The Authorised officer, Allahabad Bank V/S Smt.H.E.Kamala Bai & ors

R.A(S.A):68/2009

1.         This appeal impugns the order dated 18.03.2009 passed by the Learned Presiding Officer, DRT Bangalore in ASA No.359/2008.

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

It is stated that the 13^th respondent stood as a guarantor to the credit limits sanctioned to the borrower viz., the 14^threspondent owned by the 15^th respondent as its Proprietor.  It is stated that the 13^th respondent as a guarantor mortgaged his immovable property viz., No.32/9, Cholourpalya, Magadi Road, Bangalore by way of deposit of title deeds as a security for the credit limit availed by R14.

  It is stated that while accepting the said property as a security the appellant as per the legal opinion of the panel advocate obtained a declaration from Respondent Nos.2, 3 and 4 (the sons of R13) declaring that the property belonged to R13 and that he is empowered to create a mortgage over the same and the present mortgage had been created with their consent and knowledge.

  It is also stated that R13 also gave a declaration that he is the sole owner of the mortgaged property and no one has any right over the property.  It is stated that as the borrower committed default the account was classified as a ‘NPA’ in 2005 and the appellant bank invoked the provisions of the SARFAESI Act and issued the demand notice dated 19.8.2005 under Section 13(2) of the Act. 

 It is stated that the said demand notices were also issued to Respondent Nos. 13, 14, 15 and 16.  It is stated that as the borrowers failed to repay the dues the appellant bank issued the possession notice to R13 on 17.5.2006 by serving a copy on him. 

 It is stated that the appellant also issued sale notice dated 15.6.2006 fixing the date of sale on 31.7.2006.  It is stated that after the sale notice was issued the borrowers remitted a sum of Rs.15 lakhs and on 29.7.2006 requested the bank for a time of 45 days to clear the dues and therefore the appellant bank postponed the auction fixed on 31.7.2006. 

 It is stated that even after the expiry of 45 days the borrowers failed to clear the dues as promised and therefore the appellant bank issued the second notice of sale on 2.12.2006 fixing the auction on 9.1.2007. It is stated that the 14^thRespondent filed ASA No.6/2007 on the file of DRT,Bangalore challenging the said sale notice dated 2.12.2006. It is stated that the Tribunal below disposed of the ASA 6/2007 giving an opportunity to the borrowers to repay the dues within six months in three installments. 

 It is stated that as the borrowers failed to repay the dues as ordered by the Tribunal below the appellant was constrained to issue the sale notice dated 14.2.2008 for the fourth time fixing the reserve price at Rs.36,62,300/- on the basis of the valuation report dated 14.6.2006 obtained from an approved valuer.  It is stated that the said sale notice was sent to the borrower and as he was not available the notice was affixed on the secured asset and was also published in “Indian Express” and “Kannada Prabha” both dated 15.2.2008. 

 It is stated that the appellant conducted the auction on 17.3.2008 and there were two bidders and as against the upset of price of Rs.36,62,300/- the highest bidder V. Radha Rajashekar and Roopa Gopal Rao represented by their Authorized agent S. Gopal Rao made the highest bid of Rs. 64 lakhs.  It is stated that the said bid was accepted by the Authorized officer and on receipt of entire sale consideration the sale certificate was issued on 31.3.2008 and the said sale certificate was also registered before the Sub Registrar’s Officer, Vijaya Nagar,Bangalore.

  It is stated that the Respondent Nos.1 to 12 being the LRs of R13 filed IR No.401/2008 against the sale on the file of DRT Bangalore and obtained interim orders on 16.4.2008 stating that they are the legal heirs of R13 and the property mortgaged is a HUF property and that R13 has no right to mortgage the said property.  It is stated that the appellant filed a detailed counter stating that Respondent Nos.1 to 12 are not “aggrieved persons’ and therefore the appeal is not maintainable. 

 It is stated that the Tribunal below without deciding the objections on the question of the maintainability allowed the ASA by order dated 18.3.2009 holding that the appellant bank has not produced the publication of the sale notice and the valuation report and that the appellant has also not explained the circumstances under which a declaration has been obtained from the legal heirs of R13 and further that some mischief had been played by the bank in conducting the sale without proper publications and without the valuation of the property. 

 It is stated that the Tribunal below also gave liberty to R1 to R12 to deposit the entire loan amount within 45 days of the order.  It is stated that aggrieved by the order of the Ld. Presiding Officer, DRT Bangalore dated 18.3.2009 the appellant bank has filed the present appeal.  It is prayed that the appeal be allowed.

3.         The appellant filed synopsis and the same forms part of record.

4.         Respondent Nos.2 to 12 and 13 filed their written submissions and the same forms part of record.

5.         Heard the Ld. Counsel.

6.         A perusal of the paragraph 4 of the order of the Ld. Presiding Officer reveals that the Ld. Presiding Officer had disposed of the Securitization Application in ASA No.359/2008 based on the following conclusions: -

“1.  The counter filed by the bank states that there was only one bidder who participate in the auction and whereas the sale certificate reveals that there were two persons who purchased the properties.

