HARJINDER SINGH Vs. DEBTS RECOVERY

JUDGEMENT

(1.) THE petitioner, who was the auction purchaser of the property of the guarantor (respondent No.3 herein), has filed the instant writ petition, challenging the order dated 1.11.2006, passed by the Debts Recovery Appellate Tribunal, Delhi (hereinafter referred to as 'the Appellate Tribunal') setting aside the order dated 26.7.2006, passed by the Debts Recovery Tribunal, Chandigarh (hereinafter referred to as 'the DRT'), and holding that the Recovery Officer could not have proceeded with the auction of the property in question, when there was a statutory bar under Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 (hereinafter referred to as 'SICA'), and consequently all the further proceedings including the sale in question has been set aside.

(2.) IN the present case, Canara Bank (respondent No. 2 herein) instituted Original Application No. 139 of 2001 before the DRT against the borrower company and the guarantors (respondents No.3 to 7 herein) for recovery of certain amounts. The said Original Application was allowed exparte on 30.3.2004 and an ex-parte Recovery Certificate was issued for recovery of Rs. 21,67,602/- subject to correction. Subsequently, respondents No.3 to 7 filed an application for setting aside the ex-parte Recovery Certificate. Admittedly, the respondent Company also filed a reference before the BIFR under the SICA and at the time of pendency of the Original Application and execution proceedings, the matter was pending before the AAIFR in appeal No. 148 of 2002. Consequently, when the Recovery Officer sought to recover the aforesaid amount under the Recovery Certificate by selling the property in question, belonging to respondent No.3, the guarantor, respondents No.3 to 7 moved an application before the Recovery Officer for stay of the execution and recovery proceedings, in view of Section 22 of SICA. On 21.4.2005, the Recovery Officer dismissed the said application and thereafter, on 23.4.2005, the property in question belonging to the guarantor was put to auction. The petitioner gave the highest bid of Rs. 1.26 crores and also deposited the requisite earnest money with the fall of hammer. Respondents No. 3 to 7 challenged the said order dated 21.4.2005 by filing appeal before the DRT. During the pendency of the appeal, the Recovery Officer confirmed sale in favour of the petitioner, while dismissing the objections filed by respondents No. 3 to 7. In pursuance of that order, the auction purchaser paid the entire sale consideration. Subsequently, the DRT though held that the appeal filed by the respondent against the order of the BIFR was pending before AAIFR, but instead of staying all further proceedings pending before the Recovery Officer, by placing reliance upon a decision of the Supreme Court in Kailash Nath Agarwal and others v. Pradeshiya Industrial and Investment Corporation of U.P. Ltd. and another, (2003)4 Supreme Court Cases 305, dismissed the appeal filed by respondents No. 3 to 7 against the order dated 21.4.2005, on the premise that protection under Section 22 of SICA is not available to the guarantors. Aggrieved against the said order, respondents No. 3 to 7 filed appeal before the Appellate Tribunal. Vide impugned order dated 1.11.2006, the Appellate Tribunal has allowed the said appeal, while following the decision of the Supreme Court in M/s. Patheja Bros. Forgings and Stamping and Anr., v. I.C.I.C.I. Ltd. and Anr., 2000(3) RCR(Civil) 609 : 2000 ISJ Banking 655, wherein it was held that protection available under Section 22 of SICA is applicable even to the guarantors after 1994 amendment to Section 22 of SICA. It has been further held that the decision of Kailash Nath Agarwal's case (supra) is distinguishable and the same is not applicable to the facts and circumstances of the present case. In this regard, the following observations have been made by the Appellate Tribunal :

(3.) IT has not been disputed that when the Original Application for recovery of the amount were pending before the DRT and the recovery proceedings, after passing of the ex-parte order were pending before the Recovery Officer, the appeal filed by the respondent Company against the order of BIFR under SICA was pending before AAIFR. In spite of the pendency of the said appeal, the recovery proceedings were not stayed by the Recovery Officer in view of Section 22 of SICA and the stay application was dismissed on the ground that property of the guarantor was to be auctioned, which was not protected under Section 22 of SICA. Immediately after dismissal of the stay application, the property was put to auction. The appeal filed by respondents No. 3 to 7 against the order of the Recovery Officer though was dismissed by the DRT on the ground that the provision of Section 22 of SICA is not applicable in case of the property of the guarantor, however, the Appellate Tribunal by following the decision of the Supreme Court in Patheja's case (supra) has set aside the order of the DRT while holding that protection under Section 22 of SICA is also available even to the guarantor.