STATE BANK OF INDIA v. M/S.VENEERS & LAMINATIONS(INDIA) LTD.

W.P. © No.5472 OF 2006 &35160 OF 20102company filed an application before the Board for IndustrialFinancial Reconstruction (BIFR in short) for revival steps in May,1991 and after an exhaustive analysis of the facts and figures, onfinding that it was difficult to rehabilitate the debtor Company,the BIFR recommended for winding up in September, 1996.Though the order of the BIFR was challenged by the debtorCompany before the appellate authority, it did not turn to befruitful. 3. While so, the existing liability had mounted up toRs.3.37 crores, when the creditor Bank filed O.A. before the DRT,Chennai, which was subsequently transferred to the DRT,Ernakulam, where it was numbered as O.A.No.28 of 1996. Theclaim was for satisfaction of nearly Rs.3.37/- crores together withinterest, as prescribed (ie. @ Rs.19.5%). While so, the Bankapproved the 'compromise proposal' submitted by the Companyfor a total sum of Rs. 1.30 crores as per the proceedings dated24.12.1998 and intimation was served to the defaulterCompany, asking to satisfy the due amount on or before31.03.1999 (waiving a substantial extent of nearly Rs.3.75 W.P. © No.5472 OF 2006 &35160 OF 20103crores).4. The defaulter Company did not satisfy the amount ontime and sought for extension of time, referring to variousadverse circumstances, including the fact that a Company byname 'Kitply Industries Ltd', Calcutta, who had come forward totake over the debtor Company, had subsequently backed out.Considering the grievance of the defaulter Company, the Bankextended the time upto 31.07.1999 and communicated theposition. Admittedly, the defaulter Company could not raise theamount and the OTS got lapsed. 5. In the meanwhile, as there was no proper prosecutionfrom the part of the defendants in the O.A., it was decided 'ex-parte'. On challenging the same by filing O.P.7493 of 2000,the 'ex parte' verdict was set aside and the DRT was directed toconsider the matter afresh. After considering the pleadings andevidence, the O.A. was decreed for a total sum of Rs.3,37,09,121.11/- with interest as specified. The defaulterCompany filed appeal (R.A.No.40 of 2005) before the DRAT,Chennai, wherein an interim order was passed on 21.06.2002, W.P. © No.5472 OF 2006 &35160 OF 20104directing the Company to satisfy a sum of Rs.45 lakhs withineight weeks, which was the subject matter of challenge in O.P.23591 of 2002 filed before this Court . After considering themerits, interference was declined and the OP. was dismissed,against which the defaulter Company preferred W.A.No. 639 of2004. Observing the there was no merit in the Writ Appeal, itwas dismissed by the Division Bench, as per the judgment dated06.06.2005, granting four weeks' time to deposit the balancesum of Rs. 30 lakhs, after giving credit to a sum of Rs.15 lakhsremitted already, pursuant to the interim order passed by thisCourt and leaving the matter to be considered and decided by theDRAT, Chennai. It is stated that the defaulter Company satisfiedthe said amount on 01.07.2005; thus remitting a sum of Rs.45lakhs, pursuant to the interim order passed by the DRAT,Chennai, over and above the sum of Rs.80 lakhs paid to theBank at different points of time till that date (after acceptance ofthe OTS proposal to settle the liability for the total sum of Rs.130lakhs). 6. Various contentions were raised from the part of the W.P. © No.5472 OF 2006 &35160 OF 20105defaulter Company, mainly pointing out that the default wasmore on the part of the Bank, who had not initially accepted theproposal to have settled the liability for Rs.130 lakhs and thatthe approval came only much later. It was also pointed outthat the defaulter Company was eligible to have the mattersettled under the 'Revised OTS Scheme', notified by the RBI,which benefit was however denied by the creditor Bank, statingthat the Scheme was applicable only in pending cases, whereasthe instance case had become final by virtue of the decree/orderpassed by the DRT. It was further pointed out that the defaulterCompany