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2007 DIGILAW 1551 (DEL)

KAMLESH JAIN v. JAIN COOPERATIVE BANK LTD.

2007-08-03

MANMOHAN SARIN, SUDERSHAN KUMAR MISRA

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MANMOHAN SARIN, J. ( 1 ) THE above 31 writ petitions are being decided by this judgment as common issues of fact and law arise. Besides relief sought is the same. All the petitioners are members of respondent no. 1-The Jain Cooperative Bank Ltd. (hereinafter referred to as Bank ). Petitioners had availed of loans from the bank which they failed to liquidate in accordance with the terms of the agreement. The Bank invoked arbitration and the disputes were arbitrated upon culminating in the impugned arbitral awards. ( 2 ) WE find that awards have been made and published by the Arbitrators awarding the sum due to the Bank together with varying rate of interest ranging from 10% to 18% p. a along with with penal interest and costs. ( 3 ) PETITIONERS have approached this court by way of writ petitions seeking directions to be issued to Bank to settle their respective cases also on the lines of settlement in WP (C) 18745/2005-Anchal Aggarwal Vs. Jain Cooperative bank Ltd and anr and WP (C) 18748/2005-Mohak Creations Vs. Jain Cooperative Bank ltd and anr. In the above two cases, respondent Bank accepted payment of the sum due in instalments with reduced interest @ 10. 5%. Further, the Registrar, cooperative Societies was directed not to levy the charges of execution costs, as per the award. On similar basis, Mohak Creation's case was decided. In both these cases, it was recorded in the orders that matter was being settled at the instance of the court. ( 4 ) PETITIONERS claiming themselves to be similarly placed seek parity and pray that Bank be directed to settle their disputes on the same terms. Notice in these writ petitions had been issued to respondent no. 1-Bank as also to respondent no. 2-Registrar, Cooperative Societies. The Chief Executive Officer of the Bank was also directed to be present to facilitate hearing of the matter. Respondent Bank filed its response in WP (C) 3508/2007 which as per the statement made by its counsel Mr. R. N. Bhardwaj, was adopted as response to the averments made in the writ petitions seeking parity and on the maintainability of the petition. ( 5 ) RESPONDENT Bank in its response has brought out that the loans advanced were on easy instalments and at low rates of interest. The amounts were required to be repaid in 100 monthly instalments. R. N. Bhardwaj, was adopted as response to the averments made in the writ petitions seeking parity and on the maintainability of the petition. ( 5 ) RESPONDENT Bank in its response has brought out that the loans advanced were on easy instalments and at low rates of interest. The amounts were required to be repaid in 100 monthly instalments. It is averred that petitioners singularly failed to honour their commitments, compelling the Bank to file petitions under Section 60 of the Delhi Cooperative Societies Act, 1972, before the Registrar seeking arbitration. Petitioners failed to appear in some cases while contesting others. It is only after the awards had been made and published and the matters had attained finality that petitioners have chosen to approach this court in an attempt to seek major concessions and rebates on rate of interest and costs which are not due to them. Respondent Bank averred that the Reserve Bank of India had earlier issued guidelines for settlement of Chronic Non-Performing Assets of Primary Urban cooperative Banks where the outstanding balance was Rs. 10 crores or less. Bank had received applications for settlement under the One Time Settlement Scheme. Under the Scheme, maximum one year's time was to be granted with interest @ 10% being charged on the balance. Be that as it may, as per the Bank, Registrar of Cooperative Societies did not finally approve the proposed settlement in 188 cases and rejected the same as the applications were received after the date stipulated in RBI guidelines. There was no similar scheme currently in force. ( 6 ) MR. R. N. BHARDWAJ, Learned counsel for respondent Bank submitted that individual cases of Mohak Creations and Anchal Aggarwal should not be treated as binding precedents. The Bank in the above two cases accepted the settlement at the instance of the court. It should not be adopted as a policy for all cases. Petitioners' counsel Mr. Anil Kumar, on the other hand, urged that petitioners were small time borrowers and the loans were advanced as far back as in 1990 and even earlier. There were defaults in payment. Interest element has accumulated despite on account payments, finally culminating in the awards being passed. Mr. Anil Kumar urges that most of the loans are unsecured loans. Hence recovery may not be feasible or practicable. There were defaults in payment. Interest element has accumulated despite on account payments, finally culminating in the awards being passed. Mr. Anil Kumar urges that most of the loans are unsecured loans. Hence recovery may not be feasible or practicable. He further submitted that cost of recovery itself may be prohibitive and not in consonance with the amounts sought to be realized. ( 7 ) COUNSEL for respondent Bank submitted that matter could be considered by