Thursday, July 14, 2011

Panel on education loan suggests creation of credit guarantee fund



Source :BL:KOLKATA, JULY 13:2011



Creation of a credit guarantee fund,
 extension of the tenor of repayment
 and moratorium period of educational
 loans are some of the key recommendations 
of the expert committee on education loan
 scheme constituted by the Indian Banks' Association (IBA)


The committee has submitted its recommendations to the Finance Minister, Mr Pranab Mukherjee, and the draft paper on the education loan scheme is likely to be released in a month's time, according to Mr T. M. Bhasin, Chairman and Managing Director, Indian Bank.
The expert committee was set up by IBA under Mr Bhasin to modify the education loan scheme launched in 2001-02.
“We have recommended the creation of a credit guarantee fund. A portion of the funds in the corpus could come from the government and a portion from banks. A certain portion of the premium on loans could also be set aside in the corpus,” Mr Bhasin told Business Line.
Banks have been urging the Centre to set up a credit guarantee fund on the lines of the fund created for the MSE (micro and small enterprises) by the Government and SIDBI (Small Industries Development Bank of India).
Concerned over the rise in defaults of educational loans, banks have been trying to rework some of the existing norms on such loans.

DEFAULT RATE

The cumulative outstanding under education loans for all banks stands at about Rs 45,000 crore as on date and the defaults are in the range of three-to-five per cent, Mr Bhasin pointed out. The defaults are higher on loans below Rs four lakh, which are collateral free.
The committee has suggested extension in the repayment period of education loans from five-seven years now to10-15 years to facilitate repayment and reduce the probability of default. “The moratorium period on such loans is typically six months. We have suggested it to be extended to one year,” he said.

PNB to start bank adalats to clear NPA s




Source :livemint:PTI:Thu, Jul 12 2007. 11:43 AM IST


Bank’s gross NPAs stood at Rs4,300 crore; 
cases below Rs25,000 would be taken up at adalats



Chandigarh: The Punjab National Bank on 12 June said it will start ‘bank adalats’ across the country from next month in its bid to reduce its non-performing assets.


“Like Lok Adalats, we will be starting bank adalats wherever there will be NPA accounts,” PNB chairman and managing director, K C Chakrabarty, told the media here after holding a state level bankers’ committee meeting.


He said the bank’s gross NPAs stood at Rs4,300 crore and added that cases below Rs25,000 would be considered at the ‘adalats’.


Stressing there was a need to take technology to the rural areas as only 37,000 branches of all the banks in the country operate in such areas despite the existence of 600,000 villages, he said, “we are experimenting on some models at present”.


He said “poor man’s banking or mass banking is unviable unless we have technology.”
Chakrabarty said that the 112-year-old bank was third in terms of profit.


“Our total business rose 21.7% to Rs2,36,456 crore at the end of March 2007. Deposits amounted to Rs1,39,860 crore, up 16.9%. Low cost deposits formed 46.16% of total deposits while advances rose 29.4% to Rs96,597 crore,” he said.


Credit to agriculture increased by 27.3% to reach Rs18,571 crore while share of agri credit in net bank credit stood at 18.9% as against national goal of 18%.


The bank also plans to increase its ATM presence and the customer base from 35 million to 50 million.


“We are in talks with the Railways to install 100 ATMs at about 50-60 railway stations,” he said, adding that the bank also plans to launch its credit card by early next year.


On the bank’s foreign presence, he said PNB has been granted licence by Hong Kong Monetary Authority to set up a branch in that country.


“We also plan to open offices at Singapore (offshore banking unit) and a subsidiary at Canada,” he said.


On the performance of banks in Punjab 2006-07, he said 100% financial inclusion has been achieved in Gurdaspur and Mansa and six more districts had been identified to achieve this by end of September.


The overall advances to Minority Communities have risen from Rs11,896 crore as on March 2006 to Rs15,889 crore in March this year, up 33.6%.




Air India may not be able to service working capital loans




Sorce :livemint :P.R. Sanjai & Anup Roy:Thu, Jul 14 2011. 1:00 AM IST



Air India plans to raise $850 million (Rs.3,791 crore) to part-fund the purchase of 27 Boeing 787 planes as the state-run carrier battles to prevent working capital loans from turning into bad debt.


On Tuesday, Air India told finance ministry officials that the airline may not be able to service working capital loans from Indian banks if it doesn’t get an immediate equity infusion of Rs.6,600 crore from the government.


According to two Air India executives, if the carrier fails to make payments before 31 July, the loans will turn bad as no payments have been made in the last two months. A loan turns bad if a borrower doesn’t service it for three months. Neither of them wanted to be named as they are not authorized to speak to the media.


Without the equity infusion, the cost of borrowing will go up for the proposed $850 million debt-raising plan.