2.  The sale was conducted without a proper publication.

3.  The sale was conducted without taking valuation certificate before fixing of the price of the property.”

7.         A perusal of the letter dated 17.3.2008 written by one Smt. Roopa Gopal Rao addressed to the Chief Manager, Allahabad Bank reveals that she wished to participate in the auction and that she is authorizing Shri S. Gopal Rao, her husband to participate in the auction and that in the event she is declared as the successful bidder the sale certificate may be issued in favour of herself and one Smt. V. Radha Rajasekhar. 

 This clearly reveals that the auction purchaser wanted the sale certificate to be issued in her name alongwith the name of another person and therefore the finding of the Ld. Presiding Officer that issuance of sale certificate in the name of two persons is improper and does not hold water.

8.         A perusal of the records also reveals that the bank has taken steps to properly publish the sale as required under law and has in fact published the sale notice in “The Indian Express“ and “Kannada Prabha“ both dated 15.2.2008. It is also seen that the bank has also engaged the services of M/s Techno Trade Consultants to value the property.  Therefore from the above it can be seen that the sale notice has been properly published and the property has been properly valued.

9.         From the above it can been seen that the Ld. Presiding Officer has erroneously arrived at the decision that there was a contravention of the provisions of the SARFAESI Act and therefore this Tribunal is driven to conclude that the order of the Ld. Presiding Officer is liable to be set aside.

10.       Accordingly the appeal is allowed and the order of the Ld. Presiding Officer, DRT Bangalore dated 18.3.2009 made in ASA No.359/2008 is hereby set aside.

Order delivered on 12th Sep 2011 by DRAT ,Chennai

Kotak Mahindra Bank ltd V/S Kothari Industrial Corporation ltd & anr

M.A:18/2011




1.         This appeal impugns the order dated 24.11.2010 passed by the Learned Presiding Officer, DRT-I, Chennai in IA No.135/2006 in OA 23/2005.  The order under appeal in this case was passed by the Ld. Presiding Officer in a “common order” alongwith the order in IA No. 174/2010 in OA 23/2005.

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

It is stated that the appellant is the applicant in OA No.23/2005 pending in DRT-I Chennai and that the said OA was originally filed by ICICI Bank Ltd., against the first respondent for the recovery of a sum of Rs.8,18,80,538/- together with future interest and against the 2nd respondent for a sum of Rs.210 lakhs together with future interest.  It is stated that after the filing of the OA the debt alongwith the securities and all other connected rights were assigned by ICICI Bank Ltd., to and in favour of the appellant. 


 It is stated that thereafter the appellant filed IA No.559/2005 for the substitution of the appellant as the Applicant in the OA in the place of ICICI Bank.  It is stated that the said IA was allowed by DRT on 2.2.2006 and the necessary amendment was carried out in the OA.  It is stated that the order dated 2.2.2006 passed in IA No.559/2005 was challenged by the respondents in appeal before this Tribunal and the same was disposed of by holding that the issue of assignment can be made as a specific issue at the time of arguments.


  It is stated that even when the substitution petition was pending before the Tribunal below the respondents took steps to transfer their assets and properties with a view to defraud its creditors, including the appellant. 


 It is stated that the appellant therefore filed IA No.586/2005 before the Tribunal below for the grant of orders of injunction restraining the respondents from in any manner alienating, encumbering or transferring their assets and shares pending disposal of the OA and by order dated 15.12.2005 the tribunal below ordered the respondents to maintain ‘status quo’ until further orders.  It is stated that inspite of the said order the first respondent floated a wholly owned subsidiary company by name ‘Adderley Estates Ltd.,’ and proceeded to transfer its immovable assets in favour of the said ‘Adderley Estates Ltd.,’ and presented the said document for registration on 15.3.2006 before the Sub Registrar, Coonoor and the same is pending registration for want of certain documents. 


 It is stated that the act of the first respondent in executing a document of transfer of its assets in favour of its wholly owned subsidiary company with the full knowledge of the order of ‘status quo’ passed by DRT-I Chennai is an act in violation of the order of the said Tribunal and that the same amounts to a contempt of Court.  It is stated that the appellant therefore filed IA No.135/2006 before the Tribunal below seeking to set aside the transaction effected by the 1st respondent in transferring Adderley Estates in favour of Adderley Estates ltd., under the Deed of Transfer presented for registration on 15.3.2006 and pending before the Sub Registrar, Coonoor under pending Doc. No.5/2006.


  It is stated that thereafter the respondents came out with an application in IA No.67/2006 seeking to permit the first respondent to complete the transfer of Adderley Estates to and in favour of its wholly owned subsidiary company viz., Adderley Estates Ltd.  It is stated that the applications IA No.135/2006 and IA No.67/2006 were taken up together for arguments and by order dated 30.3.2007 the Tribunal below ordered the parties to maintain ‘status quo’ till the disposal of the OA. 


