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2019 Supreme(Del) 2301
IN THE HIGH COURT OF DELHI AT NEW DELHI
S. MURALIDHAR, TALWANT SINGH, JJ.
Punjab & Sind Bank - Petitioner
Versus
M/s Indo Foreign Commercial Agency Products Private Limited & Ors - Respondents
W.P.(C) 6446, 6447 of 2016
Decided On : 21-11-2019
For the Petitioner:Mr. Saran Suri, Mr. Roshan Kumar and Mr. Jyotisman Kar, Advocates.
For the Respondent:Mr. Arun Kathpalia, Senior Advocate with Mr. Amit Dhupar, Mr. Dhrupad Das with Ms Tanvi Jain, Advocates.
The DRAT has the discretion to modify the rate of interest to meet the ends of justice under Section 19(20) of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993.
Headnote:
Interest Rate - Debt Recovery - Recovery of Debts Due to Banks and Financial Institutions Act, 1993 - Section 19(20)
Fact of the Case:
The Punjab & Sind Bank filed petitions against an order passed by the Debt Recovery Appellate Tribunal (DRAT) reducing the rate of interest from 19.5% per annum to 12% simple interest per annum.
Finding of the Court:
The Court found that the DRAT did not exceed its jurisdiction in modifying the rate of interest to 12% simple interest per annum, considering the peculiar facts and circumstances of the case.
Issues: The legality of the impugned order of the DRAT reducing the rate of interest from 19.5% per annum to 12% simple interest per annum.
Ratio Decidendi: The DRAT has the discretion to reduce the rate of interest in accordance with Section 19(20) of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, to meet the ends of justice.
Final Decision: The petitions were dismissed, and the Respondents have since discharged the entire liability in terms of the impugned order of the DRAT.
ORDER :
S. MURALIDHAR, J.
1. These two petitions by the Punjab & Sind Bank ("P&SB") are directed against a common order dated 1st March, 2016 passed by the Debt Recovery Appellate Tribunal ("DRAT"), disposing of two Appeal Nos. 37 and 38 of 2015 filed by the Respondents in the present two petitions i.e. M/s Indo Foreign Commercial Agency Products Private Limited (hereafter "the company") and the other by Shri Iqbal Singh and Mrs Manjit Dhingra.
2. The present petitions are in a narrow compass and concern the legality of the impugned order of the DRAT insofar as it has reduced the rate of interest from 19.5% per annum, compounded with quarterly rest, pendent lite and future, to 12% simple interest per annum, from the date the debt was due till the date of payment.
3. The basic transaction, by way of a Letter of Credit ("LoC") opened by the Petitioner/Bank way back in 1979, was for a value of Rs.11,82,392.82. The LoC was opened in favour of Bentrex and Co., Singapore. This was for import of copper scrap from Singapore. The ship bringing the goods sank on 8th September, 1979.
4. According to the Respondents, the shipping documents were of doubtful nature and were rejected by them. On the assurance of the Bank that the insurance money would be received, the insurer signed the necessary documents and endorsed the policies in favour of the Bank. However, the Bank did not sue the insurance company, as a result of which the Respondents filed Suit No.672/1980 in this Court against the Bank. According to the Respondents, no written statement was filed in the suit for over six years.
5. Meanwhile, another LoC was opened in favour of M/s P N Rao and Co. on 27th June, 1983. When the documents were presented to the company, they did not make payment. The amount due in respect of the LoCs from the company to the Bank in respect of the two LoCs, rose to Rs.14,87,893.39.
6. It appears that on account of certain other credit facilities extended thereafter, a total outstanding, together with interest on the earlier payments, increased to Rs.76,59,952.62, as of 1987, leading the Bank to file CS(OS) No.1679/1987 in this Court on 17th July, 1987, claiming the said sum. It must be noted that this sum was inclusive of the interest that had accrued on the outstanding sum till that date. The said sum was claimed with interest @ 19.5% per annum with quarterly rests.
7. The said suit was transferred to the Debt Recovery Tribunal-II ("DRT") and registered as OA No.443/1996. The said OA came to be disposed of by the DRT-II on 5th June, 2014, holding that the Bank was entitled to recover from the company and its directors and guarantors (except Defendant No.4 who had expired in the meanwhile), a sum of Rs.73,94,114/- with interest @ 19.50% per annum with quarterly rests with cost of Rs.2,44,235/- with effect from 17th July, 1987, till the date of recovery.
8. Aggrieved by the above order, the company filed Appeal No.37/2015 while Shri Iqbal Singh and Mrs Manjit Dhingra filed Appeal No.38/2015.
9. In the impugned order dated 1st March, 2016, the DRAT noted the submission of learned counsel for the Respondents i.e. the company, Shri Iqbal Singh and Mrs Manjit Dhingra that though the appeals were according to them likely to succeed on merits, they still “would wish to buy peace by settling the case with the bank”. Accordingly, it was submitted that the DRAT may determine “the interest considered reasonable and appropriate”. It was pointed out that a basic liability of around Rs.11.50 lakhs had led to a liability of Rs.76 lakhs, and has now assumed a huge liability of Rs.120 crores, essentially on account of interest. The DRAT then observed as under:
“The liability has become many-folded primarily because of the rate of interest which the Tribunal has allowed, which is 19.50% p.a. with quarterly rests. This rate of interest apparently is harsh and cannot pass off as fair. Counsel for the bank has not' been able to show any justification for claiming the amount with this r
