M/S DOWELL PLASTICS PVT LTD v. B L NAGENDRAIAH

(By SRI. ANAND, SR. COUNSEL FOR SRI. A R DESAI, ADV.) 2 W.A.No.158/2008 (GM-DRT) AND : 1 STATE BANK OF INDIA SPECIALISED REHABILITATION AND RECOVERY BRANCH, RESIDENCY PLAZA, 4TH FLOOR, NO.61, RESIDENCY ROAD, BANGALORE-560 025. 2 RECOVERY OFFICER DEBTS RECOVERY TRIBUNAL, BANGALORE. KRISHI BHAVAN, HUDSON CIRCLE,BANGALORE. ...RESPONDENTS (By SRI. G NAGARAJULU NAIDU, ADV. FOR R-1) This Writ Appeal is filed under Section 4 of Karnataka High Court Act, 1961, prays that this Hon'ble Court be pleased to allow this Writ Appeal, set aside the order dated 18.09.2007 in W.P. No.40801/2004 passed by the learned Single Judge and allow the said writ petition. This Writ Appeal coming on for Final Hearing this day, K.L.MANJUNATH. J., delivered the following : JUDGMENT The legality and correctness of the order passed by the learned Single Judge passed in W.P. No. 40801/2004 dated 18th September 2007 is called in question in this appeal.

2. The facts leading to this appeal are as hereunder : The appellants had borrowed loan from the 1st respondent – Bank. The same was not paid, the loan account was considered as 3 W.A.No.158/2008 (GM-DRT) non-forming assets. Recovery proceeding was also initiated by the 1 st respondent against the appellants before the Debt Recovery Tribunal and an order was passed in favour of the 1 st respondent. In the meanwhile, pursuant to the one time settlement scheme, parties were entitled to settle the dispute on or before 30th April 2003 and the same was extended upto 31.07.2004.

3. As per Annexure 'B' dated 03.03.2003 the 1st respondent – Bank offered to the appellants to compromise the matter subject to payment of Rs.12,47,567/- provided such application is received by the Bank on or before 30th April 2003 subject to payment of 25% along with the settlement application and balance of 75% be paid within a period of one year. Pursuant to Annexure 'B', the appellants filed an application to settle the claim and sent a cheque for Rs.3,25,000/- being the 25% of the amount as per the letter dated

31.07.2004 Annexure 'C' to the writ petition. The aforesaid cheque and letter were received by the Bank. Later, on 02.08.2004 as per Annexure 'D' the 1st respondent informed the appellants that the Joint Memo filed before the Recovery Officer, DRT was rejected and therefore, the property of the appellants was brought in auction. 4 W.A.No.158/2008 (GM-DRT)

4. Aggrieved by the action of the 1st respondent in bringing the property into auction, a writ petition was filed by the appellants to issue a writ of mandamus to accept Rs.13.00 lakhs in full and final settlement of the claim of the appellants and to quash the proclamation of sale dated 01.09.2004.

5. Pursuant to an interim order granted by this Court, the appellants issued a demand draft for Rs.13.00 lakhs in one lumpsum, the same has been accepted by the Bank. Thereafter, the learned Single Judge disposed of the writ petition directing the appellants to approach the respondent – Bank to settle the dispute under normal scheme of compromise and further directing the respondent – Bank to consider the case of the appellants sympathetically in view of the payment of Rs.13.00 lakhs made by the appellants on 7 th October

2004. Being not satisfied with the directions issued by the learned Single Judge, the present appeal is filed.

6. Having heard the learned Counsel for the parties, we are of the opinion that the learned Single Judge has committed an error in directing the appellants to approach the Bank to settle the matter under normal scheme of compromise because there is no scheme 5 W.A.No.158/2008 (GM-DRT) known as 'normal scheme of compromise'. The matter requires to be settled under one time settlement scheme which was introduced by the bank as an one time measure to help the borrowers who are unable to discharge the debts and to save their property. The only contention of the respondent – Bank is that the scheme was applicable to the appellants provided a matter was pending before the Recovery proceedings, since an order was passed and that a decree was passed against the appellants, the scheme was not applicable. We are unable to subscribe the views of the learned Counsel for the 1st respondent, because the offer was made by the 1st respondent – Bank to settle the amount of Rs.13.00 lakhs. The appellants were interested to settle the matter for Rs.13.00 lakhs. Though one year period was there for them to make payment, the entire amount has been paid in one lumpsum pursuant to the direction of this Court within three months from the last date to the date of filing an application. But the fact remains that before 31.07.2004 the application was filed by enclosing a cheque for Rs.3,25,000/-. If the Recovery Officer, DRT has not rejected the application filed by the 1st respondent, the 1st respondent – Bank would have accepted the same. 6 W.A.No.158/2008 (GM-DRT)

7. Considering the amount involved in this case, as it is not a huge amount as the entire amount of Rs.13.00 lakhs is paid, because the same has been paid within three months from the last date to submit second application, at best the learned Single Judge could have directed the appellants to pay interest on Rs.13.00 lakhs for the period of three months. Instead of doing so, the appellants have been directed to approach the Bank for a regular settlement, because the Bank would insist to pay the entire decreetal amount and the benefit given to the debtor under one time settlement scheme would be defeated.

8. In these circumstances, the appeal is allowed. The appellants are directed to pay interest on Rs.13,00,000/- (Rupees Thirteen lakhs only) from 31.07.2004 till the date of payment at the rate of 24% p.a. on Rs.13,00,000/- within a period of four weeks from today. Rbv Sd/- JUDGE. Sd/- JUDGE.