Gujarat High Court
Kotak Mahindra Bank Ltd vs Shree Narmada Aluminium Industries Ltd on 10 March, 2025
Author: Biren Vaishnav
Bench: Biren Vaishnav
NEUTRAL CITATION
C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025
undefined
Reserved On : 19/02/2025
Pronounced On : 10/03/2025
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/O.J.APPEAL NO. 143 of 2008
In R/COMPANY PETITION NO. 166 of 2006
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR. JUSTICE BIREN VAISHNAV
and
HONOURABLE MR. JUSTICE HEMANT M. PRACHCHHAK
==========================================================
Approved for Reporting Yes No
==========================================================
KOTAK MAHINDRA BANK LTD
Versus
SHREE NARMADA ALUMINIUM INDUSTRIES LTD
==========================================================
Appearance:
TIRTH NAYAK(8563) for the Appellant(s) No. 1
MR.ASHOK L. SHAH, ADVOCATE with ADITYA A GUPTA(7875) with
MOHIT A GUPTA(8967) for the Opponent(s) No. 1
==========================================================
CORAM:HONOURABLE MR. JUSTICE BIREN VAISHNAV
and
HONOURABLE MR. JUSTICE HEMANT M.
PRACHCHHAK
Date : 10/03/2025
CAV JUDGMENT
(PER : HONOURABLE MR. JUSTICE BIREN VAISHNAV)
1. This appeal at the hands of the Kotak
Mahindra Bank has been filed under Section 483
Page 1 of 72
Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025
NEUTRAL CITATION
C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025
undefined
of the Companies Act, 1956 (‘Companies Act‘ for
short) against the oral judgement dated
16.05.2008 passed by the Company Judge in
Company Petition No.166 of 2006. By the
judgement so passed, the learned Judge has
sanctioned the scheme of arrangement in the
nature of compromise between the respondent
Shri Narmada Aluminum Industries Limited and
its secured creditors, unsecured creditors and
share holders.
2. Facts in brief are as under:
2.1 The respondent no.1 company which was
incorporated on 15.04.1981 was facing winding
up proceedings having faced financial difficulties.
In order to pay statutory and contractual dues,
the respondent company proposed a scheme of
compromise and/or arrangement between the
Page 2 of 72
Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025
NEUTRAL CITATION
C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025
undefined
company and its members (share holders, its
secured creditors and unsecured creditors). The
scheme of compromise and arrangement was
required to be sanctioned under Section 391(2)
of the Companies Act. The company therefore
filed Company Petition No.166 of 2006 for
obtaining a sanction and by the impugned
judgment, such scheme was sanctioned. It was
the case of the appellant Kotak Mahindra Bank
that it had been assigned the debts owed by the
company to ICICI Bank by a deed of assignment
dated 29.09.2004 and therefore it was entitled to
participate in the proceedings vis-a-vis the
scheme of compromise and arrangement as
being a secured creditor. Objections were raised
by Kotak Mahindra Bank. The learned Single
Judge by the impugned order negated the
objections and in para 20 of the order under
challenge held as under:
Page 3 of 72
Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025
NEUTRAL CITATION
C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025
undefined
“20. In light of the above controversy
between the parties the Court is of the view
that the objections raised by Kotak
Mahindra Bank Ltd., cannot be taken into
account as the Kotak Mahindra Bank Ltd., is
an assignee of the debt. Since the issue
regarding assignment of debt is pending
before the Division Bench, whether the
assignee can be considered to be secured
creditor is a question to be decided by the
Division Bench. If the value of the votes
stated to have been held by Kotak Mahindra
Bank Ltd., is ignored, it cannot be said that
the scheme has not been approved by the
requisite majority of secured creditors.
Since the scheme has been approved by
secured creditors, unsecured creditors and
workers and it is beneficial to the interest of
the Members and it is not contrary to public
interest and the scheme is hereby
sanctioned and prayer made in the Company
Petition vide para 19 of the petition is
hereby granted.”
2.2 In short the learned Single Judge held that
the objections raised by the Kotak Mahindra
Bank Limited cannot be taken into account as it
is an assignee of the debt. Since the issue
regarding assignment of debt was pending
before a Division Bench, it cannot be said that
Page 4 of 72
Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025
NEUTRAL CITATION
C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025
undefined
the scheme has not been approved by the
majority of the secured creditors.
2.3 It appears that the issue traveled before the
Hon’ble Supreme Court on a Special Leave
Petition filed by the bank as the Division Bench
by an order dated 16.07.2022 in the present
appeal passed certain orders adjourning the O.J.
Appeal. The Hon’ble Supreme Court by its order
dated 02.12.2022 requested the High Court to
hear the pending appeal and the submission was
made by the learned counsel for the appellant
that the issue was covered by a decision in the
case of ICICI Bank v. Official Liquidator of
APS Star Industries Limited and others
reported in 2010 (10) SCC 1.
3. Mr.Tirth Nayak learned counsel for the
appellant-bank made the following submissions:
Page 5 of 72
Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025
NEUTRAL CITATION
C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025
undefined
3.1 On the issue of assigning of debts vis-a-vis
the company by ICICI Bank to the appellant-
Kotak Mahindra Bank, Mr.Nayak would submit
that the same is no longer res-integra in light of
the decision in the case of ICICI Bank (supra).
He would submit that in the aforesaid
judgement, the Supreme Court has upheld
assignment of debts and held that transfer of
debts/NPAs inter-se between banks as an activity
cannot be said to be impermissible under the
Banking Regulation Act, 1949 (hereinafter to be
referred to as ‘the BR Act, 1949‘ for short). In
other words therefore Mr.Nayak would submit
that since the deed of assignment dated
29.09.2004 between the two banks in the present
proceedings was also a part of the proceedings
before the Supreme Court in Civil Appeal
No.8427 of 2010, in a matter pertaining to
Balaram Cements Limited, once the Supreme
Page 6 of 72
Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025
NEUTRAL CITATION
C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025
undefined
Court has held that the debts could be assigned,
the appellant automatically became a secured
creditor entitled to lodge objections to the
scheme.
3.2 Mr.Nayak would submit that after the
judgement of the Hon’ble Supreme Court,
Division Bench of this Court in OJ Appeal No.156
of 2007 dated 30.09.2014 held that the bank has
become entitled to recover the amount from the
borrowers and therefore their prayers for
substitution cannot be rejected. Even thereafter
the learned Single Judge in Company Petition
No.489 of 2006 has clearly observed that in light
of the decision of the Supreme Court, such
situation is permissible in law and therefore the
controversy is put to rest. Having therefore
established that a bank can assign a debt with
the other bank is a settled question of law this
Page 7 of 72
Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025
NEUTRAL CITATION
C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025
undefined
Court should exercise similar jurisdiction and
hold that Kotak Mahindra Bank – the appellant
was a valid objector being a secured creditor
having stepped into the shoes of the ICICI Bank.
3.3 Mr.Nayak would further submit that the
scheme of compromise was liable to be rejected
as it was unfair. Referring to the deed of
assignment and the scheme of compromise and
arrangement, Mr.Nayak would submit that the
bank admittedly bought 26.35% of the debt and
therefore since it was holding more than 25% of
the debt, the scheme could not have been
approved as the appellant had objected to the
same.
3.4 Mr.Tirth Nayak would further submit that it
is an admitted fact that during the pendency of
the original application filed under the provisions
Page 8 of 72
Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025
NEUTRAL CITATION
C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025
undefined
of the Recovery of Debts and Bankruptcy Act,
1993 (hereinafter to be referred to as ‘the RDB
Act’ for short), a scheme under Section 391 of
the Act could not be floated since the provisions
of RDB Act overrides the Companies Act, 1956.
In support of his submission, he would rely on
the following decisions:
(I) In case of IMP Powers Limited rendered
in Company Petition No.395 of 2006 in the
High Court of Judicature at Bombay
(II) In case of Allahabad Bank v. Canara
Bank and another reported in (2000) 4 SCC
406
(III) In case of Raghunath Rao Bareja and
others v. Punjab Bank reported in (2007) 2
SCC 230.
Page 9 of 72
Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025
NEUTRAL CITATION
C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025
undefined
3.5 Reading relevant paras of the said decision,
Mr.Nayak would submit that as indisputably held
in the case of Allahabad Bank (supra) when it
comes to a special law i.e. RDB Act which gave
an overriding effect, the RDB Act would prevail.
He would therefore submit that pending the
proceedings of recovery filed by the banks in the
Debt Recovery Tribunal where the application for
substitution was accepted and though it was a
subject matter of an appeal, a scheme for
compromise and arrangement in light of the
decision in case of Allahabad Bank (supra)
could not be accepted. Only on this ground the
scheme was liable to be set aside as a company
Court did not have the jurisdiction to hear and
decide the scheme under Section 391.
