D. Subba Reddy & Anr Vs IDBI Bank Ltd. & Anr

R.A:62/2011

1.         This Appeal impugns the order dated 19.1.2011 passed by the Ld. Presiding Officer, DRT Hyderabad in OA No.132/2004.

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

It is stated that the first Respondent bank granted an Equipment Lease Assistance to the 2^ndRespondent company through its Mumbai Head Office on 18.12.1995 and obtained the necessary Lease Agreement from it on 26.7.1996 and the two appellants guaranteed the repayment of the same through a Deed of Guarantee executed on the same day and first Respondent bank provided two 1250 KVA DG Sets worth Rs.125.42 lakhs to the 2^nd Respondent company. It is stated that subsequently the 2^nd Respondent company became a sick company and was registered as a “Sick Company” on 30.6.1999 before the BIFR, New Delhi  in Case No.22/1999.  The BIFR formed an opinion on 7.11.2000 that the 2^nd Respondent Company was not viable for a revival and recommended its winding up.  It is stated that the Hon’ble High Court of Andhra Pradesh registered the BIFR reference on 27.11.2000 as RCC No. 20/2000 for winding up of the 2^nd Respondent Company by passing orders for winding up of the Company on 14.2.2001 and appointed the Official Liquidator to deal with the assets and liabilities of the company. The first Respondent bank  issued a recall notice cum termination of lease dated 16.4.2001 addressed to the 2^nd Respondent Company represented by the OL and marked a copy of the said recall notice to the appellants and thereafter issued another recall notice to the appellants on 9.5.2001.  It is stated that the first Respondent bank filed OA No.132/2004 before DRT, Hyderabad for a recovery of a sum of Rs.6,03,49,871/- and the same has been allowed by the Tribunal below on 19.1.2011. It is stated that the appellants aggrieved by the said order of the tribunal below have filed the present appeal.  It is stated that the OA ought not to have been allowed by the Ld. Presiding Officer against the appellants and it is prayed that the appeal may be allowed.

3.         The learned counsel for the  appellants submitted  that the first Respondent bank issued Exhibit A16 substituting the requirement of extension of charge on the fixed assets of the borrowing company proposed under Clause 10 (a) of Exhibit A3 i.e. the Letter of Intent (sanction letter) with the personal guarantee of the appellants and that the same was received and acknowledged by the 2^nd appellant  alone in person and not by both the appellants   merely with the  endorsement “received” and without the words “accepted” and this modification is not supported by any  resolution of the borrowing company.  The Ld. Counsel drew the attention of this Tribunal to Exhibit A5 and stated that the necessary ingredients of a valid contract of Guarantee have not been brought about in the said document and Exhibit A5 being a document lacking consensus ad idem has to be brushed aside as void and further that the Exhibit A5 does not comply with Sections 10, 13, 14, 16, 18, 19 & 142 of the Contract Act and therefore unworthy of being looked into.  The Ld. Counsel submitted that the OA ought to have been filed in DRT, Mumbai and the DRT,Hyderabad ought have rejected the OA for want of jurisdiction.  Ld. Counsel submitted that a perusal of clause No.10.7 of Exhibit A4 would reveal that it confines the exclusive jurisdiction for the present cause of action at Greater Bombay in exclusion of Hyderabad and Visakhapatnam and contended that the introduction of the Applicant-oriented Rule 6(a) of the DRT (Procedure) Rules, 1993 w.e.f.21.1.2003 can have only a prospective operation in respect of all contracts executed on or after 21.1.2003 and further that the said Rule is supplementary and not in derogation of the defendant-oriented Section 19 (1) of the RDDBFI Act. The Ld. Counsel relied upon on the following decisions on the above aspect:

a)      Laxman Prasad Vs Prodigy Electronics Ltd. And Another  (2008) 1 SCC 618  

b)      Harshad Chiman Lal Modi Vs DLF Universal & Anr (2005) 7 SCC 791

c)      New Moga Transport Company, through its proprietor Krishanlal Jhanwar Vs United India Insurance Co. Ltd. And Ors. (2004) 4 SCC 677

d)      M/s. Hanil Era Textiles Ltd. Vs M/s. Puromatic Filters (P) Ltd.
(2004) 4 SCC 671

