S.D. Singh, Presiding Officer

1. The State Bank of India filed Original Application No. 209 of 1996 against the defendants for recovery of its debt. In pursuance of order dated 4th June, 2001 certificate for recovery was issued on 20th June, 2001 by the then learned Presiding Officer of this Tribunal for the recovery of certificate amount of Rs. 1,92,01,017.40 (Rs. one crore ninety-two lakh one thousand seventeen and forty paise) from the defendants/certificate debtors jointly and severally together with interest thereon @ 9% per annum from the period 1st June, 1972 till the date of actual realization.

2. Since under Sub-section (2) of Section 7 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (hereinafter referred to as RDDBFI Act) the learned Recovery Officer discharges his functions under the general superintendence of the learned Presiding Officer. As such during the pendency of the recovery proceedings he vide his order No. 34 dated 28th February, 2005 has referred certain issues for the direction of this Tribunal which is obvious in his following observations in the said order No. 34 dated 28th February, 2005:

The learned Advocate for the Bank submits that a petition was filed on 14th October, 2004, wherein it was submitted that subsequent to the issuance of the certificate for the sum of Rs. 1,92,01,017.40 plus interest @ 9% per annum from 1st June, 1972 the certificate debtor No. 1 was informed by the Bank, by its letter dated 26th February, 2003 that the certificate debtors are eligible for settlement under RBI guidelines and also set out terms of the such settlement, inter alia at a sum of Rs. 1,97,59,566.86 p. It is further submitted that the certificate holder Bank in course of recovery proceeding and by virtue of attachment order of rents from the tenants, at the properties of certificate debtors, collected a sum of Rs. 22,15,308.90 p. which has been appropriated towards part satisfaction of the Banks dues and also certificate debtors had deposited a cheque of Rs. 27,25,0007- as upfront payment towards the said settlement. There has been a further payment of Rs. 3.5 lakh by the certificate debtors as part reimbursement of legal expenses incurred by the Bank. It is also submitted that in the meantime certificate holder Bank was notified by clarifications from the R.B.I., wherefrom it appears that the instant case is not covered under the clarifications made by R.B.I. as the decree had already been passed.

Learned Advocate for the certificate debtor No. 1 points out that the circular dated 4th August, 2004 issued by the department of circle credit officer of certificate holder Bank, stipulates that R.B.I. have clarified that the cases in which decree has already been passed the Banks can straightway execute the same and recover the dues and the R.B.I. circular on OTS-2003 dated 29th January, 2003 does not cover the case where decrees have already been passed, The learned Advocate of the certificate debtor No. 1 also submits that it has also been clarified in the said circular, that the compromise already entered into decreed cases by the branches would not be affected by the aforesaid R.B.I, clarifications. However, such compromise has already been settled by the branches as per norms of R.B.I. OTS-2003 will now be treated as settled under Banks normal scheme of compromise settlement instead of R.B.I. OTS-2003. According to learned Advocate of the certificate debtor No. 1 the clarifications laid down in the said circular letter are sufficient for certificate holder Bank to accept the proposal for compromise settlement and the question of resuming the recovery proceeding does not arise at all. It is felt that the arguments put forward by the learned Advocate for the certificate debtor No. 1 has enough substance to accept the proposal. However, in view of the technical peculiarity and also that the compromise settlement has been approved at an amount less than the amount of certificate, the matter is referred to the learned Presiding Officer for appropriate direction.

Submitted for favour of order by the learned Presiding Officer.

3. After the said reference this Tribunal directed the learned Registrar of the Tribunal to notify the parties after fixing a date before this Tribunal for hearing on the issues raised in the aforesaid order of the learned Recovery Officer. It appears from the order No. 36 dated 10th March, 2005 of the learned Registrar of this Tribunal that the parties were informed and the matter was fixed for hearing before this Tribunal. Thereafter the matter was heard on 13th July, 2005 by this Tribunal.

4. I have heard the learned Advocate Mr. S.N.P. Bhatta for the applicant/certificate holder Bank and the learned Advocates Mr. D. Basu Roy and Mr. N. Srinivas for the defendant/certificate debtor No. 1 at length and considered the reference made by the learned Recovery Officer vide Order No. 34 dated 28th February, 2005.

