C.K. THAKKER, C.J.

Rule. Shri Janak Dwarkadas appears and waives service of rule on behalf of the Respondents. In the facts and circumstances, the matter is taken up for final hearing.

2.This Petition is filed against an order passed by the Presiding Officer of the Debt Recovery Tribunal on 12th July, 2002 in applications below Exhibits 14 and 15 in O.A. No. 2617 of 1999 and confirmed by the Debt Recovery Appellate Tribunal in Miscellaneous Appeal No. 356 of 2002 on 13th November, 2002.

3.In a suit by the Appellant - Bank this Court on June 26, 1996 issued certain directions. Paragraph 2 of the said order reads as under:

"2. The motion is for appointment of Receiver in respect of all the property. While giving reply to the arguments of the Plaintiff, the counsel for the defendant agreed to give Bank Guarantee within four weeks from today of a Nationalised Bank for a sum Rs. 1.10 Crores of assurance that Bank guarantee will be enhanced after every five years considering the pendency of the suit and accumulation of the interest."

4.It appears that the suit was transferred to the Debt Recovery Tribunal. Two applications came to be filed before the Debt Recovery Tribunal, one by the Bank for enhancement of the Bank Guarantee as the period of five years was over and another by the Respondents for relieving of the payment of enhancement of Bank Guarantee as well as continuation of Bank Guarantee.

5.The Tribunal by an order, dated July 12, 2002 allowed the application of the debtor and rejected the application of the Bank:

6.In paragraph 2, the Tribunal stated:

"2. The Order dated 26.06.96 requiring the Defendants to furnish a Bank Guarantee is hereby substituted by an Order of Injunction over the piece of land which is converted as non-agricultural, from out of the entire land in possession of the Defendant shown in the Map Exh. "C". The Defendants are hereby restrained from in any manner disposing of, alienating, transferring, encumbering, parting with possession of or creating any other right, title or interest in respect of non-agricultural land from out of the land shown in Map. Exh. "C" to the Application Exh.14. The Defendants are however at liberty to develop the said portion as per sanctioned plans, if there be any, but they would be able to sell or transfer the same or part of it only after depositing the amount/ proceeds received from such transaction with the tribunal that too after obtaining the prior permission of this Tribunal."

7.Being aggrieved by the said order, the Bank approached the Appellate Tribunal. The Appellate Tribunal confirmed the order passed by the Debt Recovery Tribunal which is challenged in the present Petition.

8.The learned counsel for the Petitioner submitted that both the Tribunals proceeded on wrong basis. It was submitted that in State Bank of India vs. Trade Aid Paper and Allied Products (India) Pvt. Ltd. (FB) (AIR 1995 Bom 268 [LQ/BomHC/1995/296] ), the Full Bench of this Court has held that in suits of banks and financial institutions for recovery of loans, normally a Receiver should be appointed. Hence, in a suit filed by the bank, a prayer for appointment of Receiver was made. The prayer would have been granted by the Court, but for the fact that a statement was made on behalf of the debtor that he would give Bank Guarantee of a nationalized bank for a sum of Rs. 1.10 Crores for which the suit was filed. If, in the light of the above fact, Receiver was not appointed and Bank Guarantee was ordered to be furnished, the said order was clearly legal, valid and in consonance with law. Taking into consideration the fact that a disposal of suit would take time, a further direction was issued that such a Bank Guarantee would be enhanced after five years considering the pendency of the suit and accumulation of interest. It was, therefore, prayed by the Bank for enhancement of the Bank Guarantee.

9.The Debt Recovery Tribunal proceeded on the basis that though it was not prayed by the Bank, a statement was made by the Defendant that it would furnish a Bank Guarantee. It also observed that the Bank wanted to settle the matter out of Court. Considering the equitable aspect, the Tribunal refused to grant the prayer made by the Bank. Instead, the direction extracted hereinabove was issued by the Tribunal.

10.The Appellate Tribunal, submitted the learned counsel for the Petitioners, committed the same mistake. It also observed that the Defendants offered the Bank Guarantee of their own because of the assurance given by the Applicant Bank to settle the matter out of Court which was the basis of the order passed by the Debt Recovery Tribunal. It further observed that the Bank had never asked for any Bank Guarantee, and it was the Defendant who had preferred furnishing such Guarantee. The counsel contended that both the orders are not in consonance with law and they are liable to be set aside.

