Allahabad High Court: The Impact Of Interim Orders Ceases Upon Final Order

Allahabad High Court: The Impact Of Interim Orders Ceases Upon Final Order

The Allahabad High Court has ruled that the impact and validity of any interim order would cease upon the issuance of the final order.

The Court referenced the case of State of U.P. v. Prem Chopra, where the Supreme Court established that when a stay is granted through an interim order and the petition is ultimately dismissed, the interim order becomes integrated with the final order. It was determined that the recipient of the interim order is obligated to pay interest on the withheld or unpaid amount upon the vacation of the interim order.

M/s Durga Rice & Dall Mills (respondent no. 1), through its director, obtained a loan from Banaras State Bank Limited (later merged with the Bank of Baroda) amounting to Rs. 12 lacs, with the limit being increased over time. Various documents, including promissory notes and security agreements, were executed in favor of the bank. Upon default in repayment, the bank initiated Original Application No. 111 of 1999 before the Debt Recovery Tribunal (DRT) for recovery of dues amounting to Rs. 38,36,871. The DRT ruled in favor of the bank, affirming its entitlement to recover interest at a rate of 18.5% per annum with quarterly rest from March 22, 1999, until the realization of the decreed amount. Additionally, the respondent company was prohibited from disposing of both movable and immovable properties mortgaged with the bank.

Following this, the borrower submitted an application under Section 22(2)(g) seeking the restoration of the original case. Section 22(2)(g) grants authority to the DRT/DRAT to annul any ex-parte order or a default dismissal order. However, the application was rejected, prompting the borrower to appeal to the DRAT, where proceedings were halted by an interim order.

Before the issuance of the interim order, the auction sale had already taken place. However, as the recovery officer had not been notified of the interim order, the auction proceeded and was subsequently confirmed. This confirmation was contested under Section 30 (Appeal against the Order of Recovery Officer) of the Act, citing concerns regarding the verification of ownership and title prior to the disposal of the properties.

The petitioner, who was the auction purchaser, argued that the appeal against the recovery officer's order was not sustainable since the borrower was aware of the entire auction and attachment process but did not raise any objections. Nonetheless, the DRT nullified the entire auction proceedings. Subsequently, the auction purchaser approached the High Court seeking redress.

The petitioner's counsel argued that the appeal filed before the DRT was not valid because the orders regarding attachment, proclamation of sale, auction proceedings, and sale of immovable properties were not contested before challenging the Recovery Officer's confirmation of the sale. It was further argued that the respondent-borrower failed to fulfil the mandatory pre-deposit requirement when filing the appeal.

Additionally, it was contended that the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, does not authorize the DRT to grant relief that has not been sought. It was argued that the petitioner, as a bona fide purchaser, was being unfairly burdened due to the borrower's errors.

It was contended that upon the dismissal of the appeal in which the interim order was issued, the interim order merged with the final order. Therefore, it was argued that once the appeal was dismissed, the auction should not have been set aside. Finally, it was submitted that the bank cannot unilaterally enter into a compromise with the judgment debtor after the auction has been finalized.

The Court noted that there was no request to nullify the auction proceedings presented at any juncture before the DRT. Furthermore, the Court determined that, given the non-fulfillment of the mandatory pre-deposit requirement, the appeal should not have been considered.

The Court affirmed that because no remedy against the auction proceedings was requested, such relief could not be awarded by the DRT. Citing Bharat Amratlal Kothari v. Dosukhan Samadkhan Sindhi, wherein the Supreme Court ruled that a petitioner must seek all the reliefs desired from the Court, The Court emphasized that a Court cannot provide a remedy that has not been explicitly sought in the petition.

Applying the doctrine of merger, the Court established that upon the dismissal of an appeal as withdrawn, any interim order issued becomes integrated with the final order of dismissal.

“Once the effect and operation of the interim order wipe out on the final order being passed thereon, all consequential proceeding goes. This vital aspect of the matter was brought to the notice of the Tribunal, but instead of taking note of the said fact, the appeal of the petitioner was dismissed on that ground, which cannot be permissible in law.”

Consequently, the writ petition was granted, and the DRT's order, which invalidated the auction, was overturned.