e)      Shriram City Union Finance Corporation Ltd. Vs Rama Mishra
(2002) 9 SCC 613

f)        Cholamandalam Investments & Finance Co. Pvt. Ltd. Vs Radhika Syanthetics and Anr. (1996) 2 SCC 109

g)      Angile Insulations Vs Davy Ashmore India Ltd. And Anr.
(1995) 4 SCC 153 

4.         The Ld. Counsel for the appellants further contended that the OA filed on 5.5.2004 is time barred as the limitation period is to be calculated from 16.4.2001 of Exhibit A6 instead of 9.5.2001 of Exhibit A7 as Exhibit A6 is the termination of lease cum recall notice issued on 16.4.2001 addressed to the principal borrower with due marking of its copy to the appellants in their status as guarantors and it was not a usual debt recall notice.  He added that the repeat recall notice on 9.5.2001 would not in any way extend the period of limitation and the Notice of the termination of the lease with or without recall of outstanding dues and with marking of its copies to the guarantors is inherently possessive of the element of recalling the outstanding dues against the guarantors and is also covered under the “doctrine of constructive notice”. The Ld. Counsel contended that the ruling in the case of Syndicate Bank Vs Channaveerappa Beleri & Ors. (2006) 11 SCC 506 relied upon by the 1^st Respondent Bank has no application to the present case as Exhibit A6 is considered as mere debt- recall notice not only to the Principal Borrower but also to the appellants simultaneously.  The Ld. Counsel sought the rejection of Exhibit A1 i.e. the Evidence Affidavit of AW-1 dated 13.8.2010 as the averments made therein were not on behalf of IDBI Bank Limited and as the same did not incorporate all the events of transition from the original applicant IDBI to the present IDBI Bank Limited.  The appellants further stated that the first Respondent Bank surrendered the leased assets to the OL and joined the general pool for which reason it has not only got the realizations on its secured assets to the tune of Rs.64.57 lakhs on 30.3.2005 but also received Rs.21,36,604/- from the general pool out of the amount of Rs.33,50,460/-  which is nothing but the admitted dues payable to the 1^st Respondent Bank as of 14.2.2001 i.e. the date of winding up order and adjudicated  by the OL accordingly . The Ld. Counsel relied on Rule154 of Companies (Court) Rules, 1959 which reads as follows: “The value of all debts and claims against the company shall, as far as is possible, be estimated according to the value thereof at the date of the order of the winding-up of the company or where before the presentation of the petition for winding-up, a resolution has been passed by the company for voluntary winding-up, at the date of the passing of such resolution” and stated that the O.L. is reportedly holding more than Rs.1 Crore realized from the assets of the 2^ndRespondent Company.  The debts and claims receivable by the 2^nd Respondent Company to the extent of Rs.11.27 crores stand admitted before the OL out of which Rs.72,34,758/- is decreed and the balance are in the execution process and therefore the balance pending dues of the first Respondent to the tune of Rs.12,13,856/- are realizable from the above amounts presently lying with  the OL.  The Ld. Counsel stated that the dictum laid down in the case of Murali D. Kanuri Vs DRAT, Chennai & Ors - CDJ 2010 APHC 203 relied by the first Respondent Bank has no application to the present case as the appellants did not allege any distress sale of the company’s assets by the OL.  The Ld. Counsel stated that the liability of the appellants as guarantors is coextensive with that of the principal debtor u/s 128 of the Contract Act and therefore the dues at any rate cannot exceed Rs.33,50,460/- out of which the 1^st Respondent Bank had already received and appropriated Rs.21,36,604/-.  The Ld. Counsel stated that the decision in the case of  T. Raju Setty vs. Bank of Baroda vide AIR 1992 Karnataka 108 (DB) cannot be relied upon by the 1^st Respondent Bank in this case as there is no waiver of Sections 140 &141 of the Contract Act in Exhibit A5.  The Ld. Counsel added that the appellants are entitled to the securities from the first Respondent bank in terms of Section 141 of Contract Act, 1872 in the event of any amounts recoverable from them as held in the case of IFCI Vs The Cannore Spinning & Weaving Mills Ltd. – (2002) 5 SCC 54.  The Ld. Counsel stated that when once the Hon’ble High Court of Andhra Pradesh was pleased to pass an order for winding up of the second Respondent Company on 14.2.2001, the appellants as guarantors get divested of their right of subrogation available   u/s 141 r/w 140 of the Contract Act and when the appellants right over the securities is abrogated through operation of law, the corresponding obligation for the discharge of the liability stands automatically abrogated.  The Ld. Counsel submitted that the appellants are not liable even to the extent of the balance of the pending dues of Rs.12,13,856/- out of the total dues admitted before the OL.  The Ld. Counsel stated that the order under appeal is exfacie illegal and is not enforceable against them as the OA was allowed against them alone even without crystallizing the liability against the 2^nd Respondent Company and without addressing the fact of the 1^st Respondent Bank’s admission of the claim before OL atRs.33,50,460/-.

