REPORTABLE

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 5150 OF 2017

BANK OF INDIA               …Appellant Versus

YADAV CONSULTANCY SERVICES (P) LTD.  AND ORS.                 ....Respondents

J U D G M E N T

R. BANUMATHI, J.

This appeal is preferred against the judgment dated 19.11.2015

passed by the High Court of Judicature at Bombay in ARA No. 15 of

2014 dismissing the appeal of the appellant Bank thereby affirming

the judgment of the District Judge, Pune and the award passed by

the  MSMEDF  Council  directing  the  appellant  Bank  to  pay

Rs.1,62,82,079/- with interest at the rate of 24% to respondent No. 1

and also pay cost of Rs. 5,00,000/- to respondent No. 1.

2. The matter has a chequered history of two decades.  Brief facts

which led to filing of this appeal are as follows:- The appellant Bank

filed suit in Special Suit No. 628 of 1998 for recovery of Rs.9.55 lakhs

along with interest against one M/s Sona Aluminium Finishers (P) Ltd.

The said suit was decreed on 30.01.1999.  Since the decreed amount

Page No. 1 of 15

exceeded rupees ten lakhs, in view of Section 31-A of Recovery of

Debts due to Banks and Financial Institutions (RDDBFI) Act, 1993,

the recovery proceedings were transferred to the Recovery Officer,

Debt  Recovery  Tribunal  (DRT),  Pune  and  registered  as  R.P. No.

06/2002.   After  attachment  of  the  property,  the  property  was

auctioned  on  08.03.2006.   By  order  of  DRT  dated  14.07.2006,

certificate  of  sale  was  issued  in  favour  of  auction

purchasers-respondents  No.  3  to  5.  Since  the  Certificate  Debtors

(Mortgagor/Guarantor) were said to be creating obstruction in delivery

of  possession of  the property  to  the auction purchasers,  by  order

dated  26.07.2006,  the  Recovery  Officer,  DRT,  Pune  appointed

respondent No.1 as "Court Commissioner".  The appellant Bank was

directed to pay service charges to the first respondent.  Respondent

No.  1  took  possession  of  the  property  on  09.11.2006.   Auction

purchasers filed an application in R.P. No. 06 of 2002 on 13.11.2006

and DRT, Pune on the same date i.e. 13.11.2006 directed respondent

No.  1 to  hand over  the possession of  the subject  property  to  the

auction purchasers.

3. There was then a dispute between the appellant Bank and M/s

Sona Aluminium Finishers (P) Ltd. - Certificate Debtor and the same

came  to  be  compromised;  however  the  same  failed  due  to Page No. 2 of 15

non-compliance  of  the  terms  and  conditions  of  the  compromise.

Appellant  Bank  sent  letter  dated  04.05.2007  informing  the  first

respondent  that  they  had  decided  to  discharge  the  Court

Commissioner with effect from 08.05.2007 and the Bank also paid the

charges  of  respondent  No.  1  up  to  08.05.2007.   However,  the

Recovery Officer by his order dated 12.06.2007 directed the appellant

Bank to continue to pay the charges to respondent No. 1 which was

challenged by the appellant Bank before the Presiding Officer, DRT,

Pune by preferring Appeal No. 25 of 2007.  In Appeal No. 25 of 2007,

vide order  dated  24.07.2008,  DRT  set  aside  the  order  of  the

Recovery Officer and directed the first respondent to take steps for

recovery of its charges from the auction purchasers from 08.05.2007.

Be it noted, respondent  No. 1 had not challenged the order dated

24.07.2008;  but  filed  an  application  on  07.11.2008  in  R.P.  No.

06/2002 seeking for  direction to the auction purchasers to pay its

charges.  Only the auction purchasers challenged the order of DRT

dated 24.07.2008 before Debt Recovery Appellate Tribunal (DRAT),

Mumbai in Appeal No. 589 of 2008 wherein respondent No. 1 was

one of the respondents.  When the said appeal filed by the auction

purchasers was pending before DRAT, the first respondent filed Writ

Petition No. 10259 of 2011 seeking direction from the High Court to Page No. 3 of 15

expedite hearing of the said appeal and dispose the same at an early

date.  The  said  writ  petition  was  disposed  of  by  order  dated

16.01.2012 directing DRAT, Mumbai  to  decide the appeal within a

period of three months and accordingly, the said Appeal No. 589 of

2008 was dismissed for default on 30.05.2012.

