Saturday, March 23, 2013

Can we have an affluent promoter and a sick company? - NO,



S. MURLIDHARAN B L : 23 MAR  2013

The other day, Finance Minister P. Chidambaram made no secret of his displeasure at the indulgence shown to wilful defaulters. These are people who have the capacity to repay, or are guilty of diverting loans for personal gain, or for purposes other than the ones stated in the loan applications.
The financial system indulges them through endless corporate debt restructuring. Canara Bank is wringing its hands helplessly after Deloitte reportedly admitted its inability to trace the loan of Rs 400 crore it extended to a Hyderabad-based media group. It is now knocking at the doors of the Debt Recovery Tribunal.
The media group’s dues to the Indian banking system are in the region of Rs 5,000 crore. Its promoter’s dalliance with cricket by sponsoring an IPL team is well known.
The rumour mill has it that the bulk of the money owed by the group has found its way into cricket investments, apart from investments in fancy cars. Another cricket aficionado and liquor baron, too, owes our banking system a whopping Rs 7,000 crore. For too long has the system winked at the shenanigans of wilful defaulters, sometimes going to the extent of converting the outstandings into equity at exaggerated valuations.
The Sick Industrial Companies (Special Provisions) Act, 1985, made industrial sickness fashionable by extending several concessions to sick companies, including stay of coercive legal proceedings against their assets. There were many instances of contrived or feigned sickness, with the BIFR unable to tell between what was genuine and what wasn’t.
The indulgence to wilful defaulters has, predictably, spawned a slew of jokes. Such aphorisms as “you borrow in lakhs, you are in trouble with the bank; borrow in crores, the bank is in trouble with you” have become the stuff of folklore. Levity aside, the truth is the lot of the financial system is not hopeless; but only if it bestirs itself and goes for the jugular of the defaulters.

BENAMI, HAWALA


There is a view that promoters can take shelter behind limited liability. This is not entirely true because the financiers invariably take a personal guarantee from the promoters, be they individuals or corporates. Such personal guarantees should be invoked without the slightest hesitation. The institution of benami, of course, makes things difficult for financiers in India. The money trail is also often lost in the dizzying maze of shell companies acting as a buffer. Add the hawala route and the repertoire of tricks at the disposal of the wily defaulters is complete.
A frontal attack on benami brooks no delay. Vested interests have been scuttling it since 1988, when Rajiv Gandhi made bold to fashion a law that sent fear down their spines with confiscation staring them in the face. Inter-corporate loans need to be regulated more strictly.
(The author is a Delhi-based chartered accountant.)
(This article was published on March 22

Of affluent promoters, sick companies?



ET :Mythili Bhusnurmath | Mar 22,2013 09:27 PM IST


In truth such instances are fewer than in the past

‘We cannot have an affluent promoter and a sick company,’ warned the Finance Minister, P Chidambaram, speaking to media persons after a meeting with the heads of state-run banks in the capital on Monday. The reference, presumably, was to the Vijay Mallya owned Kingfisher Airlines.

Unfortunately, such veiled threats to corporate biggies are like water off a duck’s back! The fact is affluent promoters and sick companies have long been part of the coporate firmament in India. Speak to bankers, especially those in state-owned banks, and they will regale you with a long list of companies belonging to the Modis, the Ruias, the Essars, the MA Chidambaram group (SPIC), to mention just a few, that have been run to the ground by promoters and then nursed with taxpayer money. Kingfisher Airlines is only the most recent. The company was given kid-glove treatment by a consortium of banks, led by State Bank of India, before they finally called it a day.

Why do banks, that have no compunction in going after ordinary borrowers like you or I, turn Shrinking Violets when it comes to large corporate borrowers? The answer is simple: political clout of the corporates.

The silver lining is that, unlike in the past, such instances are less frequent than before thanks, in part, to media attention.The public furore seen over sops given to Kingfisher Airlines was noticeably absent in the past. And, hopefully, marks the beginning of the end of favoured treatment for a favoured few!.

Writ jurisdiction ousted vis-a vis orders of recovery tribunals- yet again!!




