tag:blogger.com,1999:blog-44864764669732337332024-03-12T16:22:41.656-07:00Court Cases Affecting BankersBY _____Danendra JainDanendra Jainhttp://www.blogger.com/profile/06877409854811449220noreply@blogger.comBlogger66125tag:blogger.com,1999:blog-4486476466973233733.post-23097071253400117722016-02-07T18:51:00.003-08:002016-02-07T18:59:27.241-08:00Supreme Court Favour Tenant Affects Banks<div class="first" id="yui_3_9_1_1_1454899553830_1192">
<span style="font-family: "georgia" , "times new roman" , serif;"><span style="font-family: "times new roman"; font-size: x-large;">Banks’ NPA pains just got worse</span></span></div>
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<span style="font-family: "georgia" , "times new roman" , serif;"><span style="font-family: "times new roman"; font-size: x-large;">--The Indian Express by Indu Bhan</span></span></div>
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<span style="font-family: "georgia" , "times new roman" , serif;"><i>The apex court, in the matter of Vishal N Kalsaira vs Bank of India & Ors, has ruled that tenants cannot be arbitrarily evicted by using the provisions of the Sarfaesi Act as that would amount to stultifying the statutory rights of protection given to the tenant. This ruling given by learned apex court will further add to the pain of banks.</i></span></div>
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<i><span style="font-family: "georgia" , "times new roman" , serif;"><b>A non-obstante clause (Section 35 of the Act) cannot be used to bulldoze the statutory rights vested on the tenants under the Rent Control Act, the court observed, while holding that the securitisation law will not override various rent control laws enacted by state governments as it will leave tenants to the mercy of landlords.</b> </span></i></div>
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<i><span style="font-family: "georgia" , "times new roman" , serif;">“There is an interest of the bank in recovering the NPAs on the one hand, and protecting the right of the blameless tenant on the other. The Rent Control Act being a social welfare legislation must be construed as such. A landlord cannot be permitted to do indirectly what he has been barred from doing under the Rent Control Act, more so when the two legislations, that is the Sarfaesi Act and the Rent Control Act, operate in completely different field,” the judgment stated. </span></i></div>
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<i><span style="font-family: "georgia" , "times new roman" , serif;"><b>The Sarfaesi Act empowers a secured creditor to take possession of the mortgaged property if the borrower fails to pay up after 60 days of the notice for default of loan repayment being served.</b> </span></i><br />
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<i><span style="font-family: "georgia" , "times new roman" , serif;">Rejecting the contention of the banks that the Sarfaesi Act overrides provisions of the Rent Control Act, the court said that if it were to be accepted, it would render the entire scheme of all rent control laws as “useless and nugatory since tenants would be left in the fear that the landlord may use the tenanted premises as a security interest while taking a loan from a bank and subsequently default on it.” </span></i><br />
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<i><span style="font-family: "georgia" , "times new roman" , serif;">The top court also directed that enhanced rent by way of a conditional interim order shall be continued to be paid to the respective banks, which is to be adjusted towards debts of the debtors/landlords. </span></i><br />
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<i><span style="font-family: "georgia" , "times new roman" , serif;">Legal experts, however, feel that the judgment is flawed on many counts as it does not take into consideration the larger public interest. Barring lenders from proceeding under securitisation laws to evict the tenants residing in the tenanted premises which have been offered as collateral securities for loans is going to frustrate loan recovery. <b><span style="color: red;">When the Sarfaesi Act came into force, the NPA burden stood at R1.1 lakh crore and has increased to R2.67 lakh crore at the end of March 2015 in case of PSU banks.</span></b> </span></i><br />
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<i><span style="font-family: "georgia" , "times new roman" , serif;">“With this judgment, the Sarfaesi Act would become unworkable. It is easy for the borrowers to put up bogus tenants, by producing back-dated rent receipts, thereby frustrating the entire intent and purpose of framing the Act.</span></i><br />
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<i><span style="font-family: "georgia" , "times new roman" , serif;">In case the rights of unregistered/oral tenants were considered necessary to be protected, it should have been subject to certain guiding principles/conditions, so as to make the Sarfaesi Act workable, viz. that a unregistered or oral tenancy would be accepted as valid, only where there are overwhelming documents in possession of such lessees like electricity bills, water bills, voter ID and passport to prove his possession,” Kapur says. </span></i><br />
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<i><span style="font-family: "georgia" , "times new roman" , serif;">According to another Supreme Court lawyer R Chandrachud, the court has “overlooked the aspect that Sarfaesi Act has a public element involved”, as at the end of the day, the loans come from public money. “It misses the larger point that the landlord by merely leasing its premises does not lose other rights as he continues to be the owner of the property and still retains the right to sell and give the property as a collateral towards loan,” he says. </span></i><br />
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<span style="font-family: "georgia";"><span style="font-size: x-small;"><a href="https://in.finance.yahoo.com/news/verdict-corner-banks-npa-pains-010700051.html" target="_blank">https://in.finance.yahoo.com/news/verdict-corner-banks-npa-pains-010700051.html</a>
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Rs 1.14 lakh crore of bad debts: The great government bank write-off</span></h1>
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That is the amount of bad loans waived in last three financial years, more than the write-off in the previous nine </h2>
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- See more at: <br />
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http://indianexpress.com/article/india/india-news-india/bad-loan-financial-year-rti-rbi-bank-loan-raghuram-rajan-bad-loan-financial-year-rti-rbi-bank-loan-raghuram-rajan-1140000000000-bad-debts-the-great-govt-bank-write-off/#sthash.3liXoUDY.dpuf<br />
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<b></b><i></i><u></u><sub></sub><sup></sup><strike></strike></span>Danendra Jainhttp://www.blogger.com/profile/06877409854811449220noreply@blogger.com1tag:blogger.com,1999:blog-4486476466973233733.post-6210588568806232172015-06-07T17:15:00.006-07:002015-06-07T17:15:51.137-07:00Bank Cannot Disclose Customers Data<span class="arttle"><h1>
<em><span style="font-family: Georgia, "Times New Roman", serif;">Bank liable for wrongful disclosure of customer data-Times of India 08 Jun 2015</span></em></h1>
<em><span style="font-family: Georgia, "Times New Roman", serif;">MUMBAI: A banker is privy to confidential financial information. Hence, he must exercise caution to ensure it does not fall into wrong hands. <br /><br /><strong>Case Study:</strong><br /><br /> Rupa Mahajan Pahwa had a joint savings account with her husband Ajay at Punjab National Bank's Vasant Kunj branch in New Delhi. The account was to be operated by either or survivor. Later, the relationship between Rupa and Ajay soured and they filed for divorce in court. </span></em><br />
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<em><span style="font-family: Georgia, "Times New Roman", serif;">During court proceedings, Ajay produced a duplicate passbook of her account, and was using it against her. Her inquiries revealed that the bank had handed over a duplicate passbook to a third party at the behest of her husband. An aggrieved Rupa filed a complaint against the bank before the Delhi District Forum. She claimed that her husband had deserted her and their infant daughter, leaving them without any financial support. She was seeking maintenance through the court proceedings. The production of the duplicate passbook in the court by her husband had resulted in revealing all her confidential financial details without her consent. Due to this, she faced humiliation in court, causing her further mental torture and harassment. Besides, it would also drastically affect the amount of maintenance and alimony. She sought a compensation of Rs 7 lakh from the bank. <br /><br /> The district forum observed that the bank had not produced any record to show the identity of the person to whom the passbook had been handed over. The forum concluded that the bank had attempted to manipulate evidence, for which it imposed a penalty of Rs 5,000, payable by the bank to the State Consumer Welfare Legal Aid. The forum also found that Rupa had been subjected to mental agony, harassment and emotional suffering due to the bank's capricious conduct. The bank was directed to pay Rupa a compensation of Rs 1 lakh for the suffering, Rs 30,000 for deficiency in service, and Rs 5,000 as litigation costs. <br /><br /> The bank approached the National Commission in revision. The bank's main contention was that Ajay was a joint account holder. The operating instructions were either or survivor. Ajay had written a letter requesting for a duplicate passbook to be handed over to the bearer of the letter. The bank claimed it could not be fastened with any liability since the duplicate passbook had been issued on the basis of a request . <br /><br /> Rupa, who appeared in person, faulted the bank's reasoning. She pointed out that a duplicate passbook could be issued only when the original is lost or stolen. This criteria was not fulfilled since Ajay's application merely said he was applying for a duplicate as the original was not available with him. Also, the authority to collect the passbook was not given in favour of any specific person, but merely to the bearer of the request letter. Rupa argued that the bank ought to have insisted on an authorization in favour of a specific person, and his signature attested by the account holder, to prevent the passbook from falling into wrong hands. <br /><br /> When confronted with this reasoning, the bank conceded that this was a lapse, but promptly tried to cover it up by arguing that Rs 100 had been debited from the account for issuance of the duplicate passbook, which had been handed over to Ajay's father. The commission observed that there was no authorization in favour of Ajay's father nor was his signature attested in the request letter. In its order of May 28, 2015 delivered by the Bench of Justice D K Jain and Vinay Kumar, the National Commission indicted the bank for trying making a deflective and unconvincing attempt to gloss over a significant lapse. It upheld the state commission's order. <br /><br /><strong>Conclusion:</strong><br /><br /> A bank is liable for failure to safeguard a customer's confidential data.</span></em><br />
