IN THE DEBT RECOVERY APPELLATE TRIBUNAL AT CHENNAI
DATED THE 16TH OCTOBER, 2002
PRESENT: HON’BLE MRS. JUSTICE A. SUBBULAKSHMY
CHAIRPERSON
MA-120/2002
(TA-876/1997-DRT-I, Chennai)
BETWEEN:
1. Neetu Autos Pvt. Ltd.
2. T.N. Lakshumanan
3. Sudha Lakshumanan
(Address of Regd. Office of appellants: No.5, Friend’s Enclave,
Collector Office Road, Tiruchirapalli)
… Appellants
(Counsel: Mr. R. Subramanian)
AND
UCO Bank,
Manachanallur Branch,
Tiruchirapalli District.
… Respondent
(Counsel: Mr. D. Mukundan)
: O R D E R :
1. The Appeal is directed as against the final Order dated 21.3.2002 passed by the PO, DRT-I, Chennai, in TA-876/1997. The Bank filed the Suit against the defendants for recovery of the amount due to the Bank. During the pendency of the Suit, the matter was settled between the parties for a sum of Rs.62 lakhs and the defendants agreed to pay that amount and it was accepted by the Bank also by means of a Compromise Memo dated 13.3.1999 and the amount was payable by 30.6.1999. On various dates till 27.8.1999, the defendants paid Rs.30,50,000/- and as on 27.8.1999 there was balance amount of Rs.31,50,000/-. Thereafter, the defendants again requested the Bank by their own letter dated 18.1.2001 to give further concessions for settlement of the amount by giving benefit under the revised Reserve Bank of India (RBI) guidelines. The appellant has stated in that letter dated 18.1.2001 that the appellant has since obtained information regarding revised RBI guidelines on Compromise Settlements for recovery of dues in NPA accounts issued by the Reserve Bank of India and as per the revised guidelines, NPAs relating to all sectors and also to cases pending before the Courts are covered and settlement can be effected by applying the revised RBI guidelines and has requested the Bank to give him the benefit of revised RBI guidelines and to restrict his liability to Rs.55,50,000/-. So, in the letter dated 18.1.2001 the appellant himself has asked the Bank to restrict his total liability to Rs.55.50 lakhs by giving benefit of revised RBI guidelines. The proposal given by the appellant to settle the matter for Rs.55.50 lakhs was reconsidered and accepted by the Bank and the balance amount of Rs.25 lakhs was also paid by the defendants to the Bank and the entire matter was settled for Rs.55.50 lakhs as requested by the defendant in his letter dated 18.1.2001.
2. When the case was taken up before the DRT for final hearing, the defendants claimed for further reduction in the amount of final settlement to the extent of RBI’s One Time Settlement (OTS) Scheme and wanted to give credit to the amount already paid towards OTS Scheme and the defendants prayed for revision of the amount already paid pursuant to the old Compromise and which is now in excess of the present OTS Scheme as per the RBI guidelines. That prayer was strongly opposed by the Bank on the ground that the earlier compromise has become final and that can neither be re-opened nor modified in terms of One Time Settlement as prayed for by the defendants and further reduction cannot be granted. The PO, DRT, considered the arguments advanced by both the parties and disposed of the TA in terms of the compromise entered into between both the parties based on the offer-cum-request letter of the defendants dated 18.1.2001 and allowing the TA to the extent of Compromise agreement entered into between the parties. Aggrieved against that Order the appellants defendants have preferred this appeal.
3. Counsel for the appellant defendant submits that when the matter again came up for compromise by virtue of the defendant’s letter dated 18.1.2001, the revised RBI guidelines came into effect on 4.8.2000 and it was in force on 27.2.2001 when the subsequent compromise was arrived at by reducing the amount from Rs.62 lakhs to Rs.55.50 lakhs and if the RBI guidelines are applied there will still be reduction of that amount and there is excess amount of Rs.16,52,792/- available with the Bank and that amount has to be refunded to the Bank. Counsel for the appellant drew my attention to the statement of Account standing in the name of the appellant maintained by the Bank and pointed out that after 7.9.1991 there has been no transaction whatsoever and applying the NPA rules and guidelines, that account as on 7.9.1991 had become NPA and on that day the total amount due by the defendants to the Bank together with interest, penal interest etc. was Rs.38,97,208/- and by applying the settlement scheme as per the revised RBI guidelines dated 4.8.2000, the amount outstanding as on 7.9.1991 i.e. Rs.38,97,208/- became the NPA and only that amount is payable and only that amount is recoverable and so the excess amount has to be refunded. The criteria for NPA declaration is overdue for two quarters as on Balance Sheet date.
