X. John Kennedy V/S AO, Indian Bank

IA-1531/2011(delay) – It is seen that Ld. CounselShri N.S. Manoharan appears on behalf of the Auction Purchaser.  A reading of the order dated 25.2.2012 reveals that the matter has been posted to 15.3.2012 for filing of counter R2. Thereafter this IA was taken up and today it is posted for arguments in this IA.  R2 has not filed counter.  Today there is no representation for R2.  R2 is called absent.

Ld. Counsel Shri Ravi appearing on behalf of the petitioner stated that the Hon’ble High Court of Madras has directed this Tribunal to dispose of the IA filed for condonation of delay by 26.3.2012 and stated that he is advancing his arguments on this application alone.

The Petitioner has filed this IA for the condonationof delay of 191 days in filing the appeal against the order dated 23.5.2011 passed by the Ld. Presiding Officer, DRT Madurai in SA No.111/2011 and has in the affidavit filed in support of the petitioner stated that he is running a mosquito coil manufacturing business and that he had availed credit facilities to the tune of more than Rs.1 crore from the respondent bank on 10.9.2008 and that his brother passed away in February 2010, due to which the petitioner had suffered and the business started facing financial difficulties.  


It is stated that the respondent bank took up proceedings under the SARFAESI Act and the petitioner had to file SA 260/2010 before DRT, Madurai challenging the action of the respondent bank.  It is stated that thereafter he gave a proposal to the bank for settlement and during the consideration of the proposal he withdrew SA No.260/2010 in view of his application for settlement.  Later the petitioner made a representation to the respondent bank and inspite of the petitioner having raised his stock position for more than Rs.10 lakhs and depositing Rs.23 lakhs the respondent bank took fresh proceedings under the SARFAESI Act and issued a sale notice dated 24.4.2011 and aggrieved by the issuance of the said sale notice the petitioner had approached DRT Madurai and filed SA No.111/2011 and in the said SA he had prayed for a grant of stay of all further proceedings of the Authorized Officer and stay was not granted.  


It is stated that the petitioner therefore approached the Hon’ble High Court of Madras and filed writ petition in W.P. No.6595/2011 and the Hon’ble High Court of Madras had directed the petitioner to pay a sum of Rs.30 lakhs to the respondent bank which he had paid and that later the writ petition came to be dismissed and liberty was given to the petitioner to file the appeal before this Tribunal.


  It is stated that there is some delay in filing the appeal and it is stated that during the pendency of the writ petition he did not challenge the order passed by the Ld. Presiding Officer, DRT Madurai in the stay application and that he has approached this Tribunal with a delay and has prayed that the delay of 191 days in filing the above appeal may be condoned. 

The petitioner has set out his case in detail in the affidavit filed in support of the petition.

The Authorized Officer of the Indian Bank filed the detailed counter setting out that the petitioner has failed to file the appeal in time and the appeal is barred by limitation.  It is stated in the counter that the SARFAESI Act is a self contained Act and the period of limitation provided in the appeal for Section 18 of the Act cannot be extended resorting to the provisions of the Limitation Act. 


 It is stated by the bank that the delay has not been explained and that the secured asset has been sold and the sale certificate had already been issued both for the factory, the land and the generator and it is stated that the petition is only liable to be dismissed. 

The Authorized Officer of the respondent bank has set out his case in the counter filed by him in the said petition.

Ld. Counsel for the petitioner took this tribunal through the factual matrix of the case and stated that in view of the fact that the petitioner hadbonafide prosecuted his case before the Hon’bleHigh Court of Madras and that the period spent before the Hon’ble High Court of Madras should be excluded for the purpose of limitation as per Section 14 of the Limitation Act.  


Ld. Counsel stated that the dictum laid down by the Hon’bleHigh Court of Madhya Pradesh in the case of “M/s Setji Banshidhar Kedia Rice Mills Pvt. Ltd. and others Vs. State Bank of India and others-AIR 2011 Madhya Pradesh 205” is only persuasive and that this Tribunal is not bound by the said judgment and relied upon the following decisions in support of his contentions:

(i)                  P. Sarathy Vs. State Bank of India 2000 (III) CTC 552.

