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High Court Of Delhi
GARGYA RESEARCH INSTRUMENTS - Appellant
Versus
STATE BANK OF INDIA - Respondent
Decided On : 03/03/2006
Recovery of Debts - Recovery of Debts Due to Banks and Financial Institutions Act, 1993 - Section 19
Fact of the Case:
The petitioner, a small scale industry, availed various credit facilities from the respondent bank but failed to repay the loans and defaulted on the terms of the sanction. The bank filed a petition for recovery of the outstanding dues under Section 19 of the Act before the Debt Recovery Tribunal (DRT). The DRT passed an ex-parte order in favor of the bank, which was subsequently upheld by the Debt Recovery Appellate Tribunal (DRAT). The petitioner's application for setting aside the ex-parte order was rejected by the DRT.
Finding of the Court:
The court found that the petitioner failed to provide sufficient cause for non-appearance and noted the petitioner's tactics to avoid paying dues. The court emphasized the importance of timely loan repayment for the functioning of banks and financial institutions and dismissed the petition.
Issues: Non-repayment of loans, default on credit facilities, application for setting aside ex-parte order
Ratio Decidendi: The court held that the petitioner's failure to repay loans and the tactics employed to avoid payment did not warrant interference under Article 226 of the Constitution. The court emphasized the need for timely loan repayment to ensure financial liquidity for banks and financial institutions.
Final Decision: The petition was dismissed by the court.
( 1 ) THIS writ petition has been filed for quashing the impugned order dated 23. 1. 2006 in Miscellaneous Appeal No. 227/2005 and for a writ of mandamus directing the respondents not to dispossess the petitioner from the mortgaged property at C-12, Site-IV, Sahibabad Industrial Area, Ghaziabad, U. P. The petitioner also prayed for a mandamus directing the respondents to settle the matter between the petitioners as per the guidelines on the Rehabilitation/ots scheme and not to proceed further for confirming the auction sale.
( 2 ) HEARD learned counsel for the parties.
( 3 ) THE facts of the case have been set out in paragraph 3 of the writ petition which we have perused.
( 4 ) THE petitioner No. 2 is a sole proprietor of petitioner No. 1 and is running a small scale industry for manufacturing various electrical and electronic products.
( 5 ) THE petitioners had approached the respondent/state Bank of India, and since 1972 was sanctioned and granted various working capital facilities (both fund based and non-fund based) for its working capital requirements in respect of its business in its factory at C-12, Site-IV, Sahibabad Industrial Complex, U. P which was duly availed and utilized by it over the years.
( 6 ) ON the request of the defendant No. 1 the respondents/state Bank of India granted and renewed the following financial assistance to the petitioners:-"nature OF FACILITY (A) FUND BASED Sanctioned Limit cash Credit (Factory Type) Rs. 17. 00 lacs cash Credit [e. P. C. (Preshipment)] Rs. 5. 00 lacs cash Credit (Book Debts) Rs. 3. 00 lacs cash Credit (Bills Clean) Rs. 12. 00 lacs cash Credit [export Bills (post shipment)] Rs. 6. 00 lacs demand Draft Purchase (Cheque) Rs. 2. 00 lacs medium Term Loan Rs. 2. 25 lacs (B) NON-FUND BASED letters of Credit Rs. 6. 00 lacs bank Guarantee Rs. 20. 00 lacs"
( 7 ) THE sanction/renewal of the aforesaid facilities by the State Bank of India to the petitioner was subject to the terms and conditions set out in the bank?s letter dated 10. 8. 1994 (the sanction letter) which was duly accepted by the petitioners. In token of the acceptance of the said terms and conditions by the petitioner No. 1 , the petitioner No. 2 who is the sole proprietor of petitioner no. 1 duly signed/endorsed copy of the said sanction letter.
( 8 ) PURSUANT to the sanction of the said facilities the petitioner No. 1 executed various documents and created various securities the details of which have been given in the application of the bank before the DRT under Section 19 of The recovery of Debts Due to Banks and Financial Institutions Act, 1993 (herein after referred to as the Act ).
( 9 ) THESE include:-" (a) Cash Credit of Rs. 17 lacs with interchangeability with Cash Credit [e. P. C. (Pre Shipment)] facility of Rs. 5 lacs aggregating to Rs. 22 lacs in pursuant to which the petitioner No. 1 executed and agreement with Cash Credit dated 10. 8. 1994 with the bank. (b) Cash Credit [epc (Preshipment)] facility of Rs. 5 lacs with interchangeability with Cash Credit (Factory Type) upto Rs. 5 lacs, aggregating to Rs. 10 lacs. (c ) Cash Credit (Book Debts) facility of Rs. 3 lacs. (d) Cash Credit (Bills Clean) facility of Rs. 12 lacs. (e) Cash Credit [export Bills (Post Shipment)] facility of Rs. 6 lacs. (f) Demand draft purchase (Cheque) facility of Rs. 2 lacs. (g) Medium Term Loan of Rs. 2. 25 lacs. (h) Bank Guarantee facility of Rs. 20 lacs and Letters of Credit facility of Rs. 6 lacs. "
( 10 ) PURSUANT to the aforesaid documents executed and securities created the petitioner duly availed and utilised the said credit facilities and loans from time to time. In the meantime, the petitioner No. 1 approached the bank with a request for allowing interchangeability between the Cash Credit (Factory Type) facility of Rs. 17 lacs, Cash Credit [epc (preshipment)] facility of Rs. 5 lacs, cash Credit (Export Bills (Post Shipment) facility of Rs. 6 lacs and Cash Credit (Bills Clean) facility of Rs. 12 lacs. The b
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