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<em><span style="font-family: Georgia, "Times New Roman", serif;">Consumer wins battle against bank, will receive compensation of 5,000</span></em></h1>
<em><span style="font-family: Georgia, "Times New Roman", serif;">MARGAO: A consumer has got an order from a district forum against Axis bank to pay him compensation of 5,000 for rejecting his cheque of around 6,000 that was drawn to pay electricity bills.<br /><br /> D J de Souza had approached the district consumer disputes redressal forum, South Goa.<br /><br /> The complainant had issued a cheque in favour of chief electrical engineer for a sum of 6,960 towards the electricity bills. The cheque was drawn on Axis Bank dated June 4, 2014.<br /><br /> According to the complainant, he had to suffer loss due to rejection and had to pay 850 more to the electricity department.<br /><br /> According to the opposite party, the cheques were rejected/returned back to the complainant because of alteration/correction in the cheque.<br /><br /> Forum president, Jayant S Prabhu and members Savita G Kurtarkar and Cynthia Colaco observed, "On close scrutiny of the cheque dated June 4, 2014, we find that there is hardly any alteration carried out by the complainant while issuing the cheque drawn on the chief electrical engineer. According to us, material alteration means the alteration should be such which becomes difficult to read or to interpret the writing done on the instrument. According to us, if the collecting bank can very well read the writings done on the instrument, then there should not be any problem to the clearing bank i.e. the opposite party in clearing the cheque".<br /><br /> The forum held that as the opposite party refused to clear the cheque, the complainant obviously had to suffer and had to pay late payment charges to the electricity department. As such, according to us, there is deficiency in service on the part of the opposite party which eventually left the bill unpaid, the forum said.<br /><br /> The forum stated "The complainant has brought nothing on record to show that he had to pay a sum of 850 as late charges. As such, we are of the opinion that a sum of 5,000 would be adequate to compensate the complainant towards harassment and mental torture."<br /><br /> The complainant would also be entitled towards a sum of 5,000 towards cost of the complaint, the forum directed.</span></em><br />
<em><span style="font-family: Georgia, "Times New Roman", serif;"><a href="http://timesofindia.indiatimes.com/business/india-business/Bank-liable-for-wrongful-disclosure-of-customer-data/articleshow/47578843.cms">http://timesofindia.indiatimes.com/business/india-business/Bank-liable-for-wrongful-disclosure-of-customer-data/articleshow/47578843.cms</a></span></em><br />
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<a href="http://timesofindia.indiatimes.com/city/goa/Consumer-wins-battle-against-bank-will-receive-compensation-of-5000/articleshow/47578336.cms">http://timesofindia.indiatimes.com/city/goa/Consumer-wins-battle-against-bank-will-receive-compensation-of-5000/articleshow/47578336.cms</a><br />
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<br /></span></em></span>Danendra Jainhttp://www.blogger.com/profile/06877409854811449220noreply@blogger.com0tag:blogger.com,1999:blog-4486476466973233733.post-43606349855158855342015-05-13T19:42:00.000-07:002015-05-13T19:42:09.891-07:00Supreme Court Decision<h1 itemprop="headline">
<em><span style="font-family: Georgia, "Times New Roman", serif;">Supreme Court refuses to stop Centre from granting quota to Jats-NDTV-13.05.2015</span></em></h1>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"><strong>New Delhi: </strong> The Supreme Court today declined to stay the Centre's decision to grant reservations in government jobs and educational institutions to the Jat community.<br /><br />The Top Court expressed its satisfaction with the documents submitted by the Centre in support of its decision to bring the Jats in the OBC list, and posted the matter for further hearing on May 1.<br /><br />"Prime facie, we are satisfied with the material submitted by the government for providing reservations to Jats," Chief Justice P Sathasivam said.<br /><br />The Supreme Court had on April 1 directed the Centre to turn over all the files pertaining to its decision to extend OBC quota to the Jats in seven states - Uttar Pradesh, Madhya Pradesh, Gujarat, Rajasthan, Haryana, Himachal Pradesh and Bihar.<br /><br />In its petition, OBC Reservation Raksha Samiti had appealed to the Supreme Court to quash the Jat quota announced by the Centre just before the polls, and also argued that it was contrary to the recommendation of the National Commission for Backward Classes.<br /><br />A few Jat organisations had, in the interregnum, filed a caveat, contending that the Court should hear them also before passing any orders.<br /><br />Quota for Jats is seen as the Congress' attempt to improve its poll prospects in nine states where the community has a strong presence - Gujarat, Haryana, Himachal Pradesh, Madhya Pradesh, Rajasthan, Uttar Pradesh, Delhi, Uttarakhand and Bihar. Congress leaders have assessed that over eight crore Jats in these states can be the deciding factor in at least 30 Lok Sabha constituencies.<br /><br />The National Commission for Backward Classes had opposed a quota for Jats on grounds that the community cannot be classified as "backward" and such a move would deprive more deserving groups of central benefits. The proposal was still cleared at a special cabinet meeting on March 2 and notified on March 4, just a day before the announcement of Lok Sabha polls brought a model code of conduct into effect.</span></em></div>
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<span style="font-family: Georgia, "Times New Roman", serif; font-size: x-large;"><em>SC says no to politicians’ photos on government ads-The Hindu</em></span></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">The apex court, however, permitted the use of photographs of the President, Prime Minister and CJI in the advertisements.</span></em></h2>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">In a historic judgment holding that taxpayers' money cannot be spent to build "personality cults" of political leaders, the Supreme Court on Wednesday restrained ruling parties from publishing photographs of political leaders or prominent persons in government-funded advertisements. </span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">The apex court said such photos divert attention from the policy of the government, unnecessarily associate an individual with a government project and pave the way for cultivating a "personality cult". </span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">As an exception to this general rule, the court held that the photos of only three constitutional authorities - Prime Minister, President and Chief Justice of India - can be used in such ads. But for that too, the personal approval of these three authorities need to be got before publication. </span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">The judgment by a bench of justices Ranjan Gogoi and N.V. Ramana came on the basis of a series of recommendations given by its own committee led by noted legal academcian N.S. Madhava Menon on introducing checks on government-funded ads. </span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">The committee was formed in April 2014 on a PIL filed by NGO Common Cause had argued that ruling party leaders and ministers were taking undue advantage at public expenses. </span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">The Menon panel had recommended a complete ban on publishing of photos in the ads. It had further said that no ads should be allowed on election eve. </span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">In his verdict, Justice Gogoi modifies the recommendation on four counts. </span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">One, instead of a complete ban on publishing of photos of all individuals, it departs to the extent of saying that pictures of PM, President and CJI can be used provided they personally clear it - thus, in a way, making them also accountable for the publication. </span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">Two, the court improvises on the Menon committee recommendations to direct the government to appoint a three-member Ombudsman body of persons with "unimpeachable integrity". </span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">Three, the bench disagrees with the Menon panel's suggestion for a performance audit on such government ads. </span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">Four, the court said there was no need for a curb on government ads on election eve. However, it said such ads should be given with fairness and even dispensation to the media.</span></em></div>
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Danendra Jainhttp://www.blogger.com/profile/06877409854811449220noreply@blogger.com0tag:blogger.com,1999:blog-4486476466973233733.post-72201784981803326902015-05-08T17:21:00.003-07:002015-05-08T17:22:32.171-07:00Enforcement Of Security Interest SARFAESI ACT 2002<span style="font-family: Georgia, "Times New Roman", serif; font-size: x-large;"><em>SARFAESI Act, 2002: Enforcement of security interest-By T. R. Radhakrishnan-Source Lawyers Club</em></span><br />
<em><span style="font-family: Georgia, "Times New Roman", serif;">It is observed that the general belief and perception of many of the legal luminaries, Court Judges, Chair persons of DRAT and Presiding Officers of DRT and also the secured creditors and their authorised officers, is that Section 13(2) of SARFAESI Act cannot be challenged and the borrower can challenge only actions initiated by the Authorised Officer under section 13(4) of the said Actand that too under section 17(1) of the Act when the borrower files his Securitisation Application (SA). As per the said Act, the borrower can approach DRT only when the Authorised Officer issues a notice of possession u/s 13(4) of SARFAESI Act.</span></em><br />
