UCO Bank vs M/s. Arena Machineries Limited And Ors

Anil Kumar Srivastava, Chairperson

THE APPELLATE TRIBUNAL :

Appeal No. 128 of 2022 and Appeal No. 127 of 2022 are arising against a common judgment and order dated 26th March, 2021, passed by Learned DRT-III, Kolkata in O.A.522 of 2019 (UCO Bank -vs- M/s. Arena Machineries Limited & Others) hence both the appeals are being decided by one judgment.

As per the pleadings of the parties the Respondent No. 1 is the principal Borrower who approached the Bank for Credit  Facilities  and  Loan  Agreement  for  Rs.24.00  crore followed by enhancement of Cash Credit Facilities from Rs.3.00 crore to Rs.13.00 crore. It was secured by hypothecation and personal Guarantee of the Directors of the Company, Respondents No. 2 to 4 and a Demand Promissory Note was also executed with necessary documents. Defaults were committed by the Defendants and account was classified as N.P.A. on 30.6.2019. Legal Notice was sent on 12.7.2019 by the Bank to the Respondents and O.A. was instituted on 29.7.2019. Drawing of Recovery Certificate for Rs.25,86,77,476.40p together with uncharged interest at the rate of 11.70% calculated upto 28.02.2019 in respect of Term Loan and upto 30.6.2019 and in respect of Cash Credit upto 01.02.2015. Pending O.A., upto 13.7.2020, an amount of Rs.21,75,53,643.29p was repaid by the Respondents and after adjustment of all the sums paid by the Defendants, a sum of Rs.7,16,53,564.71p is to be paid till 31.8. 2020.

Respondents contended before the Learned DRT that on receipt of the summons they approached the Bank for settlement. Some Officer of the Bank assured that if the Respondents deposited Rs.21.00 crore before final hearing of the O.A., he would recommend for waiver of the balance claim along with pendente lite and future interest. On the basis of such oral assurance Respondents deposited Rs. 21,75,53,643.29p from 06.9.2019 to 13.7.2020. Accordingly, only Rs.4,11,23,833.11p is due and Bank is not entitled to claim or realise pendent lite and future interest.

After hearing the all Learned Counsel for the parties, Learned DRT arrived at a finding that since the Defendants have deposited an amount of Rs.21,75,53,643.29p after filing of the O.A., it shows bona fide on the part of the Respondents. Accordingly, a Recovery Certificate for Rs.4,11,23,833.11p was issued with a time limit of 180 days to repay the same. Pendente lite and future interest is also waived. Feeling aggrieved by this finding, Appellants preferred the instant two appeals.

Cross appeal is filed by the Respondents challenging the finding and the order passed by the Learned DRT.

I have heard the Learned Counsel for the parties and perused the record.

As far as the sanction of loan and the disbursement of the loan are concerned, it is not in dispute. It is also not in dispute that an amount of Rs. 21,75,53,643.29p was deposited by the Respondents from 6.9.2019 to 13.7.2020 on different days. O.A. was filed by the Bank with the following prayer:

“Certificate for payment of Rs.25,86,77,476.40p, including uncharged interest calculated upto 28.2.2019 in respect of Term Loan and upto 30.6.2019 in respect of Cash Credit facility from 1.7.2019 till the date of actual payment by the Defendants jointly and severally to the Appellant.”

Further consequential reliefs were also sought.

The main contention of the Respondents was that some Bank Officer assured them that if they will deposit Rs.21.00 crore before the final hearing of the O.A., proposal would be sent to their Head Office for waiver of the remaining amount as well as interest. On the strength of such oral assurance, amount was deposited by the Respondents; now the Bank cannot resile from the assurance given by the Bank Officer. In a letter to the Bank by the Respondents dated 14.9.2020 it is stated that :

“12. As per your bank notice dated 9th July 2019, the total outstanding due to your bank is INR 25,86,77,476.40 (Rupees Twenty Five Crores Eighty Six Lacs Seventy Seven Thousand Four Hundred and Seventy-Six Only and forty paise) out of which INR 21,75,53,643.29 (Rupees Twenty One Crores Seventy Five Lacs Fifty Three Thousand Six Hundred and Forty-Three and twenty nine paise) has been repaid to you, thus making the net outstanding dues as INR 4,11,23,833.11 (Rupees Four Crores Eleven Lacs Twenty Three Thousand Eight Hundred and Thirty-Three and eleven paise) as on date, which clearly shows our integrity and intent to pay, so much so that an amount of INR 3.0 Crores was paid upfront to you in the month of September 2019.”

Learned Counsel for Appellant would submit that neither any assurance was given by any officer of the Bank nor such an assurance can have any legal bearing. It is further submitted that in the letter dated 14.9.2020 there is an admission by the Respondents hence they cannot withdraw the same.

Per contra, Learned Counsel for Respondent vehemently argued that when an assurance was given by the Bank Officer, Respondents deposited the amount pending O.A. No person would deposit such a huge amount during pendency of the O.A. It raises a presumption that assurance was given by the Bank Officer. Learned Counsel places reliance upon S. Saktivel (Dead) by LRs -vs-M. Venugopal Pillai & Others ([(2000) 7 SCC 104] and Union Bank of India -vs- Rashyan Udyog & Others (AIR 1990 Cal 146).

