Sri. Sankarapandian stores (P) ltd & ors V/S SBI & anr

M.A(S.A):232/2011

Sri. Sankarapandian stores (P) ltd & ors V/S SBI & anr 

IA 456/2012 (adv.hearing);   This IA is dismissed as infructous.

MA(SA) 232/2011:  Ld. Counsel Shri Velusamy appears on behalf of appellants 1 to 7 and prays for an adjournment. 

Ld. Counsel Shri Subramanian appearing on behalf of appellants 8 and 9 stated that a sum of Rs.5.53 crores has already been paid by the appellants 1 to 9 after the issuance of Sec.13(2) notice and that this tribunal has to calculate the amount for the pre-deposit to be made under Sec.18 of the SARFAESI Act by dividing the amount claimed under Sec.13(2) by two and subtract the amount if any paid from that and then pass an order for deposit of 25% of the remaining amount.

  Ld. Counsel stated that appellants 8 and 9 are in financial difficulties and that this Tribunal by use of its discretionary powers may reduce the amount of pre-deposit from that of 50% to 25% of the dues calculated as stated above and pass orders for pre-deposit in this case.  

Ld. Counsel added that the Authorized Officer did not adhere to the procedure under the Security Interest (Enforcement) Rules, 2002 and that the Authorized Officer did not even receive 25% of the bid amount at the time of conducting the auction and prayed that the respondent bank may be directed to produce the proof for the payment of 25% on the date of auction.

Ld. Counsel Shri Om Prakash appearing on behalf of M/s Ramalingam Associates for the respondent bank stated that the amount claimed in the Sec.13(2) notice is Rs.22,72,54,292.34p and that this tribunal is required to take into consideration the amount determined in the Sec.13(2) notice and thereafter proceed to determine the amount of the pre-deposit in this case as laid down by the Hon’ble High Court of Madras in WP No.26582/11. 

 Ld. Counsel prayed that a sum equivalent to 50% of the aforesaid claim may be directed to be deposited by the appellants in this case to enable this Tribunal to entertain the appeal and added that this tribunal being bound by Sec.18 of the SARFAESI Act should not proceed to hear the appeal or should not proceed to pass any orders of stay without the pre-deposit and prayed that orders may be passed.  

Ld. Counsel also added that there are no proceedings pending before the Hon’ble High Court of Madras in this case other than WP No.13677/2012 filed by the appellants 8 and 9 and that this Tribunal may proceed to pass orders for the pre-deposit as per law.

Heard both sides.

It is seen that the amount claimed in the Sec.13(2) notice is Rs.22,72,54.292.34 and an amount of Rs.5,53,00,000/- has been paid by the appellants 1 to 9. Therefore the amount due as per Sec.13(2) notice after giving credit to the amount paid by the appellants works out to Rs.17,19,54.292.34. In view of the facts and circumstances of the case more particularly in view of the fact that this Tribunal is bound by Sec.18 of the SARFAESI Act and in view of the fact that the difficulties expressed by the appellants 8 and 9 do not outweigh the difficulties faced by the bank which is the custodian of public money which money is required to be made available for circulation to the other members of the public it would be appropriate if the following order is passed.

“The appellants 8 and 9 are directed to deposit a sum of Rs.8,59,77,147/- being 50% of Rs.17,19,54,292.17 into this Tribunal on or before 26.6.2012..  Call this MA(SA) on 27.6.2012 for verification of the compliance”

IA 529/2011 (stay);  It is seen that this IA was not taken up on 16.5.2012 due to electricity failure in this Tribunal.  It is also seen that this IA was not taken up on 18.5.2012 as the Chairperson had gone on leave.  Today MA(SA) 232/2011 has been taken up and orders for the pre-deposit have been passed.   Orders of stay cannot be passed without the pre-deposit being made as per the dictum of the  Hon’ble High Court of Madras in WP No.23708/2011 and therefore this Tribunal has to await the making of the pre-deposit Hence call this IA  along with MA(SA) on 27.6.2012 for verifying as to whether the pre-deposit has been made.  Notice to R1 to R9 by then.

