Higher provisioning hits IOB profit

The Hindu : Oct 27,2012

Indian Overseas Bank increased its total income by 14.4 per cent to Rs. 5,515.02 crore in the second quarter ended September 30, 2012, from Rs.4,822.56 crore in the corresponding quarter of the previous year.

The net profit was sharply lower at Rs.158.43 crore against Rs.207.46 crore in the second quarter of the previous year. Interest reversal on restructured and slippage accounts and additional provisions due to the reversal had resulted in a lower profit, the bank said in a statement.

The net profit for the half-year ended September 30, 2012, was lower at Rs.391.86 crore against Rs.413.04 crore in the year-ago period.

Total business went up by 17.80 per cent to Rs.3,42,508 crore on September 30, 2012, from Rs.2,90,744 crore as on September 30, 2011. Deposits registered a growth of 15.61 per cent at Rs.1,89,115 crore against Rs.1,63.597 crore. Gross advances were up 20.62 per cent at Rs.1,53,393 crore against Rs.1,27.166 crore.

Gross NPAs (non-performing assets) rose sharply to Rs.5,930 crore from Rs.3,898 crore due to few major accounts which turned into NPAs. The industry and services sectors contributed significantly to the NPAs.

The net NPA ratio was 2.25 per cent against 1.21 per cent. The credit deposit ratio (CD) increased to 81.11 per cent as on September 30, 2012, from 77.74 per cent as on September 30, 2011.

Exposure to Kingfisher Airlines may become NPA for Indian Overseas Bank

B S :Neelasri Barman / Mumbai Oct 29, 2012, 16:53 IST

Two years ago the loans of Kingfisher Airlines were restructured under industry dispensation

Chennai-based public sector lender, Indian Overseas Bank (IOB) which has exposure of Rs 120 crore towards cash-strapped Kingfisher Airlines today said the account may become non-performing asset (NPA) for the bank in the current quarter (October-December). While most Kingfisher lenders already marked the account as non-performing, it is still performing for the Chennai-based lender.

According to a senior official of the bank, if it becomes a NPA then the bank will have to provide 15-25 per cent of this Rs 120 crore as provisioning in this quarter. The exposure is in the form of working capital finance. At present, the lender is treating KFA account as standard asset though payments has become due.

There are 17 banks in the consortium of lenders to Kingfisher Airlines in which State Bank of India is the leader with an exposure of about Rs 1,500 crore.

As on September 30 the gross NPAs of the bank stood at Rs 5,930 crore as against Rs 3,898 crore a year ago while net NPAs stood at Rs 3,378 crore as against Rs 1,505 crore a year ago. According to the bank's chairman and managing director M Narendra going forward the bank will focus a lot on recovery. Narendra said fresh slippage in the July-September quarter was 1,600 crore domestically and international was Rs 200 crore. 

Two years ago the loans of Kingfisher Airlines were restructured under industry dispensation. However, the airline began to default on payments. Due to this the loans turned NPAs for most lenders in the third and fourth quarters of the last fiscal.

As part of the restructuring package, part of the debt (about Rs 750 crore) was converted into equity. In March 2011, Kingfisher issued about 116 million shares (of Rs 10 each) at a price of about Rs 64 per equity share. These shares had a lock-in period of a year.

Banks received shares of the airline but the stock price plunged due to which banks had to make provisions for erosion in the value of shares. On Monday, the Kingfisher Airlines stock closed at Rs 11.75 on the BSE, a rise of 3.07 per cent.

Priya vs The Authorised Officer ,IOB

Madras High Court

on 3 January, 2012

DATED: 03.01.2012
CORAM
THE HONOURABLE MR.JUSTICE P.JYOTHIMANI
and
THE HONOURABLE MR. JUSTICE M. DURAISWAMY
W.P.No.15961 of 2011 &
M.P.No.2 of 2011
Priya .. Petitioner
VS.

