M/s Vaikund Property Development Pvt Ltd and Others vs INDIAN BANK on 31 October 2020

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The Applicants have preferred the present Review Application under Rule 5A of Debts Recovery Tribunal (Procedure) Rule, 1993, to 2RA No.5/2018

review the impugned order dated 23.10.2017; and seeking to modify the order as per the Reasons at Para 11 and 12; and to reduce the rate of interest from 12% p.a. simple to 6% p.a. simple; and to redeem the mortgage.

2. Facts of the case in brief:-

2.1 The applicants are the defendants and the respondent is the applicant bank in the OA No.369/2002. The Respondent herein have filed the OA No.369/2002 under Section 19 of RDB & FI Act for the recovery of sum of Rs.31,34,554/- along with interest and cost, which was allowed by the DRT, Bangalore on 14.05.2009.

2.2. The OA No.369/2002 was renumbered as TA No.985/2017 on the point of jurisdiction and after hearing the parties, the TA was allowed on 23.10.2017 against the Defendants jointly and severally liable to pay the entire amount together with interest and cost with yearly rests from date of application till date of realization of entire amount. The rate of interest is fixed at 12% p.a. simple.

2.3 Aggrieved by the said final order in the OA, the Applicants preferred an Appeal before the Hon'ble DRAT, Chennai in RA No.41/2010, and the Hon'ble DRAT vide ordered dated 20.09.2013 remanded the matter back to DRT, Bangalore to dispose of the matter with a direction to pass appropriate orders and also directed to recall the Recovery Certificate issued in this case.

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2.4 It is the specific case of the review applicantsthat the operative portion of the Order is contrary to the Reasons mentioned and the Tribunal has concluded to award interest @12% p.a. simple, though the applicants had made specific prayer to award interest @6% p.a.

2.5 It is ardently contended that the Tribunal has awarded interest on Yearly Rests from the date of application till date of realization of entire amount as sought by the Applicant Bank which requires to be modified. If the interest is calculated at 12% p.a. simple, by excluding the expenses incurred by the Bank from capital account, then the claim of the Bank will be drastically reduced in contra to their Memo submitted before Hon'ble DRAT.

2.6 The Applicants herein have relied on the judgements of Hon'ble Supreme Court in the matter of *Veerappa Vs. Canara Bank and Ravindra Vs. Central bank of India*, where the interest is awarded @6% on creating mortgage. On these grounds, the Applicant has prayed for modification of the orders and for reduction of the interest from 12% p.a. simple to 6% p.a. simple. Hence the present RA before this Tribunal.

3.0 The respondent bank has filed their Statement of Objections inter alia contending that the Applicants who are the defendants in TA No.985/2017 have filed the above application seeking review of the final order dated 23.10.2017, passed by this Tribunal in TA No.985/2017.

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3.1 The Application for review is false and frivolous, which deserves to be dismissed for non-joinder of parties. In TA No.985/2017, there were totally five defendants, including the Applicants herein. However, the defendant No.4(a) and 5(a) in TA are not parties to the above application. Hence, the present application is liable to be dismissed without any consideration.

3.2 It is specifically contended that a person is entitled to maintain an application for review only, if there is any error apparent on the face of record in the order passed by this Tribunal. In the instant case, the final order dated 23.10.2017, in TA No.985/2017 passed by this Tribunal is a well-considered order and there is no error much less error apparent.

3.3 The Respondent bank in the OA has sought contractual rate of interest @18% p.a. compounded, whereas this Tribunal while disposing of the main matter, was pleased to consider the request of the applicants/defendants in TA for reducing the rate of interest to 6% p.a. and upon consideration of such request, this Tribunal exercising the discretionary powers vested with the Tribunal in the matter of awarding interest @12% simple is just and proper and accordingly, the interest was awarded on the principal claim of the bank.

3.4 It is the specific case of the respondent bank that, If the rate of interest is further reduced as claimed by the Applicants herein, 5RA No.5/2018

injustice would be caused to the Respondent Bank particularly the loan being availed by the Defendants for commercial purpose and also they have dragged the proceedings for a period of about fifteen years from the date of filing the OA. Hence, the order passed is with a judicial approach applying equity, therefore this part of the order is not erroneous.