5. The brief facts as pleaded in the petition filed by the State Bank of India, the applicant/certificate holder Bank are that pursuant to the certificate dated 20th June, 2001 the recovery proceeding was initiated in the instant matter. In the meantime guidelines for scheme of compromise of non-performing assets of public sector Banks issued by the R.B.I, came into effect by circular No. DBOD, BP, BC 65/21.4.117/2002-03 dated 29th January, 2003.

6. Following such guidelines the applicant/certificate holder Bank wrote to the defendant/certificate debtor No. 1 by its letter dated 26th February, 2003 informing the certificate debtor No. 1 that the certificate debtor No. 1 was eligible for settlement under the aforesaid R.B. 1. guidelines and set out terms of such settlement inter alia at a sum of Rs. 1,97,59,566.86 if offered by the certificate debtor No. 1 and called upon it to give its response thereto.

7. In response to the said letter dated 26th February, 2003 of the certificate holder Bank the certificate debtor No. 1 on or about 31 st July, 2004 by a letter No. MC-04-05/77 sent a cheque for Rs. 27,25,000/- as upfront payment. The certificate holder Bank, in the course of recovery proceedings and by virtue of an attachment order of rents receivable from the tenants of the certificate debtors at its premises at McLeod House. 3, Netaji Subhas Road, Kolkata had collected from two tenants a sum of Rs. 22,15,308.90 which has been appropriated towards part satisfaction of the dues of the certificate holder. The said sum of Rs. 27,25,000/- and Rs. 22,15,308.90 is aggregating to 25% of the offered amount of Rs. 1,97,59,566.86 The other payments which were proposed to be made quarterly, were to be paid subsequently as per the R.B.I, guidelines.

8. The certificate debtor No. 1 on or about 17th August, 2004 by letter No. MC/04-05/91 sent a cheque for Rs. 3,50,000A as part reimbursement of legal expenses incurred by the certificate holder Bank.

9. The certificate holder Bank had accepted the cheque for Rs. 27,25,000/- and Rs. 3,50,000/- and kept in sundry deposit account with a view to appropriate the same towards the dues of the certificate holder Bank after acceptance of the compromise proposal by the appropriate authority of the certificate holder Bank.

10. In the meantime, the certificate holder Bank, the State Bank of India, was notified of clarifications from the R.B.I, and it has been clarified in the said petition filed by it dated 14th October, 2004 that in view of such clarification of the R.B.I. the certificate holder Bank is unable to accept the said compromise proposal. The clarification is specified in the circular letter No. Circo/Adv 7091/04-05 dated 11th August of the S.B.I., Kolkata, LHO.

11. The applicant/certificate holder Bank i.e. State Bank of India has filed the said petition for passing appropriate order in this matter for the ends of justice.

12. Before reaching the definite conclusion to decide the matter it would be advantageous firstly to discuss the position of law regarding the compromise at the state of recovery proceeding. The RDDBFI Act is a special enactment having an overriding provision contained in Section 34 thereof. After the issuance of certificate of recovery on the basis of the order of the Tribunal to the Recovery Officer for recovering of the amount of the debt specified in the certificate learned Recovery Officer has to recover the certificate amount in accordance with the procedure provided in Chapter V of the said RDDBFI Act. There is a difference between execution of decrees and order under Order 21 of the CPC 1908 and the execution of the recovery certificate under Chapter V of the RDDBFI Act. Under Order 21 of the CPC, 1908 the decree is being executed on the application of the holder of decree but under the RDDBFI Act it is mandatory on the Presiding Officer to issue a certificate under his signature, on the basis of the order of the Tribunal for this purpose. The application of the certificate holder is not required for execution. Under said Chapter V of the RDDBFI Act which contains provisions from Section 25 to Section 30 there is no scope of compromise between the certificate holder and the certificate debtor. Since the recovery proceedings under said Chapter V is not contemplated to be initiated at the instance of the certificate holder as such it is extraneous to presume the right in the certificate holder to compromise or withdraw the recovery proceeding which he has not initiated. This proposition is further fortified after having a analytical look at the provision of Section 29 of the said RDDBFI Act contained in the said Chapter V thereof. It is apparently clear from the said Section 29 that by applying the provisions of the Income-tax Act the recovery of certificate amount has been put at par the recovery of the Income-tax. There is no compromising provision in the Second Schedule to the Income-tax Act, 1961 relating to the procedure for recovery of taxes. It is further obvious from the said 9 Chapter V that after the certificate is issued the law imposes the duty on the learned Recovery Officer to recover the amount applying the modes of recovery specified in that chapter. After going through the provisions of the said Chapter V of the RDDBFI Act and the related provisions of the Income-tax, 1961, the intention of the Legislature becomes transparent that the Legislature intended to recover the debts due to Banks in the like manner as the tax (Income-tax Act) is being recovered. Since the provisions of Chapter V of the RDDBFI Act is comprehensive and self-contained procedure the other provisions of the CPC, 1908 in view of Section 4 of that CPC, shall not be deemed to limit or otherwise affect the provisions of the special law contained in said Chapter V of the RDDBFI Act. Furthermore, the a provisions contained in Section 89 and Order 23 Rule 3 of the CPC relate to the compromise at the suit stage i.e. at the stage of the trial of original application and do not cover the compromise at the stage of execution i.e., stage of recovery proceeding for which self-contained provisions are given in Chapter V of the RDDBFI Act. The presumption of authority in the certificate debtors to compromise the recovery proceeding which is not being initiated at its instance and for which onus is put on to the learned Recovery Officer to recover, the certificate amount from any property of the judgment debtor/certificate debtor may amount to put the recovery proceeding as per the proceeding for deciding the rights between the parties which is not intended by the Legislature by debarring the defendant from whom the recovery is to be made to make any objection to the certificate on any ground under Section 26 of the RDDBFI Act which may include the ground that the certificate amount has been compromised.

