"Preposterous" : Supreme Court Dismisses Bank's Plea To Invoke Contempt Action Against Debts Recovery Officer

The Supreme Court recently dismissed a special leave petition filed by the Bank of Baroda challenging the decision of the Madhya Pradesh High Court in not taking contempt action against a Debts Recovery Officer.

The bench of Justices Dinesh Maheshwari and Vikram Nath while dismissing the Special Leave Petition observed,

"We are clearly of the view that in this case, the proposition of invoking contempt jurisdiction of the High Court, that too by a Nationalised Bank, was not only baseless but was rather preposterous."

The Supreme Court added that the proper remedy of the Bank was to challenge the order of Recovery Officer before the Appellate Authority rather than pursuing contempt action.

"We are at one with the High Court merely because of the allegations that the conclusion drawn by the Recovery Officer were purportedly not in conformity with the decision of the High Court in M.A. No. 1153 of 1999, he cannot be held liable for contempt. The remedy of the petitioner was to challenge the order of the Recovery Officer before the Appellate Authority."

Case Before High Court

M/s Premier Brass and Metal Works Ltd., had availed various loan facilities from the applicant right from the year 1956 and the loans and the cash credit facilities were renewed/increased from time to time. It had also equitably mortgaged with the applicant a leasehold plot and created other securities such as hypothecation of tangible movable properties and machineries as well as finished and raw materials stored or available in stocks or in the trade thereof from time to time. As the borrower failed to repay the balance outstanding amount to the Bank, a suit for recovery of dues amounting to Rs.14,03,38,797.30/- was filed by the appellant in the Court of District Judge, Bhopal which was subsequently transferred to Debts Recovery Tribunal.

While the proceedings before the DRT were pending, Hindustan Copper Limited filed a suit before the High Court at Delhi to which the bank was not a party and was not having any knowledge and the suit was decreed. Counsel further said that the decree was transferred to District Judge, Bhopal for its execution and on execution of the decree, the property of M/s Premier Brass and Metal Works Ltd, Bhopal was attached.

When the auction was being conducted, the bank filed an application under Order 21 Rule 53 of the Code of Civil Procedure before the Executing Court objecting to the attachment and sale.

The same was on the ground that the applicant was a secured creditor having obtained pledge or mortgage of all the movable and immovable property and other creditor had no right to proceed against the machineries and other movable and immovable properties mortgaged with the applicant.

Since the same was rejected by the Executing Court on September 15, 1999, the bank had filed an appeal against the same which was disposed of on May 16, 2006. In the same, the High Court while setting aside order dated February 15, 1999, declared that Section 33-C of the Act did not affect the rights created in the appellant's favour by mortgage or pledge of the property before 15th March, 1976. The High Court further held that these rights could not be sold for recovery of sales tax dues of the respondent No.1 or for the amount due to the decree holder.

Bank of Baroda had filed a contempt petition u/s 12 of the Contempt of Courts Act r/w Article 215 of the Constitution of India complaining that the Debts Recovery Officer, Debts Recovery Tribunal, Jabalpur had violated the mandate of the Court as contained in order dated May 16, 2006 passed in an appeal (Bank of Baroda Vs. M/s Premier Brass and Metals Ltd.,) and thus had made himself liable for punishment for committing gross Contempt of Court.

Senior Advocate V.S.Shroti with Advocate A.P.Shroti appearing for the petitioner (Bank of Baroda) contended that in spite of the clear directions given by the High Court, the Recovery Officer by the order dated November 26, 2020 had virtually nullified the order passed by the High Court by holding that since the sale had not been set aside, therefore the property sold to bonafide purchaser could not be restored to its previous position.

While dismissing the petition, Justice GS Ahluwalia observed,

"If the facts of the present case are considered, it is clear that the Successful purchaser had moved an application before the Recovery Officer which has been decided by him. If the petitioner is of the view that the conclusion drawn by the Recovery Officer is not in conformity with the decision given by this Court in Misc. Appeal No.1153/1999, then he has the remedy to challenge the same before the Appellate Authority but in the considered opinion of this Court, the Recovery Officer cannot be held to be liable for contempt."

Case Title: Bank of Baroda v Manish Shrivastava| Special Leave to Appeal (C) No(s). 19566/2021

Coram: Justices Dinesh Maheshwari and Vikram Nath

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