KAMS LEATHERWARE LTD Vs. PUNJAB NATIONAL BANK

JUDGEMENT

(1.) THIS petition filed under Article 226 of the Constitution prays for quashing order dated 22-11-2005 (Annexure P8) passed by the Debt Recovery appellate Tribunal, Delhi, requiring the petitioner to deposit an amount of Rs. 5. 00 lacs as a pre-condition for entertaining its appeal. It is appropriate to mention that the appeal has been filed by the petitioner company against the order dated 7-6-1999 (Annexure P1) passed by the Debt Recovery tribunal, Jaipur. It has further been prayed that directions be issued to the Debt Recovery Appellate Tribunal, Delhi to entertain the appeal without insisting on any pre-deposit as per the provisions of Section 21 of Recovery of Debts Due to Banks and Financial institutions Act, 1993 (for brevity "1993 act" ).

(2.) BRIEF facts of the case, as disclosed in the petition are that the respondent-bank namely Punjab National Bank filed a Civil suit on 8-9-1995 in the Courts at Kharar for recovery of its dues alleging default on the part of the petitioner to repay the same. The suit was transferred to the Debt Recovery Tribunal, Jaipur. The final order was passed on 7-6-1999 (Annexure P1 ). The Debt recovery Tribunal recorded a categoric finding that the Punjab national Bank sanctioned cash credit hypothecation limit (CCHL) of Rs. 33. 00 lacs on execution of loan documents and guarantee deeds. It was also found that the Punjab National Bank was entitled to charge interest at the rate of 16. 5% per annum with quarterly rests from 6-9-1990 to 7-9-1995 and penal interest at the rate of 2% per annum with quarterly rests from 1-4-1994 to 7-9-1995. Therefore, revised statement was to be filed after calculating interest for the aforementioned terms. However, the Punjab National Bank was not held entitled to interest from 19-10-1994 on the amount of Rs. 54,78,036/ -. At this stage, it is appropriate to notice certain paragraphs of the application filed by the petitioner company with a request to the punjab National Bank to dispose of the hypothecated stocks or to grant permission to the petitioner company to sell the same. It was conceded 4n an application filed by the punjab National Bank on 29-2-1996 that possession of the hypothecated goods was taken by the bank in October 1994. The Tribunal also recorded a finding that the bank was negligent inasmuch as it did not sell the leather goods which were in its custody since October 1994 despite the authority given to it by the petitioner company and the obvious stand of the bank was that the goods in its custody were perishable. On the submission of the revised statement, the bank was held entitled to recover a sum of rs. 41,82,760/- with costs of the suit being the second charge holder. The bank was further held entitled to recover the aforementioned amount by the sale of hypothecated goods.

(3.) THE petitioner company filed an appeal before the debt Recovery Appellate Tribunal, Mumbai (Annexure P2 ). On 22-7-1999, the Debt Recovery Appellate Tribunal passed an order directing the petitioner company to deposit Rs. 10. 00 lacs within a period of three months from the date of the order and it also granted stay of execution of the recovery certificate upto the period of three months. It was also clarified that in case the deposit is made then stay was to continue till the disposal of the appeal, otherwise the stay was to stand vacated. On an application filed by the petitioner company for issuance of directions to the bank to recover Rs. 10. 00 lacs by selling its goods which were kept in its custody an order dated 20-12-1999 was passed appointing local Commissioner for preparing the inventory of stock at the first instance. On 17-2-2000 the Appellate Tribunal issued directions for sale/auction of the goods. The Tribunal further directed that on realization of the sale proceeds, the Recovery Officer was to send Rs. 10. 00 lacs to the bank and to hold the rest of the balance in deposit by the Debt Recovery Tribunal until the disposal of the appeal (Annexure P3 ). When the case came up before the Appellate Tribunal after it transferred to New Delhi on 15-2-2001 an order was passed granting permission to move an appropriate application for seeking waiver of pre-condition of deposit before entertaining its ap'peal (Annexure P4 ). It is pertinent to mention that the Local Commissioner appointed by the Appellate Tribunal had assessed the value of the hypothecated goods which were lying in the custody of the bank at Rs. 25,000/ -. The petitioner company filed an application dated 10-3-2001 with a prayer for waiver of precondition of deposit and for entertainment of its appeal on merit (Annexure P5 ). The application was contested and reply was filed (Annexure P6 ). The application was disposed of on 22-11-2005 directing the petitioner company to deposit an amount of Rs. 5. 00 lacs within a period of one month from the date of order as a pre-condition for hearing of the appeal on merit (Annexure P8 ). The operative part of the order reads as under:-