UCO Bank vs E. Thirugnanasambandam & Ors.

Learned Counsel for both sides are present.

This appeal is filed against the order passed in MA 223 of 2024 in OA Dy. No. 2119 of 2024 by the learned Presiding Officer, DRT-III, Chennai on 8.4.2025.

Learned Counsel for the Appellant submitted that OA Dy No. 2119 of 2024 has been filed for recovery of a sum of Rs.5,01,78,541.05p, together with further interest, due from the Respondents. It was initially filed on 3.6.2022 on the file of DRT-II, Chennai under Dy. No. 915 of 2022. Then it was physically filed on 8.9.2022. The Original Application was returned by DRT-II, Chennai on 13.10.2022 to present it before DRT-III, Chennai, in view of the Gazette Notification No. SO. 4717(E) dated 4.10.2022. It was re-presented before DRT-III, Chennai under Dy No. 2119 of 2024.

The 1^st Defendant expired on 14.10.2022, leaving behind legal representatives. The Appellant filed insolvency petition before National Company Law Tribunal (NCLT), Chennai against the 3^rd Defendant in the Original Application, and Mr. Ebenezer Inbaraj was appointed as Insolvency Resolution Professional (IRP). The 1^st Defendant, along with the 2^nd Defendant in the Original Application, approached the Bank for an out of the court settlement of Rs.5.17 crores. The Bank offered a one-time settlement vide its communication dated 25.3.2024. Out of the OTS amount agreed upon, the Respondents paid only Rs.15.00 lakhs. In the said circumstances, the Original Application was re-presented with a delay of 757 days, as detailed hereunder:

The delay in re-presentation was not wilful. Only because of the insolvency proceedings, and a one-time settlement proposal, there was a delay in re-presentation.

He further submitted that for this lapse, Banks should not be taxed twice – one by ordering payment of costs of Rs.50,000/-, and the other by disallowing the interest for 668 days. The Appellant Bank is a public sector bank, public money is involved and, therefore, he prays for setting aside the order dated 8.4.2025 passed by the Learned Presiding Officer, DRT-III, Chennai in MA No. 223 of 2024 in OA Dy. No. 2119 of 2024.

Learned Counsel for the Respondents submitted that this appeal is filed against the imposition of costs and for disallowing of interest for the default period. He further stated that the original application was filed through online on 3.6.2022. Thereafter, with the delay of 89 days, physical copy of the Original Application was filed. The said Original Application was returned for clearing certain office objections on 13.10.2022, and the 1^st Defendant in the Original Application died on 14.10.2022. Thereafter, only on 12.8.2024, the Original Application was re-presented by a new Advocate. Learned Presiding Officer, DRT-III, Chennai, while allowing the MA 223 of 2024, imposed costs of Rs.50,000/- payable to Tamil Nadu State Legal Services Authority and disallowed the interest for the default period of 668 days in the event of the Appellant succeeding the Original Application claim.

Considered the rival submissions and perused the records.

From the submissions of the Learned Counsel appearing for the Parties and the facts elicited above, it can be gathered that there is a huge delay in re-presentation of the Original Application due to change of jurisdiction. Initially it was filed before DRT-II, Chennai, and then on instructions, it was filed before DRT-III, Chennai. In the said process, there was delay in re-presentation, as detailed above. The Bank, as a public sector bank, is expected to be vigilant and cautious in prosecuting the litigation against the borrowers. Merely because the insolvency proceeding was pending against one of the Defendants, and that an OTS proposal was made, considered, and failed, these grounds are not justifiable grounds for the huge delay in re-presentation of the Original Application before the DRT having the jurisdiction. However, this Tribunal finds that the Appellant was asked to pay of costs of Rs.50,000/-, apart from disallowing the interest for 668 days. The Appellant cannot expect interest for the period, when the matter is not pending before the tribunal or Court. Therefore, this Tribunal concurs with the findings of Learned Presiding Officer, DRT-III, Chennai to show that Appellant is not entitled for interest for a period of 668 days. When the interest is disallowed, again ordering the Appellant to pay costs of Rs.50,000/- is a harsh order.

Therefore, the order of the Learned Presiding Officer, DRT-III, Chennai, directing payment of costs of Rs.50,000/- to Tamil Nadu State Legal Services Authority is set aside, and the remaining part of the order with regard to disallowing interest for a period of 668 days, is confirmed.

Accordingly, this appeal MA 25 of 2026 is ordered.

Parties are directed to bear their own costs.

Pending IAs, if any, stand closed.