“The moment a company defaults in paying interest to banks, its future fund-raising programme gets affected, but Air India will get the benefit of being a government entity,” said Madan Sabnavis, chief economist at rating agency firm Credit Analysis and Research Ltd.
Air India has submitted a financial restructuring plan to the finance ministry. According to the plan, at least 60% of the total working capital will be converted into a long-term loan and the rest into cumulative preference shares for 15 years. It envisages a saving of Rs.1,000 crore a year in interest rates.
“The government has not cleared it as yet. If nothing fructifies, banks will have to classify the loan as a non-performing asset (NPA),” said a senior executive with a large public sector bank that has exposure to the carrier. He did not want to be identified.


Once a loan becomes an NPA, banks need to set aside money or provide for it. Besides, they also do not earn any interest on such loans.


“The government should take a decision whether we need to have an airline like Air India. If yes, it cannot be run as loss-making. Therefore, it needs to bring in private sector ethics to the organization,” Sabnavis said.


Air India should increase efficiency levels, lower expenditure and pare the workforce to cut its wage bill. 


Theairline has trimmed its workforce from 33,500 to 28,500 in the last three years.
Air India had debt of Rs.42,570 crore and accumulated losses of Rs.22,000 crore as of 31 March.
On Wednesday, Mint had reported that Air India was seeking a total equity support of Rs.42,920 crore till fiscal 2021. 


This includes guarantees for aircraft loans worth Rs.30,584 crore (both present and future) up to the 2021 fiscal year.


“It is possible to revive Air India, but it has to run like a commercial enterprise,” Sabnavis said.







Students' degrees could soon brand them defaulters






Source :BL:NewDelhi:july 13,2011
If you've defaulted on repaying an education loan, soon that fact could be stamped on the back of your degree or diploma certificate. The Indian Banks' Association (IBA) is said to be considering such a proposal to bring down non-performing assets (NPAs) in education loans.

THREE-PRONGED STRATEGY

“We have suggested a three-pronged strategy for the revised scheme. This includes tracking the student and creating a special credit guarantee fund for the education loan, besides stamping the certificate,” the chairman and managing director of a nationalised bank said.
The scheme will need the nod of both the Finance Ministry and the Reserve Bank of India before it can be introduced, added the chief executive of another bank.
Educational institutions are divided over this proposal. The Executive Director and Dean of Manav Rachna University, Col (Retd) V. K. Gaur, says, “It is not a good idea. Procedures for taking education loan are already very lengthy. Banks take more and more precautions, now one more provision will make life difficult for the students.”
He is apprehensive that stamping of certificates could be another way to exploit students.
On the other hand, Prof C. P. Singh, Professor-in-Charge of University School of Mass Communication, Guru Govind Singh IP University, supports the new proposal. He says, “If the certificate carries a stamp, what is wrong in it, if your conscience is clear, you would like to pay on time.”

FINALISATION OF SCHEME

The revised scheme is likely to be finalised within the next two months. Sources told Business Line that the initial structure of the revised scheme was discussed at a review meeting of public sector banks held last Friday.
Bankers are worried about the rising trend of NPA in education loans. Though they are not giving the exact percentage of standard assets turning into NPAs in the category, declining year-on-year growth in terms of accounts added and outstanding amount say a lot (see table).
Bankers say that the new system would require active co-operation from educational institutions for which specific instructions from the HRD Ministry will also be required. There is a strong possibility that a special credit guarantee fund will be created for education loans.
The size of the fund could be Rs 5,000 crore. It was also suggested that the loan repayment tenure should be increased to 15 years from the existing seven years. Though it was felt that such an option would increase the rate of interest, providing this option has not been ruled out.

Madras High Court orders notice on plea to fill posts In Chennai DRTs







Source : The Hindu :CHENNAI, July 9, 2011

The Madras High Court has ordered notice on a public interest litigation petition seeking a direction to the Centre to fill vacancies of the posts of Presiding Officer of the Debt Recovery Tribunal (DRT)-I and III in Chennai.

Three DRTs

In the petition, the DRT and DRAT (Debt Recovery Appellate Tribunal) Bar Association, represented by its president, K.A. Ramakrishnan, said there were three DRTs in Chennai.
The Presiding Officer of the tribunal-I laid down office in February and that of tribunal-III in May this year.
These vacancies had not been filled till date.

Speedy disposal

In DRT-I, there were about 2,100 matters pending as on date.

The vacancies should be filled for speedy disposal.

The petitioner also prayed the court for a direction to the concerned authorities to restore the operation of the two lifts in the building on Anna Salai where the tribunals were housed.

Tuesday, July 12, 2011

DRT II Mumbai judgement



























IN THE DEBTS RECOVERY TRIBUNAL, II, MUMBAI
Before Shri K.J. Paratwar, Presiding Officer. 
S. A. No 33/2006

1.         M/s. National Flask Industries Ltd.
            A/2, Shed No. 502, G.I.D.C., Sarigam, Dist.
            Valsad, Pin Code 396 155, Gujarat.