4. Counsel for the appellant further submitted that a sum of Rs.15,58,871/- has been added as interest on 5.1.1993 after a lapse of six quarters as against the required period of only two quarters to declare an account as a NPA and so there cannot be doubt that in this case the maximum amount that can be recovered will be only Rs.38,97,208/- and the maximum the Bank can collect as per the RBI norms is Rs.38,97,208/- only and as the Bank has collected Rs.55,50,000/- by way of settlement, the balance amount of Rs.16,52,792/- has to be refunded. On the other hand, Counsel for the respondent Bank submitted that originally the matter was settled for Rs.62 lakhs and again it was reduced to Rs.55,50,000/- and if interest was calculated and added it would have come to more than Rs.73 lakhs and by showing concession only the amount was reduced to Rs.55.50 lakhs and that is proper and the appellant is not entitled for any further reduction and the appellant has also paid the entire amount of Rs.55.50 lakhs and the appellant also agreed for payment of that amount in his letter dated 18.1.2001 and the appellant is not entitled for further reduction and refund of that amount.
5. The clarification for guidelines for recovery of dues relating to NPAs of public sector Banks disclose that revised guidelines also cover such cases which have been decreed or settled by DRT/BIFR. In cases where decree has been awarded, execution petition filed, but no recovery is forthcoming, the offer of compromise may be obtained keeping the provisions of the Special Settlement Scheme (Revised) of RBI, in view. Clarification has been asked for Query No.15 which states that “Bank has been accepting compromise settlement in NPA accounts on various accounts under the existing guidelines and these cases have not yet been fully settled. Please clarify whether all such cases which have been compromised and for which full payment has not been received so far, could be reopened or not under the revised new Scheme”. The answer for this is “No. Such accounts need not be reopened by the Bank. If the revised Scheme is beneficial to the borrower, it is open for him to opt for RBI Scheme. On a case to case basis the decision will be taken by the respective sanctioning authorities.” It has also been clarified that in an account which was classified as sub-standard as on 31.3.1997 and which subsequently became doubtful or loss, interest to be charged at simple basis. The revised guidelines of RBI specifically states that if the revised Scheme is beneficial to the borrower it is open to the borrower to opt for the RBI Scheme.
6. In the case on hand, the defendant appellant by virtue of his letter dated 18.1.2001 has applied to the Bank on 18.1.2001 requesting the Bank to follow the revised RBI guidelines and give him the benefit of the revised guidelines. So, it is crystal clear from the letter of the defendant that the defendant has opted for RBI Scheme revised guidelines. By virtue of the letter dated 18.1.2001, the Bank is bound to apply the revised RBI guidelines and fix the amount based on the RBI guidelines. Even though the matter was compromised originally for Rs.62 lakhs, the subsequent compromise for Rs.55.50 lakhs was arrived at only after the revised RBI guidelines came into effect. So, at the time when the subsequent compromise was effected on 27.2.2001, the revised RBI guidelines was in force and by virtue of the letter dated 18.1.2001 the appellant has also opted for the benefit under revised RBI guidelines Scheme. So, it was very well open to the Bank to apply the provisions of the revised RBI guidelines and to fix the amount due to the Bank.
7. Much reliance is placed upon by the Counsel for the respondent Bank that the appellant himself has restricted his liability to Rs.55.50 lakhs and only as per his request the matter was settled and further reduction cannot be given. Of course, in the letter dated 18.1.2001, the appellant has requested for restricting his liability to Rs.55.50 lakhs, but he has sought for the benefit of the revised RBI guidelines. Simply because the appellant has restricted his liability to Rs.55.50 lakhs as he has sought for the benefit of the revised RBI guidelines, it cannot be stated that the defendant’s liability is to be compromised only for Rs.55.50 lakhs as the defendant has accepted that amount in his letter and the benefit of the revised RBI guidelines need not be given to the appellant. The appellant has clearly requested the Bank to give him the benefit of revised RBI guidelines and the revised RBI guidelines also provides for giving the benefit to the borrower if the borrower has opted for the benefit of the revised guidelines and the guidelines also provide for applicability of these guidelines even to compromise matters which were not fully settled and when the borrower has opted for the benefit of the revised RBI Scheme since it is beneficial for him, the Bank is bound to apply the provisions of the revised RBI guidelines and fix the amount due to the Bank.
