TaxTMI 
TaxTMI 
2016 (5) TMI 982
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....e in the Writ Petition, we find that in actuality, there are two other orders that are implicitly under challenge. The first of these is an order dated 22nd November 2012 passed by the Recovery Officer on an application made by the 1st Respondent pursuant to which a certain sale of property, to which we will refer hereafter, in favour of the Petitioner was ordered to be cancelled and was set aside. The second is an order dated 30th January 2013 passed by the Presiding Officer of the Debt Recovery Tribunal in a First Appeal filed by the Petitioner. 2. We have heard Ms. Sethna for the Petitioner and Mr. Cooper for the 1st Respondent, the Asset Reconstruction Company (India) Limited ("ARCIL"), at considerable length. The record before us includes the Petition in two volumes, running to about 500 pages, a substantial Affidavit in Reply, a copy of the written submissions filed before the Debt Recovery Appellate Tribunal, a four volume compilation of documents filed by the 1st Respondent, the Petitioner's written submissions and authorities along with an accompanying compilation and the 1st Respondent's written submissions and compilation of judgments. There are also two Receiver's re....
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....ransferred and sold all loans of Daewoo together with the Recovery Certificate and all underlying securities, including the suit properties, to ARCIL. The Recovery Certificate was then amended to bring ARCIL on record. ARCIL then initiated Recovery Proceeding No. 440 of 2004 before the Recovery Officer, Mumbai DRT ("Recovery Officer"). (h) In the meantime, IDBI Bank, till then also a creditor of Daewoo, entered into an Assignment Agreement by which it assigned, transferred and sold all its loans to Daewoo along with all underlying securities, including the suit properties, to one Stressed Assets Stabilisation Fund ("SASF"). This is Respondent No. 4 to the present Writ Petition. SASF was brought on record in ARCIL's Recovery Proceeding. (i) Since the DRT Receiver was unable to sell the properties by public auction, ARCIL filed an application before the Recovery Officer seeking that the DRT Receiver be permitted to invite bids in public auction for sale of the assets but on various payment options such as deferred payment, payment in cash, payment in kind and so on. The DRT Receiver attempted to sell the properties in execution of the Recovery Certificate in various public auct....
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....oner before us today. The offer made by Crosslinks in respect of Lot No. 2, the current assets, stood rejected. ARCIL Compilation, Vol. I, pp. 30-47. (m) On 28th September 2007, an order came to be passed by the Presiding Officer of the DRT recording and noting the support of the workmen's union to the offer made by the Petitioner as a nominee of the Crosslinks. ARCIL Compilation, Vol. I, pp. 28-29. (n) It seems that the Recovery Officer's order of 12th February 2007 was carried in appeal by various parties including Canara Bank. In one of these appeals, the Presiding Officer of the DRT passed an order of status quo of the sale of the suit properties (i.e., the fixed assets). This order of status quo was finally brought to an end by an order dated 5th October 2007 passed by the DRT. (o) ARCIL then filed an application before the Recovery Officer seeking compliance of the previous order dated 12th February 2007. On this application, numbered as Exhibit "52", the Recovery Officer passed an order on 16th October 2007 inter alia sanctioning the sale of the fixed assets (Lot No. 1) in favour of the Petitioner for Rs. 765 crores on the terms and conditions of sale mentioned in t....
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....L and Crosslinks filed appeals to the DRAT. By its order dated 25th October 2007, the DRAT vacated the interim stay of the recovery proceedings. (s) On 25th October 2007, the DRT Receiver delivered possession of the fixed assets to the Petitioner. (t) On 7th November 2007, the DRT passed a common order confirming the Recovery Officer's order of 12th October 2007 and rejecting the objections raised by bidders that the sale was not in conformity of the DRT Act and Income Tax Act. The bidders' appeals were dismissed. Aggrieved by this order, Canara Bank filed an appeal to the DRAT. That appeal is pending. (u) On 2nd June 2008, the Petitioner filed Miscellaneous Application No.33 of 2008 (later numbered Exhibit "69") before the Recovery Officer. It sought directions against the Uttar Pradesh State Industrial Development Corporation ("UPSIDC"), the lessor of the land at the Surajpur Industrial Estate, to forthwith withdraw its claim in relation to the transfer of the lease and demanding that the claim be lodged instead with the Official Liquidator attached to Delhi High Court. ARCIL was not joined as a party to this application. UPSIDC filed an Affidavit and Written Submissions....