3.6 Mr.Nayak would therefore submit that in
light of the decision in the case of Allahabad
Page 10 of 72
Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025
NEUTRAL CITATION
C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025
undefined
Bank (supra) and also in the case of ICICI Bank
(supra), the issue is no longer in doubt that on
the twin grounds i.e. (i) that the deed of
assignment is valid and a bank can assign its
debts to the other and (ii) in light of the
pendency of the recovery proceedings before the
DRT when the RDB Act has an overriding effect,
the learned Company Judge would not have
sanctioned the scheme in question. He also
relied on the decision in case of Tata Motors
Limited vs. Pharmaceutical Products of
India Limited reported in 2008 (7) SCC 619.
3.7 Mr.Nayak would further submit that if the
scheme which is approved is later found to have
not complying with the provisions of the scheme,
can also be set aside. Merely because substantial
time has lapsed and the appeal has remained
pending, it cannot be a ground to oust the
Page 11 of 72
Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025
NEUTRAL CITATION
C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025
undefined
appellant.
4. Mr.Ashok L. Shah learned advocate assisted
by Mr.Aditya Gupta for the respondent company
would make the following submissions:
4.1 According to Mr.Shah, the appellant has no
locus-standi. The bank claims to be a creditor on
the basis of deed of assignment dated
29.09.2004. The deed of assignment is not valid
and does not and cannot assign any rights of the
ICICI Bank in favour of the appellant.
4.2 Mr.Shah learned counsel would take us
through the relevant paras of the decision in case
of ICICI Bank (supra) and seek to distinguish
the judgement on the ground that the deed of
assignment in the case before the Supreme Court
was that of 31.03.2006. It was a deed of
Page 12 of 72
Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025
NEUTRAL CITATIONC/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025
undefined
assignment post the RBI guidelines dated
13.07.2005.
4.3 According to the learned counsel the issue
before the Supreme Court was the interpretation
of a deed of assignment post the RBI Guidelines
and therefore the legality of the two banks
entering into the deed of assignment was
considered in light of the guidelines of the RBI
and not in isolation with the provisions of the
Banking Regulation Act, 1949. He would submit
that since in the present case the deed of
assignment was 29.09.2004, the judgement in
the case of ICICI Bank (supra) would never be
applicable.
4.4 Moreover, even assuming for the sake of
argument that the Supreme Court had opined
that entering into a deed of assignment was part
Page 13 of 72
Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025
NEUTRAL CITATIONC/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025
undefined
of banking business and the Courts were to hold
the assignment of debts between the ICICI Bank
and the Kotak Mahindra Bank, in the present
case as an activity permissible under the Act, the
other issues which arose for determination of the
Company Court including the applicability of the
Registration Act, the Stamp Act etc. were kept
open. The Supreme Court remitted the matters
to the Division Bench for consideration of other
issues.
4.5 Based on this window being open, Mr.Shah
would submit that the deed of assignment dated
29.09.2004 was not duly stamped as required
under Section 5 of the Gujarat Stamp Act 1958
and as mandated by Section 34 of the Act. He
would submit that the deed of assignment was
comprising of 114 distinct matters and therefore
the stamp duty payable on such deed of
Page 14 of 72
Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025
NEUTRAL CITATIONC/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025
undefined
assignment be required to be calculated and
aggregated and paid on the basis as if each such
matter is a distinct matter and was a separate
instrument. The present deed of assignment
bore a stamp duty of Rs.1 lakh only and therefore
it was not duly stamped. Relying on paras 29 to
31 and 33 of the decision in the case of Chief
Controlling Revenue Authority v. Coastal
Gujarat Power Limited reported in 2015 (10)
SCC 700, Mr.Shah would submit that in the case
before the Supreme Court, 13 banks had given
separate loans. It was in this case that the
Supreme Court held that the stamp duty had to
be on each transaction of loan.
4.6 Relying on the decision in case of
Arunachalam Mutthu v. State Bank of India
reported in 2009 SCC Online ALL 592, he
would reiterate his submission.
Page 15 of 72
Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025
NEUTRAL CITATION
C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025
undefined
4.7 Relying on the notification dated 06.05.2002
of the Maharashtra Government produced with
the Civil Application, Mr.Shah would submit that
the stamp duty of Rs.1 lakh was not sufficient
inasmuch as, the word used in the notification
was ‘the duty with which an instrument of
‘Securitization of Loans’ was expressly stated.
A single instrument therefore as in the present
case was inefficiently stamped.
4.8 Mr.Shah would further submit that since the
decision in the case of ICICI (supra) was in
context of RBI Guidelines dated 13.07.2005, it
cannot in any way apply to the present deed of
assignment. In support of his submission, he
would rely on the decision of the Gujarat High
Court in the case of Kotak Mahindra Bank v.
Balaram Cements Limited reported in 2010
SCC Online GUJ 13830.
Page 16 of 72
Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025
NEUTRAL CITATION
C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025
undefined
4.9 Mr.Shah would further submit that deed of
assignment was never produced by the appellant
before the learned Single Judge and it is the
company which by way of the Civil Application
has produced the same. Reading the
endorsement on the deed he would submit that
the instrument which seeks to declare, create,
assign, distinguish any interest has to be
registered compulsorily as per the provisions of
Section 17 of the Registration Act. The deed is
not so registered. The deed ought to have been
registered within four months as per Section 23
of the Act by 28.01.2005. The delay for
registration even otherwise could not have been
condoned. Even if the deed of confirmation to
the deed of registration is seen, the same is
executed on 26.10.2005, long time after
28.01.2005. Registry therefore even otherwise
has no power to register a document which is
Page 17 of 72
Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025
NEUTRAL CITATION
C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025
undefined
barred by limitation. It was not a case of delayed
registration due to urgent necessity of
unavoidable extent. The registrar has expressly
observed on the deed of assignment and the
confirmation deed that the annexure is not
registered. Relying on the decision in case of
Ajaykumar M. Singh v. Basant Bhoruka
reported in 2016 SCC Online Bom 6960,
Mr.Shah would submit that in absence of
registration and even after having not so
registered after the statutory period having
expired, the deed of assignment was invalid.
Reliance was also placed on the decision of the
Andhra Pradesh High Court in case of Smt. G.
Kadambari W/o G. Kesuvulu v. District
Registrar and others in Writ Petition
No.4079 of 2004. In other words, it is clear
that the deed of assignment having not been
registered, no security interest was legally
Page 18 of 72
Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025
NEUTRAL CITATION
C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025
undefined
created. Even the decisions on which the
learned counsel Mr.Nayak had relied upon held
that the issue of substitution was concluded.
Other issues were kept open i.e. the validity of
the deeds of assignment from the point of view of
the Stamp Act and the registration.
4.10 Mr.Shah would further submit that the deed
of assignment was hit by the mandatory
provisions of Section 28 of the Registration Act
inasmuch as though the deed of assignment was
registered in Andheri (Mumbai), the property
was situated in Bharuch and therefore it was not
the place where the land was situated. In
support of his submission, he relied on a few
decisions of coordinate High Courts.
4.11 Mr.Shah would further submit that the
contention of Mr.Nayak that since substitution
Page 19 of 72
Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025
NEUTRAL CITATION
C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025
undefined
proceedings have already been allowed by DRT,
that the principle of resjudicata would apply to a
company is not correct. He would submit that
against the judgement of the Debt Recovery
Tribunal on the substitution of the appellant
bank, an appeal has been filed and the appeal is
pending before the Debt Recovery Tribunal.
There are decisions of the Hon’ble Supreme
Court which suggest that in a judgement which is
under challenge in an appeal, principle of res-
judicata will not apply.
4.12 Mr.Shah would further submit that the DRT
at Mumbai cannot decide issues with regard to
the statutory provisions under relevant sections
of Gujarat Stamp Act, Registration Act etc. He
would rely on the decision in the case of Canara
Bank v. N.G. Subbaraya and another reported
in (2018) 16 SCC 228. He would submit that
Page 20 of 72
Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025
NEUTRAL CITATION
C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025
undefined
the substitution is allowed only as an interim
measure on prima-facie satisfaction and not
conclusive.
