IN THE DEBT RECOVERY APPELLATE TRIBUNAL AT CHENNAI
DATED THE 14TH OCTOBER, 2004
PRESENT: HON’BLE JUSTICE DR.
CHAIRPERSON
MA-72/2004
(IA-187/2003 in TA-533/2001-DRT-II, Chennai)
BETWEEN:
Indian Bank,
ARMB-I Branch,
Chennai.
… Appellant
(Counsel: Mr. T.R. Rajagopalan for M/s. Aiyar & Dolia)
AND
1. M/s. Kay Pee Kay Medical Services Pvt. Ltd.,
Rep. by its Managing Director Dr. K. Padmanabhan,
43, II Main Road
Raja Annamalaipuram,
Chennai-600 028.
2. Dr. K. Padmanabhan,
(Address as in 1 above).
… Respondents
(Counsel: Mr. Krishnamurthy for M/s. G. Govindarajan)
: O R D E R :
1. Mr. T.R. Rajagopalan, Advocate holding for M/s. Aiyar & Dolia for the appellant Indian Bank and Mr. Krishnamurthy, Advocate holding for M/s. G. Govindarajan for the respondents 1 & 2, are present.
2. This Miscellaneous Appeal is filed by the appellant/Original applicant Indian Bank aggrieved by the Order dated 16.4.2004 passed by the Learned PO of DRT-II, Chennai, in IA-187/2003 in TA-533/2001. By the impugned Order the Ld. PO allowed the application made by the defendants/Respondents herein wherein they had prayed for giving direction to the applicant Bank to treat the cut-off date as 31.3.1992 with respect to Medium Term Loan (MTL) Account and Temporary Overdraft Account of the respondents and cut-off date as 22.9.1995 with respect to Clean Loan Accounts I, II & III. Further direction was given to the applicant Bank that on the basis of these cut-off dates, calculation with respect to OTS amount payable by the defendants including the legal expenses and other charges be made, and the same be informed to the defendants within 15 days from the date of the Order. Defendants were directed to pay the amount quantified by the applicant Bank in terms of the above Order within three weeks from the date of communication by the applicant Bank failing which the applicant Bank was held to be entitled for the whole claim in the TA with future interest etc. The Bank is aggrieved by this Order because direction with respect to treating cut-off date with respect to the accounts of the defendants as given by the Ld. PO was not acceptable to the Bank. Moreover, contention of the Bank was that the One Time Settlement (OTS) guidelines given by the Reserve Bank of India (RBI) were only for directions and not for governance and therefore, they are not binding upon them. The appeal has been filed by the Bank mainly on these two grounds.
3. I have heard Mr. T.R. Rajagopalan, Advocate appearing for the appellant Indian Bank and Mr. Krishnamurthy, Advocate appearing for the respondents. I have also gone through the proceedings including the impugned Order, the revised RBI guidelines for compromise settlement of chronic Non-Performing Assets (NPAs) of public sector banks and other relevant material and, in my view, the Ld. PO was not correct in passing the impugned Order.
4. It is revealed from the proceedings that the Suit was filed by the Bank way back in the year 1995 in the High Court of Judicature at Madras
5. The Bank’s contention all throughout has beenthat as per the revised RBI Scheme the cut-off date was correctly taken as 22.9.1995 and the amount transferred to Protested Bills was Rs.7,88,84,836/-. In the Protested Bills Account there was a credit of Rs.2,53,11,690/- by way of FCNRD proceeds from Purasawalkkam Branch and another credit of Rs.81,462/- by Current account proceeds. The minimum recoverable amount was worked out as per revised RBI scheme for compromise of NPA Accounts and the said figure arrived at was Rs.5,48,55,264/-. Thus, taking into consideration all the transactions, the Bank sanctioned compromise settlement of Rs.550 lakhs and it was this proposal which was communicated to the respondents by their letter dated 28.1.2003. But, it appears that the respondents did not accept the said proposal nor adhered to the stipulated terms and conditions and the Bank by their letter dated 30.4.2003, therefore, intimated to the respondents that the sanction accorded stood cancelled. It was communicated to the respondents that if they were still desirous of settling the amount, fresh proposal could be sent under the revised Scheme of RBI on or before 30.4.2003 and the Bank would consider and pass orders either way.
6. Though on principle, the respondents were agreeable to the compromise proposal the mute question was what was the cut-off date. According to the defendants, the cut-off date with respect to MTL account was 31.3.1992 and that of Temporary OD Account the cut-off date was 31.3.1992 and with respect to Clean Loan Accounts I, II & III, the cut-off date was 22.9.1995. The contention of the respondents to this effect was accepted by the Ld. PO, but the Bank was not agreeable to this. Though the account of the defendants became NPA as on 31.3.1992, it was re-classified as Standard Asset as on 31.3.1993 and 31.3.1994, because payments were made by the defendants. Therefore, again their account was classified as Sub-standard Asset as on 31.3.1995 and was classified as doubtful asset as on 31.3.1996. This contention of the Bank appears reasonable. I, therefore, reject the contention of the respondents’ Advocate on this point.
7. Moreover, the respondents’ contention that the RBI guidelines are binding on the Bank even if they are to their detriment, cannot be accepted. These guidelines are indeed in the nature of guidance and they are not meant for governing. These 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 and, therefore, Bank cannot be compelled to accept the proposal made by the respondents nor can they be compelled to accept the cut-off date as per the respondents’ contention.
8. While allowing the Appeal RA-12/2004 filed by the Central Bank of India, this Appellate Tribunal by its Order dated 15.9.2004, has held that the RBI guidelines are there to guide and not to govern. Reference was usefully made to the decision of the Allahabad High Court 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 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. Even the previous Chairperson of this Appellate Tribunal, Late Justice Smt. A. Subbulakshmy, has held in deciding the case of Sri Raghavendra Theatre Vs. Bank of India (Appeal RA No.7/2003 in Appeal-1/2002 in OA-878/1995) that if default is committed by the appellant in terms of the compromise then the compromise is to be treated as broken and the terms of the compromise is no longer binding on the Bank.
9. In the present case at hand, the respondents have not adhered to the terms of the compromise. That appears to be their regular practice on earlier two occasions also. The respondents did not accept the compromise offered by the Bank though it was for a lesser amount and though the Bank’s claim was duly accepted and was reflected in the Balance Sheet by the respondents. Therefore, I am in respectful agreement of the above two authorities (supra) and I am in agreement with the Bank’s contention that the guidelines are not binding upon the Bank even though they are not prejudicial to the Bank’s interest. Therefore, the Ld. PO ought not have compelled the Bank to accept the proposal as given by the defendants. The impugned Order will have, therefore, to be set aside and the appeal will have to be allowed. Accordingly, following Order is passed.
10. Miscellaneous Appeal MA-72/2004 is allowed.
(Dictated to PS, the transcript corrected and order pronounced in the open court & signed by me today 14.10.2004).
Sd/-
[ JUSTICE DR. PRATIBHA UPASANI ]
CHAIRPERSON
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