(ii)                A. Aruljothi Vs. The Deputy Commissioner of Labour, Salem and Anr. 2003 (3) CTC 37

(iii)               Mukri Gopalan Vs. CheppilatPuthanpurayil Aboobacker. 2009 (2) CTC 302

(iv)              State of Goa Vs. M/s Western Builders 2006-4-L.W.883

The Ld. Counsel stated that this Tribunal is boundby  the law laid down by the Hon’ble High Court of Madras in the case “Ponnusamy and Another Vs. DRT, Coimbatore 2009 (2) CTC 302”  and the same enables this Tribunal to condone the delay that occurs in filing the  appeal under Section 18 of the SARFAESI Act and prayed that the delay may be condoned as the same has been property explained.

The Ld. Counsel for the respondent bank stated this Tribunal has no jurisdiction whatsoever to condone the delay that had occurred in filing the appeals under Section 18 of the SARFAESI Act and further that this Tribunal is bound by the decision of the Hon’ble High Court of Madhya Pradesh and added that this tribunal is bound by its own order dated 2.3.2012 made in IA No.179/2012 in AIR (SA) No.1017/2011.

Respondent No. 2 was called absent.

Heard both sides.

The following points arise for consideration in this IA:

(i)                  Whether this Tribunal has jurisdiction to condone the delay in filing the appeals under Section 18 of the SARFAESI Act?

(ii)                If so, whether the petitioner has made out a case for the condonation of delay of 191 days in filing the appeal?

Point No.1 – The Hon’ble High Court of Madhya Pradesh in the case of “M/s Setji BanshidharKedia Rice Mills Pvt. Ltd., and others Vs. State Bank of India and others AIR 2011 Madhya Pradesh 205” has laid down in paragraphs 19 and 39 of its judgment that the Debt Recovery Appellate Tribunal has no powers to condone the delay in filing of appeal before it under Section 18 of the SARFAESI Act and therefore in view of the law laid down in the said judgment this Tribunal has no powers to condone the delay in filing of appeal under Section 18 of the SARFAESI Act.

Point No.(ii) – Point No. (i) has been answered in the negative and against the petitioner and therefore this Tribunal cannot condone the delay of 191 days for want of jurisdiction as stated above.

Point Nos. (i) and (ii) have been answered against the petitioners and therefore this IA is dismissed.

This judgement  was delivered on 23 rd Mar 2012 by the Honble Chair Person of DRAT Chennai  

Quotes Gems - Determination

 

"Determine that the thing can and shall be done, 

 and then we shall find the way."

 

-Abraham Lincoln

Sony Ericsson pays for defective mobile

 



Fe :Thursday, Mar 22, 2012 at 1358 hrs IST


New Delhi: Mobile handset manufacturer Sony Ericsson has been ordered by a consumer forum here to pay over Rs 12,000, including compensation, to a customer for selling her a defective mobile phone and then not repairing it.

A Delhi District Consumer Disputes Redressal Forum ordered Sony Ericsson Mobile Communications Pvt Ltd to pay the sum to Rohini resident Barkha Gupta on her plea alleging that the Sony Ericsson handset, bought by her from Spice Retail Ltd, turned out to be defective and the mobile company's service centre failed to repair it.

The forum presided by Rakesh Kapoor held that the mobile phone sold to Barkha was defective since the allegation was not contested by Sony Ericsson, which was proceeded against ex-parte.

"We are convinced after checking with the uncontested facts that mobile set has manufacturing defect and hence Sony Ericsson is directed to refund the amount of Rs 4,650 along with compensation to the tune of Rs 3,000 and also the litigation cost worth Rs 5,000," it said.

Barkha had said in her plea that the mobile purchased by her for Rs 4,650 in January last year developed some snag within a few months after which she took it to the service centre, Mobile Gallery and Services, for repairs in May 2011.

She said the service centre returned the mobile after a month, but it began stopped functioning and became totally dead, despite undergoing software upgrades twice as well as replacement of its motherboard.

She added despite the manufacturing defect, neither the mobile company nor the retail shop agreed to replace the set.

Panel to advise sector-specific cure for NPAs

 



21 MAR, 2012, 04.48AM IST, DHEERAJ TIWARI,ET BUREAU  

NEW DELHI: Concerned over the steep rise in bad loans, the finance ministry has set up a committee to suggest sector-specific mechanisms to address the issue. 