 It is stated that aggrieved by the said order the appellant filed MA No. 83/2007 before this Tribunal and by order dated 12.11.2007 this Tribunal directed the tribunal below to dispose of OA No.23/2005 within a period of three months from the date of receipt of a copy of the order and also directed the parties to maintain ‘status quo’ as ordered by DRT-I Chennai and also directed the appellant to produce the assignment deed before the DRT alongwith its proof affidavit at the time of enquiry. 


 It is stated that since the order directing the time bound disposal of the OA was passed on the premises that the parties had consented for passing of the order the appellant filed a Review Application in Dy No.1342/2007 before this Tribunal for clarifying that the appellant did not consent for the order dated 12.11.2007 passed by this Tribunal in MA No.83/2007 and the said Review Application was ordered on 5.6.2008 expunging the words “The Ld. Counsel for the Respondents has fairly conceded….”.  It is stated that the appellant thereafter filed CRP No. 1953/2008 before the Hon’ble High Court of Madras challenging the order dated 12.11.2007 passed in MA No. 83/2007 as reviewed on 5.6.2008. 


 It is stated that the Hon’ble High Court of Madras remitted the matter to DRT-I Chennai for determination of the question relating to substitution, the legality and propriety of the transfer of the mortgaged property and further directed all the parties to maintain ‘status quo’.  It is stated that in pursuance of the said order the DRT took up the issues for consideration and by order dated 1.10.2009 in IA No. 559/2005 held that the order of substitution of the appellant in the place of ICICI Bank Ltd., is proper. 


 It is stated that said order was challenged by the respondents in CRP No.3331/2009 wherein by order dated 25.2.2010 the Hon’ble High Court of Madras held that the respondents can put forth all its contentions in the OA and directed DRT-I Chennai to dispose of IA No.135/2006 as expeditiously as possible and also to dispose of OA No.23/2005 within a period of three months from the date of receipt of a copy of the order and the parties were also directed to file their respective pleadings within a period of one month.  It is stated that pursuant to the said order IA No.135/2006 was taken up for hearing by DRT-I Chennai.


 It is stated that when the appellant came to know of the details of an another transfer effected by the 1st respondent i.e., the transfer of Glendale estates, the appellant filed an application in IA No.174/2010 before the tribunal below to set aside the sale effected in favour Glenworth Estates Limited as the same is hit by Section 52 of the Transfer of Property Act. 


 It is stated that the transferee companies viz., Adderley Estates Ltd., and Glenworth Estates Ltd., are not parties either to the OA proceedings or to the connected IA proceedings.  It is stated that the said companies have no say whatsoever in OA No.23/2005 and they cannot also be heard in IA No.135/2006 and IA No.174/2010 as they had ventured to act against the orders of ‘status quo’ passed by the Tribunal below.


  It is stated that however after the order of the Hon’ble High Court of Madras dated 25.2.2010 in CRP No.3331/2009 the transferees came out with an application in IA No.77/2010 seeking to implead themselves as parties to the OA proceedings. 


 It is stated that the applications in IA No.135/2006, IA No.77/2010 and IA No.174/2010 were heard together by the Tribunal below and by order dated 24.11.2010, the Tribunal below without considering the materials available before it erroneously directed the impleading of Adderley Estates Ltd., and Glenworth Estates Limited as parties to the IAs and OA. 

3.         The Ld. Counsel for the Appellant relied upon the following decisions in support of his contentions:

a)      Bakhtawar Singh and others Vs. Nirmal Singh and others AIR 1973 Punjab and Haryana 448.
b)      Robust Hotels (P) Ltd., and 03 Ors. Vs. E.I.H. Limited and Ors 2010-5-L.W. 544.
c)      Usha Sinha Vs. Dina Ram and others (2008) 7 SCC 144
d)      Prithawi Nath Ram Vs. State of Jharkhand and Others (2004) 7 SCC 261.
e)      Director of Education, Uttaranchal and Others Vs. Ved Prakash Joshi and Others (2005) 6 SCC 98.
f)        Delhi Development Authority Vs. Skipper Construction Co. (P) Ltd., and Another (1996) 4 SCC 622.
g)      ICICI Bank Limited Vs. Official Liquidator of APS Star Industries Limited and Others (2010) 10 SCC 1.
h)      Director of Education, Uttaranchal and Others Vs. Ved Prakash Joshi and Others (2005) 6 SCC 98.
i)        Surjit Singh and others etc., Vs. Harbans Singh and Other etc., AIR 1996 SC 135.
j)        Bakthavatsalam Vs. Anjapuli and 5 others 2001 (1) CTC 19.


