IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 12/09/2002
CORAM
THE HON'BLE MR.JUSTICE E.PADMANABHAN
WRIT PETITION No. 20288 of 2002
AND
WMP.Nos. 28096 OF 2002
Ajay Kumar Gupta ..Petitioner
-Vs-
1. The Syndicate Bank,
rep. by its General Manager
Recoveries & Rehabilitation Dept.,
Corporate Office,
Bangalore
2. The Syndicate bank
Royapettah Branch,
Chennai-14 ..Respondents
For petitioner: Party-in-person
For respondents: Representative of the Bank
Petition filed under Article 226 of The Constitution of India praying
for the issue of a writ of certiorarified mandamus, as stated therein.
:O R D E R
The writ petitioner prays for the issue of a writ of certiorarified
mandamus calling for the records of the first respondent in his office
reference No.4815/2913/COMP/C/SR, dated 28.8.2001, quash the same and
consequently direct the second respondent Bank to settle the loan accounts of
Shantivihar group and M/s.Atomos Exports Private Ltd., under Reserve Bank
India’s guidelines applicable to non performing assets and pass such further
or consequential order.
2. With the consent of either side, the writ petition itself was
taken up for the final disposal.
3. The counsel for the petitioner and the respondents were not
present consecutively. But the petitioner submitted his arguments in person.
So also the officer of the respondent Bank made his submissions. This court
called upon either parties to submit their written arguments. Accordingly,
the writ petition as well as the respondent submitted written arguments, which
is being considered.
4. The present writ petition has been filed aggrieved by the
communication dated 28.8.2001 whereby the respondent bank rejected the
petitioner’s proposal for one time settlement of the debts of his late
father’s company in terms of RBI guidelines for non performing assets. It is
pointed out by the petitioner that while rejecting the request, the respondent
had assigned two reasons which are unsustainable. The first of the reason
being that the offer of Rs.40.51 lakhs is too low compared to the value of
securities available. The second of the reason which prevailed with the
second respondent bank being the proposal has been received after 30.6.2001,
whichis the last date fixed by RBI guidelines.
5. While challenging the two reasons assigned by the respondents, the
petitioner also contended that the contentions/objections raised in the
counter that the petitioner is not entitled to invoke the scheme for one time
settlement as the borrower has committed fraud and willful default. According
to the petitioner such an objection cannot be raised by way of an answer to
the petitioner’s claim when the same has not been set out in the objection or
relied upon as a reason to decline the petitioner’s request. It is further
pointed out by the petitioner that he has come forward with bona fide
intention to settle his late father’s debts under the scheme and the
respondent’s refusal to apply the RBI guidelines is arbitrary. That apart, it
is further contended that no opportunity has been afforded to the petitioner
to explain his position before the respondent as to the stand taken which
disentitle the petitioner from claiming the benefit of the scheme. The
petitioner also relied upon the pronouncement of the Apex Court in Central
Bank of India Vs. Ravindran reported in 2002 (2) CTC 3 54. While elaborating
the said contention. It is contended that without affording an opportunity
the petitioner’s father ha been stigmatized and the petitioner had been denied
of a valuable right of availing the benefit and hence the respondent should be
directed to apply the RBI guidelines for one time settlement of his father’s
debt.
6. Per contra, the respondent bank contended that the request was
made beyond the time prescribed in the RBI Guidelines which was operative only
upto 31.1.2001 and extended up to 31.6.2001 on which date the scheme came to
an end. The petitioner made a request only on 21.7 .2001 and it has been
rightly rejected summarily. According to the respondent the petitioner’s
father late Sudharshanlal Guptha borrowed monies from the respondent bank for
his business of Shanti Vihar, Automas Exports and Sampath & Co., Group.
Sudharshanlal Guptha made default in three accounts and even during his
lifetime various proceedings were initiated by the respondent bank. The suit
instituted on the original side of this court was transferred to the Debt
Recovery Tribunal, Chennai and a recovery certificate has already been issued.