2.         Mr. Arun M. Gandhi, M/s. National Flask Industries Ltd.,
            22, Interlink Industries EstateCaves Road,
            Jogeshwari [East],
            Mumbai 400 068

3.         Mr. Shashikant M. Gandhi, M/sNational Flask Industries Ltd.,
            22, Interlink Industries EstateCaves Road,
            Jogeshwari [East],
            Mumbai 400 068

4.         Smt. Meena H. Gandhi,
            18, Gangadwar, Sanyas Ashram, V.P. Road,
            Vile Parle [West],
            Mumbai 400 056

5.         Mr. Haresh M. Gandhi,
            18, Gangadwar, Sanyas Ashram, V.P. Road,
            Vile Parle [West],
            Mumbai 400 056

6.         Smt. Daksha Arun Gandhi,
            18, Gangadwar, Sanyas Ashram, V.P. Road,
            Vile Parle [West],
            Mumbai 400 056

7.         M/s. Crown Industries,
            22, Inter Link Indl. EstateCaves Road,
            Jogeshwari [East],
            Mumbai 400 068
                                                                                                            ..          Applicants

                                    V/s.

1.         The Saraswat Co-op. Bank Ltd., having its Head Office at
            Sailor Building, D.H. RoadNext to American Dry Fruit Store,
            Opp. Hutatma ChowkFort,
            Mumbai 400 001 
            AND  
            having its recovery department at 74-C, Samadhan Bldg., 2nd Floor,
            Senapati Bapat Marg[Tulsi – Pipe Road],
            Dadar [West],
            Mumbai 400 028 
            AND 
            having its branch office at Pratiksha Apartment, Opp. Filmistan Studio,
            S.V. RoadGoregaon [W],
            Mumbai 400 062

2.         The Shamrao Vithal Co-op. Bank Ltd., having its registered Office at
            CTS No. 948/B, Village Kole Kalyan, Nehru Road, Opp. Vakola Market,
            Santacruz [East],
            Mumbai 400 055 
            AND 
            having its branch office at 12, Udyog Nagar,
            Time Star Bldg., S.V. Road,
            Goregaon [West],
            Mumbai 400 062

3.         The Cosmos Co-op. Bank Ltdhaving its registered office at
            Cosmos Heights, 269/270Shaniwar Peth,
            Pune 411 030 
            AND 
            having its branch office at
            45, Saraswati Niwas, Hanuman Road,
            Vile-Parle [E],
            Mumbai 400 057

4.         The North Kanara GSB Co-opBank Ltd., having its registered office at
            Laxmi Sadan, 361, V.P. RoadGirgaum,
            Mumbai 400 004 
            AND 
            Shree Niketan, Hindu Friends Society Road,
            Jogeshwari [East],
            Mumbai 400 060
                                                                                                            .. Respondents

Mr. Rishabh Shah with Mr. Jay Choksi, holding for Mr. Rohit Shetty, Adv. for the Applicants. 
Mr. Harshad Bhadbhade, Adv. For the Respondents

J U D G E M E N T
(Delivered on this 29th day of June, 2010
            This application U/s. 17 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 [for short ‘SARFAESI Act’] pertains to these properties of Applicant No. 1 : 
  Plot of land bearing No. A-2, 502, in the Sarigaon Industrial Estate, Survey No. 29/p, Village Sarigaon, Taluka Umbergaon, Dist. Valsad, Gujarat, admeasuring 1,816 sq. meters; 
  Factory land & building bearing No. 166/p, Village Naroli, Silvasa, Union Territory, Dadra & Nagar Haveli, admeasuring 18900 sq. meters. 
of Applicant No. 7 : 
 Office premises situated at 22, Inter Link Industrial Estate, Caves Road, Jogeshwari [E], Mumbai 400 060 admeasuring about 2000 sq. ft. 
2.         The Respondents took possession U/s. 13(4) of the SARFAESI Act of the properties – situated – at Jogeshwari on 17.09.2006, at Silvasa on 24.10.2006 and at Sarigaon on 24.08.2006 – on the Applicant’s failure to pay the amounts demanded by notice U/s. 13(2) of SARFAESI Act to the Applicant No. 1 on 30.12.2005 and to rest of the Applicants Dt. 02.01.2006. This has aggrieved the applicants who have assailed the action under SARFAESI Act in this 64 pages long S.A. having copious reference and reproduction of RBI guidelines and other unnecessary facts. 
3.         Under caption “The background of the matter is as under” the Applicants have stated several facts about the reasons of the Company’s precarious financial condition, etc. It is stated that major fire broke on 04.06.2001 in the Company causing damage / loss of around Rs.17 /18 Crores from out of which a sum of Rs.5.70 Crores was received against the insurance claim. Under the orders of Hon’ble High Court of Judicature at Bombay in Review Petition No. 40 of 2005, the amount is kept with Respondent No. 1 in interest bearing no lien account. Due top the loss, the Company was badly in need of additional finance which the Respondents did not sanction. The Company also did not get any relief under Corporate Debt Restructuring Scheme [CDR Scheme]. The failure on the part of Respondents to grant ad-hoc limits led to the closure of operations of the Company. The Company suffered loss, due to the Respondents’ not adhering to the RBI guidelines, to the extent of Rs.119.17 Crores, for which the Company has filed suit in Civil Court at Silvasa. Therefore there is no ‘debt’. 