This comes soon after the rating agency Moody's downgraded the Union Bank of India one notch on Monday due to its high level of troubled assets and low provisions for coverage. The rating firm had earlier downgraded country's largest lender SBI on the same grounds. 

"We have already asked banks to take preventive steps. The working group also has senior bankers who will look at other resolution mechanisms available," said a finance ministry official. 

The committee will have representation from the finance ministry, the Reserve Bank of India and some banks. The government has already indicated that containing bad assets will be an important parameter while evaluating the performance of the top brass in state-run banks. 

"We are monitoring the situation with banks. There are some sectors where we expect situation to become better in coming days," the official said, adding that some of the announcements made in the budget in reference to raising loans from abroad will lower stress in sectors, such as aviation and power. 

Finance Minister in Budget 2012-13 has allowed $1-billion ECB for the airline industry for one year, and allowed foreign debt to part-finance rupee debt taken by power companies and also for affordable housing. 

Abanker who attended the meeting on NPA resolution said that the focus is on sectors, such as textile, agriculture and telecom. "It will be a challenge to handle bad loans in agriculture. Some banks are taking help from business correspondents at panchayat level to ensure timely repayment," he said. 

Lending to the farm sector has slowed down due to rise in bad loans. In November 2010, the share of farm loans was 13.10%, which had dropped to 11.18% in November 2011. 

"In our meeting with RBI, we had said that textiles, steel, mining and aviation are the broad sectors where there is stress. Since agriculture is a priority sector, there will be no constraints," said an executive director of a north-based bank.

IFCI CEO gets one month’s imprisonment for contempt of court

 
 Kanu Sarda | Place: New Delhi | Agency: DNA: Mar 21, 2012, 8:00 IST 

In an unprecedented order, the Delhi High Court awarded one month simple imprisonment to top officials of Industrial Finance Corporation of India Ltd (IFCI) after holding them guilty of contempt of court for defiance and misusing the judicial system.

Justice PK Bhasin awarded one month simple imprisonment to CEO-cum-managing director Atul Kumar Rai, Shalini Soni, assistant general manager (Law) of IFCI and RK Bansal of Debts Recovery Tribunal for contempt of court and undermining the judicial order passed by the high court.

The court, however, kept its order in abeyance for four weeks to enable the contemnors to approach the appellate court for any relief, if so desired.

On contacting IFCI, the financial body declined to comment saying the matter is sub-judice.

The court also slapped a fine of Rs5 lakh on the IFCI and said, “A public sector organisation is to bear the brunt of fine because of the lapses committed by its head and a senior officer.”

“The facts of the present case show that a very dangerous trend has started amongst the litigants and that trend is to approach the authorities subordinate to this court to get rid of some adverse orders passed by this court and get relief from the subordinate authorities which stands declined by this Court,” the court observed.

“That kind of an evil trend needs to be nipped in the bud. In case no stern action is taken at the initial stage the subordinate authorities shall also get emboldened and with impunity they shall start obliging the litigants by giving them reliefs for extraneous considerations even though the high court had rejected the same relief,” the court noted.

The court’s order came on contempt proceedings initiated by the official liquidator of Koshika Telecom that some of the assets of the company had been auctioned at the instance of IFCI by the Debts Recovery Tribunal-I, where proceedings had been initiated by the IFCI against Koshika for recovery of over Rs200cr.
Out of the sale proceeds of the auctioned assets of Koshika, about Rs12cr were permitted by the recovery officer attached to DRT to be retained by the IFCI.

On this, the High Court had in October 2009 passed an order giving a direction to IFCI to remit the amount got from the telecom company to the official liquidator.

However, IFCI did not comply with the direction and contempt was initiated.

Claiming innocence, Rai had contended before the bench that being the CEO of such a huge public sector financial institution he could not be expected to oversee each and every matter.
“Courts are not expected to get swayed away like that just because the contemnor happens to be a person holding a high position like that of a Managing Director of IFCI. In my view, he has missed the bus and it is now too late in the day for him to be praying for exoneration and that too for himself only and leaving his colleagues to sail alone in the sea which has now turned rough. Being the captain of the ship he should not have even made such an attempt to jump out of the ship alone and reach the shore in a single seater boat meant only for him,” the court said.