4.         The Respondents filed their written submissions and the same forms part of the record.

5.         The Respondents relied upon the following decisions in support of their contentions:

a)      Khemchand Shankar Choudhari and Anr. Vs. Vishnu Hari Patil and Others (1983) 1 SCC 18.
b)      Bhagwan Dass Chopra Vs. United Bank of India and Others 1987 (Supp) SCC 536.
c)      Savitri Devi Vs. District judge, Gorakhpur and others (1999) 2 SCC 577.
d)      Dhurandhar Prasad Singh Vs. Jai Prakash University and Others (2001) 6 SCC 534.
e)      Devendra Kumar Sarewgee Vs. Purbanchal Estates (P) Ltd., 2006 (9) SCC 199.
f)        Amit Kumar Shaw Vs. Farid Khatoon 2005 (11) SCC 403.
g)      Empress Mills Vs. Member, Industrial Court & Ors. 2007 (1) BCR 91

6.         Heard the Ld. Counsel.

7.         A perusal of the transfer deed dated 22.10.2005 between M/s Kothari Industrial Corporation Limited and M/s Glenworth Estate Limited reveals that the transfer of Glendale Estate to M/s.Glenworth Estate Limited has been made together with all assets, rights, benefits and other movables and immovable properties alongwith the liabilities and obligations of the said Estate. 


 It is also seen that it is further clarified in the undertaking contained in the said transfer deed that the transfer had been effectuated for a gross consideration of Rs.22 crores alongwith the Term Loan and debenture dues.


  It is also seen that the transferee company is a wholly owned subsidiary of the transferor company.  Similarly M/s Kothari Industrial Corporation Limited had transferred the Adderley Estates to M/s Adderley Estate Limited for a gross consideration of Rs.8,50,00,000/- and M/s Adderley Estate Limited is also a wholly owned subsidiary of the transferor company. 


 It is also seen from the affidavit filed in support of the application in IA No.77/2010 that Glenworth Estate Limited and Adderley Estate Limited have undertaken to settle the dues arising out of OA No.23/2005 upon due adjudication of the matter in accordance with law.  

8.         A perusal of the index sheet annexed to the original records pertaining to OA No.23/2005 reveals that Page Nos.747 to 819 are the proceeding sheets of the OA.  From a perusal of Page 813 it reveals that it contains the order dated 15.12.2005 and a Xerox copy of the very same order / proceeding is stapled to the said proceeding sheet and contains endorsements which are reproduced below:

“Original order sent to ex. PO for signatures on 28.9.2006”
                                                                              Sd/-
                                                                        28.9.2006

“Reminder sent on 22.11.2006”.
                                                                              Sd/-
                                                                        22.11.2006

From the above it can be easily seen that the Ld. Presiding Officer did not sign the order on 15.12.2005 and had signed it only after 22.11.2006 i.e., nearly after one year and that too after a reminder dated 22.11.2006 was sent to him to sign the orders and further that he has signed not in one order dated 15.12.2005 but in two orders of the same order dated 15.12.2005. 


 The respondents have filed a copy of the ‘A’ diary proceedings dated 15.12.2005 though it is not a certified copy and have placed the same in Page No. 167 of their typed set filed in Appeal No.19/2011 before this Tribunal.


  A perusal of the endorsement seen in the left side therein would reveal that the signature of the Ld. Presiding Officer found in the upper portion of the page may not be that of the Ld. Presiding Officer as the endorsement speaks of sending the order for signature to the ‘ex. PO’ on 28.9.2006 and that the endorsement would not have been made had the Ld. Presiding Officer signed the order on 15.12.2005 itself.  Further a perusal of the docket sheet of the IA No.586/2005 reveals that the copies of the said IA were served on the respondents therein only on 24.11.2006 i.e., after one year of the order.  


The non signing of the Ld. Presiding Officer in the order dated 15.12.2005, the office endorsement showing that the original order was sent to the ‘ex. PO’ for signatures on 29.9.2006 which was followed by a reminder on 22.11.2006 and the existence of two originals of the same order dated 15.12.2005, the service of the IA on the respondents only on 24.11.2006, the absence of any proof of service to demonstrate that the 1strespondent was informed of the order of ‘status quo’ dated 15.12.2005 before 24.11.2006, a verification revealing that an official of DRT-I Chennai was sent to Mumbai to obtain the signature of the Ld. Presiding Officer who had then rejoined his parent department i.e., Ministry of Law at Mumbai, when coupled with the averments made in paragraph 19 of the counter affidavit of the first respondent in IA No.135/2006 clearly reveal that there was no order of ‘status quo’ much less any order passed on 15.12.2005 and hence this Tribunal is compelled to brush aside the order dated 15.12.2005 upon which the signatures had been obtained after a period of one year and inserted in to the record and proceed to hold that the circumstances prevalent on 15.12.2005 and thereafter do not warrant this Tribunal to infer that an order of ‘status quo’ was indeed passed on 15.12.2005.

9.         A perusal of the application filed by the petitioners in IA No.135/2006 and IA No.174/2010 reveals that the prayer made therein is to set aside the transaction effected by the first respondent transferring the Adderley Estates in favour of Adderley Estates Limited and Glendale Estate in favour of Glenworth Estate Limited.  The main contention of the appellant is that the said transfer has been effected when the ‘status quo’ order dated 15.12.2005 passed by the Tribunal below was in operation. 


