KK Goyal v. Midmex

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WP No.9918/2013
HIGH COURT OF MADHYA PRADESH : BENCH AT INDORE
D.B.: Hon'ble Shri P.K. Jaiswal
Hon'ble Shri D.K. Paliwal, JJ.
Writ Petition No.
9918
/201
3

Krishnakant Goyal
Versus
M/s. Midex Global Private Limited & others
Writ Petition No. 11720
/201
3

State Bank of India
Versus
M/s. Midex Global Private Limited & others
* * * * *
Shri A.K. Sethi, learned Senior Counsel with Shri Harish Joshi,
advocate for the petitioner in Writ Petition No.9918/2013.
Shri S.C. Bagadiya, learned Senior Counsel with Shri Satish
Agrawal, advocate for respondents No.1 to 4 in Writ Petition
No.9918/2013.
Shri Satish Majumdar, advocate for respondent No.5 / Bank in Writ
Petition No.9918/2013.
-------
Shri Satish Majumdar, advocate for the petitioner / Bank in
Writ Petition No.11720/2013.
Shri S.C. Bagadiya, learned Senior Counsel with Shri Satish
Agrawal, advocate for respondents No.1 to 4 in Writ Petition
No.11720/2013.
None for respondent No.5.
Shri A.K. Sethi, learned Senior Counsel with Shri Harish Joshi,
advocate for respondent No.6 in Writ Petition No.11720/2013.
Shri A.K. Chitale, learned Senior Counsel with Shri Sandeep
Kochatta, advocate for respondent No.7 in Writ Petition
No.11720/2013.
-------
* * * * *
O R D E R
(Passed on this 28th day of January, 2015)
Per P.K. Jaiswal, J.
This order shall govern disposal of (1) Writ
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Petition No.9918/2013 (Krishnakant Goyal v. M/s.

Midex Global Private Limited & others) and (2) Writ
Petition No.11720/2013 (State Bank of India v. M/s.
Midex Global Private Limited & others).
2. The respondent No.1 – M/s. Midex Global
(P) Ltd is a company incorporated under the Indian
Companies Act, 1956, having its registered office at
Indore. The main activity of the company is trading
(Export & Import) in Engineering Goods, Molasses,
Soya and other agricultural products. The respondents
No.2 to 4 are the Directors of the Company. The
Company was enjoying various credit facilities in the
aforesaid business activity from the respondent No.5 –
State Bank of India since January 2006. At the request
of the company, the respondent No.5 had sanctioned
various credit facilities vide sanction letter dated
19.01.2006 (Rs.23.25 crores). The respondents No.2
to 4 offered their personal guarantee in respect of the
aforesaid credit facilities sanctioned by the bank to the
company and, therefore, they are jointly and severally
liable along with the company to pay all the
outstanding dues to the bank.
3. As a security for the aforesaid credit facilities
aggregating Rs.23.25 crores, the respondent No.2 had
signed various security documents in possession of the
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bank. The respondents No.2 and 3 had jointly

executed a deed of guarantee for repayment of
Rs.23.25 crores with interest, costs and other expenses
in favour of the bank. They as a further security for re
payment of amount of Rs.23.25 crores executed an
equitable mortgage of their respective properties in
favour of the respondent No.5 bank on 25.01.2006.
4. That, apart from a term loan of Rs.5.25 crores
sanctioned by the bank by sanction letter dated
19.1.2006, the bank vide sanction letter dated
19.9.2007 had sanctioned / modified various credit
facilities in favour of the company. The respondents
No.2 to 4 had accepted the terms and conditions
mentioned in the sanction letter dated 19.09.2007 and
appended their signatures thereon signifying such
acceptance. At the request of the respondent No.1 –
Company, the bank has structured the terms for
Forward Contract limit of Rs.16 crores and also a
Credit Exposure limit of Rs.4.40 crore on 09.10.2007
for which ISDA Master Agreement has been executed
by the company on 10.04.2008. The Board of Directors
of the Company passed a resolution for availing Forex
Derivative Contract. After sanction of such facilities,
ISDA Master Agreement was executed between the
company and the bank.
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5. That, for availing the facilities of Forex

Derivative Transaction, the company was required to
submit letters for the same from time to time. The
Forex Derivative Transactions were routed through the
cash credit limit at the request of the company by
submitting letters from time to time.
6. On 12.01.2009, the respondent No.1
company had submitted letter to the bank stating
therein that cash credit account had become irregular
due to Forex Derivative Transactions and requested for
Working Capital Term Loan of Rs.18 crores to make the
cash credit account regular. The bank vide sanction
letter dated 09.02.2009, sanctioned the enhanced
credit facilities (Rs.27.39 crores). As per Annexure /I,
which is part of the sanction letter dated 09.02.2009
and which is duly signed by the respondent No.1 to 4,
specifically provides that all the facilities mentioned in
the sanction letter are duly secured by primarily and
collaterally security of the properties mentioned therein
as also the personal guarantees of the respondents
No.2 to 4.
7. From the aforesaid, it is clear that at the
request made by the company vide letter dated
12.01.2009, the respondent No.5 bank vide letter dated
09.02.2009 carved out the Forex Derivative
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Transactions and parked the same in the Working

Capital Terms Loan amount of Rs.19.50 crores, which
was duly secured by primary and collateral security as
also the guarantee of respondents No.1 to 4. It is,
therefore, very clear that the Working Capital Term
Loan was not a prefunded or preexisting facility, but
was open to park the currency / Forex Derivative laws
till then being routed through cash credit account.
8. The respondent No.1 company paid an
amount of Rs.3,65,0007/ towards stamp duty for
execution of various security documents and creation
of equitable mortgage in favour of the respondent No.5
bank vide letter dated 14.05.2009 as a security for
various credit facilities sanctioned vide letter dated
09.02.2009. The respondents No.2 to 4 had executed
various security documents on 14.05.2009, pursuant to
sanction / transaction / enhancement of various credit
facilities and had also executed supplemental deed of
guarantee for increase in Over All Limit aggregating
Rs.30.55 crores on 14.05.2009.
9. The respondent No.2 on behalf of the
respondent no.1 company had further executed a letter
of undertaking not to create further charge inrespect
of current and fixed assets of the company over which
the bank has already having first charge. On
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14.05.2009, the respondent No.2 Narottham Somani,

has executed a joint Hindu family letter.
10. That, as a security for the aforesaid credit
facilities sanctioned vide sanction letter dated
09.02.2009, the following properties are mortgaged
with the respondent no.5 bank :
(i) Plot no.14/2, Block No.658 & plot No.15/2, Block
No.657, admeasuring 4000 sq.ft. Eachm, total area 8000
sq.ft. Situated in New Palasia, Indore belonging to
respondent No.3 Smt. Meenakshi Somani.
(ii) Plot No.16/2, area 400 sq.ft, Block no.6 situated in
Scheme No.2C, New Palasia, Indore in the name of
Respondent No.4 Shri Narottam Somani. (HUF).
(iii) Open Terrace adjoining Prakoshta No.401A and
401B, situated on the 4th Floor, Municipal House No.10,
Manoramaganj, Plot No.2 B, Rajgarh Kothi, Appollo Trade
Center, Indore belonging to Midex Global Pvt. Ltd.
(iv) Prakoshta No.401 A, situated on the 4 th Floor,
Municipal House No.10, Manoramaganj, Plot No.2 B,
Rajgarh Kothi, Apollo Trade Centre, Indore beloning to
Midex Global Pvt. Ltd.
(v) Prakostha No.401 B, situated on the 4th Floor,
Municipal House No.10, Manoramaganj, Plot No.2B,
Rajgarh Kothi, Apollo Trade Centre, Indore belonging to
(vi) Prakoshtha No.403 & 404, situated on the 4 th floor,
Municipal House No.10, Manoramaganj, Plot No.2B,
Rajgarh Kothi, Apollo Trade Centre, Indore belonging to
(viii) Land out of Survey No.104, House No.7 and Survey
No.108, House No.13, situated in village Vijaydurg, Tehsil
Devgad, Distt. Sindhugarh (Maharashtra).”
11. As per audited balance sheet for the year

ending 31.03.2009, the respondent No.1 company had
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admitted its liability to the extent of