The said Certificate has also reached finality. The recovery proceedings has
reached the advanced stage of sale. The petitioner was resorting to various
proceedings to stall the sale of the mortgaged properties by filing
W.P.No.3575 of 1999. By order dated 8.3.1999, the petitioner was directed to
deposit 1/3rd of the decree amount within six weeks from that date, which he
failed to comply. The petitioner thereafter instituted C.S.No.8 of 2000 and
sought for stay of sale in O.A.No.20 of 2000. The suit was dismissed on
6.9.2000, while recording a finding that the petitioner even alienated
substantial properties to 3rd parties without securing the consent from the
bank for all the alienation. The petitioner also moved the Debt Recovery
Tribunal IN I.A.No.837 of 2001 to direct the respondent Bank to settle the
dues in accordance with RBI Guidelines. Thereafter the petitioner has filed
the W.P.No.12043 of 2001 and sought for stay of sale under the very same
context. The said writ petition was also dismissed on 1.7.200 1. The present
writ petition is third of the series of writ petition filed by the petitioner.
The petitioner has not approached the court with clean hands. The petitioner
has not made a request for settlement in accordance with RBI guidelines on
21.7.2001. The petitioner claimed a settlement under the RBI guidelines as
early as 2.2.2001 when the guidelines were not operative.
7. It is contended by the respondent that guidelines do not cover
cases of willful default, fraud and malfeasance. In case of willful default,
fraud and malfeasance, the bank has to initiate prompt action for recovery.
The petitioner’s case squarely falls under the category of willful default,
fraud and malfeasance. According to the respondent after the mortgage and
filing of the suit by the respondent bank, late Sudharshanlal Gupta sold the
mortgaged properties under various sale deeds as undivided shares and one of
them has been included in the typed set of papers. AS seen from the sale deed
the vendor Sudharshanlal Guptha has covenanted the purchaser that he and
Shanti Vihar Hotel have good, valid, full and unimpeachable title to the
property and that it is not encumbered. Such a stipulation in the sale deed
is a false statement. Therefore no further investigation or enquiry is
required in this behalf. The order passed by this court on the original side
speaks volumes against the petitioner and his conduct.
8. On 8.10.1996 late Sudharshanlal Gupta came forward with an offer
for settlement with the Bank for a sum of Rs.125 lakhs as seen from the
document filed by the respondent bank. On 31.10.1997, the petitioner’s
brother offered to pay Rs.170.08 lakhs as one time settlement. The respondent
bank accepted the offer of 170.08 lakhs on 24.1.19 98 though the total amount
due as on 24.1.1998 was in the range of Rs.375.79 lakhs. This approach of the
petitioner is clear from the document produced by the respondent. The
petitioner’s brother ought to have made payments within two months, but he
sought for extension of time by two months by letter dated 26.7.1998. The
condition has not been complied.
9. Before the Civil Court, the petitioner produced list containing 54
purchasers and claimed that they have retained a sum of Rs.38,0 4,004/= for
being paid to the respondent bank. But those purchasers when served with a
notice by the recovery officer of the DRT, appeared before the said Tribunal
and claimed that they have paid the entire amount to late Sudharshanlal
Gupta/Shanti Vihar and no money has been retained by them. In the light of
the said conduct the respondent contends that the petitioner is not entitled
to any relief as such a conduct is fraudulent act and deliberate attempt to
screen. The respondent further contends that when an identical application is
pending before the DRT, the present writ petition is not maintainable.
Further, the order in W.P.No.12043 of 2001 and pendency of I.A.No.837 of 2001
before the DRT is a bar to the present writ petition and it has to be
dismissed in limini as not maintainable.
10. The point that arise for consideration are:
(i) Whether the impugned order of rejection by the respondent bank
is illegal and liable to be quashed?
(ii) Whether the petitioner could compel the respondent to accept
his proposal for one time settlement in terms of RBI Guidelines dated 27th
July 2000 as extended?
(iii)To what relief if any?
All the above points could be considered together.
11. This court has to necessarily refer to certain material facts for
appreciation of facts. The deceased Sudharshanlal Gupta during his life time
on 8.10.1996 approached the respondent bank, submitted a proposal to pay
Rs.125 lakhs to settle the entire dues of his Group of Companies to the
Syndicate Bank’s Branches of Royapettah, Nandanam and Madras Main Branch and
proposed to pay the entire amount within five months from the date of receipt
of approval, besides expressed that he is agreeable to pay a sum of
Rs.50,000/= in total towards legal expenses incurred by the Bank.
