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2022 DIGILAW 198 (KAR)

Canara Sales Corporation Ltd. v. Canara Bank

2022-02-14

ALOK ARADHE, M.G.S.KAMAL

body2022
JUDGMENT ALOK ARADHE J. - In this writ petition the petitioner has assailed the validity of the orders dtd. 19/12/2011 as well as order dtd. 14/10/2016 passed by the Debt Recovery Appellate Tribunal (hereinafter referred to as 'the tribunal' for short). 2. Facts leading to filing of this petition briefly stated are that the petitioner is a company having its head office at Mangalore, Dakshina Kannada. The petitioner No.2 is the Chairman cum Managing Director of petitioner No.1. The petitioner mainly deals in petroleum products and was also a dealer for fiat cars. The petitioners had availed of various credit facilities from the respondent Bank (hereinafter referred to as 'the Bank' for short) from time to time. On 28/10/1995, the petitioners had obtained credit facility upto Rs.28.00 Lakhs and a loan account viz., OCC No.5207 was opened. The total limit on the aforesaid account was Rs.40.00Lakhs. The Bank on 1998 sanctioned another credit facility for a sum of Rs.25.00 Lakhs bearing OCC 5734. The petitioners have mortgaged its landed property bearing RS No.91/58 situated at Balmatta Road, Mangalore to secure the credit facility granted to the petitioner. The petitioners had the following three credit facilities. S. No. Account Number Limit 1. OCC 5207 Rs. 40 Lakhs 2. OCC 5734 Rs. 25 Lakhs 3. OCC 5778 Rs. 15 Lakhs 3. As per the request made by the petitioner to enjoy the aforesaid fresh cash credit facility of Rs.40.00 Lakhs at different branches in the Bank, the petitioners were permitted to enjoy the following cash credit limits in following branches of the Bank. S. No. Branch Name City Apportioned Amount 1. Hampankatta Mangalore Rs. 17.5 Lakhs 2. Traffic Island Hubli Rs. 7.5 Lakhs 3. Puttur Puttur Rs. 4 Lakhs 4. Kalasipalyam Bangalore Rs. 3 Lakhs 5. Main Branch Madikeri Rs. 4.5 Lakhs 6. Karkala Karkala Rs. 3.5 Lakhs Total Rs. 40 Lakhs 4. A notice dtd. 20/9/2002 under Sec. 14(2) of the Securitization and Financial Reconstruction of Assets and Interest Act, 2002 (hereinafter referred to as 'the Act' for short) was served on the petitioners, by which the petitioners were informed that they should discharge their liability within 60 days and make payment of an amount of Rs.1,47,38,712.00 failing which, the rights of the Bank under Sec. 13(4) of the Act would be exercised. Thereafter, the petitioners sold an extent of 12.5 cents of the mortgaged property and deposited a sum of Rs.75,71,563.00 towards their liability. The petitioners, thereafter, were served with another notice dtd. 20/5/2003 by which the petitioners were informed that as on 31/3/2003, a sum of Rs.77,78,144.00 was due and payable by them. The petitioners thereupon submitted a fresh proposal to the Bank and offered to make payment of Rs.45.00 Lakhs to settle the OCC Numbers - 5207, 5734 and 5778. 5. The Bank vide communication dtd. 17/5/2005 informed the petitioners that their offer of Rs.45.00 Lakhs for full and final settlement of OCC Account with HampanaKatta Branch of the Bank has been accepted. The petitiioners were further directed to furnish an undertaking for clearance of entire liability in respect of credit facility of up country branches of the Bank viz., Puttur, Karkala, Madikeri, Traffic Island Hobli and Kalasipalyam, Bangalore with upto date contractual interest and costs within 30 days of the receipt of communication i.e., on or before 15/6/2005. The petitioner paid the amount and thereafter the Bank released property mortgaged property and returned the documents to them. The petitioners, thereupon, sold the properties to the third parties. 6. The Bank, thereafter, issued a winding up notice on 29/5/2006 to the petitioners, which was duly replied by them on 13/6/2006. The Bank thereafter, initiated recovery proceedings before the Debt recovery tribunal. The original application filed by the Bank was dismissed by an order dtd. 26/11/2008 by the Debt Recovery Tribunal on the ground that settlement of three accounts maintained in Hampanakatta Branch includes the payment availed by the petitioners at other branches also. Being aggrieved, the Bank preferred an appeal before the tribunal. The tribunal by an order dtd. 19/12/2011, in the absence of the counsel for the petitioners allowed the appeal. The petitioners therefore, filed an application seeking recall of the order dtd. 24/10/2016 dismissed the aforesaid application. In the aforesaid factual background, this petition has been filed. 7. Learned counsel for the petitioners submitted that the petitioners had made a proposal of One Time Payment of Rs.45.00 Lakhs to settle OCC 5207, 5734 and 5778, which was accepted by the Bank on 17/5/2005. It is further submitted that after accepting the payment in terms of settlement, the Bank had released the entire property from mortgage. 7. Learned counsel for the petitioners submitted that the petitioners had made a proposal of One Time Payment of Rs.45.00 Lakhs to settle OCC 5207, 5734 and 5778, which was accepted by the Bank on 17/5/2005. It is further submitted that after accepting the payment in terms of settlement, the Bank had released the entire property from mortgage. It is therefore, contended that petitioners have paid the amount towards full and final settlement of entire dues and therefore, the Debt Recovery Tribunal rightly dismissed the original application filed by the petitioners. It is also urged that statement of accounts of other branches shows the liability of the petitioners to be nil and the Hampanakatta branch of the bank has no authority to initiate the proceeding for recovery of the amount due to other branches of the bank. However, the aforesaid aspect of the matter has not been appreciated by the Tribunal and the impugned order is therefore, liable to be quashed. 