D. Murugesan, J.@mdashThe petitioner has come up with the present writ petition for a mandamus directing the first respondent to proceed with the recovery of amounts in pursuance of the Recovery Proceedings No. 117 of 2003 and pass all incidental orders necessary for such recovery.
2. The facts leading to the filing of the writ petition as put forth in the affidavit in support of the writ petition are set out hereunder:
2.1. The petitioner (hereinafter referred to as "the bank") is a banking company and carrying out banking business. In that process, the third respondent, Sajjan Textile Mills Limited (hereinafter referred to as "the Mill") had availed term loan facilities from the bank to the tune of Rs. 580 lakhs. To secure the same, the Mill hypothecated and created equitable mortgage in favour of the bank in respect of its movable and immovable properties situate at Nilakottai, Dindigul. The Mill committed default in re-payment of the loan availed by it. Therefore, the bank filed two civil suits before the High Court, Bombay, in the year 1999 for recovering the sum of Rs. 8,36,15,087/-. One suit was laid against the Mill and another against the guarantors. Those suits were transferred to DRT III Mumbai, as by that time DRT at Mumbai was constituted. They were assigned O.A. No. 1631 of 1999 and O.A. No. 1526 of 1999. The tribunal adjudicated the dispute and found that the Mill was liable to pay the claim amount with interest at 16% per annum by its order dated 17.4.2003. A Final Recovery Certificate was issued to the Recovery Officer on 10th June 2003 for a sum of Rs. 5,90,32,753/-. The said certificate was issued for its execution and realisation of dues to the bank by way of sale of movable and immovable assets of the Mill.
2.2. The bank filed an application before the Recovery Officer DRT III, Mumbai u/s 19(23) of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 ("the RDDBFI Act", in short) for transfer of the Recovery Certificate to DRT, Coimbatore, as the properties of the Mill were situated within its jurisdiction, and an order to that effect was passed.
2.3. The Recovery Officer DRT, Coimbatore on 20.09.2003 issued demand notice and warrant of attachment of movables including all machineries and finally the Recovery Officer, Coimbatore passed an order on 30.09.2003 ordering attachment of the machineries.. The Mill filed an application before the Recovery Officer DRT, Coimbatore challenging the authority of the Recovery Officer DRT, Mumbai to transfer the Recovery Certificate to Coimbatore. The said application was dismissed on 12.01.2004 and the said order became final, since neither the Mill nor the guarantors challenged the same.
2.4. The bank thereafter requested the Recovery Officer DRT, Coimbatore to proceed with the sale of the machineries of the Mill. The Recovery Officer DRT, Coimbatore thereafter invited sealed tenders for the sale of machineries of the Mill. A sum of Rs. 1,75,00,000/- was fixed as upset price and the date of inspection was fixed on 29.01.2004. He also invited the prospective tenders on or before 30.01.2004. The tenders were to be opened on 03.02.2004 in the presence of the bidders.
2.5. One Shree Maruthi Textiles submitted its tender and offered to pay a sum of Rs. 2,50,99,999/-. It was the highest offer and hence the Recovery Officer declared the said textile mill as the highest bidder. The said mill was directed to remit the full purchase money together with the poundage fee within 15 days from the date of sale. The textile mill did not remit the amount within the stipulated time and submitted a letter dated 18.02.2004 seeking extension of time. The said application was consented by the bank. However, the Recovery Officer passed an order dated 27.02.2004 directing the said textile mill to pay 25% of the bid amount less EMD on or before 05.03.2004 and the balance of 75% on or before 10th March 2004 along with the poundage fee of Rs. 2,51,000/-. The said textile mill did not pay 25% as directed and submitted a letter dated 08.03.2004 for extension of time by one more month stating that the labourers were preventing its representatives from entering into the place where the machineries were installed.
2.6. The Recovery Officer declined to grant time and on 17.03.2004, he declared Shree Maruthi Textiles as defaulter and held that the machineries would be resold and the second highest bidder viz. Sri Vairalakshmi and Co., would be given opportunity to bid the machinery for Rs. 2,50,99,999/-. The second respondent, in pursuance to the said order, submitted a letter agreeing to deposit the EMD amount of Rs. 17,50,000/- and also willing to pay the purchase price of Rs. 2,50,99,999/-. It was accepted by the Recovery Officer. The second respondent paid the EMD amount of Rs. 17,50,000/-. On 25.03.2004, Sri Vairalakshmi & Co., filed a letter before the Recovery Officer, DRT, Coimbatore requesting him for extension of time and accordingly he granted extension of time till 16.04.2004 for making payment of the full purchase money.
2.7. While the matter stood thus, during the first week of April, 2004, the Recovery Officer, DRT Coimbatore went back to his parent department and the office of the DRT became vacant with effect from 01.04.2004. Since, the Presiding Officer of DRT, Coimbatore was also transferred, the Presiding Officer DRT II, Chennai was appointed as the Presiding Officer holding concurrent charge of DRT, Coimbatore. In view of the request made by the petitioner-bank to proceed with the recovery proceedings, the first respondent took up the recovery proceedings on 07.05.2004. However, he passed the following order in the docket:
Since no regular R.O is available in this Tribunal the EMD deposited by the second bidder has to be returned. Further, the matter should be returned to DRT III, Mumbai for further NA.
2.8. As the first respondent declined to deal with the matter and directed the Registry to return all the papers to DRT, Mumbai, the bank has come up with the present writ petition for the relief set out earlier.
2.9. For completion of narration of facts, we may also state that in the present writ petition, this Court by order dated 2.8.2004 directed Sri Vairalakshmi & Co., to deposit a sum of Rs. 50 lakhs immediately and the balance amount to be paid in instalments or in one lot, however within 2 months (i.e) on or before 02.10.2004. The Mill filed SLP No. 22658 of 2004 challenging the said order and the Apex Court by order dated 29.10.2004 directed status quo.
