Cochin International Airport Ltd. vs Presiding Officer and Others

Badar Durrez Ahmed, J.—This review application has been filed by Housing & Urban Development Corporation Limited (hereinafter referred to as "HUDCO"), which was arrayed as Respondent No. 2 in the Writ Petition (Civil) No. 6531/2008, which had been filed by Cochin International Airport Limited (hereinafter referred to as "CIAL") in which the judgment and / or order dated 23.12.2009 was delivered by this Bench. HUDCO seeks a review of the said judgment dated 23.12.2009 by way of the present application. HUDCO had filed a SLP before the Supreme Court being SLP (Civil) 3836/2010 seeking special leave to appeal from the said judgment dated 23.12.2009. However, the said SLP was dismissed by the Supreme Court on 15.02.2010 by a non-speaking order. Notwithstanding the dismissal of the said special leave petition, HUDCO has filed the present review application alongwith an application for condonation of delay which has been condoned by our order dated 07.05.2010.

The plea taken by Mr A.S. Chandhiok, the learned Additional Solicitor General, appearing on behalf of HUDCO, was that the application (O.A. No. 10/2006) filed by HUDCO u/s 19 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (hereinafter referred to as "the said Act") contained three prayers. The first prayer was with regard to delivery of shares. In the alternative, recovery of a sum of Rs. 780 crores representing the value of shares was sought. The third prayer was for a decree / certificate in favour of HUDCO and against CIAL for an amount of Rs. 2,28,64,566/- allegedly representing the balance amount plus interest and penal interest thereon till 28.02.2006 and interest thereon @ 11% per annum with quarterly rests from 01.01.2006 till the date of payment and additional interest from 01.03.2008. According to Mr Chandhiok, while the impugned order decided the issue with regard to the first prayer by holding that debt as defined in Section 2(g) of the said Act, did not include a claim to share certificates, the impugned judgment failed to address the aspects covered by the second and third prayers in the said O.A. 10/2006 and thus there was a mistake and / or error apparent on the face of the record in dismissing the entire O.A. No. 10/2006 (HUDCO v. Cochin International Airport Limited) pending before the Debts Recovery Tribunal (hereinafter referred to as "DRT") as being not maintainable. It was contended that while the impugned decision conclusively dealt with the issues and aspects covered under prayer (a) of O.A. No. 10/2006, prayers (b) and (c), which were in money terms, had not been considered by this Court inasmuch as the same were not brought to the notice of this Court. It was contended by Mr Chandhiok that prayers (b) and (c) of O.A. No. 10/2006 were independent of prayer (a) which pertained to the delivery of shares and, therefore, the application (O.A. No. 10/2006), even though it was not maintainable insofar as prayer (a) was concerned, could be maintained in respect of the remaining prayers, namely, prayers (b) and (c). Thus, according to Mr Chandhiok, this was a fit case for review of the impugned judgment dated 23.12.2009.

Mr Chandhiok also submitted that even though the Supreme Court had dismissed the SLP filed by HUDCO against the impugned judgment dated 23.12.2009, the present review petition was permissible and maintainable provided the grounds for review are made out. He submitted that the dismissal of the SLP by the Supreme Court did not amount to a merger of the judgment of this Court dated 23.12.2009 with the order of dismissal of the Supreme Court dated 15.02.2010. Consequently, he submitted that notwithstanding the dismissal of the SLP by the Supreme Court, it is permissible for this Court to entertain the present review petition. In support of this contention, Mr Chandhiok referred to the following two decisions of the Supreme Court:

i) V.M. Salgaocar and Bros. Pvt. Ltd. Vs. Commissioner of Income Tax,

ii) Kunhayammed and Others Vs. State of Kerala and Another,

Mr Chandhiok then referred to paragraphs 49 and 50 of the judgment dated 23.12.2009 which read as under:

So, while "debt" has to be considered in its widest amplitude, it cannot transcend the boundaries specified in Section 2(g) itself. The said section describes "debt" as any "liability" etc.,. We have seen that shares cannot be considered as liabilities. Therefore, a claim to issuance of shares or delivery of shares cannot be regarded as an action seeking the recovery of a "debt" as defined in Section 2(g) of the said Act.

