Can a NPA declared company pay dividend ?

Source ;oneindiamoney:Monday, February 21, 2011, 12:04


Vikas WSP Ltd has informed BSE that:

"In the month of March 2009, due to world recession, realizations of export bills were delayed more than 3 months. As per Reserve Bank of India regulations, if the bills are delayed more than 90 days (3 months), the account has to be declared Non - Performing Assets (NPA). SBBJ declared the account of NPA in March 2009 and arecovery suite was filed, in DRT, Jaipur and obtained an interlocutory order from DRT restraining the company from distribution of dividend to its shareholders. 


Subsequently, the realizations of all the bills were received by the SBBJ bank, Company filed damages case against the bank and also filed an appeal against the order of lower Court in Appellate Court.


 On December 08, 2010, due to settlement with bank, the entire issue has been resolved with mutual agreement. Now matter ended. Appellate Court has ordered to distribute dividend within 3 months from the date of order i.e. upto March 07, 2011.

Due to mutual settlement between Bank and Petitioner (Vikas WSP Limited), the petitioner has not pressed the damages claim and therefore, the demand of damages claim is closed without any direction.

Now the company can distribute the dividend for the years 2008-09 and 2009-10 as approved by its shareholders within a period of 3 months from the date of order.

In view of the above order the last date of payment of dividend comes out to March 07, 2011. 


However, company has already distributed dividend for the year 2008-09 and dividend for the year 2009-10 will be distributed latest by March 07, 2011 which is the last date as per Appellate Court order.

Can a NPA declared company pay dividend ?

Source ;oneindiamoney:Monday, February 21, 2011, 12:04


Vikas WSP Ltd has informed BSE that:

"In the month of March 2009, due to world recession, realizations of export bills were delayed more than 3 months. As per Reserve Bank of India regulations, if the bills are delayed more than 90 days (3 months), the account has to be declared Non - Performing Assets (NPA). SBBJ declared the account of NPA in March 2009 and a recovery suite was filed, in DRT, Jaipur and obtained an interlocutory order from DRT restraining the company from distribution of dividend to its shareholders. 


Subsequently, the realizations of all the bills were received by the SBBJ bank, Company filed damages case against the bank and also filed an appeal against the order of lower Court in Appellate Court.


 On December 08, 2010, due to settlement with bank, the entire issue has been resolved with mutual agreement. Now matter ended. Appellate Court has ordered to distribute dividend within 3 months from the date of order i.e. upto March 07, 2011.

Due to mutual settlement between Bank and Petitioner (Vikas WSP Limited), the petitioner has not pressed the damages claim and therefore, the demand of damages claim is closed without any direction.

Now the company can distribute the dividend for the years 2008-09 and 2009-10 as approved by its shareholders within a period of 3 months from the date of order.

In view of the above order the last date of payment of dividend comes out to March 07, 2011. 


However, company has already distributed dividend for the year 2008-09 and dividend for the year 2009-10 will be distributed latest by March 07, 2011 which is the last date as per Appellate Court order.

SC: Borrowers must approach tribunal, not high court

Source : Business Standard:M J Antony / New Delhi February 14, 2011, 0:55 IST


The Supreme Court (SC) stated last week a borrower and his guarantors who have been served with a notice under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act has a remedy under the Act and should not rush to the high court. In this case, Kanaiyalal vs State of Maharashtra, State Bank of India advanced loans against mortgage of certain property. The loan was declared as non-performing asset and the bank proceeded to take over the mortgaged property. The guarantors moved the Bombay high court against the bank’s move. It rejected the petition stating they had tried to avail of the remedy earlier by moving the debt recovery tribunal The excise commissioner appealed to the SC. It quashed the tribunal’s order.


Permanently fixed furniture too subject to excise 

The SC ruled last week central excise duty can be levied on furniture permanently fixed to the walls or ground. It set aside the decision of the Customs, Excise and Service Tax Appellate Tribunal, Bangalore, which took a contrary view in the case, Commissioner vs Mehta & Co. This Mumbai company was engaged in interior decoration of luxury hotels. It entered into turn-key contracts with its clients and furniture was part of the work contract. When the revenue authorities demanded excise duty, it protested the woodwork was carried out in the premises of the hotels and they were permanent fixtures. They cannot be removed without causing damage to the goods or cannibalisation. When the contention was rejected, the firm moved the tribunal, which accepted its argument.