IA 734/11 (direction); Call with MA(SA) on 27.6.2012

IA 1381/11 (stay); Call with MA(SA) on 27.6.2012

IA 457/2012 (stay); Call with MA(SA) on 27.6.2012

This Order was issed by THE HON'BLE CHAIRPERSON ,DRAT Chennai on24/05/2012

Cheque encashed by fraud? Bank has to pay, rules consumer forum

Rebecca Samervel, TNN | May 15, 2012, 12.35AM IST

MUMBAI: A consumer forum recently held a bank guilty of deficiency for attempting to absolve itself of responsibility in a fraudulent cheque encashment case. 

Indian Bank was reprimanded for being negligent and allowing the encashment of a cheque which was evidently tampered with. The forum ordered the bank to pay Qatar-based Riyaz Mukdam the enchased amount of Rs 2.81 lakh along with 9% interest from December 2008. This amounts to about Rs 25,000. Mukdam will also get Rs 10,000 as cost of the complaint. 

Mukdam had an NRI account in the bank's Wadala branch in Mumbai. On November 24, 2008, he sent five post-dated cheques to his brother Abbutallah in Mumbai. One of the cheques dated November 25, 2009 was for Rs 2.81 lakh. On December 12, 2008, when Mukdam asked his brother about the cheques, he was told that he hadn't received that one. When Abbutallah checked with the bank, he realized that somebody had overwritten his brother's name with another name and had encashed it at the bank's Bandra branch. The cheque's date was changed from November 25, 2008 to November 25, 2009, and Mukdam's signature was forged. He alleged that the cheque was encashed due to the bank's negligence. 

Mukdam said the bank filed a police complaint only on December 29, 2010. He alleged that after seeing the overwriting, the bank should have got suspicious about its genuineness and should not have acted carelessly. He filed a complaint with the bank's branches in Wadala and Bandra. Mukdam also filed a complaint with the Mumbai District Consumer Disputes Redressal Forum on December 10, 2010. 

The bank didn't file its defence and made no attempt to deny Mukdam's allegations. The forum held that under such circumstances, Mukdam's allegations stood intact. The forum stated that from documents presented, it was proved that the cheque was tampered with and the signature was forged. The forum said that when it was clear that there were obvious changes to the cheque, the bank should have checked with Mukdam and conducted investigations. The forum also said the bank's irresponsible behaviour was evident after it delayed filing the police complaint.

Restructured loans will account for 3.5% of total advances: Crisil

BL:MUMBAI, APRIL 24:2012


The total amount of loans that are likely to be restructured by banks over 2011-12 and 2012-13 is estimated at nearly Rs 2-lakh crore, said Crisil.


Pointing out that a sizeable proportion of the restructuring comprises large-ticket corporate exposures, the credit rating agency said the total restructured loans will account for 3.5 per cent of the total advances as at March 2013.


Furthermore, banks' gross non-performing assets are set to increase to 3.2 per cent by March 2013, from 2.9 per cent as at December 2011.


Crisil has assessed that the large quantum of restructuring reflects the prevailing stress on corporate India's credit quality because of lower profitability, weak demand, and tight liquidity

Contempt notice to DRT PO Hydrabad

• April 19, 2012 
• DC 
• Hyderabad

Justice L. Narasimha Reddy of the High Court on Wednesday issued a contempt notice to E. Jacob R. Daniel, presiding officer of the Debt Recovery Tribunal, Hyderabad, and chief manager of the Indian Bank. The judge was dealing with a plea by one Kishore Pokala, challenging a GO issued by the government on November 7, 2007 not to register a property located at Road No. 10, Banjara Hills, belonging to N. Sarasa Devi, the alleged kingpin in the Sarva Shiksha Abhiyan scam.

The petitioner claimed that he had purchased the property in an auction conducted by the Indian Bank and when he approached the joint sub-registrar, Hyderabad (south), he refused to register it as it was under attachment by the Crime Investigation Department. The CID approached the government, seeking sanction to attach her properties as they were acquired through her having embezzled government funds.

The government gave the sanction and the CID approached the Chief Judge, City Civil Court and the court granted the order to attach the property. Meanwhile, Indian Bank approached the Debt Recovery Tribunal to auction the property as Sarasa Devi had mortgaged it with the bank to secure a loan which she had failed to repay.