Recapitulating the facts of the present case, we find that a sum of Rs 175.07 crores was admittedly due from the Petitioner to HUDCO as on 31.12.2002. Part of this "debt" was re-worked and re-scheduled as a Package Loan by virtue of the Package Loan Agreement of 07.03.2003. The balance, a sum of Rs 52 crores was agreed to be converted into equity, representing 26% of the equity of the Petitioner. Thus, if the agreement were to be worked through, "debt" to the extent of Rs 52 crores would stand converted into equity. It would, then, no longer remain "debt". But, as the shares have not been issued / delivered, HUDCO filed the OA seeking, inter alia, the issuance / delivery of the shares. HUDCO can either have a claim to the "debt" or to the shares, not to both. If they insist on maintaining their claim for shares then their claim would not be a claim for recovery of a "debt" but, would be one seeking performance of a contractual obligation. Their remedy would, therefore, lie elsewhere and, not before the Debts Recovery Tribunal.

Referring to the said paragraphs, Mr Chandhiok submitted that it is clear that a claim to issuance of shares or delivery of shares cannot be regarded as an action seeking the recovery of "a debt" as defined in Section 2(g) of the said Act. He submitted that in the present review application that part of the decision is not under challenge. He further submitted that in paragraph 50 of the said judgment dated 23.12.2009 itself, it has been mentioned that "HUDCO" can either have a claim to the "debt" or to the "shares", not to both. He, therefore, contended that once the claim to the shares has been held to be outside the purview of "debt" as appearing in Section 2(g) of the said Act, the application filed on behalf of HUDCO before the DRT could be considered de hors the prayer in respect of shares. He further submitted that, therefore, the application before the DRT ought not to have been thrown out log, stock and barrel as being not maintainable.

Mr Andhyarujina, the learned senior counsel appearing on behalf of CIAL, submitted that the arguments raised by Mr Chandhiok were clearly untenable. He submitted that prayer (b) of O.A. No. 10/2006 filed by HUDCO before the DRT was not independent of prayer (a). He submitted that while prayer (a) sought delivery of 520 lakh shares of Rs. 10 each, prayer (b), in the alternative, sought a decree / certificate to the tune of Rs. 780 crores being the value of the said 520 lakh shares calculated @ 150 per share as on 31.01.2006 plus dividend or any other right from the date of issue alongwith interest at the rate of State Bank of India Prime Landing Rate with quarterly rests. Clearly, according to Mr Andhyarujina, prayer (b) was not independent of prayer (a) and was compensation in substitution of the alleged non-delivery of shares claimed under prayer (a). Thus, according to him, prayer (b) was just another face of prayer (a) and that, by virtue of prayer (b), HUDCO was asking for nothing but the market value of the shares which it had sought delivery of in prayer (a).

Mr Andhyarujina further submitted that insofar as prayer (c) is concerned, the claim was for an amount of Rs. 2,28,64,566/- representing the balance amount plus interest. He submitted that the Petitioner, as would be apparent from paragraph 8 of the judgment dated 23.12.2009, had already deposited with the DRT a sum of Rs. 73 crores which had represented the entire balance plus interest up to 27.06.2006 and, therefore, the entire liability of CIAL towards HUDCO stood totally discharged.

Mr Andhyarujina also took the plea that it was not fair on the part of HUDCO to have filed the present review application when these very pleas had been taken before the Supreme Court by HUDCO and, particularly, in grounds IX and XII of the SLP filed by it. Mr Andhyarujina also referred to the affidavit dated 28.05.2010 affirmed by Mr R. Venkiteswaran, who is the Executive Director (Finance) and Company Secretary of CIAL. In the said affidavit, it has been stated in paragraph 3, that in SLP No. 3836/2010, HUDCO had contended that prayer 6(b) and (c) of O.A. No. 10/2006 before the DRT could not be excluded from the jurisdiction of the DRT and that the fact that HUDCO had raised this contention, was evident from the various paragraphs of the SLP and, particularly paragraphs (ix) and (xii) and ground IX thereof. It was also stated in paragraph 3 of the said affidavit that this contention was specifically raised and argued by the counsel for the applicant at the time of admission of the SLP and that the deponent was present in the Supreme Court when the SLP was argued. It was contended by Mr Andhyarujina that in the rejoinder affidavit filed on behalf of CIAL, it has been admitted that HUDCO in its SLP had, inter alia, contended that prayers 6 (b) and (c) of O.A. No. 10/2006 before the DRT could not be excluded from the jurisdiction of the DRT. HUDCO has also not specifically denied the statement made by the said Mr Venkiteswaran that the contention had been specifically raised and argued by the counsel for HUDCO at the time of admission of the special leave petition. Thus, it was contended by Mr Andhyarujina that not only is the review petition without any merit, but that once such arguments had been raised before the Supreme Court and the SLP was dismissed, it was not fair on the part of HUDCO to have filed the present review petition. In any event, it was submitted that there is no mistake or error apparent on the face of the record or existence of any other sufficient reason for review of the judgment dated 23.12.2009 and, consequently, the review application ought to be dismissed with costs.