A director of a company should not be dragged to a criminal court when documents prove he was not responsible for issuing cheques which were dishonoured, the SC stated last week. The Calcutta high court had asked a former director of Rifa Healthcare (India) who had resigned from the company to stand trial for the issuance of 18 cheques. He showed from documents he had left the company and therefore the case against him should be quashed. But the high court insisted it was his duty to show the trial court he had indeed quit the company. Therefore, he should face the trial first. He appealed to the SC against the order. The SC set aside the ruling in the case, Harshendra Kumar vs Rebatilata Kole, stating it was evident from the records of the company and the registrar of the companies he had left the firm at the time of issuing the cheques.

Appeal over violation of rules on storing imported good

The SC last week dismissed the appeal of M/s SBEC Sugar Ltd against the Bombay HC order allowing the customs authorities to charge dues for keeping imported goods in the warehouse beyond the permitted time. The firm had imported capital goods for its unit. The goods were kept in the warehouse under bond. After the expiry of the period, the firm applied for extension of the facility. Meanwhile, the government enlarged the Export Promotion Capital Goods Scheme to cover agro-based industries. The sugar firm availed of this facility and claimed exemption. The authorities rejected the request. The importer moved the high court, and later appealed to the SC, without success. The SC judgment clarified the benefit of exemption granted under the export promotion scheme would not be available to the firm.

Petition on trademark dismissed

The Madras high court last week rejected the petition of Crompton Greaves Ltd seeking a trade mark injunction against Salzer Electronics Ltd in a dispute over the use of the logo CG. Salzer, an Indian company, was a third party manufacturer for Crompton Greaves of electrical goods. Later, Salzer manufactured similar goods for a British firm, Europa Component & Equipment plc with trademark MCG. The latter trade mark is owned by a European company called Motor Control and Industrial Switch Gear.

Salzer sent its goods with MCG mark to UK. The high court stated that since the goods were sent to UK on Europa’s orders, with a mark registered there and to be sold abroad, there was no cause for injunction. Moreover, the mark was not visible on the face of the goods unless the outer casing was removed.

Auction Sale-- of bank properties- Chennai

Source :The New Indian Express.Chennai

Auction Sale-- bank Of baroda, chennai, 14-03-2011

Source :BOB.Chennai

Sapthagiri Pee Gee Fruits Processing (P) Ltd., Vs UCO Bank

IN THE DEBT RECOVERY APPELLATE TRIBUNAL AT CHENNAI

DATED THE 14^TH SEPTEMBER, 2004

PRESENT:  HON’BLE JUSTICE DR. PRATIBHA UPASANI

CHAIRPERSON

MA-35/2004

(IA-750/2002 in TA-68/1996-DRT-I, Chennai)

BETWEEN:

M/s. Sapthagiri Pee Gee Fruits Processing (P) Ltd.,

Rep. by its Managing Director Mr. M.G. Sekar,

607, 7^th Street, Gopalapuram,

Chennai-600 086.

…  Appellant

            (Counsel:  Mr. M.G.C. Prabhakar)

AND

UCO Bank,

730, Mount Road (Anna Salai),

Chennai-600 002.

…  Respondent

            (Counsel:  Mr. Srinath Sridevan)

:  O R D E R  :

1.         This Miscellaneous Appeal is filed by the Appellant/Third party purchaser/Auction purchaser M/s. Sapthagiri Pee Gee Fruits Processing (P) Ltd., being aggrieved by the Common Order dated 24.12.2003 passed by the Learned PO of DRT-I, Chennai, on the Interim Application IA No.750/2002.  By the impugned Order the Ld. PO rejected the application made by the auction purchaser in which a prayer was sought that the DRT should pass order directing the Recovery Officer/Bank that the amount of Rs.2,91,255/- out of Rs.75 lakhs deposited by the auction purchaser towards the sale proceeds, be paid directly to the Tamil Nadu Electricity Board (for the sake of brevity hereinafter referred to as TNEB), Dharmapuri Circle, Dharmapuri.  Apprehension was expressed that if these arrears of electricity were not paid, then the auction purchaser might face disconnection of electricity supply.

