Mere delay in Filing Applications For Recall or Review Cannot be a Reason for Rejecting Petition on Technical Ground of Delay: Bombay HC [Read Order]

In a recent case, the Bombay High Court held that mere delay in filing applications for recall or review cannot be a reason for rejecting petition on the technical ground of delay.

Shaila Clubs owns and operates a recreational club.  For the purpose of setting up and commencing the recreational club, Shaila Clubs applied for loan from the Bank as well as from the Greater Bombay Co-operative Bank. On 2 May 2005 both the Banks agreed to sanction credit facilities in favour of Shaila Clubs, which were duly secured by the Shaila Clubs by mortgaging its property at Bandra vide registered Deed dated 27 May 2005. It appears that Shaila Clubs repaid entire loan amount disbursed by Greater Bombay Co-operative Bank and the Bank remained the sole mortgagee in respect of the Shaila Clubs premises since the Bank’s loan was not fully repaid.

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By Conducting Agreement dated 18 May 2007, Shaila Clubs permitted M/s. Savannah Lifestyle Private Limited (Savannah) to operate the recreational club for a period of 15 years and 6 months in consideration of monthly royalty and compensation. It is Bank’s case that since Shaila Clubs defaulted in repayment of loan disbursed by the Bank, its account was classified as NPA and the Special Recovery Officer of the Bank initiated recovery proceedings against Shaila Clubs. The Bank obtained recovery certificate from Deputy Registrar of Co-operative Societies, Mumbai, under Section 101 of the Maharashtra Co-operative Societies, 1960 (M.C.S. Act, 1960) and filed an application before the Additional Chief Metropolitan Magistrate, Esplanade, Mumbai, seeking physical possession of the Shaila Clubs’ land and property.

By order dated 22 October 2018, the Additional Chief Metropolitan Magistrate allowed the Application preferred by the Bank and authorised the recovery officer to take over possession of the properties of Shaila Clubs under police assistance. Savannah filed Writ Petition No.14517 of 2018 in the Court challenging the Magistrate’s order dated 22 October 2018. By order dated 20 December 2018, this Court granted interim stay to the Magistrate’s order on condition of deposit of amount of Rs.50,00,000/- by Savannah. It appears that Savannah filed application bearing C.C. No.1052/MA/2019 before the Chief Metropolitan Magistrate seeking recall of the order dated 22 October 2018.

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The application was however rejected by the  Magistrate by order dated 19 June 2019. Savannah filed Writ Petition No.7542 of 2019 before this Court challenging Magistrate’s order dated 19 June 2019. For showing bonafides, Savannah was made by this Court to deposit an amount of Rs.2 crores. On condition of such deposit, this Court stayed possession order passed by the Magistrate. By order dated 17 January 2020, Writ Petition No.7542 of 2019 was allowed by setting aside Magistrate’s order dated 19 June 2019 and the matter was remanded before the  Magistrate for fresh decision in accordance with law.

Shaila Clubs was admitted into Corporate Insolvency Resolution Process (CIRP) in pursuance of order passed by the National Company Law Tribunal (NCLT) on 29 October 2021 in pursuance of Petition filed under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC) by legal representatives one Mrs. Meghna Rajeev Kore. Accordingly, Resolution Professional was appointed in respect of Shaila Clubs.  Bank filed its claim with the Resolution Professional and became part of committee of creditors. Savannah also filed its claim against Shaila Clubs.

It appears that the suspended director of Shaila Clubs Mr. Amit Kore complained to the Liquidator vide letter dated 17 November 2022 objecting to assignment of loan of Shaila Clubs to Savannah. The Bank addressed letter dated 17 November 2022 to the Resolution Professional requesting him not to act on the Minutes of Order and asserting that the mortgaged property of Shaila Clubs was still with the Bank. The Bank thereafter wrote to Shaila Clubs on 18 November 2022 referring to the objections of Mr. Amit Kore and stating that the OTS offered to Savannah has been cancelled and returning the amount of Rs.87,92,000/- to Savannah. However, Savannah refused to accept the demand drafts. The Liquidator also filed an affidavit in Writ Petition No.11610 of 2022 bringing on record the subsequent events and recorded that the decisions to offer benefit of OTS scheme to Savannah and to enter into consent terms were incorrect.

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The Petitioner and Respondent No. 1 and 2 have settled their disputesout of Court. By an order dated 28th of July 2022, the learned Deputy Registrar (Urban Banks), Cooperative Societies, Maharashtra State, Pune, has extended the application of the One Time Settlement Scheme dated 6th of June 2022 to the Respondent No. 2 Bank. Accordingly, among other defaulters, Respondent No. 2 has offered the benefits of the same to Respondent No. 3 as also to the Petitioner since the Petitioner is in possession of the Premises. As against the actual dues of INR 8,97,73,098/- as of today, after the credit of INR. 2,50,00,000/- by the Petitioner under orders passed by this Hon’ble Court, the Petitioner has offered to deposit a further sum of INR. 87,92,000/-only.

Given the above, the erstwhile Directors of Shaila Clubs have beenconstrained to take several steps in law in order to protect illegal occupation of the property as well as the other Financial Creditors, including the Bank, from the fraudulent claims of Savannah Lifestyle. In such circumstances, it is baffling to note that your good office has proceeded to engage with Savannah Lifestyle and agreed to an OTS with Savannah Lifestyle, by intentionally excluding Shaila Clubs. The ulterior motives of all concerned and the male fide acts/omissions of the parties to this scheme are very evident, and not far to seek.

A single bench of Justice Sandeep V. Marne viewed that mere delay, not involving latches, acquiescence or estoppel, would not prevent this Court from exercising inherent power of recalling its order. The inherent power of the Court in recalling an order is not circumscribed by considerations of delay. Once this Court concludes the compromise is unlawful and could not have been acted upon by this Court, mere delay would not be a hurdle for this Court to recall and/review the recording of unlawful compromise.

The court viewed that the order passed by the Court on 21 October 2022 on the basis of Minutes of Order dated 20 October 2022 deserves to be recalled both in application filed by the Bank as well as in the Review Petitions filed by Shaila Clubs and its suspended director.

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