2.10. In the meantime, on 13.8.2004, the Presiding Officer, DRT, Chennai, at the instance of the bank as well as Sri Vairalakshmi & Co., directed the Recovery Inspector, Coimbatore to go with the bank officials with approved valuer and segregate the machinery into five lots and also segregate the machinery at the first instance for Rs. 50 lakhs and to file a compliance report before 08.09.2004. Between 24.8.2004 and 26.10.2004, Sri Vairalakshmi & Co., removed lot ''P'' machinery. On 1.9.2004, Sri Vairalakshmi & Co., moved another application before the Presiding Officer, DRT, Chennai to remove other lots and deposited Rs. 60.36 lakhs. However, the Presiding Officer, DRT, Chennai directed Sri Vairalakshmi & Co., to remove lot ''K''. Thereafter, Sri Vairalakshmi & Co., removed certain lots. On 5.10.2004, the bank filed an application before the Presiding Officer, DRT, Chennai in I.A. No. 407 of 2004 for appropriation of proceeds. By order dated 26.10.2004, the Presiding Officer, DRT, Chennai, confirming that the entire sale proceeds were paid by Sri Vairalakshmi & Co., and had removed the machinery as on 26.10.2004, ordered for appropriation of sale proceeds.
2.11. On 16.5.2008, the Apex Court allowed the Civil Appeal filed questioning the order of the Division Bench of this Court and remanded the same to this Court on the ground that the Mill was not given an opportunity of being heard and ordered the status quo to be maintained.
2.12. In the meanwhile, BIFR, Mumbai recommended the winding up of the company, and by order dated 28.3.2008, the High Court of Bombay directed the winding up of the third respondent Mill in C.P. No. 395 of 2003. The third respondent Mill filed an appeal and the order of winding up was confirmed on 8.8.2008. SLP No. 22300 of 2008 filed by the Mill was also dismissed by the Apex Court on 22.9.2008.
3. We have heard Mr. A.L.Somayaji, learned Senior Counsel appearing for the petitioner, Mr. P.S.Raman, learned Advocate General appearing for the second respondent assisted by Mrs.Pushpa Menon, Mr. Ajit K.Sinha, learned Senior Counsel appearing for the third respondent and Mr. S.R.Sundar, learned Assistant Official Liquidator appearing for Official Liquidator (Bombay).
4. Mr. A.L.Somayaji, learned Senior Counsel for the petitioner-bank would submit that the Presiding Officer, DRT, Coimbatore has not passed any judicial order on the proceedings relating to the Recovery Certificate. By order dated 7.5.2004, he has only made an endorsement in the docket that in view of want of Recovery Officer in the said Tribunal, the matter should be returned to DRT III, Mumbai for further necessary action. In these circumstances, it is not necessary for the bank to question the said order and on the other hand, the writ petition seeks for a direction to the DRT, Coimbatore to proceed further with the Recovery Certificate based upon the order of DRT III, Mumbai directing the DRT, Coimbatore to proceed with the Recovery Certificate, which order has become final, as the appeal filed by the Mill was dismissed. He would also submit that subsequent to the filing of the writ petition, the bank also filed an application before the DRT, Chennai for completion of sale on the basis of the order of the Division Bench of this Court and thereafter further proceedings were held and in fact, Sri Vairalakshmi & Co., was permitted to remove lot ''K'' of the machineries. Thereafter, by further orders, the said Sri Vairalakshmi & Co., was allowed to remove lot ''D'', lot ''L'' and lot ''T'' machineries. The said Sri Vairalakshmi & Co., also has paid the entire money representing the sale price of machineries and the Recovery Inspector, DRT, Coimbatore also submitted a report to the Presiding Officer, Chennai confirming the payment. On 5.10.2004, the bank also filed an application before the Presiding Officer, DRT, Chennai in I.A. No. 407 of 2004 for appropriation of proceeds to be paid to the bank towards security charges. The DRT, Chennai has also passed such an order on 26.10.2004. In this background, the writ petition seeking for a direction can be entertained even when the docket order dated 7.5.2004 passed by the DRT, Chennai is not questioned.
5. On the other hand, Mr. Ajit K.Sinha, learned Senior Counsel for the third respondent-Mill would firstly submit that unless the order of DRT, Chennai dated 7.5.2004 in returning the papers to DRT III, Mumbai is questioned, the writ petition in the nature seeking for a direction alone is not maintainable. By that order, in fact the DRT, Chennai has also directed the refund of EMD paid by the Mill. Hence the learned Senior Counsel submitted that the writ petition is liable to be rejected. That apart, he would submit that the entire proceedings both before the High Court of Bombay followed by the proceedings before the DRT, Mumbai and the consequential proceedings of DRT, Coimbatore and Chennai are a nullity since the matter was already pending before BIFR. He would rely upon the provisions of Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 (for short, "the SICA"). The core contention of the learned Senior Counsel is that in the absence of consent from BIFR, the decree passed by Court or any other forum is a coram non judice and is without jurisdiction and it is a nullity. He would also submit that the provisions of Section 34 of the RDDBFI Act will only be in addition and not in derogation of SICA. Therefore, the provisions of Section 22 of SICA will prevail over the provisions of RDDBFI Act. He would further submit that the entire sale proceedings are illegal, since the proceedings are in contravention of Schedule II and III of the Income Tax Act. He also added that a fraud has been played in the sale.