1.The Authorised Officer
Indian Overseas Bank
Erode Main Branch
12/1, Apt Road, Erode  3.
2. C.Shanmugam ... Respondents
Writ petition filed for the issuance of a writ of Certiorarified Mandamus, calling for the records culminated to the notice dated 29.06.2011 on the file of the 1st Respondent and quash the same as being arbitrary and violative of Principles of Natural Justice and Article 21 Constitution of India and consequently direct the first respondent to return the movable property belonging to the Petitioner.
For Petitioner : Mr.K.Kumaresh Babu
for Mr.K.Surendar
For Respondents : Ms.Ananda Gomathy Sivakumar  for R-1
Mr.V.T.Narendran -for R-2
ORDER
(order of the Court was made by P.JYOTHIMANI, J)
The writ petition is filed challenging the notice dated 29.06.2011 issued to the petitioner by the first respondent/Bank for sale of the movables listed therein, by invoking the powers under the Securitisation and Reconstruction of financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as 'SARFAESI Act'). Admittedly, the movable goods are belonging to the petitioner, who is a tenant in the property, belonging to the second respondent.

2. It is also not in dispute that the above said movables mentioned in the impugned notification are not the subject matter of security for the borrowal from the bank and the petitioner has not stood as a guarantor in respect of the amount stated to have been borrowed from the bank by one Samsen Papli, from whom the second respondent has purchased the property for repayment under the SARFAESI Act.
3. The petitioner, after giving notice under section 13(4) of the Act has approached the Chief Judicial Magistrate, Erode under section 14 of the Act and there are certain orders passed by the Chief Judicial Magistrate for possession. Since the petitioner/tenant has locked the premises by keeping the movables inside the house, there was further direction given by the Chief Judicial Magistrate appointing an Advocate Commissioner to brake open and take possession of the movables. Based on the said order passed by the Chief Judicial Magistrate, Erode, the house resided by the petitioner was brake opened and the goods were taken to the custody of the first respondent/Bank. It is, at that stage, invoking the powers under SARFAESI Act, the first respondent/Bank has issued the impugned notification brining the movables for sale. The present writ petition is filed challenging the said notification.
4. The impugned challenges is on the ground that when the movables, which are the subject matter of the impugned notification, are not the subject matter of security for the payment of loan obtained from the first respondent by the second respondent and when the petitioner has never stood as a guarantor for the payment of the amount availed by Samsen Papli from the first respondent/Bank, there is absolutely no jurisdiction on the part of the bank to invoke the SARFAESI Act against the petitioner. It is seen that notice under section 13(2) was not given to the petitioner but it was given to the second respondent. When the movable properties, which are the subject matter stated in the impugned notification does not belong to the second respondent, there is no question of bringing such movables for sale. The very act of the first respondent/Bank in approaching the Chief Judicial Magistrate, Erode under section 14 of the Act to take the movables belonging to the petitioner is alienation to the principles enunciated under the SARFAESI Act.
5. The first respondent/Bank in the counter affidavit has specifically admitted that they are not proceeding to sell the movable properties under the provisions of the SARFAESI Act and they are prepared to withdraw the notification unconditionally. Further, in the counter affidavit, the first respondent/Bank has chosen to state very strangely that the bank is willing to handover the movables back to the petitioner provided the charges incurred by the bank being paid to them. The relevant portion is extracted below:-
"10. I have been advised not to proceed with the sale of the movables under the provision of SARFAESI Act and I hereby withdraw the said notice unconditionally, but however I am willing to handover the movables back to the petitioner provided the charges incurred by us towards the safe keeping of the said articles are paid to the bank."
6. It is also seen in the counter affidavit that the following charges are claimed by the first respondent/Bank against the petitioner as a matter of reimbursement, which are as follows: (i) Charges towards Security Guard : Rs.1,09,200/-
(ii)Paper Publication Charges : Rs. 2,050/-
(iii) Paper Publication chargs : Rs. 6,050/-
(iv) Building rent (Rs.3000 x 6 months) : Rs. 18,000/-
(v) Insurance Premium amount : Rs. 803/-
(vii) Legal charges and lawyer fees : Rs. 2,500/- -----------------
Total : Rs.1,38,803/-
-----------------
7. The learned counsel for the first respondent/Bank would vehemently contend that eventhough the movable goods never stood as a security for the repayment of the loan borrowed by Samsen Papli, from whom the second respondent has purchased the property, the petitioner being the tenant under the second respondent, having come to know about the steps taken by the Bank under section 14 of the Act, has chosen to lock the premises unlawfully and that has only made the Bank to approach the Chief Judicial Magistrate for brake open and it was only a matter of necessity and therefore, when possession was taken, it was only preserved and for preserving the goods, the expenses were incurred. According to the learned counsel for the first respondent/Bank, the charges claimed above has to be reimbursed to the first respondent/Bank.

