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 Estate, Caves Road,

            Jogeshwari [East],

            Mumbai 400 068

3.         Mr. Shashikant M. Gandhi, M/s. National Flask Industries Ltd.,

            22, Interlink Industries Estate, Caves 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. Estate, Caves 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. Road, Next to American Dry Fruit Store,

            Opp. Hutatma Chowk, Fort,

            Mumbai 400 001 

            AND  

            having its recovery department at 74-C, Samadhan Bldg., 2^nd 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. Road, Goregaon [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 Ltd. having its registered office at

            Cosmos Heights, 269/270, Shaniwar 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-op. Bank Ltd., having its registered office at

            Laxmi Sadan, 361, V.P. Road, Girgaum,

            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 29^th 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.:29^th June, 2010                                                                                                                                                                                                                                                Presiding Officer

Debts Recovery Tribunal, II,

                                                                                                                                                                                                                                                                                   Mumbai

N.S. John Vs S B T

IN THE DEBT RECOVERY APPELLATE TRIBUNAL AT CHENNAI

DATED THE 26^TH OCTOBER, 2005

PRESENT:  HON’BLE MR. JUSTICE K. GNANAPRAKASAM

CHAIRPERSON

MA-131/2005

(IA-460/2004 in OA-366/2002:  DRT, Ernakulam)

BETWEEN:

N.S. John,

Nediyamannil,

Vallikode-Kottayam,

Pathanamthitta District,

Kerala.

…  Appellant

AND

SBT

Pathanamthitta, Kerala.

Represented by its Chief Manager

…  Respondent

Counsel for Appellant:  Mr. Isac T. Paul for M/s. Peter & Karunakar

Counsel for Respondent:  Mr. Girish Kumar

:  O R D E R  :

1.         This Appeal is directed against the Order dated 4.2.2005 passed by the DRT, Ernakulam, in IA-460/2004 in OA-366/2002.

2.         The Appellants are the defendants in the OA and they have filed an Application in IA-460/2004, to condone the delay of 446 days in filing the Reply Statement and the same came to be dismissed by the DRT by its Order dated 4.2.2005, and the same is under challenge in this Appeal.

3.         I have heard the Learned Advocate for the Appellant and Respondent and also perused the relevant papers placed before this Tribunal. 

4.         The Appellant in the Affidavit filed before the DRT had stated that they were directed to file the Written Statement within two weeks from 20.11.2002 and they did not do so.  The Written Statement was filed on 24.2.2004 and there was a delay of 446 days in filing the Written Statement.  The delay was explained in the Affidavit by stating that the defendants were trying to settle the claim with the Applicant Bank and the defendants were optimistic of settling the claim and unfortunately the defendants could not raise sufficient funds from the expected sources and hence they were constrained to file the Written Statement and only in the said circumstances, there was a delay and the said delay was neither willful nor wanton.

5.         The Respondent Bank herein filed a Counter opposing the said Petition stating that the defendants after receipt of the summons appeared through their Advocate on 7.10.2002 and four weeks time was given to file the Written Statement and the case was posted on 20.11.2002.  Subsequently, the case was posted to 24.4.2003, 18.7.2003, 17.10.2003, for filing the Written Statement of the defendants.  The case was then posted to 1.12.2003 for want of time and it was adjourned to 9.2.2004 for the Proof Affidavit of the Applicant Bank and the Bank also filed the Proof Affidavit on 15.10.2003 and finally the case was posted on 25.2.2004 and only in the meanwhile, the defendants filed the Written Statement. The Bank does not admit the effort said to have taken by the defendants to settle the matter.  The defendants have also not filed any Application for extension of time as provided under Rule-12 of the DRT (Procedure) Rules, 1993, and hence prayed for the dismissal of the Petition.

6.         The Ld. PO of the DRT after taking into consideration all the aspects and after having heard both sides, came to the conclusion that Order-8 Rule-1 of the Code of Civil Procedure (CPC) as amended with effect from 1.7.2002, states that, “The defendant shall, within thirty days from the date of service of summons on him, present a written statement of his defence.”  The proviso thereto says that, “Where the defendant fails to file the written statement within the said period of thirty days, he shall be allowed to file the same on such other day, as may be specified by the Court, for reasons to be recorded in writing, but which shall not be later than ninety days from the date of service of summons.”  The Tribunal was also guided by the decision of the three Judge Bench of the Hon’ble Supreme Court in the case of Dr. J.J. Merchant & others, Appellants Vs. Shrinath Chaturvedi, Respondent – (2002) 6 SCC 635, wherein it was held that, “Under Rule-1 of Order-8 of the Code, there is a legislative mandate that written statement of defence is to be filed within 30 days and if there is failure to file the Written Statement within the stipulated time, the Court can at the most extend further period of 60 days and no more.”  After having observed so, the DRT came to the conclusion that it has no power to extend the period for filing written statement beyond 90 days from the date of service of summons on the defendant.  Reliance was also made to Sub-section (4) of Section-19 of the RDDB&FI Act, 1993, and Sub-section (5) of the said Act was also taken into consideration.  The DRT ultimately placing reliance upon the case of Dr. J.J. Merchant & others, held that time beyond 90 days from the date of service of summons cannot be granted to the defendants to file the Written Statement and dismissed the Petition of the defendants.  Aggrieved by the same, the 2^nddefendant has preferred this Appeal.