Rs.33,82,73,677.76/ N.P. and the balance of Working
Capital Term Loan is reflected under Working Capital
Loan from Banks under Schedule (“c”) attached and
forming part of the balance sheet of respondent No.1.
12. That, since the respondent No.1 company
failed to maintain the financial discipline, the loan
account has become irregular and, therefore, the same
were classified as “Non Performing Assets” (NPA), in
accordance with the directives of Reserve Bank of
India.
13. The irregularity occurred in cash credit
account was due to Forex Derivative Transactions and
were further confirmed by the Board of Resolution
dated 14.05.2009 and 11.01.2010.
14. The bank had filed Original Application No.
149/2011 before the Debts Recovery Tribunal,
Jabalpur (In short, 'DRT') for recovery of amount of
Rs.41,42,47,514.93/ (Forty One Crores Forty Two
Lakhs Forty Seven Thousand Five Hundred Fourteen
Rupees & Ninety Three Paise). Simultaneously, the
bank also issued a demand notice dated 21.05.2011
under Section 13(2) of The Securitisation &
Reconstruction of Financial Assets & Enforcement of
Security Interest Act, 2002 (herein after referred as 'the
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Securitization Act') to the respondents No.1 to 4,

requiring them to make payment of
Rs.40,52,30,116.10/ (Forty Crores Fifty Two Lakhs
Thirty Thousand One Hundred Sixteen Rupees & Ten
Paise) within 60 days from the date of notice failing
which the action as provided under Section 13 (2) of
the Securitization Act would be taken. The
respondents No.1 to 4, instead of making repayment of
outstanding dues, submitted an objection dated 20 th
July, 2011 under Section 13 (3A) of the Securitization
Act to the Bank. The bank rejected this offer on
29.07.2011.
15. That, since the outstanding dues were not
liquidated within the stipulated period of 60 days, the
bank issued possession notice dated 24.09.2011 and
20.09.2011 under Section 13 (4) of the Securitization
Act.
16. That being aggrieved by the action taken by
the respondent No.5 – bank for recovering its
outstanding due under the Securitization Act, the
respondents No.1 to 4 filed Securitisation Application
No.199/11, before the Debt Recovery Tribunal,
Jabalpur under Section 17 of the Securitization Act for
quashing of the entire action of the bank initiated
under Section 13 thereof.
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17. During pendency of the said Securitisation

Application, the respondent No.5 issued auction notice
in the news paper dated 28.01.2012 in respect of the
immovable properties and fixed the date and time for
auction for 28.02.2012 at about 11.30 PM.
18. The respondents No.1 to 4 filed an
application for grant of stay of auction before the DRT.
The learned Presiding Officer of DRT by order dated
27.02.2012 dismissed the stay application. The
learned Presiding Officer, DRT has held that
outstanding dues arising out of various credit facilities
sanctioned vide letter dated 09.02.2009 were duly
secured and the same are sought to be recovered by the
bank. The respondents No.1 to 4 had made false
allegations only for the purpose of misleading the DRT
and obtaining the desired relief.
19. The petitioner has submitted the tender for
Rs.5.31 crores along with security deposit of Rs.53.00
lacs. On 28.2.2012, i.e., on the date of auction, the
petitioner was declared as successful bidder in respect
of the property bearing house No.14/2 Block No.658
(4000 sq ft) and house No.13/2 Block No.657 (40000
sq ft) New Palasia, Indore, MP for Rs.5.31 crores.
20. That being aggrieved by the order dated
27.02.2012 passed by the DRT, Jabalpur an Appeal
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No.R24/12 was filed before the Debts Recovery

Appellate Tribunal, Allahabad (for short, 'DRAT') under
Section 18 of the Act challenging the interim order
passed by the DRT on 27.02.2012. The learned DRAT
considering the fact that tenders were received on
27.02.2012 vide order dated 28.02.2012 directed that
the bank shall be entitled to open the tenders, but shall
not give effect to the same by confirming the auction or
otherwise.
21. The respondent No.5 bank has issued a letter
No.2874 to the petitioner on 29.02.2012 in which the
petitioner's highest bid was accepted and the petitioner
was directed to pay 25% of the bid i.e. amount of
Rs.1,32,75,000/, which the petitioner has deposited
on 29.2.2012 itself, after deducting the amount of
security deposit / earnest money to the tune of Rs.53
lacs.
22. The respondent No.5 issued another letter
No.2875 dated 29.02.2012 and has directed the
petitioner to deposit the remaining 75% i.e.,
Rs.3,98,25,000/ on or before 14.03.2012. It has also
been informed to the petitioner that such action is
subject to the final decision of the matter pending
before the DRT and before DRAT. The petitioner after
receipt of letter from the bank came to know about the
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interim order passed by the DRAT and has sent a letter
dated 06.03.2012 and 09.03.2012 to the respondent
No.5 bank not to insist upon the petitioner to deposit
balance 75% amount of Rs.3,98,25,000/ till the
disposal of the matter pending before the DRT and
DRAT.
23. As no reply has been given by the respondent
No.5 – Bank and, therefore, the amount of
Rs.3,98,25,000/ has been remitted by the petitioner to
the respondent No.5 bank through RGTS on
14.03.2012, i.e. within the time specified by the
respondent No.5 bank in its letter No.2875 dated
29.02.2012. The appeal No.R24/2012 was listed for
hearing before the DRAT on 24.08.2012 on which date
it was brought to the notice of the learned DRAT that
the Securitisation Application was already fixed for
final hearing on 25.09.2012. The DRAT passed an
order on 24.08.2012 to the effect that “since the matter
has already been fixed for final arguments on
25.09.2012, therefore, it will be appropriate to adjourn
the case with direction to the DRT that on 25.09.2012,
the matter be heard and no adjournment shall be
sought by the parties. The appeal be listed on
10.10.2012. The interim order passed shall continue”.
24. On 17.09.2012, the respondents No.1 to 4
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filed an application before the DRT, Jabalpur for

quashing of the recovery proceedings initiated by the
bank under the provisions of the Act on the ground
that provisions of the Act are not applicable in the
instant matter. The bank filed its reply and opposed
the prayer. The Presiding Officer of the DRT on
25.09.2012 reserved the case for orders on
Securitisation Application as well as interlocutory
application and the case was listed for 16.10.2012 for
delivery of the orders. Order dated 25.09.2012 of DRT
reads, as under:
“25.09.2012
Shri Satish Agarwal for Appellant.
Shri Sanjay Agarwal for Bank (Respondent).
Shri Manoj Sharma for bidder of property (along
with Adv. Narendra Chauhan) who lodged
intervention application on 24.09.2012. Reply
lodged by appellant who lodged IA on 17.09.2012.
Order dated 24.08.2012 in Appeal R24/12 had
directed this Tribunal that on 25.09.2012 the matter
shall be heard and no adjournment shall be sought
by the parties. Shri Satish Agrawal for appellant
submitted that he is arguing only the IAs and not
prepared for arguing SA. Shri Sanjay Agarwal has
filed reply to the IA lodged by appellant for quashing
the recovery proceedings and argued IA as well as
SA. Hence this case is reserved for orders in SA and
IA. The appellant may lodge written arguments if so
desired within one week.”
25. The respondents No.1 to 4 being aggrieved

by order dated 25.09.2012 passed by the Tribunal filed
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an application in pending SA No.R24/2012 on

26.09.2012 before the DRAT seeking following relief :
“i. Stay further proceedings in SA No.199/2011

pending before DRT, Jabalpur, until disposal of
Securitization Appeal No.R24/2012 pending
adjudication before this Hon'ble Appellate Tribunal;
ii. Direct the Learned DRT to decide interim
application filed by appellant and other pending
interim applications first, without deciding the SA
No.199/2011;
iii. This Hon'ble Appellate Tribunal may kindly be
pleased to hear the captioned appeal finally and
decide the issue of power of respondent bank under
provisions of SARFAESI Act, 2002.
iv. This Hon'ble Tribunal may be pleased to pass
any other or further order(s) deemed fit and
necessary in the facts and circumstances of the
matter.”
26. The DRAT vide order dated 27.09.2012

