Shakuntalam Landcraft Pvt Ltd vs Asset Reconstrution Company India on 12 June 2024

J U D G M E N T

The Recovery Officer passed orders dated 25th April 2024 and 29th April 2024 (the impugned orders), directing the parties to file an affidavit to enable him to investigate the allegations against him in Appeal No.1 of 2024. The Appellant feels aggrieved by the Recovery Officer's impugned order dated 29th April 2024.

The Appellant states that the impugned order dated 29th April 2024 is cryptic, unreasoned, arbitrary, absolutely baseless, and must be quashed and set aside. The Recovery Officer directed the Appellant to file an affidavit specifying the allegations against him. The Recovery Officer passed an erroneous order, and therefore, the Appellant rightly preferred Appeal No.1 of 2024, challenging his order dated 17th January 2024. The Recovery Officer adopted unregulated practices and procedures and found no place in the 1993 Act a complete code. The Recovery Officer exceeded his jurisdiction by usurping the supervisory jurisdiction of the higher forums in passing the impugned order dated 29th April 2024, which had no nexus to the case. The Recovery Officer's impugned order is a roving inquiry attempting to curtail the parties' right to challenge the order before the higher forum. The Recovery Officer's impugned order has set a wrong precedent in its effect and implementation. By the impugned order, the Recovery Officer subordinate to the Appellate Courts cannot direct the parties to file such an affidavit explaining its Appeal. The Recovery Officer usurped the jurisdiction of the Hon'ble DRAT.

Authum and UPSIDA preferred appeals against the Tribunal's order dated 24th April 2024. The Hon'ble DRAT refused to stay the operation and implementation of the Tribunal's order dated 24th April 2024. The Hon'ble Bombay High Court also did not grant any ad-interim or interim relief to UPSIDA. Therefore, the refusal of the higher forums to interfere with the Tribunal's order dated 24th April 2024 was sufficient for the Recovery Officer not to pass the impugned order dated 29th April 2024 directing the parties to explain or specify the allegations made against him. The Appellant requests the Tribunal to (i) quash and set aside the impugned order dated 29th April 2024 and (ii) stay the operation of the Recovery Officer's impugned order dated 29th April 2024.

Respondents 1 and 2 filed reply affidavit Exhibit

9. They felt aggrieved by the impugned order dated 29th April 2024. The Recovery Officer exceeded his jurisdiction and committed an act of judicial impropriety and indiscipline. The Recovery Officer's impugned order cannot allow or encourage such practice beyond the law's rule. According to Respondents 1 and 2, it amounts to sitting in Appeal against the order of this Tribunal. The impugned order caused harassment to the certificate holders in recovering their dues. In paragraph 4, Respondents 1 and 2 have set up the case of how the Recovery Officer acted against the aim and object of the 1993 Act and suo motto put hurdles in completing the sale, issuance of sale certificate, handing over of the possession and distribution of the sale proceeds. The Recovery Officer put further hurdles by the impugned order in continuous contempt of the higher forums’ orders. Respondents 1 and 2 shall deliver the original title deeds of the mortgaged property sold under e-auction dated 28th August 2023 to the Appellant. The 3rd Respondent Official Liquidator, through counsel, consented to allow application Exhibit to distribute and appropriate the sale proceeds subject to Respondents 1 and 2 or the certificate holders furnishing an undertaking to bring back the money, if necessary, to satisfy the workers' claim pending adjudication. Despite consent by the Official Liquidator and without a prohibitory order of higher forum, the Recovery Officer adjourned the case to 14th June 2024. Respondents 1 and 2 request the Tribunal to set aside the impugned orders. The Recovery Officer's conduct shows he shall continue exceeding jurisdiction and deprive the parties of their rights.

The 3rd Respondent presented an email Exhibit 10 sent to the advocate on record stating that (i) its role is to release the amount to the extent of the workers' claim pari passu with the secured creditors and (ii) it has no issue with the sale or Appeal.

Respondents unconditionally support the Appellant in quashing and setting aside the impugned order dated 29th April 2024.