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<em><span style="font-family: Georgia, "Times New Roman", serif;"> But a perusal of the tenets of the SARFAESI Act shows the following aspects.</span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"> A secured creditor shall be entitled to exercise all of any of the rights under sub-section (4) of section 13 of SARFAESI Act without the intervention of the court <strong>only if</strong> the following actions are initiated by the secured creditor / authorised officer.</span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"> 1. Security agreement should be executed between the secured creditor and the borrower.</span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"> 2. Security interest should be created on the secured assets in favour of the secured creditor.</span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"> 3. Debt of the borrower should be classified as Non-Performing Asset (NPA) for which <strong>the debt has to be crystallized.</strong></span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"> 4. Secured creditor has to issue a notice u/s 13(2) of SARFAESI Act demanding the dues from the borrower by giving all the details of the dues and securities to be enforced based on <strong>the definition of NPA as per RBI norms.</strong></span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"> 5. The borrower is required to make the payment as demanded by the secured creditor within 60 days from the date of the notice.</span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"> 6. The borrower is entitled to make his representation and raise his objections to the notice.</span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"> 7. The authorised officer has to give a reply to the representation made and objections raised by the borrower within 15 days giving valid reasons if he rejects the representation made and objections raised by the borrower.</span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"> Hence the question of serving of notice u/s 13(4) of the Act comes only when the bank and financial institution undertake the aforesaid actions upon which the borrower can file his Securitization Application (SA).</span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"> The first pertinent question is, can section 13(2) of SARFAESI Act be challenged? If so, on what grounds can it be challenged? The answer is “yes” if the notice issued u/s 13(2) of SARFAESI Act is not as per the provisions of SARFAESI Act and also if it violates RBI norms for classifying the account as NPA and if the bank and financial institution do not follow the RBI guidelines. In this connection Andhra High Court judgment in the matter of M/s Sravan Dall Mill P. Ltd. Vs. Central Bank of India pronounced on 11th September 2009 is worth recalling. The relevant portion of the said judgment is quoted hereunder. The judgment pertains to two important aspect of SARFAESI Act which as per the said judgmentare “<strong>(i) Whether the remedy under Article 226 is available to the petitioner challenging the notice under Section 13(2) of the SARFAESI Act? (ii) Whether the respondent bank has satisfied the requirement of asset classification under the Prudential Norms as framed under Master Circular of the RBI?” </strong></span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"><strong>“</strong>2. In normal course we would not have entertained this writ petition inasmuch as no measures under Section 13(4) of the SARFAESI Act have been taken by the first respondent bank but we have heard the writ petition at length after permitting the respondent to file a counter affidavit in view of the fact that the petitioner questions the classification of its account, by the first respondent bank, as a Non-Performing Asset (NPA). The foundation of the writ petition and the basic contention of the petitioner, therefore, is that the declaration of the petitioner's account as NPA is not justifiable and consequently the jurisdictional fact necessary for invocation of Section 13 of the SARFAESI Act is non-existent in this case.”</span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">It further states, "14. What was expected by this court was not as to whether the officers of the respondent-bank are aware of the circulars and the judgments, but what had been directed is to consider as to whether the account of the petitioner falls within the said category as defined in the circulars and such consideration should have come out in the form of a speaking consideration i.e., by assigning reasons as observed by the Hon'ble Supreme Court. Even the contents of para 5 does not disclose this aspect of the matter where it only says that the value of the security being more has no bearing towards classification without indicating what else was the method followed for classification. </span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">Thought the learned counsel for the respondents attempted to point out the circular of R.B.I., the same does not serve any purpose at this stage since neither the reply dated 25th May, 2005 nor the objection statement filed in this petition would refer to the details in this regard and <strong>what is required is not to notice the R.B.I guidelines alone but to indicate from the materials on record that the account in question falls within the guidelines. Only when that is done the respondents would be at liberty to proceed in accordance with law. Hence it requires reconsideration at the hands of the respondents themselves."</strong>And again the Hon’ble High Court points out, "37. <strong>Next we come to the question as to whether it is on whims and fancies of the financial institutions to classify the assets as non-performing assets, as canvassed before us. We find it not to be so”. </strong></span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">The judgment further says, “Thus, from the above, it is clear that the classification of an account as NPA must be in accordance with the directions or guidelines relating to asset classification issued by the RBI. The said aspect of classification of the account as NPA, therefore, assumes any amount of importance and is the first step that is necessary to be satisfied by the creditor bank for invoking the provisions of the SARFAESI Act.</span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"> It would, therefore, be open for the borrower to invoke the jurisdiction of this Court seeking judicial review of such decision of a creditor declaring his account as NPA, in view of the fact that such classification by itself leads to serious consequences of invocation of the SARFAESI Act against the borrower. Further, Section 13(3)(A) of the SARFAESI Act inserted by amendment consequent upon a decision of the Supreme Court in MARDIA CHEMICALS's case (2 supra) makes the position further clear that mere rejection of objections of the borrower to the notice of the creditor under Section 13(2) of the SARFAESI Act, would not give rise to cause of action to invoke jurisdiction of DRT under Section 17 of the SARFAESI Act, unless measures as envisaged under sub-clause (4) of Section 13 of the SARFAESI Act are taken by the creditor.” The most important aspect of the judgment is, “19. We are, however, not persuaded to accept the said submission of the learned counsel for the respondents for the reason that a serious civil consequence will flow against the borrower, the moment his account is classified as NPA and thereafter, the proceedings are taken demanding entire outstanding amount by issuing a notice under Section 13(2) of the SARFAESI Act. <strong></strong></span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"><strong>The appropriate adjudicatory internal mechanism as envisaged by the Supreme Court is not evolved as is evident from the present case. In fact, the only reply which the bank gave to the objections of the petitioner was that 'we would like to bring to you attention that the said account was classified as NPA on 31.05.2006 and bank has every right to take legal steps under the SARFAESI Act to recover its outstanding overdues from the said NPA account' (see reply of the bank dated 01.09.2006).</strong></span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"><strong> T</strong></span></em><em><span style="font-family: Georgia, "Times New Roman", serif;"><strong>here is no reference in the said reply as to when and how the account was classified as NPA, particularly, when the petitioner has asserted to the contrary and has sent detailed objections to the very classification of the said account based upon the prudential norms referred to above. The judicial review before this Court is, therefore, certainly available to the borrower in such circumstances.</strong> The first question whether the notice issued u/s 13(2) of SARFAESI Act can be challenged is accordingly answered.</span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"> Regarding the application of section 13(4) of SARFESI Act the judgment says, “21. The Supreme Court in MARDIA CHEMICALS's case (2 supra) in relevant paragraphs 45 and 46 has laid down as follows:</span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"> "45...The purpose of serving a notice upon the borrower under sub-section (2) of Section 13 of the Act is, that a reply may be submitted by the borrower explaining the reasons as to why measures may or may not be taken under sub- section (4) of Section 13 in case of noncompliance of notice within 60 days. <strong></strong></span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"><strong>The creditor must apply its mind to the objections raised in reply to such notice and an internal mechanism must be particularly evolved to consider such objections raised in the reply to the notice. There may be some meaningful consideration of the objections raised rather than to ritually reject them and proceed to take drastic measures under sub-section (4) of Section 13 of the Act. Once such a duty is envisaged on the part of the creditor it would only be conducive to the principles of fairness on the part of the banks and financial institutions in dealing with their borrowers to apprise them of the reason for not accepting the objections or points raised in reply to the notice served upon them before proceeding to take measures under sub-section (4) of Section 13. Such reasons, overruling the objections of the borrower, must also be communicated to the borrower by the secured creditor. </strong></span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"><strong>It will only be in fulfillment of a requirement of reasonableness and fairness in the dealings of institutional financing</strong>which is so important from the point of view of the economy of the country and would serve the purpose in the growth of a healthy economy. </span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">It would certainly provide guidance to the secured debtors in general in conducting the affairs in a manner that they may not be found defaulting and being made liable for the unsavory steps contained under sub-section (4) of Section 13. At the same time, more importantly we must make it clear unequivocally that communication of the reasons not accepting the objections taken by the secured borrower may not be taken to give an occasion toresort to such proceedings which are not permissible under the provisions of the Act. </span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">But <strong>communication of reasons not to accept the objections of the borrower, would certainly be for the purpose of his knowledge which would be a step forward towards his right to know as to why his objections have not been accepted by the secured creditor who intends to resort to harsh steps of taking over the management/business of viz. secured assets without intervention of the court. Such a person in respect of whom steps under Section 13(4) of the Act are likely to be taken cannot be denied the right to know the reason of non-acceptance and of his objections..."