6. In response to the above submissions, Mr. A.L.Somayaji, learned Senior Counsel for the bank would submit that the Mill had participated in the proceedings right from the inception of the two suits before the High Court of Bombay. The Mill has also filed written statement after the transfer of the suits to DRT III, Mumbai. The Mill had participated in the entire proceedings. Even after the Recovery Certificate was issued and the same was transferred to DRT, Coimbatore for further action, as the properties of the Mill were situated within the jurisdiction of that Tribunal, the Mill participated in the proceedings and allowed the DRT, Coimbatore and subsequently DRT, Chennai to proceed with the sale proceedings. Hence it is not now open to the Mill to question the entire proceedings on the ground they are a nullity. That apart, even on facts, the Mill was declared sick on 6.8.98 even before the suits were filed. The bank was also appointed as an operating agency. On 30.10.2000, BIFR permitted the banks and financial institutions to continue the suits filed before the DRT. On 5.10.2001, BIFR recommended for winding up of the company and based upon the recommendations of BIFR, the Mill was wound up by the orders of High Court of Bombay made in C.P. No. 395 of 2003 dated 28.3.2008. The appeal preferred by the Mill was dismissed by the High Court of Bombay on 8.8.2008 and thereafter, the SLP filed by the Mill was also dismissed by the Apex Court on 22.9.2008. In the meantime, a provisional liquidator was appointed on 28.9.2007. In these circumstances, the challenge to the above proceedings on the ground of nullity is not available to the Mill. Further, as on today, the Mill cannot question the proceedings, as the provisional liquidator was appointed and subsequently, the Official Liquidator, Bombay has taken over charge of the Mill. In these circumstances, on the question of waiver, the Mill is not entitled to raise the non-compliance of the provisions of Section 22 of SICA.
7. Mr. P.S.Raman, learned Advocate General appearing for the second respondent has also submitted that the Mill, which has slept over the matter for several years without questioning the filing of the suits filed by the bank and without questioning the proceedings before the Debts Recovery Tribunals at Bombay and Coimbatore and the orders passed thereunder, cannot now raise for the first time before this Court that the suits filed before the High Court of Bombay and the proceedings before the Debts Recovery Tribunals at Bombay and Coimbatore and the orders passed thereunder are non est in law. Having failed to take the plea at the earliest point of time, now the Mill cannot take such a plea that too, in the writ petition filed by the bank.
8. Mr. S.R.Sundar, learned Assistant Official Liquidator for the Official Liquidator (Bombay) has submitted that the question of waiver does not arise on the given facts and circumstances of the case, especially when Section 22 of SICA is pressed into service. In this context, he relied upon a judgment of the Apex Court in
9. We have carefully considered the submissions made on either side.
10. The primary objections of the Mill are that the writ petition for a mandamus is not maintainable, when the order of the DRT, Chennai dated 7.5.2004 in returning the papers relating to the proceedings pending before the Recovery Officer to the DRT, Mumbai is not questioned. We have carefully gone through the endorsement made by the Presiding Officer, DRT, Chennai dated 7.5.2004. The papers were returned only on the ground that since no Recovery Officer was available in the DRT, the papers were sought to be returned to the DRT, Mumbai for further action. By the said endorsement, it could not be said that final orders were passed as to the recovery proceedings on any ground. The said order only directed DRT III, Mumbai to take further action. Subsequent to the above, the Presiding Officer, DRT, Chennai considered the request of Sri Vairalakshmi & Co., which was the second highest bidder, and directed the Recovery Inspector, Coimbatore to go with the bank officials with approved valuer and segregate the machineries into five lots and to file a compliance report on or before 8.9.2004. Pursuant to the said direction, the machineries were segregated into five lots and the report fixing the valuation of each lot was filed by the valuer on 20.8.2004. In fact the Recovery Inspector, Coimbatore himself visited the factory with the valuer and ensured the segregation of machineries on 23.8.2004, who later submitted his report to the DRT, Chennai on 27.8.2004. Subsequent to the report, Sri Vairalakshmi & Co., was allowed to remove lot ''P'' machineries between 24.8.2004 and 26.10.2004. Thereafter, Sri Vairalakshmi & Co., deposited a sum of Rs. 60.36 lakhs before the Presiding Officer, DRT, Chennai, who again directed the said Sri Vairalakshmi & Co., to remove lot ''K'' by his order dated 1.9.2004. Accordingly, the machineries were removed and the bank also filed an application before the Presiding Officer, DRT, Chennai in I.A. No. 407 of 2004 for appropriation of the sale proceeds.
11. Before adverting to the rival contentions, it will be useful to extract the operative portion of the order of the Apex Court made in Civil Appeal No. 573 of 2005 dated 16.5.2008 questioning the earlier order passed by this Court in the present writ petition. Paragraphs 5, 6, 7 and 8 of the said order are usefully extracted here under:
5. Mr. Singhvi, the learned senior counsel for the appellant, has at this stage raised only one argument before us. He has pointed out that the appellant was respondent No. 3 in the writ proceedings in the High Court and though a Vakalatnama had been filed by a counsel on its behalf, the name of the counsel had not appeared in the cause list on the 2nd August, 2004 nor on the date preceding that date with the result that the appellant had suffered serious prejudice on account of remaining unrepresented on being unaware of the proceedings.
6. Mr. Andhyarujina, the learned senior counsel for the respondent bank has, however, taken us through the entire sequence of events and the history of the litigation and pointed out that the appellant was only a formal party in the writ proceedings, and as all the orders pertaining to the recovery and the sale had become final as some had not been challenged by the appellant and in some others, the challenge had failed, no useful purpose would be served in interfering in this matter. He has also pointed out that the property had been sold and removed from the appellant''s mill under the orders of this Court and nothing now remained to be decided and that the efforts of the appellants to prolong the litigation any further should be discouraged.