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

3.         Property belonging to the Certificate debtor M/s. Dharmapuri Steel Castings Ltd., Dharmapuri, which was mortgaged to the applicant Bank namely, UCO Bank, was purchased by the present appellant at auction held by the Recovery Officer during the course of recovery proceedings initiated against the Certificate debtor.  The property consisted of land along with building and old machinery equipment etc.  While tenders were invited by the Recovery Officer for sale of the Steel castings factory of the Certificate debtor, they were invited on ‘as is where is basis’.  The bid of the present appellant was accepted.  The amount paid by the auction purchaser/present appellant was Rs.75 lakhs.  The appellant later on came to realise that there were electricity dues by TNEB to the tune of Rs.2,91,255/-.  As per rules of the TNEB, if this amount was not paid the auction purchaser would have faced disconnection of electricity supply.  Therefore, application came to be made by the appellants/auction purchaser that this amount of Rs.2,91,255/- out of the deposit of Rs.75 lakhs made by the auction purchaser towards sale proceeds in the Tribunal/Bank be paid directly to the TNEB.  It was this application which came to be rejected by the Ld. PO of DRT-I, Chennai. 

4.         I have heard Mr. Mr. M.G.C. Prabhakar, Advocate for the appellant and Mr. Srinath Sridevan, Advocate for the respondent Bank.  I have also gone through the proceedings including the impugned Order, the offer inviting tenders by the Recovery Officer for sale of the mortgaged property and the terms and conditions under which sealed tenders were invited.  In the said text, description of the property is given and it is specifically and categorically mentioned that tenders are invited for sale on ‘as is where is basis’ for realising the dues of M/s. Dharmapuri Steel Castings (Certificate debtor).  Thus the said invitation leaves no room for doubt that the premises were to be purchased in the auction by the auction purchaser on ‘as is where is basis’.  The appellants, therefore, ought to have been on their guard, ought to have been vigilant and alert and should have made enquiries whether there were any encumbrance on the property. Since the appellants, in spite of being businessmen did not make any such enquiry which reasonably any prudent businessmen would have made, it was revealed later on that TNEB had dues of Rs.2,91,255/- by way of outstandings.

5.         Clause-6.10 of the terms and conditions of supply of electricity of TNEB specifically says that in such a contingency the intending purchaser has to pay the arrears.  Clause-6.10 can be reproduced below for the sake of  convenience :-

                        “The Board will refuse to supply electricity to an intending consumer who has defaulted in payment of dues to the Board in respect of any other service connection held in his name.

                        In case of services which have been disconnected / dismantled for non-payment of arrears and if the services are to be availed by other parties in the same premises either by purchase or transfer or in auction or on lease basis then in such cases the services will be effected only on clearance of the dues outstanding against such disconnected / dismantled service by the intending consumers.”

6.         The above Rule makes it clear that the sole responsibility to clear the outstandings of TNEB is of the auction purchaser/appellant only.  Now, the appellant wants to adjust this amount of Rs.2,91,255/- from Rs.75 lakhs which he has paid to the Bank towards the purchase of the mortgaged property.  This, of course, is unreasonable and not acceptable.

The appellants are trying to avoid the additional burden of paying the outstanding and want that amount to be adjusted from the amount which they have already paid towards the purchase of the mortgaged property.  But the Bank towards whose dues the property is auctioned should not be deprived of the amount which rightfully is due to the Bank.  The lapse has to be totally attributed to the negligent appellants who did not verify before making offer to purchase the property with respect to the encumbrance upon the said property which they wanted to purchase.  The property and plant and machinery was not promised by the Tribunal to be sold as free from any encumbrance.  The property was to be sold on the ‘as is where is basis’.  Nothing was suppressed or was kept in the dark from the intending purchaser about the status of the factory, condition of plant and machinery and the same were offered for sale on ‘as is where is basis’.  It was then the responsibility of the intending purchaser as a prudent businessman and buyer to make relevant enquiries with respect to the property.  Once the auction purchaser has purchased the property with his eyes open, now he cannot deprive the Bank of its dues by submitting that the electricity dues should be paid from the sale proceeds.  That will not be fair.  The auction purchaser has to pay the outstanding of TNEB by making payment to TNEB if he wants to enjoy the premises with electricity supply.  Another peculiar thing is that the TNEB has not made any application that their dues should be paid by the Bank, and rightly so, because the Bank is not responsible to pay any arrears of electricity dues of the property sold to the third party.  The property was mortgaged with the Bank and it was the borrower who had committed default and not the Bank.  For realising the debt the property was sold.  The application about adjustment of the outstanding dues of TNEB is made by the auction purchaser to reduce his burden.  But he has to thank himself for this situation.  Had he made proper enquiries he would have come to know about the dues payable to TNEB and accordingly he would have changed the offer made by him or would have sought some adjustment towards the electricity dues of TNEB.