</strong></span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"> "46. We are holding that it is necessary to communicate the reasons for not accepting the objections raised by the borrower in reply to notice under Section 13(2) of the Act more particularly for the reason that normally in the event of noncompliance with notice, the party giving notice approaches the court to seek redressal but in the present case, <strong>in view of Section 13 (1) of the Act the creditor is empowered to enforce the security himself without intervention of the Court. </strong></span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"><strong>Therefore, it goes with logic and reason that he may be checked to communicate the reason for not accepting the objections, if raised and before he takes the measures like taking over possession of the secured assets, etc.”</strong>It is apparent from the said sections of the Act that the SARFAESI Act comes into effect only if there is crystallized liability and that the account should be classified as NPA. Therefore, the judgment states, “23. <strong></strong></span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"><strong>The right of the borrower to have a due consideration of objections is, therefore, an important right of the borrower where the bank is bound to apply its mind and inform the borrower of its reasons as to why and how the account is classified as NPA, particularly, when the borrower raises specific objections in that regard. The reply of the bank must indicate application of mind by the bank that the </strong>decision of the bank in classifying the account as NPA was fully in conformity with the prudential norms of RBI. Non-consideration of the said objection by mere<strong> statements in the reply that the bank has considered the same cannot be said to be the fulfillment of the obligation of the bank under Sections 13(2) and 13(3)(A) of the SARFAESI Act.” </strong>Thus the second question also is clarified well.</span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"> Yet in another case of Madras High Court in the matter of W.P.No.15272 of 2009, Sheeba Philominal Merlin vs. The Repatriates Co-op Finance Bank on 10 August 2010, the judgment pronounced by the said High Court is worth recalling. The relevant portion is cited here with, “<strong>As per the Act, the first step would be to issue notice U/s. 13(2) by the authorised officer who is deemed to be armed with a money decree which attained finality. By the statute the authorised officer, is clothed with powers of trial court and execution court and the code of Civil Procedure which governs the civil proceedings is no more necessary. To put it otherwise, by the Special Act, the authorized officer acts like a Civil Court clothed with powers hitherto exercised by it.” </strong></span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"><strong>The judgment continues, “The financial institutions, namely the lenders owe a duty to act fairly and in good faith. There has to be a fair dealing between the parties and the financing companies/institutions are not free to ignore performance of their obligation as a party to the contract. They cannot be free from it…………..It is incumbent upon such financial institutions to act fairly and in good faith complying with their part of obligations under the contract</strong>. This is also the basic principle of concept of lender's liability. <strong>It cannot be a one-sided affair shutting out all possible and reasonable remedies to the other party, namely, borrowers and assume all drastic powers for speedier recovery of NPAs. Possessing more drastic powers calls for exercise of higher degree of good faith and fair play.</strong></span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"><strong> The borrowers cannot be left remediless in case they have been wronged against or subjected to unfair treatment violating the terms and conditions of the contract. They can always plead in defense deficiencies on the part of the banks and financial institutions.” Further, the judgment states, “5. The aforesaid Act clothes the authorized officer of the bank with enormous powers to deal with the secured assets to recover the outstanding amounts. Once the power is given, the Courts have held that the same has to be exercised in the way it is to be done and not otherwise. Here is a case where the first respondent/bank, contrary to the Act acted in whimsical and capricious manner and brought the property of the petitioners and sold the same to the fourth respondent in an ill-devised manner which is unknown to law.” </strong>But in practice the power vested with the Authorised Officer is abused and misused and it is not being exercised in the way it is to be done and not otherwise by the authorised officer of the bank or financial institution. </span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">The verdict further states, “The well-established precepts of public trust and public accountability are fully applicable to the functions which emerge from the public servants or even the persons holding public office.” And the judgment points out further, “82. <strong>Principle of public accountability is applicable to such officers/officials with all its vigour. Greater the power to decide higher is the responsibility to be just and fair. The dimensions of administrative law permit judicial intervention in decisions, though of administrative nature, but are ex facie discriminatory. The adverse impact of lack of probity in discharge of public duties can result in varied defects not only in the decision-making process but in the decision as well. </strong></span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"><strong>Every public officer is accountable for its decision and actions to the public in the larger interest and to the State administration in its governance</strong>.” The judgment concludes with the final order, “47. <strong>For non-compliance of mandatory provisions of the Act, fraud, lack of fair play, bonafides etc., the entire proceedings initiated by respondent bank in favour of the fourth respondent gets vitiated and is hereby set aside.” And “</strong>48. <strong>There will be an order of exemplary cost of Rs.50,000/- (Rupees fifty Thousand only) payable by the respondents bank 1 to 3 to the petitioners within 15 days from the date of the receipt of a copy of this order. Consequently, connected M.P.No.1 of 2009 is closed”. </strong></span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">Section 17(7) OF SARFAESI Act states, “Save as otherwise provided in this Act, the Debts Recovery Tribunal shall, as far as may be, dispose of the application in accordance with the provisions of the Recovery of Debts Due to Banks and Financial Institutions Act,1993 (51 of 1993) and the rules there under.” Further Section 37 of the SARFAESI Act also states, <strong>“Application of other laws not barred”</strong> in which RDDB Act, 1993 is also included.</span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"> Besides, SARFAESI ACT, 2002 states, under section 2- definitions(ha), “ { “Debt” shall have a meaning assigned to it in clause (g) of section 2 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993)}. Section 2 ((g) of DRT Act, 1993 which defines debt as, <strong>“ Debt”</strong> means any <strong>liability(inclusive of interest)</strong> which is claimed as due from any person by a bank or a financial institution or by a consortium of banks or financial institutions during the course of any business activity undertaken by the bank or the bank or financial institution or the consortium under any law for the time being in force, in cash or otherwise, whether secured or unsecured, or assigned , or otherwise, or whether payable under a decree or order of any civil court or any arbitration award or otherwise or under a mortgage and subsisting on, and <strong>legally recoverable on, the date of the application.</strong>” Such being the definition, it imperative and inevitable to ascertain whether the claim of the bank and financial institution pertains to <strong>legally recoverable debtor not</strong> for which first of all the debt has to be crystallised.</span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"> Unless and until that is done, the bank and the financial institution cannot invoke SARFAESI Act and issue notice u/s 13(2) of the said Act and takefurther action u/s 13(4) of the said Act to take possession of the securities on which security interest has been created by them.The following two aspects are to be considered by the appropriate authorities when the bank and financial institution invoke SARFAESI Act.</span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"> - The secured creditor / authorised officer must ensure whether the demand made by them under section 13 (2) of SARFAESI Act is for the recovery of <strong>legally recoverable debt for which the debt has to be crystallized. </strong>Besides, the authorised Officer must also make certain that the representation made and objections raised by the borrower are understood properly by application of mind to the points brought out by the borrower to ascertain without any ambiguity and doubt that he is justified in rejecting the representation and objections of the borrower to realize the <strong>legally recoverable dues. </strong></span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"> - The presiding officer of DRT also should ensure that the bank and the financial institution make certain that they have invoked section 13(4) of SARFAESI Act for the <strong>recovery of crystallised and legally recoverable debt only</strong> and that they sought the assistance of District Magistrate / Metropolitan Magistrate to take physical possession of the secured assets and that the District Magistrate / Metropolitan Magistrate also extend their assistance only after ascertaining the facts as true and correct as submitted in the affidavit by bank and financial institution for the recovery of <strong>legally recoverable debt only.</strong>In this connection the following judgment of Madras High Court is worth recalling. “In the matter of V. Noble Kumar vs Standard Chartered Bank, the Madras High Court (DB) vide citation 2011(1) Bankers’ Journal 178 decided on 27.07.10, declared that the proceedings mounted to arbitrary exercise of powers under Sec 14 and therefore the order of the CJM was set aside. The extract of the order is reproduced here below.