7.         The Ld. Advocate for the Appellant would contend that they have been under the bonafide impression that the matter could be settled and they have been approaching the Respondent Bank and as they could not settle the matter, they have filed the Written Statement and only in the said circumstances, there was a delay and the said delay was neither willful nor wanton.  It is further submitted that the post of Presiding Officer was kept vacant somewhere between November, 2002 upto August, 2003.  It is also one of the reasons, which prevented them from filing the Written Statement.  But however, it is prayed that the Appellant have filed the Written Statement alongwith the Application to condone the delay and they may be given an opportunity to defend the case, as they have got a good and valid defence.

8.         On the contrary, the Ld. Advocate for the Respondent Bank would contend that the Appellant was not at all diligent in defending the case.  When the Tribunal granted two weeks time on 20.11.2002, the defendants could have filed the Written Statement or at least within a reasonable time thereafter, but they have not done so.  The defendants have deliberately delayed filing the Written Statement with a view only to protract the proceedings.  It is also further submitted that the reason given by the Appellant that just because the post of Presiding Officer was vacant for some time, they did not file the Written Statement, cannot be a good and valid ground for non-filing of the Written Statement.  Nothing prevented the defendants from filing the Written Statement.

9.         After having heard the Ld. Advocate for the Appellant and Respondent, it is made out that no doubt, Order-8 Rule-1 C.P.C. states that the defendant shall present a Written  Statement of his defence within 30 days from the date of service of summons on him.  This amendment was introduced to the C.P.C. by the amended Act 46 of 1999, which came into force on 1.7.2002.  Though Section-22(1) of the RDDB&FI Act, 1993 states that the Tribunal and the Appellate Tribunal shall not be bound by the procedure laid down by the C.P.C., 1908 (5 of 1908), but shall be guided by the principles of natural justice, it is well settled, as it has been rightly observed by the DRT also that the Tribunal can act upon the provisions contained in the Code and can even go beyond the Code so long as it passes orders in conformity with the principles of natural justice, as it has been held in the case of Allahabad Bank, Calcutta Vs. Radha Krishna Maity & Others – (1999) 6 SCC 755.  The 30 days period as provided under Order-8 Rule-1 CPC, could be extended upto a period of 90 days as stated in the proviso to Order-8 Rule-1, which states, “Where the defendant fails to file the written statement within the said period of thirty days, he shall be allowed to file the same on such other day, as may be specified by the Court, for reasons to be recorded in writing, but which shall not be later than ninety days from the date of service of summons.”  Following the proviso and also the Judgement rendered by the Hon’ble Supreme Court in Dr. J.J. Merchant’s case, the DRT came to the conclusion that the Appellant filed the Written Statement after a period of 90 days and, therefore, that cannot be entertained, and dismissed the Petition.

10.       Now the Ld. Advocate for the Appellant relies upon the case of Kailash, Appellant Vs. Nanhku & others, Respondents – (2005) 4 SCC 480, wherein the Hon’ble Supreme Court considered the Judgement delivered by the Supreme Court in the case of Dr. J.J. Merchant Vs. Shrinath Chaturvedi – (2002) 6 SCC 635, and had held, “A careful reading of the judgment shows that the provisions of Order 8 Rule 1 CPC did not directly arise for consideration before the Court and to that extent the observations made by the Court are obiter.”   It was further observed that the attention of the Court was not invited to the earlier decision of that Court in Topline Shoes Ltd. case – (2002) 6 SCC 33.  Ultimately, their Lordships came to the conclusion that, “A prayer seeking time beyond 90 days for filing the Written Statement ought to be made in writing.  In its judicial discretion exercised in well settled parameters the Court may indeed put the defendants on terms including imposition of compensatory costs and may also insist on an affidavit, medical certificate or other documentary evidence (depending on the facts and circumstances of a given case) being annexed with the application seeking extension of time so as to convince the court that the prayer was founded on grounds which do exist.”  Ultimately it was held (Paras 44&45), “The extension of time shall be only by way of exception and for reasons to be recorded in writing, howsoever brief they may be, by the court.  In no case, shall the defendant be permitted to seek extension of time when the court is satisfied that it is a case of laxity or gross negligence on the part of the defendant or his counsel.  The court may impose costs for dual purpose: (i) to deter the defendant from seeking any extension of time just for the asking, and (ii) to compensate the plaintiff for the delay and inconvenience caused to him.

            Howsoever, no straitjacket formula can be laid down except that the observance of time schedule contemplated by Order 8 Rule 1 shall be the rule and departure therefrom an exception, made for satisfactory reasons only.  We hold that Order 8 Rule 1, though couched in mandatory form, is directory being a provision in the domain of processual law.”

