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Calcutta High Court
PRANAB KUMAR CHATTOPADHYAY, J.
Eastern Paper Mill Machinery Pvt. Ltd. - Appellant
Versus
State Bank of India - Respondents
W.P. No. 1616 of 2003
Decided On : 23 August 2004
DEBTS RECOVERY TRIBUNAL - SETTLEMENT - OTS 2000 AND OTS 2003 - SETTLEMENT FORMULA - RBI GUIDELINES - BINDING ON BANKS - BANK'S OBJECTIONS - DRT'S ORDER - DRAT'S ORDER - WRIT PETITION - COURT'S DECISION: 1. OTS 2000 and OTS 2003 guidelines issued by RBI are mandatory and binding on banks. 2. The settlement formula under OTS 2000 and OTS 2003 is the same: 100% of the outstanding balance in the account as on the date of transfer to the protested bills account or the amount outstanding as on the date on which account was categorised as doubtful NPA, whichever happened earlier. 3. Bank's objections to the settlement under OTS 2003 were not valid as the amount payable under OTS 2003 would be the same as under OTS 2000, namely, Rs. 58.51 lakhs + interest at PLR. 4. DRT has the power to decide whether the parties have arrived at a settlement as per the One Time Settlement Scheme. 5. DRAT erred in setting aside the DRT's order recording the entire claim of the bank as settled at Rs. 58.51 lakhs with interest at PLR. 6. Court allowed the writ petition and affirmed the DRT's order.
Fact of the Case:
The petitioners, Eastern Paper Mills Machinery Pvt. Ltd. and others, challenged the order passed by the Debts Recovery Appellate Tribunal (DRAT) on July 16, 2003, which set aside the order passed by the Debts Recovery Tribunal-II, Kolkata (DRT) on March 7, 2003. The DRT had recorded the entire claim of the respondent bank, State Bank of India (SBI), as settled at Rs. 58.51 lakhs with interest in terms of the provisions of OTS-2003 (One-Time Settlement Scheme, 2003) ignoring the objections raised on behalf of SBI against recording of the said settlement.
Finding of the Court:
The court held that the OTS 2000 and OTS 2003 guidelines issued by RBI are mandatory and binding on banks. The settlement formula under both schemes is the same. The bank's objections to the settlement under OTS 2003 were not valid as the amount payable under OTS 2003 would be the same as under OTS 2000, namely, Rs. 58.51 lakhs + interest at PLR. The DRT has the power to decide whether the parties have arrived at a settlement as per the One Time Settlement Scheme. DRAT erred in setting aside the DRT's order recording the entire claim of the bank as settled at Rs. 58.51 lakhs with interest at PLR.
Issues: 1. Whether the OTS 2000 and OTS 2003 guidelines issued by RBI are mandatory and binding on banks? 2. Whether the settlement formula under OTS 2000 and OTS 2003 is the same? 3. Whether the bank's objections to the settlement under OTS 2003 were valid? 4. Whether the DRT has the power to decide whether the parties have arrived at a settlement as per the One Time Settlement Scheme? 5. Whether the DRAT erred in setting aside the DRT's order recording the entire claim of the bank as settled at Rs. 58.51 lakhs with interest at PLR?
Ratio Decidendi: 1. OTS 2000 and OTS 2003 guidelines issued by RBI are mandatory and binding on banks by operation of law under Section 35A of the Banking Regulations Act, 1949. 2. The settlement formula under OTS 2000 and OTS 2003 is the same as per the settlement formula mentioned in both the OTS 2000 and OTS 2003, which is 100% of the outstanding balance in the account as on the date of transfer to the Protested Bills Account or the amount outstanding as on the date on which the account was categorized as doubtful NPAs, whichever happened earlier. 3. The bank's objections to the settlement under OTS 2003 were not valid as the amount payable under OTS 2003 would be the same as under OTS 2000, namely, Rs. 58.51 lakhs + interest at PLR. 4. The DRT has the power to decide whether the parties have arrived at a settlement as per the One Time Settlement Scheme under Section 89 of the Code of Civil Procedure 1908. 5. The DRAT erred in setting aside the DRT's order recording the entire claim of the bank as settled at Rs. 58.51 lakhs with interest at PLR as the settlement under the RBI OTS was binding upon the bank by operation of law.