7.         Section-55(1)(a) of the Transfer of Property Act says that at the time of sale the seller has to disclose to the buyer any material defect in the property of which the seller is and the buyer is not aware and which the buyer could not with ordinary care discover.  In the present case at hand, the notice inviting sealed tenders reveals that all the relevant information to the intending purchaser was revealed and nothing was suppressed.  It was categorically mentioned that the property as well as the plant and machinery were being sold only on ‘as is where is basis’ which clearly means that the Tribunal/Bank was selling the machinery at its face value at present condition, situation and subject to prior dues, charges or encumbrances, if any, that may be found to be paid by the purchaser, as the Tribunal was not aware of the dues/charges.  Interested buyers were at liberty to make any enquiries and have inspection of the property in question.

….5/

8.         In view of the above discussion, I find no infirmity in the impugned Order passed by the Ld. PO of DRT-I, Chennai.  The appeal, therefore, will have to be rejected.  The said Order, therefore, will have to be upheld and the appeal will have to be dismissed.  Accordingly, following Order is passed.

9.         Miscellaneous Appeal MA No.35/2004 is dismissed.

(Dictated to PS & the transcript signed by me today the 14^th September, 2004)

                                                                                                                                                                                                                                                                        Sd/-

[ JUSTICE  DR. PRATIBHA UPASANI ]

CHAIRPERSON

SBI Vs Bi Metalic Steel & Alloys Ltd & Allahabad Bank

IN THE DEBT RECOVERY APPELLATE TRIBUNAL AT CHENNAI

DATED THE 22^ND APRIL, 2004

PRESENT:  HON’BLE MRS. JUSTICE A. SUBBULAKSHMY

CHAIRPERSON

MA-37/2003

(MA-95/02 in RA-1/02 in MP-3&4/01 in RP-375/01 in OA-1144/1995-DRT, Hyderabad)

BETWEEN:

State Bank of India,

Main Branch, Bank Street,

Koti, Hyderabad.

….  Appellant

            (Counsel:  Mr. K.S. Sundar)

AND

1.  Mr. V. Chakrapani,             (Party in person)

     325, Kabra Complex,

     M.G. Road, Secunderabad,.

2.  M/s. Bi Metalic Steel & Alloys Ltd.,

     Rep. by its Official Liquidator,

     Hyderabad.

3.  Allahabad Bank,

     Parklane Branch,

     Secunderabad.

…  Respondents

:  O R D E R  :

1.         The Original Application (OA) was allowed by the Tribunal by Order dated 13.1.1997.  Recovery proceedings commenced.  The 1^st respondent filed MP-3/2001 before the Recovery Officer praying to close the recovery proceedings against immovable properties of the defaulter as barred by limitation and another petition MP-4/2001 was also filed before the Recovery Officer by M/s. V.M. Finance & Leasing Company against the property and the Recovery Officer rejected both the applications by Order dated 28.8.2002.  Then the petitioner in MP-3/01 preferred an appeal RA-1/2002 before the Presiding Officer and that was dismissed by the Tribunal by Order dated 4.10.2002.  Again the 1^st respondent filed Review Petition MA-95/2002 before the Tribunal for reviewing its Order dated 4.10.2002 and the Review Petition was allowed by the Tribunal by Order dated 6.1.2003 and consequently RA-1/02 was also allowed.  That Order dated 6.1.2003 is being now challenged by the Bank in this appeal.