4.13 The contention of Shri Nayak that since the
bank holds more than 26% of the total dues, is
not tenable. In accordance with the provisions of
Section 391(2) of the Companies Act only if a
majority in number representing three fourths in
value of the creditors, present and voting have to
be present at the meeting. It is evident from the
mandates of the meeting that the appellant bank
had not deposited with the company at his
registered office 48 hours before the time of the
meeting a resolution of its board authorizing the
person to attend and vote. This was in clear
violation of Rule 70(2) of the Company Court
Rules. He would submit that even otherwise, the
resolution authorizing one Mr.Bandish Dixit was
Page 21 of 72
Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025
NEUTRAL CITATION
C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025
undefined
a resolution by the share transfer and routine
transactions committee of the Board of Directors
and there was no resolution of the Board of
Directors and therefore it was not a valid
resolution.
4.14 With regard to the judgement of IMP
Powers Limited (supra), Mr.Shah would submit
that the Indusind Bank in other case was the only
creditor out of eight secured creditors who had
objected. In the present case the appellant’s
very status as a creditor, that too a secured
creditor, is in dispute.
4.15 Relying on a decision in case of Core
Health Care Limited v. Nirma Limited
reported in 2007 SCC Online Guj 235, the
Supreme Court has held that even if a creditor
has approached DRT, there is no bar for
Page 22 of 72
Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025
NEUTRAL CITATION
C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025
undefined
sanctioning the scheme. On these submissions,
Mr.Shah would submit that the appeal be
dismissed.
5. In rejoinder, Mr.Nayak would submit that it
is not open for the respondent to object to
assignment deed on the grounds of registration
etc as they have not challenged nor filed any suit
or an application. Relying on a decision in case
of Hindustan Steel Limited v. M/s.Dilip
Construction Company reported in 1969 (1)
SCC 597 and other decisions submit that when
the document is registered and the same has not
been challenged, the same is presumed to be
valid unless challenged.
5.1 Mr.Nayak would submit that the decisions
relied upon by the respondent in case of
Balaram Cements Limited (supra), Coastal
Page 23 of 72
Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025
NEUTRAL CITATION
C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025
undefined
Gujarat Power Limited (supra) and other
judgements do not apply to the facts of the case.
ANALYSIS
6. Having considered the submissions of the
respective counsels, we need to consider the
several issues that have been argued before us.
6.1 Issue of Assignment: The learned counsel
for the appellant referred to the case of ICICI
Bank Limited (supra) and had submitted that in
light of the decision, the issue that a bank cannot
assign its debts to the other bank has been
settled inasmuch as the Supreme Court has
upheld an assignment and held that the same is
part of the credit appraisal mechanism and part
of banking business under the Banking
Regulation Act, 1949. While it is the case of the
Page 24 of 72
Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025
NEUTRAL CITATION
C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025
undefined
respondent company that the judgement would
not apply to the present appeal inasmuch as any
issue before the Supreme Court was an
assignment deed dated 31.06.2006 which was a
deed of assignment post the guidelines of the
Reserve Bank of India dated 31.03.2006. It was
therefore the submission of the respondent
company that the judgement would not cover the
issue of assignment and it was still open for the
company to suggest that the appellant could not
be the secured creditor as the debt could not
have been assigned to it.
6.2 We have extensively been taken through by
both the learned counsels for the respective
parties through the decision in the case of ICICI
Bank (supra). We would agree with the
submission of the learned counsel for the
appellant that the issue whether a bank could
Page 25 of 72
Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025
NEUTRAL CITATION
C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025
undefined
assign its debts to the other is a covered issue.
Though the learned counsel for the respondent
would want us to accept his submission that the
judgement is only in context of deed of
assignment dated 31.03.2006, what we note in
the heading of the judgement is that before the
Supreme Court also was a Civil Appeal No.8427
of 2010 and therefore though the Supreme Court
was considering the facts of Civil Appeal @ SLP
(c) No.2240 of 2009, we cannot shut our eyes to
the fact that the question of law cannot be read
in isolation in context of the deed of assignment
dated 31.03.2006.
6.3 The Company Judge before the Gujarat High
Court whose judgement was a subject matter of
challenge in the Supreme Court had framed a
number of questions of law viz. whether the
Company Court was justified in holding that a
Page 26 of 72
Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025
NEUTRAL CITATION
C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025
undefined
separate documentation of assignment of each
loan was required to be registered; whether the
Company Court was justified in concluding that
the deed was not registered and whether the
rights could be assigned. However, since the
High Court upheld the order of the Company
Court only on the question of assignment of debt
by the banks holding that it is not an activity
which is permissible under the BR Act, 1949,
other questions were not examined and the only
question that was examined was whether Kotak
Mahindra Bank could be substituted in place of
ICICI Bank. Reading the decision in case of
ICICI Bank (supra) whether the analysis of
Banking Regulation Act, 1949 was carried out,
the Supreme Court held that the Act basically
seems to regulate banking business and
assignment of debts is not an activity
impermissible under the BR Act, 1949. Paras 37
Page 27 of 72
Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025
NEUTRAL CITATION
C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025
undefined
to 39 of the decision in case of ICICI Bank
(supra) read as under:
“37. The point we are trying to make is that
apart from the principal business of
accepting deposits and lending the said
1949 Act leaves ample scope for the banking
companies to venture into new businesses
subject to such businesses being subject to
the control of the Regulator, viz. RBI. In
other words, the 1949 Act allows banking
companies to undertake activities and
businesses as long as they do not attract
prohibitions and restrictions like those
contained in Sections 8 and 9. In this
connection we need to emphasize that
Section 6(1)(n) enables a banking company
to do all things as are incidental or
conducive to promotion or advancement of
the business of the company. Section 6(1)
enables banking companies to carry on
different types of businesses. Under Section
6(1), these different types of businesses are
in addition to business of banking, viz., core
banking. The importance of the words “in
addition to” in Section 6(1) is that even if
different businesses under clauses (a) to (o)
are shut down, the company would still be a
banking company as long as it is in the core
banking of accepting deposits and lending
so that its main income is from the spread or
what is called as “interest income”. Thus, we
may broadly categorise the functions of the
banking company into two parts, viz., core
banking of accepting deposits and lending
and miscellaneous functions and services.
Page 28 of 72
Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025
NEUTRAL CITATION
C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025
undefined
Section 6 of the BR Act, 1949 provides for
the form of business in which banking
companies may engage. Thus, RBI is
empowered to enact a policy which would
enable banking companies to engage in
activities in addition to core banking and in
the process it defines as to what constitutes
“banking business”.
38. The BR Act, 1949 basically seeks to
regulate banking business. In the cases in
hand we are not concerned with the
definition of banking but with what
constitutes “banking business”. Thus, the
said BR Act, 1949 is an open-ended Act. It
empowers RBI (regulator and policy framer
in matter of advances and capital adequacy
norms) to develop a healthy secondary
market, by allowing banks inter se to deal in
NPAs in order to clean the balance sheets of
the banks which guideline/policy falls under
Section 6(1)(a) r/w Section 6(1)(n).
Therefore, it cannot be said that assignment
of debts/NPAs is not an activity permissible
under the BR Act, 1949. Thus, accepting
deposits and lending by itself is not enough
to constitute the “business of banking”. The
dependence of commerce on banking is so
great that in modern money economy the
cessation even for a day of the banking
activities would completely paralyse the
economic life of the nation. Thus, the BR
Act, 1949 mandates a statutory
comprehensive and formal structure of
banking regulation and supervision in India.
39. The test to be applied is – whether
Page 29 of 72
Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025
NEUTRAL CITATION
C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025
undefined
trading in NPAs has the characteristics of a
bona fide banking business. That test is
satisfied in this case. The guidelines issued
by RBI dated 13.7.2005 itself authorizes
banks to deal inter se in NPAs. These
guidelines have been issued by the
Regulator in exercise of the powers
conferred by Sections 21 and 35A of the Act.
They have a statutory force of law. They
have allowed banks to engage in trading in
NPAs with the purpose of cleaning the
balance sheets so that they could raise the
capital adequacy ratio. All this comes within
the ambit of Section 21 which enables RBI
to frame the policy in relation to Advances
to be followed by the banking companies
and which empowers RBI to give directions
to banking companies under Section 21(2).
These guidelines and directions following
them have a statutory force. When a
delegate is empowered by the Parliament to
enact a Policy and to issue directions which
have a statutory force and when the
delegatee (RBI) issues such guidelines
(Policy) having statutory force, such
guidelines have got to be read as
supplement to the provisions of the BR Act,
1949. The “banking policy” is enunciated by
RBI. Such policy cannot be said to be ultra
vires the Act. The idea behind empowering
RBI to determine the Policy in relation to
Advances is to enable banking companies to
expand their business of banking and in that
sense such guidelines also define – as to
what constitutes banking business.”