Final Decision: The court allowed the writ petition and affirmed the DRT's order recording the entire claim of the respondent bank, State Bank of India (SBI), as settled at Rs. 58.51 lakhs with interest at PLR. The court set aside the impugned order passed by the learned Chairperson, Debts Recovery Appellate Tribunal on July 16, 2003.
ORDER :- The petitioners herein have challenged the order dated 16th July 2003 passed by the Debts Recovery Appellate Tribunal (hereinafter referred to as DRAT). By the said order, learned Chairperson of the DRAT was pleased to set aside the order passed by the Debts Recovery Tribunal-II, Kolkata (hereinafter referred to as DRT) on March 7, 2003.
2. It was alleged on behalf of the respondent bank before the DRAT that the learned Presiding Officer of DRT passed the aforesaid order on 7th March 2003 recording entire claim of the respondent bank as settled at Rs. 58.51 lakhs with interest in terms of the provisions of OTS-2003 (One-Time Settlement Scheme, 2003) ignoring the objections raised on behalf of the respondent bank against recording of the said settlement.
3. The question agitated before the DRAT is whether the decree/certificate issued by the DRT-II was passed on compromise/settlement or otherwise. It has been specifically submitted on behalf of the respondent bank that there was no settlement and hence, the order of DRT-II dated 7th March 2003 should not be treated as a consent order.
4. The undisputed facts relating to this matter are mentioned hereinafter :
In April, 1991, State Bank of India (hereinafter referred to as Bank) filed Title Mortgage Suit No. 73 of 1991 in the Court of learned Asstt. District Judge at Barasat against Eastern Paper Mills Machinery Pvt. Ltd., Adhir Kumar Bose, Mrs. Pushpa Bose, Amitava Bose, Anil Kumar Bose, Enayet Ali and Azizur Rahman, praying for a decree for Rs. 1,56,92,599.57p against the defendants jointly and severally.
5. The mortgage property is comprised of 30 Bighas, 10 Kottahs and 8 Chattaks of land with building, shed, erection, fittings and fixtures standing thereon. The mortgaged property was valued by High Court Panel Valuer over Rs. 2 crores.
6. Upon enactment of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (DRT, Act for short) on 24-6-1993, the Title Mortgage Suit No. 73 of 1999 in 1996 stood transferred to Debts Recovery Tribunal II, Kolkata, in terms of Section 31 of DRT Act and was registered as T.A. No. 67 of 1996.
7. During the pendency of the said proceedings, Reserve Bank of India (RBI) issued "One time Settlement Scheme" 2000 ("OTS 2000", in short), the said Scheme was operative only up to 31-3-2001 and claim amount settled thereunder was required to be paid in the manner provided therein within a period of one year from the date of settlement.
8. By the letter dated 31-3-2001 (i.e. the last date of validity OTS), the writ petitioner made an offer for settlement at Rs. 58.51 lakhs which was accepted by the Bank provided payment was made in the strict conformity with the said OTS 2000.
9. By the letter dated 10-4-2002, Bank recorded that within the stipulated one year period, writ petitioner failed to make any payment and comply with the terms of settlement.
10. Writ petitioners did not pay the said settled amount of Rs. 58.51 lakhs or interest or any part or portion thereof within the stipulated period of one year.
11. In October 2002, writ petitioners made an application before DRT praying, inter alia, for
a) The plaintiff be directed to consider the settlement proposal of the petitioners, and to settle its claims fully and finally at Rs. 58.51 lakhs, the amount fixed under the settlement scheme;
(b) Payment of any interest on the above amount be completely waived;
(c) The order dated 25th July, 2002 passed in T.A. No. 31 of 2001 be set aside, quashed and/or recalled;
(d) The appointment of Special Officer/Receiver be recalled and cancelled;
12. On 25-11-2002 Bank filed an application before DRT and objected to the settlement of Banks claim at Rs. 58.51 lakhs.
13. Writ petitioners herein filed an application before DRT on 7th January 2003 praying that the learned Tribunal may-
(i) Formulate the terms of possible settlement between the parties;
(ii) Refer the same for judicial settlement or for mediation as the learned Tribunal may deem fit an
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