4.         The Respondents issued notice U/s. 13(2) of SARFAESI Act. The Applicants gave reply / representation to the same raising 105 objections. A Petition came to be filed in the Hon’ble High Court of Judicature at Bombay by worker union in which offer for settlement of Rs. 7 Crores was made but the Banks insisted for Rs.9 Crores. Since the settlement did not materialize, the Banks gave reply U/s. 13(3-A) of SARFAESI Act to the representation / reply to the demand notice. The Banks were about to take recourse to Section 13(4) whereupon the applicant Company filed Writ Petition [Stamp] No. 1644 of 2006 which however came to be disposed of in view of remedy U/s. 17 of SARFAESI Act. The Respondents ultimately took possession of the properties as stated earlier. 
5.         After the aforesaid facts, the Applicants have set out the grounds. The grounds common to all the Respondents are thus: The notice is illegal. The challenge is external and internal. By external, I refer to the contention that the issuance of two demand notices U/s. 13(2) are illegal. The first notice Dt. 30.12.2005 was issued to the Company while the second notice Dt.02.01.2006 was issued to the Applicant Nos. 2 to 7 from amongst whom Applicant No. 7 is mortgager of Jogeshwari Property. By internal challenge what is meant is the exorbitant demand. Firstly, the demand was in excess by Rs.23,22,65,631/-, in the aggregate, taking the amounts certified by the Banks in the Certificates of dues, to be the basis. The excess demand of each Bank as set out in S.A. in the tabular form is extracted below: 
A)        The Saraswat Co-op. Bank Ltd.           


Loan No.

Balance as per Bank Certificate Dt. 17.06.2005 upto 31.03.2005

Amount as per SARFAESI notice U/s. 13(2)

Difference Amount

SL 4611

                          5,192,482

                      8,777,656

             3,585,174

SL 4569

                          9,183,295

                    15,802,644

             6,619,349

SL 4923

                          9,348,161

                    15,523,944

             6,175,783

SL 4585

                        11,984,712

                    20,259,614

             8,274,902

SL 4818

                          5,706,005

                      9,645,745

             3,939,740

OD 2672

                      106,167,696

                  170,306,000

           64,138,304

SL 5508

                        15,351,844

                    25,951,599

           10,599,755



                      102,094,100

                  000,207,000

         100,000,007


B)        The Shamrao Vithal Co-op. Bank Ltd. 


Loan No.

Balance as per Bank Certificate Dt. 17.06.2005 upto 31.03.2005

(in Rupees)

Amount as per SARFAESI notice U/s. 13(2)

(in Rupees)

Difference Amount



(in Rupees)

TL 728

                          4,277,335

                      7,497,452

             3,220,117

TL 754

                          2,469,045

                    4,342,330

             1,873,285

OD 79

                        47,317,851

                    82,627,622

           35,309,771



                        54,064,231

                    94,467,404

           40,403,173


C)        The North Kanara GSB Co-op. Bank Ltd. 


Loan No.

Balance as per Bank Certificate Dt. 17.06.2005 upto 31.03.2005

(in Rupees)

Amount as per SARFAESI notice U/s. 13(2)

(in Rupees)

Difference Amount



(in Rupees)

TL 417

                        14,145,423

                    13,109,508

             4,964,085

TL 418

                        12,119,607

                    16,403,940

             4,284,333

TL 421

                          2,616,393

                      3,540,665

                924,312

TL 469

                          2,225,827

                      3,067,057

                841,230

OD 1698

                        20,669,421

                    39,426,936

           18,757,515



                        51,776,631

                    81,548,106

           29,771,473


d)         The Cosmos Co-op. Bank Ltd. 


Loan No.

Balance as per Bank Certificate Dt. 07.06.2005 upto 31.03.2005

(in Rupees)

Amount as per SARFAESI notice U/s. 13(2)

(in Rupees)

Difference Amount



(in Rupees)

OD 990007

                       55,507,441

                 114,265,417

           58,757,976

           
6.         The other ground common to the Respondent Banks is that the charged interest is far in excess. The Applicant Company had pointed out the same by several letters and had even shown from the certificate issued by M/s. Kiran Matani & Asso., Chartered Accounts that the interest charges is in excess by Rs.12,77,84,368/- as on 30.11.2005 as per the table extracted below for ready reference: 



Sr.