8. Even though the contention of the learned counsel for the first respondent/Bank is attractive and she has taken strenuous steps to pursue this court to accept her plea, we are unable to accept the same for the simple reason that the goods which are taken by the first respondent/Bank are not the subject matter of the security. In such circumstances, in all fairness, the first respondent/Bank should not have taken any steps under the SARFAESI Act to take the goods belonging to the petitioner, who is a third party. The petitioner is neither a guarantor for the repayment of the loan stated to have been received by the said Samsen Papli, from the first respondent/Bank nor the movable goods belonging to the petitioner were given as a security for repayment. In such circumstances, taking possession through court of law does not mean that the SARFAESI Act enables the first respondent/Bank to take possession lawfully. Therefore, the question of indemnifying the Bank for having kept the same on behalf of the petitioner does not arise.
9. According to us, the first respondent/Bank has no right to recover even if the amount stated to have been spent sought to be indemnified as per sections 13(7) and 13(10) of the SARFAESI Act which reads as follows: "Section 13(7) : Where any action has been taken against a borrower under the provisions of sub-section (4), all costs, charges and expenses which, in the opinion of the secured creditor, have been properly incurred by him or any expenses incidental thereto, shall be recoverable from the borrower and the money which is received by the secured creditor shall, in the absence of any contract to the contrary, be held by him in trust, to be applied, firstly, in payment of such costs, charges and expenses and secondly, in discharge of the dues of the secured creditor and the residue of the money so received shall be paid to the person entitled thereto in accordance with his rights and interests. Section 13(10) : Where dues of the secured creditor are not fully satisfied with the sale proceeds of the secured assets, the secured creditor may file an application in the form and manner as may be prescribed to the Debts Recovery Tribunal having jurisdiction or a competent court, as the case may be, for recovery of the balance amount from the borrower."
10. It is not the case of the petitioner that the petitioner voluntarily given possession of these goods to the bank so as to enable the bank to keep it and the bank has taken steps without even giving notice to the petitioner, who is not liable to pay any amount in respect of the borrowal made by the said Samsen Papli,. In view of the above, we are unable to accept the contention raised by the first respondent/Bank.
11. Accordingly, the writ petition stands allowed and the impugned notification dated 29.6.2011 stands set aside. As per the undertaking given by the first respondent/Bank in their counter affidavit paragraph No.10 (extracted above), the first respondent/bank shall handover all the goods to the petitioner immediately, in any event, within a period of two weeks from the date of receipt of a copy of this order. No costs. Consequently, connected miscellaneous petition is closed.
rj
To
The Authorised Officer
Indian Overseas Bank
Erode Main Branch
12/1, Apt Road
Erode 3

M/s.IOCEE Exports ltd & ors V/S The Authorised officer, IOB

R.A(S.A):96/2010

1.         This appeal impugns the order dated 10.7.2009 passed by the Learned Presiding Officer, DRT-I Chennai in SA No. 158/2009.