4. After so pursuing the matter before DRT, DRAT and the High

Court,  the  first  respondent  instead  of  challenging  the  order  dated

30.05.2012,  sought  arbitration  before  Micro,  Small  and  Medium

Enterprises  Development  Facilitation  Council  (MSMEDF  Council),

Pune  under  Micro,  Small  and  Medium  Enterprises  Development

(MSMED)  Act,  2006.   The  MSMEDF Council  passed an  ex parte

award on 12.09.2012 directing the appellant Bank to pay a sum of

Rs. 1,62,82,079/- to respondent No. 1 within the period of one month

from the date of  award i.e.  12.09.2012 with interest  at  the rate of

24%.  In the incidental proceedings arising out of the award passed

by the MSMEDF Council, by order dated 19.03.2013 in Writ Petition

No. 2877 of 2013 filed by the appellant Bank, the High Court stayed

the order  of  the District  Judge,  Pune passed in  DKT No.  1741 of

2012,  subject  to  deposit  the  entire  decretal  amount  that  is

Rs. 1,93,22,590/- within one week with the Registrar, High Court of

Judicature at Bombay and the appellant Bank had deposited the said Page No. 4 of 15

amount.  Appeal filed by the appellant Bank under Section 34 of the

Arbitration and Conciliation Act, 1996 being Civil Application No. 352

of 2013 was dismissed by the District Judge, Pune vide order dated

16.06.2014.  Further appeal filed by the appellant Bank under Section

37 of the Arbitration and Conciliation Act, 1996 in Arbitration Petition

No. 15 of 2014 came to be dismissed by the High Court inter alia on

various grounds:- (i) DRT has no jurisdiction to entertain the appeal

and therefore order dated 24.07.2008 would be non est; (ii) MSMED

Act,  2006  was  specially  enacted  to  deal  with  dispute  of  delayed

payments  to  service  providers  and  the  MSMEDF  Council  had

jurisdiction to adjudicate the dispute; and (iii) Bank has not taken any

step to take possession from Court Commissioner after paying the

charges; but it has simply refused to pay the charges and dragged

the  litigation.   Being  aggrieved,  the  appellant  Bank  preferred  this

appeal.

5. We have heard at  length Mr. Dushyant Dave, learned senior

counsel  appearing  for  the  appellant  Bank  and  Mr.  Prakash

Wamanrao Yadav-the first respondent who appeared in-person.  We

have  carefully  considered  the  rival  contentions  and  perused  the

impugned judgment and the materials on record.

Page No. 5 of 15

6. Upon consideration of the rival contentions, the following points

arise for consideration in this appeal:-  

i. When  the  obligation  of  the  appellant  Bank  to  pay  the  charges

expired on 30.11.2006, when the physical possession of the subject

property was handed over to the auction purchasers and when the

order dated 24.07.2008 of Debt Recovery Appellate Tribunal, Pune

has  attained  finality,  can  the  first  respondent  claim  charges  for

security services from the appellant Bank?  ii. Whether  the  High  Court  was  right  in  saying  that  DRT  had  no

jurisdiction  to  entertain  the  appeal  and  that  the  order  dated

24.07.2008 would be non est? iii. When the first respondent was appointed as Court Commissioner

through the order of the Recovery Officer in the proceedings before

DRT in  R.P. No.  06/2002 and when the parties were vigorously

pursuing the matter before DRT, DRAT and also before the High

Court,  whether the first  respondent  was right in approaching the

Micro,  Small  and  Medium  Enterprises  Development  Facilitation

(MSMEDF) Council, Pune; -and-

iv. Whether  the  award  passed  by  the  Micro,  Small  and  Medium

Enterprises  Development  Facilitation  (MSMEDF)  Council,  Pune

affirmed  by  the  District  Court  and  also  by  the  High  Court  is

sustainable?   