directed the DRT to decide the preliminary objection
contended in the application dated 26.09.2012 first.
Being aggrieved by the aforesaid order of the DRAT,
the respondent No.5 bank had filed Writ Petition
No.17203/2012 before the High Court Principal Seat at
Jabalpur, which was dismissed by the Division Bench of
the court on 11.10.2012. In view of the order dated
27.09.2012 passed by the DRAT in pending Appeal
No.R24/2012 and the order dated 11.10.2012 passed
in Writ Petition No.17203/2012, the DRT decided the
application dated 26.09.2012 filed by the respondents
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No.1 to 4 by order dated 09.04.2013 and held that the
action of the bank under the Act is absolutely legal and
justified. Order dated 09.04.2013 reads as under :
“SA No.199/2011
09.04.2013
Order in IA lodged on 17.09.2012 by the
appellants to quash the recovery proceedings on
the ground that provisions of Act 2002 are not
applicable.
Shri Satish Agarwal, for the appellant.
Shri Sanjay Agarwal, for the Bank.
Heard. Perused the records.
The submission of the appellant is that the
Respondent Bank had proceeded with the recovery of
the dues since the CC account had become irregular
due to transfer of losses arising out of derivative
transaction therefore, at the request of the appellant
WCTL of Rs.18 Crores was sanctioned to make the
CC account regular. The sanction letter is dated
09.02.2009 and was secured by primary security
which is evident from board resolution dated
14.05.2009, security documents were executed on
14.05.2009 and thus the loss due to forex derivative
transaction were transferred in WCTL account. These
submissions are false and incorrect. The sanction
letter dated 18.10.2006 by which limit of Rs.16
Crores was sanctioned for derivative contract and a
limit of Rs.4 Crores at credit exposure limit
derivative deals. No security interest was credited
vide sanction letter dated 18.10.2008 and therefore,
the provisions of Act 2002 does not apply. Vide
sanction letter A5, A10, A20 and A21, CC Limit was
sanctioned for Rs.1.00 Crore only for the purpose
mentioned in Annex.A6 of the sanction letter.
Contrary to the terms of sanction CC Limit has been
debited over 27 times by the loss of derivative
transaction which is illegal and without authority of
law. The cash credit account was always in credit
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because there was no occasion to pay any customs
duties. On 25.10.2008 the CC account was debited
for Rs.38,88,194/ for the first time which is
derivative loss and thereafter, various debit entries
were made which are more than Rs.1.00 Crore
towards derivative losses which can be verified with
the statement of account. The cheques issued by the
company to use the credit balance were dishonoured
there was no condition to debit the derivative losses
in the CC account. The money which thus became
due to the Bank is for illegal business which was
carried out between the Bank and the client violating
RBI guidelines and cannot be recovered under Act
2002. No security interest was created before
26.03.2009 to secure the alleged loan of Rs.19.50
Crores credited in the CC account on 27.03.2009.
No cheques or transfer voucher is signed by the
applicant for such transfer and no request was made.
No documents is produced to show disbursement of
any amount to the applicant after execution of
documents on 14.05.2009. If the account of the
appellant was NPA of 30.06.2009 by sanction letter
dated 09.04.2010 was issued by the Bank. If the
security documents are executed on 14.05.2009,
then how could the account be classified as NPA on
30.06.2009 before 90 days. Sanction of WCTL was
valid upto 01.03.2009 and no security documents
were created till that date. Letter dated 09.02.2009
containing purpose terms and conditions sanction of
WCTL does not disclose that the same was
sanctioned to park derivative losses and therefore,
the same is to be decided by this Tribunal as directed
by the Hon’ble DRAT, Allahabad dated 24.08.2012
for which this IA is lodged.
In the reply lodged by the Bank to this application, it
is submitted that since it was submitted before the
appellate Tribunal that the case is fixed for final
arguments before DRT Jabalpur on 25.9.2012, the
Hon’ble Appellate Authority had directed that the
case be heard finally on 25.09.2012 and no
adjournment shall be sought by the parties. The
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issue raised in this IA is one of the main issues in the
appeal and therefore, the appeal can be heard finally.
The reply of the Bank to the SA, to the application
for stay as well as additional reply may be considered
as the reply to this IA as per document No.1 letter
dated 24.09.2010 the applicants have confirmed the
outstanding dues to be Rs.33.08 Crores as on
01.04.2009 out of which Rs.24.73 Crores was due
towards forex derivative losses, and after calculation
of interest other than forex derivative losses, the total
dues was Rs.34.45 Crores. The applicants have
admitted in the said letter that the account had
become NPA on account of forex derivative losses.
Hence requested for a dismissal of the IA with costs.
This IA is seen lodged by the applicant referring
certain documents lodged by the Respondent Bank in
the reply to the appeal No.R24/2012 lodged by the
appellant before DRAT, Allahabad challenging the
interim order dated 27.02.2012 of this Tribunal
wherein it was held “…… When it is revealed that
the borrowers are not willing to liquidate the dues
though they have continued to enjoy the credit
facility from the date of availing and subsequent
enhancement / additions as per their requests as
seen from the pleadings documents produced by
the parties this Tribunal cannot interfere by
granting stay of auction schedule for 28.02.2012
when no illegality is proved by the Appellant in the
proceedings for recovery initiated by the
Respondent Bank against them under Act 2002.
Therefore, the prayer in the IA seeking stay of
auction scheduled for 28.02.2009 lodged by
Appellant is dismissed with costs to the Respondent
Bank.”
The documents of the defendants in the reply before
Hon’ble DRAT, Allahabad referred to in this IA are
not produced by the applicant and this Tribunal is
not able to no as to when of the documents referred
by the Bank in the reply before the Hon’ble Appellate
Tribunal are being mentioned in this IA by the
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appellant. The Respondent Bank in the reply to this
IA has submitted that the reply to the SA, the reply to
the interim prayer for stay of auction and the
additional reply lodged by the Bank in the SA may be
considered to be the reply to the pleadings in this IA.
Therefore, the documents referred by the Bank in
their above referred pleadings are considered for the
decision in this IA. In the order dated 27.02.2012
the plea of the appellant raised in this IA was duly
considered on merits by this Tribunal and was held
“……The appellants who have thus availed the
Foreign Exchange Derivative Facility from the Bank
by giving assurances to produce the underlying
import export contract as required under FEMA 1999
and Regulation 4 of Regulation 2000 framed there
under have failed to submit the underlying import
export contract with the passive support of the
respective officers of the Bank but continued to enjoy
the facility without submitting the contract to the
Bank which is admitted by them in the letter dated
12.01.2009. Therefore, the arguments of the learned
Counsel for the appellant that since no underlying
contract was produced by the bank, (that the Bank
had specifically admitted in writing in its reply under
the Right to Information Act) is not a ground to hold
that no such assistance was granted / if at all granted
without necessary underlying export import
agreement is speculative in nature and is contrary to
law and therefore, cannot be enforced as argued by
the learned Counsel for the Appellant.
In the decision reported in AIR 2011 Mad. 144 it was
held that “……contention raised that there was no
underlying exposure, cannot be heard to be raised
by the plaintiff who made a declaration in
contract in question that it was entering into this
transaction solely for the purpose of hedging its
foreign currency Balance sheet exposure
Declaration is binding on the plaintiff and the
same was sufficient for the defendant Bank to
enter into the deal”is applicable to the contention
now raised by the appellant that since the Bank
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had failed to produce the underlying contract the
same cannot be enforced is therefore, not
applicable.
The appellants having accepted Annex.R4
sanction and executed the necessary loaning and
security documents Annex.A28 to A31 on
14.05.2009 as stated in the OA, the confirmation
as per resolution of the Board of Directors of the
company on 14.05.2009 and 11.01.2010 clearly
reveal that the Bank is fully entitled to recover its
dues as claimed for from the Appellant in its 13
(2) notice of demand dated 21.05.2011.”
Therefore, having once held that the Bank is entitled
to recover its dues as claimed for from the appellant
in the notice of demand dated 21.05.2011, this
Tribunal cannot by the pleadings in the IA alone hold
otherwise as required by the appellants. The reason
for the said finding was also given in detail as follows
“…… The contention of the learned Counsel for the
appellant that there was no security interest
created in favour of the Bank for the dues under
WCTL of Rs.19.50 lacs enjoyed since acceptance of
Annex.R4 sanction, is seen to be rebutted by the
Bank in its reply and the documents produced
which shows that R3 ISDA agreement was
superseded by the execution of Annex.R4 sanction
dated 09.02.2009 that too on the request of the
appellants as per letter dated 12.01.2009 given by
the MD of D1 company to the Bank. The
arguments of the learned Counsel for the appellant
that Annex.R4 sanction was not as requested by
the appellant as per letter dated 12.01.2009
cannot be accepted because Annexure R4 sanction
is seen accepted by the appellants on the very same
day and duly approved by the Board of Directors
on 14.05.2009 and 11.01.2010 of sanction and if
they had any reservation in accepting the terms
and conditions of Annex.R4 they could have
declined from accepting Annex.R4 or even they
could have evaded execution of loaning and
security documents on 14.05.2009 as per the
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Annex.R4 sanction seen duly accepted by them. In
pg. 3 of Annex.R4 Annex.1 it is revealed that the
WCTL availed as per Annex.R4 was duly secured
by the mortgage of the properties in favour of the
Bank. Though Annex.A20 is the copy of sanction
dated 09.02.2009 the Appellants have produced
the copy without their signature so as to
strengthen their misleading averment that the
same was never accepted. This will reveal that
they have come before this Tribunal with false
allegations only for the purpose of misleading the
Tribunal and obtaining a relief against the
recovery proceedings and are therefore, not
entitled for an order on merits as held by the
Hon’ble Apex Court in its decision reported in AIR
2007 SCW 5350.”
Their submission that their account could not be NPA
was also not accepted by holding thus “…… because
the said sanction Annex.A21 has never been
accepted by the appellant and has never come into
effect. This will only reveal that though the Bank
was ready to help the appellant to tide over the
financial crunch so as to help them to regularize
the account they have declined the offer by
refusing to accept the same and therefore, they
cannot now plead that Annex.A21 sanction dated
09.04.2010 will reveal that the classification of
their account as NPA was never done. Though the
appellants have produced Annex.A21 sanction the
letter dated 25.03.2010 of the company referred
therein has not been produced.
The submission that notice as required under ISDA
agreement was not given is also not accepted
because IDSA agreement is seen superseded by
acceptance of Annex.R4 dated 09.02.2009 and
execution of loaning and security documents on
14.05.2009 in favour of the Bank by the
borrowers without any reservations / objections.
So also due to the acceptance of the terms and
condition of Annex.R4 sanction by the borrowers
who had continued to enjoy the credit facility
20
WP No.9918/2013
availed by them till the issuance of 13 (2) notice,
their contention that any dispute under the ISDA
agreement has to be resolved through arbitration
and therefore, jurisdiction of judicial authority is
ousted under Section 5 of Arbitration and
Conciliation Act is not tenable. Had the Annex.R3
ISDA Agreement been not superseded by
acceptance of Annex.R4 sanction dated
09.02.2009 and subsequent execution of
documents on 14.05.2009 by the Appellants, the
appellants would have resorted to resolve the
dispute by invoking by provisions by Arbitration
and Conciliation Act against the Bank which
admittedly is not invoked till date as the same is
not pleaded in this SA.” Therefore, their submission
that their account was never NPA and therefore, the
recovery proceedings is to be quashed as not
maintainable cannot be accepted.
Annex.R9, 10 and 11 produced by the Bank, with
the additional reply also reveal that the appellants
had admitted that their CC account had irregular due
to forex derivative transaction requested for sanction
WCTL of Rs.18 Crores to make its CC account
regular. Considering the said request the bank as per
R4 sanction dated 09.02.2009 had curbed out the
forex derivative transaction and parked the same in
WCTL account which was duly secured by primary
and collateral security as well as the guarantee of
appellants who had paid stamp duty of Rs.3.65 lacs
as seen from R12 letter dated 14.05.2009. It is
further clear from Annex.R6 letter dated 25.06.2008
the forex derivative transaction were routed to the
CC limit at the request of the appellant. As per
Annex.A22 to A27 to the OA 149/2011 the
appellant No.2 had confirmed the balance as on
31.03.2009 and in R7 the audited balance sheet for
the year ending 31.03.2009, the appellant company
is seen to have admitted its liability to the tune of
Rs.33,82,73,677.6p. The document No.1 produced
by the Bank with the reply to this IA dated
24.09.2010 written by the appellants reveal that they
21
WP No.9918/2013
confirmed the principal balance Rs.33.08 Crores as