 It is seen from the records that the transfer of Glendale Estate in favour of Glenworth Estate Limited and Adderley Estates in favour of Adderley Estates Limited has been effected by transfer deed dated 22.10.2005 and 30.11.2005 on which dates there was no restraint upon the respondents from in any way dealing with their properties.


 Further, as brought out above, the order of status quo did not exist on 15.12.2005 and could not have existed on any day before 22.11.2006 and that the Respondents were not put on notice about the existence of the order of ‘status quo’ prior to 24.11.2006.

10.       Therefore, in view of the fact that the order of status quo did not exist on 15.12.2005 and could not have existed any day before 22.11.2006 this Tribunal is driven to conclude that the Ld. Presiding Officer, DRT-I, Chennai has not properly considered the facts and circumstances of the cases and has erred in coming to the conclusion that the Glenworth Estate Limited and Adderley Estate Limited are required to be impleaded in the IAs before proceeding to decide about setting aside the transfers where the respondents are said to have been restrained from transferring the properties by the operation of an non existent order said to be dated 15.12.2005 and such being the case this Tribunal is driven to hold that the Ld. Presiding Officer ought to have dismissed the IA No.135/2006 and IA No.174/2010 and also ought not to have ordered impleadment of Glendale Estates Limited and Adderley Estates Limited in the said IAs and ought to have proceeded to hold that the said IAs warrant only a dismissal.


 The Ld. Presiding Officer ought to have taken up the OA itself for disposal and disposed of the same in obedience to the order of the Hon’ble High Court of Madras dated 25.10.2010 made in CRP No.3331/2009. 

11.       Therefore in view of the above the order dated 24.11.2010 passed by the Ld. Presiding Officer, DRT-I Chennai in IA No.135/2006 is hereby set aside and IA No.135/2006 shall stand treated as closed and the Ld. Presiding Officer is requested to take up the OA itself for disposal in obedience to the order of the Hon’ble High Court of Madras mentioned above and dispose of the same..

12.       The appeal is disposed of accordingly.

Order delivered  by DRAT Chennai on 7 th Sep 2011

Surge in bad loans, slow economy may hit SBI's profit over next quarters

Source :10 NOV, 2011, 01.38AM IST, ET BUREAU 

MUMBAI: State Bank of India (SBI), India's largest lender, said quarterly earnings rose 12% arresting two quarters of fall, but a surge in bad loans and a slowing economy could erode its profitability for a few more quarters.

Net profit of the bank, which is the nation's financial sector barometer, rose to Rs2,810 crore fromRs2,501 crore a year ago as it lent more to individuals and companies and net interest income - the difference between the return or yield on loans and the cost of deposits - also grew.

But bad loans due to a slowing economy and its continuation took the sheen off its earnings as investors worried that it may be a long wait before SBIovercomes it and issues related to its capital.

SBI shares fell 6.8% - the highest in the last six months - to close at Rs1,862. The bank, which has a market share - both loans and deposits - of close to a quarter in the banking industry, had shocked investors with a 99% drop in earnings in the quarter to March '11 and 46% in the quarter to June - weighed down by higher provisioning or money set aside for bad loans.

SBI's earnings were muted in the quarter to September as the bank decided not to accept any interim dividends from its associate banks considering that in the year-ago period it booked Rs280 crore on this count.

NPAs at 4.19% of total advances 

Besides last year, SBI earned Rs350 crore in financing steelmaker Tata Corus, unlike this year. That meant a slide of 14% in its non-interest income - money earned from business other than core lending such as dividends, guarantees and selling third-party products - at Rs 285 crore.

But what has stoked concerns is the rise in non-performing loans - known as NPAs or bad loans - that aggregated to 4.19% of total advances with loans amounting to Rs8,000 crore slipping from the standard category, which denotes an asset on which there is no default, to the sub-standard category, which is marked by defaults.

Its net NPAs - bad loans arrived after making provisions - was 2.04%. State Bank of India Chairman Pratip Chaudhuri, while saying the lender was actively pursuing recovery of bad loans, warned that there could be a rise in stressed assets considering the slowdown in growth.

"Looking at the stress in the system, there is a probability that gross NPAs could go up further. What one should look at are net NPA levels, which reflect the bank's ability to withstand the pressure of bad portfolios," he said on Wednesday after the results were announced.

“Rise in NPAs, slippages need to be urgently addressed”

Anand Sinha, Deputy Governor, RBI (third from right), releasing an IDRBT’s

book at the valedictory function of BANCON in Chennai on Sunday 

.(From left) B. Sambamoorthy, author of the book and Director,

 IDRBT, M.D. Mallya, Chairman of IBA , M. Narendra, CMD, IOB and

 A.K. Bansal, Executive Director, IOB are in the picture. 

Source :The Hindu:Nov 7,2011 

 Photo Source : The Hindu:R.Ragu

RBI Deputy Governor attributes problem to aggressive lending

Deputy Governor of Reserve Bank of India Anand Sinha on Sunday flagged the steep increase in Non Performance Assets (NPAs) and slippages as two issues that the country's banking sector needed to urgently address.