</span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">“19.A perusal of the said order shows that the Chief Judicial Magistrate had merely directed the appointment of a Commissioner for the purpose of taking possession of the schedule mentioned property and to hand over the same to the secured creditor. There is nothing to indicate as to the compliance of the provisions of section 13(2), 13(4) and Rule 8. As there is no reference to the compliance of the provisions by the secured creditor, it must be presumed that no materials were placed before the Chief Judicial Magistrate by the secured creditor in respect of the compliance. Further, the affidavit filed by the bank in support of the petition seeking for vacating interim order, nothing has been stated as to the compliance of the provisions of section1 3(2), 13(4) and particularly Rule 8. It does not also state that even after the advocate commissioner was directed to take possession, the above procedures have been followed. In that view of the matter, the impugned proceedings are unsustainable in the eye of law, as it would amount to arbitrary exercise of the powers conferred under section 14.</span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"> 20. Accordingly, the impugned order of the learned Chief Judicial Magistrate, Chengalpattu, dated 14.12.2009 is set aside. The writ petition is allowed. No costs. Consequently, connected M.Ps. are closed.”</span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">The pertinent question is what constitutes legally recoverable debt? Where as definition of <strong>debt</strong> is given, no where the definition of <strong>“legally recoverable”</strong> is given either in SARFAESI Act or under RDDB Act. Unless the definition of <strong>“legally recoverable”</strong> is resolved, it will be subjected to various interpretation and definition. (The author has given his interpretation of “legally recoverable debt in one his articles on the subject matter) Hence, it is apparent that section 13(2) can be challenged at any point of time during the process of adjudication or through the representation and objections submitted by the borrower or through his S.A andthe challenge of section 13(4) of SARFAESI Act need not be confined alone to the steps taken by the bank and financial institution under section 13(4) of SARFAESI Act. </span></em></div>
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<strong><em><span style="font-family: Georgia, "Times New Roman", serif;">T.R.Radhakrishnan,</span></em></strong></div>
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<strong><em><span style="font-family: Georgia, "Times New Roman", serif;">Banking & Management Consultant,</span></em></strong></div>
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<strong><em><span style="font-family: Georgia, "Times New Roman", serif;">Facilitator: DRT & SARFAESI CASES and CONSUMER FORUM,</span></em></strong></div>
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<strong><em><span style="font-family: Georgia, "Times New Roman", serif;">H.R.Trainer: Corporates, Colleges & Schools, & Freelance Writer,</span></em></strong></div>
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<strong><em><span style="font-family: Georgia, "Times New Roman", serif;"> No. 8, Morya Gardens, </span></em></strong></div>
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<strong><em><span style="font-family: Georgia, "Times New Roman", serif;">Indoe.452016 (Madhya Pradesh)</span></em></strong></div>
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<strong><em><span style="font-family: Georgia, "Times New Roman", serif;">E-mail: <a href="mailto:trrk1941@gmail.com">trrk1941@gmail.com</a></span></em></strong><br />
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<a href="http://www.lawyersclubindia.com/articles/SARFAESI-Act-2002-Enforcement-of-security-interest-6657.asp?utm_source=newsletter&utm_content=news&utm_medium=email&utm_campaign=nl_May#.VU1MxO-JjIU">http://www.lawyersclubindia.com/articles/SARFAESI-Act-2002-Enforcement-of-security-interest-6657.asp?utm_source=newsletter&utm_content=news&utm_medium=email&utm_campaign=nl_May#.VU1MxO-JjIU</a></div>
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Danendra Jainhttp://www.blogger.com/profile/06877409854811449220noreply@blogger.com0tag:blogger.com,1999:blog-4486476466973233733.post-32479467775560394182015-04-26T19:22:00.002-07:002015-04-26T19:22:39.542-07:00Jurisdiction OF DRT Against Guarantor<span style="background-color: yellow; font-family: Georgia, "Times New Roman", serif; font-size: x-large;"><em>DRT has no jurisdiction to issue Certificate of Recovery against the Guarantor-By Sri Narendra Sharma in Lawyers' Club</em></span><br />
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<em><span style="font-family: Georgia, "Times New Roman", serif;"><span class="style3" style="background-repeatt: initial initial; font-familyy: Arial;">(1)</span><span style="background-repeatt: initial initial; font-familyy: Arial;"> It is respectfully submitted that the recovery proceedings against the Guarantor before hon’ble Debts Recovery Tribunal (hereinafter ‘DRT’ or ‘</span><span style="font-familyy: Arial;">Tribunal</span><span style="background-repeatt: initial initial; font-familyy: Arial;">’) under section 19 of </span><span style="font-familyy: Arial;">the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (<span style="background-repeatt: initial initial;">hereinafter</span> ‘the Act’)<span style="background-repeatt: initial initial;"> are absolutely unlawful. DRT has no jurisdiction to proceed against the Guarantor as he has not taken any "debt", which he has to repay. As per section 4 of the U.S. Statutes of Frauds, 1677 a promise ‘to answer for the debt, default or miscarriage of another person’ is a contract of guarantee. The Guarantor promises to discharge the debtor’s liability if the debtor should fail to do so. <span class="style2">The Guarantor’s liability is therefore secondary </span>to that of the principal debtor {Guild & Co. v. Conrad (1894) 2 QB 885, 896}. <o:p></o:p></span></span></span></em><br />
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<em><span style="font-family: Georgia, "Times New Roman", serif;"><span class="style3" style="font-familyy: Arial;">1.1</span><span style="font-familyy: Arial;"> Section 2(g) of the Act defines ‘debt' to mean: </span><span style="background-repeatt: initial initial; font-familyy: Arial;"><o:p></o:p></span></span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"><span style="font-familyy: Arial;">“any liability (inclusive of interest) which is claimed as due from any person by a bank or a financial institution or by a consortium of banks or financial institutions during the course of any business activity undertaken by the bank or the financial institution or the consortium under any law for the time being in force, in cash or otherwise, whether secured or unsecured, or assigned, or whether payable under a decree or order of any civil Court or any arbitration award or otherwise or under a mortgage and subsisting and legally recoverable on, the date of the application.” </span><span style="background-repeatt: initial initial; font-familyy: Arial;"><o:p></o:p></span></span></em></div>
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<span style="background-repeatt: initial initial; font-familyy: Arial;"><em><span style="font-family: Georgia, "Times New Roman", serif;">Hon’ble Bombay High Court in Centurion Bank Ltd. vs Indian Lead Ltd. And Anr. {(2000) 100 Comp Cas 537 Bom; (1999-3) 101 Bom LR 556; Decided on 20 August, 1999} has, inter alia, held as follows. <o:p></o:p></span></em></span></div>
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<span style="background-repeatt: initial initial; font-familyy: Arial;"><em><span style="font-family: Georgia, "Times New Roman", serif;">"19. It has been pointed out that defendant No. 2 is a guarantor against whom the suit is only for recovery of money. <span class="style2">The suit against the guarantor is not a suit for recovery of debt but for enforcement of the guarantee</span>." (Emphasis supplied)<o:p></o:p></span></em></span></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"><span style="font-familyy: Arial;">The readers may please note that, unless stated otherwise, the contents of all the following paragraphs are the relevant extract from the judgment of </span><span style="font-familyy: Arial;">Hon’ble Supreme Court in </span> <span style="font-familyy: Arial; font-sizee: 13pt; line-heightt: 150%;">Nahar Industrial Enterprises </span> <span style="font-familyy: Arial;">Ltd</span><span style="font-familyy: Arial; font-sizee: 13pt; line-heightt: 150%;"> vs Hongkong & Shanghai Banking Corp. </span><span style="font-familyy: Arial;">{2009 (2) DRTC 273 (SC)</span><span style="font-familyy: Arial;">; Decided on </span><span style="font-familyy: Arial; font-sizee: 13pt; line-heightt: 150%;">29 July, 2009</span><span style="font-familyy: Arial;">}. <span style="background-repeatt: initial initial;">(Further, the italics/bold/underline have been supplied by me in all the following paragraphs as per the comparative importance of the content).<o:p></o:p></span></span></span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"><span class="style3" style="font-familyy: Arial; font-sizee: 12.0pt; line-heightt: 150%;">(2) </span><span style="font-familyy: Arial; font-sizee: 12.0pt; line-heightt: 150%;"> Hon’ble Supreme Court in Karnataka State Financial Corporation Vs N. Narasimahaiah & Ors {2008 AIR 1797, 2008 (5) SCC 176; Decided on 13/03/2008} has, inter alia, observed as follows.<o:p></o:p></span></span></em></div>
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<span style="font-familyy: Arial;"><em><span style="font-family: Georgia, "Times New Roman", serif;">“12. If special provisions are made <span class="style2">in derogation to the general right of a citizen</span>, the statute, in our opinion, should receive strict construction. “<o:p></o:p></span></em></span></div>
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<span style="font-familyy: Arial;"><em><span style="font-family: Georgia, "Times New Roman", serif;">14. Section 29 of the Act nowhere states that the corporation can proceed against the surety even if some properties are mortgaged or hypothecated by it. The right of the financial corporation in terms of Section 29 of the Act must be exercised only on a defaulting party. <span class="style2">There cannot be any default as is envisaged in Section 29 by a surety or a guarantor</span>. The liabilities of a surety or the guarantor to repay the loan of the principal debtor arises only when a default is made by the latter.<o:p></o:p></span></em></span></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">“<span style="font-familyy: Arial;">18. Apart from the defences available to a principal borrower under the provisions of the Indian Contract Act, <span class="style2">a surety or a guarantor is entitled to take additional defence</span>. Such additional defence may be taken by the guarantor not only against the corporation but also against the principal debtor. He, in a given situation, would be entitled to show that the contract of guarantee has come to a not. <span class="style2">Ordinarily, therefore, when a guarantee is sought to be enforced, the same must be done through a court having appropriate jurisdiction</span>. In the absence of any express provision in the statute, a person being in lawful possession cannot be deprived thereof by reason of default on the part of a principal borrower.”<span style="background-repeatt: initial initial;"> (Emphasis supplied)<o:p></o:p></span></span></span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"><span class="style3" style="font-familyy: Arial;">(3) </span><span style="font-familyy: Arial;">Therefore, now let us examine<span class="style3"> </span>whether DRT is </span> <span style="font-familyy: Arial;">a court having appropriate jurisdiction?</span><span style="font-familyy: Arial;"><o:p></o:p></span></span></em></div>
