Bombay High Court
Rajeev Kishor Mehta vs Hdfc Bank Ltd. And 2 Ors on 21 January, 2025
Author: A.S. Chandurkar
Bench: A.S. Chandurkar
2025:BHC-OS:943-DB
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
WRIT PETITION NO.1157 OF 2023
Rajeev Kishor Mehta, ]
R/of Gamdevi, Mumbai - 400 007. ] .. Petitioner
Versus
1. HDFC Bank Ltd., ]
Registered Office at Lower Parel, Mumbai ]
2. Beautiful Diamonds Ltd. ]
(Now Splendour Gems Ltd. - In Liquidation) ]
Through Official Liquidator, Fort, Mumbai ]
3. The Recovery Officer, ]
Debts Recovery Tribunal - II, ]
Colaba, Mumbai ] .. Respondents
Mr. Nitin Thakkar, Senior Advocate, with Mr. T.N. Tripathi, Ms. Kalyani
Wagle and Ms. Somya T., Advocates, i/by T.N. Tripathi & Co., for the
Petitioner.
Mr. Kevic Setalvad, Senior Advocate, with Mr. Dharam Jumani, Mr. Mihir
Nerurkar, Ms. Prapti Kedia, Ms. Neha Rautela and Mr. Rushikesh Dusane,
Advocates, i/by Agama Law Associates, for Respondent No.1.
Mr. Mohamedali M. Chunawala with Mr. P.S. Gujar, Advocates for
Respondent No.4-UOI.
Mr. Nishit Dhruva with Mr. Prakash Shinde, Ms. Niyati Merchant, Mr. Yash
Dhruva and Mr. Harsh Sheth, Advocates, i/by MDP Legal, for Respondent
No.5.
Mr. Ranjeev Carvalho, Advocate for the Official Liquidator.
CORAM : A.S. CHANDURKAR & RAJESH S. PATIL, JJ
The date on which the arguments were heard : 22ND OCTOBER 2024.
The date on which the Judgment is pronounced : 21ST JANUARY 2025.
JUDGMENT :
[ Per A.S. Chandurkar, J. ]
1. Rule. Rule made returnable forthwith and heard learned counsel for
the parties.
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2. The petitioner has raised a challenge to the order dated 5 th February
2020 passed by the Recovery Officer, Debts Recovery Tribunal-II, Mumbai
in Recovery Proceedings No.709 of 2004. By the said order, Warrant of
Arrest came to be issued against three Certificate Debtors including the
petitioner, who is Certificate Debtor No.6 in the aforesaid proceedings.
Besides aforesaid, the petitioner’s bank accounts, lockers and shares have
been attached and he has been restrained from operating any type of bank
accounts, lockers and shares. Various other ancillary directions have been
issued. This order came to be passed on the application below Exhibit-82
that was moved by the 1st respondent – HDFC Bank Ltd. (hereinafter
referred to as “the Bank”). By that application, the Bank had prayed that a
show cause notice be issued to the Certificate Debtors as per Section 25(b)
of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993
(for short, “Act of 1993”) and in the event of failure to show cause, it was
prayed that the Certified Debtors be subjected to civil arrest. By recording
a finding that the petitioner failed to show any intention to repay the
outstanding amount, the said order came to be passed.
3. Mr. Nitin Thakkar, learned Senior Advocate for the petitioner at the
outset submitted that when the writ petition was filed, the impugned
order dated 5th February 2020 had not been uploaded. As the petitioner
apprehended his arrest, he had moved this writ petition. After a copy of
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the order was available, the writ petition was amended and the order
dated 5th February 2020 was placed on record. According to him, the show
cause notice dated 15th January 2018 issued by the Recovery Officer was
without application of mind and it did not make out any ground
whatsoever for the petitioner’s arrest. He referred to Rule 73(1)(b) under
the Second Schedule to the Income Tax Act, 1961 (for short, “the Act of
1961”) to indicate that the procedure prescribed therein as well as the
satisfaction required to be recorded prior to ordering arrest was absent.