on 01.04.2009 out of which Rs.27.45 Crores is due to
forex derivative losses. After calculation of interest
other then forex derivative losses they had admitted
the dues to be Rs.34.45 crores. By this letter it is
seen that they have admitted the dues and had
requested for reschedulment for compromise as per
proposal A to J of document No.1.
The effort of the appellant in this case by abusing
and misuing the provision of law is found to be only
to prevent the applicant Bank from pursuing the
recovery proceedings which are seen duly initiated
and pursued by the Bank for recovery of its lawful
dues from the appellants who had time and again
reiterated their liability in favour of the Bank. Except
for assurance to pay the dues, the appellants have till
date not made any substantial payment towards the
dues, instead they are bent upon preventing the
applicant Bank from making the payment as well as
preventing this Tribunal from disposing the appeal
within the period stipulated under 17(5) of the Act
2002. The prayer in the IA to hold that the provisions
of Act 2002 are not applicable in the instant matter
and to quash the recovery proceeding is rejected
directing the appellant to pay costs of Rs.3.00 lacs in
this IA.
The parties are directed to appear for final hearing
for disposal of this appeal as per the direction of the
Hon'ble Division Bench of the Allahabad High Court
reported in 2012 (2) BC 5.”
27. As per prayer made in the application dated
15.04.2013 filed by the respondents No.1 to 4, it has
been prayed that order dated 09.04.2013 passed by the
DRT be taken on record, prayer clause of the said
application is relevant which reads as under :
“In view of the aforementioned facts and circumstances
of the matter this Hon'ble DRAT may kindly be pleased
22
WP No.9918/2013
to take the accompanied order dated 9.4.2013 passed by
Hon'ble DRT, on record;
This Hon'ble DRAT may kindly be pleased to decide the
issue about the powers of the bank to have taken
recourse to the provisions of the 2002 Act, in the present
case, in view of order dted 27.9.2012 passed by this
Hon'ble DRAT;

This Hon'ble DRAT may be kindly be pleased to pass any
other or further order(s) deemed fit and necessary in the
facts and circumstances of the matter.”
28. It is well settled that unless and until the

order dated 09.04.2013 was challenged by filing an
appeal under Section 18 of the Act, the legality of the
same cannot be decided in pending Appeal No.R
24/2012, which has been filed against the interlocutory
order of rejection of application for grant of stay. It is
also to be noted that Securitisation Application of the
respondents No.1 to 4 had not been finally decided by
the DRT and during pendency of the said Appeal, a
preliminary objection was filed and in compliance to
the order passed by the DRAT, the DRT decided the
objection and rejected it by order dated 09.04.2013.
The DRAT vide its judgment dated 30th July, 2013,
decided the Appeal No.R24/2012, which was filed
against the interlocutory order of refusal of stay dated
27.02.2012, passed by the DRT in S.A.No.199/2012,
but very surprisingly also set aside the final order dated
09.04.2013 of DRT, which was never challenged by the
23
WP No.9918/2013
respondents No.1 to 4 by filing appeal under Section 18
of the Act.
29. Learned Senior Counsel for the petitioner
submitted that the DRAT has committed grave illegality
in holding that the losses arising out of Forex
Derivative Transactions could not have been
transferred into Working Capital Term Loan and Cash
Credit Account, as the same is contrary to the Circular
of the Reserve Bank of India (RBI) dated 29.10.2008.
The Appellate Tribunal has completely erred in
interpreting the RBI Circular dated 29.10.2008, which
is modification of earlier RBI Circular dated
13.10.2008, ignoring Clause 2.1 (ii) of the Circular,
which remains effective and unchanged. Clause 2.1 (ii)
of the Circular dated 13.10.2008 provides for debiting
Cash Credit / Overdraft Account of forex transactions
on due date and as such, the action of the bank is in
consonance and adhering to the Circular of the RBI.
30. It is also submitted that respondents No.1 to
4 by letter dated 12.01.2009 had made a request to the
bank that Cash Credit Account had become irregular
due to Forex Derivative Transactions and requested for
sanction of Working Capital Term Loan to make the
Cash Credit Account regular. Pursuant to such request
made by the respondents No.1 to 4, the bank vide
24
WP No.9918/2013
sanction letter dated 09.02.2009 carved out Forex