8. Counsel for the appellant submitted that as on 7.9.1991, the amount outstanding to the Bank was only Rs.38,97,208/- and that amount alone is the NPA and the Bank is entitled only to recover that amount. Counsel for the respondent Bank submitted that the Suit was filed in the year 1993 and interest for these periods have been added and the amount has been arrived at Rs.54,56,279/- and the amount of Rs,38,97,208/- will not become the NPA amount. From the Statement of Account it is clear that after 7.9.1991 there has been no transaction. The RBI guidelines states that the minimum that should be recovered under the revised guidelines in respect of compromise settlement of NPAs classified as doubtful or loss as on 31.3.1997 would be 100% of the outstanding balance in the account as on the date of transfer to the protested bill account or the amount outstanding as on the date on which the account was categorized as doubtful NPAs, whichever happened earlier, as the case may be. Counsel for the appellant pointed out that the amount outstanding as on the date on which the account categorized as doubtful NPAs was 7.9.1991. So by applying the latter provision of the settlement formula of the revised RBI guidelines, Counsel for the appellant pointed out that only the amount outstanding as on 7.9.1991 i.e. Rs.38,97,208/- is the NPA amount since there was no transaction afterwards. Counsel for the respondent Bank submitted that the NPA is classified as doubtful or loss as on 31.3.1997, so the outstanding as on 31.3.1997 alone should be taken as NPA amount and not as stated by the Counsel for the appellant as on 7.9.1991. To clarify that position, Counsel for the appellant relies upon the Paper publication effected in the Tamil daily and also ‘The Hindu’ Business Review column. The publication in the Tamil daily ‘Dina Malar’dated 2.10.2000 reveals that by virtue of RBI guidelines all the outstanding amount prior to 31.3.1997, it is enough if the borrower pays only the principal amount without paying any interest. In ‘The Hindu’dated 13.4.1995, in the article “A practical guide for banks on IRAC norms”, it is stated that “For the purpose of reckoning this non-performance, the date when the irregularity started should be the starting point. For example, if during the current fiscal year the borrower enjoying cash credit has met the interest dues only up to the June quarter, he will be considered “non-performing” as of March 31, 1995 and will be considered a “doubtful asset” as of March 31, 1997 with this period of non-performance calculated from July 1, 1994”. The settlement formula of RBI guidelines reads that the amount outstanding as on the date on which the account was categorized as doubtful NPAs can be taken as the date for declaring as NPA.
9. In the case on hand, on 7.9.1991 the outstanding became NPA i.e. Rs.38,97,208/-. As per the revised RBI guidelines the minimum amount that should be recovered under the revised guidelines in respect of compromise settlement of NPAs classified as doubtful or loss as on 31.3.1997 would be 100% of the outstanding balance in the account as on the date of transfer to the protested bill account or the amount outstanding as on the date on which the account was categorized as doubtful NPAs, whichever happened earlier, as the case may be. The wording “whichever happened earlier, as the case may be” clearly denotes that the amount outstanding as on the date on which it was categorized as doubtful NPAs is the date for declaring it as NPA. Since no transaction took place after 7.9.1991, the outstanding as on 7.9.1991 is the NPA i.e. Rs.38,97,208/-. The second compromise was effected only after the revised RBI guidelines came into effect and the borrower defendant has also opted for the benefit of the revised RBI guidelines by applying to the Bank by means of letter dated 18.1.2001. So the Bank is bound to apply the RBI revised guidelines and settle the matter of the defendant. As per the revised RBI guidelines, the borrower was liable to pay only 100% of the outstanding balance in the account on the date when it became NPA. Admittedly, the defendant appellant is entitled for the benefit of the revised RBI guidelines and by applying the provisions of the revised RBI guidelines the defendant appellant is liable to pay only the NPA amount i.e. 100% of the outstanding balance amount in the account of the defendant maintained by the Bank. So the defendant is liable to pay only Rs.38,97,208/-. The revised RBI guideline is beneficial to the borrower. Since the borrower found it beneficial, he applied to the Bank by means of letter dated 18.1.2001 by opting for the RBI revised scheme. When the appellant has applied to the Bank for applying the provisions of the RBI revised guidelines and settle the matter, the Bank was duty bound to settle the matter by applying the revised RBI guidelines. The Bank has miserably failed to do so. When the RBI has provided some benefit for the borrower by issuing revised guidelines it is the duty of the Bank to apply those provisions and settle the matter especially when the borrower the defendant has opted for the revised RBI Scheme. The appellant defendant is fully entitled for the provisions of the revised RBI Scheme. By applying the provisions of the revised RBI guidelines the appellant is liable to pay only the outstanding amount of Rs.38,97,208/-. So the defendant the appellant is entitled for refund of Rs.16,52,792/-.
10. Appeal allowed. The appellant is entitled for refund of Rs.16,52,792/- from the respondent Bank. No costs.
(Dictated to PS, transcribed by him and corrected, signed & pronounced by me in the open court today the 16th October, 2002).
[ MRS. JUSTICE A. SUBBULAKSHMY ]
CHAIRPERSON
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