There was no authority whatsoever with the Recovery Officer to suo-moto
issue a notice to show cause why a Warrant of Arrest should not be issued.
Reference was made to Regulation 60(17) of the Regulations of Practise,
2010 as well as Form 55 to indicate non-compliance of the requisites in
that regard. He took the Court through various proceedings initiated by
the Bank to which the petitioner was also a party. He sought to distinguish
the role of the petitioner with that of the other Certificate Debtors and
submitted that though this distinction was placed before the Debts
Recovery Tribunal in the reply filed by the petitioner, the same was not
taken into consideration. By treating the position of the petitioner to be
similar with that of the other Certificate Debtors, the impugned order
came to be passed. Considering the drastic nature of directions issued
which resulted in curtailing the civil liberty of the petitioner, it was
necessary for the Recovery Officer to have taken into consideration all
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relevant aspects before passing the order. In absence of recording of any
satisfaction as per Rule 73(1)(b) under the Second Schedule to the Act of
1961, the impugned order was not sustainable. To substantiate his
contentions, the learned Senior Advocate placed reliance on the following
decisions :-
Vinod Hingorani S/o. Ramchand Rochiram Hingorani Vs.
The Securities & Exchange Board of India and Anr., 2015
SCC OnLine Bom 1665
Ch. Harpal Singh and Ors. Vs. Lala Hira Lal, AIR 1954
Allahabad 402
Pundlik Mahadu Nazire Vs. Maharashtra State Farming
Corporation, 1992 Mh.L.J. 455
Gaon Sabha and Anr. Vs. Nathi and Ors., (2004) 12 SCC
555
4. Mr. Kevic Setalvad, learned Senior Advocate for the Bank opposed
the aforesaid submissions. At the outset, he submitted that the order
passed below Exhibit-82 on 5th February 2020 had been challenged by
Certificate Debtor Nos.2 and 3 in Writ Petition No.132 of 2023 (Kishor K.
Mehta and Anr. Vs. Recovery Officer, Debts Recovery Tribunal, Mumbai-II
and Ors.). While considering such challenge, a Co-ordinate Bench was of
the view that the matter required re-consideration at the hands of the
Recovery Officer. By the judgment dated 27 th February 2023, Recovery
Petition No.709 of 2004 was restored before the Recovery Officer and the
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impugned order dated 5th February 2020 was directed to be treated as an
interim order pending consideration of the Recovery Petition. It was
submitted that since the petitioner was also party to the application below
Exhibit-82 and the order impugned by the petitioner was directed to be
treated as an interim direction, a similar course could be followed. In that
context, it was urged that on principles of res judicata analogous to
Explanation VI to Section 11 of the Code of Civil Procedure, 1908, it was
not permissible for the petitioner to agitate all contentions afresh. It was
submitted that similar opportunity could be granted to the petitioner who
could be heard by the Recovery Officer. In that regard, the learned Senior
Advocate placed reliance on the following decisions :-
ITW Signode India Ltd. Vs. Collector of Central Excise,
(2004) 3 SCC 48 Narayana Prabhu Venkateswara Prabhu Vs. Narayana
Prabhu Krishna Prabhu (Dead) by LRs., (1977) 2 SCC
181 Dharampal Satyapal Ltd. Vs. Deputy Commissioner of
Central Excise, Gauhati and Ors., (2015) 8 SCC 519 Kishor K. Mehta and Anr. Vs. Recovery Officer, Debts
Recovery Tribunal-II, Mumbai and Anr., (OOCJ Writ
Petition No.132 of 2023, Judgment dated 27 th February
2023)
5. We have heard the learned counsel for the parties at length and with
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their assistance we have also perused the documents placed on record. It
is seen that Original Application No.146 of 2002 filed by the Bank was
decided on 11th April 2002 and the Bank was held entitled to recover an
amount of Rs. 14,74,51,929.35 from the Certificate Debtors. The Bank
thereafter filed Recovery Proceeding No.709 of 2004. The Bank on 2 nd
February 2018 moved an application seeking directions to be issued for
the civil arrest of Certificate Debtor Nos.2 to 7 and also for deposit of
their passports. The petitioner as Certificate Debtor No.6 filed affidavit in
reply and denied the prayers made in the application. It was stated that he
had no means to pay the decretal amount and insolvency proceedings
filed in 2006 were still pending. There was no element of bad faith or
malafides attributed to the petitioner. The learned Recovery Officer
decided the application filed by the Bank below Exhibit-82 on 5 th February
2020. He considered the application filed by the Bank qua Certificate
Debtor Nos.2, 3 and 6 and directed issuance of warrant of arrest against
them. He further directed that the bank accounts, lockers and shares
standing in their names be attached and restrained them from operating
any such facility. Various other ancillary directions were also issued. It is
further seen from the record that Certificate Debtor Nos.2 and 3 had
challenged the aforesaid order passed below Exhibit-82 by preferring Writ
Petition No.132 of 2023. The said writ petition was decided on 27 th
February 2023. The Co-ordinate Bench of this Court was of the view that
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the matter required re-consideration at the hands of the Recovery Officer.