The Appellant's submissions: Mr Nagori submitted that the Recovery Officer's impugned order dated 29th April 2024 is without jurisdiction and wrong in law. The learned counsel took the Tribunal through the Appeal and grounds therein. The Appellant requested the Tribunal to quash and set aside the impugned order dated 29th April 2024.

Submissions of Respondents 1 and 2: Respondents 1 and 2 unconditionally support the Appellant, requesting the Tribunal to quash and set aside the impugned order dated 29th April 2024. The counsel representing Respondents 1 and 2 or the certificate holders stated that the Recovery Officer denied them the distribution of the sale proceeds unless they complied with the impugned order dated 29th April 2024. It has nothing to do with the case's progress. The law allows or permits Respondents 1 and 2 to support the impugned orders without filing a separate appeal.

The Recovery Officer is harassing Respondents 1 and 2 and putting hurdles in their recovery process. The Tribunal cannot allow the Recovery

Officer cannot to sit in Appeal against the orders of the higher forums. The Recovery Officer has on record the orders passed by the higher forums. He is in continuous contempt of the orders of the higher forum. The successive contemptuous orders by the Recovery Officer would lay the worst precedent. The impugned order demonstrates the Recovery Officer's judicial impropriety and indiscipline. By the impugned order, the Recovery Officer usurped the jurisdiction of the higher forum. Between 28th August 2023 and today, the Recovery Officer put the following hurdles by avoiding:

(i) the sale confirmation,

(ii) the issuance of the sale certificate, (iii) handing over the possession of the property to the Appellant and (iv) prompt distribution of the sale proceeds. Looking at the Recovery Officer's conduct, Respondents 1 and 2, through the counsel, request the Tribunal to record their consent to hand over the original title deeds relating to the mortgaged property sold in e-auction dated 28th August 2023. Respondents 1 and 2 request the Tribunal to record the Official consent to distribute the sale proceeds on a pari passu basis to the extent of the workers' claim. Respondents 1 and 2 consents to allow the Appeal with direction to the Recovery Officer to dispose of interlocutory applications Exhibits 882 and 885 within one week.

The 3rd Respondent's submissions: Respondent 3, or the Official Liquidator, also unconditionally supported the Appellant and requested the Tribunal to quash and set aside the orders dated 25th April 2024 and 29th April 2024. It is the Official Liquidator's stand to support the Appeal challenging the impugned order without filing a separate appeal, which is permissible by law. The 3rd Respondent's entitlement is to the extent of the workers' claim on a pari passu basis with the secured creditor. Despite the 3rd Respondent's consent, the Recovery Officer did not pass the order. The 3rd Respondent requests the Tribunal to direct the Recovery Officer to distribute the sale proceeds immediately.

The 3rd Respondent or the Official Liquidator also request to look into the legality and validity of the impugned order dated 25th April 2024.

Mr Vivek Phadke, Advocate representing UPSIDA, submitted that his client is not a party to the present Appeal. UPSIDA made no allegations against the Recovery Officer in Appeal 1 of 2024 but directed the parties to file the affidavit by the impugned order. He informed the Recovery Officer that the Hon'ble Bombay High Court (vacation bench), after a lengthy hearing, did not pass any ad-interim and interim order. At UPSIDA's request, the Hon'ble Bombay High Court (vacation bench) accepted to list its Writ Petition before the regular bench.

The Tribunal heard the learned counsels for the parties.

Analysis and Findings:

On 25th April 2024, the Recovery Officer directed the Official Liquidator's counsel to file an affidavit. Reading the impugned order dated 25th April reveals the Recovery Officer overreacted and made a mountain out of the molehill. The reference to paragraph 102 of the order dated 24th April 2024 does not indicate that the Official Liquidator's counsel made any allegations against the Recovery Officer. The Recovery Officer must understand that the learned counsel is answerable to the Official Liquidator attached to the Hon'ble Delhi High Court. The Recovery Officer's microscopic view would enlarge the scope of the issue from macro to minor or major or blow irrelevant matters out of proportion. The Recovery Officer unnecessarily exaggerated the statement in paragraph 102 without reasoning and logic, terming it as an allegation against him. The Recovery Officer may restrict the parties'

