Sajjan Textile Mills Ltd vs Icici Bank Ltd And Ors

2. The appellant, Sajjan Textile Mills Ltd. was

sanctioned a loan of Rs.3 Crore by the respondent Bank

on 15th July 1992. As the appellant committed default in

making re-payment, a civil suit for recovery was filed.

The Bombay High Court also passed an order dated 18th 2

December 1997, appointing the Court Receiver, as the

Receiver for the movable and immovable properties of the

appellant. The appellant, however, made an application

before the BIFR on 23rd June 1998 for being registered as

a sick industrial unit and it was registered as such on

15th July 1998 and was declared a sick unit by order

dated 6th August 1998. Two suits were thereafter filed by

the respondent Bank in the Bombay High Court, one

against the appellant for recovery of a sum of

Rs.8,36,15,087/- and the other against the

guarantors. The aforesaid civil suits as also suits filed

by the Central Bank of India and the State Bank of

Travancore also for recovery of loans advanced were all

transferred to the DRT, Bombay Bench, and an

inventory of all the machinery available in the appellant's

mill was made and a report submitted to the Tribunal.

The BIFR also passed an order on 5th October 2001

that as the appellant company could not be

resusticated, it was just and equitable that it be wound

up. In the meanwhile, the respondent Bank (in April 3

1999) also filed an application for the recovery of the

principal amount of Rs.3 Crore. The DRT in its order

allowed the application and passed an order for the

recovery of the aforesaid amount from the appellant. A

notice of demand dated 31st December, 2002 was issued

by the Recovery Officer and recovery proceedings were

initiated. The Recovery Officer issued a certificate

against the appellant and the guarantors making them

jointly and severally responsible for a payment of

Rs.5,90,32,753/-. As the properties were situated within

the jurisdiction of the DRT, Coimbatore, Tamil Nadu,

the recovery proceedings were accordingly transferred

to Coimbatore on an application made by the Bank. As

the appellant and the guarantors did not pay the

amounts due, an order for the attachment of the movable

property of the appellant was issued, and despite several

objections taken by the appellant, a proclamation for

sale by way of tender was issued on 19th January 2004.

The five tenders received were opened on 3rd February,

2004 and Sri Maruthi Textiles was found to be the 4

highest bidder with a bid of Rs.2,50,99,999/-. The

Recovery Officer thereupon directed the successful

tenderer to deposit the balance money within 15 days

which was further extended by 30 days up till 27th

February 2004. The aforesaid amount was, however,

not paid on which the Recovery Officer in his order

dated 17th March 2004 directed that the offer of the 2nd

respondent, Sri Vairalakshmi be accepted on payment

of the amount tendered by Sri Maruthi Textiles. This

offer was accepted by respondent No.2 and it

undertook to deposit the bid money, but vide application

dated 25th March 2004, sought an extension of time for

doing so, which too was granted. It appears that on 1st

March 2004, the Office of the Recovery Officer and DRT

Coimbatore fell vacant and the Presiding Officer DRT,

Chennai was appointed to hold the dual charge of both

places. On 16th April 2004, respondent No.2 once again

applied for more time for complying with the conditions

of payment and the Presiding Officer, DRT, Chennai, who 5

was holding the post as an additional charge made the

following order on 7th May 2004:

"Since no regular Recovery Officer 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 N.A."

4. On 11th May 2004, the respondent Bank filed a writ

petition before the Madras High Court for a direction to the

Presiding Officer, DRT, Chennai to proceed with the recovery

of the amounts due. In this petition, Sajjan Textiles, the

present appellant, was shown as respondent No.3 and Sri

Vairalakshmi & Co. was shown as the second respondent.

The appellant was duly served and a vakalatnama also filed by

an Advocate on its behalf on 21st July 2004. It appears,

however that the High Court by its order dated 2nd August

2004 disposed of the writ petition in the absence of the

appellant's counsel by giving yet more time to respondent No.2

to pay the balance amount either in full or in instalments 6

within a time frame of 2 months and the Presiding Officer,

DRTC was directed to complete the sale transaction in terms

mentioned in the body of the order. It is this order which has

been impugned in this appeal.

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 7

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 8

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.

.................................J. (TARUN CHATTERJEE )

.................................J. ( HARJIT SINGH BEDI) New Delhi, Dated: May 16, 2008