Sarasa Devi brought to the notice of the Tribunal that the property was under attachment with the police. However, the Tribunal held that the civil court order was not binding on the Bank and it was not valid. After seeking assistance from the special counsel for the government N. Sridhar Reddy, the judge decided to initiate proceedings for blatant violation of orders of the Civil Court and issued notices under the Contempt of Court Act.

Give flats to those who paid in full: HC
Justice L. Narasimha Reddy of the AP High Court directed the principal secretary to the housing department and the managing director of Rajeev Swagruha Corporation Ltd to ensure that the possession of flats is allotted to the members of the Sathbhavana Township Allottees Welfare Association.

The judge ruled that the allottees should be given the possession without insisting on registration of the documents, provided the entire consideration was paid. The judge granted the interim direction while dealing with a plea by the association, challenging the failure of the authorities to hand over possession to those who were allotted the flats despite payment of the final cost. The judge said that the members of the association had responded to the notification issued by the housing department, which had promised that flats would be sold at 25 per cent less than the market value and possession of the flat would be handed over within 24 months.

Though more than four years have elapsed, construction had not been completed. In the meanwhile, the members of the petitioner-association had paid the entire amount.

Security for Surekha to continue
Justice R. Subhash Reddy of the High Court on Wednesday directed the police to continue providing security to former MLA Konda Surekha, at her own cost, until an assessment of the threat perception had been done before a final decision was taken. The judge granted the order while dealing with a plea by Ms Surekha.

System-Based NPA Reporting Improves Transparency

Abhishek Raval 12th April, 2012 in BFSI



When recently asked about the reason for spike in Non Performing Assets (NPAs) of select Indian banks, RBI's Deputy Governor Subir Gokarn attributed it to the migration of NPA calculation from manual reporting to an IT system-based approach . By bringing to the fore previously unreported NPAs the system based approach led to an increase in the overall NPA reporting.


The recent Financial Stability Report points out a 25.5% growth in NPAs in the first half of 2011-12, the highest in the past six years. NPAs continue to be a grave area of concern for the banks and regulators alike. And, the key to addressing this issue lies in having a correct picture of NPAs. After all, unreported NPAs mean unaddressed NPAs.


Manual Reporting: Where Is Transparency?


"Manual system, due to lack of visual ease, involves going through scores of ledgers, manuals etc. Due to lack of scope for verification this gives leeway to banks to show a rosy picture about the financial numbers. On the other hand, software based system gives a single window view of the lifecycle of the loan from the day it is disbursed. This avoids manipulation of any kind and ensures complete transparency," explains R.B.Barman, Former ED- RBI.


A rulebased tool providing an organised display replacing the wide ledgers also enables the employees of RBI's Department of Banking Supervision to quickly check the veracity of the account entries and numbers and find if there are any aberrations.


As a result, both the finance ministry and RBI have directed Indian banks to automate NPA management and eliminate manual intervention. Moreover the implementation date for BASEL III norms is around the corner. Indian banks should abide them between 2013 and 2019. 


How System-Based Approach Works


IT Tools have features to act as a repository of the payment history of the borrowers. Thus, pre-emptive action can be taken when there is a possibility of an account entering the NPA category . Various categories of loans and the rules and payment periods associated with them can be tracked using a tool, as opposed to a manual system where one has to scan through scores of manuals, ledgers, etc.


To quote an example, the NPA norm for an agricultural loan for a crop of a long gestation period is different from a loan relating to an industry product of short gestation period. These complex rules can be better taken care of by a software tool than handled manually. Moreover there are various stages of NPA management requiring with different approaches required at each stage. For instance, a different approach is required at a stage when the account is categorised as an NPA than at a stage when the borrower is relentless and not making payments, which requires a legal notice to be sent. The rule based system triggers the alert.


Besides building greater transparency moving to a system based approach has its advantage in reducing the cost of NPA management. A manual setup requires large scale hiring of manpower while a technology tool streamlines the process using much lesser resources. Also, there is a possibility of slippages in people-managed systems, whereas a technology tool will improve productivity by managing set processes on rule-based systems.