arguments to the extent permissible based on the facts of their case. The impugned order does not show any reason to erase any remark or specific information from the judgment dated 24th April that the Recovery Officer feels is unnecessary or inaccurate. The Tribunal firmly believes that a mere statement by the Official Liquidator's counsel recorded in paragraph 102 of the judgment dated 24th April 2024 would not impact the Recovery Officer's reputation or standing. The Recovery Officer cannot suo motto start an inquiry to show his way of fairness and transparency. The Tribunal's order dated 24th April 2024 is subjudice before the Hon'ble (i) DRAT and (ii) Bombay High Court. The Recovery Officer cannot sit in an Appeal against the higher forum's order. Given the discussion above, the Tribunal holds that the Recovery Officer's impugned order dated 25th April 2024 is non-est and not binding on the 3rd Respondent or the Official Liquidator.

The Tribunal shall now consider the impugned order dated 29th April 2024, referencing paragraphs 226, 231 and 232 of the Tribunal's order dated 24th April 2024. For the sake of convenience, paragraphs 226, 231 and 232 are reproduced below:

Paragraph 226: The Appellant, Respondents 1 and 2, raised an additional issue against the three recovery officers, (i) Mr Sujeet Kumar, (ii) Mr Sunil Meshram and (iii) Mr Sandeep Sharma, for judicial indiscipline and their habit in this case of conducting proceedings and passing orders suo motto in the absence of pleadings, applications, evidence and arguments to cause damage or prejudice to the concerned party or parties. They have opened Pandora's box to show the Recovery Officers acted arbitrarily and unreasonably. They grossly misused and abused the chair and powers they derived from the 1993 Act, read with the Rules under the Second Schedule of the Income Tax Act.

Paragraph 231: Mr Sandeep Sharma: The Recovery Officer adopted the same modus operandi as Mr Sujit Kumar and Mr S.K. Meshram. The Recovery Officer set in Appeal and suo motto reviewed or revised the order dated 28th August 2023, 13th September 2023 and 17th September 2023. He openly rebelled against the higher forums' order by aiding and abetting the contempt. The Recovery Officer committed contempt of this Tribunal's order dated 24th November 2023 and the Hon'ble DRAT's order dated 6th December 2023.

Paragraph 232: The parties allege that Mr Sunil

Meshram and Mr Sandeep Sharma, the Recovery Officers, favoured Respondents 4 and 5 despite the Rules in the Second Schedule of the Income Tax Act. The Recovery Officer's conduct in passing the impugned order appears

(i) suspicious and doubtful, (ii) dereliction in discharging the judicial function, and

(iii) grave misconduct, which tantamounts to unbecoming of the judicial officer. Their conduct requires investigation and action by the competent authority under Administrative Law and the Contempt Act.

The Recovery Officer calls the findings in paragraphs 226, 231, and 232 "allegations." The Recovery Officer conducted the proceedings by passing orders "suo motto" without pleadings, applications, evidence, and arguments. If the Recovery Officer feels that he has not (i) acted arbitrarily and unreasonably, (ii) grossly misused and abused the chair and powers derived from the 1993 Act read with the Second Schedule of the Income Tax Act, (iii) suo motto sat in Appeal, (iv) suo motto reviewed or revised the orders referred to in paragraph 231 of the judgment dated 24th April 2024, (iv) not defied the higher forum's order by aiding and abetting the contempt,

(v) committed contempt of the orders dated 24th November 2023 and the Hon'ble DRAT's order dated 6th December 2023, (vi) favoured the parties referred to in paragraph 232, (vii) committed an act of dereliction in discharging the judicial function, grave misconduct and unbecoming of the judicial officer, he has the remedy to approach the appropriate forum to expunge the remarks.

Ground (G) of the Appeal reveals the parties or the Appellant brought to the Recovery Officer's knowledge the rejection of any interim relief by the Hon'ble DRAT in Appeals filed by Authum Investment and UPSIDA, respectively. The Appellant's counsel stated that the Hon'ble Bombay High Court rejected UPSIDA's request to grant injunctive relief to stay the operation and implementation of the judgment dated 24th April 2024 passed by the Tribunal in Appeal No.1 of 2024. Once the higher forum refuses to entertain the Appeals and Writ Petition filed by Authum Investment and UPSIDA, the Recovery Officer cannot sit in the Appeal, usurping the higher forum's supervisory jurisdiction to pass the impugned order.