6.4 It is in this context that the Supreme Court
Page 30 of 72
Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025
NEUTRAL CITATION
C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025
undefined
held while concluding that the assignment of
debt by the banks inter-se is an activity
permissible under the Act. On the other issues
viz. those where the deed required registration
or it was sufficiently stamped were left open.
Paras 53 and 54 of the decision in case of ICICI
Bank (supra) read as under:
“53. As stated above, by the impugned
judgment, the Division Bench of the Gujarat
High Court upheld the order of the
Company Court only on one ground, namely,
assignment of debts by the banks inter se is
an activity which is impermissible under the
Banking Regulation Act, 1949. However, the
Division Bench did not go into other issues
which arose for determination before the
Company Court, including applicability of
the provisions of the Registration Act, 1908.
54. In the circumstances, we set aside the
impugned judgment(s) on the question of
assignment of debts as an activity
permissible under the Banking Regulation
Act, 1949. However, we remit these matters
to the Division Bench of the High Court(s)
for consideration of other issues raised in
this batch of cases. Subject to above, the
impugned judgment(s) is set aside and the
civil appeals are allowed with no order as to
costs.”
Page 31 of 72
Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025
NEUTRAL CITATION
C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025
undefined
6.5 We therefore are unable to agree with the
submission of the learned counsel Mr.A.L.Shah
for the respondent company that on the issue of
assignment, the decision in the case of ICICI
Bank (supra) would not help the appellant.
6.6 When we in that context appreciate the
decisions relied upon by Mr.Tirth Nayak in O.J.
Appeal No.156 of 2007 in case of Kotak
Mahindra Bank v. OL of M/s APS Star India
Limited and 19 opponents dated 30.09.2014,
by which, the Division Bench remanded the
matter to the Company Judge and the decision in
Company Application No.489 of 2006 and others
dated 28.01.2015. In the aforesaid case, what is
evident is that the other issues as to whether the
individual deeds of assignment met the
requirements of other enactments like the
Registration Act, the Stamp Act etc. did not arise
Page 32 of 72
Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025
NEUTRAL CITATION
C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025
undefined
in the applications and the Court held that as and
when such issues are raised at an appropriate
stage, the same would be decided by the
concerned forum. Para 14 of the decision in case
of Kotak Mahindra Bank Ltd. v. O.L. of M/s.
APS Star India Ltd. & 20 rendered in Company
Application No.489 of 2006 dated 28.01.2015
reads as under:
“14. From the submissions advanced by the
learned counsel for the respective parties, it
is apparent that the common refrain of the
learned counsel is that these applications
are limited to the prayer for substitution,
which stand allowed by the Supreme Court
as well as by the Division Bench by holding
that such substitution is permissible in law
and hence, the matters come to an end. The
other issues as to whether the individual
deeds of assignment meet with the
requirements of other enactments, like the
Registration Act, the Stamp Act, etc., do not
arise in the present applications and that as
and when such issues are raised at an
appropriate stage before the appropriate
forum, the same would be decided by the
concerned forum.”
6.7 In other words, the question whether the
Page 33 of 72
Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025
NEUTRAL CITATION
C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025
undefined
deed of assignment was sufficiently stamped and/
or not registered and breach of other provisions
of the Registration Act was left open to be
decided for an appropriate forum at an
appropriate time.
6.8 Since these issues are raised by the learned
counsel for the respondent extensively in the
written submissions so filed i.e. as to the validity
of the assignment deed being questioned on the
ground of it being in breach of the Stamp Act and
the Registration Act, these questions will have to
be dealt by us as they have not been so dealt
with in the similar matters in the earlier rounds
before this Court.
6.9 We have been taken through the orders
passed by the Debt Recovery Tribunal from time
to time. We note that initially an order was
Page 34 of 72
Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025
NEUTRAL CITATION
C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025
undefined
passed below Exh.22 by the Debt Recovery
Tribunal in Original Application No.229 of 2003
dated 25.01.2007 allowing the substitution of
Kotak Mahindra Bank in Original Application
No.229 of 2003. That was challenged by the
respondent company by filing Misc. Appeal
No.60 of 2007. The Debt Recovery Appellate
Tribunal by its oral judgement dated 17.01.2013
where the Company raised the very same
objections as to the validity of deed of
assignment on the ground of it being
insufficiently stamped, not being registered etc.,
quashed the order of 25.01.2007 and remanded
the matter to the Debt Recovery Tribunal to
consider these issues afresh. The Debt Recovery
Tribunal on remand by an order dated
20.09.2013 extensively considering various case
laws and submissions set out by the respective
parties, negated the submissions made on similar
Page 35 of 72
Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025
NEUTRAL CITATION
C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025
undefined
grounds by the company with regard to the
breach of the Stamp Act and the Registration Act
etc. and allowed the application. We are
informed that against the said order passed by
the DRT, Misc. Appeal No.43 of 2014 has been
filed by the Company before the Debt Recovery
Appellate Tribunal and the same is pending for
hearing. In other words, the issues that we are
called upon to decide on the validity of deed of
assignment on the aspect of insufficient stamp
and non-registration have been decided below
Exh.22 by the Debt Recovery Tribunal which was
a subject matter of appeal before the Appellate
Tribunal and the same is pending. The question
therefore is, whether it is open for the company
to raise the very same issues which have been
concluded against it albeit a subject matter of
appeal before the Debts Recovery Appellate
Tribunal.
Page 36 of 72
Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025
NEUTRAL CITATION
C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025
undefined
6.10 Mr.Nayak learned counsel for the appellant
had during the course of his submissions argued
that once the issues have validly been decided by
a competent forum, on the principle of res-
judicata, it is not open for the company to raise
very same issues. On the other hand, Mr.Shah
would want us to hold otherwise. True it is that
as far as the issue of whether a bank can assign
its debts to the other is a concluded issue in light
of the decision in case of ICICI Bank (supra),
merely because on the issues of insufficiency of
stamp on the assessment deed and non
registration thereof etc., the Debt Recovery
Tribunal by its order dated 20.09.2013 has held
against the company. That is a subject matter of
an appeal before the Appellate Tribunal. In case
of N.G. Subbaraya and another (supra), the
Supreme Court has held that the principle of
resjudicata will not apply when the decision on
Page 37 of 72
Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025
NEUTRAL CITATION
C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025
undefined
the first suit is erroneous or is a subject matter
of appeal. After discussing the case law on the
issue the Supreme Court has held that in the
case where an appeal is filed against the
judgement, the principle of resjudicata will not
apply. Paras 18 to 20 of the decision in case of
N.G. Subbaraya and another (supra) read as
under:
“18. As to what happens when an appeal is
filed against a judgment in the first
proceeding, a Full Bench of the Allahabad
High Court in Balkishan v. Kishan Lal,
(1888) ILR 11 All 148 (at 159-161), is most
instructive. Mahmood, J., speaking for the
Full Bench, referred to Explanation IV to
Section 13 of the Code of Civil Procedure, as
it then stood. The learned Judge referred to
the said explanation in the following terms:
“The latter part of the Explanation IV of that
section has been framed in somewhat
unspecific language, and runs as follows:
“A decision liable to appeal may be final
within the meaning of this section until the
appeal is made.”
The language of the section is silent as to
what happens when an appeal has been
Page 38 of 72
Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025
NEUTRAL CITATION
C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025
undefined
preferred; and no doubt much depends upon
the interpretation of two vague words “may”
and “until” as they occur in the sentence
which I have just quoted. I may perhaps say
that more has been aimed at by that
sentence than the few words of which that
sentence consists could convey. What has
been left unsettled by that sentence is the
difficulty pointed out by a juristic Judge of
such eminence as Mr. Justice Holloway of
Madras in Sri Raja Kakarlapudi
Suriyanarayanarazu Garu v. Chellamkuri
Chellamma [5 M.H.C.R. 176] when that
learned Judge said:
“In the lower Court it seems to have been
taken for granted that the former judgment
could not be conclusive because an appeal
was pending. This is not in accordance with
English law, as the judgment on the
rejoinder in Doe v. Wright [10 A. & E. 763]
shows. It would, however, be perfectly
sound doctrine in the view of other jurists
(Unger Oct. Priv. Recht, II, 603, Sav. Syst.,
297, Seq. Waihier, II, 549). As an
Englishman I should be sorry to invite a
comparison between the reasons given by
these great jurists for their and those
embodied in the English cases for the
contrary doctrine.” xxx xxx xxxI hold that the views thus expressed by
Pothier and, as Mr. Justice Holloway has
indicated, adopted by other continental
jurists as to the doctrine of res judicata, are
consistent with the interpretation which I
place upon Explanation IV of s. 13 of the
Code of Civil Procedure in relation to thePage 39 of 72
Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025
NEUTRAL CITATIONC/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025
undefined
authority of judgments still liable to appeal.