The first issue which arises is - whether a review is permissible after the dismissal of a SLP by the Supreme Court, Insofar as this aspect is concerned, although such a practice may be distasteful leading to multiplicity of proceedings, it is not strictly impermissible in law. The decisions relied upon by Mr Chandhiok [V.M. Salgaocar and Bros (supra) and Kunhayammed and Ors. (supra)] are clear on this aspect of the matter. The logic is that the exercise of jurisdiction conferred on the Supreme Court by Article 136 of the Constitution of India consists of two steps - (1) granting special leave to appeal; and (2) hearing the appeal. While hearing the petition for special leave to appeal, as observed in Kunhayammed and Ors. (supra), the Supreme Court is called upon to see whether leave is to be granted or not and, in doing so, the Supreme Court does not exercise its appellate jurisdiction, but it merely exercises its discretionary jurisdiction to grant or not to grant leave to appeal. A dismissal of the SLP is merely an expression of opinion by the Supreme Court that a case for invoking the appellate jurisdiction of the Supreme Court was not made out. Therefore, the order of the High Court, which is impugned before the Supreme Court in the special leave petition, in such a case, does not merge with the in limine order of dismissal passed by the Supreme Court at the stage of admission of the special leave petition. In V.M. Salgaocar & Bros (supra), the Supreme Court held that the doctrine of merger does not apply in the case of the dismissal of the SLP under Article 136 of the Constitution of India. This was re-affirmed in Kunhayammed and Ors. (supra). In the latter decision, it was also conclusively held as under:

The doctrine of merger and the right of review are concepts which are closely interlinked. If the judgment of the High Court has come up to this Court by way of a special leave, and special leave is granted and the appeal is disposed of with or without reasons, by affirmance or otherwise, the judgment of the High Court merges with that of this Court. In that event, it is not permissible to move the High Court by review because the judgment of the High Court has merged with the judgment of this Court. But where the SLP is dismissed - there being no merger, the aggrieved party is not deprived of any statutory right of review, if it was available and he can pursue it. It may be that the review court may interfere, or it may not interfere depending upon the law and principles applicable to interference in the review. But the High Court, if it exercises a power of review or deals with a review application on merits - in a case where the High Court''s order had not merged with an order passed by this Court after grant of special leave - the High Court could not, in law, be said to be wrong in exercising statutory jurisdiction or power vested in it.

Thus, we agree with Mr Chandhiok that notwithstanding the dismissal of HUDCO''s SLP on 15.02.2010 by the Supreme Court, it is permissible for this Court to entertain the present review application and that there is no bar in doing so.

This takes us to the next aspect and that is - whether HUDCO has made out a case for review or not. It is obvious that the judgment would be reviewed only if HUDCO is able to point out some mistake or error apparent on the face of record or if there exists any other sufficient reason for reviewing the same. For this purpose, it would be necessary to set down the factual backdrop. In O.A. No. 10/2006 filed u/s 19 of the said Act, HUDCO, inter alia, claimed the following reliefs:

a) To direct the Defendant No. 1 to deliver/issue share certificates of 520,00,000 shares of Rs. 10/- each (equivalent to 26% equity of the authorized capital of the Defendant No. 1 company) alongwith all other benefits accrued out of such shares since the said agreement for which the entire agreed consideration of Rs. 52 crores has been paid to the Defendant No. 1 company as on 31.12.2002 as per the Package Loan Agreement dated 07.03.2003;

b) In alternative to pass a decree/certificate to the tune of Rs. 780,00,00,000 (Rupees Seven Hundred and Eighty Crores Only) being the value of 520,00,000 shares (being 26% of the equity in Defendant No. 1) @ Rs. 150/- as on 31.01.2006 plus dividend or any other right from the date of issue along with interest at the rate of SBI PLR with quarterly rest against the Defendants;

c) Pass a decree/certificate in favour of the applicant and against the Defendant No. 1 for an amount of Rs. 2,28,64,566/- (Rupees Two Crores Twenty Eight Lakh Sixty Four Thousand Five Hundred and Sixty Six only) (being the balance amount plus interest and penal interest thereon till 28.02.2006) and interest thereon @ 11% p.a. with quarterly rests from 01.03.2006 till the date of payment and additional interest from 01.03.2006.