5.         The appellants filed their written submissions and the same forms part of the record.

6.         The Ld. Counsel for the Respondent stated that the DRT, Hyderabad originally allowed the OA 132/2004 on 25.11.2005 setting the appellants ex-parte and later MA 114/2008 filed by the appellants for setting aside the said ex-parte order was dismissed by  DRT, Hyderabad on 19.2.2009.  The said Order was challenged by the appellants before this Tribunal through MA 93/2010 and the same was allowed  on 16.6.2010 and that thereafter the DRT, Hyderabad heard the matter at length and passed the impugned order allowing the OA.  The Ld. Counsel for first Respondent Bank opposed the  contention of the appellants about the lack of jurisdiction for the DRT, Hyderabad to the present cause of action and stated  that the introduction of Rule 6(a) of the DRT (Procedure) Rules, 1993 w.e.f.21.1.2003 overrules the Clause No.10.7 of Exhibit A4 dated 26.7.1996 and that in view of the same the DRT, Hyderabad had  the  jurisdiction and that it had correctly allowed the OA as prayed for. The learned counsel stated that the OA was filed within limitation on 5.5.2004 as calculated from 9.5.2001 being the date of Exhibit A7  and relied on the dictum laid down in the case of Syndicate Bank Vs Channaveerappa Beleri & Ors. (2006) 11 SCC 506 to show that the OA was filed within limitation. The learned counsel further contended that the appellants cannot challenge the issues of sale by the OL as decided by A.P. High Court in the case of Murali D. Kanuri Vs DRAT, Chennai & Ors - CDJ 2010 APHC 203. The learned counsel contended that the first Respondent  would not get any amounts from the Official Liquidator in the capacity as a secured creditor  as it had no charge on the fixed assets.

7.         The 1^st Respondent Bank filed its detailed written submission and the same forms part of the record.

8.         The 2^nd Respondent is the Company represented by Official Liquidator.  The Documents issued by the OL in respect of the admitted claim of the first Respondent Bank before it and the amounts disbursed by his office to the bank have come on record.

9.         Heard the Ld. Counsel.

10.       Exhibit A4 is the equipment lease agreement executed on 26.7.1996 between the Respondents and clause 10.7 of the said exhibit A4 reads as follows:

“It is agreed by and between the parties that the Civil Courts in Greater Bombay shall have exclusive jurisdiction in respect of any matter, claim or dispute arising out of or in any way, relating to this Agreement”.

