SOURCE :Aug, 2010, 05.16AM IST, Sanjay K Singh,ET Bureau
NEW DELHI: Expressing concern over the misuse of legal processes to frustrate the recovery proceedings of banks and financial institutions, the Supreme Court has said that the borrowers are duty bound to repay the due debt and any lapse in this regard will invite serious action.
The court, allowing the plea of appellant Indian Bank, directed the defaulter borrower to deposit Rs 3 crore with the lender, noting that the present case is “ illustrative of how a defaulting borrower can use the court process for frustrating the action initiated by a bank under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, for recovery of its dues”.
A bench comprising justice GS Singhvi and justice AK Ganguly said: “The court cannot lose sight of the fact that the bank is a trustee of public funds. It cannot compromise public interest for benefiting private individuals. Those who take loan and avail financial facilities from the bank are duty bound to repay the amount strictly in accordance with the terms of the contract. Any lapse in such matters has to be viewed seriously and the bank is not only entitled, but also duty bound to recover the amount by adopting all legally-permissible methods.”
The court said: “The parliament enacted the Act (Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002) because it was found that legal mechanism available till then was wholly insufficient for the recovery of the outstanding dues of banks and financial institutions.”
In this case, the Indian Bank had sanctioned loan to M/s NS Investments, a Chennai-based partnership firm in 1989 and again in 1991. After some time, the account of the borrower was declared as non-performing asset.
In 1995, M/s Blue Jaggers Estate took over the assets and liabilities of the firm. Since it failed to clear the outstanding dues, the bank filed an application before Debts Recovery Tribunal for recovery of Rs 2,15,38,158 with interest, which is pending.
During its pendency, the parties signed joint memo of compromise on June 23, 2004. The bank agreed to accept an amount of Rs 153.50 lakh towards full and final settlement of its claim against the outstanding due of Rs 661.30 lakh.
The borrower did not pay full amount in terms of the compromise and as a result the bank acquired the right to recover all dues, it signed another compromise with the borrower which undertook to pay the balance amount of Rs 63.50 lakh.
It was not accepted by the bank.
The Tribunal took cognizance of the compromise deeds signed by the parties and observed that the bank is entitled to recover the outstanding dues because the borrower had failed to fulfil its commitment in accordance with the terms of compromise.
The Debts Recovery Appellate Tribunal granted interim stay on recovery proceedings, subject to the condition of deposit of Rs 3 crore.
The borrower then filed a writ petition in the high court for an absolute and unconditional stay of the recovery proceedings. It was dismissed.
Aggrieved, the borrower filed Special Leave Petition in the apex court which was dismissed.
Since the borrower did not comply with the order passed by the Appellate Tribunal, the bank auctioned some of the mortgaged properties for which bids of Rs 5 crore were received.
Thereafter, the borrower filed three applications before the Appellate Tribunal for waiver of the requirement of pre-deposit enshrined in second proviso to Section 18(1) of the Act.
The Appellate Tribunal, however, took suo motu cognizance of the fact that the notice had been issued to the defaulter for recovery of Rs 9,86,25,736.95 and directed them to deposit Rs 4.50 crore.
This enabled the defaulter to indulge in further litigation. It filed another writ petition in the high court for quashing order of the Appellate Tribunal and another petition for issue of a mandamus to the Tribunal to decide its application.
The high court then not only set aside the second interim order of the Appellate Tribunal, but also nullified the earlier conditional interim order by declaring that as a result of the sale of property worth Rs 5 crore, the requirement of deposit of Rs 3 crore stands satisfied. Aggrieved, the bank had come to the apex court.
In the meantime, the bank issued two notices under Section 13(2) of the Act asking the borrower to pay Rs 6,47,21,885 and Rs 9,86,25,736 which, according to the lender became due.
It was objected by the borrower firm. It filed objections under Section 13(3-A) of the Act claiming that during the pendency of the recovery proceedings instituted under DRT Act, the lender cannot invoke the provisions of the act.
It was turned down by the bank and issued notice on July 26, 2007, under Section 13(4) of the Act for taking possession of the mortgaged properties.
Faced with the imminent threat of sale of the mortgaged properties, the borrower filed an application under Section 17 of the Act for quashing the proceedings initiated by the lender bank.