No.

Bank

Nature of

Facility

Amount as per Notice U/s.13(2) of SARFAESI as on 30.11.2005

Amount as per calculation as on 30.11.2005

Excess interest upto 30.11.2005

Excess and illegal Debits upto

30.11.2005

1

The Saraswat Co-op. Bank Ltd.



CC-2672

170,306,000.35

128,203,521.86

37,346,215.28

4,756,263,21

2

The Saraswat Co-op. Bank Ltd.

TL-4569

15,532,944.05

11,847,902.23

3,397,043.81

288,998.01

3

The Saraswat Co-op. Bank Ltd.

TL-4585

20,259,613.93

15,292,003.61

4,612,328.66

355,281.61

4

The Saraswat Co-op. Bank Ltd.

TL-4611

8,777,656.08

6,625,897.88

2,006,781.87

144,976.32

5

The Saraswat Co-op. Bank Ltd.

TL-4618

9,645,744.52

7,393,048.03

2,136,533.48

116,162.00

6

The Saraswat Co-op. Bank Ltd.

TL-4923

15,802,643.60

12,176,940.25

3,448,054.34

177,649.00

7

The Saraswat Co-op. Bank Ltd.

TL-5508

25,951,598.54

19,780,493.98

5,720,368.55

450,736.00

8

The Saraswat Co-op. Bank Ltd.

L/C

62,967,724.35

52,579,983.44

10,377,223.51

10,517.40

9

The Shamrao Vithal Co-op. Bank Ltd.

CC-79

82,627,622.41

70,747,327.17

11,610,789.23

269,506.00

10

The Shamrao Vithal Co-op. Bank Ltd. 



TL-728

7,497,452.00

6,593,709.43

903,742.55

-

11

The Shamrao Vithal Co-op. Bank Ltd.

TL-754

4,342,330.00

3,820,549.62

521,780.37

-

12

The North Kanara GSB Co-op. Bank Ltd.

CC-1688

39,426,936.45

32,837,646.47

6,374,449.97

214,840.00

13

The North Kanara GSB Co-op. Bank Ltd.

TL-417

19,109,508.00

12,858,406.65

6,251,101.34

-

14

The North Kanara GSB Co-op. Bank Ltd.

TL-418

16,403,940.00

11,026,098.78

5,377,841.21

-

15

The North Kanara GSB Co-op. Bank Ltd.

TL-421

3,540,665.00

2,383,979.37

1,156,685.62

-

16

The North Kanara GSB Co-op. Bank Ltd.

TL-469

3,061,057.00

1,889,808.62

1,171,248.37

-

17

The Cosmos Co-op. Bank Ltd.

cc-90007

114,265,417.39

95,668,166.91

18,584,340.47

12,910.00



TOTAL



619,509,853.67

491,725,484.30

120,986,528.63

6,787,839M56





Total of excess debited by Bank (E)++(F)






