V.C. Daga, J.
1. Rule returnable forthwith.
2. Heard finally by consent of parties. This Petition is directed against the order dated 23rd August, 2008 passed by the learned Presiding Officer of the Debt Recovery Appellate Tribunal, Mumbai ('the DRAT' for short).
Facts
3. The petitioners were partners of M/s. Sohal Engineering Works ('the said firm' for short), having its office at Sohal Industrial Estate, LBS Marg, Bhandup, Mumbai 400 078. The respondent is one of the nationalised banks of the country, having its branch office at Mumbai ('the bank' for short).
4. The bank advanced credit facilities to the extent of Rs. 56 lacs to the said firm from time to time against the mortgage of their immovable property, being plot of land bearing Survey No. 200 (part) CTS No. 286/1 to 2 of Bhandup village, Mumbai Suburban district, together with the factory building and other structures, errections and godowns standing thereon ('the said mortgaged proper' for short).
5. The said firm had also executed necessary loan documents to secure the finances made by the bank from time to time. The said firm M/s. Sohal Engineering Works comitted number of defaults in payment of outstanding dues of the bank. Consequently, amount due and recoverable from the said firm was recalled.
6. The said firm did not repay its outstanding dues inspite of demands. Consequently, the respondent-bank in the year 1993 filed Suit bearing No. 2667 of 1993 in the High Court against the said firm for recovery of their dues with future interest. The said suit was transferred to the Debt Recovery Tribunal-II, Mumbai, ('the DRT' for short) on the establishment of the said Trubunal, numbered as Original Application No. 2449 of 1999. The suit was, thereafter, decreed on 20th June, 2003. The judgment and order directed interalia; the petitioners to pay Rs. 1,36,21,240.66 Ps. together with further interest thereon with direction to sell the mortgage property, described hereinabove.
7. Being aggrieved by the aforesaid judgment and order dated 20th June 2003, the petitioners filed Appeal No. 73 of 2004 ('the said Appeal' for short) before DART alongwith Misc. Application No. 105 of 2004 for waiver of pre-deposit and prayed for stay of recovery proceedings. The DRAT vide its order dated 20th August 2007 directed the petitioner to deposit a sum of Rs. 80 lakhs within eight weeks, failing which the Appeal was to stand dismissed.
8. The petitioners could not arrange for the aforesaid sum of Rs. 80 lakhs. Consequently, on 22nd October, 2007 the Appeal automatically stood dismissed. The applications moved by the petitioners from time to time to seek extension of time did not result in compliance of the order of pre-deposit. The proceedings to execute decree obtained by the respondent-Bank were initiated before the Recovery Officer. The mortgaged property was put to auction on 23rd May 2007, in which the highest bid was given by one M/s. Kumar Housing & Land Development Ltd. for Rs. 34 Crores. However, said highest bidder defaulted in making payment of the balance bid amount. Hence the Recovery Officer of DRT-II cancelled the said auction sale and forfeited the earnest money deposit of Rs. 1.10 crore paid by the said highest bidder.
9. Being aggrieved by the order of forfeiture M/s. Kumar Housing & Land Development Ltd. preferred the Misc. Appeal No. 8 of 2007 before the Presiding Officer of the DRT, Mumbai, who was pleased to confirm the order of the Recover Officer against which which an Appeal was preferred before the DRAT, which was also dismissed by an order 28th April 2008. Now, the challenge to this order is pending before this Court in the Writ Petition filed by the said bidder.
10. The mortgaged property was again put to public auction on 16th June 2008; wherein one M/s. Kakade Infra Projects Builders Pvt. Ltd. was declared as successful bidder, whose bid was sum of Rs. 41.25 Crores. The auction sale was confirmed on 30th July, 2008, in their favour. The purchaser, has paid the stamp duty required to be paid for issuing Sale Certificate. The Recovery Officer has issued the sale certificate on 5th August 2008 together with possession receipt of the same date alongwith letter dated 8th August 2008, informing them of the order dated 7th August 2008 permitting adjustment and appropriation of the amount in favour of the bank. The possession of the subject property has also been handed over to the purchaser on 7th August 2008 by the DRT Receiver. The said Receiver, thereafter, was discharged.