2.         The case of the appellants may be stated as follows:

It is stated that the first appellant is a public limited company engaged in the business of marketing agriculture produce for exporting rice, maize and wheat etc., and textiles to foreign countries and that it approached the respondent bank for certain credit facilities and that the respondent bank by its sanction letter dated 29.3.2005 sanctioned credit facilities of Rs.19.8 crores, out of which Rs.13 crores was for the agriculture produce marketing business and the remaining Rs.6.8 crores was towards the textile export business.  It is stated that the respondent bank released only Rs.10 crores as against the sanctioned limits of Rs.19.8 crores.  It is stated that the respondent bank issued the notice under Section 13(2) of the SARFAESI Act on 21.4.2008 and that the appellants also sent a reply vide their letter dated 29.5.2008 pointing out the various refund claims and had also submitted an OTS proposal for a sum of Rs.150 lakhs.  It is stated that the said proposal for OTS was rejected by the respondent bank by their letter dated 26.6.2008 without considering the aspects brought out by them and that the respondent bank thereafter issued the possession notice on 31.7.2008.  The appellants have averred various irregularities on the part of the bank and they have stated that the present position of the appellants is only due to the action of the respondent bank. It is stated that the total loss incurred by the appellants is Rs.915.42 lakhs and that the said amount exceeds the demand made by the respondent bank and in fact the respondent bank has to refund the balance amount to the appellants.  It is stated that the loans availed by the appellants are for marketing of agricultural produce and therefore the respondent bank ought not to have initiated action under the SARFAESI Act.  It is stated that the account of the appellants is said to have been classified as NPA on 31.8.2006 and if that was true then the respondent bank could not have sanctioned fresh packing credit of Rs.150 lakhs during the month of January 2007.  It is stated that the respondent bank denied the OTS which the appellants were entitled to under the RBI guidelines.  It is stated that the valuation of the hypotheca itself would be more than Rs.2.5 crores and that the respondent bank cannot proceed to sell the immovable property of the appellants without taking an inventory of the movable goods and assessing their value.  It is stated that the sale notice issued in this case is contrary to law and that it has been issued with malafide intentions.  It is stated that the sole intention of the respondent bank is to bring the valuable properties of the appellants for sale for a throw away price and that the respondent bank has not valued the property correctly.  It is stated that the notices issued under Section 13(2) and 13(4) of the SARFAESI Act are not in accordance with law.  It is stated that respondent bank even after debiting the premium payable to ECGC for the pre-shipment failed to claim the amount from ECGC.  It is stated that the appellants aggrieved by the order of the Ld. Presiding Officer, DRT-I Chennai dated 10.7.2009 made in SA No.158/2009 have filed this appeal and prayed that the appeal be allowed.

3.         The Ld. Counsel for the appellants stated that the provisions of Section 13(3A) of the SARFAESI Act has not been complied with by the bank and that for this reason alone the proceedings of the Authorized Officer is liable to be set aside.  The Ld. Counsel stated that though this ground was taken in the grounds of the SA filed before the tribunal below and in the written arguments filed on behalf of the appellants the Ld. Presiding Officer has chosen not to refer to the violation of the provisions under Section 13(3A) of the Act.  The Ld. Counsel for the appellants stated that the respondent bank did not disburse the entire amount sanctioned by it, and that even after declaring the appellants’ account as a ‘NPA’ the respondent bank went ahead to sanction further loans though they did not disburse the same.  The Ld. Counsel also drew the attention of this Tribunal to paragraph 9 of the order of the Ld. Presiding Officer and stated that the Ld. Presiding Officer has failed to consider the aspect of violation of Section 13(3A) of the Act by the Authorized Officer and that the same has caused serous prejudice to the appellant and prayed that the appeal be allowed.

4.         The appellants filed their written arguments and the same forms part of the record. The appellants relied upon the judgment of the Hon’ble High Court of Madras dated 6.9.2011 made in W.P. No.6710/2011 in the case of “Industrial Finance Corporation of India Limited and Another Vs. The Debts Recovery Appellate Tribunal, Chennai and two others” and the judgment of the Hon’ble Supreme Court of India dated 4.11.2011 in the case of “J and K Housing Board and Anr. Vs. Kunwar Sanjay Krishnan Kaul and others” in support of his contentions.