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.... March 2010, the Recovery Officer took the Consent Terms on file. Accordingly, as provided in those Consent Terms, all pending Miscellaneous Applications filed by both ARCIL and the Petitioner came to be disposed of. (bb) On 28th April 2010, a status Affidavit came to be filed before the Recovery Officer pointing out default on the part of the Petitioner. On 3rd May 2010, ARCIL filed another Miscellaneous Application (later, Exhibit "146") before the Recovery Officer once again seeking to set aside the sale in favour of the Petitioner on the ground that Petitioner was yet in default of their obligations. The Petitioner filed an Affidavit dated 8th June 2012 in reply. On 26th July 2010, the Petitioner sought 15 days for compliance. Time was granted until 10th August 2010. Between June 2010 and February 2011, the Petitioner made several applications for time extensions for compliance with its pending obligations under the terms and conditions of the sale. The details of these various applications are not immediately germane. It is sufficient to note that throughout this period the Petitioner seems to have been in default. Undoubtedly it put forward some reasons for this noncomplia....
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....set aside the sale in favour of the Petitioner. This was numbered as Exhibit "194". ARCIL Compilation, Vol. II, pp. 84-117. Simultaneously, the Petitioner filed an application, Exhibit "196", bringing some documents on record and seeking yet another time extension. ARCIL Compilation, Vol. II, pp. 214-222 At this time, one RNA, a rival bidder filed a Miscellaneous Application, Exhibit "197", seeking to continue with its bid application previously filed and numbered as Exhibit "182", and also seeking to withdraw the praecipe, Exhibit "184", that it had filed for withdrawal of that bid application. In other words, RNA now tried to withdraw its withdrawal. In Ms. Sethna's submission this demonstrates that the entire application by ARCIL for cancellation of the sale to the Petitioner is vitiated by mala fides, and all that it was trying to do was to renegotiate an already concluded transaction with a rival bidder. (gg) On 18th February 2011, the Recovery Officer passed an order granting part of ARCIL's application restraining the Petitioner from creating third party rights or executing a lease deed. RNA was allowed to withdraw its withdrawal praecipe and it was directed to deposit Rs....
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.... 18th February 2011, i.e., one that had been passed almost a year earlier. It also filed an application for expediting the hearing. This was rejected. An appeal from the order of rejection was also dismissed. A further appeal to the DRT also failed. The Petitioner filed a Writ Petition before this Court but, on 19th March 2012 withdrew that Writ Petition. (oo) On 22nd November 2012, the Recovery Officer set aside the sale in respect of the suit property, viz., the fixed assets, in favour of the Petitioner. ARCIL Compilation, Vol. III, pp. 13-33. ARCIL was appointed a Receiver of those properties. The Recovery Officer stayed his own order except to the limited extent of permitting ARCIL to take an inventory of these fixed assets. By this order, the Petitioner's application to create a mortgage, charge, hypothecation, and pledge in compliance with the terms and conditions of sale was rejected by the Recovery Officer. (pp) The Petitioner filed an appeal to the Presiding Officer of the DRT. The Presiding Officer continued the stay. Before the DRT, the Petitioner said that the fixed assets had been duly insured. This statement turned out to be incorrect; those assets were never ke....
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....ioner refused to hand over possession or allow an inventory and valuation of the assets. ARCIL took symbolic possession of the fixed assets. This Petition was filed on 3rd May 2014 and served on Arcil on 5th May 2014. (uu) On 25th July 2014, there was an ad-interim order passed by this Court inter alia directing the maintenance of status quo and restraining the Petitioner from alienating or disposing of the fixed assets. SJ Vazidar (as he then was) and AK Menon JJ The Petitioner was also directed to insure the fixed assets and ARCIL was allowed full access to these fixed assets for the purposes of inspection and inventory. ARCIL was also permitted to give inspection to prospective bidders after 72 hours' prior notice to the parties. This Court appointed a Court Commissioner to attend the site with ARCIL and to file detailed reports. The Court also allowed the fixed assets to be re-auctioned subject to re-confirmation by this Court. (vv) We must note in passing, that there are two reports of an Officer of this Court pursuant to this order that are as yet pending final disposal. These are reports made by Mr. Dilip R. Talekar, presently the Insolvency Registrar of this Court. He....