11. The respondent-bank, pursuant to the order of the Recovery Officer dated 7th August 2008 has appropriated an amount of Rs. 17,16,10,212/- towards their decreetal claim. On 8th August 2008 and issued a receipt to the Debt Recovery Tribunal acknowledging receipt of Rs. 17,16,10,212/-.
12. The petitioners chose to move one Misc. Application bearing No. 563 of 2008 on 23rd June 2008 before the DRAT, Mumbai interalia; praying to treat the forfeited amount of earnest money amounting to Rs. 1.10 Crores as pre-deposit in compliance with the order dated 20th August 2007 with further prayer for restoration of their Appeal by condoning the delay in depositing the amount of Rs. 80 lakhs with further prayer to hear the appeal on merits. The DART by the order dated 23rd August, 2008 was pleased to reject the said Misc. Application No. 563 of 2008.
13. Being aggrieved by the order dated 20th August 2008, the petitioners have invoked the writ jurisdiction of this Court under Article 227 of the Constitution of India, contending that the forfeited amount of Rs. 1.10 Lakhs ought to have been utilised or adjusted or treated as payment against the outstanding dues owed by the petitioners to the respondent Bank or at any rate it ought to have been treated as payment or deposit in compliance of the order of pre-deposit dated 20th August 2007, where under the petitioners were directed to deposit a sum of Rs. 80 lakhs by way of pre-deposit under Section 21 of the Recovery of Debt due to Banks and Financial Institutions Act 1992 ('the DRT Act' for short).
14. The petitioners have, thus, prayed for setting aside impugned order dated 23rd August, 2008 and sought declaration that the forfeited amount be treated as a pre-deposit in compliance with the order of 20th August, 2007. In the alternative, the petitioners are seeking extention of time to comply with the said order of pre-deposit.
Submissions
15. Mr. Thakkar, learned senior Counsel appearing for the petitioners submits that the purpose of deposit of 75% of the decreetal amount is to ensure that frivolous and non-maintainable appeals are not filed by the litigants. He further submits that the DART after considering merits of the case was pleased to direct the petitioners to deposit Rs. 80 lakhs. As such, appeal cannot be said to be without merits. In his submission, the petitioners could not arrange for the funds, hence they could not comply with the order of pre-deposit. He submits that the amount of Rs. 1.10 Crore forfeited by the Recovery Officer in Recovery Proceedings can conveniently be treated as a deposit of Rs. 80 lakhs in compliance of the order of pre-deposit. He further submits that the said amount stands forfeited to the bank as such bank's dues are secured to the extent of Rs. 1.10 Crore. In the alternative, Mr. Thakkar urged that this Court should grant one more opportunity to the petitioners to comply with the order of pre-deposit so as to enable the petitioners to avail his statutory right of Appeal. In his submission, no prejudice would be caused to the bank, if the impugned order is quashed and set aside and appeal is restored to file by allowing one of the prayers made by the petitioners.
16. Per contra Mr. Shetye, learned Counsel appearing for the respondent-bank strongly opposed the above submissions, contending that the Review Petition filed against the judgment and decree dated 20th June 2003 was dismissed by the Debt Recovery Tribunal on 20th November, 2003. The petitioners, thereafter, had filed Appeal against the order of rejecting the Review Petition before the DRAT and prayed for waiver of deposit, as prescribed under the DRT Act, wherein the petitioners were directed to deposit the sum of Rs. 80 lakhs, which petitioners failed to deposit, with the result Appeal automatically stood dismissed on 15th October 2007. The petitioners, thereafter, took out one Misc. Application in DART seeking extension of time to deposit Rs. 80 lakhs and for restoration of their Appeal. However, the petitioners thereafter, again failed to comply with the order of deposit even though the period to make pre-deposit was extended by the Appellate Tribunal.