Again, with the sole objective of delaying the legal process, it filed three applications. A writ petition was also filed in the Madras High Court.
The petition was referred by the high court to the Tamil Nadu Mediation and Conciliation Centre.
It submitted a report incorporating the offer of the borrower to pay interest for the delayed payment of Rs 63.50 lakh. It was not accepted by the bank.
The Tribunal took cognizance of the compromise deeds signed by the parties and observed that the bank is entitled to recover the outstanding dues because the borrower had failed to fulfil its commitment in accordance with the terms of compromise.
The Debts Recovery Appellate Tribunal granted interim stay on recovery proceedings, subject to the condition of deposit of Rs 3 crore.
The borrower then filed a writ petition in the high court for an absolute and unconditional stay of the recovery proceedings. It was dismissed.
Aggrieved, the borrower filed Special Leave Petition in the apex court which was dismissed.
Since the borrower did not comply with the order passed by the Appellate Tribunal, the bank auctioned some of the mortgaged properties for which bids of Rs 5 crore were received.
Thereafter, the borrower filed three applications before the Appellate Tribunal for waiver of the requirement of pre-deposit enshrined in second proviso to Section 18(1) of the Act.
The Appellate Tribunal, however, took suo motu cognizance of the fact that the notice had been issued to the defaulter for recovery of Rs 9,86,25,736.95 and directed them to deposit Rs 4.50 crore.
This enabled the defaulter to indulge in further litigation. It filed another writ petition in the high court for quashing order of the Appellate Tribunal and another petition for issue of a mandamus to the Tribunal to decide its application.
The high court then not only set aside the second interim order of the Appellate Tribunal, but also nullified the earlier conditional interim order by declaring that as a result of the sale of property worth Rs 5 crore, the requirement of deposit of Rs 3 crore stands satisfied. Aggrieved, the bank had come to the apex court.
Thursday, September 9, 2010
Tribunal cancels sale certificate of Canara Bank
SOURCE :ARUN KUMAR, TNN, Jun 23, 2010, 03.59am IST
PATNA: In a case pertaining to Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (Sarfaesi) Act, the Debts Recovery Tribunal, Patna, has found the Canara Bank main branch, Gandhi Maidan, chief manager on wrong side of the law. The petition was filed against bank authorities by one Dinesh Prasad, a resident of Bakarganj Bazaza Lane, for violation of Sarfaesi Act.
According to the tribunal order, Prasad took term loan from the bank in 2002 to purchase the property — now in question — located at shop no. G-23, Govinda Complex, Govind Mitra Road, and made payment to the bank.
The bank started debiting the interest illegally on monthly basis which resulted into financial crunch and the applicant was overburdened and the bank illegally classified the account as non-productive account on June 30, 2004 without any information to the applicant.
The notice by the bank was served to Prasad in August 2005 and symbolic possession of the property was taken by the bank on December 30, 2005.
On April 27, 2008, the bank published the sale notice in the newspaper. The petitioner filed a petition before the tribunal within stipulated time limit — on June 11, 2008.
During the pendency of the appeal, the bank executed the sale deed in favour of the single bidder for the property, one Damodar Prasad Santhalia, on August 12, 2008 without seeking permission from the tribunal.
The tribunal noted that in this case the fraud was committed by the bank officials and auction purchaser by giving false affidavits and the bank sold the property during pendency of the appeal. The tribunal order with regard to the public auction said the legal obligation of the bank authorities was to secure the best price, but in this case the respondent bank sold the property at a throwaway price to Santhalia.
Allowing the Sarfaesi appeal of Prasad, the tribunal cancelled the sale certificate and confirmation of the sale certificate.
PATNA: In a case pertaining to Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (Sarfaesi) Act, the Debts Recovery Tribunal, Patna, has found the Canara Bank main branch, Gandhi Maidan, chief manager on wrong side of the law. The petition was filed against bank authorities by one Dinesh Prasad, a resident of Bakarganj Bazaza Lane, for violation of Sarfaesi Act.
According to the tribunal order, Prasad took term loan from the bank in 2002 to purchase the property — now in question — located at shop no. G-23, Govinda Complex, Govind Mitra Road, and made payment to the bank.