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....cording to Ms. Sethna, such a private treaty sale lies specifically within the purview of Rule 8 of the Security Interest Enforcement Rules framed under the SARFAESI Act. Neither the Act nor the Rules require permission from the DRT for such a sale and ARCIL did not need to go to the DRT for a sale that was, in Ms. Sethna's submission, entirely private. It also consequently did not need a confirmation of the sale from the DRT. It could always enter into a private conditional sale with specific terms and conditions. Ms. Sethna makes reference to various Sections of the SARFAESI Act, in particular Section 31(e), to submit that the SARFAESI Act does not apply to conditional sales over which no security has been created. This, in her submission, bars the application of the SARFAESI Act. In other words, it operates to oust the jurisdiction of the DRT. Simply put, her submission is that Section 34, the provision of the SARFAESI Act that ousts the jurisdiction of ordinary Civil Courts, is itself ousted in the case of a private conditional sale, and that jurisdiction re-vests with the Civil Court. The SARFAESI Act has absolutely no application to such a sale. 6. Ms. Sethna relies on a n....
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....s precluded from assailing a confirmed sale. Further, she submits that since ARCIL had intentionally relinquished its known rights, its applications for setting aside the sale were barred. Kadiyala Rama Rao v Gutala Kahna Rao, (2000) 3 SCC 87; Superintendent of Taxes, Dhubri v Onkarmal Nathmal Trust, AIR 1975 SC 2065. 9. Ms. Sethna submits, in the alternative and without prejudice, that once Consent Terms were filed with the DRT, in effect these operated as an application by ARCIL of a withdrawal of its application to set aside the sale. No liberty was reserved to ARCIL to bring a subsequent application to set aside the sale. ARCIL, therefore, relinquished any right that it may have had to have the sale set aside and it is now estopped from urging to the contrary. The DRT was at best an executing Court. It had no right to unilaterally vary binding Consent Terms arrived at privately between the parties or to go behind these Consent Terms. In Ms. Sethna's submission, these Consent Terms operate as an estoppel or as constructive res judicata; the more so since no liberty was reserved to make a fresh application. Ms. Sethna relies on various decisions to submit that a consent decree....
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....ent Terms. It is Ms. Sethna's submission that either under the SARFAESI Act or under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 ("the RDDB Act") the DRT has no authority to make and order of sale on a deferred payment basis. It cannot be vested with a continuing obligation to monitor performance in relation to any particular terms and conditions of sale such as the issuance of debentures. Central to Ms. Sethna's formulation is that ARCIL suppressed the fact of the quite considerable UPSIDC dues of nearly Rs. 18 crores at the time of the auction sale. When these matters came to light, UPSIDC insisted on payment of its entire dues upfront. This left the Petitioner with little choice but to initiate a litigation with UPSIDC, and that in turn led to a considerable delay. The Petitioner cannot, Ms. Sethna submits, be foisted with the consequences of this inevitable delay, one that was entirely due to suppression of relevant facts at the time of the sale by ARCIL itself. She says that ARCIL made repeated applications to set aside the sale between 2009 and 2011. There were three such attempts. All of these were nothing but an attempt to transact on the propert....
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....e context, Mr. Cooper relies on the decision of Supreme Court in Gurdev Kaur v Kaki, AIR 2006 SC 1975 in which the Supreme Court said that findings of facts, however wrong or even inexcusable, cannot be interfered with in a second appeal. The rationale behind this principle, one that finds statutory voice in Section 100 of the Code of Civil Procedure, 1908, is that there should be a judicial authority possessed of jurisdiction to maintain and, where necessary, to establish throughout its jurisdiction uniformity in law but this jurisdiction is not to be exercised to create a legal environment of constant uncertainty. We are bound by this decision. 16. Ms. Sethna's other submissions are refuted in terms by Mr. Cooper for ARCIL. Briefly stated, his submission is that the sale in favour of the Petitioner was a conditional sale subject to the compliance of certain terms and conditions. It was not an absolute sale and did not confer an absolute title on the Petitioner. The terms and conditions were contained in the order 16th October 2007, passed by the Recovery Officer as also in the Consent Terms of 13th November 2009. The mere handing over of possession to the Petitioner did not re....
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....y; this too was never done. The Petitioner cannot, he submits, and we believe quite correctly, claim a 'concluded' or 'completed' sale while being in wholesale default of its purchase obligations. Either the Consent Terms are binding or they are not; and the Petitioner cannot have it both ways. It cannot on the one hand say they are binding and have received the imprimatur of the Court, and then say that that very Court never had the fundamental jurisdiction in the first place. The Consent Terms are critical to the construct of Ms. Sethna's case; and those Consent Terms were only possible in a Court and not outside it. 18. As to the issue of the sale being a private contract or private treaty between ARCIL and the Petitioner without the intervention of the DRT and being contrary to provisions of the DRT or SARFEASI Act and the applicable provisions of Income Tax Act, 1961 Mr. Cooper submits that this is the first time that these contentions have been raised by the Petitioner. They are clearly an afterthought. This is meant only to defeat the order of 25th July 2014 passed by the Recovery Officer forfeiting the Petitioner's payment of Rs. 267.75 Crores. Before the Recovery Office....
