Case Note & Summary
The dispute arose from a loan agreement between the Central Bank of India and M/s. Maruti Acetylene Co. Pvt. Ltd., where the respondent defaulted on repayment. The Debt Recovery Tribunal initiated proceedings, and a proposal for a One Time Settlement (OTS) was made, which was dismissed by the Tribunal. An appeal to the Debt Recovery Appellate Tribunal resulted in a conditional stay, requiring a deposit of Rs. 25 lakhs. This amount was later adjusted against the loan. The High Court intervened, proposing a settlement of Rs. 1 crore, which included the deposited amount. The bank was directed to accept the deposit and keep it in a no-lien account. However, the respondent did not agree to the proposed settlement. The High Court ultimately ordered the bank to refund Rs. 1 crore with contractual interest. The appellant contested this, arguing that the Rs. 25 lakhs had already been adjusted and that the Rs. 75 lakhs was in a no-lien account, thus should not attract contractual interest. The court found that the High Court erred in directing the refund with contractual interest and allowed the appeals, modifying the refund direction. The matter was to be reconsidered by the High Court on its merits.
Headnote
A) Debt Recovery - One Time Settlement - High Court's Direction on Refund - Recovery of Debts Due to Banks and Financial Institutions Act, 1993, Section Not Mentioned - The High Court directed the bank to refund the entire amount of Rs. 1 crore with contractual interest, which was contested by the appellant on grounds of prior adjustments and the nature of the deposit. Held that the High Court's direction was incorrect regarding the contractual interest on the amount deposited in a no-lien account (Paras 5-6).
Issue of Consideration
Whether the High Court was correct in directing the refund of the entire amount with contractual interest despite prior adjustments.
Final Decision
The Supreme Court allowed the appeals, modifying the High Court's direction regarding the refund of Rs. 1 crore with contractual interest, stating that the interest should only accrue on the amount deposited in a no-lien account.
Law Points
- Debt Recovery
- One Time Settlement
- Contractual Interest Rate
- Adjustment of Payments