5.         The Ld. Counsel for the respondent bank drew the attention of this tribunal to the notice issued under Section 13(2) of the SARFAESI Act and the communication addressed by the appellants to the Chairman and Managing Director of the bank with a copy to the Authorized Officer and stated that the receipt of the said communication by the Authorized Officer can in no way be said to be under the provisions of Section 13(3A) and added that therefore there cannot be any violation of Section 13(3A) of SARFAESI Act.  The Ld. Counsel drew the attention of this tribunal to the letter dated 29.5.2008 sent by the appellant and stated that a reading of paragraph 3 at Page of the said letter would reveal that the appellants have admitted that they have utilized the limits to the extent of Rs.10 crores out of Rs.17.26 crores. The Ld. Counsel stated that no amount was sanctioned after the issuance of notice under Section 13(2) of SARFAESI Act.  The Ld. Counsel further drew the attention of this Tribunal to the reply sent by the appellants to Section 13(2) notice at page 89 of the typed set of papers and stated that it is not a reply to Section 13(2) notice as the appellants have not raised any objections to the Section 13(2) notice and that the same can be considered only as a representation made by the appellants to the Chairman of the bank for the grant of a OTS.  The Ld. Counsel added that the appellants have not taken any ground regarding the violation of Section 13(3A) in the SA. The Ld. Counsel prayed that the appeal be dismissed.  The Ld. Counsel for the Respondent Bank relied upon the following judgments in support of his contentions:

i)                    Industrial Finance Corporation of India Limited (IFCI) Vs. DRAT, Chennai – CDJ 2011 MHC 4916.

ii)                   Kalpesh P.C. Surana Vs. Indian Bank – 2010 (3) CTC 287.

iii)                 B. Shanmugam Vs. Union Bank of India – 2008(2) CTC 249

iv)                Industrial Development Bank of India Ltd. Vs. Kamaldeep Synthetics Ltd. 2007 (2) CTC 397.

6.         The respondent bank filed its written arguments and the same forms part of the record.

7.         Heard the Ld. Counsel for the appellants and the respondent bank.

8.         It is seen that the appellants have based their case firstly on the violation of Section 13(3A) of the SARFAESI Act by the Authorized Officer and secondly on the exercise of choice of the Authorized Officer in selecting a particular secured asset for taking possession under the provisions of the SARFAESI Act.

9.         It is seen that the notice under Section 13(2) of the SARFAESI Act was issued by the Authorized Officer empowered by the Cathedral Branch of Indian Overseas Bank, 762 Anna Salai, Chennai-600002 to the appellants and the first appellant represented by its Managing Director had sent a letter to the Chairman and Managing Director, Indian Overseas Bank, Central Office, Chennai-600002 and in the said letter the first appellant has stated that the appellants are in receipt of the notice dated 21.4.2008 issued by the Cathedral Branch, Indian Overseas Bank regarding payment of the dues to the bank and the first appellant has prayed that an OTS be given to it in view of the difficult financial position of the first appellant.

10.       From a reading of the letter of the first appellant dated 29.5.2008 addressed to the Chairman and Managing Director, Indian Overseas Bank, Central Officer, Chennai-600002 the following are revealed:

i)                    The said letter is neither addressed to the Authorized Officer nor to the secured creditor in this case being the Cathedral Branch, Indian Overseas Bank, 762 Anna Salai, Chennai-600002.

ii)                   The first sentence of the letter reveals that the first appellant was aware that the payment is due to the Cathedral Branch, Indian Overseas Bank, Chennai-2 and though the first appellant is in knowledge of the fact that the objection / representation pursuant to the Section 13(2) notice has to be made only to the said branch of the bank or to the Authorized Officer of the said branch chose not to give a representation or raise an objection to the notice issued under Section 13(2) to the Authorized Officer of the said branch or to the said branch.

iii)                 The letter was addressed to the Chairman and Managing Director, Indian Overseas Bank, Central Office, Chennai and it was only a letter consisting of only pleas for grant of OTS to the first appellant and that only a copy of the same is marked to the Cathedral Branch, Indian Overseas Bank, Chennai-600002.