7. We have heard the learned Counsel for the parties and gone through the record very carefully. It is true that the litigation has had a chequered career in several forums including this Court. However, in the present proceedings, we are not called upon to take a decision on the ultimate effect of the earlier set of proceedings as Mr. Singhvi has limited his claim to the fact that the appellant had not been heard at the time when the High Court had made the impugned order on 2nd August 2004. We are unable to accept Mr. Andhyarujina''s plea that as the sale proceedings had attained finality, there was no need to have heard the appellant / company as it had been impleaded as a mere formality. We feel that once having made the appellant a party in the writ proceedings, it does not lie on the Bank to contend that the appellant was not entitled to a hearing. We, accordingly, set aside the order of the High Court dated 2nd August 2004, and remit the case for a fresh decision in accordance with law. We also direct that till such time the High Court takes its decision in the matter, the status quo order passed by this Court on 29th October 2004 will continue to operate. We also request the High Court, in the background that the matter has been pending for a very long time to render its decision as expeditiously as possible.
8. The appeal is allowed. There will, however, be no order as to costs.
12. A careful reading of the judgment of the Apex Court would show that the history relating to the litigation was brought to the notice of the Court and after noting the history, the Apex Court observed as above. It is also clear that the submission of Mr. Andhyarujina, the learned Senior Counsel for the bank that no useful purpose would be served in interfering in the matter, as the property had already been sold and removed from the Mill under the orders of the Court and nothing remained to be decided and that the efforts of the Mill were only to prolong the litigation and accordingly the same should be discouraged, did not find favour, as the Apex Court did not accept the said contention, but rather remitted the matter for fresh consideration. In these circumstances, we are called upon to consider all the contentions raised by either side and decide the same.
13. On the above factual background, the question for consideration is as to whether the bank will be justified in approaching this Court for continuance of the proceedings without challenging the docket order? In our opinion, the Presiding Officer, DRT, Coimbatore did not decide the dispute between the parties vide the docket order dated 7.5.2004 and such order did not give any cause of action for the parties to question it''s validity. The docket order, as already indicated, is only directing the return of the papers to the DRT, Mumbai for want of regular Recovery Officer. Later on, the DRT itself has taken up the application and much water has flown by now. In these circumstances, the bank cannot be denied the relief solely on the ground that it had not questioned the docket order. In matters like this, the Court is bound to consider the justification in the relief, rather than finding a reason on technicalities to reject the claim, if such claim is otherwise justifiable. Hence the first contention of the Mill that the writ petition for a mandamus cannot be entertained in the absence of challenge to the docket order has no substance and accordingly, the same is rejected.
14. The next submission is relating to the challenge to the entire proceedings on the ground of nullity. Before we delve upon the legal contentions, we may refer to the facts of the case.
15. The learned Senior Counsel appearing for the bank as well as the learned Advocate General appearing for the second respondent contended that both in the suits that were filed before the High Court of Bombay and in the proceedings before the Debts Recovery Tribunal either at Bombay or at Coimbatore, the Mill did not raise the issue at any point of time that the initiation of the suits or proceedings before the Debts Recovery Tribunals cannot be proceeded in view of the bar u/s 22 of SICA. In this regard, it may be noticed that the suits were filed in April, 1999 before the High Court of Bombay. The suits were transferred even in the year 1999 to Debts Recovery Tribunal, Mumbai and renumbered as O.A. Nos. 1526 and 1631 of 1999. Thereafter, BIFR by its order dated 13.10.2000 permitted the banks and institutions to continue the suits filed before Debts Recovery Tribunal, but it said that the decrees could be executed only after prior approval from the BIFR.
16. On 11.3.2003, the Bombay High Court issued notice to the Mill directing it to appear in the Company court to answer the winding up of the company. On 17.4.2003 a common order was passed by the Debts Recovery Tribunal, Mumbai in O.A. Nos. 1526 and 1631 of 1999 for recovery of a sum of Rs. 5,89,62,243. On 10.6.2003, final Recovery Certificate was issued by the Debts Recovery Tribunal, Mumbai. The Mill and its guarantors never challenged the said orders. Thus the decree passed by Debts Recovery Tribunal had become final. Thereafter, the Recovery Officer, DRT III, Mumbai passed an order on 9.7.2003 forwarding the Debt Recovery Certificate to Debts Recovery Tribunal, Coimbatore for execution, since the factory, land and building, plant and machinery were within the jurisdiction of Debts Recovery Tribunal, Coimbatore. The Mill filed Appeal No. 429 of 2003 against such transfer. That appeal was dismissed on 16.12.2003 and the said order has become final.
17. On 30.9.2003, the Recovery Officer, Debts Recovery Tribunal, Coimbatore issued warrant of attachment of movable properties and the same seems to have been executed on 10.10.2003 in the presence of Mr. Pandey, the representative of the Mill. Thereafter, the Mill filed an application before the Recovery Officer challenging the transfer of Debts Recovery Certificate and the recovery proceedings before the Recovery Officer, DRT, Coimbatore and the same was rejected on 12.1.2004. Subsequently, the Recovery Officer issued a Proclamation of Sale of Machinery by proceedings dated 19.1.2004. The Mill was aware of the same and did not raise any objection. The facts narrated above would amply establish that the Mill was aware of the entire proceedings and had also participated in the entire proceedings. It did not raise that no consent of BIFR was obtained and therefore, in view of Section 22 of SICA, no proceedings against the Mill can be proceeded with. In our opinion, the Mill cannot be allowed to raise the said contention at this point of time. Further, we may point out that as early as on 13.10.2000, the BIFR had permitted the bank and the institutions to continue the suits pending before DRT III, Mumbai. Of course, in that order, the BIFR had also observed that the decrees if any obtained were to be executed only after prior approval of BIFR. Section 22 of SICA requires only a consent for initiating proceedings to recover any money due. Even before the suits were laid, the Mill was declared as sick and the ICICI bank was appointed as the operating agency on 6.8.98. Nevertheless, BIFR had permitted the bank to continue with the suits instituted. That permission would amount to the grant of consent by BIFR in exercise of the power u/s 22 of SICA. Of course, a condition was imposed that the decrees if any obtained were to be executed after approval. The subsequent proceedings for execution of the recovery certificate would only be procedural and in view of the participation of the Mill subsequently in all the proceedings which has resulted in sale of the properties, what is remaining is the appropriation of the sale proceeds by the bank. In the facts and circumstances of the case, the Mill cannot question the subsequent proceedings on the ground of non-compliance of the conditional permission granted by the BIFR. We may also point out that when the DRT III, Mumbai transferred the recovery proceedings to DRT, Coimbatore, the Mill only objected to the power of DRT III, Mumbai in having transferred the recovery proceedings to DRT, Coimbatore, but did not question the bar contained in Section 22 of SICA. Further, even when that application was dismissed, no further challenge was made by the Mill and allowed that order to become final. Of course, the learned Counsel would also submit that these questions can be raised in a collateral proceedings. In our opinion, the question of nullity, of course, can be raised in a collateral proceedings, but when the Mill has acquiesced itself to the proceedings by participating in the same, it cannot now raise the question of further proceedings.