In his valedictory address at ‘BANCON 2011' hosted by the Indian Overseas Bank and the Indian Banks' Association (IBA), Mr. Sinha said while part of the up-trending of NPAs could be attributed to the fallout of the global financial crisis, the bulk of the problem had its roots in very aggressive lending during the boom period.

While ruling out a systemic issue because of this, Mr. Sinha pointed out that while gross NPAs have been going down — in spite of inching upwards slightly in percentage terms — in absolute terms, the stock of NPAs had been going up in the last four to five years despite the ratio coming down.

In fact, between March 6 and 10, the NPA stock grew by 63 per cent, Mr. Sinha said. While overall profitability had helped peg the net NPAs at a respectable level, this measure of management was more akin to putting a lid on the garbage, he said.

“The fact is that there are a lot of unproductive assets lying underneath and that needs to be resolved,” he said.

The other area of worry was the substantial increase in slippage — from 1.8 per cent during 2007-08 to 2.2 per cent in 2009-10. As a result, slippage outsized recovery despite heavy write-offs, he said. Mr. Sinha urged banks to tone up credit management to contain slippage, mobilise recovery and reduce NPA stock. 

The RBI would be issuing draft guidelines on Basel III capital adequacy norms for the banking system by December and put out a final version by March 31, 2012, Mr. Sinha said. 

Stating that the Basel norms were not a regulatory product, he said the RBI sought a smooth transition to the Basel III norms.

It is important for senior management of banks have to understand the nitty-gritty of specialised niche products as the complexity of products coupled with excessive risk-taking had led to the governance failure that triggered the global financial crisis, Mr. Sinha said.

Mr. Sinha advocated appropriate standardisation of the Know Your Customer (KYC) norms to make them a one-time or single-point procedure. 

While new accounts are largely in adherence with the KYC norms, there is a lot of deficiency with regard to older accounts, he said.

Pointing to projections that the Indian banking system could become the third largest in the world by 2025, Mr. Sinha said the focus should not be on size but on sustaining “excellence in responsible banking”, through an advocacy of corporate governance, higher productivity, product innovation and financial inclusion. 

Responsible banking was no longer a choice as it was an obligation to the nation and the world in a globalised economy and banks should combine their pursuit of profits with a balancing of the interests of all stakeholders, Mr. Sinha said.

 Mr. Sinha also launched a handbook ‘Holistic CRM and Analytics' authored by B. Sambamurthy, director, IDRBT. M. Narendra, IOB chairman and managing director, M. D. Mallya, IBA chairman and A. K. Bansal, IOB executive director, also participated.

Keywords: Non Performance Assets, banking

M/s.Chandragiri construction company & ors V/S Federal Bank & ors

M/s.Chandragiri construction company & ors V/S Federal Bank & ors 
A.IR:891/2011



IA 1369/11 (waiver): The representative of the respondent bank takes notice on behalf of the respondent bank and states that this Tribunal may take note of the requirement under Sec.18 of the SARFAESI Act and pass orders.

Ld.  Counsel Shri Arun Natarajan appearing on behalf of the petitioners states that the petitioners are ready and willing to deposit Rs.3.00 crores into the loan account and prays for time of two months for the purposes of complying with the requirement under Sec.18 of the SARFAESI Act. 


 He adds that the petitioners have already paid a sum of Rs.1.25 crores into the loan account and that the said sum of Rs.1.25 crores may also be taken into account while considering the pre-deposit under Sec.18 of the SARFAESI Act and prays for a sympathetic consideration of the case of the petitioner.  He further states that the petitioners are ready and willing settle the dues in an amicable manner and that it is due to certain reasons beyond the control of the petitioners that the loan could not be repaid in time.

Heard the Ld. Counsel.

In view of the facts and circumstances of the case more particularly in view of the fact that the petitioners are ready and willing to deposit Rs.3.00 crores into the loan account and in view of the fact that the petitioners have already deposited a sum of Rs.1.25 crores into the loan account and that both the sums put together would exceed 25% of the dues it would be appropriate to pass the following order.

“The petitioners are directed to deposit a sum of Rs.3.00 crores into the loan account on or before 1.2.2012. Call this IA on 2.2.2012 for verification of the compliance”

The representative of the respondent bank states that the bank will wait till 2.2.2012 for taking any further action.

IA 1370/11 (stay): Call with IA 1369/11.

43
M.A:554/2010
Integrated Housing Developers ltd V/S R.Premchand & 3 ors 
1.         This appeal impugns the order dated 06.08.2010 passed by the Learned Presiding Officer, DRT Ernakulam in IA No.1941/2010 in OA No.95/2010.