Cosmos Bank And Indi Soft Partner For NPA Management


Urban Co-operative Banks (UCBs), which form a significant part of the lending community in India, are also stressed with high NPAs. Targeting the co-operative banking sector Indisoft Consultancy has recently launched an Indian version of its NPA management product, i.e. 'Rx Office NPA'. The product is customised for the Indian market based on the incumbent law viz. Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI) that government uses for NPA management, informs Prasad Nagool, CEO-Indisoft Consultancy Services.


Cosmos Bank has provided the business knowledge and regulatory know how for designing the product. "The team from Cosmos gave insights of business services from a co-operative bank perspective. Working with the Cosmos team enabled us to design the product from a user angle," shares Nagool. The bank is also using the product for their NPA management. "Rx Office NPA will help banks to reduce their NPAs to a great extent," states Sunil Sabnis, Director- Cosmos Co-operative Bank. 


Cosmos Bank is running on Infosys' Finacle Core Banking Solution (CBS), which is unable to handle NPAs on its own and manual intervention is required. "After implementing Rx Office NPA there is seamless bidirectional data transfer between the CBS and Rx Office NPA eliminating manual intervention. It has benefited in terms of regular tracking of the lifecycle of default. Meanwhile, the Finacle system is also updated accordingly so as to provide an end-to-end view from the loan disbursal date to the latest update of loan default," explains Sanjeev Dahiwadkar, CEO, Indisoft LLC. 


There are four pillars of 'Rx Office NPA' - Information management, document management, rule based workflow management and communication

Is Kingfisher Airlines really in trouble?

Rumi Datta Hardasmalani / Mumbai Apr 13, 2012, 00:57 IST


It may just be a well-crafted strategy by Vijay Mallya to sail through the current crisis

While everyone seems to be in a mood to write him off with headlines about his airline on the verge of collapse, Vijay Mallya may well be right on track in executing his plans to get back a leading position in the aviation space.

Mallya may already have a foreign airline partner by his side, perhaps a cash-rich one, something that he has already hinted at in the recent past. All he has to do is clear the regulatory hurdles for the entry of his new airline partner in india. This is what may help him survive the current crisis.

Today, he is doing just that with ultimate precision. Mallya is actually firing on all cylinders. Grounding over 75 per cent of the airline’s fleet, rolling-back almost all international operations, not paying his employee’s salaries till sometime back and delaying outstanding payments are some of the pressure points he has managed to create for the government to clear the FDI policy on aviation.

The overall impact of all these moves on increased air fares is only adding fuel to the fire, further mounting pressure on the government to clear the policy, while it keeps consumers’ interests in mind.

Why is he doing this all by himself? The answer is simple. No other airline in India today is in real need of this new proposed FDI policy that will allow foreign airlines to pick up a stake in an indian carrier.

Jet Airways seems well funded, with Naresh Goyal in no mood to raise fresh equity as he sits tight on a promoter holding of over 80 per cent in his airline. Indigo is well on track with its IPO plans and a time-tested, profitable expansion plan. Spicejet’s largest shareholder, Kalanithi Maran is in no hurry to either cash-out or launch aggressive expansion plans given the airline is making money. Wadia-controlled GoAir has always been in a wait-and-watch mode, with little or no muscle power to impact regulatory norms, particularly given its size.

This leaves Kingfisher Airlines — the only one that is not only bleeding but requires a massive revamp and fund infusion. Having exhausted all fund raising options, roping in a foreign airline is Mallya’s only way out.

For those who think that the cash-strapped Kingfisher Airlines will have no takers, consider this: KFA has a fleet comprising 12 owned aircraft, owns substantial prime slots on trunk routes like Mumbai-Delhi and had a market-share of around 29 per cent prior to shrinking its operations. Kingfisher has tactfully given up unprofitable slots in smaller cities or excess ports, and is expected to find them vacant once it resumes full-fledged operations in its new avatar.

And now, by leveraging this crisis, it has not only managed to cut excess flab but has also cut down non-profitable route operations besides re-negotiating high-cost lease rentals while returning expensive wide body aircraft.