Such judgments are not definitive
adjudications. They are only provisional, and
not being final cannot operate as res
judicata. Such indeed seems to be the view
adopted by the learned Judges of the
Bombay High Court when they said, in
Nilvaru v. Nilvaru [ILR 6 Bom. 110.],“We consider that when the judgment of a
Court of first instance upon a particular
issue is appealed against, that judgment
ceases to be res judicata and becomes res
sub judice.” In this case, therefore, both the
Courts below were wrong in law in holding
that the previous judgment of the 10th
March, 1886, which at the date of the
institution of this suit was still liable to
appeal, and which at the date of the decision
of this suit by the first Court, as also at the
date of the decision by the lower appellate
Court, was the subject of a second appeal
pending in this Court (S.A. No. 973 of 1886)
could operate as res judicata in favour of the
plaintiff in regard to his title as to the
malikana.
19. The Privy Council, in an early judgment
in S.P.A. Annamalay Chetty v. B.A. Thornhill
AIR 1931 PC 263 (at 264), was faced with
the question as to whether the filing of an
appeal would by itself take away the res
judicata effect or whether a matter heard
and finally decided by the first Court was res
judicata until it was set aside on appeal. The
Privy Council held:
“Section 207 of the Civil Procedure Code,
Page 40 of 72
Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025
NEUTRAL CITATIONC/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025
undefined
1889, provides as follows:
“All decrees passed by the Court shall,
subject to appeal, when an appeal is
allowed, be final between the parties; and
no plaintiff shall be non-suited.”
The appellant maintained that, under this
provision, no decree, from which an appeal
lies and has in fact been taken, is final
between the parties so as to form res
judicata, while the respondent contended
that such a decree was final between the
parties and formed res adjudicata until it
was set aside on appeal. In their Lordships’
opinion the former view is the correct one,
and where an appeal lies the finality of the
decree on such appeal being taken, is
qualified by the appeal and the decree is not
final in the sense that it will form res
adjudicata as between the same parties. The
opinion of the learned Judges of the
Supreme Court clearly inclined to the same
view, and their Lordships have a difficulty in
appreciating why the learned Judges found
it unnecessary to decide this point, for this
view still leaves it open to the Court to see
that the appellant does not get decree twice
over for the same sum, and it is inconsistent
with the other ground expressed by them for
their decision that the appellant’s cause of
action had been merged into the decree in
Action No. 4122, since, according to this
view, that decree was not final. Their
Lordships regret that the second action was
not adjourned pending the decision of the
appeal in the first action, as that would have
simplified procedure and saved expense.”
Page 41 of 72
Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025
NEUTRAL CITATION
C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025
undefined
20. Our law, therefore, is different from the
American law – a decree from which an
appeal lies and has in fact been filed would
render the res sub judice and not judicata.
This judgment of the Privy Council has been
repeatedly followed by the High Courts in
this country. See, Parshotam Parbhudas v.
Bai Moti AIR 1963 Gujarat 30 at para 8,
Bhavani Amma v. Narayana Acharya AIR
1963 Mysore 120 at para 2, Satyanarayan
Prosad Gooptu v. Diana Engineering
Company AIR 1952 Calcutta 124 at para 10
and Venkateswarlu v. Venkata Narasimham
AIR 1957 Andhra Pradesh 557 at para 3.”
6.11 Since the subject matter of DRT decision is
in appeal, in our opinion therefore, the objection
of the learned counsel for the appellant that it is
not open for the company to take up the very
same issue before us is negated.
6.12 We therefore will now examine the issue of
the deed of assignment whether being in
compliance of the provisions of Gujarat Stamp
Act and that whether it is in compliance of the
Registration Act as argued by the learned
Page 42 of 72
Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025
NEUTRAL CITATION
C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025
undefined
counsel for the respondent company? By relying
on Section 5 of the Gujarat Stamp Act, 1958,
Mr.Shah would submit that the deed of
assignment dated 29.09.2004 purports to assign
claims of ICICI Bank from 114 different
independent distinct companies to the Civil
Application filed in appeal. We have been taken
through the deed of assignment with these 114
companies. He would therefore submit that
these are distinct loans from these distinct
companies and as per Section 5 of the Stamp
Act, they are several distinct matters and
therefore, a consolidated amount of stamp duty
cannot be accepted.
6.13 In the decision in case of Coastal Gujarat
Power Limited (supra), the Supreme Court was
considering the issue of stamp duty on the
instrument of mortgage where 13 banks had
Page 43 of 72
Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025
NEUTRAL CITATION
C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025
undefined
given separate loans. Before the Supreme Court
an issue arose out of a reference answered by
the Full Bench of the Gujarat High Court. By the
impugned judgement before the Supreme Court,
the reference was answered against the revenue
holding that the company was not required to
pay deficit stamp duty. Considering the
submission made by the revenue that the High
Court had failed to appreciate that the banks had
formed a consortium and financial assistance had
been availed through its consortium through 13
lenders which were distinct matters and
therefore each has to be separately assessed for
the stamp duty was accepted by the Supreme
Court. Discussing the scope of Sections 4, 5 and
6 of the Stamp Act, the Supreme Court held as
under:
“33. Answering the Reference, the
Constitution Bench of this Court elaborately
discussed the scope and object of SectionsPage 44 of 72
Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025
NEUTRAL CITATIONC/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025
undefined
4,5, and 6 of the Stamp Act and finally
allowed the appeal. Their Lordship held:-
“We are unable to accept the contention
that the word “matter” in section 5 was
intended to convey the same meaning as the
word “description” in section 6. In its
popular sense, the expression “distinct
matters” would connote something different
from distinct “categories”. Two transactions
might be of same description, but all the
same, they might be distinct. If A sells
Black-acre to X and mortgages White-acre to
Y, the transactions fall under different
categories, and they are also distinct
matters. But if A mortgages Black-acre to X
and White-acre to Y, the two transactions
fall under the same category, but they would
certainly be distinct matters. If the intention
of the legislature was that the expression
‘distinct matter’ in section5 should be
understood not in its popular sense but
narrowly as meaning different categories in
the Schedule, nothing would have been
easier than to say so. When two words of
different import are used in a statute in two
consecutive provisions, it would be difficult
to maintain that they are used in the same
sense, and the conclusion must follow that
the expression “distinct matters” in section
5 and “description” in section 6 have
different connotations.”
6.14 What therefore becomes evident when we
examine the present deed of assignment is that it
Page 45 of 72
Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025
NEUTRAL CITATION
C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025
undefined
was in connection with 114 distinct matters and
therefore the stamp duty had to be paid in
accordance with the provisions envisaged under
Section 5 of the Stamp Act. Section 5 of the
Stamp Act reads as under:
“Section 5 – Instruments relating to several
distinct matters:
Any instrument comprising or relating to several
distinct matters distinct matters or distinct
transactions shall be chargeable with the
aggregate amount of the duties with which
separate instruments, each comprising or
relating to one of such matters or distinct
transactions] would be chargeable under this
Act.”
6.15 Even otherwise, the perusal of a notification
dated 06.05.2002 filed with the Civil Application
by the company indicates that the duty has to be
paid on the instrument of securitization of loans
or the assignment of debt. In other words, the
incident of Stamp Duty are loans that are
assigned by the deed of assignment by one bank
Page 46 of 72
Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025
NEUTRAL CITATION
C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025
undefined
to the other. There are therefore several
separate distinct transactions made by a single
instrument and the duty therefore has to be on
each loan for one each separate distinct matter.
The parties had referred to a decision in case of
Arunachalam Mutthu (supra). However, for
our purposes, in light of the decision of the
Gujarat High Court in case of Coastal Gujarat
Power Limited (supra), we deem it necessary to
refer to the decision in the case of
Arunachalam Mutthu (supra). Even in
accordance with the provisions of Section 34 of
the Stamp Act therefore the instrument i.e. the
deed of assignment cannot be said to be a legal
deed and even if we were to accept the legal
submission of the counsel for the appellant that
the transfer of assignment is legal, on the facts of
the case, we hold that the deed of assignment
fails the test of it being sufficiently stamped
Page 47 of 72
Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025
NEUTRAL CITATION
C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025
undefined
under the provisions of the Stamp Act.
