Case Law Details

Case Name : Arjun Industries Ltd & ANR Vs Industrial Development Bank of India & ANR. (Delhi High Court)
Appeal Number : LPA 380/2011
Date of Judgement/Order : 19/12/2011
Related Assessment Year :
Courts : All High Courts (4255) Delhi High Court (1296)

Arjun Industries Ltd & Anr Vs. Industrial Development Bank Of India & Anr.(Delhi HC) – Para 7 of the order dated 23.05.2007 reads as under:-

‘During the course of arguments, we had put to learned counsel for the parties that prima facie there does not appear to be any legal impediment or obstacle in the assignment of the debt by financial institution like IDBI. However, if the respondents wish to contest the O.A. filed by the petitioner before the Debt Recovery Tribunal on merits and/or to contend that petitioner was also bound by the settlement recommended for acceptance by the petitioner predecessor-ininterest i.e. IDBI or to urge any ground on merits in defence to the OA, these would be raised before the Debt Recovery Tribunal.

Confronted with this situation after some position and says that the matter be disposed of and the Debt Recovery Tribunal be asked to examine afresh the defence of the respondents on merits including its contention that the petitioner were bound by the purported decision of its predecessor-in-interest i.e. IDBI to accept the proposal of the respondents. Learned counsel for the petitioners has no objection to the same, subject to their right to contend that there has been no settlement. Besides petitioner’s right to urge that respondent No.3 itself had recognized the petitioner as an assignee when they offered to improve upon the proposal already made to IDBI’.

The appeal is accordingly disposed of declaring that the observations made by the learned Single Judge in the impuged order are set aside. The writ petition filed by the appellant is dismissed, but not on the reasoning of the Single Judge but on the reasoning that the same was not maintainable in view of the consent recorded on behalf of the appellants in para 7 of the order dated 23.05.2007 disposing of the W.P. (C) No. 3535/2007.

ORDER

 PRADEEP NANDRAJOG, J.

1. Appellants had filed WP(C) No.6557/2008 praying that IDBI be restrained from assigning the debt owed by appellant No.1 to any third party. Mandamus was prayed for that IDBI be directed to accept the one time settlement proposal made by the appellant No.1, which was approved by the North Zone Committee of IDBI in the meeting held on 21.03.2006; minutes whereof were approved on 27.03.2006.

2. Dismissing the writ petition, the learned Single Judge has held that twice before, the appellant No.1 had backed out from the one time settlement commitment and thus it was held that the appellants would not be entitled to any relief.

3. Second reasoning on which writ petition has been dismissed is that as per the law declared by the Supreme Court in the decision reported as 2010 (10) SCC 1 ICICI Bank Limited Vs. Official Liquidator of APS Star Industries Ltd., the debtor could not question the assigning of a debt.

4. It was urged by the learned counsel for the appellant that the inappropriate manner in which prayers were claimed in the writ petition should not have coloured the view taken by the Single Judge. At the core of the challenge in the writ petition was also non-acceptance of OTS settlement made by the appellants to IDBI. Learned counsel urged that RBI has framed guidelines for Public Sector Financial Institution and Banks to consider OTS proposals and these guidelines, being in public interest, would give birth to actionable claim. Learned counsel urged that if, pending consideration of an OTS settlement, a debt is permitted to be assigned, a valuable right of debtor would be affected. The valuable right being, a fair consideration of OTS settlement within the RBI guidelines.

5. It is true that in ICICI Bank Limited case (Supra), the Supreme Court has held that when a bank or a financial institution assigns a non-performing the asset, no right of the debtor is affected.

6. In a judgment pronounced by us on 08.12.2011 deciding LPA No.112/2011, Hindon River Mills Ltd. Vs. IFCI Ltd., we had drawn the distinction between what would constitute and interest simplicitor and what would constitute an interest maturing into a right. We have held that only where there is a right would thereby a corresponding obligation on a third party. We have held that a person may have an interest in a particular subject matter, but there may not be any corresponding duty cast upon a third party.

7. There is merit in the submission made by learned counsel for the appellant that a debtor has a right vis-à-vis a Public Sector Financial Institution to have a fair consideration of the OTS settlement proposal for the reason the RBI guidelines occupied the filed on the subject and thus it can safely be said that Public Sector Financial Institutions would be under an obligation to fairly consider a OTS proposal, keeping in mind the guidelines framed by the RBI. This right operates in an independent field. The right of a financial Institution to sell its non-performing assets operates in a distinct separate field.

8. Without going into the factual matrix of the justness of the decision taken by IDBI to sell the non-performing asset to Kotak Mahindra Bank Ltd., we simply highlight that at an earlier round of litigation fought when W.P. (C) No.3535/2007 was decided by this Court, it was expressly observed in the order dated 23.05.2007, that appellants would accept the assignment of the debt by IDBI but with a condition, being that the assignee of the debt would be bound by the decision to be taken by Debt Recovery Tribunal whether the OTS settlement was liable to be accepted. In other words, the successor-in- interest of IDBI would abide by the said verdict to be returned by the Debt Recovery Tribunal.

9. We not that in the said writ petition, the writ petitioner was Kotak Mahindra Bank Limited i.e. the assignee of the debt. The assignor i.e. IDBI was respondent No.1. The appellant No.1 was respondent No.3.

10. Para 7 of the order dated 23.05.2007 reads as under:-

“During the course of arguments, we had put to learned counsel for the parties that prima facie there does not appear to be any legal impediment or obstacle in the assignment of the debt by financial institution like IDBI. However, if the respondents wish to contest the O.A. filed by the petitioner before the Debt Recovery Tribunal on merits and/or to contend that petitioner was also bound by the settlement recommended for acceptance by the petitioner predecessor-ininterest i.e. IDBI or to urge any ground on merits in defence to the OA, these would be raised before the Debt Recovery Tribunal. Confronted with this situation after some position and says that the matter be disposed of and the Debt Recovery Tribunal be asked to examine afresh the defence of the respondents on merits including its contention that the petitioner were bound by the purported decision of its predecessor-in-interest i.e. IDBI to accept the proposal of the respondents. Learned counsel for the petitioners has no objection to the same, subject to their right to contend that there has been no settlement. Besides petitioner’s right to urge that respondent No.3 itself had recognized the petitioner as an assignee when they offered to improve upon the proposal already made to IDBI”.

11. The appeal is accordingly disposed of declaring that the observations made by the learned Single Judge in the impuged order are set aside. The writ petition filed by the appellant is dismissed, but not on the reasoning of the Single Judge but on the reasoning that the same was not maintainable in view of the consent recorded on behalf of the appellants in para 7 of the order dated 23.05.2007 disposing of the W.P. (C) No. 3535/2007.

12. Needless to state the Debt Recovery Tribunal would take the necessary decision with reasonable dispatch.

13. No costs.

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0 responses to “Public sector financial institutions under obligation to fairly consider OTS proposal keeping in mind the RBI guidelines – Delhi HC”

  1. Sivananthan says:

    We really feel this judgment of Hon’ble bench of Delhi High Court is bringing breeze in the field of debtors who want to settle their dues.Thanks to the positive thought.An attempt has been made to create a equality before law,for a honest debtor and guarantors. Right to get a fair deal is also an universal legal right.

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