18. The learned Senior Counsel for the Mill has referred to a series of judgments of the Apex Court as well as the Division Bench of this Court in support of his contention that the entire proceedings right from the institution of the suits at the High Court of Bombay till the recovery proceedings were continued at DRT, Chennai are a nullity.
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19. In Kiran Singh''s case, the Apex Court was considering the question whether a suit could be laid before a District Munsif Court when the proper Court to try the suit would be the Subordinate Court as per the valuation of the suit. The construction of Section 11 of the Suits Valuation Act was under consideration. Having regard to the objections raised as to the jurisdiction of the Munsif Court to try the suit immediately at the appellate stage, the Apex Court had observed as follows:
6. The answer to these contentions must depend on what the position in law is when a court entertains a suit or an appeal over which it has no jurisdiction, and what the effect of Section 11 of the Suits Valuation Act is on that position. It is a fundamental principle well established that a decree passed by a court without jurisdiction is a nullity, and that its invalidity could be set up whenever and wherever it is sought to be enforced or relied upon, even at the stage of execution and even in collateral proceedings. A defect of jurisdiction, whether it is pecuniary or territorial, or whether it is in respect of the subject-matter of the action, strikes at the very authority of the court to pass any decree, and such a defect cannot be cured even by consent of parties. If the question now under consideration fell to be determined only on the application of general principles governing the matter, there can be no doubt that the District Court of Monghyr was coram non judice and that its judgment and decree would be nullities. The question is what is the effect of Section 11 of the Suits Valuation Act on this position.
We may point out that the Apex Court has observed as above having noticed that the objections were raised even at the initial stage.
20. In Sushil Kumar Mehta''s case, the facts were that the landlord without taking recourse under the rent control proceedings, filed an ejectment suit. The tenant thereupon filed an application u/s 47 C.P.C. contending that the decree of the Civil Court was a nullity. In those circumstances, the Apex Court has held that the decree passed by the Court without jurisdiction over the subject matter or on other grounds which goes to the root of its exercise or jurisdiction, lacks inherent jurisdiction. It is a coram non judice.
21. In Real Value Appliances Limited case, the appellant before the Apex Court challenged the appointment of the provisional liquidator and the order appointing a receiver by the High Court of Bombay contending that in view of mandate of Section 22 of the Act, such order should not have been passed. The Apex Court held that once a reference is registered or that an enquiry u/s 16(1) commences, the prohibitions contained in Section 22 shall immediately come into play. That was also a case where the appellant immediately after the orders of High Court of Bombay had approached the Apex Court contending that in view of bar u/s 22, the High Court of Bombay ought not to have passed an order appointing a provisional liquidator or a receiver. In the case on hand, as stated already, the Mill had participated in all the proceedings, invited orders and thereafter for the first time raised such a plea and that too, in a writ petition filed by the petitioner-bank. Even now the Mill did not question the jurisdiction of the High Court of Bombay and the DRT by initiating appropriate proceedings.
22. The next decision relied on is Rishabh Agro Industries Limited case. That was a case where the appellant before the Apex Court filed an application before the High Court for stay of the suit in view of Section 22 of the Act, when winding up proceedings were initiated. That was also a case where the parties had approached the Court immediately after initiation of the winding up proceedings and there was no laches on their part.
23. In Jay Engineering Works Limited case, the Apex Court was considering a case where respondent No. 2 filed a claim petition before the Industry Facilitation Council, the first respondent therein in terms of provisions of the Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act, 1993. The award of the Council was put in execution. The bank account of the appellant was attached by the District Court, Ratlam. A writ petition was filed by the appellant before the Madhya Pradesh High Court questioning the same. The writ petition was dismissed by the learned Single Judge and the Letters Patent Appeal was also dismissed. The Apex Court, while dealing with the issue, held that when an enquiry was initiated u/s 60, no suit for recovery of money or other proceedings shall be proceeded with. Here again, the appellant therein was diligent in approaching the High Court with a plea that no further proceedings could be initiated in any Court. In this case, as stated already, the Mill had not initiated any proceedings and it had taken such a plea only in the writ petition filed by the bank.
24. In Bhoruka Textiles Limited case, the Apex Court was considering a case where the respondents therein filed a suit for recovery of the amount before the Civil Judge, Hangal. One of the contentions raised by the appellant before the Apex Court in the said suit was that the company has become a sick Industry within the meaning of the provisions of Section 22 of the SICA and a reference having been made to the Board of Industrial and Financial Reconstruction in terms of the provisions of the Act, the suit was not maintainable. Since such a plea was taken at the earliest point of time, the Apex Court has held that the jurisdiction of the Civil Court was ousted in terms of the provisions of Section 22 of the SICA.