In paragraph 26 of the aforesaid judgment, it has been observed as under:-
26. It is the gravity of the consequences that is arrest and
detention that has persuaded us to grant an opportunity to
the petitioners. It is for that limited purpose we have
entertained the writ petition, despite the alternate remedy of
statutory appeal. Considering the facts and circumstances, the
appropriate course of action would be to permit the
respondent-Bank to file additional submissions before the
Recovery Officer placing on record such material as may be in
possession of the respondent-Bank including the newspaper
items and the material that forms the basis of the same. Also
to direct the petitioners to file affidavits-of-disclosure within a
time-bound period and to file affidavit-in-reply to the
additional material. The impugned order will have to be
treated as an interim direction and findings recorded in the
impugned order by the Recovery Officer to be treated as
prima facie findings subject to confirmation or otherwise of
the interim order. Till the decision is taken thereupon, the
interim order passed in this petition regarding stay of arrest
shall continue. The interim order passed in this petition is
only regarding stay of order directing arrest and detention. As
regards the direction on restriction on travel under the
impugned order, the same shall continue till the disposal of
proceedings before the Recovery Officer. According to us, this
course of action would grant both, the petitioners and the
respondent-Bank, an opportunity to put-forth their case.”
6. It is on this premise that the learned Senior Advocate for the Bank
sought to contend that since this Court had considered the challenge to
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the common order dated 5th February 2020 passed by the Recovery Officer
below Exhibit-82 insofar as Certificate Debtor Nos.2 and 3 were
concerned and an opportunity was given to them to re-agitate their
contentions afresh, a similar course may be followed insofar as the
petitioner who is Certificate Debtor No.6 is concerned. A contention was
also raised that the aforesaid adjudication would operate as res-judicata
given the reasons assigned while deciding Exhibit-82. The learned Senior
Advocate for the petitioner however joined issue on this aspect and
submitted that the defence raised by the petitioner was distinct from the
defence raised by the Certificate Debtor Nos.2 and 3 and therefore, the
observations made in the aforesaid decision would not be applicable to the
petitioner.
7. What we find on the reading of the judgment dated 27 th February
2023 in Writ Petition No.132 of 2023 is that the Court has considered in
detail the application moved by the Bank below Exhibit-82, the reply filed
by the petitioners therein and the manner of consideration of the matter
by the Recovery Officer. It has been observed that the issue “whether the
petitioners are white collar criminals” had been framed unnecessarily as
this issue was beyond the scope of Rule 73(1) under the Second Schedule
of the Act of 1961.To that extent, the petitioner cannot have any grievance
as this finding enures to his benefit. It has then been observed that the
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application preferred by the Bank below Exhibit-82 did not give much
particulars to enable a proper consideration of the matter as required
under Rule 73(1). The Bank produced certain newspaper report and
extracts from the websites of the “Financial Express” published on 19 th
November 2022. The Court however found that all this material was not
placed before the Recovery Officer for his consideration. It is on that
premise that the Division Bench was of the view that all such material
deserved to be placed before the Recovery Officer at the first instance for a
factual enquiry. Considering the implications flowing from the grant of
prayers made in the application in the context of Rule 73(1), the Court
was of the view that an opportunity ought to be given to the said
petitioners as the application on the basis of which the order was passed
did not contain necessary details. It is for this reason that the proceedings
were remanded to the Recovery Officer by treating the order dated 5 th
February 2020 passed by him as an interim order pending consideration of
the application below Exhibit-82. Various other ancillary directions were
also issued to enable consideration of the application below Exhibit-82
afresh.