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<span style="font-familyy: Arial;"><em><span style="font-family: Georgia, "Times New Roman", serif;">“Section 17 - Jurisdiction, powers and authority of Tribunals.--(1) A Tribunal shall exercise, on and from the appointed day, the jurisdiction, powers and authority to entertain and decide <span class="style3">applications from the banks and financial institutions</span> <span class="style3">for recovery of debts </span>due to such banks and financial institutions.”<o:p></o:p></span></em></span></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">Section 18 bars the jurisdiction of all courts in relation to the matters specified in Section 17 (except of the Supreme Court and of a High Court under Articles 226 and 227 of the Constitution).<o:p></o:p></span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"><span style="font-familyy: Arial; mso-bidi-font-weight: bold;">“18. Bar of Jurisdiction.</span><span style="font-familyy: Arial;">—On and from the appointed day, <span class="style3">no court</span> or other authority <span class="style3">shall have, or be entitled to exercise, any jurisdiction</span>, powers or authority (except the Supreme Court, and a High Court exercising jurisdiction under articles 226 and 227 of the Constitution) <span class="style3">in relation to the matters specified in section 17</span>.”<o:p></o:p></span></span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"><span class="style3" style="font-familyy: Arial;">4.1 </span><span style="font-familyy: Arial;">Section 22 provides for the procedure and powers of the Tribunal and Appellate Tribunal, sub-section (1) whereof reads as under: “Section 22 - Procedure and Powers of the Tribunal and the Appellate Tribunal.--(1) <span class="style3">The Tribunal </span>and the Appellate Tribunal <span class="style3">shall not be bound by the procedure laid down by the Code of Civil Procedure, 1908</span> (5 of 1908), but shall be guided by the principles of natural justice and, subject to the other provisions of this Act and of any rules, the Tribunal and the Appellate Tribunal shall have powers to regulate their own procedure including the places at which they shall have their sittings.” <o:p></o:p></span></span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"><span class="style3" style="font-familyy: Arial;">4.2</span><span style="font-familyy: Arial;"> The term ‘jurisdiction’ means the authority to enforce laws or pronounce legal judgments. Proceedings before DRT is <span class="style2">sui generis </span>(means ‘of his own kind’ or ‘peculiar to himself’) and <span class="style3">totally different from the procedure in a Civil Court.</span><o:p></o:p></span></span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"><span class="style3" style="font-familyy: Arial;">(5)</span><span style="font-familyy: Arial;"> Section 2 (2) of the Code of Civil Procedure, 1908 (</span><span style="background-repeatt: initial initial; font-familyy: Arial;">hereinafter</span><span style="font-familyy: Arial;"> ‘the Code’) defines a <span class="style3">“decree”</span> to mean the formal expression of <span class="style3">an adjudication which</span>, so far as regards the Court expressing it, <span class="style2">conclusively determines the rights of the parties with regard to all or any of the matters in controversy in the suit</span> and may be either preliminary or final. `Judge' has been defined under Section 2(8) of the Code to mean the presiding officer of a Civil Court. Section 2(14) of the Code defines an <span class="style3">“order”</span> to mean the formal expression of any decision of a Civil Court <span class="style3">which is not a decree</span>.<span style="background-repeatt: initial initial;"><o:p></o:p></span></span></span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"><span class="style3" style="background-repeatt: initial initial; font-familyy: Arial;">(6)</span><span class="style3" style="font-familyy: Arial;"> </span><span style="font-familyy: Arial;">Delhi High Court in Cofex Exports Ltd. vs. Canara Bank [AIR 1997 Delhi 355] opined that <span class="style3">Debt Recovery Tribunal is not a court but is a Tribunal</span> having been created by a statute vested with a special jurisdiction to try only applications by banks or financial institutions to recover any debt. Although having regard to the provisions contained in clauses (a) to (b) of sub-section (2) of Section 22 of the Act <span class="style3">it had all the trappings of a court but it was held not to be a court as such. </span>In relation to the conflict of jurisdiction between the Civil Court and the Tribunal, it was observed:<o:p></o:p></span></span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"><span style="font-familyy: Arial;">“39. Finality shall attach to the findings arrived at and reached by each of the two within its respective jurisdictional competence. Issues heard and decided by the Tribunal shall operate as res judicata and shall bind the parties in the suit before the civil court by virtue of explanation VIII to S. 11 Civil Procedure Code.<span class="style3"> </span>However, the civil court shall be free to decide such issues as lie within its jurisdictional competence. If the civil court must decide an issue seized by it and within its competence and <span class="style2">if there be an unavoidable conflict between the findings recorded by the civil court and by the Tribunal, the finding of Civil Court would obviously override </span> and supersede the findings recorded by the Tribunal for a court is a court and tribunal is a tribunal;<span class="style2"> the former adjudicates on trial, the later holds only a summary inquiry guided by principles of natural justice as the Act provides.”</span></span><span style="background-repeatt: initial initial; font-familyy: Arial;"> </span></span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"><span style="font-familyy: Arial;">It was, thus, held that the Tribunal is inferior to that of the Civil Court.</span><span style="font-familyy: Arial; font-sizee: 10pt; line-heightt: 150%;"><o:p></o:p></span></span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"><span class="style3" style="background-repeatt: initial initial; font-familyy: Arial;">(7)</span><span style="background-repeatt: initial initial; font-familyy: Arial;"> </span><span class="style3" style="font-familyy: Arial;">Civil court is a body established by law for administration of justice</span><span style="font-familyy: Arial;">. We may notice that a learned Single Judge of the Calcutta High Court in State Bank of India vs Madhumita Construction Pvt Ltd (AIR 2003 Cal. 7) and a Division Bench of the Delhi High Court in Cofex Exports Ltd. vs. Canara Bank [AIR 1997 Delhi 355] have held that the <span class="style3">DRT is not a court</span> and <span class="style3">it exercises</span> <span class="style3">powers of a civil court</span> <span class="style3">only in respect of limited matters</span>. Civil Courts are constituted under statutes, like Bengal, Agra and Assam Civil Courts Act, 1887. Pecuniary and territorial jurisdiction of the civil courts are fixed in terms thereof. Jurisdiction to determine subject matter of suit, however, emanates from Section 9 of the Code.</span></span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"><span class="style3" style="font-familyy: Arial;">7.1</span><span style="font-familyy: Arial;"> <a class="style6 ExternalLink" href="http://www.indiankanoon.org/doc/193036/" target="_blank"><span style="color: black; text-underline: none;">In P. Sarathy v. State Bank of India {2000 (5) SCC 355</span></a>}<span class="style1"> </span>Hon’ble Supreme Court has held :- <o:p></o:p> </span></span></em></div>
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<span style="font-familyy: Arial;"><em><span style="font-family: Georgia, "Times New Roman", serif;">“12. It will be noticed that Section 14 of the Limitation Act <span class="style3">does not speak of a “civil court” but speaks only of a “court”</span>. It is not necessary that the court spoken of in Section 14 should be a “civil court”. Any authority or tribunal having the trappings of a court would be a “court” within the meaning of this section.<o:p></o:p></span></em></span></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"><span style="font-familyy: Arial;">13. ... in order to constitute a court in the strict sense of the term, an essential condition is that<span class="style3"> the court should have</span>, apart from having some of the trappings of a judicial tribunal, <span class="style3">power to give a decision or a definitive judgment which has finality and authoritativeness</span> which are the essential tests of a judicial pronouncement”.</span><span style="background-repeatt: initial initial; font-familyy: Arial;"> (Emphasis supplied)<o:p></o:p></span></span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"><span class="style3" style="background-repeatt: initial initial; font-familyy: Arial;">(8)</span><span class="style2" style="font-familyy: Arial;"> If the Tribunal was to be treated to be a civil court, the debtor or even a third party must have an independent right to approach it </span><span style="font-familyy: Arial;">without having to wait for the Bank or Financial Institution to approach it first.<span class="style3"> </span>The continuance of its counter-claim is entirely dependant on the continuance of the applications filed by the Bank.<span class="style3"> Before it no declaratory relief can be sought for by the debtor. </span>It is true that claim for damages would be maintainable but the same have been provided by way of extending the right of counter-claim.<o:p></o:p></span></span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"><span class="style3" style="font-familyy: Arial;">8.1 Debt Recovery Tribunal cannot pass a decree. It can issue only recovery certificates. </span><span style="font-familyy: Arial;">[See Sections 19(2) and 19(22) of the Act]. The power of the Tribunal to grant interim order is attenuated with circumspection. {See Dataware Design Labs. v. State Bank of India, {[2005] 12 Comp. Cas. 176 (Ker) at 184}.</span></span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"><span class="style3" style="font-familyy: Arial;">8.2</span><span style="font-familyy: Arial;"> Concededly <span class="style3">in the proceeding before the Debt Recovery Tribunal detailed examination; cross-examinations, provisions of the Evidence Act as also application of other provisions of the Code of Civil Procedure like interrogatories, discoveries of documents and admission need not be gone into. </span>Taking recourse to such proceedings would be an exception. Entire focus of the proceedings before the Debt Recovery Tribunal centers round the legally recoverable dues of the bank.<o:p></o:p></span></span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"><span class="style3" style="font-familyy: Arial;">8.3</span><span style="font-familyy: Arial;"> For the aforementioned purpose, we must bear in mind the distinction between two types of courts, viz., civil courts and the courts trying disputes of civil nature. <span class="style3">Only because a court or a tribunal is entitled to determine an issue involving civil nature, the same by itself would not lead to the conclusion that it is a civil court. </span>For the said purpose, as noticed hereinbefore, a legal fiction is required to be created before it would have all attributes of a civil court. <b>The Tribunal could have been treated to be a civil court provided it could pass a <span class="style3">decree</span> and it had all the attributes of a civil</b> <span class="style2">court including undertaking of a full-fledged trial in terms of the provisions of the Code of Civil Procedure and/or the Evidence Act.</span> <o:p></o:p> </span></span></em></div>