3.5 Further, the Tribunal vide interim order dated 07.10.2002 had restrained the defendants in OA from alienating the OA schedule properties. However, the Defendant No.2 in TA No.985/2017, who is the 2^nd Applicant herein has sold a portion of the OA schedule B property in violation of interim order dated 07.10.2002 with a dishonest intention of defrauding the bank and enriching himself. Such conduct of the Applicant herein does not deserve any sympathetic consideration by this Tribunal.

3.6 The decisions relied on by the applicant are not applicable to the facts of the present case, particularly since the loan in question is commercial loan; the Applicants are developers by profession, applicants have dragged the proceedings for fifteen years without making any efforts to settle the dues to the bank and violated the interim order of this Tribunal by selling a portion of the mortgaged property.

3.7 Further the plea of the applicants for redeeming the property is not sustainable at this stage, since the OA Schedule A property has already been sold under SARFAESI Act and the SA filed 6RA No.5/2018

by the 2^nd Applicant challenging the sale has been dismissed by this Tribunal and third party interest has also been created on the property. For the above-mentioned reasons the Respondent bank prays for dismissal of the Review Application with costs.

4.0 Heard the arguments of Ld. Counsels for both sides and perused the available records.

5.0 It is evident that the Respondent Bank has preferred OA No.369/2002 before DRT, Bangalore, which came to allowed on 14.05.2009 directing the Defendants liable to pay a sum of Rs.31,34,554/- along with costs and interest @18% p.a. compounded with quarterly rests from the date of application till the date of realization.

5.1 It is manifest from records that the Applicants preferred an Appeal before Hon'ble DRAT against the said final order of DRT, Bangalore dated 14.05.2009 and the same was set aside on 20.09.2013, passing the following order:- *"The order of the Ld. Presiding Officer, DRT, Bangalore dated 14.05.2009 made in OA No.369/2002 is hereby set aside. The Ld. Presiding Officer, DRT, Bangalore is directed to take up OA No.369/2002 and dispose of the same in accordance with law as expeditiously as possible. The amount lying in this Tribunal is directed to be sent to DRT, Bangalore with a direction to the Ld. Presiding Officer to pass appropriate orders at the time of the disposal of the OA. The Ld. Presiding Officer is directed to recall the recovery certificate already issued in this case."*

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5.2 As per the direction of Hon'ble DRAT, Chennai, this Tribunal reopened the TA and after hearing arguments of the parties, passed a well-considered order on 23.10.2017 allowing the TA against the Defendants jointly and severally directing them to pay the entire TA amount with yearly rests from the date of application till the date of realization and after due consideration of the prayer made by D1 to D3, the rate of interest is reduced and fixed at 12% p.a. simple with yearly rests.

5.3 The primary issue raised by the Applicant is that the portion of the 'ORDER' is contrary to the 'REASONS' mentioned and the Tribunal has come to conclusion and awarded 12% p.a. simple in the order passed by my predecessor on 23.10.2017 needs/requires for a review.

5.4 The core issued for consideration before this Tribunal is:- *Whether the final order dated 23.10.2017 is liable to be reviewed to reduce the rate of interest from 12% p.a. simple to 6% p.a. simple and to redeem the mortgage as prayed in the review application?*

The provision to review the order of the Tribunal is enumerated in S.22(2)(e) of the Recovery of Debts due to Banks and Financial Institutions Act,1993 read with Rule 5-A of the Debts Recovery Tribunal[Procedure] Rule,1993.

5.5 A careful reading of sub-section (2) of S.22 of the Act will clearly show that grounds for review mentioned in O.47 R.1 of the Code are available to a review petitioner before the Tribunal. But sub-rule (1)

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of R.5-A of the Rules conveys that the Tribunal shall have power to review its own orders only on two grounds namely, some mistake or error apparent on the face of record for review under R.5-A of the Rules, For proper appreciation of facts, Section 5A in The Debts Recovery Tribunal (Procedure) Rules, 1993 is extracted, which reads as follows:- "5A. Review.