was not entitled to have the benefit of the said Schemeby virtue of the specific stipulation under the Scheme, denyingthe benefit to 'wilful defaulters'. The contention of the defaulterCompany is that it was never a 'wilful defaulter', going by theterms of the relevant clause under the Scheme specifying thedefinition of the term 'wilful defaulter' and further that thecreditor Bank had not constituted a Committee to identify the'wilful defaulters'. It is also stated that the defaulter Company'sname does not appear anywhere in the list published by the W.P. © No.5472 OF 2006 &35160 OF 20106creditor Bank in the relevant Website, showing the particulars of'wilful defaulters' and as such, denial of benefit of the RBIScheme is liable to be interfered.7. During the pendency of the appeal before the DRAT,Chennai, the creditor Bank issued a letter dated 17.07.2003 tothe defaulter Company, referring to the letter dated 11.04.2003sent by the defaulter. As per the said communication, the Bankinformed that the offer of Rs. 50 lakhs towards payment of thebalance amount under the compromise settlement agreedearlier had been approved by the appropriate authority, oncondition that interest at PLR (Prime Lending Rate) would be paidfrom 01.04.1999 till the date of final payment of the compromiseamount; thus requesting the defaulter Company to makenecessary arrangements to satisfy the due amount at an earlydate. 8. On receipt of the said communication, the defaulterCompany agreed to satisfy the principal amount of Rs.50 lakhstowards the balance compromise settlement amount agreedearlier, but contended that they were liable to pay interest only W.P. © No.5472 OF 2006 &35160 OF 20107from 17.07.2003 and not from 01.04.1999.Taking note ofthe facts and circumstances, the Appellate Tribunal observed thatthe only question that fell for consideration was whether theappellant Company was liable to pay interest at the PLR ratefrom 17.07.2003 only or from 01.04.1999, as claimed by theBank and that it had become quite unnecessary to answer allother points raised in the appeal. 9. After observing that the Bank was not justified incategorising the defaulter company as a 'wilful defaulter', theAppellate Tribunal observed that the appellant had paid variousamounts on different dates and that the Bank had quantified theprincipal amount only as Rs.50 lakhs by their letter dated17.07.2003 and that since the said figure was acceptable to theBank, it would be proper to direct the appellant Company to paythe said amount with interest at the PLR from 17.07.2003 only,holding that the delay was more on the part of the Bank ingiving credit to a sum of Rs.15 lakhs paid on 31.03.2004 and asum of Rs.30 lakhs on 01.07.2005 (totalling Rs.45 lakhs). It wasaccordingly, that the Bank was directed to file a revised W.P. © No.5472 OF 2006 &35160 OF 20108statement before the DRT, Ernakulam, directing the DRT to issuea revised DRC (Debt Recovery Certificate) for the said amount,virtually allowing the appeal in part, without prejudice to therights and contentions with regard to the correctness of thestatement of accounts, if disputed by the defaulter Company. 10. Adv. Mr. P.V. Surendranath, the learned Counsel forthe creditor Bank submits that the verdict passed by the DRAT,Chennai is per se wrong and illegal, in having restricted the rightto collect interest at the PLR on the outstanding principal amountof Rs.50 lakhs (to top up the OTS figure of Rs.130 lakhs, asoriginally agreed) only to be from 17.07.2003. It is pointed outthat the factum of settlement of the dispute under the then OTSscheme by paying a total sum of Rs.130 lakhs as agreed,approved and accepted, as let known vide Ext.P3 dated18.01.1999 stands conceded. Admittedly, the defaulter Companyhad satisfied only a total sum of Rs.80 lakhs, by way of differentlots, at different points of time, towards the total liability ofRs.130 lakhs and the balance sum of Rs.50 lakhs, as agreedearlier was also to be paid within the specified date, i.e before W.P. © No.5472 OF 2006 &35160 OF 2010931.03.1999. Despite