The impugned order dated 29th April 2024 suo motto passed by the Recovery Officers is arbitrary, without jurisdiction, adopting unregulated practice and procedures not found in the 1993 Act and the Second Schedule of the Income Tax Act.

It is a matter of grave concern that the Recovery Officer adopted unknown procedures to delay the distribution of the sale proceeds to the Respondents without complying with the impugned order dated 29th April 2024. The impugned order passed during the pendency of UPSIDA's Writ Petition before the Hon'ble Bombay High Court and Authum's Appeal before the Hon'ble DRAT Mumbai is perverse, arbitrary, biased, and beyond jurisdiction. The Recovery Officer's order is not only an order without the law's authority but contemptuous. It is in the teeth of the Tribunal's order dated 24th April 2024. In the Tribunal's view, the Recovery Officer had no legal authority to pass the impugned order. Once again, the Recovery Officer overreached the law and acted contrary to the judicial propriety and precedent. The Tribunal views the impugned order as promoting lawlessness by the Recovery Officer. The Recovery Officer's approach is legally impermissible and against the public interest or policy.

Exhibits 882 and 885: The case presented by the Appellant and Respondents reveals they consent to allow these two applications. Mr Nagori urged the Tribunal to pass directions to the Recovery Officer on disposing of the two applications within one week.

Respondents 1 and 2, through counsel, correctly submitted that it is their legal and moral obligation and are ready and willing to hand over the title deeds to the Appellant subject to the outcome of Appeal (Diary) No.922 of 2024 and Appeal No.27 of 2024 pending before the Hon’ble DRAT, Mumbai.

The Appellant and the 3rd Respondent consent to distribute and appropriate the sale proceeds. Therefore, the Tribunal must direct the Recovery Officer to pass an order disposing of the two applications, Exhibits 882 and 885, on this line within one week.

Recovery Officer's conduct: The Appellant and Respondents 1 and 2 urged the Tribunal to look into the continuity of the contempt as the Recovery Officer, without regret, intentionally defied the higher forum's order. The Tribunal suspect the Recovery Officer's direct role and, for extraneous reasons, supports the third parties and openly defies the higher forum's orders. The impugned order is neither reasoned, educated nor a rule book decision. The Recovery Officer's open defiance of the higher forum's orders constitutes judicial misconduct.

The Tribunal feels the Competent Authority's role in looking into the Recovery Officer's behaviour seriously and on a priority basis. The Recovery Officer's habit of acting suo motto, sitting in Appeal or Review or Revision and passing order nullifying the higher forum's order, openly defying the higher forum orders would make the institution face negative consequences.

In judicial discipline and propriety, the lower or the subordinate court lacks jurisdiction to overturn the higher forum's orders. The common law doctrine requires upholding the decorum of judicial and administrative hierarchy. It demonstrates the Recovery Officer's incapacity (physical or other). The Recovery Officer orders defying tendency or pattern indicates incompetency, which has significant implications for the judicial system and justice administration.

The Tribunal directs the learned Registrar to forward a copy of the order to the Competent Authority for record, information and necessary action.

Given the discussion above, the Tribunal declared that the impugned order dated (i) 24th April 2024 is non-est, not binding on the 3rd Respondent or the Official Liquidator, and (ii) 29th April 2024 stands quashed and set aside. The Tribunal orders and directs the Recovery Officer to dispose of

Exhibits 882 and 885 within one week in line with this order.

Hence, the following order:

ORDER

(A) By consent of the Appellant and Respondents, Appeal No.4 of 2024 is allowed in terms of prayer clause 6(a) and (b) with no order regarding the costs. (B) The Tribunal orders and directs the Recovery Officer to dispose of Exhibits 882 and 885 within one week in line with this order. (C) I.A. No.1120 of 2024 stands disposed of.

Sd/-

(Deepak M. Thakkar) Presiding Officer, DRT-2, Mumbai Nidhi