2.         The Recovery Officer in his Order dated 28.8.2002 has found that the Demand Notice under Rule-2 of the Second Schedule of Income Tax Act, 1961 were issued under Part-1 of the Rules whereas attachment of the property is provided under Rule 48 of the said rules and service of attachment is provided under Rule 49 and Proclamation of Attachment is provided under Rule 50 and Rule 51 clearly states that the attachment of property under Rule 48 shall relate back to the date on which the notice to pay arrears was served and the time limit of four years stipulated in Rule 68(B) shall be taken into consideration only with reference to the service of the proceedings commenced from the stage of Rule 48 i.e. attachment and not earlier in view of the language used under Rule 68(B) of the Second Schedule to the Income Tax Act, 1961 to the effect that no sale of immovable property shall be made under this part after expiry of 4 years and in the present case attachment of immovable property was issued under Rule 48 on 31.7.2001 and still the period of 4 years is available for proceeding further and it is not barred by limitation. 

3.         Even though the PO, DRT, initially dismissed the appeal RA-1/02 preferred as against the Recovery Officer’s Order, on the Review Petition (MA-95/02) filed by the 1^st respondent herein, the PO, DRT allowed that Review Petition by Order dated 6.1.2003 holding that after recovery proceedings are taken he is empowered to act only under the provisions of the Income Tax Act, which is made applicable under Section 29 read with Section 34 of the RDDB&FI Act and he has ultimately found that it is barred by limitation.  The PO’s finding is that the Recovery Officer has to take action with regard to the recovery only under the provisions of the Income Tax Act, which is made applicable under Section-29 read with Section-34 of the RDDB&FI Act. 

4.         Section-29 of the RDDB&FI Act, 1993 reads as follows :-

“Application of certain provisions of Income-tax Act:  The provisions of the Second and Third Schedules to the Income-tax Act, 1961 and the Income-tax (Certificate Proceedings) Rules, 1962, as in force from time to time shall, as far as possible, apply with necessary modifications as if the said provisions and the rules referred to the amount of debt due under this Act instead of to the income-tax :

Provided that any reference under the said provisions and the rules to the “assessee” shall be construed as a reference to the defendant under this Act.”

5.         Section-34 of the RDDB&FI Act, 1993 reads as follows -

“Act to have overriding effect – (1) Save as provided under sub-section (2), the provisions of this Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in any instrument having effect by virtue of any law other than this Act.

(2)        The provisions of this Act or the rules made thereunder shall be in addition to, and not in derogation of, the Industrial Finance Corporation Act, 1948, the State Financial Corporations Act, 1951, the Unit Trust of India Act, 1963, the Industrial Reconstruction Bank of India Act, 1984 [the Sick Industrial Companies (Special Provisions) Act, 1985 and the Small Industries Development Bank of India Act, 1989]”

6.         Section-29 of the RDDB&FI Act clearly states that only the provisions of the Second and Third Schedule to the Income Tax Act, 1961 and the Income Tax (Certificate Proceedings) Rules, 1962 as in force from time to time shall as far as possible apply with necessary modification.  It clearly states that the provisions of Second and Third Schedules to the Income tax Act, 1961 alone will apply and not the entire Income Tax Act.  So, the finding of the PO, DRT that after execution proceedings started the provisions of the Income Tax Act is made applicable under Section 29 read with Section 34 of the RDDB&FI Act, is erroneous and it is liable to be set aside in as much as Section 29 reads that the provisions of Second and Third Schedules to the Income Tax Act and Income Tax (Certificate Proceedings) Rules, 1962 alone will apply as far as possible. 

7.         Rule-68B of the Second Schedule of Income Tax Act, 1961 reads as follows :-

“Time limit for sale of attached immovable property -  (1) No sale of immovable property shall be made under this Part after the expiry of four years from the end of the financial year in which the order giving rise to a demand of any tax, interest, fine, penalty or any other sum, for the recovery of which the immovable property has been attached, has become conclusive under the provisions of section 245-I or, as the case may be, final in terms of the provisions of Chapter XX.”

8.         Rule-68B of the Income tax Act states that amount for recovery of which immovable property has been attached, that has become conclusive under the provisions of Section 245-I or, as the case may be, final in terms of the provisions of Chapter XX.  This Rule is not applicable under the RDDB&FI Act and these provisions cannot be applied to for sale of the property under the RDDB&FI Act. Rule-68B will apply only for the recovery of amount which has become conclusive under the provisions of Section 245-I or in terms of provisions of Chapter XX.  Since the provisions of Section 245-I and Chapter XX are not applicable under the RDDB&FI Act, this cannot be invoked at all.