8. Though it was strenuously urged on behalf of the petitioner that
Certificate Debtor No.6 was not similarly situated as Certificate Debtor
Nos.2 and 3, what we find is that the application filed by the Bank below
Exhibit-82 was composite in nature and similar prayers were made against
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Certificate Debtor Nos.2, 3 and 6. A specific finding having been recorded
that the application below Exhibit-82 having not given necessary
particulars, it was also the duty of the Recovery Officer to enforce the
pending recovery carefully. It is this aspect of the matter which persuades
us to follow a similar course as directed by the Co-ordinate Bench while
deciding Writ Petition No.132 of 2023. While considering the challenge
raised by the Certificate Debtor Nos.2 and 3 to the common order dated
5th February 2020 that a re-look at the said application was necessary, we
are satisfied that a similar direction needs to be issued even in the present
proceedings. As stated in the earlier decision that since the impugned
order proceeded to issue a warrant of arrest, the writ petition was
entertained notwithstanding the fact that an alternate remedy was
available to the petitioners for challenging the order passed by the
Recovery Officer. We have therefore not entered into the merits of the
rival contentions which could be urged before the Recovery Officer. We are
thus satisfied that issuance of similar directions as issued in Writ Petition
No.132 of 2023 would serve the ends of justice:-
Accordingly the following order is passed:
a) Recovery Proceeding No.709/2024 filed by the Bank before
the Recovery Officer stands restored to file.
b) The impugned order dated 5th February 2020 passed by the
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Recovery Officer shall be treated as an interim orderpending consideration of the application below Exhibit-82.
c) The observations made in the impugned order dated 5 th
February 2020 shall be treated as prima facie findings of
the Recovery Officer. The Recovery Officer shall, after
giving an opportunity to the parties decide whether to
confirm, modify or set aside the impugned order dated 5 th
February 2020. It is clarified that all contentions of both
parties are expressly kept open. Any observations made in
the order dated 5th February 2020 shall not preclude the
Recovery Officer from taking a different view of the matter
on merits.
d) (i) The Petitioner and the Bank shall appear before
the Recovery Officer on 3rd February 2025.
(ii) Upon appearance of the parties, the Recovery
Officer shall stipulate the period within which the
Petitioner would file an affidavit of disclosure
with documentation in reference of the properties
including the one referred in the record of the
writ petition annexing all necessary details. This
period shall not be more than two weeks from
the date of appearance.
(iii) The Recovery Officer shall grant the Bank an
opportunity to file an additional affidavit/
application placing on record the material in
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support of the contention that a case under Rule
73(1) under the Second Schedule to the Act of
1961 is made out against the Petitioner. This
period shall not be more than four weeks.
(iv) The Recovery Officer shall direct the Petitioner to
file reply affidavit to the additional application of
the Respondent-Bank within a period of three
weeks from the date the application is filed. If the
reply affidavit is not filed within three weeks, the
Petitioner would forfeit his right to file reply
affidavit and the Recovery Officer would be
entitled to proceed in the matter on that basis.
(v) After the pleadings are complete, the Recovery
Officer will take a final decision on merits within
a period of three months.
(e) Till the decision is so taken, the ad-interim order passed
in the writ petition on 13th February 2020 would
continue subject to the petitioner co-operating in the
adjudication of the application.
(f) Rule is disposed of in aforesaid terms with no order as to
costs.
[ RAJESH S. PATIL, J. ] [ A.S. CHANDURKAR, J. ]
Digitally
signed by
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ABHAY DIXIT
DIXIT Date:
2025.01.22
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