17. Mr. Shetye further submits that the petitioners have filed various applications before the Recovery Officer as well as the DRAAT to seek extension of time and tried to obstruct the sale of the mortgaged property but could not succeed in their endeavour. The first public auction of the attached property was conducted on 23rd June, 2007. The successful bidder deposited amount of earnest money Rs. 1.10 Crores, but failed to deposit balance amount of auction bid. Therefore, by an order dated 15th June, 2007, the earnest amount of Rs. 1.10 Crore was forfeited by the Tribunal. The said forfeiture was confirmed. However, the said orders as on date are under challenge in the Writ Petition pending before this Court. He, thus, submits that this amount cannot be allowed to be utilised for the benefit of the petitioners. He further submits that the mortgage property has been sold and sale proceeds thereof stand adjusted towards decreetal liability. The liability of the petitioners now stands satisfied.
18. Mr. Shetye further submits that the application made by the petitioner for treating the forfeited amount in compliance of the order of pre-deposit cannot be accepted. In his submission the order impugned is reasonable and reasoned order with which no fault can be found in exercise of writ jurisdiction. He further submits that if the submission made by the petitioners is accepted, then every borrower would take advantage of the sale proceeds of the property sold during the course of execution proceedings, which would result in revival of Appeal giving rise to further litigations, placing rights of the purchaser in jeopardy. Grant of such prayer would be contrary to the very provisions of the DRT Act which provides for pre- deposit in the event of appeal at the instance of the borrower/judgment debtor.
19. Mr. Shetye further submits that during pendency of the Recovery Proceedings the petitioners in violation of order of injunction granted by the Tribunal, sold their bungalow No. 22 worth crores of rupees to the son of their tenant merely for Rs. one Crore to defeat the rightful claim of the bank. The respondent Bank, therefore, had to take out aplication against the petitioners wherein vide order dated 23rd March 2007 the petitioners are held guilty of the contempt of Court, directing their imprisonment for 30 days. He thus, submits that the petitioners are not entitled to any equitable relief, much less any order of extension of time in the writ jurisdiction of this Court looking to their conduct.
20. Lastly, he submits that the amount forfeited by the Recovery Officer does not come to the coffers by the bank. Forfeited amount goes to the Central Govt. in view of the Rule 58 of Schedule-II of the Income Tax Act, 1961 which is made applicable in the matter of recovery by virtue of Section 28(5) of the Debt Recovery Act. He, thus, submits that the petition is devoid of any substance and the same is liable to be dismissed.
Statutory Provision
21. Before considering the rival submissions, it is necessary to turn to the statutory provisions relevant to decide the question raised in this petition.
Relevant Provisions of the DRT Act:
20. Appeal to the Appellate Tribunal.-
(1) Save as provided in Sub-section (2), any person aggrieved by an order made, or deemed to have been made, by a Tribunal under this Act, may prefer an appeal to an Appellate Tribunal having jurisdiction in the matter.
(2) No appeal shall lie to the Appellate Tribunal from an order made by a Tribunal with the consent of the parties.
(3) Every appeal under Sub-section (1) shall be filed within a period of forty-five days from the date on which a copy of the order made, or deemed to have been made, by the Tribunal is received by him and it shall be in such form and be accompanied by such fee as may be prescribed:
Provided that the Appellate Tribunal may entertain an apeal after the expiry of the said period of forty-five days if it is satisfied that there was sufficient cause for not filing it within that period.
(4) On receipt of an appeal under Sub-section (1), the Appellate Tribunal may, after giving the parties to the appeal, an opportunity of being heard, pass such orders thereon as it thinks fit, confirming, modifying or setting aside the order appealed against.
(5) The Appellate Tribunal shall send a copy of every order made by it to the parties to the appeal and to the concerned Tribunal.
(6) The appeal filed before the Appellate Tribunal under Sub-section (1) shall be dealt with by it as expeditiously as possible and endeavour shall be made by it to dispose of the appeal finally within six months from the date of receipt of the appeal.
21. Deposit of amount of debt due, on filing appeal- Where an appeal is preferred by any person from whom the amount of debt is due to a bank or a financial institution or a consortium of banks or financial institutions, such appeal shall not be entertained by the Appellate Tribunal unless such person has deposited with the Appellate Tribunal seventy-five per cent of the amount of debt so due from him as determined by the Tribunal under Section 19.
