Case Note & Summary
The petitioners, Small Industries Development Bank of India (SIDBI) and India SME Asset Reconstruction Company Ltd., challenged an order dated 26th May 2010 passed by the Debt Recovery Appellate Tribunal (DRAT), Mumbai. The DRAT had set aside an order dated 5th February 2009 of the Debt Recovery Tribunal (DRT), Mumbai, which had allowed the original application filed by the petitioners and issued a recovery certificate against the respondents. The respondents, M/s. Aditya Diamonds and its guarantors, had availed credit facilities from SIDBI and subsequently defaulted. A One Time Settlement (OTS) was sanctioned by SIDBI on 31st March 2003, requiring payment of Rs. 29,79,658/-. The respondents deposited Rs. 10 lakhs but failed to pay the balance. The DRT allowed the bank's application and issued a recovery certificate for a higher amount. The DRAT set aside the DRT order, holding that the respondents should be permitted to comply with the OTS by depositing the amount payable under the OTS together with interest as per the OTS terms. The High Court upheld the DRAT's order, finding that the DRT had erred in not giving effect to the OTS and in calculating interest beyond the OTS terms. The court held that the interest component must be calculated strictly in accordance with the OTS sanction letter and that the DRAT had correctly exercised its appellate powers.
Headnote
A) Debt Recovery - One Time Settlement - Interest Calculation - The issue pertained to the calculation of interest under an OTS sanctioned by the bank. The DRT had allowed the bank's original application and issued a recovery certificate. The DRAT set aside the DRT order, permitting the respondents to deposit the OTS amount with interest as per the OTS terms. The High Court held that the DRAT's order was correct and that the interest component must be calculated strictly in accordance with the OTS sanction letter. (Paras 1-10) B) Debt Recovery - Appellate Tribunal's Power - Section 19 of Recovery of Debts Due to Banks and Financial Institutions Act, 1993 - The DRAT has the power to set aside or modify orders of the DRT. In this case, the DRAT found that the DRT had erred in not giving effect to the OTS and in calculating interest beyond the OTS terms. The High Court upheld the DRAT's exercise of power. (Paras 11-20)
Issue of Consideration
Whether the Debt Recovery Appellate Tribunal (DRAT) was justified in setting aside the DRT order and permitting the respondents to comply with the One Time Settlement (OTS) by depositing the amount payable under the OTS together with interest as per the OTS terms.
Final Decision
The High Court dismissed the writ petition and upheld the DRAT order dated 26th May 2010, permitting the respondents to comply with the OTS by depositing the amount payable under the OTS together with interest as per the OTS terms.
Law Points
- One Time Settlement
- Interest Calculation
- Debt Recovery Tribunal
- Appellate Tribunal's Power
- Section 19 of Recovery of Debts Due to Banks and Financial Institutions Act
- 1993