  • Nishith Desai Associates


Introduction
The Supreme Court in the recent judgment of T. P. Vishnu Kumar v. Canara Bank P.N. Road, Tiruppur and Ors1. reiterated the principle that when specific remedy is made available to a party, invocation of writ jurisdiction under Article 226 of the Constitution of India is not permissible in matters of recovery of debts. 
Writ jurisdiction of the Court cannot be invoked to test the validity/correctness of every interim order passed by the Debt Recovery Tribunal (“DRT”) under the provisions of the Recovery of Debts due to Banks and Financial Institutions Act, 1993 (“Act”).
Factual Matrix
The present case arises from an appeal against the Madras High Court (“Mad HC”) Division Bench judgment2 wherein the appeals against Single Bench judgment were allowed on the ground of availability of alternate remedy under Section 20 of the Act.
Canara Bank (“Respondent Bank”) had filed application before the DRT for recovery of amounts of INR 29, 68,161.93/- with interest @ 17% per annum with respect to Open Cash Credit facilities granted to T. P. Vishnu Kumar (“Appellant”) herein. 

These amounts were granted on the mortgage of other immovable properties and guarantee given by other partners of the partnership firm formed along with the Appellant herein. 
The debts were acknowledged by the Appellant however over a period of time the accounts maintained with the Respondent Bank became irregular and monies were not received leading to issuance of notices. 

The Appellant filed its response and submitted their inability to file detailed written statement in the absence of non-production of accounts by Respondent Bank.

 The Appellant filed separate interim applications seeking production of entire accounts and other relevant documentation.

 All the interim applications were dismissed by DRT.
In furtherance thereof, the Appellant filed writ petition under Article 226 of the Constitution before Single Bench of Mad HC for issuance of writ of mandamus directing Canara Bank to produce statement of accounts. 
The Appellant contended that merits of the matter should be decided in a trial and same cannot be dealt with at the interim stage.

 Further, such applications cannot be admitted without entire documents being submitted as the same were absolutely necessary for filing detailed written statement. 
The Respondent Bank contended that the Tribunal is permitted to make such orders and give directions on discovery and production as it deems fit. 

The Single Bench held that non-furnishing of documents amounted to prejudice against the Petitioner and allowed the writ petition directing the Respondent Bank to submit the documents.
The said decision was appealed by Respondent Bank before Division Bench as despite alternate remedy prevailing under the Act writ jurisdiction was invoked. The appeal was allowed leading to the present petition before the Supreme Court.
Issue
The only issue to be determined before the SC was whether existence of alternate remedy barred invoking the jurisdiction of the civil court.
Judgment and Analysis
The SC held that writ petitions cannot be filed in case of recovery of dues unless there exists any statutory violation or proceedings are conducted in an arbitrary, unreasonable and unfair manner. 
If the Act itself provides for a mechanism or an alternate remedy, writ jurisdiction of the High Court cannot be invoked as the same would defeat the very objective of enacting a separate statute and establishing a specialized Tribunal.
The purpose of the Act was ensuring speedy recovery of bank dues. Due to severe delay in adjudicating and disposing such cases, banks and financial institutions like any other litigants were subjected to go through a process of pursuing the cases for recovery through civil courts for unduly long periods, leading to the trapping of crores of rupees in litigation proceedings, which the banks could not re-advance, leading to enactment of the Act and DRT to assure expeditious recovery proceedings and speedy adjudication of matters concerning debt recovery of banks.
The Tiwari Committee which recommended the constitution of a Special Tribunal for recovery of debts due to banks and financial institutions stated in its report that the exclusive jurisdiction of the Tribunal must relate not only in regard to the adjudication of the liability but also in regard to the execution proceedings.
Section 17 of the Act provides that the DRT shall have jurisdiction to “entertain and decide applications from banks and financial institutions for recovery of debts due to such banks and financial institutions and Section 18 of the Act clearly bars the jurisdiction of other authorities and courts except the Supreme Court and High Courts under Articles 226 and 227 of the Constitution. It is a settled law that any provision ousting the jurisdiction of civil court must be strictly construed3.
The Tribunals and the Appellate Tribunals established to bring about special procedural mechanism for speedy recovery of the dues of banks and financial institutions have also made provision for ensuring that defaulting borrowers are not able to invoke the jurisdiction of Civil Courts for frustrating the proceedings initiated by the banks and other financial institutions. 
The SC in Allahabad Bank vs. Canara Bank & Anr4. held that the Act confers exclusive jurisdiction on the Tribunal.