Sudharshanlal Gupta passed away on 7 .6.1997 and his son Sampathlal Gupta on
31.10.1997 came forward with a proposal to pay Rs.170.08 lakhs. On 24.1.1998,
the respondent bank sent a reply to the effect that the competent authority
has permitted the petitioner to settle the dues amounting to Rs.375.79 lakhs
by accepting Rs.170.08 lakhs and agreed to waive Rs.205.71 lakhs as on
31.12.1997, subject to the condition that within two months the entire sum is
paid, besides several other conditions. The petitioner’s brother Sampath
Guptha by reply dated 26.3.1998 requested for extension of time by two months
while referring to the bank’s letter dated 27.1.1998, besides representing
that he has arranged for funds. On 3rd April, 1998, the respondent Bank by
reply with respect to the extension sought for, informed that the petitioner
has to make a cash down payment of Rs.50% of the original compromise offer of
funds and the petitioner should pay overdue interest at 18%. The same has not
been complied with.
12. The writ petitioner herein filed W.P.No.3575 of 1999 and by order
dated 8.3.1999, this court granted stay subject to payment of 1/3 rd of the
demand within six weeks from 8.3.1999, besides making it clear that failure to
comply with the conditions, the interim order will stand vacated. The
condition was not complied with. The respondent bank with reference to the
petitioner’s request by its letter dated 7.8.2000 intimated the petitioner hat
the offer of Rs.75 lakhs for one time settlement is too low to accept and the
offer is not acceptable to the respondent. Such an offer was made on
27.7.2000 for the first time. The petitioner followed the said letter by
another letter dated 23.1.2001 requesting the respondent to inform him the
amount payable for settlement in terms of the guidelines issued by RBI. The
respondent by letter dated 13.3.2001 drew the attention of the petitioner to
its letter dated 27.1.1998 wherein it was agreed to settle the dues by
accepting the payment of Rs.170.08 lakhs and the petitioner was called upon to
come to the Bank for negotiations. The petitioner followed it with his letter
dated 18th June 2001 taking a stand that in terms of RBI circular the total
amount payable is only Rs.40,50,956.30 which he is prepared to settle for
various accounts which his late father was connected. The above facts are
clear from the correspondence exchanged between the parties.
13. The Debt Recovery Tribunal, Chennai after contest of the
proceedings issued a recovery certificate in favour of the respondent bank.
The Bank preferred an appeal in so far as it was aggrieved by the rate of
interest and the appellate tribunal awarded interest at the rate of 15%. The
petitioner’s application on the original side of this court pending the suit
has been dismissed and also the earlier WMP filed by him in the writ petition
has been dismissed for non compliance of the conditions. The Debt Recovery
Tribunal has also issued a recovery certificate and the recovery officer
initiated action. At that stage, the petitioner moved I.A.837 of 2001 seeking
for a direction directing the respondent bank to calculate the amounts due in
accordance with the guidelines issued by the RBI. The said application is
being opposed and pending with DRT. At that stage, the impugned communication
has been sent to the petitioner by the respondent bank intimating that his
offer of 40.51 lakhs is not acceptable and it is very low when compared to the
Rs.480.41 lakhs and the value of securities available. The above facts are
clear from the material papers filed by either side.
14. Admittedly an identical application filed by the petitioner
before the DRT in I.A.No.837 of 2001 filed earlier in point of time is still
pending. The said Tribunal is competent to decide the said application.
Having invoked the jurisdiction of the Debt Recovery Tribunal the petitioner
has rushed to this court.
15. The Reserve Bank of India framed a scheme and issued guidelines
on 27th July, 2000 for recovery of dues relating to non performing assets of
public sector Banks. Clause 3 of the guidelines reads thus:-
“The guidelines will not, however, cover cases of willful default, fraud and
malfeasance. The bank should identify cases of willful default, fraud and
malfeasance and initiate prompt action against them.”
