Textile Undertakings (Nationalisation) Act, 1995 – As per appellant-Bank, Shree Sitaram Mills Ltd. was taken over by respondent no.1 & nationalised w.e.f. 01.04.1994 – It enjoyed credit facilities with the appellant – Respondent no.2-Ministry was guarantor in respect of said credit facilities – Appellant filed recovery suit against respondent no.1 – Transferred to Debts Recovery Tribunal – Recovery certificate issued – However, recovery proceedings were adjourned sine die – Appellant submitted claim with Commissioner of Payment – Received Rs.1,59,82,634/- against claim of Rs.1,05,35,86,783.47/- – Meanwhile, Govt. of India issued O.M dated 22.01.2004 for settlement of commercial disputes between Public Sector Enterprises inter se; Public Sector Enterprises and Govt. Dept. through Permanent Machinery of Arbitrators (PMA) – Appellant requested initiation of arbitration with Union of India/respondent no.2 – Sought recovery of balance sum from respondent no.1 and Shree Sitaram Mills Ltd. – By notice dated 17.10.2011, Arbitrator appointed under PMA directed the appellant, respondent no.1 & Shree Sitaram Mills Ltd. to submit statements of claim and counter reply – Respondent no.1 filed application for cessation of arbitral proceedings – Rejected by Arbitrator, PMA – Respondent no.1 filed writ petition assailing aforesaid notice and challenging jurisdiction of the Arbitrator – Dismissed – Filed LPA – Allowed – Held: Present examination is limited to the aspect relating to forum – Claim initially made by the appellant is against Shree Sitaram Mills Ltd. – Respondent no.1 is disputing the liability for the same by bringing about a distinction since the take-over was only of Shree Sitaram Mills (which was a part of Shree Sitaram Mills Ltd.) and not of Shree Sitaram Mills Ltd. – Thus, an adjudication on that aspect cannot be considered as a dispute involving only the two public sector establishments as contemplated under the O.M – Question of liability could neither have been decided in writ proceedings nor in this appeal – Impugned judgment to the extent it quashed notice dated 17.10.2011 warrants no interference – However, the conclusion that the respondents are not liable for the amount claimed by the appellant is set aside – Question of liability and the manner of recovery to be considered by appropriate forum – Textile Undertaking (Take-over of Management) Act, 1983 – Recovery of Debts Due To Banks and Financial Institutions Act, 1993.
Partly allowing the appeal, the Court
HELD: 1.1 Since the present examination is limited to the aspect relating to forum and when it is seen that the claim initially made by the appellant is against the Shree Sitaram Mills Ltd. and the Respondent No.1 is disputing the liability for the same by bringing about a distinction since the take-over was only of Shree Sitaram Mills and not of Shree Sitaram Mills Ltd., an adjudication on that aspect to be made cannot be considered as a dispute as involving only the two public sector establishments as contemplated under the Official Memorandum referred to above. The appellant had originally instituted the recovery proceedings against Shree Sitaram Mills Ltd. by filing Suit No.3961/1988 which was thereafter transferred to the Debts Recovery Tribunal I, Mumbai in O.A. No.2526/1999. The said proceeding had concluded by issue of Recovery Certificate dated 05.08.2004 against the other defendants except defendant Nos.3 (a to c) regarding which an appeal in DRTA Appeal No.271/2005 is pending before the Debts Recovery Appellate Tribunal, Mumbai. The said appeal is against the judgment and decree dated 29.03.2005. In the recovery proceedings pursuant to the decree, if in the meanwhile certain change of status relating to the judgment debtor has taken place as in the instant case, namely, the takeover of Shree Sitaram Mills which was a part of Shree Sitaram Mills Ltd. is to be taken note. Upon consideration of evidence adduced by the parties it has to be determined in that light as to whether the Respondent No.1 Corporation has in fact inherited such liability making themselves liable for the decree in existence or on the other hand if such liability has remained and subsisted with Shree Sitaram Mills Ltd. It is a matter to be examined in such recovery proceedings by providing opportunity to the parties to adduce evidence. Further in respect of post take over period a Suit No.4489/96 was filed which was transferred to DRT and registered as O.A.No.1114/2000 which has remained pending as respondent No.2 had proceeded to BIFR. In that circumstance if the appellant herein had chosen to initiate the proceedings before the PMA, keeping in view that the COD which was subsequently constituted is a mechanism in the nature of pre-litigation mediation, it cannot be said that the step adopted by the appellant is wholly without basis. However, when it is noticed that the Respondent No.1 has serious objections to the liability and nature of take-over of the Textile Mills is to be examined before recoveries are made, the adjudication of the matter in the recovery proceedings would be the appropriate course. [Paras 19-21][702-G-H; 703-A-G]
1.2 The question of liability could neither have been decided in the writ proceedings before the High Court nor in this appeal. If this aspect is kept in view, the conclusion reached by the Division Bench to hold that the respondent herein is not liable for the dues of Shree Sitaram Mills Ltd. and the proceedings is misconceived for such claim is an erroneous conclusion reached in a proceedings where such conclusion ought not to have been recorded. The impugned judgment passed in LPA to the extent of quashing the notice dated 17.10.2011 of the Arbitral Tribunal under the PMA warrants no interference. However, the conclusion reached by the Division Bench that the respondents are not liable for the amount claimed by the appellant herein is set aside. In that regard, the proceedings in O.A.No.2526/1999 had concluded by issue of Recovery Certificate in O.A.No.2526/1999 and the R.C. No.269/2004 was initiated towards recovery of amount. Insofar as the rejection of the claim against defendant Nos.3 (a to c) the Appeal DRTA No.271/2005 is stated to be filed in the DRTA Mumbai and the same is said to be pending. In so far as the post take over claim, the proceedings in O.A.No.1114/2000 is pending before the DRT, Mumbai and is stated to be adjourned sine die. The said proceedings shall now stand revived. In the said recovery proceedings in R.C.No.269/2004 the appellant is permitted to bring on record the respondents. The respondents are reserved the liberty of putting forth their contentions to oppose the same. The Recovery Officer/Presiding Officer of the DRT in the respective proceedings shall if necessary, after providing opportunity for tendering evidence take a decision with regard to the liability if any, on the part of the respondents to satisfy the decree/recovery certificate issued against Shree Sitaram Mills Ltd. Such decision shall be taken by the Recovery Officer/Presiding Officer independently, based on the materials available on record without being influenced by any of the observations contained either in the order of the High Court or the order passed by this Court in this appeal. [Paras 2224][704-D-H; 705-A-E]
ONGC v. Collector of Central Excise, Mumbai (1995) Supp 4 SCC 541; Electronics Corporation of India Ltd. v. Union of India (2011) 3 SCC 404 : [2011] 2 SCR 971; Swadeshi Cotton Mills Company Ltd. v. The Commissioner of Central Provident Fund MANU/TN/0532/1999; U.P State Sugar Corporation Ltd. v. Dr. Kailash Behari Sharma MANU/UP/1055/1997
– referred to.
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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