Central Bank of India Vs Premier Paper Products

IN THE DEBT RECOVERY APPELLATE TRIBUNAL AT CHENNAI

DATED THE 15^TH SEPTEMBER, 2004

PRESENT:  HON’BLE JUSTICE DR. PRATIBHA UPASANI

CHAIRPERSON

RA-12/2004

(IA-474/2003 in TA-1458/2002-DRT, Coimbatore)

BETWEEN:

Central Bank of India,

Variety Hall Road,

Coimbatore.

…  Appellant

            (Counsel:  Mr. S. Kothandaraman)

AND

1.  M/s. Premier Paper Products,

     By its Partner P. Nagarajan,

     (Now known as Premier Plass Pak Ltd.)

    

2.  P. Nagarajan

3.  P. Rajarathinam

4.  P. Ramamurthy

(Address of Respondents 1 to 4:  231, Pollachi Road, Coimbatore-641 021).

…  Respondents

            (Counsel:  Mr. M. Rajan for M/s. K. Chandrasekaran)

:  O R D E R  :

1.         Bank filed Suit OS No.454/1995 in the Sub-Court, Coimbatore, in the year 1995 which came to be transferred to DRT, Chennai, upon the establishment of DRTs under the RDDB&FI Act, 1993 and again re-transferred to DRT, Coimbatore, and re-numbered as TA No.1458/2002.

…2/

2.         This Appeal is filed by the appellant/Original applicant Central Bank of India being aggrieved by the judgement and Order dated 25.2.2004 passed by the Learned PO of DRT, Coimbatore, in IA-474/2003 in TA-1458/2002.  By the impugned Order the Ld. PO allowed the IA-474/2003 taken out by the defendants and disposed of finally the TA No.1458/2002 in view of the direction given by him in the IA. 

3.         Few facts which are required to be stated are as follows.

4.         Original Suit OS No.454/1995 was filed by the Bank against four defendants for recovery of amount to the tune of Rs.4,27,16,228.77p payable by the defendants to the applicant Bank for granting certain credit facilities to the defendants.  The defendants executed various security documents on several dates.  The defendants created mortgage by deposit of their title deeds on their properties with intent to create equitable mortgage as a security for due return of the loans availed by the defendant No.1 firm and its partners.  Since the defendants did not regularise their account the Suit as mentioned above, came to be filed by the Bank.  During the pendency of the proceedings, at one point of time, the defendants had given a proposal for settling the claim by offering Rs.464 lakhs but the settlement proposal did not come through.  One more attempt for settlement also failed.  Thereafter, the Reserve Bank of India came out with certain guidelines for settlement of NPA accounts.  In pursuance to the said guidelines the defendants submitted a revised proposal offering Rs.317.73 lakhs in full and final settlement of the Bank’s claim.  The proposal of the defendants was not accepted by the Bank and they were asked to improve their offer.  A revised offer was made of Rs.326.88 lakhs.  However, the revised proposal is still pending.  As per the Bank’s case, even that offer made by the respondents was subsequently withdrawn by them and another revised proposal was given by them on 30.4.2003 offering Rs.317.73 lakhs and to show their bonafides, deposited Rs.70 lakhs plus Rs.15 lakhs.  The said amount of Rs.70 lakhs was since withdrawn before the impugned Order dated 25.4.2004 came to be passed by the Ld. PO of DRT, Coimbatore.

…3/

5.         While the OA was still pending, the defendants made an application being IA No.474/2003 to the DRT praying for a declaration that they were entitled to the benefits of the RBI circular/guidelines and praying that the applicant Bank be compelled to accept the offer made by them of Rs.317.73 lakhs under the One Time Settlement (OTS) as per the Scheme of RBI. 

6.         The Bank’s contention was that the RBI guidelines were in the nature of guiding and not for governing.  The contention of the Bank was that the guidelines were not binding on the Bank.  It was contended that the guidelines are not issued under Section-21 (1) of the Banking Regulation Act, 1949 or under Section-47-A (1) (b) of the said Act.  It was contended on behalf of the Bank that in view of this, the Bank could not be compelled to accept the proposal made by the defendants.

7.         The Ld. PO of DRT, however, held that the guidelines were binding on the Bank and passed an Order directing the Bank to accept a sum of Rs.317.73 lakhs in full and final settlement of the Suit claim being the minimum of the NPA as mentioned in the guidelines dated 29.1.2003.  IA-474/2003 which was made by the defendants was accordingly allowed and since direction was given to the Bank to accept the said amount of Rs.317.73 lakhs in full and final settlement, without adjudication the Learned PO closed and disposed of the TA in view of the direction given by him in IA-474/2003. 

8.         I have heard Mr. S. Kothandaraman, Advocate for the appellant Bank and Mr.M. Rajan, Advocate for the respondents.  I have also gone through the proceedings and the Case law which was submitted across the bar, and in my view, the Ld. PO has committed an error in holding that the guidelines given by the RBI under the OTS Scheme are binding on the bank.

9.         I find myself in agreement with the submission made by the Advocate appearing for the Bank that the guidelines are there to guide and not to govern.  Reference can be usefully made to the decision of the Allahabad High Court reported in 2004(3) CCC 165 (AIL) (Sardar Prem Singh Vs. Bank of Baroda).  The Division Bench of the Allahabad High Court in this case has held that the guidelines for recovery of non-performing assets do not confer right on a party to get one time settlement and that guidelines are purely administrative instructions which are not enforceable by Court of law.

10.       I am in respectful agreement with the observations made by the High Court. Reference can be also usefully made to the judgement delivered by the previous Chairperson of this Appellate Tribunal in Appeal RA No.7/2003 in Appeal-1/2002 in OA-878/1995 (Sri Raghavendra Theatre Vs. Bank of India).  In this matter, the late Justice Smt. A. Subbulakshmy has observed that if default is committed by the appellant in terms of the compromise then the compromise has to be treated as broken and the terms of the compromise is no longer binding on the Bank.

11.       In the present case at hand also, the respondents defendants have not kept their words by abiding to the terms of the compromise proposal.  The payment was not made in time and as observed earlier, it cannot be said that the guidelines are binding upon the Bank even though they are prejudicial to its interests.  The Ld. PO ought not to have compelled the Bank to accept the proposal and dispose of the TA itself without adjudicating upon it.  The impugned Order will have, therefore, to be set aside and the appeal filed by the Bank will have to be allowed.  Accordingly, following Order is passed.

12.       Appeal RA-12/2004 filed by the Central Bank of India is allowed.  The matter is remanded back to the Learned PO of DRT, Coimbatore, for deciding the OA in accordance with law on its own merits.

(Dictated to PS & the transcript corrected, pronounced & signed by me today the 15^th September, 2004).

                                                                                                                        Sd/-

[ JUSTICE  DR. PRATIBHA UPASANI ]

CHAIRPERSON