9.         The 1^st Respondent pointed out that by applying this provision under Rule-68B, the period of four years has to be reckoned from the end of the financial year in which the Order giving rise to a demand of any tax, interest, fine, penalty or any other sum of recovery to which the immovable property has been attached.  The 1^st respondent pointed out that the OA Order was passed on 13.1.1997 and from the end of the financial year if the period of four years is reckoned this case is clearly barred by limitation.  He pointed out that the Order giving rise to a demand means Order passed in the main OA and from that date from the end of that financial year, no sale can take place after the expiry of four years.  That argument is not an acceptable one.  The provisions of Section 245-I or provisions of Chapter XX are not applicable under the RDDB&FI Act.  The end of financial year will come only in the case of Income tax arrears and interest etc. and not under the RDDB&FI Act.  The question of financial year will not arise under the Act under the provisions and Section 245-I or Chapter XX are also not applicable under the RDDB&FI Act.  Section-29 of the RDDB&FI Act clearly states that only the provisions of Second and Third Schedule to the Income Tax Act, 1961 will apply with necessary modification.  The Heading in Section-29 itself indicates that only certain provisions of the Income tax Act shall be applicable i.e. provisions of Second and Third Schedule to the Income Tax Act.  So the whole of Income tax Act is not applicable under the RDDB&FI Act and also the provisions of Section 245-I or Chapter XX.  The amount which has become conclusive under the provisions of Section 245-I or Chapter XX alone cannot be recovered after the expiry of four years from the end of the financial year and not the amount determined under the RDDB&FI Act.  So, by invoking Section-68B of the Income-tax Act the 1^st respondent cannot contend that the time limit fixed for sale of attached immovable property under the RDDB&FI Act is only four years from the end of the financial year in which the Order for demand arises.  So the period of limitation set out in Rule-68B is not applicable for recovery of the amount under the RDDB&FI Act.

10.       Further, Section-24 of the RDDB&FI Act states with regard to the limitation.  It reads that the provisions of Limitation Act, 1963 shall, as far as may be, apply to an application made to a Tribunal.  With regard to the limitation, it has been clearly set out under the Act that only the provisions of Limitation Act, 1963 shall apply to an application made under the RDDB&FI Act to the Tribunal.  When there is specific provision with regard to the limitation under the RDDB&FI Act, the provisions contained in Section-68B of the Income-tax Act cannot be applied.  Under the Limitation Act, the period of limitation for execution proceedings is 12 years.

11.       Law empowers the Recovery Officer a period of 12 years to start the execution proceedings.  When there is specific provision which is made applicable for recovery of the amount under the RDDB&FI Act, only that law is applicable and not the period of limitation provided under Rule-68B of the Income tax Act.  All the cases which have been transferred to the DRT under the RDDB&FI Act were pending before the Civil Court before the enactment of the RDDB&FI Act.  After the RDDB&FI Act came into force, under the provisions of this Act the cases pending before the Civil Court were transferred and only those provisions relating to recovery of proceedings for mortgage suits are applicable under the RDDB&FI Act as there is specific provision under the Act with regard to the period of limitation under Section-24 of the Act.  So, the period of limitation is only 12 years and not the period mentioned in Rule-68B of the Income Tax Act.  So, I do not find any force in the argument advanced by the 1st respondent.  Order dated 6.1.2003 passed by the PO, DRT, Hyderabad, allowing the Review Petition (MA-95/02) and consequently allowing RA-1/2002 holding that the recovery proceedings against immovable properties is barred by limitation, is erroneous and it is liable to be set aside and it is set aside.

12.       Appeal allowed.  Order dated 6.1.2003 passed by the PO, DRT, Hyderabad, in the Review Petition (MA-95/2002) is set aside.  Recovery Officer is directed to continue the recovery proceedings.

(Dictated to PS & the transcript corrected, pronounced & signed by me in the open court today the 22^nd April, 2004).

[ MRS. JUSTICE A. SUBBULAKSHMY ]

CHAIRPERSON