25. In Clan Line Steamers Limited case, the Division Bench of this Court was considering a question as to whether leave should be obtained at the institution of the suit and if no application was filed for such leave, the defect could be cured. While answering the same, the Division Bench held that in the absence of leave the suit was not maintainable. Nevertheless, that will not be a bar for the Court to grant leave. However the Bench went on to observe that when a new defendant is sought to be added, in the suit instituted in respect of that defendant, leave could be granted insofar as that defendant is concerned. In view of the above, the Bench held that the suit filed without obtaining leave under Clause 12 of the Letters Patent cannot be entertained. In our opinion, the said judgment cannot be made applicable to the facts of this case.
26. A perusal of the above judgments would show that whenever the plea of jurisdiction was available to the parties, such plea could only be raised at the earliest point of time in the very same proceedings. Only under those circumstances the issue of nullity of the proceedings was considered and upheld.
27. The law on the issue of nullity of the proceedings is by now well settled. Whenever a Court or the Tribunal, as the case may be, tries a suit without jurisdiction and any judgment or order is passed to be a nullity in most of the cases, be it in a civil suit relating to civil dispute or the suits laid invoking the provisions of SICA, the Apex Court had found that the plea should be raised at the earliest point of time.
28. The provisions of Section 22(1) of SICA read thus:
22.Suspension of legal proceedings, contracts, etc. (1) Where in respect of an industrial company, an inquiry u/s 16 is pending or any scheme referred to u/s 17 is under preparation or consideration or a sanctioned scheme is under implementation or where an appeal u/s 25 relating to an industrial company is pending, then, notwithstanding anything contained in the Companies Act, 1956, or any other law or the memorandum and articles of association of the industrial company or any other instrument having effect under the said Act or other law, no proceedings for the winding up of the industrial company or for execution, distress or the like against any of the properties of the industrial company or for the appointment of a receiver in respect thereof and no suit for the recovery of money or for the enforcement of any security against the industrial company or of any guarantee in respect of any loans or advance granted to the industrial company shall lie or be proceeded with further, except with the consent of the Board or, as the case may be, the appellate authority.
(2) to (5) .....
The provisions of Section 34 of RDDBFI Act, 1993 read thus:
34. Act to have overriding effect.
(1) Save as provided under Sub-section (2), the provisions of this Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in any instrument having effect by virtue of any law other than this Act.
(2) The provisions of this Act or the Rules made thereunder shall bein addition to, and not in derogation of, the Industrial Finance Corporation Act, 1948 (15 of 1948), the State Financial Corporations Act, 1951 (63 of 1951), the Unit Trust of India Act, 1963 (52 of 1963), the Industrial Reconstruction Bank of India Act, 1984 (62 of 1984) and the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986) and the Small Industries Development Bank of India Act, 1989 (39 of 1989).
29. A careful reading of Section 22 of the SICA would show that when an enquiry u/s 16 is pending or any scheme referred to u/s 17 is under preparation or consideration or a sanctioned scheme is under implementation or where an appeal u/s 25 relating to an industrial company is pending, then notwithstanding anything contained in the Companies Act, 1956 or any other law, no suit for recovery of money or for the enforcement of any security against the interested company or of any guarantee in respect of any loans or advance granted to the industrial company shall lie or be proceeded with further, except with the consent of the Board or, as the case may be, the appellate authority. The restriction for institution of a suit for recovery of money or for enforcement of any security against an industrial company or any guarantee to the industrial company is not totally prohibited, but such proceedings are restricted to be initiated only after obtaining consent of the Board or, as the case may be, the appellate authority. The consent of the Board appears to be only procedural and, of course, must be strictly complied with.
30. In
134. This brings us to the next question regarding the applicability of Section 22 of SICA in the proceedings initiated by IDBI for recovery of its dues under the provisions of the RDDB Act, 1993.
135. As will be seen from what has been indicated hereinabove, the final order was passed on 15.7.2003 by DRT, Chandigarh, at a point of time when no reference had at all been made by the respondent Company to BIFR for being declared a "sick company". The auction was held and concluded on 30.10.2004, again before a reference had been made by the respondent Company to BIFR. It is only on 21.12.2005 that the Company filed a reference before BIFR which was rejected on 3.4.2006. In between, the appeal preferred by the respondent Company (No. 52 of 2004) before DRT u/s 30 of RDDB Act was allowed and the auction-sale was set aside, but the final order passed by DRT, Chandigarh, remained untouched.
136. The appeal preferred by the appellant herein against the order of DRT allowing Appeal No. 52 of 2004 was subsequently decided in favour of the appellant on 10.2.2006 and the auction-sale was confirmed in favour of the appellant with a direction upon the Recovery Officer and the other authorities concerned to complete the sale in favour of the appellant herein. It is only on 15.9.2006, after all the aforesaid orders had been passed that a second reference was filed by the respondent Company before BIFR on 15.9.2006 and on 22.2.2007 the Company was declared to be a "sick company" by BIFR.
137. The above dates will amply show that the proceedings had been taken by IDBI u/s 19 of the RDDB Act and the final order had been passed therein long before BIFR came on to the scene. Even the auction-sale was concluded in favour of the appellant before the first reference was made by the Company to BIFR. The sale was confirmed by DRAT before the writ petitions were allowed by the High Court on the ground that the recovery proceedings were barred u/s 22 of SICA. Ultimately, the Company''s first reference was rejected by BIFR and only upon a second reference filed by the respondent Company on 15.9.2006 was the Company declared by BIFR to be a "sick company" on 22.2.2007.
138. In other words, the final order in the recovery proceedings u/s 19 of the RDDB Act was passed and the auction-sale was concluded before the first reference was filed by the respondent Company with BIFR and long before the respondent Company was declared to be a sick company on 22.2.2007. It is, therefore, clear that the provisions of the Sick Industrial Companies (Special Provisions) Act, 1985, were sought to be invoked by Respondent 1 Company after the recovery proceedings had been concluded in favour of the appellant who had also deposited the sale price in respect of his offer which had been accepted by the Recovery Officer.