(1) *Any party considering itself aggrieved by an order made by the Tribunal on account of some mistake of error apparent on the face of the record desires to obtain a review of the order made against him, may apply for a review of the order to the Tribunal which had made the order.*

(2) *No application for review shall be made after the expiry of a period of thirty days from the date of the order and no such application shall be entertained unless it is accompanied by an affidavit verifying the application.*

(3) *Where it appears to the Tribunal that there is no sufficient ground for a review, it shall reject the application 2[but where the Tribunal is of opinion that the application] for review shall be granted, it shall grant the same:*

*Provided that no such application shall be granted without previous notice to the opposite party to enable him to appear and to be heard in support of the order, a review of which is applied for.]"*

5.6 It is evident from the records, the Tribunal has passed a detailed well considered order on merits as per the direction of Hon'ble DRAT by my predecessor on 23.10.2017, and reducing the rate of interest from 18% p.a. compounded quarterly rests to 12% simple yearly rests from the date of application till the date of realization.

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5.7 The contention of the applicant that, the Order which came to be passed reducing the interest @12% simple is contrary to the reasons mentioned in the final order. The relevant para of the order is extracted below for better understanding of the case of the applicant:-

*"The prayer of the defendants 1 to 3 for reducing the interest to 6% P.A. simple deserves consideration and hence in view of the facts and circumstances of the case, the interest from the date of application till date of realisation is fixed at 12% P.A. simple. The application therefore deserves to be allowed and is allowed."*

5.8 The extract of the said portion of the order would reveal that the Tribunal had considered the plea/contention of the applicants for reducing the interest, has thought it fit to award the rate of interest @ 12% simple. An observation in the reasoning cannot be a conclusive thinking of the court; an understanding of the facts and circumstances of the case and on order based on the reasoning portion is a conclusive thought of the court. In the instant matter, the Tribunal was considerate taking into the plea of the applicants seeking for reduction of interest and then after due consideration has thought it appropriate and correct has awarded interest at 12% simple. Hence, at any stretch of imagination it is not an error on the face of the record.

5.9 Further it is also seen in the said order dated 23.10.2017, at Para-11 that the Bank have sold the Application Schedule B mentioned properties pending the main application and appropriated the sale proceeds towards the loan account and the Schedule A mentioned 10RA No.5/2018

properties is also sold, but the same is subject to the outcome of TSA No.91/2017.

5.10 However, the said TSA 91/2017 filed by the 2^nd Applicant challenging the sale has also been dismissed by this Tribunal and third party interest has also been created on the property. Hence, the claim of the Applicants that the question of redemption of the schedule properties does not arise as third party interest has already been created. Even otherwise the applicants have lost their rights to redeem the property when they failed to exercise their rights under S.13[8] of the SARFAESI act.

5.11 It is discernible from the records that during the pendency of the present proceedings, as per the order dated 23.10.2017, the Respondent Bank filed an updated perfect memo of calculations dated 11.12.2017 calculating the interest @12% P.A. simple on the outstanding liability of the defendant in TA No.985/2017, which is found to be in order.

5.12 It is also well settled that once an application is filed before the Tribunal, it is the discretion of the Tribunal to award the rate of interest in respect of the amount claimed from the date of application till the date of realization. In the instant case, my predecessor has passed a detailed order considering all the aspects and has exercised his discretion in accordance with law and reduced the rate of interest from 18% p.a. compounded quarterly to 12% p.a. simple yearly rests from 11RA No.5/2018

the date of application till the date of realization. The memo of calculation produced by the Respondent Bank calculating the interest @12% is found to be in order as directed by the tribunal in the final order of the OA.

5.13 The Tribunal relies upon the judgement of the Hon'ble Supreme Court in the case titled Thungabhadra Industries Ltd. v. Govt. of A.P [reported in AIR 1964 SC 1372] has distinguished an erroneous decision and a decision which could be characterised as vitiated by 'error apparent' and it reads thus:- *"[T]here is a distinction which is real, though it might not always be capable of exposition, between a mere erroneous decision and a decision which could be characterised as vitiated by 'error apparent'. A review by no means an appeal in disguise whereby an erroneous decision is reheard and corrected but lies only for patent error ..... where without any elaborate argument one could point to the error, and say, here is a substantial point of law which stares one in the face, and there could reasonably be no two opinions entertained about it, a clear case of error apparent on the face of record would be made out."*