The words civil Court in the above clause have to be deemed as the Debts Recovery Tribunals of Mumbai.  In this case the equipment lease was sanctioned by the 1^st Respondent at its Mumbai Head Office, disbursed at its Hyderabad Branch and end used at Nellore, Andhra Pradesh and it can be seen that the 1^st Respondent being the Applicant in the OA is to be deemed to be functioning in the jurisdictions of DRT, Mumbai, DRT, Vishakapatnam and DRT, Hyderabad and when the parties have expressly agreed to resolve their disputes within the jurisdictions of Civil Courts in Mumbai the OA ought to have been filed in the DRT at Mumbai.  It is settled law that parties by using the words exclusive have restricted the place of suing to one place in exclusion of the other courts having jurisdiction. The 1^st Respondent Bank is deemed to be functioning for the present cause of action in the jurisdictions of DRT- Mumbai, DRT- Hyderabad and DRT-Visakhapatnam in terms of Rule 6(a) of the DRT (Procedure) Rules, 1993 r/w Section 19 (1) of the RDDBFI Act as it sanctioned the ELA credit facility at its Mumbai Head Office, disbursed the amount at its Hyderabad Branch and deployment of funds was occasioned at Nellore, Andhra Pradesh.  Clause No.10.7 of ExhibitA4 specifically confined the jurisdiction for the present cause of action at Greater Bombay in exclusion of Hyderabad andVisakhapatnam. It is not the case of the first Respondent bank that they had filed the OA at DRT,Hyderabad due to a mistaken impression or bonafide belief of jurisdiction there at Hyderabadand the first Respondent has vehemently opposed the contention of the appellants about jurisdiction both in the OA proceedings and in the present appeal proceedings. In such an event, as held by the Hon’ble Supreme Court in the cases of Laxman Prasad Vs. Prodigy Electronics Ltd. (2008) 1 SCC 618, Harshad Chiman Lal Modi Vs DLF Universal Ltd. (2005) 7 SCC 791,  Transport Co. vs. United India Insurance Co. Ltd. (2004) 4 SCC 677, Textiles Ltd. v. Puromatic Filters (P) Ltd. (2004) 4 SCC 671, Shriram City Union Finance Corporation Ltd. Vs Rama Mishra (2002) 9 SCC 613, Cholamandalam Investments & Finance Co. Pvt. Ltd. Vs Radhika Syanthetics and Anr (1996) 2 SCC 109 and Angile Insulations Vs Davy Ashmore India Ltd. And Anr (1995) 4 SCC 153, the present cause of action should have been adjudicated at DRT, Mumbai and its adjudication at DRT, Hyderabad is without jurisdiction. 

11.       Exhibit A5 is the guarantee bond and the circumstances preceding the execution of Exhibit A5 and the subsequent events revealing the absence of objections ever being made about the said guarantee bond by the appellants, drive this Tribunal to hold that the execution of Deed of Guarantee is valid on the ground of acquiescence by the appellants.  Similarly Exhibit A1 is also to be held valid by virtue of Section 34 of the Companies Act and also on the basis of the description of the 1^st Respondent bank appearing in Exhibits A4 and A5 that cover the successors and assigns of IDBI.

12.       Exhibit A6 is the Notice of termination of the lease and it is dated 16.4.2001.  The said Notice of termination is inherently and impliedly a recall notice of dues as no further lease rentals would accrue except the interest from the date of the termination of the lease.  Moreover the copies of the same have been specifically sent to the Appellants.  Any acknowledgement of debt on behalf of the principal debtor extends simultaneously the limitation period for the principal debtors as well as the guarantors in terms of Section 18 of the Limitation Act.  The notice to the principal debtor company recalling the advance is to be considered as a deemed notice of recall of the advance to its Directors  and it is also to be considered as the invocation of the guarantees of its Directors who are claimed as the guarantors to the advance and in this case the Notice of termination dated 16.4.2001 sent to the company has also to be deemed to be the Notice of termination to upon its Directors and therefore it has to be reckoned that the period of limitation runs only from 16.4.2001 and not from 9.5.2001 being the date of the repeat Notices sent to the Appellants by the 1^st Respondent Bank and such being the case it can be seen that the OA filed is barred by limitation.