the extension of time granted till31.07.1999, the due amount was not cleared and the OTS gotlapsed. It was notwithstanding the proceedings, as above, evenafter getting a favourable verdict from DRT, Ernakulam in O.A.28 of 1996, that the Bank thought it fit and proper to give onemore chance to the defaulter Company to clear the balanceamount of OTS of Rs.50 lakhs and avail the benefit thereunder;on condition that interest at the PLR was satisfied in respect ofthe delay from 01.04.1999 to 17.07.2003. If the defaulterCompany wanted to have the benefit of the OTS, as above, ithad to be taken as it was and the DRAT, Chennai was havingabsolutely no power or competence to have scaled down theinterest, restricting the same to be applicable only w.e.f.17.07.2003 in place of 01.04.1999. The date w.e.f. whichinterest on the balance OTS amount was liable to be paid, wasnot a subject matter of consideration before the DRT, Ernakulamor even before the Appellate Tribunal and as such, the verdictpassed by the Appellate Tribunal is liable to be intercepted bythis Court, submits the learned Counsel. W.P. © No.5472 OF 2006 &35160 OF 20101011. The learned Counsel for the Bank also submits that inview of the law declared by the Apex Court in X -CalibreKnives (P) Ltd and another vs State Bank of India [2005(10) SCC 265] and also the verdicts passed by a DivisionBenche of the High Court of New Delhi in W.P.(C) 10005 of2005 and by a Division Bench of the Bombay High Court inSathe Biscuits & Chocolates Ltd. Vs. Bank of Maharashtra(AIR 2004 Bombay 101), the defaulter Company, who wasalready extended the benefit as per the then existing Scheme butfailed to satisfy the same, is having no vested right to projectanother claim to be considered under a different Scheme broughtabout later and it is liable to be treated as a 'wilful defaulter' inthis regard. The scope of the Scheme has also been consideredin the decision rendered by the High Court of Delhi, wherein ithas been held that a defaulter having once entered into asettlement with the Bank, but did not satisfy the due amountunder the OTS, is not entitled to the benefit of subsequent RBIScheme, which is squarely applicable to the case in hand. It isalso asserted that, in view of the specific terms of the Scheme, W.P. © No.5472 OF 2006 &35160 OF 201011when there is already a decree, such cases are clearly outsidethe purview of the Scheme. 12. Shri P. Ravindran, the learned Sr. Counsel appearingfor the defaulter Company submits that the Bank was nothaving a consistent stand or a case. Initially, they contendedthat the defaulter Company had already sustained a decree andhence it was outside the purview of the Scheme. Then, theycame up with the contention that the defaulter Company was a'wilful defaulter', which in fact was not correct, in view of theclear stipulations issued by the RBI under the relevant Schemedefining the term 'wilful defaulter'. The learned Counsel furthersubmits that the verdict passed by the DRT had already been setaside by this Court, while ordering remand as per the judgmentin O.P.No.7493 of 2000 and hence the subsequent RBIScheme could have been made applicable to the case in hand.It is also pointed out that the final verdict passed by the DRT,Ernakulam, after fresh disposal, came to be intercepted by theDRAT, Chennai, vide order dated 13.01.2006 in RA.40 of 2005and that the matter has been remanded to the DRT. This being W.P. © No.5472 OF 2006 &35160 OF 201012the position, the claim of the defaulter Company to have thebenefit of the recently notified OTS scheme of the Bank in theyear 2010, forms the basic prayer in W.P.