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

It is stated that the appellant is the first defendant in OA No.95/2010 filed by the 4th respondent for the recovery of a sum of Rs.4,64,50,839/- and the Respondent Nos.1 to 3 are the defendant Nos.5 to 7 in the said OA.  It is stated that Late Shri K.P. Ramachandran Nair for himself and as power agent of his children viz., the Respondent Nos.1, 2 and 3 vide sale agreement dated 6.3.1992 had agreed to sell the wet agricultural lands admeasuring 12 Acres 27 cents comprised in Survey Nos.1280, 1281, 1282, 1286, 1288, 1279, 1283, 1284 and 1285 and an extent of 30 cents comprised in Survey Nos.1291/1B, 1291/1B-1, 1291/1B-4 and an extent of 48 cents comprised in Survey No.1291/2 and an extent of 2 cents 640 sq. ft. all situated in Kadakampalli Village. Thiruvananthapuram Taluk within the Registration and Sub registration district of Thiruvananthapuram.  It is stated that the said Late Shri K.P. Ramachandran Nair died in the year 1993 leaving behind Respondent Nos.1, 2 and 3 as his legal heirs.  It is stated that the sale consideration had been paid by the appellant to Respondent Nos.1, 2 and 3 in installments and that the said Respondents had handed over the original documents, the physical possession of the property and further that they had also executed a registered power of attorney dated 8.6.1994 in favour of the appellant to deal with the property as its absolute owner alongwith the power for alienation.  It is stated that the appellant had filed for the “Green Zone Exemption” from the Government of Kerala to convert the wet agricultural land into a residential property for the purpose of commencing the housing project after payment of the necessary charges in the year 1995.  It is stated that the appellant had invested a sum of Rs.1 crore on the property for laying a proper approach road by acquiring the adjacent land admeasuring 2 ½ cents and had also developed the interior roads to reach the proposed houses.  It is stated that the appellant had also purchased 28 cents of land  which the Respondent Nos.1 to 3 had sold to a third party.  It is stated that the appellant had mortgaged all the properties in favour of the 4th respondent for the housing project.  It is stated that the appellant is contesting all the cases filed against the property for and on behalf of Respondent Nos.1 to 3 and that the appellant had also filed written statement in the OA.  It is stated that the Respondent Nos.1 to 3 seeing the development of the project and the increase in the value of the property coupled with the changes in the Registration Rules stopped cooperating with the appellant for the completion of the formalities and went to the extent of canceling the power of attorney executed in favour of the appellant with a sole intention to further enrich themselves by defrauding the appellant.  It is stated that the Respondent Nos.1 to 3 had also approached the 4th respondent bank to release the documents deposited by the appellant expressing their willingness to settle the dues of the bank and that the 4th respondent had insisted for the production of a consent letter from the appellant.  It is stated that at this stage the Respondent Nos.1 to 3 filed IA No.1941/201 in OA No.95/2010 against the 4th respondent seeking for a direction to the 4th respondent for the release of the title deeds / Document No 6 in the OA on receipt of the payment as demanded by the bank without impleading the appellant in the said IA.  It is stated that the appellant had already paid the entire sale consideration to Respondent Nos.1 to 3 and that it is in actual physical possession of the property ever since 1994 and it is having an absolute right over the same and that it is a proper and necessary party in the said IA.  It is stated that the IA has been allowed by the Tribunal below and aggrieved by the same the present appeal has been filed.  It is prayed that the appeal be allowed and the order of the Ld. Presiding Officer, DRT Ernakulam dated 6.8.2010 in IA No.1941/2010 in OA No.95/2010 be set aside.

3.         The Ld. Counsel for the appellant stated that one of the grievances of the appellant is that the Ld. Presiding Officer, DRT Ernakulam has passed the order in the IA even without notice to the appellant and prayed that the matter may be remitted to the tribunal below for a fresh consideration of the IA after affording an opportunity to the appellant to put forth its case.  The Ld. Counsel added that the appellant has paid the entire sale consideration to Respondent Nos.1, 2 and 3 and therefore it is not proper on their part to seek the title deeds from the bank and that a fresh hearing of the IA by the Tribunal below is very much necessary in this case.  It is stated that the order of the Ld. Presiding Officer, DRT Ernakulam is liable to be set aside on the question of law as well as on facts. The Ld. Counsel prayed for allowing the appeal.

4.         The Ld. Senior Counsel for Respondent Nos.1 to 3 stated that they had already revoked the General Power of Attorney in favour of the appellant and that therefore Respondent Nos.1 to 3 are entitled to a redemption of the mortgage by the payment of the entire dues to the bank and equally entitled to the return of the original title deeds.  The Ld. Senior Counsel stated that the order of the Ld. Presiding Officer is proper and the Ld. Presiding Officer has rightly held that the Respondent Nos. 1, 2 and 3 are entitled to a redemption of mortgage and drew the attention of this Tribunal to Section 60 of the Transfer of Property Act and added that a reading of the same would drive this Tribunal to conclude that Respondent Nos. 1, 2 and 3 are entitled to the return of the documents of title and relied upon the following decisions in support of the case of Respondent Nos.1 to 3:

(i)                  Corporation Bank, Bangalore Vs. Laitha H. Holla : AIR 1994 KAR 133.
(ii)                T.K. Subramaniya Iyer (Died) and others vs. C. Natarajan and others: AIR 1996 Madras 241
(iii)               Mhadagonda Ramgonda Patil and Others Vs. Shripal Balwant Rainade and Others: (1988) 3 SCC 298
(iv)              Shivdev Singh and Another Vs. Sucha Singh and Anr.: (2000) 4 SCC 326.