 That being the position, the parties have to agitate their grievances only before the said forum, DRT and not before this Court under Article 226 of the Constitution or any other forum.
Further, the said law was reiterated again in Punjab National Bank vs. O. C. Krishnan & Ors5. , wherein the SC held that “the Act was enacted with a view to provide a special procedure for recovery of debts due to the banks and the financial institutions.
 There is a hierarchy of appeal provided in the Act, itself namely, filing of an appeal under Section 20 and this fast-track procedure cannot be allowed to be derailed either by taking recourse to proceedings under Articles 226 and 227 of the Constitution or by filing a civil suit, which is expressly barred. 
Even though a provision under an Act cannot expressly oust the jurisdiction of the court under Articles 226 and 227 of the Constitution, nevertheless, when there is an alternative remedy available, judicial prudence demands that the Court refrains from exercising its jurisdiction under the said constitutional provisions.”
The Supreme Court in Kohinoor Creations and Ors. v.Syndicate Bank6 held that all matters within the purview of the Act are to be dealt by the specialized tribunal, DRT and Appellate Tribunal constituted only for this purpose and no other body or forum can deal with these disputes. 

The bar of civil court thus applies to all such matters which may be taken cognizance of by the DRT.
Not only in relation to the applicability of the Act and approaching DRT, the SC in United Bank of India vs Satyawathi Tondon and Ors7. observed that it is a matter of serious concern that despite repeated pronouncements, the High Court’s continue to ignore the availability of statutory remedies under the DRT and Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (“SARFAESI Act”) and exercise jurisdiction under Article 226 for passing orders which have serious adverse impact on the right of banks and other financial institutions to recover their dues.
It is surprising to note that the Mad HC in the past has itself ruled against approaching civil courts; invoking writ jurisdiction in case of recovery of debts by banks8 however had allowed it in the present case. 
The present judgment is one more attempt to clarifying the law and creating awareness among the litigants in relation to recovery of dues from banks and financial institutions.
Failing to nip the bud of frivolous invocation of writ remedy under Article 226 and 227, in this case resulted in a delay of more than five years. 
If justice delayed is justice denied, then justice has certainly been denied to Canara Bank despite SC’s proverbial rap on Mad HC’s (single bench) knuckles.

Wednesday, March 20, 2013

Mallya takes a dig at SBI, asks what about loan recovery from others




PTI









First Post :20 Mar 2013 :Mumbai: 
What about loan recovery from those other than Kingfisher?, wondered its promoter Vijay Mallyawhile taking a dig at bank chiefs in his tweet for their “constant speak” to media on getting back dues from the grounded airline.
“I seriously wonder what motivates the bank chairmen to constantly speak to the media on loan recovery fromKingfisher Airlines. What about others?” Mallya tweeted.
“We are blazing all guns and taking all steps to recovery (of Kingfisher loans),” Pratip Chaudhuri, Chairman of SBI, the lead lender to Kingfisher, had said yesterday. Posing a question on why Kingfisher should not be given a chance to resume operations, Mallya tweeted back: “SBI Chairman — All guns blazing on Kingfisher loan recovery. All my guns blazing on restart/rehabilitation. Why should v b denied a chance? (sic).”
PTI
Kingfisher Airlines owes a whopping Rs 7,500 crore to a consortium of 17 public banks, mostly state-run banks. It is grounded since last October and its licence also expired on December 31, 2012.
Chaudhuri’s assertion on loan recovery from Kingfisher also coincided with Finance Minister P Chidambaram asking banks to take firm steps to recover loans from wilful defaulters. “The country cannot afford to have affluent promoters and sick companies,” Chidambaram had said yesterday after meeting heads of PSU banks and financial institutions in New Delhi.
PTI

























Monday, March 18, 2013

இலங்கை தமிழர் பிரச்னையை தீர்க்க பிரதமருக்கு வக்கீல்கள் தந்தி

tamil news, tamil news paper, tamil newspaper, tamil evening news paper
Thamizh Murasu :18 March 2013

காஞ்சிபுரம்: தமிழ்நாடு மற்றும் புதுவை மாநில வழக்கறிஞர்கள் சங்கங்களின் கூட்டமைப்பின் செயற்குழு உறுப்பினர்கள் கூட்டம் காஞ்சிபுரத்தில் நேற்று நடந்தது.