(C) 35160 of 2010.13. After hearing both the sides, this Court finds that thereis no dispute that the total liability under the transaction gotmounted up, almost to nearly Rs.5 crores and that the Bank hadaccepted the proposal of the defaulter Company to haveextended the benefit of OTS, on payment of a total sum ofRs.130 lakhs on or before 31.03.1999. It also remains a factthat, though the time for payment was extended upto31.07.1999, the due amount was not paid by the defaulter andthe OTS got lapsed, finally leading to the order/decree passed bythe DRT, Ernakulam for realisation of Rs. 3,37,09,121.11/- withinterest as specified, less the amount satisfied in the meanwhile.Even after passing the decree, the Bank volunteered to give onemore opportunity to the defaulter Company to pay the deficitamount of OTS as originally agreed, i.e. to an extent of Rs.50lakhs subject to satisfaction of interest at PLR from01.04.1999, as the OTS proposal was approved and accepted, on W.P. © No.5472 OF 2006 &35160 OF 201013condition that the due amount was paid on or before31.03.1999. It was open for the defaulter Company, either tohave accepted the said figure as given in letter dated 17.07.2003or to have contested the appeal before the DRAT. Instead ofdoing that, the defaulter Company disputed the liability to payinterest from 01.04.1999 on the principal amount of Rs.50 lakhs,while agreeing to satisfy the amount with interest from17.07.2003, which led to the observation of the DRAT inparagraph '8' of the appellate verdict, in the following terms:“Now the only question that falls forconsideration of this Tribunal is whether theAppellants are liable to pay interest at PLRrate from 17.7.2003 only or from 1.4.1999 asclaimed by the Respondent Bank. Hence ithas become unnecessary to answer all otherpoints raised in the Appeal”14. From the above, it is clear that the Appellate Tribunaldid not consider any other point raised in the appeal and no suchpoint was ever pressed from the part of the appellant, i.e.defaulter Company. Justifiability of the demand for interest on W.P. © No.5472 OF 2006 &35160 OF 201014the balance principal sum of Rs.50 lakhs from 01.04.1999, asdemanded by the Bank vide letter dated 17.07.2003, was neverthe subject matter of consideration before the DRT, nor was it anissue mooted before the Appellate Tribunal. As such, it wasnever open for the Appellate Tribunal to have curtailed the rightsand interests of the Bank in this regard, who has already waivedsubstantial amount to an extent of nearly Rs. 3.7 crores,ordering to waive further amount by way of interest from01.04.1999, by compelling the Bank to extend the benefit of OTScontrary to the agreed terms. As it stands so, it is liable to beintercepted by this Court as not correct or sustainableeither on facts or in law .15. With regard to the claim of the defaulter Company tohave the benefit of the revised Scheme notified by the RBI, nodecision has been rendered by the DRAT in this regard, as borneby the order dated 13.01.2006. It is obviously for the reasonthat, the defaulter Company, pursuant to issuance ofcommunication by the Bank on 17.07.2003, (extending thebenefit of earlier OTS confining the figure to the very same W.P. © No.5472 OF 2006 &35160 OF 201015amount of Rs.130 lakhs, but for demanding interest at PLR onthe deficit amount from 01.04.1999 till the date of payment),had voluntarily and consciously confined the contention onlyagainst the demand of interest from 01.04.1999, instead of from17.07.2003,( the date of letter) and nothing more. The verdictpassed by the Appellate Tribunal, without considering the saidaspect or as to the correctness of the decree amount, is notunder challenge, at the instance of the defaulter Company.Even in W.P.(C)No.35160 of 2010 filed by the defaulterCompany, nearly four years after the other writ petition filed bythe Bank, the only prayer is for extending the benefit of thenewly introduced OTS Scheme, 2010 of the creditor Bank andthere is no challenge against the order passed by the DRAT, (acopy of which has been produced therein as Ext.P12).16. There is a contention for the defaulter Company in W.P.