13.       A perusal of clause VIII of the equipment lease agreement dated 26.7.1996 between the 2^ndRespondent and the 1^st Respondent reveals that the 1^st Respondent was entitled to terminate the lease without any notice at any time after occurrence of any of the events stated therein.  A reading of clause 8.1.i of the agreement reveals that the 1^st Respondent was entitled to the termination of the lease when the 2^nd Respondent failed to pay the dues.  It is seen after the commencement of the lease for a period of 60 months from 1.1.1996, the 2^nd Respondent was irregular in payment of lease rentals and did not pay any of lease rentals after 16.7.1997 and that upon such continued default in the payment of lease rentals the 1^st Respondent was entitled to remove and repossess the equipment as per clause 8.2.1 of the agreement on any day after 16.7.1997 or at least after 30.6.1999 when the 2^nd Respondent made a reference under Section 15 of SICA to BIFR as per the provisions of Clause 8.1.v. It can be seen that the first Respondent issued the termination of lease-cum-recall notice only on 16.4.2001 much after the Official Liquidator had taken possession of the assets of the 2^nd Respondent company and that the 1^st Respondent had not chosen to enforce its rights and preferred to remain quite till the year 2001 when the Official Liquidator took possession of the 2 DG sets.  In this case there is an agreement between the creditor who is the 1^stRespondent herein and the sureties who are appellants with reference to the enforcement of the security and it can be seen that the 1^st Respondent was bound to act in diligence in terms of the lease agreement or in other words the 1^st Respondent was bound to take possession of the 2 DG sets and dispose of the same and recover its dues soon after no payments were made after 16.7.1997 and it can also further be seen that the 1^st Respondent was negligent and had omitted to enforce its rights guaranteed to it under the lease agreement and by such neglect had caused a gross reduction in the value of the 2 DG sets when they were  sold much later by the Official Liquidator in addition to huge accrual of defaulted release rentals.  The omission on the part of the 1^st Respondent to promptly terminate the lease on the date of default  and the further omission on its part to take possession and dispose of the 2 DG sets from 17.7.1997  till the parting of the same to the Official Liquidator in the year 2001 has enabled the sureties i.e. the appellants to claim discharge to the extent of the value of the 2 DG sets as on 17.6.1997 and therefore in view of the same it can be easily said that the appellants are entitled to a discharge under Sec. 139 of the Indian Contract Act.

14.       It is a settled position of law that where the right of the surety against the principal debtor is impaired due to any action or inaction of the creditor, the surety is discharged to that extent under the combined effect of Section 139 and 141 of the Indian Contract Act.  It can be seen from the above that due to the inaction on the part of the first Respondent bank the rights of the appellants have been impaired and therefore the appellants are entitled to a discharge under the combined effect of Section 139 and 141 of the Indian Contract Act. Further Section 139 of the Indian Contract Act is a residuary section, the object of which is to ensure that no arrangement different from that contained in the surety’s contract is forced upon the surety and if the surety pays the debt, he has the benefit of every remedy which the creditor had against the principal debtor which in this case is not available to the appellants as the principal debtor company had already been taken over by the Official Liquidator. 

15.       It is also seen that the 1^st Respondent has already recovered Rs.64.57 lakhs on 30.3.2005 out of the net sale proceeds of the leased assets carried out by the Official Liquidator.  After adjusting the same, it has admitted before the Official Liquidator the net dues payable at Rs.33,50,460/- being the outstanding amount in the ELA account as of 14.2.2001 i.e. the date of winding up order. Out of the said amount, which stand as adjudicated dues payable by the 2^nd Respondent company, the 1^st Respondent has already received a sum of Rs.21,36,604/- from the Official Liquidator and that a sum of Rs.1 crore  lying in deposit and readily available with the Official Liquidator would eventually enable the 1^st Respondent bank to realize its adjudicated dues and as per Rule 154 of the Companies (Court) Rules, 1959, the liability of the 2^nd Respondent Company is crystallized at the level of amount admitted and adjudicated by the Official Liquidator which can be deemed as the full and final settlement.  In the case of Union Bank of India vs. Chairperson DRAT & others - (2011) 167 Comp Cases 1 (All) it has been laid down that whena Bank accepts certain amount in full and final settlement of the claim from Liquidator, it cannot proceed again against the guarantors for the balance amount and therefore the guarantors automatically stand discharged.  In the present case, the appellants cannot be held liable even to the extent of balance of the dues of Rs.12,13,856/- from the amount admitted before and adjudicated by OL due to the abrogation of rights available to them in terms of Sections 140 ,141 and 145 of the Contract Act and when once the second Respondent borrower company comes under the ambit of Section 456, 535, 536 & 537 r/w 441of the Indian Companies Act, 1956.

