Indian Bank Through its Authorized Officer vs M/s. Siddhivinayak Logistics Ltd. & Ors

Ashok Menon, Chairperson

The appellant bank is in appeal impugning the judgment and order dated 04.03.2020 in Original Application No. 515/2017 on the files of the Debts Recovery Tribunal-II, Ahmedabad (D.R.T.) which was decreed in favour of the bank for the realization of the amount of a sum of ₹168,75,53,914.30 together with the interest at the rate of 10% P.A. with monthly rests from the date of the filing of the O.A. till realisation and costs from defendant Nos. 1 to 13 jointly and severally. The appellant, however, could not get a charge over the vehicles which were allegedly hypothecated for the debt and the Ld Presiding Officer observed thus in Para No. 29 of the Judgment.

“It is a high-value case in which the bank has claimed recovery of Rs.168,74,53,914.30 (Rupees One Hundred Sixty Eight Crores Seventy Four Lacs Fifty Three Thousand Nine Hundred Fourteen & Paise Thirty only) and it is astonishing that in this case bank has claimed its recovery by enforcing its rights over hypothecated vehicles only and there is no other collateral security and bank has failed to prove on record hypothecation as required and expected from a financial institution to have effective relief. Although the defendants appeared and failed to file written statement but bank cannot be allowed to bank upon weakness of defendants. It was the duty of the bank to prove its case at first instance. So keeping in view gravity of latches and negligence on the part of the bank, I feel fair to impose cost of Rs. 5 lacs to be deposited with National Defense Fund Account No. 11084239799 State Bank of India at New Delhi Main Branch (00691).”

The appellant is aggrieved and hence, in appeal.

The respondents did not appear to contest the appeal. Before the D.R.T. there was a Counsel who was appearing for the defendants but no written statements were filed and there was no effective defense taken up by the defendants.

The appellant is aggrieved by the imposition cost of a sum of ₹5 lakhs on the appellant for the reason that they did not get the hypothecation registered with the authorities in the registration certificate of the vehicles and therefore, it could not be realised from the sale of vehicles and moreover. It is also observed that there is no other collateral security created in favour of the huge amount of loan which was granted and therefore, the appeal is in appeal.

However, it is also observed that in the absence deposit of the cost of ₹5 lakhs with the National Defense Fund, the recovery certificate shall not be issued.

Heard the Ld. Counsel appearing for the appellant. Perused the records. I find that the adverse observation made by the Ld. Presiding Officer regarding the negligence on the part of the appellant bank for not obtaining sufficient collateral security and not registering the hypothecation of the vehicles with the motor vehicles authority is justified but the imposition of cost on the bank, however, is not justified. Because the D.R.T. is not entitled to impose such cost on the bank. At the most, it could have forwarded this judgment to the higher-ups in the bank for appropriate action against the officials who had facilitated the granting of the loan without sufficient collateral security and the hypothecation. But imposing a cost on the bank could further burden a public institution which would also go from the public money and therefore, there is no justification for imposing such a cost.

Hence, the appeal is allowed and the impugned order as regards the imposition of cost a sum of ₹5 lakhs to be deposited with the National Defense Fund is set aside, but at the same time it is directed that the higher officials of the bank shall inquire this matter and take appropriate action against the officials responsible for granting such a huge amount of loan without sufficient security. The recovery certificate shall be issued to the bank to enable them to take steps for recovery.