5.         The Ld. Counsel for the 4th respondent bank stated that a Debt Recovery Tribunal constituted with the avowed object of recovery of public money cannot restrain any person from paying public money back to the bank.  The Ld. Counsel stated that Respondent Nos.1, 2 and 3 should be given the liberty to pay the dues to the bank.  The Ld. Counsel added that the interse dispute between the appellant and the Respondent Nos.1, 2 and 3 cannot be the subject matter before the DRT in a OA filed under the RDDB & FI Act and that the dispute should be resolved only by the appropriate forum. 

6.         Heard the Ld. Counsel.

7.         A perusal of the IA No.1941/2010 on the file of DRT Ernakulam reveals that the appellant though being the first defendant in the OA filed by the Canara Bank has not been included as a respondent in the said IA.

8.         It is the case of the appellant that it had entered into an agreement with the owners of the Schedule ‘A’ property of the OA for its development as housing sites and that considerable sums of money has been spent for the project and that the appellant has already paid the entire sale consideration to Respondent Nos.1, 2 and 3.

9.         It is seen that the Respondent Nos. 1, 2 and 3 had approached the bank i.e., the 4th respondent for return of the original title deeds on payment of its dues and that the 4th respondent bank had stated that it would not be able to release the title deeds without the consent letter from the developer company, which is the appellant herein.  It is also seen that the title deeds have been deposited with the respondent bank only by the appellant.

10.       From the above it can be seen that attempts have been made by Respondents 1, 2 and 3 for getting back the documents from the bank after obtaining orders from the tribunal below as seen in IA No.1941/2010 in OA No.95/2010 dated 6.8.2010 by keeping out the appellant who according to it has paid the entire sale consideration to the said respondents.  It can also be seen that the appellant has made claims over the property and orders have been passed in the IA No.1941/2010 by the tribunal below without hearing the appellant.  It can also be seen that the 4th respondent bank has also taken a clear stand in its letter dated 12.5.2010 addressed to Respondent Nos.1, 2 and 3 that the documents cannot be returned without the consent of the appellant.

11.       Therefore from the fact that the appellant has claimed the entire property to be its own, from the fact that the appellant had deposited the title deeds of the property with the 4th respondent bank, from the fact that the Respondent Nos. 1, 2 and 3 have not included the appellant as a respondent in IA No. 1941/2010 on the file of DRT Ernakulam, from the fact that the appellant was not afforded an opportunity to place its submissions in IA No.1941/2010. from the fact that the stand of the 4th respondent bank is that the documents cannot be returned to Respondent Nos. 1, 2 and 3 without the consent of the appellant as seen from their letter dated 12.5.2010, from the fact that the rights of the appellant have been decided even without hearing it, from the fact that the principles of natural justice has not been adhered to by the Ld. Presiding Officer of the tribunal below, it would be appropriate if IA No.1941/2010 is remitted to the tribunal below for consideration afresh in accordance with law after due notice to all the parties in the OA.

12.       Accordingly the order dated 6.8.2010 passed by the Ld. Presiding Officer, DRT Ernakulam in IA No.1941/2010 in OA No.95/2010 is hereby set aside and the IA No.1941/2010 is remitted back to the tribunal below for consideration afresh in accordance with law after due notice to all the parties in the OA.  The Ld. Presiding Officer is directed to take up the IA afresh and dispose of the same within a period of one month from the date of receipt of a copy of this order.  The Ld. Counsel for the appellant is directed to file a copy of this order into the tribunal below and seek a date for the hearing of the IA.

13.       The appeal is disposed of accordingly.  


Order  passed by DRAT Chennai on 4th Nov 2011

Banks poised to toothcomb loans

Source :Mahua Venkatesh, Hindustan Times,New Delhi, November 04, 2011



With a surge in the level of bad assets, banks are now setting up specialised cells to assess, document and monitor performance of loans and asset quality even for small-ticket sizes including retail and personal credit.


Until now, banks have primarily monitored the performance of big-ticket loans


However, following the steady increase in the level of bad assets in the banking industry and the downgrade of India's largest lender - State Bank of India (SBI), banks have decided to monitor even small sized loans.


The finance ministry has also asked banks to carry out an immediate assessment of their non-performing asset (NPA), documentation of the same and adherence of banking guidelines.


"We will monitor small retail loans also, until now we have primarily focused on bigger loans," said PK Anand, executive director, Punjab & Sind Bank.


The Reserve Bank of India (RBI) has also asked banks to monitor their asset quality on a regular basis especially since interest rates have steadily inched upward. 


State-owned banks have witnessed a surge in the level of bad assets.


The gross NPA of public sector banks for the period ending March, 2011 stood at Rs 71,047 crore.


Over the last few months, many banks have reported rising instances of irregular loan repayments as equated monthly installments (EMIs) have risen many times.