11.Mr. Dwarkadas, learned senior advocate appearing on behalf of the Respondents, on the other hand, supported the order passed by the Tribunals. He submitted that it is an equitable order. Considering the rival contentions of the parties and protecting the interest of the Bank, if certain directions were issued by the Debt Recovery Tribunal and not disturbed by the Appellate Tribunal, it cannot be said to be a fit case to exercise extra ordinary powers under Article 226 or supervisory jurisdiction under Article 227 of the Constitution of India. It was also submitted that while passing the order, subsequent development and change of circumstances were also taken into account by both the Tribunals. Now, there is no impediment so far as the development is concerned. Considering such change, orders have been made by the Tribunals. Finally, it was submitted that if the orders will be set aside, serious prejudice will be caused to the Respondents. On the other hand, if the orders will be confirmed, the Bank will not be prejudiced at all.

12.Having considered rival contentions of the parties, in our opinion, both the Tribunals proceeded on a wrong basis. At the initial stage, an interim order was passed when the suit was filed by the Bank in this Court. In our opinion, the Court was right in not appointing Receiver since it was conceded and agreed by the Defendant to give Bank Guarantee within the stipulated period for a sum of Rs.1.10 Crores for which the suit was filed. The Court also took note of the fact that the suit might take some time. A provision was, therefore, made for enhancement of Bank Guarantee after five years. In the order there is no whisper about the settlement by the Bank with the Debtor. It, therefore, cannot be said that such a statement was made by the Defendant on the basis of assurance by the Bank that it would settle the matter with the Defendant and but for such talk, no order could have been passed. On the contrary, we are prima facie of the view that in such a situation following the decision in Trade Aid Paper and Allied Products (India) Pvt. Ltd., (supra) the Court would have considered the prayer of the Bank for appointment of Receiver. Hence, the grounds weighed with the Debt Recovery Tribunal as well as the Appellate Tribunal do not impress us.

13.Obviously, in the circumstances it was perfectly reasonable and proper on the part of the Bank to ask for enhancement of Bank Guarantee. The order was self operative and as soon as five years were over, the amount was to be enhanced in the light of the order passed on 26th June, 1996. In any case, when the application was made by the Bank, it was to be decided considering the order passed on 26th June, 1996.

14.In our view, the application made by the debtor was ill conceived and ought not to have been granted. Regarding change of circumstances, equity had been taken into account for not appointing the Receiver and allowing the Defendant to furnish Bank Guarantee and no orders could have been made in the present proceedings. Both the orders are, therefore, liable to be quashed and set aside and the order passed on 26th June, 1996 by this Court has to remain in force till the disposal of Original Application.

15.In the circumstances, the Petition is allowed. Rule is made absolute. The orders passed by the Debt Recovery Tribunal and the Debt Recovery Appellate Tribunal are hereby quashed and set aside. The Application made by the Bank for enhancement of Bank Guarantee is hereby allowed and the order passed by the Tribunal on the application of the debtor is quashed. So far as a sum of Rs. 1.10 Crores is concerned, the Bank Guarantee which had already been furnished in pursuance of the order passed by this Court on 26th June, 1996, will be renewed by the debtor till the disposal of the suit. As far as enhancement is concerned, the application is allowed and the debtor will furnish enhanced Bank Guarantee as per the said order which will remain in force till the disposal of the Original Application. Such enhanced Bank Guarantee will be furnished within a period of eight weeks. If the order is not complied with, it is open to the Bank to take consequential action.

16.The learned counsel for the Respondents prays that the order passed by us may be kept in abeyance for some time so as to enable the Respondents to approach the Supreme Court.

17.So far as the Bank Guarantee of Rs.1.10 Crores is concerned, the order was very much there, and the Bank Guarantee had already been furnished. There is, therefore, no question of stay as far as that part is concerned.

18.Regarding enhancement of Bank Guarantee, as prayed by the learned counsel for the Respondents, we have granted time of eight weeks to furnish such guarantee. Hence, no further order is necessary. The learned counsel for the Respondents under the instructions of the Respondent stated that the Respondent is not in position to furnish enhanced Bank Guarantee.

Petition is accordingly allowed. Rule is made absolute with no order as to costs.