13. During the course of arguments it has been discussed that this Tribunal under Section 19(25) of the RDDBFI Act has certain inherent power which reads as under:

(25) The Tribunal may make such orders and give such directions as may be necessary or expedient to give effects to its orders or to prevent abuse of its process or to secure the ends of justice.

For the ends of justice the compromise may be recorded by the Tribunal and an order may be passed in accordance therewith.

14. The learned Counsel Mr. Patra Bhatta appearing for the State Bank of India i.e., certificate holder Bank submitted that in case the compromise is accepted it will go against the guidelines of the R.B.I., DBOD BP BC 65/21.04.117/2002-03 dated 29th January, 2003 read with circular letter No. Cir. Co/Ad v/091/04-05 dated 11th August, 2004 of S.B.I., Kolkata, LHO. The relevant portion of the said circular dated 11th August, 2004 is quoted as below:

1. Please refer to para 1.6.5 of Annexure I of our circular No. CirCo/Adv/269/02-03 dat 14th February, 2003 containing guidelines for recovery of NPAs upto Rs. 10 crores under R.B.I. OTS-2003 advising therein that

Cases pending before Courts/DRTs/BIFRincluding cases where decree obtained/recovery certificate (RC) issued/BIFR order available are also eligible subject to consent decree/order being obtained from Courts/DRTs/BIFR.

2. In this connection, we advise that R.B.I. have now clarified that the cases where decree has already been passed, the Banks can straightaway execute the same and recover the dues and the R.B.I. circular on OTS-2003 dated 29th January, 2003 does not cover the cases where the decrees has been passed.

3. Consequent upon R.B.Is. clarification on non-inclusion of decreed accounts under OTS 2003 a doubt had arisen on the status of the compromises settled/accepted by the branches under R.B.I. OTS scheme in cases decreed by the Court.

4. The issue was examined by corporate centre and it has been decided that:

(a) The compromises already entered into decreed cases by out branches would not be affected by the aforesaid R.B.I, clarifications. However, such compromise as already settled by the branches as per norms of R.B.I. OTS-2003, will now be treated as settled under Banks normal scheme of compromise settlements instead of R.B.I. OTS- 2003.

(b) Since R.B.I, has extended the time period of R.B.I. OTS 2003 up to 31st October, 2004, no fresh case decreed by the Courts would be considered under the scheme. However, the branches may consider such cases under Banks normal scheme of compromise settlement of dues strictly on merits of each case.

15. Furthermore, the learned Counsel Mr. Patra Bhatta relied on a decision of the Honble Supreme Court in Civil Appeal No. 4929/2004 (arising out of SLP (C) No. 17147/03) in X-Calibre Knives Pvt. Ltd. v. State Bank of India. This case also relates with a compromise proposal at a stage when the recovery proceedings were set in motion pursuant to the order passed by the D.R.T. In this case the Honble Supreme Court has observed as under:

The guidelines of 29th January, 2003 lay down: "These guidelines will cover cases on which the Banks have initiated action under the SRFAESI Act, 2002 and also cases pending before Courts/D.R.Ts./BIFR, subject to consent decree being obtained from the Courts/D.R.Ts./BIFR.