தலைவர் பரமசிவம் தலைமை தாங்கினார். செயலாளர் ரகுநாதன், பொருளாளர் மணி முன்னிலை வகித்தனர். காஞ்சிபுரம் பார் அசோசியேஷன் தலைவர் கார்த்திகேயன் வரவேற்றார். இதில் நிறைவேற்றப்பட்ட தீர்மானங்கள்: வழக்கறிஞர்கள் சேம நலநிதியை ரூ. 5.25 லட்சமாக உயர்த்திய தமிழக முதல்வருக்கு நன்றி. புதுவை வழக்கறிஞர்களுக்கும் இதுபோல் நிதி கிடைக்க செய்யவேண்டும்.


வழக்கறிஞர்களுக்கு எதிராக பொய் வழக்கு போடும் போலீசாரை தவிர்க்கும் வகையில் உயர்நீதி மன்ற உத்தரவின் அடிப்படையில் மாவட்ட அளவில் அமைதிக்குழு அமைக்க வேண்டும். இலங்கை தமிழர் பிரச்னையில் தமிழர்களுக்கு ஆதரவாக தீர்மானங்கள் கொண்டுவர வலியுறுத்தி பிரதமர், வெளியுறவுத் துறை அமைச்சருக்கு தந்தி அனுப்ப வேண்டும். நீதிமன்றங்களில் காலி பணியிடங்களை நிரப்பி உள்கட்டமைப்பு வசதிகளை நிறைவேற்ற வேண்டும். இவ்வாறு தீர்மானங்கள் நிறைவேற்றினர். இதில், பார் கவுன்சில் உறுப்பினர்கள் ரங்கநாதன், கதிரவன், துணைத் தலைவர் ராம்குமார் கலந்து கொண்டனர். நிர்வாக குழு உறுப்பினர் எழிலரசன் நன்றி கூறினார்.

SBI taking all steps to recover money from Kingfisher





NEW DELHI: The lead banker to Kingfisher Airlines today said it is taking all steps to recover the loan provided to the grounded carrier.

"We are blazing all guns and taking all steps to recovery (of Kingfisher loans)," SBI Chairman Pratip Chaudhuri said here after the meeting of the Finance Minister with the heads of PSU banks and financial institutions.

"There is a core group. They are assessing what are securities what can be disposed of quickly then they are put on auction... That is how it goes," he said.

Earlier in the day, Finance Minister P Chidambaramasked the banks to take firm steps to recover loans saying that the country cannot afford to have "affluent promoters and sick companies".

"We cannot have an affluent promoter and a sick company. Promoters must bring in money...," Chidambaram had said.

The consortium of 17 banks, led by SBI, has an outstanding of over Rs 7,000 crore from the carrier but has shares of listed entities like United Spirits as collaterals which should realise Rs 500 crore. That apart, they have the brand Kingfisher as a security.

Additionally, the consortium has a residual right over the securities held by Srei Infrastructure Finance which comes to Rs 500 crore. Srei bought this from ICICI Bank in April last year.

SBI has the maximum exposure, over Rs 1,600 crore, in the Vijay Mallya-led airline, followed by PNB (with Rs 800 crore, IDBIat Rs 800 crore, Bank of India at Rs 650 crore and Bank of Baroda has Rs 550 crore.

On Finance Minister's direction on bad loans recovery, Chaudhuri said: "We are taking all steps to recover our NPAs and make the situation better.

"Wherever they can't pay full amount at least part recovery is made so that these are upgraded and the accounts on CDR that process are being expedited."