16.       Therefore from the fact that the OA has been filed by the 1^st Respondent Bank against the appellants after the prescribed period of limitation, from the fact that the OA was adjudicated by DRT, Hyderabad without jurisdiction, from the fact that the secured creditor has acted in a manner not consistent with the rights of the surety, from the fact that by the inaction of the 1^st Respondent bank the eventual remedy of the surety against the principal debtor had been impaired, from the fact that there is every possibility of the first Respondent realizing the dues admitted before and adjudicated by the Official Liquidator and from the fact that the appellants are entitled to a discharge by virtue of operation of Sections 139 and 141 of the Indian Contract Act this tribunal is driven to conclude that the order of the tribunal below allowing the OA claim against the appellants is liable to be set aside.

17.       Accordingly the order of the Ld. Presiding Officer, DRT, Hyderabad dated 19.1.2011 passed in OA 132/2004 is hereby set aside and consequently the OA filed against the appellants in OA 132/2004 on the file of DRT, Hyderabad is hereby dismissed. 

18.       In the result the Appeal is allowed. No costs.

19.       The Ld. Presiding Officer, DRT, Hyderabadis directed to recall the Recovery Certificate issued against the appellants.


The Chair Person of DRAT Chennai passed this order on 16th DEC2011

Govt clears changes in laws to deal with bad loans

Source :13 Oct, 2011, 1449 hrs IST, PTI



NEW DELHI: The government today approved amendments to the SARFAESI and debt recovery acts to enable banks to effectively deal with the menace of bad loans and also encourage them to disburse credit freely to home and corporate loan seekers. 

The Cabinet approved the introduction of the Enforcement of Security Interest and Recovery of Debts Laws (Amendment) Bill, 2011, in the next Winter Session of Parliament, Information and Broadcasting Minister Ambika Soni told reporters here. 

The Bill seeks to amend the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act and Recovery of Debts due to Banks and Financial Institutions (RDBF) Act so as to strengthen the regulatory and institutional framework related to recovery of debts due to banks and financial institutions through the Enforcement of Security Interest and Recovery of Debts Laws (Amendment) Bill, 2011. 

"The proposed amendments would enable banks to improve their operational efficiency, deploy more funds for credit disbursement to retail investors, home loan borrowers, etc, without fearing for recovery, thus bringing about equity," she said. 

Further, she said, "Mandatory registration of subsisting security interest (equitable mortgages) would promote innovation in credit information." 

The suggested amendments would strengthen the ability of banks to recover debts due from the borrowers, enhance the ability of banks to extend credit to both corporate and retail borrowers, reduce the cost of funds for banks and their customers and reduce the level of non-performing assets, she said. 

Soni noted that the banks and financial institutions were facing numerous problems in recovery of defaulted loans on account of delays in disposal of recovery proceedings. 

The government, therefore, enacted the RDBF Act in 1993 and SARFAESI Act in 2002 for the purpose of expeditious recovery of non-performing assets (NPAs) of the banks and FIs, she added. 

Although these two acts have helped in reducing NPAs, banks have sent certain suggestions for further strengthening of secured creditor rights, she said. 

According to Department of Financial Services Secretary D K Mittal, four sections of the RDBF Act, 1993, and six sections of the SARFAESI Act, 2002, will be amended.

Audited bank books understate bad loans: RBI

Source  :BS Reporter / Mumbai December 18, 2011, 0:30 IST

Pointing to shortcomings in the quality of bank audits, the Reserve Bank of India (RBI) has said financial statements certified by accountants show lower non-performing assets than is actually the case.

There is a difference between the levels of non-performing assets (NPAs) found during the course of supervisions (by RBI) and those in audited books of banks. Bad loans in certified statements are less, RBI Governor, D Subbarao, said on Saturday.

 Seeking an improvement on this front, Subbarao said, "We must identify where the systemic difference is coming from." He was addressing a conference organised by the Institute of Chartered Accountants of India (ICAI).

Subbarao said accountants who sign bank books were RBI's "eyes and ears". He added the regulator expected them to send out early warning signals to assist the regulator in the supervisory process. A true and fair picture must be shown to shareholders, he said.

The economic slowdown and rise in interest costs, owing to a rise of over 250 basis points in lending rates, have exerted pressure on the repayment capacity of retail and corporate borrowers. Gross NPAs of commercial banks rose to Rs 97,922 crore at end of March from Rs 84,698 crore a year ago, according to RBI data.