CIAL had filed an application being I.A. No. 458/2006 in the said O.A. No. 10/2006 before the DRT, wherein it had taken the following pleas:

(a) the DRT at Delhi lacked territorial jurisdiction;

(b) no cause of action had accrued to the Respondent inasmuch as the entire loan amount stood paid on account of exercise of the right of foreclosure; and

(c) the application u/s 19 of the said Act for delivery of shares was not maintainable inasmuch as the said relief did not amount to recovery of a debt as defined in Section 2(g) of the said Act.

It was also contended on the part of CIAL that HUDCO only had the right of recovery of a sum of Rs. 175.07 crores as per the Package Loan Agreement of 07.03.2003 between the parties and since CIAL had tendered the entire balance due on account of the loan transaction, the Respondent had no subsisting right under the loan agreement. The application filed by CIAL was dismissed by the DRT by virtue of its order dated 12.02.2008. The contentions raised by CIAL with regard to territorial jurisdiction, the cause of action and maintainability were rejected. Being aggrieved by the said order dated 12.02.2008, CIAL filed the said writ petition [WP(C) 6531/2008] in which the main ground urged was with regard to the scope and meaning of the word "debt" as defined in Section 2(g) of the said Act. The detailed facts, which surround the Package Loan Agreement dated 07.03.2003, are set out in the judgment dated 23.12.2009 and need not be repeated herein. It would be sufficient to note that the rights and liabilities of HUDCO and CIAL got crystallized in the said Package Loan Agreement of 07.03.2003. It was an admitted position that as on 31.12.2002, a sum of Rs. 175.07 crores was outstanding towards HUDCO. It was agreed that the said outstanding amount would be converted into a package loan for Rs. 175.07 crores with interest at 11% per annum to be repaid from the quarter ending 31.03.2003 till 30.06.2011 in 34 quarterly installments. The first installment was of Rs. 70 crores and fell due on 31.03.2003. The other 33 installments were of Rs. 318.04 lakhs each. After the execution of the Package Loan Agreement, CIAL remitted an amount of Rs. 120 crores to HUDCO in March 2003 itself which represented the payment of the first installment of Rs. 70 crores as also the value of the next 16 quarterly installments of Rs. 3.184 crores each. In other words, by the payment of Rs. 120 crores, in March 2003 itself, the package loan of Rs. 175.07 crores stood repaid up to the 17th installment, which, as per the repayment schedule was payable only by 31.03.2007. According to CIAL, as per Clause 3 of the Package Loan Agreement, a sum of Rs. 52 crores had been earmarked by it towards the proposed equity participation by HUDCO in the share capital of CIAL. In this manner, according to CIAL, as on March 2003 itself, only an amount of Rs. 3.07 crores was outstanding towards the total dues of a sum of Rs. 175.07 crores and was chargeable to interest @ 11% in terms of the said agreement.

According to CIAL, because HUDCO failed to comply with the statutory requirement with regard to obtaining the requisite permission and clearance from the Government and the Governmental agencies, by a letter dated 16.09.2004 it informed HUDCO that the offer of the Petitioner for conversion of part of loan amount to the extent of Rs. 52 crores into equity stood withdrawn. Consequently, CIAL tendered an amount of Rs. 63,49,00,508 to HUDCO in the following manner:

1) Demand Draft No. 112472 dated 16.09.2004 for Rs. 30,00,00,000/- drawn on the Union Bank of India, Service Branch, New Delhi;

2) Cheque No. 425111 dated 16.09.2004 for Rs. 33,49,00,508/- drawn on Punjab National Bank.

The said amount of Rs. 63,49,00,508/- was towards settlement of the outstanding loan with interest. HUDCO, however, declined to accept the same and returned the said draft and cheque by their letter dated 23.09.2004. According to CIAL, on tendering the total amount of Rs. 63,49,00,508/- by CIAL on 16.09.2004, the entire liability of CIAL towards HUDCO stood discharged, although the Petitioner had ample time up to June, 2001 to repay the entire outstanding loan in terms of the Package Loan Agreement and, thus, CIAL had time, in exercise of its right to foreclose the loan in terms of Clause 12 of the Package Loan Agreement.