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<span style="font-familyy: Arial;"><em><span style="font-family: Georgia, "Times New Roman", serif;">8.4 It is now trite law that jurisdiction of a court must be determined having regard to the purpose and object of the Act. If the Parliament, keeping in view the purpose and object thereof thought it fit to create separate tribunal so as to enable the banks and the financial institutions to recover the debts expeditiously wherefor the provisions contained in the Code of Civil Procedure as also the Evidence Act need not necessarily be resorted to, in our opinion, by taking recourse to the doctrine of purposive construction, another jurisdiction cannot be conferred upon it so as to enable this Court to transfer the case from the civil court to a tribunal. <o:p></o:p></span></em></span></div>
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<span style="font-familyy: Arial; font-sizee: 10pt;"><em><span style="font-family: Georgia, "Times New Roman", serif;"><o:p> </o:p><o:p> </o:p></span></em></span></div>
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<span style="font-familyy: Arial;"><em><span style="font-family: Georgia, "Times New Roman", serif;">(9) CONCLUSION: The Tribunal was constituted with a specific purpose as is evident from its statement of objects. The preamble of the Act also is a pointer to that too. We have also noticed the scheme of the Act. It has a limited jurisdiction. Under the Act, as it originally stood, did not even have any power to entertain a claim of set off or counter-claim. <span class="style2">No independent proceedings can be initiated before it by a debtor. A debtor under the common law of contract as also in terms of the loan agreement may have an independent right. No forum has been created for endorsement of that right. </span>Jurisdiction of a civil court as noticed hereinbefore is barred only in respect of the matters which strictly come within the purview of Section 17 thereof and not beyond the same. The Civil Court, therefore, will continue to have jurisdiction. Even in respect of set off or counter-claim, having regard to the provisions of sub-sections (6) to (11) of Section 19 of the Act, it is evident :- <o:p></o:p> </span></em></span></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"> a) That the proceedings must be initiated by the bank <o:p></o:p></span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"> b) Some species of the remedy as provided therein would be available therefor.<o:p></o:p></span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"> c) In terms of sub-section (11) of Section 19, the bank or the financial institution is at liberty to send a borrower out of the forum.<o:p></o:p></span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"> d) In terms of the provisions of the Act, thus, the claim of the borrower is excluded and not included.<o:p></o:p></span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"> e) In the event the bank withdraws his claim the counter-claim would not survive which may be contrasted with Rule 6 of Order VIII of the Code.<o:p></o:p></span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"> f) Sub-section (9) of Section 19 of the Act in relation thereto has a limited application.<o:p></o:p></span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"> g) The claim petition by the bank or the financial institution must relate to a lending/borrowing transaction between a bank or the financial institution and the borrower.<o:p></o:p></span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"> h) The banks or the financial institutions, thus, have a primacy in respect of the proceedings before the Tribunal.<o:p></o:p></span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"> i) An order of injunction, attachment or appointment of a receiver can be initiated only at the instance of the bank or the financial institution. We, however, do not mean to suggest that a Tribunal having a plenary power, even otherwise would not be entitled to pass an order of injunction or an interim order, although ordinarily expressly it had no statutory power in relation thereto.<o:p></o:p></span></em></div>
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<span style="font-familyy: Arial;"><em><span style="font-family: Georgia, "Times New Roman", serif;"><span class="style2">j) It can issue a certificate only for recovery of its dues. It cannot pass a decree.</span><o:p></o:p></span></em></span></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"> It was held by hon’ble Supreme Court that the Tribunal, therefore, would not be a Civil Court. <o:p></o:p></span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"><span style="background-repeatt: initial initial; font-familyy: Arial;">(10) </span><span style="font-familyy: Arial;"><a class="style6 ExternalLink" href="http://www.indiankanoon.org/doc/1310275/" target="_blank"><span style="color: black; text-underline: none;">In State Bank of India v. Madhumita Construction (Pvt.) Ltd. and others</span></a>, [AIR 2003 Cal 7], the Calcutta High Court has held:- </span><o:p></o:p></span></em></div>
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<span style="font-familyy: Arial;"><em><span style="font-family: Georgia, "Times New Roman", serif;">“13. The Tribunal constituted under the DRT Act is not a Court. It is a Tribunal having the trappings of a Court. A Tribunal with trappings of Court cannot be equated with a Court as is understood from the expression “Court”. A Court is a body established by law for the administration of justice by Judges or Magistrates. This definition may include a Tribunal as well. Inasmuch as, it is also a body constituted or established by law for administration of justice. But, when it comes to the distinction between Court and Tribunal, then the Court as it understood is different from a Tribunal. The word “Court”, however, has not been defined anywhere in any law.”<o:p></o:p></span></em></span></div>
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<span style="font-familyy: Arial;"><em><span style="font-family: Georgia, "Times New Roman", serif;">10.1 </span></em><a class="style6 ExternalLink" href="http://www.indiankanoon.org/doc/1516582/" target="_blank"><span style="color: black; text-underline: none;"><em><span style="font-family: Georgia, "Times New Roman", serif;">In Greater Bombay Coop. Bank Ltd. v. United Yarn Tex (P) Ltd.,</span></em></span></a><em><span style="font-family: Georgia, "Times New Roman", serif;">[ (2007) 6 SCC 236 ], Supreme Court has held:- <o:p></o:p> </span></em></span></div>
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<span style="font-familyy: Arial;"><em><span style="font-family: Georgia, "Times New Roman", serif;">“Para 77. </span></em><a class="style7 ExternalLink" href="http://www.indiankanoon.org/doc/1531171/" target="_blank"><span style="color: black; text-underline: none;"><em><span style="font-family: Georgia, "Times New Roman", serif;">In Harinagar Sugar Mills v. Shyam Sundar Jhunjhunwala</span></em></span></a><em><span style="font-family: Georgia, "Times New Roman", serif;"> this Court held: (AIR p. 1680, para 32) <o:p></o:p> </span></em></span></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"> By `courts' is meant courts of civil judicature and by `tribunals', those bodies of men who are appointed to decide controversies arising under certain special laws. Among the powers of the State is included the power to decide such controversies. This is undoubtedly one of the attributes of the State, and is aptly called the judicial power of the State.”<o:p></o:p></span></em></div>
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<o:p><em><span style="font-family: Georgia, "Times New Roman", serif;"></span></em></o:p><br /></div>
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<span style="font-familyy: Arial;"><em><span style="font-family: Georgia, "Times New Roman", serif;">10.2 </span></em><a class="style6 ExternalLink" href="http://www.indiankanoon.org/doc/908954/" target="_blank"><span style="color: black; text-underline: none;"><em><span style="font-family: Georgia, "Times New Roman", serif;">In Supreme Court Legal Aid Committee v. Union of India</span></em></span></a><em><span style="font-family: Georgia, "Times New Roman", serif;"> it was held: (SCC p.745, para 14)<o:p></o:p></span></em></span></div>
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<span style="font-familyy: Arial;"><em><span style="font-family: Georgia, "Times New Roman", serif;"> “14. It is common knowledge that a `court' is an agency created by the sovereign for the purpose of administering of justice. It is a place where justice is judicially administered. It is a legal entity.”<o:p></o:p></span></em></span></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"><span style="background-repeatt: initial initial; font-familyy: Arial;">(11) </span> <span style="font-familyy: Arial;">EXCLUSION OF JURISDICTION MUST BE EXPRESS:<b><o:p></o:p></b></span></span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"> It must be remembered that the jurisdiction of a civil court is plenary in nature. Unless the same is ousted, expressly or by necessary implication, it will have jurisdiction to try all types of suits.<o:p></o:p></span></em></div>
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<o:p><em><span style="font-family: Georgia, "Times New Roman", serif;"> </span></em></o:p></div>