            This Judgement was not placed before the DRT, Ernakulam, when it passed Order on 4.2.2005, and only in the said circumstances, the DRT based upon the earlier Judgement of Dr. J.J. Merchant & others, held that time for filing the Written Statement cannot be extended beyond 90 days from the date of service of summons on the defendants.  But now, the pronouncement in Kailash’s case: (2005) 4 SCC 480, enables the Court to extend the time for filing of Written Statement even beyond 90 days, of course, for valid reasons.  In the given case, the Appellant has stated they were optimistic of settling the claim and only on that ground they were not able to file the Written Statement in time.  Though it does not appear to be satisfactory, but however, taking note of the lenient view taken by the Hon’ble Supreme Court, I am inclined to condone the delay in filing the Written Statement, but however, on cost, as the Appellant was not diligent in filing the Written Statement not only within the time stipulated, but even thereafter also.

11.       In the above said circumstances, the Appeal is allowed on condition that the Appellant shall deposit a sum of Rs.10,000/- (Rupees Ten thousand only) by way of costs before DRT, Ernakulam, by Demand Draft taken in the name of “Prime Minister’s National Relief Fund”, on or before 16.11.2005, failing which the Order passed today shall stand erased and recalled.  On such deposit, the DRT, Ernakulam, is directed to send the Demand Draft to the Prime Minister’s National Relief Fund, at Delhi.

(Dictated to PS in the open court today 26.10.2005, typed by him & order signed by me)

                                                                                                                        Sd/-

[ JUSTICE  K. GNANAPRAKASAM ]

CHAIRPERSON

NPAs have increased from Rs.59,927 cr to Rs.74,617 Cr

Source :The Hindu :NEW DELHI, July 8, 2011

Union Finance Minister Pranab Mukherjee on Friday exhorted chief executives of all public sector banks (PSBs) and financial institutions to contain the downward trend in asset quality by devising suitable strategies for curbing and rolling back their non performing assets (NPAs).

Addressing the CEOs of banks and financial institutions at a review meeting here, Mr. Mukherjee lauded the significant credit growth of 22.44 per cent posted by the PSBs during 2010-11 but also pointed to a moderation in the last quarter while sounding a note of caution to all in respect of asset quality.

“Of course, [asset quality] is an area of concern as gross NPAs have increased from March 2010 to March 2011.

 Gross NPAs have increased from Rs.59,927 crore to Rs.74,617 crore,”

 Mr. Mukherjee told the media after the meeting.

 “Growth of NPAs was one item on which detailed discussions have taken place and I have suggested to the public sector bank CMDs that you must not only apply your due diligence for the fresh sanction of loans but also ensure the mechanism through which the NPA growth could be stemmed,” he said.

The core CRAR (capital to risk assets ratio), also known as capital adequacy ratio (CAR), of scheduled commercial banks as on March 31, 2010, stood at 10.1 per cent under the Basel-II framework. This, Mr. Mukherjee said, was much above the Reserve Bank of India's stipulation of 6 per cent and underlined the core capital strength of the Indian banking system. He was also happy to note that the RBI had reported that stress tests of credit risk exposure of banks revealed a reasonably comfortable position and their resilience to withstand unexpected deterioration in credit quality.

To gear up for the future, the Finance Minister advised the PSB chiefs to undertake a comprehensive capital planning exercise, particularly in view of the Basel-III capital adequacy benchmarks which have to be adopted. Also, considering the increasing investment needs of the infrastructure sector, he said banks need to sustain and improve the flow of credit and they should gain more headroom for lending to such projects by availing of ‘Takeout finance' facilities from IIFC.

With regard to MSMEs (micro, small and medium enterprises), Mr. Mukherjee said that although banks have achieved 35 per cent growth in credit to the sector against the target of 20 per cent, there was a decline in the number of micro enterprise accounts and the lending agencies must proactively extend credit to this sector. Likewise, the performance, under the one per cent ‘Interest subvention scheme for housing loans and interest subsidy for housing urban poor' (ISHUP), he said, has not been up to the desired level and banks need to increase credit disbursement in this segment, he said.

As for the farm sector, Mr. Mukherjee said that while the credit flow momentum seen in 2010-11 had to be maintained and the overall progress of agricultural credit was a matter of satisfaction, many banks had failed to meet their obligations. These banks, he said, must focus attention on this important aspect and show visible signs of improvement in their performance.

Mr. Mukherjee also pointed out that there was a wide gap between the number of farm loan accounts and the ‘Kisan Credit Cards' (KCCs) issued, which suggested that there were still a large number of inactive cards. Banks, he said, should put in place a system for renewal of these cards on an on-going basis and ensure disbursement of credit through these cards.

The Finance Minister said the task force under the chairmanship of Nandan Nilekani in its interim report had recommended a general, unified, platform called ‘Core subsidy management system' for direct subsidy and entitlement transfer. The UIDAI, he said, had empanelled 64 banks for opening ‘Aadhaar' enabled bank accounts along with Aadhaar enrolment, which is in consonance with the financial inclusion agenda of the Finance Ministry.

SBI Vs B I Metalic Steel & Alloys Ltd

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