7.         The Banks have not produced advice for interest rates charged. The reply given by the secured creditors is without application of mind. The miscellaneous contentions are that the penal interest is not quantified and is also compounded. The notice U/s. 13(2) to the Guarantor does not mention dates of NPA. The transaction is not registered with the central registry. The Respondents have not produced any authority U/s. 49 of Maharashtra Society’s Act from the Applicants. 
8.         After the aforesaid grounds common to all the Respondent Banks, the Applicants have raised individual contentions in respect of Banks many of which do not constitute grounds within the scope of SARFAESI Act. The contentions as regards The Saraswat Co-op. Bank Ltd. are thus: 
(i)         In the statement issued on 31.03.2002, balance in forced Letter of Credit account is shown Rs.2,89,07,849/-. However, in the notice U/s. 13(2) the amount as on 30.11.2005 is shown Rs.6,29,67,724.35. This means that the amount has gone up by Rs.3,40,59,875.35 in 44 months which is obviously exorbitant.  
(ii)        The Bank Guarantee has not been invoked. Yet, the Bank demanded in the notice is Rs.55,07,443/- thereunder. 
(iii)       The Bank classified account as NPA on 31.03.2001. Yet, it forcibly obtained cheque of Rs.5.70 Lacs after the NPA date. The cheque was transferred to the account of sister concern namely M/s. National Plastic. From said account the Bank took cheque and unauthorisely transferred money to Suspense Account at Kandivali Branch. This ground is not pressed into service perhaps realizing that the state grievance cannot be addressed in the application U/s. 17 of SARFAESI Act.  
(iv)       The Bank did not credit interest of Rs.5,38,531.51 on the margin money deposited in FDR for Letter of Credit. This ground is also not perused. 
(v)               Vide letter Dt. 31.03.2001, the bank reviewed the then existing limits and decided to issue NOC to IDBI allowing the first charge over fixed assets to be financed by IDBI and to induct Indian Bank in consortium. Yet, inconceivable the account is said to have became NPA on same date i.e. 31.03.2001. 
9.         The grounds in respect of The Shamrao Vithal Co-op. Bank Ltd. are thus:
(i)         The Bank debited, without advice or authority, from time to time between 23.02.1998 to 31.10.1998 a sum of Rs.2,64,28,790.02 as set out on Page 23 & 24 of the S.A. This ground is not pressed into service probably realizing that the challenge to the debit entries taken before about seven years does not fall within the scope of the application. 
(ii)        The Bank did not give credit to margin amount of Rs.1,93,11,642/-. This contention is also not pressed into service. 
(iii)       The amount demanded under notice U/s. 13(2) is against two Cash Credit Facilities while there was only one Cash Credit Facility. In this regard, it is ultimately admitted that the amount of Rs.1,92,62,589.38 is wrongly said to be under Cash Credit although it is under Term Loan. The attempt to exploit the technical mistake was abandoned. 
(iv)       The Bank wrongfully made payment to Income Tax of Rs.68,35,165/- without consent of B.I.F.R. This ground is also not pressed into service. 
(v)        The dividend of Rs.4,050/- of the shares in the name of the Directors was credited in the Company’s account. This ground is also abandoned.  
10.       There are no specific and substantive individual grounds in respect of the Cosmos Co-op. Bank Ltd. It is stated that agreed rate of interest is @ 16.50% while the interest levied is at said rate with quarterly rests. 
11.       In case of the North Kanara GSB Co-op. Bank Ltd., the contention is that by letter Dt.10.10.2002 it had informed that the account became NPA from December 2010 but in letter Dt.31.03.2001 the NPA date is 31.03.2001 while the S.A. states that the NPA date is 01.08.2000.  
12.       The S.A. is sought to be allowed on the aforesaid grounds. 
13.       The Respondents resisted the S.A. by reply [Exh.9] in the nature of affidavit of Mr. Ajit S. Rege, D.G.M. of Respondent No. 1 Bank. It is contended that the Respondents [the Respondent No. 1 being the leader] in consortium had granted several facilities to the Applicant No. 1 Company. The Applicant Nos. 1 & 7 created mortgage. The Borrower [Applicant No.1] committed defaults and the account became irregular and consequently the same was classified by Saraswat Bank as NPA with effect from 31.03.2001 and by other Banks on the respective dates. The Respondents had issued notice U/s. 13(2). It is stated that the actual possession of Silvasa and Sarigaon property is taken but only symbolic possession of Jogeshwari property is taken. The Banks admit about the fire on 04.06.2001 in the Company’s Silvasa Unit. It is also admitted that the Bank did not grant Ad-hoc Facility of Rs.2 Crores as sought by the Company. But that was because huge amounts were due and the account was classified as NPA on 31.03.2001. the averments about OTS are admitted but it is denied that the banks were ready for settlement for Rs. 9 Crores which amount in fact was suggested by the Applicant Company. 
14.       While meeting the contentions about the excess amount by Rs.23,22,65,631/-, it is stated that the amounts mentioned in the Bank Certificate [upon the basis of which the Applicants assailed the amount], are only principal amounts. This is so because as per the RBI guidelines the interest cannot be debited [and was not debited] in the account after the date of NPA. It is also denied that excess interest of Rs.12,77,84,368/- is charged. The Applicants never raised any objection about the amount. In fact, they admitted the extent of the Company’s liability in its balance sheet. The contentions about the grounds which are not pressed into service are also denied. The S.A. is sought to be dismissed on aforesaid grounds. 
15.       The Applicants filed rejoinder in the nature of affidavit of Mr. H. Gandhi, Director of Applicant No. 1 at Exh.34. The Applicants also filed copies of the Bank Certificate, Statement of Account and other documents. The Respondents filed Statement of Account at Exh. 25 to 28. the additional affidavit of Mr. H. Gandhi is filed at Exh. 77 and copies of the balance sheets for the year 2007-08 to 2008-09 below Exh. 78 for explaining the admission of liability in the earlier balance sheets. 
