Judgment :-

G.S. Singhvi, J.

1. Leave granted.

2. These appeals filed for setting aside order dated 23.10.2009 passed by the Division Bench of Madras High Court are illustrative of how a defaulting borrower can use the court process for frustrating the action initiated by a bank under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short `the Act') for recovery of its dues.

3. The appellant-Bank sanctioned loan to M/s. N.S. Investments, a partnership firm in 1989 and again in 1991. After some time, the account of M/s. N.S. Investments was declared as non-performing asset. In 1995, respondent No.1 M/s. Blue Jaggers Estate Ltd. took over the assets and liabilities of M/s. N.S. Investments. The respondents claim that this was done at the asking of the appellant who agreed to provide additional financial assistance to the tune of Rs.1 crore, but no tangible evidence has been produced in support of this assertion.

4. Since the respondents failed to clear the outstanding dues, the appellant filed an application under Section 19 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (for short, `the DRT Act') for recovery of Rs.2,15,38,158/-with interest. The same was registered as O.A. No. 1098 of 1998 and is pending before Debts Recovery Tribunal, Chennai (for short, `the Tribunal').

5. During the pendency of O.A. No. 1098 of 1998, the parties signed Joint Memo of Compromise dated 23.6.2004 whereby the appellant agreed to accept an amount of Rs.153.50 lakhs towards full and final settlement of its claim as against the outstanding dues of Rs.661.30 lakhs. The schedule of repayment was fixed by the parties and the appellant agreed for proportionate release of the mortgaged and non-mortgaged properties. The parties also agreed that in case of non-compliance of any of the conditions, O.A. No. 1098 of 1998 shall stand decreed. This is evinced from paragraph 4 of the Joint Memo of Compromise which reads as under:

"In the event of Non-compliance of any one of the aforesaid conditions, the Original Application No. 1098 of 1998 shall stand decreed as prayed for and the Applicant bank shall be entitled to recover the full amount of Rs.2,15,38,158.00 as prayed in the Original Application with future interest at contract rate from the Application date till payment in full with costs and also proceed to bring the schedule mentioned properties in the Original Application for sale through public auction at the cost of the defendants."

6. Although, the respondents did not pay full amount in terms of compromise dated 23.6.2004 and as a result of that, the appellant acquired the right to recover all the dues, it signed another compromise with the respondents who undertook to pay the balance amount of Rs.63.50 lakhs on or before 31.3.2005 along with interest at the rate of 11.50% per annum. Notwithstanding this, the respondents defaulted in payment of the balance amount, which they finally paid on 28.3.2007.

7. In the meanwhile, the appellant issued two notices dated 19.2.2004 and 30.12.2006 under Section 13(2) of the Act. By the first notice, the respondents and some others were called upon to pay Rs.6,47,21,885/-together with interest at the rate of 19.89% per annum with quarterly rests. By the second notice, they were asked to pay Rs.9,86,25,736/- which, according to the appellant, became due as on 31.12.2006 together with interest at the rate of 19.89% per annum with quarterly rests. The respondents filed objections under Section 13(3-A) of the Act and claimed that during the pendency of the recovery proceedings instituted under the DRT Act, the appellant cannot invoke the provisions of the Act. They also claimed that the Tribunal has the discretion to decide the rate of interest payable after filing of an application under Section 19 of the DRT Act and requested that the proceedings initiated under the Act may be dropped. The appellant did not accede to the request