The bank started debiting the interest illegally on monthly basis which resulted into financial crunch and the applicant was overburdened and the bank illegally classified the account as non-productive account on June 30, 2004 without any information to the applicant.
The notice by the bank was served to Prasad in August 2005 and symbolic possession of the property was taken by the bank on December 30, 2005.
On April 27, 2008, the bank published the sale notice in the newspaper. The petitioner filed a petition before the tribunal within stipulated time limit — on June 11, 2008.
During the pendency of the appeal, the bank executed the sale deed in favour of the single bidder for the property, one Damodar Prasad Santhalia, on August 12, 2008 without seeking permission from the tribunal.
The tribunal noted that in this case the fraud was committed by the bank officials and auction purchaser by giving false affidavits and the bank sold the property during pendency of the appeal. The tribunal order with regard to the public auction said the legal obligation of the bank authorities was to secure the best price, but in this case the respondent bank sold the property at a throwaway price to Santhalia.
Allowing the Sarfaesi appeal of Prasad, the tribunal cancelled the sale certificate and confirmation of the sale certificate.
Firm fined for challenging judicial officer's order
Source :Shibu Thomas, TNN, Sep 9, 2010, 12.38am IST
MUMBAI: A firm's attempt to challenge the qualification of a judicial officer after he passed an adverse order backfired in the Bombay high court. A division bench of Justice P B Majmudar and Justice Anoop Mohta imposed a fine of Rs 20,000 on the firm Tiger Jewellery India Pvt Ltd (TJIPL). The firm had alleged that the presiding officer of the Debts Recovery Tribunal (DRT), Mumbai, who had passed an order against them, did not have the requisite experience.
The HC did not agree. "The petitioner having lost before the concerned DRT, has tried to take out the present proceedings in which we do not find any substance,'' said the judges. The court said that the judicial officer had to engage an advocate to defend himself and justify his appointment. "In our opinion, this petition is nothing but a vexatious proceeding,'' said the HC and asked the firm to shell out the fine to the parties within two weeks. This follows the recent guidelines by the Supreme Court to impose exemplary costs on persons who file frivolous petitions.
In the present case, proceedings were initiated against TJIPL before the DRT. In June 2009, the presiding officer, Vijay Kumar, rejected TJIPL's plea to keep his case for urgent hearing. Subsequently, TJIPL filed the petition claiming that Kumar was not qualified to head the tribunal as he did not have the requisite qualification of practising as an advocate for seven years.
The Union government pointed out that Kumar belonged to the Indian Legal Service and had enrolled as an advocate in 1978 and represented the Centre in various capacities. He had at least 11 years of practice in various courts. The HC agreed that Kumar was eligible for the post. "It is not necessary that for all these seven years, he should be an actively practising advocate,'' said the court.
MUMBAI: A firm's attempt to challenge the qualification of a judicial officer after he passed an adverse order backfired in the Bombay high court. A division bench of Justice P B Majmudar and Justice Anoop Mohta imposed a fine of Rs 20,000 on the firm Tiger Jewellery India Pvt Ltd (TJIPL). The firm had alleged that the presiding officer of the Debts Recovery Tribunal (DRT), Mumbai, who had passed an order against them, did not have the requisite experience.
The HC did not agree. "The petitioner having lost before the concerned DRT, has tried to take out the present proceedings in which we do not find any substance,'' said the judges. The court said that the judicial officer had to engage an advocate to defend himself and justify his appointment. "In our opinion, this petition is nothing but a vexatious proceeding,'' said the HC and asked the firm to shell out the fine to the parties within two weeks. This follows the recent guidelines by the Supreme Court to impose exemplary costs on persons who file frivolous petitions.
In the present case, proceedings were initiated against TJIPL before the DRT. In June 2009, the presiding officer, Vijay Kumar, rejected TJIPL's plea to keep his case for urgent hearing. Subsequently, TJIPL filed the petition claiming that Kumar was not qualified to head the tribunal as he did not have the requisite qualification of practising as an advocate for seven years.
The Union government pointed out that Kumar belonged to the Indian Legal Service and had enrolled as an advocate in 1978 and represented the Centre in various capacities. He had at least 11 years of practice in various courts. The HC agreed that Kumar was eligible for the post. "It is not necessary that for all these seven years, he should be an actively practising advocate,'' said the court.
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