16.       I have heard arguments of Learned Counsel representing the rival parties. 
17.       At the very threshold, the contention about the legality of notice U/s. 13(2) is taken up. As noted earlier, the contention is two fold. The notice dt. 30.12.2005 since not addressed to the Guarantor – Mortgager, is said to be bad. It is not possible to endorese this submission qua Applicant Nos. 2 to 6 since they are not mortgagors and therefore cannot be said to be ‘Borrowers’ for the purpose of SARFAESI Act. Therefore, it was unnecessary to issue notice to them. The Applicant No. 7 is mortgagor of one property. Therefore, in law, it was unnecessary to issue a notice U/s. 13(2) to it. What the Respondent did was to merely endorse copy to Applicant No. 7 without even calling upon it to discharge the liability. Notice Dt. 30.12.2005 therefore cannot be treated to be statutory notice U/s. 13(2) against Applicant no. 7. 
18.       Realizing the above position, the notice U/s. 13(2) was given on 02.01.2006 to Applicant Nos. 2 to 7. The Applicants’ contention that said notice supercedes the first notice is mentioned for the purpose of rejection; for said notice is not given to the principal Borrower and is given mainly to Applicant No. 7 who is ‘Borrower’ [being mortgagor of Jogeshwari property]. The bare perusal of said notice shows that it does not meet requirement of Section 13(2) & (3) of SARFAESI Act. It is so because by said notice, a sum in the aggregate is claimed by Respondent Nos. 1 to 3 without giving the amounts claimed under each facility muchless the amounts of principal and interest. Such a omnibus demand is not in conformity with the requirement of Sub-section (2) & (3) of Section 13 of SARFAESI Act. What is required is that the notice gives ‘details’ of the amount payable by the Borrower. Said notice therefore in itself is untenable. But, the facility wise amount was demanded in the notice Dt.30.12.2005, a copy of which was sent to Applicant No. 7. This can be construed to be demand under each facility. The external challenge to the notice therefore fails. 
19.       That brings me to the internal challenge to the notice Dt.30.12.2005. The notice is said to be bad on the ground that the amount demanded is highly exaggerated and inflated as stated in the tables in Para 4, supra. It is settled in law that adjudication of the amount is not to be done in the S.A. Therefore, it is impermissible to find out the exact outstandings. At the same time, simply because the extent of claim is not to be adjudicated in the S.A., it does not mean that secured creditor can demand any amount. The amount demanded may not be accurate and precise but has to be close to the secured creditor’s entitlement. The secure creditor ought to demand the reasonably correct amount. 
20.       An amount of Rs.23,22,65,631/- is said to have been demanded in excess. In reply, the Respondent Banks have contended that the aforesaid amount is in fact interest from the dates of respective NPA up to 30.11.2005. After hearing the parties at great length and on going through the record, I find that the Applicants have completely overlooked interest from the date of NPA up to 30.11.2005. The Applicants have simply taken the figures [in Column No. 2 of the table] as given in the certificates issued by the Bank and harped upon the date therein [say for e.g. 31.03.2005 in case of Saraswat Co-op. Bank Ltd.]. It can be seen from the Statement of Account that the amount in the certificate does not include interest up to the aforesaid date. At the same time, it is not that the amount does not at all include interest after the date of NPA. The Learned Counsel for the bank admitted that although the account of Saraswat Co-op. bank Ltd. was classified as NPA on 31.03.2001, the interest has been debited in the account from time to time up to 31.12.2002. Mr. Bhadbhade Learned Counsel has tried to submit across the bar that it was so because attempts for restructuring the account were going on and therefore the account was in operation. This however is not contended in the reply / say and therefore cannot be entertained especially when not clarified in the notice. At the end of the Statement of Account, Saraswat Co-op. Bank Ltd. has merely given said figures of interest under the heading ‘unapplied interest up to 30.11.2005’. This in my view is absolutely wrong. Have regard to the peculiar facts of the case, it was necessary to give the date of commencement of unapplied interest and the rates at which it has been applied from time to time. Moreover, if that was so, it is not understood as to how the interest for about 33 months [01.01.2003 to 30.11.2005] would be as high as given in Column No. 3 of the table. 
21.       What is said in respect of Saraswat Co-op. Bank Ltd. is generally and broadly applicable in respect of amount of unapplied interest as shown in third column of table in Para 4 above of remaining three Banks. The date of NPA of Shamrao Vithal Co-op. Bank Ltd. is 30.06.2001 but the Statement of Account of CC No. 79 shown that interest has been debited on 31.03.2003, 31.05.2003 and 30.06.2003. Thus, it is not as if that no interest has been debited after the date of NPA. In the absence of period and rate of unapplied interest, it was not possible to the Borrower to know and verify the amounts of interest. 
22.       In case of North Kanara GSB Co-op. Bank Ltd., there are three dates of NPA at three places. At one place, the date of NPA is 01.08.2000 while at other place it has stated that the account became NPA in December 2000 and at yet another place the date of NPA is 31.03.2001. This Bank also has not clarified the period and rate of unapplied interest which amounts to not giving ‘details’ as contemplated by Sub-section (3) of Section 13 of SARFAESI Act. The Statement of Account of Cosmos Co-op. Bank Ltd. shows that is it has levied interest after the date of NPA Dt. 31.03.2001. There are several debit entries of interest from 30.06.2001 to 30.06.2003. No doubt, there are also reversal entries of interest but, such entries are not of all debit entries.   