6.16 The other alternative submission that the
respondent company had canvassed was on the
issue of deed of assignment being though
requiring compulsory registration was not
registered at all. Section 17 of the Registration
Act provides that certain documents need be
compulsorily registered. Admittedly, the deed of
assignment is one of such instrument which
requires compulsory registration. The
registration of such document has to be within
the prescribed time limit as so provided under
Section 23 of the Registration Act. Section 25 of
the Registration Act provides that if there is a
delay in presenting a document for registration
within four months of its execution on account of
its urgent necessity or unavoidable extent, the
Registrar can extend the period for a document
Page 48 of 72
Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025
NEUTRAL CITATION
C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025
undefined
for presentation for registration by a further
period of four months. For our purposes,
Sections 17, 23 and 25 of the Registration Act
read as under:
“17. Documents of which registration is
compulsory.–(1) The following documents
shall be registered, if the property to which
they relate is situate in a district in which,
and if they have been executed on or after
the date on which, Act No. XVI of 1864, or
the Indian Registration Act, 1866, or the
Indian Registration Act, 1871, or the Indian
Registration Act, 1877, or this Act came or
comes into force, namely:– (a) instruments
of gift of immovable property; (b) other non-
testamentary instruments which purport or
operate to create, declare, assign, limit or
extinguish, whether in present or in future,
any right, title or interest, whether vested or
contingent, of the value of one hundred
rupees and upwards, to or in immovable
property; (c) non-testamentary instruments
which acknowledge the receipt or payment
of any consideration on account of the
creation, declaration, assignment, limitation
or extinction of any such right, title or
interest; and (d) leases of immovable
property from year to year, or for any term
exceeding one year, or reserving a yearly
rent; 1 [(e) non-testamentary instruments
transferring or assigning any decree or
order of a Court or any award when such
decree or order or award purports orPage 49 of 72
Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025
NEUTRAL CITATIONC/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025
undefined
operates to create, declare, assign, limit or
extinguish, whether in present or in future,
any right, title or interest, whether vested or
contingent, of the value of one hundred
rupees and upwards, to or in immovable
property:] Provided that the 2 [State
Government] may, by order published in the
3 [Official Gazette], exempt from the
operation of this sub-section any lease
executed in any district, or part of a district,
the terms granted by which do not exceed
five years and the annual rents reserved by
which do not exceed fifty rupees. 4 [(1A) The
documents containing contracts to transfer
for consideration, any immovable property
for the purpose of section 53A of the
Transfer of Property Act, 1882 (4 of 1882)
shall be registered if they have been
executed on or after the commencement of
the Registration and Other Related laws
(Amendment) Act, 2001 (48 of 2001) and if
such documents are not registered on or
after such commencement, then, they shall
have no effect for the purposes of the said
section 53A.] (2) Nothing in clauses (b) and
(c) of sub-section (1) applies to– (i) any
composition deed; or (ii) any instrument
relating to shares in a joint stock Company,
notwithstanding that the assets of such
Company consist in whole or in part of
immovable property; or (iii) any debenture
issued by any such Company and not
creating, declaring, assigning, limiting or
extinguishing any right, title or interest, to
or in immovable property except in so far as
it entitles the holder to the security afforded
by a registered instrument whereby thePage 50 of 72
Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025
NEUTRAL CITATIONC/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025
undefined
Company has mortgaged, conveyed or
otherwise transferred the whole or part of
its immovable property or any interest
therein to trustees upon trust for the benefit
of the holders of such debentures; or (iv)
any endorsement upon or transfer of any
debenture issued by any such Company; or
(v) 1 [any document other than the
documents specified in sub-section (1A)] not
itself creating, declaring, assigning, limiting
or extinguishing any right, title or interest of
the value of one hundred rupees and
upwards to or in immovable property, but
merely creating a right to obtain another
document which will, when executed,
create, declare, assign, limit or extinguish
any such right, title or interest; or (vi) any
decree or order of a Court 2 [except a
decree or order expressed to be made on a
compromise and comprising immovable
property other than that which is the
subject-matter of the suit or proceeding]; or
(vii) any grant of immovable property by 3
[Government]; or (viii) any instrument of
partition made by a Revenue-Officer; or (ix)
any order granting a loan or instrument of
collateral security granted under the Land
Improvement Act, 1871, or the Land
Improvement Loans Act, 1883; or (x) any
order granting a loan under the
Agriculturists, Loans Act, 1884, or
instrument for securing the repayment of a
loan made under that Act; or 4 [(xa) any
order made under the Charitable
Endowments Act, 1890 (6 of 1890), vesting
any property in a Treasurer of Charitable
Endowments or divesting any suchPage 51 of 72
Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025
NEUTRAL CITATIONC/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025
undefined
Treasurer of any property; or] (xi) any
endorsement on a mortgage-deed
acknowledging the payment of the whole or
any part of the mortgage-money, and any
other receipt for payment of money due
under a mortgage when the receipt does not
purport to extinguish the mortgage; or (xii)
any certificate of sale granted to the
purchaser of any property sold by public
auction by a Civil or Revenue-Officer. 5
[Explanation.–A document purporting or
operating to effect a contract for the sale of
immovable property shall not be deemed to
require or ever to have required registration
by reason only of the fact that such
document contains a recital of the payment
of any earnest money or of the whole or any
part of the purchase money.] (3) Authorities
to adopt a son, executed after the 1st day of
January, 1872, and not conferred by a will,
shall also be registered.
23. Time for presenting documents.–
Subject to the provisions contained in
sections 24, 25 and 26, no document other
than a will shall be accepted for registration
unless presented for that purpose to the
proper officer within four months from the
date of its execution:
Provided that a copy a of a decree or order
may be presented within four months from
the day on which the decree or order was
made, or, where it is appealable, within four
months from the day on which it becomes
final.
25. Provision where delay in presentation is
Page 52 of 72
Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025
NEUTRAL CITATIONC/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025
undefined
unavoidable.–(1) If, owing to urgent
necessity or unavoidable accident, any
document executed, or copy of a decree or
order made, in 2 [India] is not presented for
registration till after the expiration of the
time hereinbefore prescribed in that behalf,
the Registrar, in cases where the delay in
presentation does not exceed four months,
may direct that, on payment of a fine not
exceeding ten times the amount of the
proper registration-fee, such document shall
be accepted for registration. (2) Any
application for such direction may be lodged
with a Sub-Registrar, who shall forthwith
forward it to the Registrar to whom he is
subordinate.”
6.17 From the record, the document-the deed of
assignment and thereafter the deed of
confirmation dated 26.10.2005 are placed before
us by way of OJCA No.1 of 2022 by the company.
The deed of confirmation when read indicates
that it has rubber stamp in Marathi language.
When translated it would read that annexure is
not registered. This makes it very clear that the
deed of confirmation, to which the deed of
assignment annexed was not registered. We
Page 53 of 72
Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025
NEUTRAL CITATION
C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025
undefined
note that the deed of assignment is annexed was
not registered. We note that the deed of
assignment was dated 29.09.2004. In accordance
with the provisions of Section 23 of the Act, the
assignment deed ought to have been registered
on or before 28.01.2005. Considering the
provisions for condoning the delay of four
months the time expired on 28.05.2005. Reading
the deed of confirmation would indicate that it is
dated 26.10.2005 and is registered only on
17.11.2005. Obviously therefore it was beyond
the stipulated statutory period under the
6.18 We may also note a decision cited by the
learned counsel for the respondent in the case of
Ajaykumar M. Singh (supra). Paras 16, 16.2
and 16.3 of the judgement would read as under:
“16. In any event, it is trite that registration
Page 54 of 72
Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025
NEUTRAL CITATIONC/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025
undefined
of the Deed of Confirmation would not
extend to the enclosures annexed to the said
Deed of Confirmation. In other words, by
virtue of registration of a Deed of
Confirmation, any document annexed
thereto does not ipso facto get registered.
As also submitted by the Defendant, the said
Deed of Confirmation relates to some
conditional sale and not to an agreement for
creation of charge. Even otherwise the said
Document was submitted for registration on
11th March, 1999 i.e. after almost two and
half years after its execution. As per
Sections 23 and 25 of the Registration Act, a
document needs to be tendered within four
months of its execution or after explaining
sufficient cause within further 4 months
thereof and thereafter the Superintendent of
Stamps or Sub-Registrar does not have the
authority /jurisdiction to even entertain such
a request for registration. Both Sections 17
of Registration Act and Section 100 of the
Transfer of Property Act make it mandatory
for a document creating charge to be
compulsorily registered. Section 49 of the
Registration Act deals with the effect of non-
registration. The same is reproduced
hereunder:
“49l Effect of non-registration of documents
required to be registered.- No document
required by Section 17 or by any provision
of the transfer of Property Act, 1882, to be
registered shall –
(a) affect any immovable property comprised
therein, or KPPNair 41 S-5086/98
(b) confer any power to adopt, or
Page 55 of 72
Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025
NEUTRAL CITATIONC/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025
undefined
(c) be received as evidence of any
transaction affecting such property or
conferring such power, unless it has been
registered.