7. The auction of the property was conducted on 08.03.2006 and

the sale of the auctioned property was confirmed on 14.07.2006 and

Page No. 6 of 15

the sale certificate was issued in favour of the auction purchasers on

the same date.  The Recovery Officer appointed the first respondent

as  Court  Commissioner  on  26.07.2006  and  the  fees  of  the  first

respondent to be directly paid by the Certificate Holder Bank.  On

13.11.2006, the appellant Bank filed purshis praying to hand over the

possession  of  subject  property  (Pavitra  Hall)  to  the  auction

purchasers and on the same date i.e. 13.11.2006, on the application

filed by the auction purchasers, possession of the subject property

was  handed  over  to  the  auction  purchasers  and  they  have  also

issued  acknowledgement  of  possession.   On  the  same  date  i.e.

13.11.2006,  purshis  on behalf  of  the auction purchasers  was also

filed in R.P. No. 06 of 2002 before DRT in and by which the auction

purchasers undertook to pay all expenses as required to protect their

possession.   Purshis  of  expenses  filed  by the auction  purchasers

reads as under:-

"Purshis of expenses Purshis on behalf of auction purchaser is as under:

a) That from the time of taking possession i.e. 13.11.2006 of auctioned property as purchased i.e.,  "Pavitra Hall",  the Auction Purchaser shall bear all  the expenses  as  may  be  required  to  protect  their  possession,  including payments if required to be made to the security personnel.  That the Auction Purchaser  shall  be  liable  accountable  &  duty  bound  to  safeguard  the possession to the exclusion of all others

b) Hence this purshis."

Page No. 7 of 15

8. The  appellant  Bank  sent  the  communication  to  the  first

respondent on 04.05.2007 calling upon him to get his bill cleared for

Rs. 30,866/- being the charges for security services at "Pavitra Hall"

up to 08.05.2007.  In the said communication, Bank had made it clear

that ".....no further payment will be made to you (Yadav Consultancy)

by the Bank....."; however, the Recovery Officer by his letter dated

12.06.2007  directed  the  appellant  Bank  to  continue  to  pay  the

charges for security services to the first respondent.  Appellant Bank

challenged  the  said  order  of  Recovery  Officer  dated  12.06.2007

before DRT in Appeal No. 25 of 2007.  DRT set aside the said order

of the Recovery Officer and directed the Recovery Officer to recover

Court  Commissioner  charges  from  08.05.2007  from  the  auction

purchasers.  We may usefully refer to the said order of the DRT dated

24.07.2008 which reads as under:-

".......The  Court  Commissioner  was  appointed  at  the  instance  of  the Recovery  Officer  and  the  Recovery  Officer  has  wrongly  saddled  the appellant to pay the charges.  The Court Commissioner should not suffer in the present proceeding and, therefore, Recovery Officer is directed to recover Court Commissioner charges from 08.05.2007 till his discharge from the auction purchasers........"

9. The first respondent has not challenged the order of DRT dated

24.07.2008;  but  even  filed  application  on  07.11.2008  before  DRT,

Pune seeking for direction to the auction purchasers to pay the Court

Page No. 8 of 15

Commissioner charges to the first respondent.  The first respondent

had also filed contempt petition against the appellant Bank and the

auction purchasers.  The Recovery Officer had heard all the parties

including the Certificate Debtor (CD) who prayed for setting aside the

sale of the auction property "Pavitra Hall".  The Bank inter alia prayed

that  the  auction  purchasers  be  directed  to  pay  the  Court

Commissioner  charges  only  up  to  13.11.2006  and  discharge  the

Court Commissioner from that date.  After considering the rival claims

of all the parties, by order dated 25.03.2009 in R.P. No. 06/2002, the

Recovery Officer held that the continuation of respondent No. 1 for

safeguarding the auctioned property was solely on behalf of auction

purchasers  and  his  duty  as  "Court  Commissioner"  had  ceased  to

exist on 13.11.2006.

