TaxTMI 
TaxTMI 
2016 (10) TMI 1347
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....the Assignment Deed and by which the learned 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....
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.... 32.87 Crores and Bank Guarantee / Letter of Credit 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 ....
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....ndia filed the Original Application No.154/2012 before 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 le....
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....iled by the borrower. [3.9] That thereafter by impugned judgment and order dated 10.06.2016, 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....
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.... and the documents had not been therefore disputed and the stage of production and proof of the same had not been reached at 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 hi....
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....dated 17.04.2015 specifically invoking the provisions of subsection (5) of section 5 of Securitization Act, which order had attained 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 s....
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....nd/or file the proceedings for recovery of the amount due and payable by the borrower. It is submitted that the contention on behalf of the respondents is that 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 institut....
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.... the RDB Act has also been amended to include a Securitization Company or reconstruction company, thereby entitling it to file application for recovery of dues before the 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....
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....its of the Assignment Agreement. It is submitted that at the time of substitution, to examine the merits of the agreement was unnecessary. It is submitted that therefore even if substitution 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 MAN....
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....construction company. It is submitted that under the Assignment Agreement, the secured assets are acquired by the Trust / Trustee. It is submitted that therefore as per the law laid down 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 auth....
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.... Debenture Trustee of the kind referred in case of Krishna Filaments (Supra) wants to file proceedings for recovery of the amounts payable to the Debenture holders, section 17 of the RDB Act will 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 T....
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....und; (2) 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? [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 cal....
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....ne who shall be deemed to be persons in charge of public offices. 34. Instruments not duly stamped in admissible in evidence etc.: No instrument chargeable with duty not being an instrument referred to in subsection (1) of section 32A, shall be admitted in 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.....
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.... of the document through either of the said avenues the collector has to adjudicate on the question of the deficiency of the stamp duty. If the Collector is of the opinion that such instrument is chargeable with duty and is not duly stamped "he shall require the payment of the proper duty or the amount required to make up the 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 St....
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....it is contended that the document would not fall within the description of "bond" within the meaning of sec.2(c)(ii) of the Bombay Stamp Act. Reliance in this connection has been placed on Radha Swami Sat Sang Sabha v. Raj Narain, A.I.R. 1943 Allahabad 218, which has been cited with approval by Special Bench of the Allahabad High Court in M/s. Hindustan Sugar Mills Ltd. v. State 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 judg....
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....and the facts which are required to be considered in detail at appropriate stage and the same could not have been decided by the learned trial Court in such a summary manner and at this stage. The relevant provisions of the Securitization Act as well as the provisions of the RDB Act which are pure questions of law which are required to be considered in detail. The effect of the order passed 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 o....
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.... company which has obtained a certificate of registration under section 3(4) of the Securitisation Act is a financial institution within the meaning of RDB Act 1993. Once the Legislature is of the view that in the light of the subsequent enactment i.e. the Securitisation Act, even the RDB Act needs to be amended suitably, then, all that remains for our consideration is whether the amendment to RDB Act is to 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 defi....
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....a bank or financial institution, being recovered by filing an application before DRT established under section 3 of the RDB Act, that is cleared by insertion of subsection (ia) in section 2(h) of the RDB Act. That insertion together with the wide wording of the term "debt" is enough to reach the conclusion that the securitisation company or reconstruction company contemplated by the Securitisation Act can step in and proceed with the matter/ application 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....
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....ely worded. Once, the words are plain and clear, then, there is no scope for interpretation. It would be the duty of the Court to give effect to the words when their meaning is plain, unambiguous and clear. If this wide phraseology is ignored, we would be acting contrary to the object and purpose sought to be achieved by both enactments. Considering that they are enacted in public interest and for expeditious recovery of public dues, we cannot ignore the said statutory 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 appe....
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...., hypothecation and assignment. Therefore, when the bank or financial institution as in the case of Krishna Filaments is acting as a debenture Trustee, then, it will not be required to approach the ordinary civil court but can take recourse to the Securitisation Act and consequently, as permissible therein, the RDB Act as well. If the arguments to the contrary are accepted that would mean ignoring and brushing aside the inclusive definitions as noticed by us. Therefore, we are 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 & O....
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....to maintain / continue to maintain the suit before the learned Tribunal for recovery of the dues under the Assignment Agreement dated 28.03.2014 visavis under the Securitization Act as well as RDB Act, we are of the opinion that the learned Tribunal has materially erred in dismissing the original applications on the aforesaid ground and that too at this stage and the learned Tribunal ought to have permitted the parties to raise the aforesaid issues at appropriate stage of trial and 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....