Provided that an unregistered document
affecting immovable property and required
by this Act, or the Transfer of Property Act,
1882, to be registered may be received as
evidence of a contract in a suit for specific
performance under Chapter II of the
Specific Relief Act, 1877 or as evidence of
any collateral transaction not required to be
effected by registered instrument.”
16.2. For the reasons set out above, it
cannot be said that the Agreement
purportedly creating the charge in respect
of the suit flats is a registered document. In
my view, the same therefore cannot even be
looked at by the Court as a piece of evidence
in the present Suit.
16.3. Even otherwise, for the same reasons
set out whilst answering Issue No. 3, that
the Plaintiff has failed to establish that the
Deed of Personal Guarantee has been
executed by and between the original
Plaintiff and the Defendant and the contents
of the same are true and correct, I hold that
the Plaintiff has failed to establish that the
Defendant has executed the Agreement
creating a charge in respect of the suit flats
(Exhibit-W to the Plaint). Issue Nos. 5 and 7
are therefore answered in the negative. In
any event it is already held whilst answering
Issue No.4 that no amount is personally
Page 56 of 72
Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025
NEUTRAL CITATION
C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025
undefined
payable by the Defendant to the Plaintiff.”
6.19 This therefore indicates that even if the
deed of confirmation is registered, that ipso-facto
would not make the annexed document
registered. Obviously therefore the effect as
stipulated under Section 49 of the Registration
Act would follow.
6.20 Even in the case of Smt. G. Kadambari
(supra) paras 13, 14, 16 and 20 read as under:
“13. Section 23 of the Act envisages that a
document shall not be accepted for
registration unless it is presented within
four months from the date of its execution.
Admittedly, the present document was
presented within four months from the date
of execution. But, it was presented without
enclosing the certificate issued by the Urban
Land Ceiling Authorities, without which the
registration cannot be made, therefore, it
can be said that it is not a proper
presentation before the Sub-Registrar as
required under Section 23 of the Act.
Therefore, the Sub-Registrar was right in
refusing to register the document without
the production of ULC certificate. When thePage 57 of 72
Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025
NEUTRAL CITATIONC/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025
undefined
document is presented for registration after
four months from the date of execution, the
Sub-Registrar has no authority to register
the same and under Section 25 of the Act,
the Registrar has no jurisdiction to register
the document if it is presented after four
months without accounting for the delay. If
the presentation of the document for
registration has not been made within four
months, the delay can be condoned under
Section 25 of the Act, provided the Registrar
is approached within four months i.e., within
eight months of the execution of the
document. If the Registrar condones the
delay, it can be presented for registration.
But, if the Registrar is approached after the
expiry of the period of eight months of the
execution of the document, the Registrar
shall have no jurisdiction to condone the
delay under Section 25 of the Act.
14. Where a document which requires
registration is not presented for registration
within the time prescribed, it will not be
open to the parties to have it registered in
an indirect manner by simply adopting the
device of referring to it or making it a part
of a later document which could be
presented for registration. Even if there is
any agreement between the parties for the
postponement of the registration after the
execution, it cannot be permitted to be
enforced, when the time for presentation
has expired.
…
Page 58 of 72
Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025
NEUTRAL CITATION
C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025
undefined
16. In Changan Lal v. Kashiram 1923
Nagpur 76, the Nagpur High Court held
that: Where the object of the agreement to
postpone the registration of the deed of
lease is obvious enough from the
circumstances and scarcely needs specific
admission, and is to conceal the actual sivai
amdani of the village, and so to reduce the
assessment of Land Revenue. Held, this
would defeat the provisions of the
Registration Act and probably the Transfer
of Property Act and the Stamp Act as well; it
was fraudulent in that it attempted to
conceal the assets of the village and so to
reduce the assessment; it involved injury to
all other members of the community in that
they would get as Land Revenue less than
their proper share of the income of the
village; and it was obviously opposed to
public policy.
…
20. In the present case, the petitioner kept
quite for a period of two years, after the
Sub-Registrar refusing to register the
document. In filing the suit and the decree
in the said suit is not binding on the
respondents to execute the terms of the
decree in violation of the provisions of the
Act. When the party fails to present a
document for registration within four
months after the execution, it cannot be
registered and if there is any delay in
presentation of the document, an application
may be made to the Registrar for
condonation of the delay and if the RegistrarPage 59 of 72
Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025
NEUTRAL CITATIONC/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025
undefined
condones the delay, when such application
is made within a period of further four
months, the registration can be done
irrespective of the fact whether the process
of registration is done beyond the period of
eight months. When once the party fails to
present the document within eight months,
it cannot be presented at any time
subsequently. The petitioner once again
presented the document after the expiry of
24 years, which is beyond the scope of
Sections 23 and 25 of the Act.”
6.21 Obviously therefore when a document
required to be registered is not presented for
registration within the stipulated time, the
parties cannot have the same registered in an
indirect manner adopting the device by referring
it to be a part of a later document.
6.22 We are not addressing the issue on the deed
of assignment being registered at Mumbai
though the immovable property was situated in
district Bharuch and would therefore require
mandatory registration in the district of Bharuch
Page 60 of 72
Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025
NEUTRAL CITATION
C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025
undefined
extensively because we have on the first two
counts on the document of assignment being
insufficiently stamped and not being registered
held against the appellant and therefore the deed
of assignment is not a deed existing in law.
6.23 Though Mr.Nayak has relied on the decision
of the Supreme Court in case of Hindustan
Steel Limited (supra) that provisions of the
fiscal statute cannot arm a litigant with a weapon
of technicality and the instrument cannot be
defeated, we would beg to disagree with the
submission because in the facts of the present
case, the Supreme Court in the case of ICICI
Bank (supra) has left it open for this Court to
delve into the issue of the validity of such
instrument. We also know that before the DRT a
prayer was made that the proceedings before the
High Court in the Company Application be kept
Page 61 of 72
Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025
NEUTRAL CITATION
C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025
undefined
in abeyance, however, by the final order of the
DRT in Exh.22, the DRT categorically permitted
the company proceedings before the High Court
to go on.
6.24 On the question of overriding effect of the
RDDB Act and the Companies Act, Mr.Tirth
Nayak has argued on the issue of the overriding
effect of the RDDB Act vis-a-vis the Companies
Act in light of the decision in case of Allahabad
Bank (supra), where the Supreme Court has
held that even when two State laws are existing,
particularly, in this case the Companies Act v/s.
the RDDB Act, the RDDB Act would have an
overriding effect in light of the provisions of
Section 34. In other words since the remedy of
recovery has been invoked, it was not open for
the Company Court to enter into a scheme of
compromise or arrangement overlooking the
Page 62 of 72
Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025
NEUTRAL CITATION
C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025
undefined
pending proceedings under the RDDB Act. True
it is that in the case of Allahabad Bank (supra),
considering the provisions of Section 34 of the
RDDB Act, the Court has held that the Act would
have an overriding effect over the Companies
Act. However, these are issues which also have
been considered as held in the case of Core
Health Care Limited (supra), where one of the
objections was raised of proceedings pending
before the DRT. The Single Judge of this Court
held as under:
“40. One of the objections raised by the
objectors is that the objectors have filed
their case before the Debt Recovery
Tribunal, therefore, this Court would have
no jurisdiction to consider the Scheme and
by grant of the Scheme as the objectors are
to be non-suited by the Debt Recovery
Tribunal, present proceedings are illegal.
The petitioners have placed their reliance
upon the judgment of the Supreme Court in
the matter of Allahabad Bank v. Canara
Bank and Anr. AIR 2000 SC 1535. So far as
the right of the objector to proceed with the
case before the Debt Recovery Tribunal is
concerned, it would certainly stand if thePage 63 of 72
Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025
NEUTRAL CITATIONC/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025
undefined
Scheme proceedings are not approved by
the High Court. Core certainly would have a
right to take out proceedings for
compromise. If the proceedings ultimately
fail and the Scheme is not approved by the
High Court, then right to proceed with the
proceedings before the Debt Recovery
Tribunal would stand, but it cannot be said
by any stretch of imagination that Scheme
proceedings cannot be approved by the
High Court in view of pendency of the
proceedings before the Debt Recovery
Tribunal. The right to recover through
agency of Debt Recovery Tribunal is a
statutory right and at the same time, right to
get any Scheme approved is also a statutory
right under the Companies Act. If no
proceedings are taken for the Scheme or its
finalization, then, the Debt Recovery
Tribunal can proceed with the matter and at
the same time, under the SARFAESI Act,
ARCIL would be entitled to sell the property.
