not being an instrument chargeable with a duty of twenty naye paise, or less h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same together with a penalty of an amount not exceeding ten times the amount of the proper duty or of the deficient portion thereof. In the present case none of the procedure as required to be followed under the provisions of the Stamp Act more particularly contemplated under Sections 33, 34, 37 and 39 has been followed. [7.5] As observed hereinabove original of neither the loan documents nor the Assignment Agreement dated 28.03.2014 are on record. Considering the provisions of the Stamp Act reproduced hereinabove, production of the original documents are prerequisite. Under the circumstances, directions issued by the learned Tribunal to the Stamp Authorities to impound the instruments and adjudicate the stamp duty thereon, are wholly without jurisdiction. The learned Tribunal has no jurisdiction whatsoever to issue such directions to the Collector of Stamp, Gujarat and the Chief Controlling Revenue Authority. [7.6] Even dismissing the original applications at this stage on the ground that loan documents and the Assignment Agreement dated 28.03.2014 are insufficiently stamped and therefore, they are inadmissible in evidence is also wholly without jurisdiction and just contrary t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of U.P., and Others, A.I.R. 1972 Allahabad 8. In Radha Swami Sat Sang Sabha's case the document which came up for consideration was a supplementary document subsequently executed after promissory notes were executed by the debtor in favour of the creditor. In terms it has been mentioned therein that the promissory notes were kept alive and all that was achieved by the document in question was to provide for a fresh liability to pay interest apart from making the provision regarding manner of payment of principal debt. It appears that in substance the view taken by the Court was that the reference to the preexisting debt was an incidental reference and that the document in question was one making a provision for payment of interest which was not provided by the original document. In paragraph 16 of that judgment it has in terms been observed as under: "In the case before us, the four promissory notes remained outstanding and we know that, as a matter of fact, three suits were filed on the basis of the four promissory notes, one of the suits consolidating two promissory notes and the other two suits were upon the basis of the other two promissory notes." Considering the facts of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the learned Tribunal permitting ARCIL to be substituted in place of original applicant - State Bank of India in view of the provisions of section 5(5) of the Securitization Act is also required to be considered in detail. [7.8] Even number of submissions on the interpretation of the Assignment Deed such as whether the Assignment Agreement has been executed in favour of ARCIL and/or whether the same has been executed in favour of ARCILASTIV Trust and/or whether ARCIL is assignee as a Trustee of the said Trust are all questions which could not have been permitted to be agitated by the learned Tribunal at this stage and the aforesaid questions could not have been considered by the learned Tribunal at this stage and on the aforesaid ground the learned Tribunal ought not to have dismissed the original applications. [7.9] At this stage the decision of the Division Bench of the Bombay High Court in the case of Alpha and Omega Diagnostics India Ltd. (Supra) is required to be referred to and considered. Identical question came to be considered by the Bombay High Court in the aforesaid decision. Questions which arose before the Bombay High Court was as to whether "reconstruction comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be construed widely as suggested by Mr.Saraf or the restricted interpretation placed by Mr.Samdani deserves to be accepted. The Court merely interpretes the law enacted by the Legislature whenever called upon to do so. There is clear demarcation of the field inasmuch as the Legislature enacts, Executive implements and the Judiciary interprets the Statutes. 25] The RDB Act is an Act providing for establishment for expeditious adjudication and recovery of debts due to banks and financial institutions. We have already reproduced the definition of the terms "debt" and "Financial Institution" as appearing in RDB Act. In United Bank of India Vs. Debt Recovery Tribunal reported A.I.R. 1999 S.C. 1381, the Supreme Court was called upon to consider the ambit and scope of the definition of the term "debt". It held that the word has to be given widest amplitude. It is defined to mean any liability inclusive of interest which is claimed as due from any person by a bank or financial institution or by a consortium thereof during the course of any business activity taken by the bank or financial institution under the law for the time being in force, the debt may be in cash or otherwise. It may ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which has been instituted by its predecessor in title/ assignee/ financial institution. If this interpretation is not placed, then, the very purpose and object of amending the definition of the word "financial institution" would be defeated. This coupled with the rights that are acquired by securitisation company or reconstruction company by virtue of section 5 of the Securitisation Act, would enable us to conclude that the narrow and restricted view no longer prevails. 