R. V. Rails Products Pvt. Ltd vs Oriental Bank Of Commerce

The petitioner was a constituent of the respondent bank since 2008. Dispute arose when the revised sanctioned terms proposed by the respondent bank in 2007 was not acceptable to the petitioner and the petitioner made a request to the bank to transfer the liabilities, if any, in the cash credit account including the bank guarantee facilities being enjoyed by the petitioner in favour of Axis Bank Limited who is the present banker of the petitioner.

The petitioner at the relevant point of time, i.e. prior to 2017, was enjoying a cash credit facility with an outer limit of Rs. 2 crore and a bank guarantee facility with an outer limit of Rs. 30 crore. The petitioner contended that as on date there is no debt to be discharged save and except that in the event the bank guarantee is furnished by the Oriental Bank of Commerce to various concerns and agencies, then the Oriental Bank of Commerce would be exposed to the extent of the liability covered by each of the said bank guarantees. The bank has raised three conditions for allowing shifting of accounts. The three conditions are mentioned in the letter dated 20th November, 2017 which read:-

"1. Concession allowed on account of CC/LC/BG Charges/commission/process fee are to be recovered with pre payment penalty charges.

Please provide 100% Liquid security by way of CDR/FDR for outstanding amount of LC/BG OR Counter guarantee of any of the nationalized bank only.

All the other terms & condition of shifting of accounts be complied."

Initially, the resistance of the bank to such takeover was that taking-over bank should be a nationalised bank, which was not accepted by me in my order dated 10th January 2018 and the said order has been accepted by the bank. In the said order, the bank was directed to file an affidavit disclosing its claim on Clause No. 1 of the letter dated 20th November 2017. Affidavit in opposition and thereafter a supplementary affidavit were filed by the bank to clarify that on Clause 1, a sum of Rs. 2,55,41,641/-would be due and payable.

Mr. Surajit Nath Mitra, learned senior counsel appearing on behalf of the petitioner, submits that each sanction constitutes a distinct and separate contract and since the petitioner did not avail of the revised sanction granted in 2017, claiming any amount in relation to the concessions that was extended to the petitioner for the earlier orders cannot be made a condition precedent for allowing taking-over of the loan. However, it is not in dispute that so far as the bank guarantee liability is there, which would likely be about Rs.2 crore, presently there is a necessity to furnish bank guarantee in terms Clause 11 of the taking over clause.

On a reading of the various clauses of the agreement, it appears that the constituent cannot get rid of its obligation under Clause 11 which relates to taking over of bank guarantee outstanding by other banks before the loan is transferred to another bank. At the same time, the bank cannot insist for any other claim over and above the said liability as none of the sanction letters provides any clause that in the event there is a request for takeover, the bank would be entitled to realize all the past concessions allowed in respect of the said facilities. However, at the interlocutory stage, the interest of both the parties are required to be protected. It is not in dispute that the respondent is presently holding a fixed deposit of over Rs. 4 crore. The respondent bank, after retaining a sum of Rs. 2.55 crore, shall release the balance amount in favour of the petitioner with accrued interest till this date and shall return all the security documents to the petitioner and discharge the present guarantee, if any, within a period of a fortnight from date.

GA No. 16 of 2018 accordingly stands disposed of.

Mr. Sandip Chatterjee, Advocate waives service of writ of summons upon the defendant bank and shall enter appearance in the suit within a period of two weeks from the date of service of the plaint accompanied by a duplicate writ of summons upon him. The defendant shall file written statement within five weeks thereafter.