It is not in dispute that the D.R.T. has already passed an order on 31st January, 2002 determining the sum payable by the appellant and thereafter, issued a recover certificate also by the time the matter was taken up for consideration in terms of the revised guidelines issued by the R.B.I. However, our attention has been drawn to a letter sent by the Bank on 25th February, 2003 in which it was stated that the dues were eligible for settlement under the guidelines of R.B.I, on the terms specified in the letter. In the letter it is stated that the minimum amount required to be paid by the appellants is Rs. 42,97,419.99 (being the outstanding balance as on 31st March, 2000). By this letter the respondent Bank proceeded on the basis that the guidelines of the R.B.I. could be applied to the applicants case. It is apparent that the said letter was issued without being aware of the stage of the proceedings before the D.R.T., para 2 of the said letter reads as follows:

Since your case is pending before Court D.R.T./BIFR any settlement will be subject to consent decree/necessary orders from the Court/DRT/BIFR and said proceedings.

Therefore, it is obvious that the letter was issued without being aware of the factual position in regard to the decision of the DRT and the issuance of recovery certificate.

The stand taken by the respondent Bank is re-enforced by this clarification issued by the R.B.I, in its communication dated 7th October, 2003 that the guidelines were not applicable to cases where already decrees/necessary orders have been passed by the Tribunal.

We cannot accept the contention of the learned Counsel for the appellants that the guidelines should not be made applicable to the cases in the which the Bank has already been approached for settlement even before the revised guidelines came into force. In fact the earlier representations were rejected on the ground that the requirements contemplated by the guidelines which then existed were not fulfilled.

We cannot, therefore, grant any relief to the appellants beyond what has already been granted by the Bank and which has been reiterated by the High Court. However, in view of the pendency of the litigation which the appellant has been bonafide pursuing, we do not think it just and proper to burden the appellants with further interest from the date of the communication sent by the respondent Bank or the order of the High Court passed subsequent thereto. Now we are inclined to grant instalments for payment of Rs. 1.10 crores at this point of time.

In the circumstances, we dispose of the appeal with a direction that if a sum of Rs. 85 lakh (Rs. 1.10 crores minus Rs. 25 lakh already paid) is paid within a period of three months from today, the outstanding loan amount shall be deemed to have been cleared in full and recovery proceeding should then stop otherwise, the respondent Bank is free to recover the amount as per the order of the DRT.

16. In para. 7 of the petition dated 14th October, 2004 the S.B.I. the certificate holder has submitted as under:

It is submitted that in view of such directions of the R.B.I., the certificate holder Bank is unable to accept the said compromise proposal.

17. It is obvious from the above quoted submission of the certificate holder Bank that the proposed compromise is not covered by the R.B.I, guidelines. Furthermore, the learned Recovery Officer has clarified in his reference vide order No. 34 dated 28th February, 2005 that the proposed compromise settlement has been approved at an amount less than the amount of certificate. Keeping in view the above circumstances where the certificate holder Bank has expressed its inability to accept the compromise proposal being contrary to the guidelines and keeping in view the ratio decidendi of the Civil Appeal No. 4929/2004 (arising out of SLP(C) No. 17147/03) as quoted above, it would not be equitable and just to accept the proposal of compromise under Section 19(25) of the RDDBFI Act. In case the compromise proposal is granted beyond what has been declined to be granted by the Bank it would not be an equitable settlement of claims. The requirement settlement of claim is the settlement between the parties by any lawful agreement of compromise. In case the settlement is against the policy of the R.B.I. which is not acceptable to the certificate holder Bank it would be imposition of the settlement and not an equitable and agreeable settlement between the parties which cannot be accepted in the interest of justice.

18. In the above upshot the petition of the certificate holder Bank is not maintainable hence dismissed, The reference of the learned Recovery Officer vide order No. 34 dated 28th February, 2005 is disposed of accordingly.

Hence, it is

ORDERED

(i) That the compromise settlement referred to by the learned Recovery Officer vide his order No. 34 dated 28th February, 2005 in RP/41/01 (OA/209/96) is not acceptable, hence rejected.

(ii) That the learned Recovery Officer is directed to recover the certificate amount under certificate issued in OA/209/96 in accordance with law and accordingly proceed further in RP/41 /01 from the stage the reference was made vide said order No. 34 dated 28th February, 2005.

Copy of this order be given/sent to the applicant certificate holder Bank and also to the defendants/certificate debtors.