139. For reasons which are obvious, the respondent Company chose not to take recourse either to Section 20 of the RDDB Act or Rule 60 of the Second Schedule of the Income Tax Act, 1961, and took a chance of filing an appeal u/s 30 of the RDDB Act with regard to the fixation of the reserve price of the Company''s assets by the Recovery Officer for the purposes of the auction-sale and the scope of the appeal was limited to such issue alone.
140. Since the respondent Company did not challenge the final order of DRT, Chandigarh, the same continued to be in force and was carried to its logical conclusion by the holding of auction-sale and confirmation thereof in favour of the appellant herein.
141. The order passed by DRAT on 10.2.2006 confirming the sale in favour of the appellant was made long before the respondent Company was declared to be a "sick company" on 22.2.2007. The High Court was, therefore, in error in applying the provisions of Section 22 of SICA when the sale had already been confirmed in favour of the appellant and the purchase price had already been deposited. Furthermore, the first reference made by the respondent Company was also rejected by BIFR on 3.4.2006.
142. Apart from the above, even on merits, the conduct of Respondent 1 Company leaves much to be desired. Without challenging the final order passed by DRT, Chandigarh, allowing the Bank''s claim of Rs. 25,26,60,836 together with interest @ 7.8% per annum, the said respondent questioned the order of the Recovery Officer, fixing the reserve price of the Company''s assets for the purposes of the auction-sale, u/s 30 of the RDDB Act, having full knowledge of the fact that the final order of DRT, Chandigarh, could not be challenged in such appeal. The steps taken by Respondent 1 Company were far from bona fide and were only aimed at stalling the auction-sale. Even at the time of auction of the Company''s assets, no attempt was made by Respondent 1 Company to secure a bid higher than that of the appellant.
31. On the facts of this case, the Mill has not questioned the earlier proceedings by way of separate proceedings and has only chosen to oppose the relief prayed by the bank. In this context, the learned Senior Counsel for the Mill would submit that such a plea is available even in collateral proceedings. Law in this regard is well recognised by the Apex Court. However, the question is whether at this point of time the Mill is entitled to take such a plea? On the facts of this case, such a plea is not available to the Mill and hence we are not inclined to accept the submission of the learned Senior Counsel for the Mill that in view of the entire proceedings being a nullity the prayer in the writ petition cannot be ordered.
32. One more contention is raised by the learned Senior Counsel appearing for the Mill, namely, that even assuming that the Debt Recovery Tribunal has the power to sell the properties of the Mill, the sale conducted is in total contravention of schedule II and III to the Income Tax Act, 1961 as made applicable to the sale by the Debt Recovery Tribunal u/s 29 of the RDDBFI Act, 1993. The sale, since illegal, is liable to be set aside. Elaborating the said contention, learned Senior Counsel appearing for the Mill submitted that the tender notice was published in Dindigul Edition of "Daily Thanthi". The publication was made in English in Tamil newspaper, which is contrary to Rule 38 of Schedule II to the Income Tax Act, which states that such publication must be given in the language of the local District, which is Tamil in the instant case; the tender notice was never published in any Tamil daily in other parts of Tamil Nadu nor in any English daily having circulation all over India or Tamil Nadu thereby effectively shutting out the wide participation; the tender notice was published on 21.01.2004 and the date of inspection of the machineries was fixed as 29.01.2004 and the last date for submission of tender was 30.01.2004. By not giving sufficient time, effective participation from the bidders are shut out; fifteen days notice was dispensed with which is contemplated under Rule 40 of Schedule II to the Income Tax Act, 1961; Shree Maruti Textiles was declared as highest bidder and since it could not pay the money within the time stipulated, extension of time was granted. However, the said period also lapsed. Hence, the second respondent wrote a letter dated 24.02.2004 enclosing the EMD of Rs. 17,50,000/- and promised to pay Rs. 1,00,00,000/- within four days and the balance amount by 06.03.2004; when Shree Maruti Textiles failed to pay the bid amount, instead of bringing a fresh sale, opportunity was given to the second highest bidder and the sale was confirmed in favour of the second respondent; as per Rule 38 of Schedule II to the Income Tax Act, every sale of movable property shall be only through issue of a proclamation under Rule 39. Rule 43 stipulates that the immovable properties shall be sold only by public auction and Rule 44(1) stipulates that in case of any default in payment, the properties shall be re-sold; the undertaking given by the second respondent in its letter dated 24.02.2004 agreeing to make payment of Rs. 1,00,00,000/- within four days and the balance amount on or before 06.03.2004 was given a complete go by since the second respondent sent a letter dated 25.03.2004 praying for extension of three weeks to remit the sale consideration; as per the order dated 25.03.2004, since the second respondent did not pay the amount within the stipulated time, the EMD paid by the second respondent ought to have been returned and the properties ought to have been brought for fresh sale by issuing fresh proclamation; even before this Court, the second respondent did not honour the orders of the Court in paying Rs. 50,00,000/- within the stipulated time; the entire tender process and sale have been conducted in undue haste and without proper valuation of the machineries.