Derivative Transactions and parked the same in the
Working Capital Term Loan Account of Rs.19.50 crores,
which was duly secured by primary and collateral
security as also the guarantee of the respondents No.1
to 4. This sanction letter was duly signed by
respondents No.1 to 4 signifying their acceptance to the
terms and conditions mentioned therein.
31. The Board of Directors of the respondent
No.1 – Company vide resolutions dated 14.05.2009
and 11.01.2010 confirmed the irregularities, which had
occurred in Cash Credit Account due to Forex
Derivative Transactions and the Directors of the
Company had executed security documents in favour of
the Bank, and therefore, the Appellate Tribunal (DRAT)
committed gross error in its order by holding that no
security documents were executed in favour of the
Bank pursuant to Board's Resolution dated 14.05.2009
in lieu of sanction of credit facilities by sanction letter
dated 09.02.2009 to the respondent No.1 / Company.
The respondent No.1 / Company also submitted Form
No.8 under the Companies Act, 1956 to the Registrar of
Companies for registration of particulars of
modification of charge. A memorandum was also
recorded showing extension of deposit of title deeds
25
WP No.9918/2013
covering enhanced limits and creation of equitable

mortgage on additional properties for existing limits
and enhanced limits / additional facilities, and thus the
bank was well within its right to initiate action under
the provisions of the Act for recovery of its outstanding
dues.
32. It is further pointed out that the Appellate
Tribunal (DRAT) is not justified in holding that bank
cannot recover losses arising out of Forext Derivative
Transactions. The losses arising out of Forex Derivative
Transactions were converted into Working Capital
Term Loan at the request of the respondent No.1 /
Company vide letter dated 12.01.2009 and the same is
sought to be recovered by the bank. Thus, the
conversion of losses of Forex Derivative Transactions
into WCTL cannot be said to be contrary to the Circular
of RBI dated 29.10.2009, which is modification of RBI
Circular dated 13.10.2008; clause 2.1 (ii) of which
permits debit to Cash Credit / Overdraft Facility, if the
client concerned is also a borrower of the bank
enjoying a Cash Credit or Overdraft facility from the
bank. In the present case, respondent No.1 / Company
is also the borrower and as such, conversion was in
accordance with the said Circular. The Appellate
Tribunal (DRAT) failed to see that the amount which
26
WP No.9918/2013
was sought to be recovered against the Cash Credit

Limit, WCTL and Term Loan were fully secured by the
security interest. Thus, it is absolutely incorrect to say
that no security interest is available with the bank to
enforce the same by invoking the provisions under the
Act.
33. Shri A.K. Sethi, learned Senior Counsel for
the petitioner has submitted that Securitisation Appeal
No.R24/2012 was filed by respondents No.1 to 4
against the order dated 27.02.2012 by which their
application for grant of injunction / stay has been
rejected. Thereafter, on 24.08.2012, when the SA
No.R24/2012 was listed for hearing, it was brought to
the notice of the learned Appellate Tribunal (DRAT)
that the main application (Securitisation Application)
was already fixed for final hearing before the DRT on
25.09.2012. The Appellate Tribunal (DRAT) on
24.08.2012, adjourned hearing of appeal with direction
to the DRT that on 25.09.2012, the matter shall be
heard and no adjournment shall be sought by the
parties; and directed that the appeal be listed on
10.10.2012. On 27.09.2012, the DRAT in the aforesaid
pending Appeal passed an order and directed the DRT
to decide the preliminary objections first. In pursuance
to the aforesaid order, the DRT on 09.04.2013 has
27
WP No.9918/2013
come to the conclusion that the provisions of the Act of
2002 are applicable and rejected the preliminary
objections.
34. The respondents No.1 to 4 neither have
challenged the aforesaid order by filing an appeal
under Section 18 of the Act of 2002 nor any application
for amendment has been submitted by them in SA
No.R24/2012, seeking amendment to challenge the
aforesaid order dated 09.04.2013. Without being any
challenge to the order dated 09.04.2013 before the
DRAT, the Appellate Tribunal quashed the proceedings
under the Securitisation Act of 2002 pending before it
and acted without jurisdiction in directing the
respondent No.5 – bank to return the auction money
received from the auction purchaser along with the
interest. This amounts to an error apparent on the face
of the record and the learned DRAT was having no
authority or jurisdiction to set aside the order dated
09.04.2013 passed by the DRT, which was not at all
under challenge before it. The only limited jurisdiction
of DRAT in SA No.R24/2012 was either to grant
interim relief or stay or to confirm the order dated
27.02.2012 passed by the DRT by which the prayer for
grant of interim relief / stay made by respondents No.1
to 4 was refused. The matter on merits was not at all
28
WP No.9918/2013
the subject matter of the appeal and in absence of any
challenge of the order dated 09.04.2013 by
respondents No.1 to 4 that order has attained finality
and was binding upon all the parties concerned. The
learned DRAT has exceeded its jurisdiction in
examining the legality, propriety and validity of the
order dated 09.04.2013.
35. In SA No.R24/2012, the DRAT having
knowing well that the appeal was filed against the
order of injunction and thus has committed an error
apparent on the face of the record in holding that
respondent No.5 bank was not justified in declaring the
accounts of respondent No.1 as 'NPA'.
36. The Appellate Tribunal (DRAT) without
going through Clause 2.1 (ii) of the Circular dated
13.10.2008 and circular dated 29.10.2008 erred in
holding that the action of respondent No.5 / bank is
against the RBI's Circulars. The DRAT also erred in
holding that RBI Circular would not be applicable and
at the same time, has held that action of respondent
No.5 / bank is against the RBI Circular.
37. It is further submitted that on 03.08.2012,
respondent No.5 / bank filed an application under
Section 14 of the Securitization Act before the
Additional District Magistrate for taking possession of
29
WP No.9918/2013
the property and the same was allowed by the

Additional District Magistrate, Indore vide order dated
11.06.2013 (Annexure P/17) in Case No.04/A
74/201213 by exercising the powers conferred under
Section 14 of the Securitization Act and the possession
of the property was ordered to be delivered. This order
was never challenged by respondents No.1 to 4 before
any competent court of law and thus, the aforesaid
order has attained the finality.
38. Shri A.K. Sethi, learned Senior Counsel
placed reliance on the decision of the Apex Court in the
case of Kotak Mahindra Bank Limited v. Hindustan
National Glass & Industries Limited & others
reported in (2013) 7 SCC 369, the issue before the
Hon'ble Supreme Court was: whether a willful default
in meeting payment obligation to a bank / financial
institution under a derivative transaction will be
covered under the RBI Master Circulars on willful
defaulters dated 01.07.2008, 01.07.2009 and
01.07.2010? The Apex Court, after appreciating the
contention of the learned counsel for the petitioner has
held that the definition of 'willful default' in the Master
Circular indicates that a willful default would be
deemed to have occurred in any of the events
mentioned in subclauses (a), (b), (c) and (d) of Clause
30
WP No.9918/2013
2.1. The phrase “willful default” in the Master Circular
has to be construed by reading the Master Circular as a
whole, looking to the provisions of the Reserve Bank of
India Act, 1934 under which RBI has powers to issue
circulars and instructions to the banks, the purpose for
which the Master Circular was issued and the mischief
that the Master Circular intends to remedy because
these constitute the context and the subject matter in
which the definition of 'willful default' finds place in
the Master Circular.
39. Prior to auction, the respondents No.1 to 4 /
company made an offer on 24.09.2010 that against the
principal outstanding balance of Rs.33.08 crores and
total dues of Rs.39.35 crores, they are ready to settle
the matter and made an offer for payment of Rs.34.45
crores towards full and final settlement of their dues,
which will be paid in three years. Paragraphs A to J of
the letter dated September 24, 2010 is relevant, which
reads, as under:
“A. We request Bank to waive all interest
charged on all the derivative losses from the
time the account has been classified as NPA.
The bank may freeze the principal liability
as Rs.34.45 crores as on September 30th
2010 for all the amounts and accounts put
together.
B. We are enclosed herewith a cheque of
31
WP No.9918/2013
Rs.12 lacs approx, as out confirmation

towards the settlement, which may be
encashed and deposited in our outstanding.
C. We are ready to pay 5% (after
deduction of Rs.12 lacs, as described in Para
B) as first settlement payment towards the
principle amount of the outstanding within
15 days of acceptance of our OTS proposal,
to show our commitment towards the
settlement of the outstanding.
D. We shall pay 1 installment of Rs.60
lacs every month for next 9 months, for
payment of principal amount.
E. We shall pay 1 installment of Rs.100
lacs every month for next 12 months, for
payment of principal amount.
F. The balance amount may be divided in
12 equal installments, which will be paid,
towards the principal amount.
G. We request bank to calculate the
interest on the OTS amount at PLR rate of
interest, simple interest at the end of the
payment, which we shall pay in 3 equal
installments after the payment of principal is
done.
H. We have identified some buyers for our
fixed assets like office at 401/402 Apollo
Trade Center, Indore, which is presently of
no use. The proceed of such sales will be in
addition to what has been committed above.
I. In case we are able to dispose off any
of our assets / shares in the overseas
venture, which we will try to our best of
ability, then we will expedite the payment.
32
WP No.9918/2013
J. We will also be doing some exports