The bench directed IFCI to deduct a sum of Rs3.5 lakh from the salary of Rai and Rs1.5 lakh from that of Soni, so that it would not have to bear the brunt of the fine, but after it has paid the same.

Zero-value Kingfisher won’t get a buyer

 

FP Staff Mar 21, 2012

Kingfisher Airlines, which is set to shut all international operations by April 10, is not likely to get any buyers as there is no equity value in the airline, said Neeraj Monga, EVP at Veritas Investment Research today.

In an exclusive interview with CNBC-TV18, Monga said the cash-strapped airline’s business operations will only shrink further going forward due to its missed targets, high debt level, unpaid employees and funding problems.

“There is no equity value in this business. The only way the equity value can come back is if there was less debt on this business,” Monga said. And the only way Kingfisher can ever turnaround or become a zero-debt company is by declaring itself bankrupt or by restructuring its massive debt.

Veritas believes the only way out for Mallya is to shut the airline down as no investor would want to put money in an asset with a poor brand positioning and massive obligations. AP

But the only way this can be achieved is by Vijay Mallyagiving up ownership and control over the airline. Even Mallya’s United Spirits can’t save the airline because a significant proportion of  UB Holding had already been pledged to the banks in order to secure the loans of Kingfisher, which have now turned into non-performing assets or bad loans. Hence United Spirits doesn’t have the cash to either pay interest  or the principal amount, leave alone employee salaries! The airline will only be capitalised once a new entity comes in, pointed out Veritas’ Monga.

Moreover, the shutting down of Kingfisher is also good for the sector as other aviation stocks will perform well  as seen with Jet Airways yesterday and pricing power might come back to the market for the airlines that do stay afloat.

So what’s the best case scenario for Mallya’s airline?

Veritas believes the only way out for Mallya  is to shut the airline down as no investor would want to put money in an asset with a  poor brand positioning and massive obligations.

“The airline was setup for 65 aircraft and around 400 flights a day. So, they have massive employee base and unpaid tax dues. Why would anybody want to enter into this mess at this time,” asks Monga?

PSU bank NPAs up 51 pc to over Rs 1 lakh crore

 



20 MAR, 2012, 04.42PM IST, PTI  

NEW DELHI: Public sector banks' gross bad debt jumped over 51 per cent to a whopping Rs 1,03,891 crore in 2011, Minister of State for Finance Namo Narain Meena said today.

Replying to supplementaries during the Question Hour in the Rajya Sabha, he said the gross Non Performing Assets (NPAs) of public sector banks has increased from Rs 68,597.09 crore at December 2010 end, to Rs 103,891.27 crore as on December 2011.

"NPA increase is marginal... not usual," he said. "Banks have been instructed to see how NPAs can be reduced."

Meena said some of the loans to sectors like power, steel, MSME and aviation have gone bad or declared NPA.

Aviation sector, he said, had an outstanding of Rs 39,000 crore, of which Rs 741 crore was NPA. Similarly, power companies had a total outstanding of Rs 1,21,000 crore, of which overdue amount is Rs 446 crore.

"The gross NPAs of public sector banks, in terms of percentage of Gross Advances, has increased from 2.27 per cent to 3.18 per cent," he said.

Listing out the reasons for the increase, he said switching over to system-based recognisation of NPA by most of the public sector banks during June-September 2011 and increase in interest rates and slowing economic growth had adversely impinged on the repayment capacity of all categories of borrowers, especially small and medium enterprises.

Overruling the judiciary - Arvind P Datar

 
 The Indian Express :Tue Mar 20 2012, 03:31 hrs
Retrospective amendment to nullify adverse judgment goes against rule of law

Here is a scenario: An Indian company is saddled with a huge demand by the Inland Revenue of the United Kingdom. The case is fought all the way to the House of Lords or now the Supreme Court. 

The highest court in that country holds that the Indian company is not liable to tax. Promptly, the British parliament nullifies the judgment with retrospective effect and makes the Indian company liable to tax.

Here is another scenario: Proceedings are launched against an Indian company for violation of US patent laws. Here again, the case is fought up to the US Supreme Court and the verdict is in favour of the Indian company.