33. The only answer to the above would be that the Mill did not question the sale of the properties till date. The Recovery Officer, Debt Recovery Tribunal, Coimbatore issued warrant of attachment of movable properties as early as on 30.09.2003 and the same was executed on 10.10.2003 in the presence of one Mr. Pandey of the Mill. The proclamation was issued as early as on 19.01.2004. The Recovery Officer invited sealed tenders on 19.01.2004. The Mill, by its letter dated 12.04.2004 to the Recovery Officer, Debt Recovery Tribunal, Coimbatore only reminded about the statutory obligation of the Mill for payment of the customs duty to the machineries imported. On 03.02.2004, the date of public auction, five prospective bidders participated. The Recovery Officer, Debt Recovery Tribunal, Coimbatore, proclaimed Shree Maruti Textiles as the successful bidder. On 27.03.2004, the Recovery Officer declared Shree Maruti Textiles as a defaulter as it failed to pay the balance amount in spite of two extensions granted to it. Thereafter, the Recovery Officer held that the machineries will be re-sold and the second highest bidder would be given opportunity to bid for the same amount as quoted by Shree Maruti Textiles. The Mill who failed to question those orders, cannot now raise the plea in the writ petition filed by the bank that the sale was not properly conducted. Hence, the said ground raised by the Mill is liable to be rejected and accordingly, rejected.
34. In this connection, it will be useful to rely on the decision in
(66) There is, I think, a three-fold classification:
(1) a right granted by an ordinary statutory enactment; (2) a right granted by the Constitution; and (3) a right guaranteed by Part III of the Constitution. With regard to an ordinary statutory right there is, I think no difficulty. It is well recognised that a statutory right which is for the benefit of an individual can in proper circumstances be waived by the party for whose benefit the provision has been made. With regard to a constitutional right, it may be pointed out that there are several provisions in our Constitution which do not occur in Part III, but which yet relate to certain rights; take, for example, the rights relating to the Services under the Union and the States in Part XIV. I do not think that it can be seriously contended that a right which is granted to a Government servant for his benefit cannot be waived by him, provided no question of jurisdiction is involved ....
35. In yet another decision in
12.The jurisdiction which is conferred on an arbitrator is on account of the consent of the parties to the arbitration agreement. Before the arbitrator, the objection as to jurisdiction of the arbitrator was withdrawn by the respondents. It shows acquiescence on the part of the respondents in the continued jurisdiction of the arbitrator to decide the dispute. The minutes recorded show that after raising the objection, the respondents have withdrawn the same. This would indicate a conscious acquiescence on the part of the respondents in the continued jurisdiction of the arbitrator. In the case of N. Chellappan v. Secy., Kerala, this Court on similar grounds held that the State Electricity Board was precluded from challenging the jurisdiction of the umpire. A passage from Russell on Arbitration, 17th Edn. At p.215 was relied upon. It is to the following effect:
If the parties to the reference either agree beforehand to the method of appointment or afterwards acquiesce in the appointment made, with full knowledge of all the circumstances, they will be precluded from objecting to such appointment as invalidating subsequent proceedings. Attending and taking part in the proceedings with full knowledge of the relevant fact will amount to such acquiescence.
It has also relied upon a decision of Privy Council in the case of Murtaza Hossein v. Bibi Bechunnissa.
13. The same passages have been quoted by this Court in a later judgment in the case of Prasun Roy v. Calcutta Metropolitan Development Authority where this Court said that long participation and acquiescence in the arbitration proceedings preclude a party from contending that the proceedings were without jurisdiction. Therefore, on this ground also the appellant is entitled to succeed.
36. In Prasun Roy v. Calcutta M.D. Authorities AIR 1988 SC 205, the Apex Court has held that acquiescence of a party to arbitration proceedings by participating in it for long time cannot be allowed thereafter to contend that by reason of some disability matter is legally incapable of being referred to arbitrator. Paragraphs 8, 9 and 10 of the said judgment are usefully extracted here under:
8.The Judicial Committee in decision in Chowdhury Murtaza Hossein v. Mussumat Bibi Bechunnissa (1876) 3 Ind App 209 observed at p.220:
On the whole, therefore, their Lordships think that the appellant, having a clear knowledge of the circumstances on which he might have founded an objection to the arbitrators proceedings to make their awards, did submit to the arbitration going on; that he allowed the arbitrators to deal with the case as it stood before them, taking his chance of the decision being more or less favourable to himself; and that is too late for him, after the award has been made, and on the application to file the award, to insist on this objection to the filing of the award.
Relying on the aforesaid observations, this Court in
9. In the grounds of appeal, no prejudice has been indicated by the appointment of the second arbitrator.
10. Mr. S.N.Kacker, learned Counsel for the respondents drew our attention to the fact that the decision in the Chowdhuri Murtaza Hossein''s case (1876 (3) Ind App 209) was where the party challenged the appointment of the receiver after the award was made. He also submits that in this case the respondents herein had challenged the order of appointment of the arbitrator on 19.04.1983 and not after the arbitrator had made the award. We are able to accept this distinction, basically the principle of waiver and estoppel is not only applicable where the award had been made but on the principle that a party, from challenging the proceedings in which he participated. In the facts of this case, there was no demur but something which can be called acquiescence on the part of the respondents or which precludes from challenging the participation.
37. The next contention raised by the learned Senior Counsel appearing for the Mill is that the entire sale process is liable to be set aside on the ground of fraud committed by the bank and the collusion between the bank and the second respondent. The contention raised in this regard is liable to be rejected for the reasons enumerated in the earlier paragraphs.
38. Having considered the issue, we are of the firm view that none of the grounds raised by the Mill can be accepted. As of now, the entire proceedings are at the stage of only appropriation of sale proceeds by the bank. That apart, the Mill has been declared as sick and the liquidator was also appointed. The further proceedings before the DRT, Chennai relating to the appropriation of sale proceeds can very well be defended by the Official Liquidator on any other grounds available to him. As the writ petition seeks only a direction to the Presiding Officer, DRT, Coimbatore to proceed further with the recovery proceedings without reference to the return and much water has flown, the bank must be allowed to work out its remedy before the DRT, Coimbatore in the application pending for appropriation. In that view of the matter, the writ petition must be allowed and accordingly, the same is allowed. However, there shall be no order as to costs. Consequently, W.P.M.P. Nos. 16614 & 16615 of 2004 are closed.