Provided that the Appellate Tribunal may, for reasons to be recorded in writing, waive or reduce the amount to be deposited under this section.
28(5) The Recovery officer may recover any amount of debt due from the defendant by distraint and sale of his movable property in the manner laid down in the Third Schedule to the Income-Tax Act, 1961 (43 of 1961).
Schedule II of Income Tax Act, 1961-
Rule 58- In default of payment within the period mentioned in the preceding rule, the deposit may, if the Tax Recovery Officer thinks fit, after defraying the expenses of the sale, be forfeited to the Government, and the property shall be resold, and the defaulting purchaser shall forfeit all claims to the property or to any part of the sum for which it may subsequently be sold.
Consideration
22. The aforesaid extracted Sections provide a conditional right of an appeal in respect of an appeal against an order made or deemed to have been made by a Tribunal under the DRT Act. Although the Section does not expressly provide for rejection of the appeal for non deposit of amount of debt due, yet it makes obligatory on the appellant to deposit the debt due pursuant to the order of the Tribunal, failing which the Appelate Tribunal is fully competent to reject the appeal. The proviso further gives power to the Appellate Tribunal, for the reasons to be recorded in writing to waive or reduce amount to be deposited under Section 21. It is a matter of judicial discretion of the Appellate Authority.
23. The right of appeal is neither absolute nor an ingredient of natural justice the principles of which must be followed in all judicial and quasi-judicial adjudication. The right to appeal is a statutory right and it can be circumscribed by the conditions in the grant. The object of Section 21 apparently is to ensure the deposit of debt due from the appellant in case he seeks to file an appeal against the order made or deemed to have been made by a Tribunal under the Act.
24. All that the statutory provision seeks to do is to regulate the exercise of the right of appeal. The object of the above provision is to keep in balance the right of appeal, which is conferred upon a person who is aggrieved by the order of the Tribunal, directing recovery of the debt due and at the same time protect the right of banking industry, to have speedy recovery of the debt due and also prevent the delay in effecting their recovery. As already stated, the right of appeal is creature of a statute. Without a statutory provision creating such a right the person aggireved is not entitled to file an appeal.
25. Considering the object and legislative intent behind Section 21, the acceptance of prayer made by the petitioner would result in defeating the legislative intent. At the same time, it would defeat the object of speedy recovery of the amount due from the debtor. Considered from this angle, no fault can be found with the impugned order which holds that-
The object of forfeiture and utilization of the forfeited amount for non compliance with the condition of deposit of full price by the auction purchaser is altogether different and therefore the said amount cannot be utilized for showing compliance with the order of deposit passed 10 months earlier against the judgment debtor. For non compliance of the order of deposit the appeal already stood dismissed and cannot be restored by treating the forfeited earnest money deposited by the auction purchaser to treat the compliance of the order of deposit by the judgment debtor. The prayer made by the petitioners appellants was rightly rejected by the Appellate Tribunal.
26. Rule 58 of Schedule II of the Income Tax Act 1961 makes it clear that in default of payment within the period prescribed, the deposit can be forfeited to the Government and the property is liable to be resold. On the face of this provision, forfeited amount cannot go to the coffers of the bank. It cannot be adjusted against recovery of the Bank. Any order in this behalf in favour of the Bank would run counter to the philosophy of Section 20 and 21 of the DRT Act. No order contrary to the provisions of the Act can be passed in the writ jurisdiction of the Court.
27. Having said so, the factual scenario depicted hereinabove makes it clear that the application seeking extention of time to deposit amount was withdrawn on 24th October, 2007 The withdrawal of the said application has resulted in waiver of the right of the applicant to seek extension of time. The dismissal of appeal became final and conclusive. The petitioners have thus, lost their right to comply with the order of pre-deposit. The novel method found out by the petitioners to seek compliance of order of pre-deposit on the face of it, cannot be accepted. At the same time, looking to the stage of litigaton and conduct of the petitioners, they are not entitled to seek extension of time to comply with the order of pre- deposit. No case in this behalf is made out by the petitioners. The pettition is devoid of any substance. It is liable to be dismissed.
28. In the result, Rule is discharged with no order as to costs.