16. The guidelines also prescribes that it shall remain operative
till 31st March 2001. The guidelines also prescribes the standard formula to
be followed by the sanctioning authority and the rate at which the settlement
could be arrived at. Assuming that the petitioner has made a request in time,
the amount offered by the petitioner is far below the amount as prescribed by
standard formula of settlement prescribed by the RBI guidelines. The RBI
guidelines has been issued on 27/7/2000 and it was in force till 30.6.2001.
Thus the respondent is under an obligation to consider the petitioner’s
request and to apply the RBI guidelines for settlement if the petitioner has
approached the bank at least before 30.6.2001 and not at any time later
thereof. But, admittedly, the petitioner has approached the respondent bank
only on 21.7.2001 and offered a very low sum as one time settlement. The
request of the petitioner being belated and too low, the respondent has no
obligation to consider.
17. The petitioner cannot compel the respondents to apply the RBI
guidelines to settle the dues as the obligation, if any, on the part of the
respondent-bank ceases on and after 30.6.2001 and the RBI Guidelines is no
longer effective and cannot be enforced. That apart, the petitioner has been
adopting dilatory tactics by instituting either suit or writ petitions or
other proceedings one after the other. As seen from the correspondence
exchanged, it is clear that the petitioner’s father, the petitioner and his
brother have been approaching the respondent bank by offering to settle the
dues by making one time payment from time to time and avoiding to pay the same
when the Bank agreed to receive a particular sum and thereafter went back from
their offer.
18. That apart, the conduct of the borrower in the present case as
has been rightly pointed out by the respondent bank would show that the
petitioner’s case will fall under the category of “willful default, fraud and
malfeasance”. As detailed by the respondent, for the past six years and odd
the petitioner, his father and brother have been proposing settlement, but
they were never bona fide, nor they were serious, but they always determined
to delay the recovery proceedings. As rightly contended by the respondent
fraud, willful default and malfeasance has been established when the
securities furnished to the Bank namely undivided shares of substantial value
has been alienated to third parties while representing that the secured
property is free from encumbrance. It was represented in the suit proceedings
that there was no fraud or malfeasance, but, demonstrably, the respondent has
established that the affidavit filed by the defaulter is false, in that,
amount has been realised from the third party-purchasers by sale of undivided
shares while in the affidavit it has been stated that substantial sum is due
from third parties in respect of the hypotheca. Therefore the scheme will not
cover the case of the petitioner who is guilty of fraud, willful default and
malfeasance. That apart, the amount offered by the petitioner is nowhere near
the amount required or prescribed as per the standard formula for settlement
under the Scheme.
19. For the above reasons, this court is of the considered view that
the respondent cannot be compelled to accept the petitioner’s offer or to
settle the petitioner’s due in terms of the RBI Guidelines. The rights, if
any, the petitioner has lost not only by filing a belated application, but
also being a willful defaulter who is guilty of fraud and malfeasance and
trying to defeat the claims of the respondent Bank by alienating the
hypotheca. When the application filed by the petitioner is pending before the
DRT, the petitioner has approached this court and wanted this court to
adjudicate the present claim in this writ petition as well. The various
findings recorded in the application for injunction on the original side of
this court speaks the conduct of the petitioner in volume.
20. In the light of the above discussion, this court holds that all
the points are answered against the petitioner and in favour of the
respondent. The contention that the respondent cannot give a new reason in
the counter is unsustainable since the relief sought for is not only a writ of
certiorari, but also mandamus. Further, there is no duty or obligation on the
part of the respondent-Bank to receive the payment offered by the petitioner
belatedly to settle the dues. The petitioner is not entitled to claim
benefits as per the guidelines of the RBI also.
21. In the result, the writ petition fails and it is dismissed. No
costs. Consequently, connected WPMP is also dismissed.
Index:Yes
Internet:Yes
gkv
12-09-2002
copy to:-
1. The Syndicate Bank,
rep. by its General Manager
Recoveries & Rehabilitation Dept.,
Corporate Office,
Bangalore
2. The Syndicate bank
Royapettah Branch,
Chennai-14
E.PADMANABHAN.J.,
Order in
W.P.No: 20288 of 2002