8. On the other hand, learned counsel for the Bank submitted that the tribunal has rightly held that the One Time Settlement Proposal offered by the respondent was accepted in respect of entire liability in respect of Hampankatta Branch of the Bank and the same does not absolve the petitioners of their liability in respect of limits availed of by the petitioners from the other branches. 9. We have considered the submissions made on both sides and have perused the record. The solitary question, which arises for consideration in this writ petition is whether the Bank vide communication dtd. 17/5/2005 has accepted the One Time Proposal in respect of the credit facility availed by the petitioners in respect of all the branches. The relevant extract of the proposal dtd. 2/5/2005 made by the petitioners read as under: We make one time payment of Rs.45.00 Lakhs (Rupees Forty Five Lakhs only) to settle the OCC 5207, 5734 and 5778. The relevant extract of the response dtd. 17/5/2005 sent by the Bank to the aforesaid proposal reads as under: (1) To accept Rs.45.00 Lakhs (rupees Forty Five Lakhs only) in full and final settlement of the OCC accounts with us i.e., Hampanakatta Branch. The compromise amount is payable within 7 (seven) days from the date of this letter. The relevant extract of the response dtd. 17/5/2005 sent by the Bank to the aforesaid proposal reads as under: (1) To accept Rs.45.00 Lakhs (rupees Forty Five Lakhs only) in full and final settlement of the OCC accounts with us i.e., Hampanakatta Branch. The compromise amount is payable within 7 (seven) days from the date of this letter. (4) An undertaking for clearance of entire liability in respect of the limits with upcountry branches, viz., at Puttur, Karkala, Madikeri, Traffic Island Hubli and Kalsipalyam Bangalore, with upto date contractual interest and costs within 30 (Thirty) days from the date of this communication i.e., on or before 15/6/2005. (6) Bank would initiate recovery steps, including legal action, to recover our dues with contractual rate of interest plus penal interest as applicable, if you fail to adhere to the above time schedule. 10. It is also pertinent to take note of the communication dtd. 25/5/2005 sent by the petitioners after the receipt of communication dtd. 17/5/2005. The relevant extract of the aforesaid communication sent by the petitioners reads as under: We understand that to give the documents mortgaged to you and whose dues have been settled by payment of Rs.45.00 Lakhs to you as agreed, you now want the acknowledgement of debt security as signed on and undertaking to clear the liability in respect of the limits with upcountry branches viz., Puttur, Karkal, Madikeri, Hubli and Bangalore. Accordingly we say: 1. The acknowledgment of debt security is already signed and is with you. Kindly note we have cleared all the NPA dues of Mangalore with you which is not reflected in the acknowledgment of debt security. 2. We undertake to clear the entire liability in respect of the limits with up-country branches viz., Puttur, Karkal, Madikeri, Hubli and Bangalore as mentioned in your above referred letter. 11. Thus, from perusal of the aforesaid communications, it is evident that petitioners offer was accepted only in respect of Hampankatta Branch and the petitioners were asked to furnish an undertaking within 30 days with regard to their liability to pay the amount due in respect of other branches. The petitioners as is evident from communication dtd. 25/5/2005 have clearly understood that they have not been absolved of their liability with regard to payment of the balance amount in respect of other branches and have undertaken to clear the entire liability in respect of other branches. The petitioners as is evident from communication dtd. 25/5/2005 have clearly understood that they have not been absolved of their liability with regard to payment of the balance amount in respect of other branches and have undertaken to clear the entire liability in respect of other branches. Therefore, the contention that the proposal made by the petitioners for One Time Settlement was accepted in respect of liability of the petitioners for all branches of the bank does not deserve acceptance. 12. The submission made on behalf of the petitioners that in the accounts of the other branches of the bank, the amount due from the petitioners has been shown to be 'Nil', does not deserve acceptance. In para 4 of the statement of objections after classifying the account as Non Performing Asset, the interest was not debited to the loan account of the petitioners and the liability of the petitioners was transferred to new account and the petitioners are liable to pay a sum of Rs.62,75,386.60 to other branches of the bank. The statement of accounts have been cumulatively annexed as Annexure R3, which support the contention of the Bank. As per the manual of instructions of working capital finance, the main branch of the bank viz., Hampankatta Branch is entitled to initiate the recovery. The impugned order neither suffers from any jurisdictional infirmity nor any error apparent on the face of the record warranting interference of this court in exercise of supervisory jurisdiction. In the result, we do not find any merit in this petition. The same fails and is hereby dismissed.