On the demand to reduce branch audit work, he said relevant branch audits at public sector banks (PSBs) had significantly declined due to core banking facilities and centralised record keeping.


The cost of audit of PSBs was significantly higher than the cost of auditing comparable private sector banks. However, ICAI has been resisted the move, as it would mean a reduction in work. ICAI's efforts in this regard are ill advised.


Accountants should sharpen their skills in concurrent audits, rather than agitate for the retention of work which does not add value, Subbarao said.


The profession had shied away from the responsibility of prevention and early detection of fraud, Subbarao said. The need for such a service exists, and if the profession did not fulfil that need, other agencies which could provide such services would displace auditors and deprive them of a potentially expanding opportunity, he added.


The central bank governor also had a word of caution for accountants on monopoly in areas like signing financial statements, advising them against perpetuating their monopoly status. Accounting professionals were concerned about expanding career opportunities, owing to the institute's growing membership.


The easy way out to expand opportunities would be to agitate for continuation of the monopoly position. However, this would be a mistake, Subbarao said, adding they should identify emerging opportunities and develop skills needed to exploit them.

RBI Reluctant to reveal the names of top 100 bank loan defaulter

Source :Anita Singh, TNN Dec 11, 2011, 05.14AM IST

PANIPAT: Reluctant to reveal the names of top 100 bank loan defaulter businessmen of the country, the Reserve Bank of India (RBI) has filed a petition in the Delhi High Court, seeking a stay on the orders passed by the Central Information Commission (CIC).

On November 15, CIC, while deciding a petition filed by local RTI activist P P Kapoor, had directed the RBI to provide him the names of defaulters by December 10 and upload these on the bank's website by December 31. In the petition, Kapoor had challenged the denial of information by the bank.

Kapoor had sought the details from the bank in August last year, but was denied on the grounds that RBI held these in 'judiciary capacity'.

However, the CIC directed the bank to post on its website complete information on all such industrialists as part of suo-motu disclosure mandated under Section 4 of the RTI Act before December 31 and asked it to update it every year.

The RBI had objected to making the information public, saying "it is held by it in fiduciary capacity and disclosing it will adversely affect economic interest of the state".

Information commissioner Shailesh Gandhi agreed that information was 'fiduciary in nature', but said that such exemption did not stand when there was larger public interest in the disclosure.

After his RTI query was dismissed by the RBI, Kapoor filed the petition with the Central Information Commission, which on October 12 summoned the public information officer of the RBI to appear before it on November 8 with all relevant documents. The commission held a hearing on the said date, but the verdict was withheld.

Kapoor said the information was sough by him in the larger public interest as revealing the names of the defaulters could force them to return the money of the public sector banks.

Mrs.Malliga V/S BOB

A.IR:954/2011

A 1472/11 (waiver);  Ld.  Counsel Shri Senthil Kumar appearing on behalf of the  petitioner stated that the respondent bank can claim only to the extent of the value of the secured asset and that the provisions of the SARFAESI Act only permit that.  

He further stated that the petitioner is a lady and that if this Tribunal imposes a condition of pre-deposit of a sum equivalent to 50% of the amount claimed by the bank the petitioner would be put to hardship and suffering. 

Ld.  Counsel added that  the amount for  the pre-deposit may be reckoned from the value of the secured asset and that the petitioner may be directed to deposit 25% of that value towards the pre-deposit.  Ld.  Counsel pleaded for sympathy and added that suitable orders may be passed.

Ld. Counsel Shri Manohar appearing on behalf of the respondent bank stated that the debt due to the respondent bank is Rs.20.73 crores and that the petitioner may be directed to deposit at least 50% of the said sum in order to meet out the requirement under Sec.18 of the SARFADSI Act.

Heard both sides.

In view of the facts and circumstances of the case  the following order is passed.

“The petitioner is directed to deposit Rs.5.18 crores into this Tribunal on or before 5.3.2012.  Call this IA on 6.3.2012 for verification of the compliance.  In the meanwhile there shall be an order of restraint upon the Authorised Officer from in any way proceeding any further under the provisions of the SARFAESI Act in any manner till 6.3.2012.”