28] Section 5 of the Securitisation Act has been reproduced by us precisely with this intent. Subsection 1 thereof opens with a non obstante clause and, therefore, any agreement or law notwithstanding, the securitisation company or reconstruction company may acquire financial assets of any bank or financial institutions in the manner set out therein. It is then provided that if bank is a lender in any financial assets acquired by the securitisation company or reconstruction company, then, such company shall, on such acquisition, be deemed to be the lender and all the rights of such bank or financial institutions shall vest in the securitisation and reconstruction company in relation to such financial assets. Subse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tatutory Mandate, and are, therefore, unable to accept the narrow and restricted interpretation placed by the petitioners herein. For this very reason, we reject the contentions of Mr.Samdani to the contrary." At this stage it is required to be noted that in the said decision the Division Bench distinguished the earlier decision of the Division Bench of the Bombay High Court in the case of Krishna Filaments (Supra) by observing in paras 29 and 30 as under: "29] Reliance placed by the petitioners on the decision of Krishna Filaments (supra) and particularly paras 23 to 26 thereof is misconceived. Therein, the Division Bench held that the bank IDBI acted as a Trustee for the subscribers to the debentures of the appellant company. The entire claim was on behalf of the debenture holders for the amounts that they have subscribed to the debentures. The Amount claimed was not of IDBI but the dues was of the subscribers of the debentures. It is only in the light of this factual position that the division bench concluded that the debt is not that of IDBI but was due and payable to the subscribers of the debentures. It is only in the light of this factual position that the division bench ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the view that in the present case, considering the definition of the term "debt" and "financial institution" appearing in the RDB Act, 1993 and the relevant provisions of Securitisation Act so also to give full effect to the same, it will have to be held that it was permissible for parties such as Arcil to apply for amendments to the Original Application No.89 of 2005." [7.10] Learned Counsel appearing on behalf of the respondents herein - original defendants relying upon the Full Bench decision of the Bombay High Court in the case of Unimers India Limited (Supra) have submitted that the Full Bench of the Bombay High Court had not agreed with the view taken by the Division Bench in the case of Alpha & Omega Diagnostics India Ltd. (Supra). However considering the observations made in para 33 in the case of Unimers India Limited (Supra), it cannot be said that the Full Bench of the Bombay High court has overruled the decision of the Division Bench of the Bombay High Court in the case of Unimers India Limited (Supra). Even in the case before the Full Bench of the Bombay High Court, suit was filed by the plaintiff in its capacity as a debenture trustee for the recovery of the amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the learned Tribunal ought to have considered the aforesaid issues at appropriate stage but not at this stage and ought not to have dismissed the applications at the threshold. Therefore, we are of the opinion that the impugned orders passed by the learned Tribunal dismissing the original applications on the aforesaid ground at this stage cannot be sustained and the same deserves to be quashed and set aside. [7.12] Now, so far as the submission on behalf of the respondents herein - original defendants that as the petitioners have alternative statutory remedy available by way of preferring appeal before the Debts Recovery Appellate Tribunal and therefore, the present petitions may not be entertained is concerned, as observed hereinabove, after hearing the learned Counsel appearing for respective parties more particularly learned Counsel appearing for the respective respondents, who are on caveat, this Court issued the notice for final disposal. Therefore, thereafter, the petitions cannot be dismissed on the ground of availability of alternative remedy of appeal before the learned Debts Recovery Appellate Tribunal. Apart from the above, as observed hereinabove, the impugned orders ..... X X X X Extracts X X X X X X X X Extracts X X X X
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