their Board if the petitioners were willing to pay as per the agreed rate of interest upto the date of award. The Bank was willing to consider proposals for reduction in post award interest and arbitration costs or waiver of execution costs, subject to Registrar of Cooperative Societies giving its consent and formal sanction for the same. Vide orders dated 16th July, 2007,the respondent Bank was asked to have the suggestions emanating during the hearing considered by its Board. ( 8 ) PURSUANT thereto, Respondent Bank informed the court of the resolution passed by its Board on 20th July, 2007. Relevant extract of the said resolution is as under:- "that those members against whom the awards have been passed and if they wish to settle their account they may apply after depositing 1/3 award amount their cases may be compromised with regard to past award interest 10. 50% to 12. 00% and pay the balance amount in two instalments. 1. In the cases of unsecured loans awarded amount upto Rs. 50000. 00. Cases can be compromised on post awarded interest @ 10. 50% and 50% of the cost awarded. The total awarded amount with 10. 50% after the award and 50% of the Arbitration cost will have to be paid in 2 monthly instalments. If the award is not paid in two monthly instalments, the amount in full as per the award will be recovered. 2. In the cases of unsecured loans awarded amount above Rs. 50000. 00. Cases can be compromised on post awarded interest @ 11. 00% and 50% of the cost awarded other conditions will be same as per point no. 1. 3. In the cases of mortgaged loan and Cash Credit Limit Account cases in which award have been passed. Cases can be compromised on post awarded interest @ 12. 00% and 50% of the cost awarded other conditions will be same as per point no. 1. 1. 3. In the cases of mortgaged loan and Cash Credit Limit Account cases in which award have been passed. Cases can be compromised on post awarded interest @ 12. 00% and 50% of the cost awarded other conditions will be same as per point no. 1. All the above decisions will be implemented after the permission of the registrar Cooperative Societies. Apart from the above the judgment debtors will also have to pay 5% as recovery commission payable by the Bank in execution cases to the Registrar. If, not exempted by the Hon'ble Court. " ( 9 ) THE above Resolution of the Board came up for consideration. Learned counsel for the petitioners submitted that Arbitrators had been awarding costs at about 10% to 12% of the awarded amount and the Bank insisting on 50% of the costs being paid, would result in an onerous burden being put on the petitioners. He, therefore, prays for its waiver. Counsel, further, requested that the balance amounts instead of two equal monthly instalments, be permitted to be paid in three equal monthly instalments. Counsel also prayed that 5% recovery amount payable to the Registrar, Cooperative Societies in execution costs be also waived. ( 10 ) WE are happy to note that Petitioners, Respondent-Bank as also registrar, Cooperative Societies adopted a constructive approach re-enforced with the commitment to resolve the litigation, which enabled consensus to emerge as under:- (i)Petitioners or other Debtors of the Bank who have suffered arbitral award may approach the Bank for a settlement seeking reduction in post award rate of interest, penal interest as well as costs. The applications be submitted along with deposit of 1/3rd of the awarded amount excluding post award interest and costs as awarded, with an undertaking to pay the remaining awarded amount together with post award interest and costs as stipulated hereinafter. The entire balance amount being liquidated in three equal monthly instalments. (ii)Bank considering the peculiar facts and individual circumstances of the case, would take into account the hardship or other relevant factors, and consider granting relief in the post award interest by confining it to 10. 5% to 12%. The post award interest would be payable in three monthly instalments. (iii)Respondent -Bank in cases where a settlement is being approved, would recover actual costs incurred by it before the Arbitrator, subject to a maximum of Rs. 5000/- per case. 5% to 12%. The post award interest would be payable in three monthly instalments. (iii)Respondent -Bank in cases where a settlement is being approved, would recover actual costs incurred by it before the Arbitrator, subject to a maximum of Rs. 5000/- per case. (iv) 5% commission amount payable by the Bank to the Registrar, Cooperative societies would not be applicable or attracted in these cases as the execution has not fructified and the amount is to be paid pursuant to the settlement. (v)In case, a debtor/ petitioner/ member fails to make the payment of instalments, he/she shall not be entitled to the benefit of reduced post award interest or waiver of costs and the entire amount in terms of the award shall become payable and the decree executable after adjusting the amount paid. Counsel for Registrar, Cooperative Societies has no objection to the settlement of the present petitions based on the above criteria. The Bank may also forward cases in future to the Registrar, Cooperative Societies for approval of settlement on the above basis. All the above writ petitions are disposed of in the above terms.