IA 1473/11 (stay); Call with IA 1472/11 on 6.3.2012.


The Chair Person of DRAT Chennai passed this order on 13th Dec 2011

M/s.Indian Bank V/S Mr.J.Paramanandam & ors

R.A:28/2011


OA 491 /1999 on the file of DRT - 1 chennai

Ld.  Counsel Shri Kasturi Rangan appearing on behalf of the first respondent stated that a sum of Rs.2 crores deposited by the first respondent’s son is lying in a Fixed Deposit with the Indian Bank, Ethiraj Salai branch and that the first respondent’s son has given a letter to the bank for appropriation of the said sum towards the settlement of the dues of his father.  

The Ld. Counsel stated that this tribunal may act upon the letter and permit the bank to appropriate the said sum of Rs. 2 crores lying with the Indian Bank, Ethiraj Salai branch as per the terms set out in the letter which includes the appropriation of the sum of Rs. 3 crores which is lying in deposit with the Alwarpet Branch of Indian Bank and which has been deposited by Shri A. Ramadas Rao. 

 The Ld.  Counsel added that the lis is long pending and that all the parties are desirous of settling the matter. The Ld.  Counsel requested that this Tribunal to pass orders permitting the bank to appropriate the sum of Rs. 2 crores lying with them as requested by the first respondent’s son.

Ld.  Counsel Ms. Vasudha Thiagarajan appears on behalf of Shri Ramadas Rao and stated that Shri Ramadas Rao is only interested in an amicable settlement and that he is also ready and willing to permit the bank to appropriate the sum of Rs. 3 crores deposited by him and lying with the Alwarpet branch of the Indian Bank provided the sum of Rs. 2 crores deposited by the first respondent’s son with the Indian Bank is appropriated first.

Heard the Ld.  Counsel.

It is seen that once the sum of Rs.2 crores lying with Indian Bank, Ethiraj Salai Branch and the sum of Rs. 3 crores lying in the Alwarpet Branch of the Indian Bank are appropriated the first respondent would be liable to pay only a sum of Rs.1 crore for the settlement.

In view of the facts and circumstances of the case it would be appropriate if this Tribunal passes the following order:

“Indian Bank is permitted to appropriate the sum of Rs.2 crores deposited by the first respondent’s son lying in a Fixed Deposit with the Indian Bank, Ethiraj Salai alongwith the accrued interest towards the settlement and immediately after the said sum of Rs. 2 crores is appropriated for the settlement of the loan account of the first respondent the bank is also permitted to appropriate the sum of Rs.3 crores lying deposited in the SB account of Shri A. Ramadas Rao in Alwarpet branch of Indian Bank towards the settlement”

Call on 9.1.2012 for further proceedings.

IA-290/2011 (Stay) – Call with RA on 9.1.2012.

IA-1461/2011(Implead Petition) – Call with RA on 9.1.2012.

The Chair Person of DRAT Chennai passed this order on 25th Nov 2011

Finance ministry pushes banks to fast-track bad loan recovery

source :12 DEC, 2011, 01.30AM IST, SANGITA MEHTA,ET BUREAU 


MUMBAI: The finance ministry is pushing capital-strapped public sector banks to hasten recovery of bad loans to improve health, and has promised to fill vacancies at debt recovery tribunals (DRT) across the nation, partly responsible for inordinate delays in ending disputes. 

"Needless to say that Rs2 lakh crore (of bad loans) are a drag on the capital of banks," a bureaucrat from the finance ministry wrote to bank chairmen recently. 

"All cases should be reviewed and... ensured that all cases pending above two years should be cleared by March 2012." Banks last year wrote off almost 10% of their gross bad loans as various recovery forums failed. 

Recovery through DRTs fell to 28% of the total referred cases in 2011, from 32% ayear earlier, data from the Reserve Bank of India (RBI) shows. 

Under the SARFAESI Act, it was a little better at 38%, compared with 30% in the same period previous year. 

Bankers had complained to the finance ministry that the DRT mechanism was not functioning efficiently, which in turn was making it difficult for them to recover dues. They had said the tribunals lacked presiding officers and recovery officers.