10. Order of the Recovery Officer dated 25.03.2009 makes it clear

that the continuation of the services of the first respondent was only

on behalf of auction purchasers and that only the auction purchasers

were  bound  to  pay  the  charges  for  security  services  to  the  first

respondent.  The relevant portion of the order of the Recovery Officer

reads as under:-

"8......The Auction Purchasers have not filed any application to discharge the said Agency, therefore, they have opted to continue the services, of the said Agency, in exercise of their discretion and in furtherance of their

Page No. 9 of 15

Exh 225.   This  Tribunal  would  therefore not  be inclined to accept  the prayer  of  CH  to  discharge  the  said  Agency,  as  doing  so  is  likely  to prejudice the Auction Purchaser's rights, in the matter of preservation and protection  of  the  auctioned  property,  and  violation  of  their  rights,  and discretion, as the CH has no concern in the preservation or protection of the auctioned property from 13.11.2006 i.e., since the Auction Purchasers having filed Undertaking at Exh 225.  9..........The status of the said Agency as "Court Commissioner" appears to  be  lost  from  13.11.2006,  as  thereafter  the  "Court  Commissioner" appears to have continued to safeguard the auctioned property for and on behalf  of  the  Auction  Purchasers,  in  furtherance  of  their  private arrangement,  particularly in  light  of  Exh 225 of  the Auction Purchaser. The term "Court Commissioner" as used by CH in its application Exh 308 therefore is  a misnomer.  The said  Agency from 13.11.2006 does not appear to have rendered services to the Auction Purchasers as "Court Commissioner" but as a private agency............ The order of the Hon'ble PO dated 24.07.2008, passed in Misc. Civil Appeal 25/2007 whereby, it appears,  relief  is  granted  to  the  Auction  Purchasers,  who  have  been directed  to  pay  the  Court  Commissioner  charges  w.e.f.  08.05.2007. Therefore, I am not required to go into the said aspects again, as the same having reached finality, as from the available record and papers, no appeal appears to be filed against the said order dated 24.07.2008...."

The  above  order  of  the  Recovery  Officer  makes  it  clear  that  the

continuance  of  respondent  No.  1  for  safeguarding  the  auctioned

property  was  solely  on  behalf  of  auction  purchasers  and  the  first

respondent's duty as "Court Commissioner" had ceased to exist on

13.11.2006.  After 13.11.2006 or at least after 24.07.2008 (Order of

DRT), for the services of respondent No. 1, if any, were availed by the

auction purchasers, only the auction purchasers are liable to pay the

said charges to respondent No. 1. The appellant Bank, therefore, was

under no obligation to pay the charges to the first respondent in any

case after 24.07.2008.  The High Court has not kept in view the order

of DRT dated 24.07.2008 and the order of the Recovery Officer dated

Page No. 10 of 15

25.03.2009.  The High Court was not right in saying that DRT had no

jurisdiction to  entertain  the appeal  and,  therefore,  the order  dated

24.07.2008 would be non est.   

11. After the above order of the Recovery Officer, respondent No. 1

filed MA No. 35 of 2009 before DRT seeking payment of charges for

security services from the auction purchasers as directed by DRT in

its  order  dated  24.07.2008  which  clearly  indicates  that  the  first

respondent had accepted the said order of DRT and also acted upon

it.   Be  it  noted,  the  proceedings  of  the  Recovery  Officer  dated

25.03.2009 in which all the parties participated proceeded mainly on

the  basis  of  the  order  of  DRT dated  24.07.2008.   But,  strangely,

respondent  No.  1  made  submission  before  the  High  Court  that

"....DRT had no jurisdiction to entertain Appeal No. 25/2007 against

the order of the Recovery Officer dated 12.06.2007........".  The said

submission of respondent No. 1 was accepted by the High Court and

it was held that ".........DRT had no jurisdiction to entertain Appeal No.

25/2007, the order dated 24.07.2008 passed by it ...... would be non

est and hence must be ignored." In our view, the High Court did not

keep in view that the respondent No. 1 had not challenged the order

of  DRT dated  24.07.2008;  and  had  acquiesced  to  the  said  order

dated 24.07.2008 and also acted upon it.  As discussed earlier, the Page No. 11 of 15

subsequent  proceedings  clearly  show  that  respondent  No.  1  and

other parties have accepted the order of DRT dated 24.07.2008 and

acted  upon  it.   The  findings  of  the  High  Court  that  DRT had  no

jurisdiction  to  entertain  the  appeal  against  the  order  of  Recovery

Officer cannot be sustained.