 The US legislature then amends the patent laws that retrospectively nullify the Supreme Court decision and deems that the Indian company has violated the patent laws.

Won’t it be outrageous if the legislature in the UK or the US repeatedly nullified every judgment that was against the state? What respect would the supreme courts of those countries command if their judgments had no sanctity and were repeatedly overruled by their legislatures?

The Finance Bill 2012, as expected, has made several retrospective amendments (with effect from April 1, 1962, 50 years earlier!). Apart from Vodafone, other decisions in favour of assessees have also been effectively overruled.

 There would be no complaint if this was done on rare occasions and where major public interest was involved. Unfortunately, nullifying every adverse judgment given each year by the Supreme Court, high courts and even the tribunals in the succeeding budget has become the norm.

Take, for instance, the case of classification lists. Manufacturers had to file classification lists to sort out their goods and pay the applicable excise duty. 

These classification lists were then approved by the department. In 1999, a five-judge bench of the Supreme Court held that once a classification list had been approved, the department could not demand duty for past periods on the ground that there was a “short levy” of duty. 

This judgment was rendered in 1999 and the Finance Act 2000 amended the law retrospectively from 1980 and nullified this decision.

Another retrospective amendment happened in 1980. Under the erstwhile Central Excise Rules, excise duty was payable when goods were “removed” from the factory. 

In 1979, the Delhi high court held that if the goods were not removed from the factory but were used by that factory in the further manufacture of other products, there would be no excise duty liability because there was no “removal”. 

In the following budget, the rules were amended retrospectively from 1944 to declare that even captive consumption would be “deemed to be a removal”.

Not just that. When the Service Tax Tribunal held that management institutions run by non-profit organisations were not “commercial or coaching centres” and need not pay service tax, this was overruled in 2008 with retrospective effect from 2003.

There are literally dozens of such examples where every adverse verdict of the courts or the tribunals has been made naught by an amendment in the budget of the following year. Such retrospective amendments are an insult to the judiciary and strike a mortal blow to the principle of separation of powers. 

They also destroy the essential principles of clarity, certainty and stability that must exist not only in tax laws but in any civilised democracy where the rule of law prevails.

Under our Constitution, the judiciary has been assigned the function of interpreting laws made by Parliament. In any dispute, the Union or state governments and the tax payers are adversarial parties and the judgment can be in favour of only one of them. 

It would be grossly improper to overrule every verdict in favour of the taxpayer. This would be a classic case of the state telling its citizens: heads I win, tails you lose.

This practice destroys the principle of separation of powers. The government will thus never be a losing party because the benefit of a judgment in favour of the assessee or citizen will immediately be taken away.

It would also be a serious insult to the judiciary if the decision in every keenly contested case is set at naught merely because it is against the government. In no civilised democracy are retrospective laws made to nullify judgments year after year after year.

 There is no point in having an “independent judiciary” where only decisions in favour of the state are respected and all decisions in favour of citizens are obliterated. We might as well amend the Constitution and declare that no court shall give any judgment adverse to the Central or state government.

It is a basic principle of tax laws that an assessee’s liability is determined by the law as it stands on the first day of the assessment year.

 A corporation pays advance tax and also deducts tax at source on the basis of the law applicable in that year. Can one tell such a corporation, after 10 years, that what it did in 2002 will be deemed to be incorrect merely because there is a Supreme Court decision in 2012 against some other assessee?

 The Finance Bill 2012 proposes to go a step further and enables assessments in transactions involving non-residents to be reopened after 16 years! Therefore, every corporation which has any dealings with non-residents will not know what its liability will be till 2028.

It is time to seriously re-examine the power of Parliament and state legislatures to retrospectively amend laws and repeatedly nullify judgments. 

The fact that the Vodafone case would stand overruled is not important; it will now face the consequence of being embroiled in litigation for several more years as has often happened in the past in the case of other assessees. What is at greater risk is the credibility and image of India as a country where the rule of law prevails.

 The possible gain of a few thousand crores of tax will be seriously off-set by the enormous damage that such amendments cause to our judiciary. 

By insulting our judiciary, we may save a few hundred or thousand crores but is it worth the greater damage it does to the Republic of India?

 Tragically, India is now a nation where not only the future but even the past is uncertain.

The author is a senior advocate, Madras high court