23.       In view of the above, it is more than obvious that the demand in the notice although made in respect of outstandings under each facility is omnibus. Not only principal amount and interest amount should have been separately given but it was necessary to give the period of rate of interest. The failure amounts to not giving ‘details’ as required by Sub-section (3) of Section of SARFAESI Act. Mr. Bhadbhade, Learned Defence Counsel has submitted that in the audited balance sheet, the Applicant No. 1 has admitted the liability of the Respondent banks and therefore the challenge to the extent of outstandings cannot be entertained. The copy of the audited balance sheet for the financial year 2005-06 partly supports this contention. But, the amount stated therein is Rs.54 Crores plus while the amount demanded by notice is about Rs.64 Crores plus. The difference thus is of about Rs.10 Crores. Thus, it cannot be said that there is admission of liability about extent of outstandings. This only shows that the Applicants have highly exaggerated their contention. Yet, there is substantial difference in the correct outstandings and demanded amount. Therefore, the conclusion that the notice is bad in law remains undisturbed. 
24.       In view of the above, it is in fact not necessary to go into the other issues. But, since the arguments were advanced and for the purpose of completeness, I would deal them. The Applicants’ contention about charging of excess interest of Rs.12,77,84,368/- [as set out in Para 5] though is exaggerated is also not altogether incorrect. The figures of excess interest have been worked out by the Applicant on the basis of calculation by Applicant No. 1 and / or its auditors and therefore cannot be accepted on their face value. But, on the Banks own showing, the amount demanded at best includes not only penal interest but also interest on penal interest since penal interest has been compounded on regular basis. The settled law now is that although the Banks may be entitled to penal interest, they are not entitled to compounding part of the same. Therefore, it was necessary for the Respondents to have excluded the amount of interest on penal interest. Ordinarily, such amount is not much but in this case the claims are running into several crores and said amount also may be in Lacs and consequently not insignificant. 
25.       That brings me to the bankwise contentions. The first is in respect of Saraswat Co-op. Bank Ltd. : The amount of Rs.6,29,67,724.35 claimed in the notice under Letter of Credit. The amount in the hand written statement as on 01.01.2002 is Rs.2,89,07,849/-. In the computerized Statement of Account, however, the outstanding balance as on 30.11.2005 excluding interest is Rs.4,00,26,837.80. It is not known as to how the amount has gone up. Moreover, just as in other accounts, the period and rate of interest of unapplied interest as on 30.11.2005 of Rs.2,29,40,886.55 is not clarified. The demand in the absence of above clarification about the interest is bad in law. 
26.       It is also to be noted that the amount claimed by Saraswat Co-op. Bank Ltd. under Bank Guarantee of Rs.55 Lacs and odd amount was not due since admittedly the Bank Guarantees were invoked on the date of issuance of demand not notice. The said bank’s claim under said head therefore should not have been made. This adds to the illegality of the notice. 
27.       That brings me to the Applicants’ contention that the reply given by the secured creditors to the representation / objuection was without application of mind. The reply Dt. 10.07.2006 shows that the banks did not specifically consider the objections and denied the allegations by grouping them under 18 heads. Although this is not ordinarily acceptable, the same will have to be endorsed in this case having regard to the representation / objection. The advocate for the Applicants gave 1672 pages objection by letter Dt.25.02.2006. Although most of the same is by way of Annexures in bond four books, the proper objection also runs into 105 pages raising many frivolous issues and taking the contentions omnibusly and vaguely practically making it impossible to deal them. If the Applicants themselves have made the things unworkable, they cannot take the benefit. It the representation / objection are themselves not proper and reasonable as could be ordinarily dealt with, the secured creditor may not have any option but to deal it in the manner in which Respondents did it. As such, it is not possible to upheld this contention. 
28.       It is also contended on behalf of the Applicants that on 31.03.2001, Saraswat Co-op. bank Ltd. has reviewed the existing limit where because it cannot be said that the account was NPA on said date. The bank has not clarified as to how the account became NPA on said date. This also is not without significance. 
29.       For the aforesaid  reasons, the application of Applicant Nos. 1 & 7 is liable to be allowed, Applicant Nos. 2 to 6 being unnecessary parties. As the Banks may test the order, I propose to give four weeks time to redeliver the possession. Hence, following order; 

O R D E R 
            A)        The Securitisation Application of Applicant Nos. 1 & 7 is allowed with no order as to costs. 
B)        The Respondents shall redeliver possession of the properties to Applicant Nos. 1 & 7, as the case may be, within four weeks. 
C)        The parties shall bear their costs.

Mumbai                                                                                                                                                                                                                                                               (K.J. PARATWAR)
Dt.:29th June, 2010                                                                                                                                                                                                                                                Presiding Officer
Debts Recovery Tribunal, II,
                                                                                                                                                                                                                                                                                   Mumbai