business for which we are in the process of
tying up a JV agreement, wherein we will be
using our port facility to export. Any
revenue received will be deposited with you,
in addition to the above mentioned
commitment.”
40. The terms and conditions of the said offer

were never abided by the company, and therefore, the
bank vide letter dated 24.07.2011 communicated the
same; relevant paragraph 4 thereof is relevant, which
reads, as under:
“4. We further advise that despite follow
up, we are neither in receipt of 2 nd copy of
our sanction letter of compromise offer
dated 28.03.2011 duly signed by the
authorized signatory of the company with
Board Resolution and other guarantors in
token of having accepted the terms and
conditions of sanction of compromise nor in
receipt of Rs.35549825.00/ towards
installments of OTS amount from Oct' 10 to
Mar' 11. It appears that the company and
guarantors are not serious towards
resolution of the account through the
compromise offer approved by the Bank at
the request of the company / guarantors
and are simply buying time on different
pretexts. It is the responsibility of the
company / directors to fulfill their promise /
offer, irrespective of directors being abroad
or otherwise which can not be a plea for
avoiding the matter and acceptable to the
33
WP No.9918/2013
Bank. We therefore again request you to

send 2nd copy of sanction letter of
compromise offer duly signed by the
authorized signatory of the company with
Board Resolution and other guarantors in
token of having accepted the terms and
conditions of sanction of compromise and or
atleast make payment of Rs.35549825.00
(pertaining to installments payable up to
31.03.2011) latest by 30.04.2011 to show
your seriousness towards the OTS, failing
which the said compromise shall be treated
as cancelled / failed by the Bank an the
Bank will be at liberty to proceed for
initiation of suitable action against the
Borrower and its directors / guarantors
including actions under SARFAESI Act.”
41. Learned Senior Counsel appearing for the

petitioner – auction purchaser submitted that after
making full payment within the stipulated time, sale
was confirmed, but due to stay granted by DRAT, the
bank had not issued any sale certificate, and therefore,
the sale was deemed to have been confirmed, as per
Rule and prayed that the impugned order of the
learned DRAT be set aside and writ petition be
allowed.
42. In reply, Shri Majumdar, learned counsel for
respondent No.5 bank pointed out about the settlement
of total dues of more than forty one crores in the sum
of Rs. Fifteen crores arrived at between the borrower
34
WP No.9918/2013
and bank and prayed for dismissal of the writ petition.
43. In presence of the parties, during the course
of hearing in the Writ Petition, stay was granted on
23.10.2013 by a Division Bench that the bank will not
return the amount received by it from the petitioner /
auction purchaser and the same stay was confirmed on
12.12.2013, after hearing the learned counsel for the
parties, including learned counsel for the bank.
44. It is very strange that a fresh offer of Rs.15
crores which was made by the respondent No.1 /
company on 05.08.2014 was accepted by the bank vide
letter dated 25.10.2014 on the following terms, which
reads as under:
“i) Unfront amount of Rs.0.75 crore,
already paid and kept in a “No Lien” Fixed
Deposit Account, has since been
appropriated including interest earned
thereon (Rs.7500000.00 plus interest
Rs.105910.00 and total Rs.7605910.00)
towards the said compromise offer
approved by the Bank.
ii) Balance amount of OTS
Rs.142394090.00 shall be paid by you
within 90 days from the date of receipt of
sanction OTS.
iii) The borrower and guarantors will sign
the compromise deed jointly within the
Bank and coordinate / arrange to obtain
consent decree in the case filed in DRT with
35
WP No.9918/2013
suitable default clause inserted therein (as
per paragraphs v and vi).
iv) On payment of full compromise
amount along with interest, if any, as per
terms of the sanction of compromise, the
properties mortgaged to the Bank shall be
released from the Bank encumbrance an all
charges released.
v) In the event of non payment of
compromise amount on due date by the
company, the Bank shall be at liberty to
treat the compromise as failed / cancelled.
In such a situation, precompromise
liabilities will be restored and Bank shall be
at liberty to proceed against the borrower
and guarantors to recover entire dues as
legally deemed fit.
vi) Any legal proceedings filed by the
company / directors / guarantors against
the Bank will be withdrawn immediately.
vii) On receipt of full compromise amount
along with interest as per terms of sanction
of compromise, the Bank will withdraw
legal actions related to this account against
the company / directors / guarantors.
viii) The names of the company and its
directors will be removed from RBI / CIBIL
list of defaulters / willful defaulters only on
payment of entire compromise amount
along with interest, if any, as per terms of
sanction of compromise.”

45. As per the aforesaid proposal, the company
has to pay the amount in installments as per the terms
36
WP No.9918/2013
and conditions of the accepted offer dated 25.10.2014.
46. Learned Senior Counsel for the petitioner has
submitted that the bank being a Government Company
fully owned and controlled by the Government of India
has committed a fraud in accepting the offer of Rs.15
crores, whereas the earlier offer dated 24.09.2010 of
Rs.34.45 crores was turned down by the Bank. This
shows how the bank officers are working and acting
and playing fraud with the public to cause loss to the
State Exchequer. He submitted that it is not the money
of the private individual. It is a tax payers money. The
bank owes some duty to discharge in the interest of
public, but their officers inconnivance with
respondents No.1 to 4 acted illegally and contrary to
the norms of the Bank settled the dues of more than
Rs.41.42 crores only a meagre amount of Rs.15 crores.
47. In reply, Shri Mazumdar, learned counsel for
the bank has contended that from the mortgaged
property they will get only a sum of Rs.11.90 crores,
and therefore, settlement of the dues of Rs.41.42 crores
to the sum of Rs.15 crores is in public interest and for
the benefit of the bank. The bank and the learned
counsel have failed to see that apart from the property,
which was mortgaged with the bank, the respondents
No.2 to 4 have submitted their personal guarantee and
37
WP No.9918/2013
rest of the amount of Rs.41.42 crores can be recovered
from their personal guarantee, which includes their
personal property and assets of the company. Thus, we
are not at all satisfied with the aforesaid explanation
submitted by Shri Mazumdar, learned counsel on
behalf of the bank regarding settlement of the dues in a
meagre amount of Rs.15 crores out of total dues of
Rs.41.42 crores, when the company itself gave an offer
of Rs.34.45 crores in the month of September, 2010
and the same was accepted on 28.03.2011.
48. In the case of Ram Chandra Singh v. Savitri
Devi & others reported in (2003) 8 SCC 319, wherein
the Apex Court has held that a collusion or conspiracy
with a view to deprive the rights of the other in relation
to a property would render the transaction void ab
initio.
49. Learned Senior Counsel for the petitioner
also placed reliance on the decision of the Apex Court
in the case of Kancherla Lakshminarayana v.
Mattaparthi Syamala and others reported in (2008)
14 SCC 258 and submitted that he has purchased the
property in a private auction, and therefore, no
confirmation from a Court is required. The bank, after
confirmation of auction, had also completed the sale,
but for want of stay order passed by this Court, no
38
WP No.9918/2013
formal letter has been issued.
50. In respect of right of the petitioner who is an
auction purchaser and whose highest bid was accepted
by the bank and the whole amount of Rs.5.31 crores
have been deposited on 28.02.2012, 29.02.2012 and
14.03.2012 respectively, the question whether he is
entitled to get the sale confirmed being a successful
bidder.
51. It is submitted that all the formalities for
issuance of sale letter has been finalized by the bank,
and therefore, the bank directed the petitioner to
deposit the rest 75% of the bid amount, amounting to
Rs.3,98,25,000/ within a period of fifteen days i.e. up
to 14.03.2012. The petitioner deposited the aforesaid
balance 75% of the bid amount within the aforesaid
period. Now nothing remains to be considered by the
bank and has to issue a sale certificate in favour of the
petitioner.
52. As per letter dated 29.02.2012 issued by
respondent No.5 – Bank, the petitioner was declared
successful bidder and he was directed to deposit rest
75% of the bid amount within fifteen days and after
depositing the aforesaid 75% bid amount, a sale
certificate will be issued in his favour. Letter dated
29.02.2012 is relevant, which reads, as under:
39
WP No.9918/2013
“mDr fuykeh esa Hkkjrh; LVV cSad }kjk