12. Next question falling for consideration is whether in the facts of

this  case,  the Micro,  Small  and Medium Enterprises  Development

Act, 2006 would apply.  As discussed earlier, the proceedings were

conducted  before  DRT  under  RDDBFI  Act,  1993  which  finally

culminated in DRT's order dated 24.07.2008 and had become final

and binding and was also accepted and acted upon by respondent

No.1.   As  per  Section  5  of  the  RDDBFI  Act,  the  Debt  Recovery

Tribunal is headed by the Presiding Officer who is or has been or is

qualified to be a District Judge.  Likewise, as per Section 10 of the

said Act, the Appellate Tribunal is headed by the Chairperson who is

or has been or is qualified to be a judge of a High Court.  DRT and

DRAT are  not  merely  having  the  trappings  of  the  courts  but  also

vested with the powers of ordinary civil court including the power to

summon and examine the witnesses on oath,  the power  to  order

inspection  of  the  documents  etc.   When  the  proceedings  were

lawfully conducted before the quasi-judicial authorities like DRT and Page No. 12 of 15

DRAT, having trappings of the civil court, MSMEDF Council had no

jurisdiction to entertain the application filed by the first respondent;

more so, when the orders passed by the DRT were accepted and

acted upon by respondent No.1.  The High Court did not consider the

question of lack of jurisdiction of MSMEDF Council.

13. The  High  Court  mainly  seems  to  have  proceeded  with  the

matter as if it is a regular appeal arising out of the award passed by

the MSMEDF Council and commenting upon the conduct of the Bank

in not seriously pursuing the matter in challenging the award.  The

High  Court  did  not  consider  the  earlier  proceedings  before  DRT,

DRAT and before the High Court except merely referring to certain

proceedings before DRT and DRAT. The High Court did not consider

various orders passed by DRT and DRAT and the conduct  of  the

parties who have been vigorously pursuing the matter before DRT,

Recovery Officer and DRAT.  The High Court also did not keep in

view that the parties were bound by the earlier orders passed by DRT

and Recovery Officer which clearly held that charges towards security

services are payable only by the auction purchasers.  The impugned

order passed by the High Court thus suffers from serious infirmity and

is liable to be set aside.   

Page No. 13 of 15

14. Pursuant  to  the order  dated 19.03.2013 passed by the High

Court, an amount of Rs.1,93,22,590/- was deposited by the appellant

Bank.  By  an  order  dated  30.03.2016  passed  by  DRT,  Pune,

respondent  No.1  has  withdrawn  an  amount  of  Rs.1,22,00,000/-

(Rs.1,00,00,000/-  plus  accrued  interest).  The  balance  amount  of

Rs.93,22,590/- is lying in deposit with the District Court, Pune.  By

order dated 22.04.2016, this Court has granted interim stay of the

impugned  order  of  the  High  Court.   However,  by  order  dated

24.10.2016, respondent No.1 was permitted to withdraw 50% of the

said amount Rs.93,22,590/- on furnishing a bank guarantee.  The first

respondent  has  not  withdrawn  the  said  50%  amount  of

Rs.93,22,590/- as he has failed to furnish bank guarantee.  We have

set aside the impugned judgment of the High Court and resultantly

the award passed by the MSMEDF Council is also set aside.

15. The impugned order is set  aside and this appeal is allowed.

The appellant Bank is free to recover the amount of Rs.1,22,00,000/-

withdrawn by the first respondent after adjusting the payments due

upto 24.07.2008.  The bank is permitted to withdraw the amount of

Rs.93,22,590/- along with accrued interest.  So far as the charges

towards  security  services  payable  to  the  first  respondent  after

24.07.2008,  liberty  is  granted  to  the  first  respondent  to  proceed Page No. 14 of 15

against  the  auction  purchasers-respondents  No.  2  and  3  in

accordance with law.  No order as to costs.

     …….…………...………J.        [KURIAN JOSEPH]

…………….……………J.        [R. BANUMATHI]

New Delhi; December 5, 2017  

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