I am not impressed by the submission made by the Learned Counsel for Respondents. At the very outset, as far as facts are concerned, in the written statement no details of the assurance are provided as to who was the officer; who gave the assurance; on what date assurance was given; in whose presence assurance was given? If an assurance is given by any officer of the Bank for depositing such a huge amount, why a letter was not obtained from the Bank Officer or if the oral proposal, made by the Bank Officer, is accepted by the Respondents then when did he deposit the amount and why any reference to such proposal was not made? It all shows that there was no conclusive agreement between the parties. Such an oral assurance cannot be accepted. In the case of S. Saktivel (supra) it was held by the Hon’ble Apex Court in paragraph 6 that :

“6. In sum and substance what proviso (4) to Section 92 provides is that where a contract or disposition, not required by law to be in writing, has been arrived at orally then subsequent oral agreement modifying or rescinding the said contract or disposition can be substantiated by parol evidence and such evidence is admissible. Thus if a party has entered into a contract which is not required to be reduced in writing but such a contract has been reduced in writing, or it is oral, in such situations it is always open to the parties to the contract to modify its terms and even substitute by a new oral contract and it can be substantiated by parol evidence. In such kind of cases the oral evidence can be let in to prove that the earlier contract or agreement has been modified or substituted by a new oral agreement. Where under law a contract or disposition is required to be in writing and the same has been reduced to writing, its terms cannot be modified or altered or substituted by oral contract or disposition. No parol evidence will be admissible to substantiate such an oral contract or disposition. A document for its validity or effectiveness is required by law to be in writing and, therefore, no modification or alteration or substitution of such written document is permissible by parol evidence and it is only by another written document the terms of earlier written document can be altered, rescinded or substituted. There is another reason why the defendant-appellant cannot be permitted to let in parol evidence to substantiate the subsequent oral arrangement. The reason being that the settlement deed is a registered document. The second part of proviso (4) to Section 92 does not permit leading of parol evidence for proving a subsequent oral agreement modifying or rescinding the registered instrument. The terms of registered document can be altered, rescinded or varied only by subsequent registered document and not otherwise. If the oral arrangement as pleaded by the appellant, is allowed to be substantiated by parol evidence, it would mean rewriting of Ext. A-1 and, therefore, no parol evidence is permissible.”

No evidence or any oral evidence is led by the Respondents. Merely by making a statement that an oral assurance was given by the Bank Officer, which is accepted by the Respondents and acted upon by the Respondents, is not acceptable in law.

Accordingly, I do not find any force in the submission that some oral assurance was given by an officer of the Bank. Any amount deposited by the Respondents, pending O.A., would no doubt be adjusted in the certificate amount but it cannot be accepted that some oral agreement was arrived at between the parties to settle the matter at Rs.21.00 crore.

Accordingly, the O.A. should have been allowed for the whole amount of Rs.25,86,77,476.40p, as claimed by the Bank.

Now it is to be seen as to what would be the interest pendent lite and future.

Learned Counsel for Appellant has challenged this finding. It is submitted that the Bank is entitled for pendente lite and future interest at the contractual rate. Learned Counsel for Respondent would submit that Learned DRT has rightly waived the pendente lite and future interest keeping in view the deposits made by the Respondents. Reliance is placed upon Union Bank of India -vs- Rashyan Udyog (supra).

In Rashyan Udyog (supra) it is held that pendente lite as well as post decree interests are in the nature of compensation or damages which the Court may award to the plaintiff for being kept out of the money due to him. It depends upon discretion of the court which has to be exercised judicially.

Learned DRT was impressed with the fact that pending O.A., from 6.9.2019 to 13.7.2020, on different dates, an amount of Rs. 21,75,53,643.29p was deposited by the Respondents. It is submitted during the argument that pending proceedings some more amount is deposited by the Respondents with the Bank. No doubt, Respondents would be entitled for the benefit of the same. As far as interest is concerned, O.A. is filed claiming the amount due as on the date of filing of the O.A.; thereafter deposits were made. In such circumstances, keeping in view the law laid down by the Hon’ble Courts, it would be appropriate that the Bank should charge interest at the rate of 9% on the amount due on the date of filing of the O.A.; thereafter, the amount shall be reduced proportionately, on the dates of deposits till the final payment is made by the Respondents. Accordingly, both the appeals are liable to be disposed of.

ORDERED

Both the appeals,  being Appeal No. 128 of  2022 and Appeal No. 127 of 2022, are disposed of with a direction that the  Appellant Bank  shall  be entitled  to interest at the rate of 9% simple on the amount of Rs.25,86,77,476.40p due on 29.7.2019, the date of filing of the O.A. From that date Bank shall charge interest by reducing the amount proportionately for the amounts deposited on different dates till realization of the amount in full. However, Respondents are granted six months’ time to make the deposit of remaining amount. During this period, no interest would be levied by the Bank. Bank should provide a statement of the interest amount in compliance of the above order to the Respondents within a period of three weeks from today. Thereafter six weeks’ time is granted to the Respondents to make the payment as ordered earlier. Judgment and order dated 26th March, 2021, passed by Learned DRT-III, Kolkata in O.A.522 of 2019 (UCO Bank -vs- M/s. Arena Machineries Limited & Others) is hereby set aside.

Copy of this judgment be placed in the records of Appeal No. 127 of 2022.

Copy of the order be supplied to Appellant and the Respondents and a copy be also forwarded to the concerned DRT.

File be consigned to Record room.

Order dictated, signed, dated and pronounced in open Court.