Canara Bank vs Vinod Kumar Jain

Ranjit Singh, J

Grievance raised by the appellant Bank is against the order passed by DRT-III, Delhi on 10.4.2012 whereby rate of interest has been reduced from 12% to 11% per annum. As per the appellant Bank the Tribunal below could not have passed order reducing the rate of interest as earlier order was a consent order on the basis of OTS proposal which was accepted by the respondent and hence he was under obligation to pay the amount due with interest @ 12% per annum.

The facts noticed in brief are as under:

The appellant Bank had filed OA No. 16 of 2009 against respondent Vinod Kumar Jain proprietor of M/s. Vikas Metals and Traders, which had been sanctioned overdraft (secured) cash credit to the extent of Rs. 50 lacs. The overdraft facility was for the purpose of wholesale trading business and manufacturing copper and PVC wires. In the OA the appellant Bank had claimed an amount of Rs. 51,74,899/- along with contractual rate of interest.

Respondent Vinod Kumar Jain approached the Tribunal below by filing S.A. under SARFAESI Act for quashing and setting aside of notice of demand, which was served on him by the Bank. During the pendency of O.A. filed by the appellant Bank and S.A. filed by the respondent, one-time settlement had taken place. Mr. H.C. Issan, Chief Manager had addressed a letter to the respondent wherein terms and conditions were proposed for one-time settlement. Terms and conditions as proposed in this letter dated December 31, 2009 are as under:

"(1) The total amount of proposal is Rs. 40.25 lacs (Forty lacs twenty five thousand only) out of which Rs. 2.00 lacs has already been paid and adjusted to be account, the balance of Rs. 38.25 lacs has been prescribed to be payable as under:

(i) Rs. 15 lacs within fifteen days from the date of this letter i.e. 21.10.2009.

(ii) Rs. 23.25 lacs on or before 31.12.2009.

(iii) Interest at the rate of 12% (simple) w.e.f. 31.1.2009.

(2) You have to withdraw suit/case filed against the Bank, if any.

(3) Bank reserves the right for withdrawal of the OTS sanctioned at any point of time even during the period permitted for payment of OTS without assigning any reasons for withdrawal of OTS.

(4) OTS sanction stands automatically withdrawn if you default in making payment of one or more instalments/OTS in full as permitted and Bank reserves the right to proceed as it deems fit including proceeding legally for money of entire dues.

(5) In the event of Bank finding the misrepresentation of the facts by you Bank reserves the right to withdraw the OTS permitted and can proceed legally for recovery of entire dues.

(6) In the event of non-compliance of any of the terms of sanction by you the OTS permitted stands automatically withdrawn without assigning any reasons for the same.

(7) The OTS is without prejudice to the right of CBI to prosecute the pending criminal case to conclusion."

The respondent herein accepted the above terms and conditions. His statement was also recorded which reads as under:

"I accepted the amount of Rs. 38.25 lacs under OTS subject to the time extended up to March 31, 2010."

The Tribunal below accordingly observed that in the interest of justice. Chief Manager of the Bank was appointed to receive symbolic possession over the secured asset, which was mortgaged property. Apart from above, the Tribunal below had observed in the order as to what would happen in case any party failed to comply with the OTS proposal. The Bank on receipt of the payment was to issue "No Due Certificate" in respect of the open cash credit account and was to release the title deed to the respondent after obtaining from him certificate of Acknowledgement.

Interest of the Bank was also protected by the Tribunal below by observing that if the Bank was not paid due amount it shall be entitled to a Certificate of Recovery for the remaining portion of its claimed amount along with contractual rate of interest from the date of filing till full recovery against the respondent herein. Another rider was attached to the effect that the Bank in that event shall file one application after having served a copy there of upon the respondent herein at least seven days before the appropriate order could be passed in connection therewith. The Registrar of the Tribunal was directed to place before the bench the draft copy of the above certificate for all its correction and issuance Consented rate of interest was 12% which was agreed to in the OTS proposal. While disposing of the OA and SA, the Tribunal below however, had observed that this consented rate of interest of 12% was truly on the higher side and gave liberty to the respondent herein to approach the Bank for its suitable consideration.