U;wure fufonk jkf'k :0 5]25]00]000@&
fu/kkZfjr dh xbZ Fkh A bl laca/k esa vkius
lokZf/kd :05]31]00]000@& dh fufonk
tek dh A pwafd vkius mDr fufonk dh 25
izfr'kr jkf'k :0 1]32]75]000@& fufonk
dh 'krksZ ds vuqlkj tek dj nh gS A vr%
vkidks a iz k f/kd` r vkf/kdkjh ds }kjk
lQy fufonkdrkZ ?kks f "kr fd;k gS A
vkids }kjk 'ks"k 75 izfr'kr jkf'k :0
3]98]25]000@& 15 fnuks ds vUnj fnukad
14-03-2012 rd tek dh tkuh gS A 'ks"k
jkf'k fufonk dh 'krksZ ds vuqlkj fnukad 14-
03-2012 rd dk;kZy;hu le; esa Hkkjrh;
LVsV cSad dh ruko xzLr vfLr izca/ku
'kk[kk] Hkksiky esa Hkkjrh; LVsV cSad dh
Hkksiky fLFkr fdlh Hkh 'kk[kk ij vkgfjr
M~zk¶V }kjk tek ugha fd;s tkus dh fLFkfr esa
mijksDr fodz; jn~n dj fn;k tk,xk ,oa
tek dh xbZ jkf'k :0 1]32]75]000@&
cSad }kjk tCr dj yh tk,xh ,oa cSad
mijksDr lEifRr dh iquuhZykeh gsrq Lora=
gksxk] ftl ij vkidk dksbZ vkf/kdkj ugh
gksxk A
mijksDrkuqlkj iw.kZ fodz; jkf'k izkIr gksus ds
mijkar (M~zk¶V ds fDy;fjax ls uxnh dj.k
gksus ds mijkar) gh vkids i{k esa fodz;
izekf.kr fd;k tk;sxk ,oa rRi'rkr fodz;
i= fufonk dh 'krksZ ds vuqlkj tkjh fd;k
tk ldsxk A
mijks D r fuykeh ekuuh; _.k olw y h
vf/kdj.k (DRT), tcyiq j ds
le{k nk;j S.A. dz 199/2011 o
225/2011 ,oa ekuuh; _.k olw y h
vihyh; vf/kdj.k (DRAT),
bZ y kgkckn ds le{k nk;j Appeal dz -
R24/2012 ds fu.kZ ; ds v/khu gks x kA ”
53. Shri Satish Majumdar, learned counsel, who

40
WP No.9918/2013
is appearing on behalf of the Bank, has drawn our

attention to Annexure P/6 letter dated 29.02.2012 (in
Writ Petition No.9918/2013) and submitted that the
confirmation of sale was subject to the decision on
Securitization Application pending before the DRT and
DRAT. He very fairly admitted that a letter / offer of
compromise for settling dues has been given by
respondents No.2 to 4 on 24.09.2010 and their offer
was for an amount of Rs.34,45,00,000/ (rupees thirty
four crores forty five lakhs), but as terms of letter dated
28.03.2011 of the Bank was not fulfilled, and therefore,
their offer was rejected by the Bank. He also admitted
that the bid of the petitioner was over and above the
offset price fixed by the Bank in the auction and he
being the successful bidder, his bid was accepted and
he deposited the whole amount within the time, as
fixed by the Authorized Officer. The Bank accepted his
bid, but sale letter was not issued, because of the
pendency of the matter before the DRT and DRAT. He
has also drawn our attention to subsection (8) of
Section 13 of the Securitization and Reconstruction of
Financial Assets and Enforcement of Security Interest
Act, 2002 and subrule (2) and (6) of Rule 9 of the
Security Interest (Enforcement) Rules, 2002 and has
drawn our attention to the following decisions: (1)
41
WP No.9918/2013
M/s. S.J.S. Business Enterpises (P) Limited v. State
of Bihar reported in LAWS (SC)200439/ROL2004
0157; (2) Navalkha & Sons v. Sri Ramanya Das &
others reported in AIR 1970 SC 2037; (3)
Ravindranath and others v. Panna Lal and others
reported in AIR 1988 MP 100; and (4) India Finlease
Securities Limited v. Indian Overseas Bank reported
in LAWS (APH)201297/LAP20120364 and
submitted that on 13.10.2014, respondents No.2 to 4 –
borrower and the bank had filed a joint application in
Original Application No.149/2011 pending before the
DRT, Jabalpur to record a settlement and the said
application has been allowed with the consent of all the
parties by order dated 13.12.2014 in terms of OTS
dated 28.10.2014 and the borrower has time to deposit
OTS amount up to 28.01.2015 without interest; and
once the application has been allowed and the dispute
between the bank and the borrower has been settled,
the petitioner – auction purchaser has no right over the
property in question and prayed for dismissal of the
writ petition.
54. Shri S.C. Bagadiya, learned Senior Counsel
appearing with Shri Satish Agrawal, learned counsel
for respondents No.2 to 4 – borrower submitted that as
per Clause 11 of the Tender Notice dated 28.01.2012,
42
WP No.9918/2013
auction was subject to pending dispute. They have also
drawn our attention to the provisions of subrule (6) of
Rule 9 of the Security Interest (Enforcement) Rules,
2002 and submitted that DRAT is entitled to set aside
the order dated 09.04.2013, because in pending
appeal, which was against the refusal of injunction /
stay, the borrower placed all the aforesaid order before
the DRAT and also prayed for setting aside of the same.
He admitted that no separate appeal against the order
dated 09.04.2013 was filed, but in pending appeal, the
DRAT was fully competent to set aside the order dated
09.04.2013 passed by the DRT. He also submitted that
the auction purchaser was well aware about the
pendency of the proceedings before the DRT, as the
same was published in public notice and thus, the
contention of the petitioner – auction purchaser, that
the Bank suppressed the fact about pendency of
proceedings before the DRT and Appeal No.R24/2012
before the DRAT, is incorrect.
55. It is also submitted that the Bank never
raised any objection before the DRAT about
considering the order dated 09.04.2013 and thus, it
cannot be said that the order of the DRT was without
jurisdiction. They lastly submitted that now the
dispute has been settled between the bank and the
43
WP No.9918/2013
borrower and in pursuance to the settlement arrived at
between them, a joint application has been filed, which
has been allowed by the Debts Recovery Tribunal on
13.12.2014 and Original Application No.149/2011 has
been disposed of, as per the settlement arrived at
between the bank and the borrower, the auction
purchaser has no right over the property in question
and prayed for dismissal of the writ petition.
56. To counter the arguments, Shri A.K. Sethi,
learned Senior Counsel submitted that the petitioner
had information about the pendency of proceedings
before the DRT, but the bank never disclosed the fact
about the interim order dated 28.02.2012 passed by
the DRAT. It is also submitted that when the writ
petition is pending between the petitioner – auction
purchaser, borrower and the bank and the Bank also
aggrieved by the order dated 30.07.2013, filed a
separate petition against the order passed by the DRAT,
in all fairness, the bank could have communicated the
settlement letter dated 28.10.2014. He prayed that the
writ petition be allowed and the impugned order dated
30.07.2013 (Annexure P/16) passed by the DRAT be
set aside.
57. Section 13 (8) of Securitization Act clearly
provides that borrower has right to pay the amount
44
WP No.9918/2013
only before the date fixed for sale or transfer and he

cannot be permitted to exercise this right after a
particular date i.e. the date fixed for sale. After making
full payment within the stipulated time under Rule 9
(4), no further confirmation of sale is required.
Respondent No.5 – bank received the entire amount
before the due date and issued a communication to this
effect to the petitioner as per Rule 9 of the Rules. The
respondent No.5 – bank accepted the full amount, and
therefore, the sale was deemed to have been
confirmed, as per the Rules. On accepting the whole
sale amount on 14.03.2012, the sale becomes absolute;
a sale certificate shall be deemed to have been issued in
favour of the petitioner.
58. As per Section 13 (8), if the borrower tenders
dues of the secured creditor together with all costs,
charges and expenses incurred at any time before the
date fixed for sale, then the secured assets shall not be
a sale in the auction. In the case in hands, the
borrower failed to tender dues before the date fixed for
sale, and therefore, the Authorized Officer proceeded
with the matter in auctioning the property.
59. In the present case, it is not the case of the
bank – secured creditor that he has not confirmed the
sale. In spite of pendency of the matter before the DRT
45
WP No.9918/2013
and DRAT, the bank vide letter No.2875 dated