In AribamTuleshwar Sharma v. AribamPishak Sharma [reported in AIR 1979 SC 1047] the Hon'ble Supreme Court has held that there are definite limits to the exercise of power of review and it reads thus:- *"It is true as observed by this court in Shivdeo Singh v State of Punjab there is nothing in Article 226 of the Constitution to preclude a High Court from exercising the power of review which inheres in every court of plenary jurisdiction to prevent miscarriage of justice or to correct grave and palpable errors committed by it. But, there are definitive limits to the exercise of the power of review. The power of review may be exercised on the discovery of new and important matter or evidence which, after the exercise of due diligence was not within the knowledge of the person seeking the review or could not be produced by him at the time when the order was made; it may be exercised where*

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*some mistake or error apparent on the face of the record is found; it may also be exercised on any analogous ground. But, it may not be exercised on the ground that the decision was erroneous on merits. That would be the province of a court of appeal. A power of review is not to be confused with appellate powers which may enable an appellate court to correct all manner of errors committed by the subordinate court".*

5.14 A reading of the above judgment it is crystal clear that there is absolutely nothing on record to show that the impugned final order is vitiated by any fraud and there is no mistake or error apparent on the face of the order as attempted to be presented by the review applicants nor the applicants have a case that they could discover any new and important matter or evidence which, after the exercise of due diligence, was not within their knowledge or could not be produced by them at the time when the matter was adjudicated or when order was passed.

5.15 Further as per Rule 5A, there is no error made out in the order, on the other hand the applicants have attempted to interpret the observation of the Tribunal to their benefit and have endeavoured to file the present RA raising contentions of an appeal and have covertly prayed for redemption of mortgage.

5.16 It is apt to mention that the on a further perusal of the records clearly reveals the fact that the present Review Application 5/2018 is filed on 12.12.2017, whereas the order in TA No.985/2017 passed by this Tribunal is on 23.10.2017, which is enclosed at Page 17 of the Application as Annexure A. The said certified copy of the order i.e.

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Annexure A is received by the Applicants on 26.10.2017 (Page-32).

5.17 As per Rule 5A(2) of DRT(Procedure) Rules, prescribes that, *"No application for review shall be made after the expiry of a period of thirty days from the date of the order and no such application shall be entertained unless it is accompanied by an affidavit verifying the application."*

5.18 In the present case the Applicants have obtained copy of the order on 26.10.2017 and filed the present Review Application on 12.12.2017 i.e. with a delay of 17 days with no application preferred for condonation of delay of 17 days.

5.19 In this regard this Tribunal relies on the Judgement of Hon'ble Supreme Court delivered on 21.01.2020 in the case titled *Standard Chartered Bank v MSTC Limited* [SLP (C) No 20093 of 2019], which clarified the interplay between the provisions of Recovery of Debts and Bankruptcy Act 1993 (RDB Act) and Limitation Act 1963 (Limitation Act). The Hon'ble Supreme Court in the aforesaid Judgement has held that:- *"14) The peremptory language of Rule 5A would also make it clear that beyond 30 days there is no power to condone delay. We may also note that Rule 5A was added in 1997 with a longer period within which to file a review petition, namely, 60 days. This period was cut down, by amendment, with effect from 04.11.2016, to 30 days. From this two things are clear: one, whether in the original or unamended provision, there is no separate power to condone delay, as is contained in Section*

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*20(3) of the Act; and second, that the period of 60 days was considered too long and cut down to 30 days thereby evincing an intention that review petitions, if they are to be filed, should be within a shorter period of limitation – otherwise they would not be maintainable."*

Since the Tribunal does not have the power to condone the delay in filing the Review, the RA No.5/2018 filed by the Applicant is not maintainable as per law and liable to be dismissed.

5.20 The Tribunal relying upon the judgments of the Hon'ble Apex Court concludes that the applicant has not made out a case for review as there is no error on the face of the records as provided under Rule 5A(1)(2) of DRT(Procedure) Rules 1993; further the present RA is filed with a delay of 17 days and it is a settled position that the Tribunal has no power to condone the delay in filing the Review under Rule 5[5A]; hence, the review application is only to be dismissed. For the foregoing discussion of facts and the applicability of Act and Rules, the present Review Application No.5/2018 is only to be dismissed.

6.0 RA 5/2018 is dismissed. Consequently, pending IA/s if any also stands disposed of. No order as to costs.

(Dictated to the PS(PJ), after its transcription and necessary corrections, signed and pronounced by me in the Open Court on this 31^st Day of October, 2020)

**Sd/-** **Presiding Officer** **DRT-II, Bangalore**