The respondent thereafter claims to have deposited the entire principal amount of Rs. 38.25 lacs by the due date i.e. before 31.12.2009. The respondent however, admittedly did not pay any amount on account of interest which was to be calculated @ 12% per annum. Instead, the respondent herein filed an application before the Bank using the opening given to him in the order passed by the Tribunal below while disposing of the OA and SA. Taking clue from invoked jurisdiction to interfere with the rate of interest as has been done. The Counsel would further contend that in view of the earlier order passed by this Tribunal on December 23, 2009 whereby OA/SA was disposed of on the basis of One Time Settlement the Bank would disposed of on the basis of One Time Settlement, the Bank would be entitled to recovery certificate for the remaining portion of the claimed amount with contractual rate of interest as was observed by the Tribunal below in the said order.

On the other hand, Counsel for the respondent would rely upon some portion of the order passed on December 23, 2009 to urge that the Tribunal below while disposing of the OA and SA had given liberty to the respondent to approach the Bank as consented rate of interest was found to be on higher side. Based on this opening, the respondent herein had moved an application as already noticed above and when prayer made by him was declined, he had filed the present Miscellaneous Application before the Tribunal below wherein the impugned order reducing the rate of interest from 12% to 11% has been passed.

There is some substance in the submission of the Counsel for the appellant, and the Tribunal below ordinarily may not have entertained such application. Since the Tribunal below earlier had observed that the consented rate of interest was on higher side and had given liberty to the respondent to represent against the same, there is some opening seen which would give cause to the respondent to espouse as his representation and prayer was declined by the Bank. Submission made by the Counsel for the appellant that the Bank is entitled to entire due amount with contractual rate of interest has also been considered by me. As per the Counsel for the respondent, the Bank has not moved so far by filing any such application which it was required to do in view of the observations and orders passed by the Tribunal below on 23rd December, 2009.

The submission made by the Counsel for the respondent has substance. However, it is to be seen if on a miscellaneous application filed by the respondent this impugned order reducing the rate of interest could have been passed. As already observed, even if the Tribunal below could entertain this miscellaneous application, the action of the Tribunal to reduce the consented rate of interest does not sound proper. The rate of interest was consented and agreed between the parties. The respondent was only given liberty to make a representation to the Bank. If the Bank had voluntarily accepted the representation or had agree to waive the interest, it would have been a different matter. In its earlier order the Tribunal below may have observed that the interest rate agreed was on the higher side but still had allowed the said rate of interest. The Tribunal did not think of reducing the rate of interest. Changing the rate of interest would amount to review of the order which is neither prayed nor could have been allowed. Prayer having been declined by the Bank may or may not give separate cause of action, but this cause could not have been espoused in the disposal of OA/SA in this matter. Accordingly, this part of the impugned order reducing the rate of interest from 12% to 11% cannot be sustained.

Counsel for the respondent has agreed to discharge the liability with interest @ 12% per annum. He has already deposited interest calculated @ 11% per annum which as per him works out to be Rs. 4,62,580/-. Counsel for the respondent is having draft of Rs. 42,053/- which, according to him, would satisfy the consented order where interest at the rate of 12% was allowed from 31.1.2009. Counsel for the appellant, however has raised some issue in this regard. Let this draft of Rs. 42,053 be deposited with the Bank within two days. The Bank would accept this draft and in case any payment according to the Bank is still due, it may serve a letter to the respondent who may then take action either to discharge the liability or to take any other action in accordance with law. It would be appropriate if the issue is amicably settled, rather than making any approach before the judicial Forum. In case, liability of the Bank is fully satisfied, the Bank will take action to vacate symbolic possession and also to hand over title deed to the respondent. The appeal is accordingly disposed of.