I presume a case where a matter is pending
before the Debt Recovery Tribunal and at
the same time, ARCIL, exercising its rights
under the SARFAESI Act sells the entire
property of the Company. After sale
proceeds are received would the property be
distributed amongst the lenders in
accordance with their rights, i.e.
proportionate ratio or in accordance with
the decrees granted either by the Debt
Recovery Tribunal or by some Court or by
High Court in some other proceedings. If
action of the ARCIL in disposing of the
property cannot be condemned and despite
decree by Debt Recovery Tribunal, salePage 64 of 72
Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025
NEUTRAL CITATIONC/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025
undefined
proceeds are to be distributed amongst the
lenders, that too, pari passu or in
proportion, then pendency of the
proceedings before the Debt Recovery
Tribunal would not come in the way of the
High Court in approving/sanctioning the
Scheme. The moment a Scheme is finalized,
approved and sanctioned by the High Court,
the Scheme would become final and the
lenders, whether Class-A or Class-B, secured
or unsecured, statutory bodies,
shareholders, promoters etc. would be
bound by the said Scheme and their right to
recover would stand crystallized under the
sanctioned scheme. Sections 391 to 394 do
not say that the Scheme would be binding
upon some only. In fact, the Scheme
proceedings bind all persons who are
associated with and are interested in the
Company, whether they are promoters,
shareholders, lenders, employees, workmen.
If the High Court approves a Scheme for
restructuring or revival of the company and
it directs that such company be restructured
in its finances or capital or by reduction of
share capital or by disposal of the property,
then the Scheme would be binding upon all
concerned. If the Scheme is approved and
the property is sold or is allowed to
demerge, then that Scheme would be final
and would have a binding effect on all
concerned, and once the Scheme binds
objectors, then they would not be allowed to
say that despite approval of the Scheme by
the High Court, they would be entitled to
proceed in the Debt Recovery Tribunal.
Judgment in the matter of Allahabad BankPage 65 of 72
Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025
NEUTRAL CITATIONC/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025
undefined
[supra] was in altogether different context,
there, the Supreme Court was not
considering approval, sanction or rejection
of the Scheme. It cannot be denied that in a
pending litigation, a borrower can come
forward for settlement and it would always
be open to the lender to accept the terms of
the settlement. If such authority is available
to a borrower, then he can always come
forward with a Scheme for compromise
which is being offered to the creditors
individually so also jointly. However, I would
agree with the petitioner that if an
individual lender can settle, then, there is no
reason to hold that the lenders collectively
cannot enter into the Scheme of
compromise.”
6.25 In context of provisions of Section 391 of the
Companies Act when a secured creditor deems it
fit to enter into a scheme of compromise, as it
did in the facts of this case, it does not lie in the
mouth of such appellant to contend that such a
scheme could not have been finalized when the
proceedings against the company were initiated
by it for recovery of dues. On this ground also
therefore we on the facts of this case hold that
Page 66 of 72
Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025
NEUTRAL CITATION
C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025
undefined
the petition of the learned counsel for the
appellant by placing reliance on the decision of
the Supreme Court in the case of Allahabad
Bank (supra) cannot be accepted.
6.26 Issue of non-compliance of provisions of
Section 391 of the Companies Act read with
Rule 70(2) of the Companies Rules: From the
conspectus of the facts that we have had the
occasion to consider, we note that the company
had proposed a scheme of compromise between
the company and its members (shareholders), its
unsecured creditors, its secured creditors etc. In
accordance with directions of the Company
Judge separate meetings were held of secured
creditors, unsecured creditors and members of
the company on 10.05.2006. Registrar of the
High Court was appointed to preside as
Chairman. None of the secured creditors had
Page 67 of 72
Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025
NEUTRAL CITATION
C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025
undefined
filed at the registered office of the company at
least 48 hours before the time of the meeting as
required by Rule 70(2) of the Companies (Court)
Rules, 1959 and due to lack of consent of all the
persons, the meeting was terminated. In
accordance with the order passed by this Court
on 16.06.2006 a fresh meeting was held on
22.07.2006 at 11:30 AM. Only three secured
creditors i.e. IDBI Bank, IFCI Limited and Dena
Bank find their appropriate authorizations of
their Board of Directors. During the course of
meeting, one Mr.Bandish Dixit from the
appellant company came and presented a
resolution passed by “share transfer and routine
transfer committee” for the Board of Directors.
It was not filed at the registered office of the
company at least 48 hours for the time fixed for
meeting and therefore the Chairman did not
allow him to attend the meeting. When we read
Page 68 of 72
Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025
NEUTRAL CITATION
C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025
undefined
the provisions of Section 391 of the Companies
Act, what is evident is that not only have the
scheme of compromise and arrangement based
on a vote of 3/4th of the members present and
voting, what is essential is that they have to be
present and vote which was not the case on hand
vis-a-vis a representative of the appellant bank.
He therefore cannot now cryfoul on the issue of
compromise or arrangement entered into by the
other secured creditors. There was a clear
violation of Rule 70(2) too which is mandatory in
nature and as held by the Bombay High Court in
the case of Scheme of Arrangement between
Mather and Platt Fire Systems Limited and
Unsecured Creditors v. Mather and Platt
Fire Systems Ltd reported in 2007 SCC
Online Bom 427, such failure is a clear
violation. Paras 34 and 35 of the decision read
as under:
Page 69 of 72
Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025
NEUTRAL CITATION
C/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025
undefined
“34. The report of the Scrutineer contains
reasons for the rejection of certain votes.
Now it is common ground before the Court
that if the rejection of the ballot filed by AP
Genco Ltd. (Sr. No. 5 in Exh. C) is upheld ,
the resolution would still be carried by the
requisite majority even if the other invalid
votes were to be treated as votes validly cast
against the scheme. The record before the
Court shows that the ballot of AP Genco was
cast by one Shri Murlidhar. The
authorisation in favour of the aforesaid
person was signed by the Chief General
Manager. Rule 70(2) of the Companies
(Court) Rules, 1959 provides as follows:
70(2) Where a body corporate which is
a member or creditor (including holder
of debentures) of a company authorises
any person to act as its representative
at the meeting of the members or
creditors of the company, or of any
class of them, as the case may be, a
copy of the resolution of the Board of
Directors or other governing body of
such body corporate authorising such
person to act as its representative at
the meeting and certified to be a true
copy by a director, the manager, the
secretary, or other authorised officer of
such body corporate, shall be lodged
with the company at its registered
office not later than 48 hours before the
meeting.
35. In the present case, it is an admitted
position that the person who sought to votePage 70 of 72
Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025
NEUTRAL CITATIONC/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025
undefined
on behalf of AP Genco, did not produce any
Board resolution, nor was any resolution
filed at the registered office of the Company
48 hours before the meeting. In fact, in the
affidavit filed on behalf of AP Genco in these
proceedings, even the authorisation, if any,
granted by the Board of Directors to the
Chief General Manager is not forthcoming
at the present stage. The provisions of Rule
70 require that where a body corporate is a
member or creditor and such a body
authorises a person to act as its
representative at a meeting, a resolution of
the Board of Directors has to be lodged with
the Company at its registered office not less
than 48 hours before the meeting. This was
admittedly not done. Hence, the rejection of
the ballot cannot be regarded as invalid.”
6.27 As held by the Supreme Court in case of
A.C. Narayanan v. State of Maharashtra
reported in 2014 (11) SCC 316, when a
meeting of creditors of a company is convened to
consider a scheme of compromise, it is not a
routine transfer and therefore in absence of any
delegated power to represent the Board of
Directors, from the resolution that is placed on
record what is evident is that it was a resolution
Page 71 of 72
Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025
NEUTRAL CITATIONC/OJA/143/2008 CAV JUDGMENT DATED: 10/03/2025
undefined
of the share transfer and routine transfer
committee and not of the Board of Members. On
this count too therefore, the appellant could not
have come before this Court objecting the
scheme of compromise and arrangement.
6.28 For all these grounds therefore we are of
the opinion that the appellant bank has no case
now to object to the scheme of compromise and
arrangement made and settled by this Court by
the judgement impugned before us.
7. The appeal is accordingly dismissed.
(BIREN VAISHNAV, J)
(HEMANT M. PRACHCHHAK,J)
ANKIT SHAH
Page 72 of 72
Uploaded by ANKIT SHAH(HC01063) on Mon Mar 10 2025 Downloaded on : Mon Mar 10 22:34:44 IST 2025