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....he Receiver received different offers in response to the sale under these special terms and conditions. The highest of these was one Adzon Media Private Limited at Rs. 600 Crores. Crosslinks's bid then was Rs. 459 Crores. It was the second highest. In a later meeting, the parties were asked to revise and enhance their offers. This was done. Crosslinks enhanced its offer from Rs. 459 crores straightaway to Rs. 765 crores and thus became the highest bidder. Adzon, the previous highest bidder, increased its offer too, to Rs. 650 crores. In between there were two others, both below the revised offer made by the Crosslinks. It was in these circumstances that the DRT-appointed Receiver submitted a report to Recovery Officer, and it was on this report the Recovery Officer, after a thorough analysis, declared and confirmed Crosslinks as the highest bidder by his order dated 12th February 2007. This sale was subsequently sanctioned by the Recovery Officer in favour of the Petitioner as a nominee of Crosslinks by an order dated 16th October 2007. Thus, it is clear that the sale is not, as Ms. Sethna would have it, an entirely private sale or a private arrangement between ARCIL and the Petiti....
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....ce and contend to the contrary. 24. We are also unimpressed by the next submission by the Petitioner that once the sale was confirmed in its favour by the Recovery Officer, he became 'functus officio' and could not have set aside the sale; and, further, that once the Petitioner had purported to issue debentures against the balance consideration, the Recovery Officer's jurisdiction ended. As we have noted, this was a Courtsanctioned sale on special terms including inter alia as to deferred payment. The sale was in pursuance of a Recovery Certificate obtained in proceedings properly brought by ICICI Bank. We do not see how officers and forums can be said to come and go like this or to have jurisdiction at one stage only to not have it ab initio at a later stage. Till such time as the Recovery Certificate, which is in that sense akin to a decree of a Civil Court, was marked satisfied, the Recovery Officer in execution of that Recovery Certificate continued to have jurisdiction. In this, Mr. Cooper is, in our view, correct in his submission that this is in fact the exclusive jurisdiction of the Recovery Officer in view of Sections 17 and 18 of the DRT Act. No civil court and no comp....
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....est. 26. It is also an argument without basis in law. Mr. Cooper is correct in saying that a court's right to set aside a sale does not end on confirmation of that sale. The present case is on surer footing, for the sale had a term of deferred payment and the Court, viz., the Recovery Officer, retained jurisdiction till that payment was made and the Recovery Certificate satisfied. Divya Manufacturing Co P Ltd v Union Bank of India & Ors., AIR 2000 SC 2346. 27. Ms. Sethna's submission that since ARCIL is a securitization company governed by the SARFAESI Act it cannot have recourse to the DRT for cancelling the sale is also a submission entirely devoid of merit. Securitization companies are included in the amended definition of 'financial institutions' under Section 2(h)(ia) of the DRT Act. Therefore, it can have recourse to the RDDB Act in addition. Every bank or financial institution (as defined) is free to move under the RDDB/DRT Act as also under the NPA/SARFAESI Act. Both are complementary. Transcore v Union of India, (2008) 1 SCC 125. 28. In our view, no question of limitation arises either. Article 127 of the Limitation Act is premised on the case falling under Order ....
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....rther obligation to bring in any more money; and that the order of forfeiture of what Ms. Sethna describes as upfront poundage should, for those reasons, be quashed. In Court, we repeatedly asked her if her clients would bring in the balance even now due. Her response was that her instructions were to say no; but to also say that if the upfront payment was returned (i.e., not forfeited), the Petitioner would have no further quarrel. We find this wholly unacceptable. The Petitioner took the property under an order of a Court, without then questioning it. It took it subject to terms and conditions. It accepted those conditions. It sought time, repeatedly, to fulfil those conditions. It did not. It says that Consent Terms filed in that very Court were binding, but also now says that that very Court had no jurisdiction ab initio. If there is an estoppel, it must run against the Petitioner, not in its favour. 32. This leaves the question of Mr. Talekar's reports. He was appointed under the interim order of this Court. He made two site visits and has placed on record two reports. The first report is dated 29th September 2014 and the second report is dated 29th October 2015. In paragra....