29.02.2012, directed the petitioner – auction purchaser
to deposit the whole amount and after receiving the
whole amount, a sale letter / certificate will be issued,
as per the terms of the tender notice. The petitioner,
on coming to know and after depositing 25% of the
amount, requested the bank not to accept the whole
amount, as the stay has been granted by the DRAT, the
bank forced the petitioner to deposit the amount, and
therefore, the petitioner deposited the whole amount
by 14.03.2012. Thus, it is not right on the part of the
bank to raise an objection and say that the sale has not
been confirmed by the secured creditor.
60. As per the terms and conditions of the
auction, sale in favour of the highest bidder shall be
confirmed on payment of the entire bid amount of
rupees 5.31 crores. Therefore, it is clear that the
moment, the total bid amount is paid by the auction
purchaser, the sale becomes absolute and the title vests
in the purchaser. Therefore, the contention that since
balance amount of purchase price has been paid on or
before the 15th day by the auction purchaser, it is
deemed that the property vests in the petitioner /
auction purchaser, has merit.
61. In the case of Sagar Maha vidyalaya, Sagar

46
WP No.9918/2013
v. Pandit Sadashiv Rao Harshe (supra) it was held

that “It may be noted that once an order was made
under Order XXI Rule 92 confirming the sale, the title
of the auction purchaser related back to the date of sale
as provided under Section 65 C.P.C. The title in the
property thereafter vests in the auction purchaser and
not in the judgment debtor. The issue of sale certificate
under Order XXI Rule 94 C.P.C. in favour of the auction
purchaser though mandatory but the granting of
certificate is a ministerial act and not judicial.”
62. In the present case, the borrower never
approached the secured creditor or Authorized Officer
before the date fixed for sale or after the sale or before
the sale becomes absolute, therefore, the decision cited
by the bank in the case of India Finlease Securities
Limited v. Indian Overseas Bank (supra) would not
be applicable to the facts of the present case.
63. In the present case, the DRAT has
misunderstood the scope of its jurisdiction and
committed grave error in entertaining the order dated
09.04.2013 passed by the DRT in pending Appeal
No.R24/2012, which was filed before the DRAT
against the order dated 27.02.2012 passed by the DRT,
rejecting the application for grant of stay filed by the
borrower. The order dated 09.04.2013 was not
47
WP No.9918/2013
impugned in pending Appeal No.R24/2012 nor any

separate appeal against the aforesaid order was filed
before the DRAT. The error committed by the learned
Appellate Tribunal was an error apparent on the face of
the proceedings and by entertaining the aforesaid order
dated 09.04.2013, the DRAT caused a serious harm,
injustice and prejudice to the petitioner. The
procedure followed by the DRAT is so erroneous that it
is in total disregard to the settled principles of law.
64. The learned DRAT in setting aside the order
dated 09.04.2013, which was not impugned in pending
Appeal No.R24/2012, has erred in proceeding with the
matter and setting aside the order dated 09.04.2013.
65. For the above mentioned reasons, we are of
the view that the learned DRAT has exceeded its
jurisdiction and committed grave error in setting aside
the order dated 09.04.2013 passed in Appeal No.R
24/2012, which was filed against an interlocutory
order dated 27.02.2012, by which the stay application
filed by respondents No.2 to 4 was rejected by the DRT
and accordingly, we set aside the order dated
30.07.2013 (Annexure P/16) passed by the DRAT.
66. As observed in the preceding paragraphs,
that in Writ Petition No.11720/2013, which has been
filed by the Bank, Division Bench of this Court by order
48
WP No.9918/2013
dated 23.10.2013, after hearing Shri Satish Majumdar,
learned counsel for the bank, granted interim relief and
directed that the State Bank of India need not return
the amount received by it from the auction purchaser.
The aforesaid order has been made absolute on
12.12.2013.
67. The learned DRAT has misinterpreted the
circulars issued by the RBI dated 29.10.2008 and
Clause 2.1 (ii) of the Circular dated 13.10.2008 and
other instructions contained in the said circular.
Consequently, as per clause 2.1 (ii) of the circular
dated 13.10.2008 it is clear that respondent No.5 –
Bank in respect of a borrower enjoying a Cash Credit /
Overdraft facility under the forex transactions on the
due date can be debited to cash credit / overdraft
facility account and the impact of nonpayment in the
cash credit / overdraft facility account and as such
there has been no violation of the RBI guidelines by the
Bank and thus, the action taken by the bank cannot be
said to be illegal to the extent of the liability i.e. the
liability excluding the liability of forex derivative
transactions for which the security interest already
exists and therefore, quashing the notice under Section
13 (2) of the Securitization Act, 2002.
68. The action of the bank in settling the dues of
49
WP No.9918/2013
Rs.41.42 crores, which was outstanding against the

bank in the year 2011 against respondents No.2 to 4
borrower for a meagre amount of Rs.15 crores, when
the bank knowing well that they had earlier rejected
the offer of Rs.34.45 crores of the borrower, is against
the norms and guidelines framed by the RBI. We,
therefore, refer the matter to the Central Vigilance
Commission and Ombudsman of the Bank to examine
the same and take appropriate action, in accordance
with law. We also direct the learned Chairman of the
State Bank of India to examine the matter when on
earlier occasion an offer of Rs.34.45 crores on behalf of
the borrower had been turned down by the bank in
2011, whether it would be appropriate for the officers
of the bank to accept an offer of Rs.15 crores in respect
of the dues of more than Rs.41 crores and settle the
claim of the bank to nullify the effect of Court
proceedings.
69. As per record, an order dated 11.06.2013 has
been passed by the Additional District Magistrate,
Indore in Case No.04/A074/201213 in favour of the
bank, in exercise of powers conferred under Section 14
of the Securitization and Reconstruction of Financial
Assets and Enforcement of Security Interest Act, 2002
and allowed the application of the respondent – bank
50
WP No.9918/2013
and directed that the possession of the property to be
delivered. Thus, secured creditor is to take possession
of the property in question in pursuance to the order
dated 11.06.2013 passed by the Additional District
Magistrate, Indore for delivering the same to the
petitioner – auction purchaser.
70. For the all going reasons, we are of the
opinion that the impugned order of the DRAT dated
30.07.2013(Annexure P/16) is liable to be set aside.
Accordingly, we set aside the impugned order of the
DRAT and allow both the writ petitions leaving the
parties to bear their own costs.
71. Copy of this order be sent to (1) Chairman,
State Bank of India, Corporate Centre, “State Bank
Bhavan”, Madam Cama Road, Mumbai 400 021; (2)
The Banking Ombudsman for Madhya Pradesh &
Chhatisgarh (under the Banking Ombudsman Scheme,
2006), C/o Reserve Bank of India, Hoshangabad Road,
Post Box No.32, Bhopal 462 011; and (3) Central
Vigilance Commission, Satarkata Bhavan, ABlock, GPO
Complex, INA, New Delhi – 110 023.
Sd/ Sd/
(P.K. Jaiswal) (D.K. Paliwal)
Judge Judge
Pithawe RC

KK Goyal v. Midmex

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1

Petition No.9918/2013 (Krishnakant Goyal v. M/s.

bank. The respondents No.2 and 3 had jointly

5. That, for availing the facilities of Forex

Transactions and parked the same in the Working

14.05.2009, the respondent No.2 Narottham Somani,

11. As per audited balance sheet for the year

admitted its liability to the extent of

Securitization Act') to the respondents No.1 to 4,

17. During pendency of the said Securitisation

No.R­24/12 was filed before the Debts Recovery

filed an application before the DRT, Jabalpur for

25. The respondents No.1 to 4 being aggrieved

an application in pending SA No.R­24/2012 on

“i. Stay further proceedings in SA No.199/2011

26. The DRAT vide order dated 27.09.2012

confirmed the principal balance Rs.33.08 Crores as

28. It is well settled that unless and until the

sanction letter dated 09.02.2009 carved out Forex

covering enhanced limits and creation of equitable

was sought to be recovered against the Cash Credit

the property and the same was allowed by the

Rs.12 lacs approx, as out confirmation

J. We will also be doing some exports

40. The terms and conditions of the said offer

Bank. We therefore again request you to

41. Learned Senior Counsel appearing for the

“mDr fuykeh esa Hkkjrh; LVV cSad }kjk

53. Shri Satish Majumdar, learned counsel, who

is appearing on behalf of the Bank, has drawn our

only before the date fixed for sale or transfer and he

and DRAT, the bank vide letter No.2875 dated

v. Pandit Sadashiv Rao Harshe (supra) it was held

impugned in pending Appeal No.R­24/2012 nor any

Rs.41.42 crores, which was outstanding against the

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No.R24/12 was filed before the Debts Recovery

an application in pending SA No.R24/2012 on

impugned in pending Appeal No.R24/2012 nor any