It is in this backdrop that HUDCO filed the petition u/s 19 of the said Act before the DRT claiming, inter alia, delivery / issuance of share certificates in respect of 520 lakh shares in CIAL. It may also be relevant to note that during the pendency of the application filed by CIAL being I.A. No. 458/2006 before the DRT, CIAL had deposited an amount of Rs. 73,31,49,763/- through a demand draft bearing No. 383217 dated 23.06.2006 before the DRT representing the entire balance amount (inclusive of the said amount of Rs. 52 crores) plus interest up to 27.06.2006.

In the first instance, HUDCO, in prayer (a) of O.A. No. 10/2006 had sought the delivery / issuance of 520 lakh shares. Insofar as that prayer is concerned, the judgment dated 23.12.2009 makes it clear that it does not fall within the purview of "debt" as appearing in Section 2(g) of the said Act and, therefore, the HUDCO''s application to that extent was clearly not maintainable. In the alternative, HUDCO in para (b) of the said O.A. No. 10/2006 had sought a decree / certificate to the extent of Rs. 780 crores representing the value of the said 520 lakh shares plus dividends etc. It is obvious that this alternative prayer is nothing but the other side of the coin. This alternative prayer seeking Rs. 780 crores is merely the alleged money value of the 520 lakhs shares. When HUDCO cannot have a claim to the shares in proceedings under the said Act, it cannot also have a claim to the money value of the shares in the same proceedings. As pointed out in the judgment dated 23.12.2009, HUDCO has already been granted liberty to pursue its remedy with regard to shares / their money value for alleged breach of contract / obligation before the appropriate forum in accordance with law. Both the prayers (a) and (b) go together. It is obvious that prayer (b) has reference to the shares which are mentioned in prayer (a) and, therefore, prayer (b) cannot be divorced from prayer (a). Consequently, the plea taken by Mr. Chandhiok on behalf of HUDCO that prayer (b) is independent of prayer (a) and can be maintained even though prayer (a) is not maintainable before the DRT in debts recovery proceedings under the said Act, is not tenable.

Insofar as prayer (c) is concerned, that, once again, represents "the balance amount". This also is not an independent prayer and is dependent on the result of prayers (a) and (b). By its very nature, it represents "a balance amount" and, therefore, has a connection with the amounts claimed under prayers (a) and (b). Therefore, we do not agree with the submission of Mr. Chandhiok that the prayers (b) and (c) are distinct and independent from prayer (a). When Mr. Chandhiok referred to paragraphs 49 and 50 of the said judgment dated 23.12.2009, in order to advance his point that even this Court recognized that HUDCO could either have a claim to the "debt" or to the "shares" and not to both, what Mr. Chandhiok was submitting was that since this Court had taken the view that the claim to the shares was not maintainable before the DRT, at least the claim to the debt would have been maintainable and, therefore, the entire O.A. No. 10/2006 ought not to have been thrown out and ought to have been continued insofar as prayers (b) and (c) were concerned, because they were in money terms. This argument may, at first blush, appear to be very attractive, but on deeper consideration, it has a flaw and, that is, that HUDCO has not given up its claim to the shares, neither in the original writ petition nor in the review application. Without giving up its claim to the shares, it cannot maintain its claim to an alleged "debt" separately.

There is also another reason as to why review of the impugned judgment dated 23.12.2009 is not called for in the present case. The main point urged before us at the time of the arguments of the writ petition was, as noted in paragraph 1 of the judgment dated 23.12.2009 itself, as to whether "debt" as defined in Section 2(g) of the said Act would include a claim to share certificates. Even in its written arguments filed before us, the plea with regard to prayers (b) and (c) had not been stressed upon. Once a decision has gone against HUDCO on the main plea of delivery of shares not being covered within the expression "debt" as appearing in Section 2(g) of the said Act, it appears to us that HUDCO is making a last ditch effort by way of this review application to save its O.A. No. 10/2006, which has been held by us to be not maintainable. Unfortunately for HUDCO, no mistake or error apparent on the face of the record has been pointed out insofar as the judgment dated 23.12.2009 is concerned. Nor have they been able to show any other sufficient reason for us to review the judgment dated 23.12.2009.

For all these reasons, the review application is dismissed with costs in favour of CIAL and against HUDCO.