The timing too seems favourable, as Mallya’s plan coincides with India’s own slow growth story, high inflation and political scandals. Also, his lying-low strategy augurs well with adverse conditions like rising fuel prices, a depreciating rupee and cut-throat competition due to excess capacity. Keeping all this in mind, despite its outstanding debt of about Rs 7,000 crore and accumulated losses of Rs 6000 crore, Kingfisher may attract an international airline keen to get a toehold in the indian aviation market.

For the foreign airline waiting in the wings to partner Mallya in India, it not only means a potentially big market share, but a clear first-mover advantage in a market that today flies around five million people a month and is projected to grow 7.5 times by 2020.

Don’t forget that Naresh Goyal had paid Rs 2,200 crore for AirSahara that was much smaller in size in terms of operations and market share and had almost no tangible assets. It was a loss Goyal has managed to absorb as he is back in a leadership position.

Perhaps this is the only way to take on rivals like Jet Airways and Indigo Airlines, head-on.

Just think about it. Only days before the IPL season, Mallya successfully managed to placate his agitated airline employees by paying them their salaries. Within a span of one week, the dgca was satisfied with the airline's explanation on why its licence should not be cancelled, Mallya's leading bankers came out in the open to say that KFA can be revived, and tax authorities un-froze his account.

Now with the ground work already in place, Mallya is only waiting for the FDI policy announcement which the relevant ministries have already said is under active consideration.

Kingfisher Airlines’ billionaire chairman continues to own one of the world's most expensive yachts, a luxury Kingfisher villa in goa, dozens of vintage cars worth millions, and a cricket as well as a Formula One team. His $4-billion group comprising breweries, biotechnology and real estate businesses continue to remain technically unaffected.

So, if you thought mallya stopped dining with football and formula one stars, shooting with super models on exotic locations, think again.

All he has managed to do is use the media most effectively.

A king-size bailout for the maharaja

BS Reporter / New Delhi Apr 13, 2012, 00:50 IST


Air India to get Rs 30,231-crore infusion till 2020-21 restructuring of debt approved 19,000 employees to be moved to two new subsidiaries

After more than three years of discussions, the Cabinet Committee on Economic Affairs (CCEA) on Thursday approved an infusion of Rs 30,231 crore in Air India till 2020-21 as part of its turnaround plan. The government has already infused equity of Rs 3,200 crore in the last two financial years

.

The government also approved the restructuring of the airline’s debt of Rs 18,000 crore, the formation of two subsidiaries for ground-handling and engineering, and the contentious shifting of over 19,000 of the 27,000 permanent employees to these new operations.

“All this infusion of money is conditional and the performance of Air India will be monitored by a committee formed by the ministry,” said civil aviation minister Ajit Singh.

Singh said there were stiff performance riders put in place for additional equity. These include improving the airline’s on-time performance to 90 per cent in two years from 71 per cent now. It also has to improve its passenger load factor to 73 per cent by 2015, and to further increase it to 75 per cent beyond 2015, from 69 per cent currently.


Based on the plan, Singh said the airline would have operational profit by 2018. Its interest payment outlay is estimated to come down by Rs 1,000 crore after the debt restructuring. The airline has an annual interest outlay of Rs 1,700 crore.


Banks are restructuring the airline’s loans of Rs 18,000 crore. Of that, Rs 10,500 crore will be converted into long-term loans, with a repayment period of 15 years, and the rest Rs 7,400 crore will be repaid to banks through a government-guaranteed bond issue
.
The Cabinet was able to push through the formation of the engineering and ground-handling subsidiary. It took the tough decision of bringing the employee-to-aircraft ratio on a par with that of profitable international airlines. With the shifting of staff to the two new companies, Air India’s employee-to-aircraft ratio will be 60 per aircaft if only permanent employees are taken into consideration. However, a large part of the work is outsourced to contract workers. If they are included, the ratio will be 142 employees per aircaft, much better than the average international norm of 150 employees per aircraft.

Air India will initially be looking for a joint venture for the engineering subsidiary.


The Cabinet also cleared the long-awaited deliveries of the Boeing 787 Dreamliners. “All the 27 Dreamliners and three Boeing 777-300 ERs will be inducted by the national carrier but that will happen on sale and lease-back,” Singh said. Air India is to take the deliveries of seven Dreamliners by January next year.