11.       Therefore from the above it can be seen that the appellants though were aware of the fact that the Section 13(2) notice emanated from the Authorized Officer, Indian Overseas Bank, Cathedral Branch, 762, Anna Salai, Chennai-600002 had chosen not to make the objection/ representation with respect to the said notice but chose to plead for grant of OTS before the Chairman and Managing Director. Therefore in view of the above fact the letter dated 29.5.2008 can in no way be considered as an objection or a representation made in response to the Section 13(2) notice issued by the Authorized Officer, Indian Overseas Bank, Cathedral Branch and such being the case the contention raised by the appellants that the bank had violated Section 13(3A) has to be brushed aside.

12.       In so far as the second point with respect to the choice exercised by the Authorized Officer with respect to the property that he took possession of, the same cannot be questioned by the appellants as the Authorized Officer is empowered under the provisions of the SARFAESI Act to pick and chose any of the secured assets for the purpose of enforcement of the security interest of the secured creditors under the provisions of the SARFAESI Act.

13.       Therefore from the fact that the letter dated 29.5.2008 addressed to the Chairman and Managing Director, Indian Overseas Bank, Central Office, Chennai cannot be taken to be a representation or an objection made to the Authorized Officer or to the branch in response to Section 13(2) notice, from the fact that the Authorized Officer is well within his powers to pick and chose any of the secured assets for the recovery of public money under the provisions of the SARFAESI Act and from the fact that no contravention of the provisions of the SARFAESI Act or the Rules made thereunder have been countenanced in this case and from the fact that that the Ld. Presiding Officer has considered in detail and has arrived at a proper conclusion that the SA has to be dismissed this tribunal is driven to conclude that the order of the Ld. Presiding Officer does not suffer from any infirmity and proceed to dismiss the appeal.

14.       Accordingly the appeal is dismissed.  No costs

The above order was delivered by the Honble Chair person of DRAT Chennai on 29th Feb 2012

IOB cuts NPAs in Karnataka by Rs 200 cr in first half

— G.R.N. Somashekar 
 
Optimistic of recovery:Mr M Narendra (right), CMD, Indian Overseas Bank, and Mr Ranganath, GM, Bangalore Region, addressing a press conference in Bangalore on Friday.

Source :Business line  Bureau:Bangalore, Dec 3.2010

Indian Overseas Bank has brought down its NPAs in Karnataka by about Rs 200 crore during the first half of this fiscal and it currently stands at around Rs 500 crore.

“We expect substantial recovery before March this year,” said Mr M Narendra, Chairman, Indian Overseas Bank.

Tourism projects

Addressing a press conference here, he saidthe bank's exposure to the real estate sector was around Rs 400 crore. “Recovery in this sector has been slow because of the recession and we are confident that we would be able step up the recovery soon,” he said.

Advances to real estate and housing sector in the state areabout Rs 240 crore as of September 30, 2010.

Participation in the State tourism projects, SEZs and infrastructure projects will be the focus for the Chennai-based bank during the year.

Mr Narendra said the bank was ‘interested' in participating in infrastructure projects such as steel, cement and power in the State. “We also want to tap the sugar belt in the state by opening branches in Belgaum and Bagalkot and industrial areas like Jigani and Bidadi,” he said.

Deposits, advances

The banks' total deposits in the State stand at Rs 5830 crore and advances at Rs 3153 crore. Priority sector advance is around Rs 624 crore and agricultural advances about Rs 249 crore. IOB has 83 branches and 41 ATMs in Karnataka.

The bank which has an employee pool of around 26,000 people plans to recruit about 1600 people (1100 clerks and 500 specialist officers) during the current year and about 100 new hires would be in the state, Mr Narendra said.