(C) 35160 of 2010 that, there is no bar in claiming the benefit ofthe newly introduced OTS Scheme of 2010, as the case of thepetitioner is not one wherein, a decree has been passed, but isto be treated as a pending matter, as Ext.P10 verdict passed by W.P. © No.5472 OF 2006 &35160 OF 201016the DRT, Ernakulam has been set aside by the DRAT, Chennai,vide Ext. P12, remanding the matter for fresh consideration. Thesaid submission does not appear to be attractive to this Court forthe reason that, even if Ext.P12 verdict of the DRAT is legallysustainable, the verdict passed by the DRT has got merged intoExt.P12, which takes the form of a decree to the extent asspecified therein, passed on 13.01.2006, whereas the 'NewScheme' was introduced only in the year 2010. Further, going bythe operative portion of Ext.P12, it is not an open remand forfresh consideration of the facts and figures and the DRT has beendirected to issue a revised DRC, on the basis of the statement tobe filed by the Bank before the DRT, computing the figures inthe manner as specified therein. The liberty reserved in favour ofthe defaulter Company is only with regard to the right to disputethe correctness of the Statement of Account and nothing more.This is evident from the operative portion as contained inparagraph 12 , which is extracted below: “12. In the result, the Appeal is allowed inpart and the Appellants are directed to pay W.P. © No.5472 OF 2006 &35160 OF 201017the amount, as per the Revised Statement ofAccount within four weeks from the date ofreceipt of the Revised Statement of Account.Even if the Appellants dispute thecorrectness of the Statement of Account, theyshall deposit the amount with theRespondent Bank, without prejudice to theirrights and contentions with regard to thecorrectness of the Statement of Account andthen they are at liberty to agitate the same,in a manner known to law”.From the above, it is clear that the role assigned to the DRT asper the appellate verdict is only that of an 'execution court', toexamine the correctness of computation and never an openremand. 17. Going by the terms of the 'newly introduced Scheme',a copy of which has been produced as Ex.P15 in W.P.(C) 35160of 2010, it has been stipulated under Clause 1.6 that thedecreed cases will not be eligible for the benefit of the SBIOTS, 2010. The petitioner has already suffered a decree, as perExt.P10 passed by the DRT in O.A.28 of 1996 on 07.12.2001, orat least by virtue of Ext.P12 passed by the DRAT in RA. 40/2005 W.P. © No.5472 OF 2006 &35160 OF 201018on 13.01.2006. As it stands so, this Court finds that the defaulterCompany is not entitled to have the benefit sought for in W.P.(C) 35160 of 2010; more so in view of the law declared by theApex Court in 2005 (10) SCC 265 (cited supra).18. However, taking note of the fact that even afterpassing Ext.P1 decree passed by the DRT, Ernakulam in O.A. 28of 1996, the Bank had volunteered to extend the benefit ofearlier OTS sanctioned for a total sum of Rs.130 lakhs andagreed to settle the accounts on payment of the deficit sum ofRs.50 lakhs with interest at PLR from 01.04.1999 till the date ofpayment, this Court finds that the defaulter Company shall beextended the said benefit. The liability stands declared only tothe said extent.19. In view of the fact that the defaulter company hasalready satisfied a sum of Rs.15 lakhs on 31.03.2004 (pursuantto the interim order passed in W.A.No.639 OF 2004) and asum of Rs.30 lakhs on 01.07.2005 (pursuant to the final verdictin W.A.), the balance principal amount ( if it be correct) can onlybe 'Rs.5 lakh' with interest at diminishing rate. The balance W.P. © No.5472 OF 2006 &35160 OF 201019figure, as above, shall be worked out by the Bank and let knownto the defaulter Company within 'two weeks' from the date ofreceipt of a copy of the judgment, upon which, the due amountshall be cleared by the defaulter Company within 'one week'thereafter, failing which the benefit of OTS will stand withdrawnand the creditor Bank will be at liberty to proceed with furthersteps to get Ext.P1 verdict passed by the DRT, Ernakulam inO.A.28 of 1996 executed, as ordered by the Tribunal.W.P.(C) 35160 of 2010 filed by the defaulter Companystands dismissed. W.P.(C) 5472 of 2006 filed by the creditorBank stands allowed and Ext.P7 verdict passed by the DRAT,Chennai in R.A.No.40/2005 is set aside to the above extent. Nocost. P.R. RAMACHANDRA MENON, JUDGE. lk