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<span style="font-familyy: Arial;"><em><span style="font-family: Georgia, "Times New Roman", serif;">11.1 In Dwarka Prasad Agarwal v. Ramesh Chander Agarwal, [(2003) 6 SCC 220] five principles were laid down stating :- <o:p></o:p> </span></em></span></div>
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<span style="font-familyy: Arial;"><em><span style="font-family: Georgia, "Times New Roman", serif;">“22. The dispute between the parties was eminently a civil dispute and not a dispute under the provisions of the Companies Act. Section 9 of the Code of Civil Procedure confers jurisdiction upon the civil courts to determine all disputes of civil nature unless the same is barred under a statute either expressly or by necessary implication. Bar of jurisdiction of a civil court is not to be readily inferred. A provision seeking to bar jurisdiction of a civil court requires strict interpretation. The court, it is well settled, would normally lean in favour of construction, which would uphold retention of jurisdiction of the civil court. The burden of proof in this behalf shall be on the party who asserts that the civil court's jurisdiction is ousted. </span></em><a class="style6 ExternalLink" href="http://www.indiankanoon.org/doc/928471/" target="_blank"><span style="color: black; text-underline: none;"><em><span style="font-family: Georgia, "Times New Roman", serif;">(See Sahebgouda v. Ogeppa,</span></em></span></a><em><span style="font-family: Georgia, "Times New Roman", serif;"> (2003) 6 SCC 151.) Even otherwise, the civil court's jurisdiction is not completely ousted under the Companies Act, 1956.</span></em></span></div>
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<span style="font-familyy: Arial;"><o:p><em><span style="font-family: Georgia, "Times New Roman", serif;"></span></em></o:p></span><br /></div>
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<o:p><em><span style="font-family: Georgia, "Times New Roman", serif;"></span></em></o:p><br /></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"> </span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"> </span></em></div>
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<span style="font-familyy: Arial;"><em><span style="font-family: Georgia, "Times New Roman", serif;">11.2 </span></em><a class="style6 ExternalLink" href="http://www.indiankanoon.org/doc/430173/" target="_blank"><span style="color: black; text-underline: none;"><em><span style="font-family: Georgia, "Times New Roman", serif;">In Nagri Pracharini Sabha v. Vth Addl. Distt. and Sessions Judge,</span></em></span></a><em><span style="font-family: Georgia, "Times New Roman", serif;"> [1991 Supp (2) SCC 36] Supreme Court has held :- <o:p></o:p> </span></em></span></div>
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<o:p><em><span style="font-family: Georgia, "Times New Roman", serif;"></span></em></o:p><br /></div>
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<span style="font-familyy: Arial;"><em><span style="font-family: Georgia, "Times New Roman", serif;">“2. A litigant having a grievance of a civil nature has, independently of any statute, a right to institute a suit in the civil court unless its cognizance is either expressly or impliedly barred. The position is well-settled that exclusion of jurisdiction of the civil court is not to be readily inferred and such exclusion must be either expressly or implied. <o:p></o:p> </span></em></span></div>
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<span style="font-familyy: Arial;"><em><span style="font-family: Georgia, "Times New Roman", serif;"> <o:p></o:p></span></em></span></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"> </span></em></div>
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<span style="font-familyy: Arial;"><em><span style="font-family: Georgia, "Times New Roman", serif;">11.3 </span></em><a class="style6 ExternalLink" href="http://www.indiankanoon.org/doc/1880938/" target="_blank"><span style="color: black; text-underline: none;"><em><span style="font-family: Georgia, "Times New Roman", serif;">In Ramesh Chand Ardawatiya v. Anil Panjwani,</span></em></span></a><em><span style="font-family: Georgia, "Times New Roman", serif;"> [(2003) 7 SCC 350] Supreme Court opined :-<o:p></o:p></span></em></span></div>
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<o:p><em><span style="font-family: Georgia, "Times New Roman", serif;"></span></em></o:p><br /></div>
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<o:p><em><span style="font-family: Georgia, "Times New Roman", serif;"> </span></em></o:p></div>
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<span style="font-familyy: Arial;"><em><span style="font-family: Georgia, "Times New Roman", serif;">“19. ..Where there is a special tribunal conferred with jurisdiction or exclusive jurisdiction to try a particular class of cases even then the civil court can entertain a civil suit of that class on availability of a few grounds. An exclusion of jurisdiction of the civil court is not to be readily inferred. (See Dhulabhai v. State of M.P.) <o:p></o:p></span></em></span></div>
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<o:p><em><span style="font-family: Georgia, "Times New Roman", serif;"> </span></em></o:p></div>
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<span style="font-familyy: Arial;"><em><span style="font-family: Georgia, "Times New Roman", serif;">11.4 The Act, although, was enacted for a specific purpose but having regard to the exclusion of jurisdiction expressly provided for in Sections 17 and 18 of the Act, it is difficult to hold that a civil court's jurisdiction is completely ousted. Indisputably the banks and the financial institutions for the purpose of enforcement of their claim for a sum below Rs. 10 lakhs would have to file civil suits before the civil courts. It is only for the claims of the banks and the financial institutions above the aforementioned sum that they have to approach the Debt Recovery Tribunal. It is also without any cavil that the banks and the financial institutions, keeping in view the provisions of Sections 17 and 18 of the Act, are necessarily required to file their claim petitions before the Tribunal. The converse is not true.<o:p></o:p></span></em></span></div>
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<span style="font-familyy: Arial;"><em><span style="font-family: Georgia, "Times New Roman", serif;">11.5 Debtors can file their claims of set off or counter-claims only when a claim application is filed and not otherwise. Even in a given situation the banks and/or the financial institutions can ask the Tribunal to pass an appropriate order for getting the claims of set-off or the counter claims, determined by a civil court. The Tribunal is not a high powered tribunal. It is a one man Tribunal. Unlike some Special Acts, as for example Andhra Pradesh Land Grabbing (Prohibition) Act, 1982 it does not contain a deeming provision that the Tribunal would be deemed to be a civil court. <o:p></o:p> </span></em></span></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"> 11.6 The liabilities and rights of the parties have not been created under the Act. Only a new forum has been created. The banks and the financial institutions cannot approach the Tribunal unless the debt has become due. In such a contingency, indisputably a civil suit would lie.<o:p></o:p></span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"><span style="background-repeatt: initial initial; font-familyy: Arial;">(12) </span><span style="font-familyy: Arial;">Sub-section (3) of Section 22 of the Act raises a legal fiction that the proceeding before the Tribunal or the Appellate Tribunal shall be deemed to be a judicial proceeding within the meaning of Sections 193 and 228 and for all the purposes of Section 196 of the Indian Penal Code, 1860. The very fact that a legal fiction has been created and the Tribunal or the Appellate Tribunal shall be deemed to be a civil court for purposes of Section 195 and Chapter XXVI of the Code of Civil Procedure, 1973, itself suggests that the Parliament did not intend to take away the jurisdiction of the civil court. In any event, the said legal faction has a limited application. Its scope and ambit cannot be extended. <o:p></o:p></span></span></em></div>
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<span style="font-familyy: Arial;"><em><span style="font-family: Georgia, "Times New Roman", serif;">12.1 Supreme Court accepted that disposal of a civil suit takes a long time. But indisputably remedy of summary and speedy trial by itself would not be sufficient to oust the jurisdiction of the civil court. Had the intention of the Parliament been so, it could have expressly said so. Casus omissus, as is well known, cannot be supplied.</span></em></span></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"><span style="background-repeatt: initial initial; font-familyy: Arial;">(13)</span><span style="font-familyy: Arial;"> VESTED RIGHT OF APPEAL: When a person files a civil suit his right to prosecute the same in terms of the provisions of the Code as also his right of appeal by way of first appeal; second appeal etc. are preserved. Such rights cannot be curtailed, far less taken away except by reason of an express provision contained in the statute. Such a provision in the statute must be express or must be found out by necessary implication.</span></span></em></div>
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<span style="font-familyy: Arial;"><em><span style="font-family: Georgia, "Times New Roman", serif;">13.1 The Code not only contains procedural provisions but also substantive rights ; right of appeal is one of them. A forum of appeal is determined in terms of the provisions of the Code having regard to the pecuniary jurisdiction of the Court as may be notified by the appropriate Government from time to time. A suitor has the right to maintain a first appeal. A second appeal also is maintainable before a High Court, subject of course to the effect that questions of law must be there for the court's consideration. For the said purpose no pre-deposit is required to be made, as is necessary in terms of the Act, that 75% of the awarded amount is required to be deposited, subject of course, to an order to the contrary, which may be passed by the Debt Recovery Appellate Tribunal. Such a right of conditional appeal, in our opinion, curtails party's right to maintain an appeal as a matter of right.</span></em></span></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"> 13.2 In the event, however, if a civil suit is transferred to the Debt Recovery Tribunal, the plaintiff would be deprived of his right in relation to the procedural mechanism as contained in the Code as also the Evidence Act. His right of appeal would also stand curtailed. While exercising the power of transfer, the High Court and this Court would thus be curtailing the right of a suitor indirectly which could not be done directly. It clearly establishes the Parliamentary intent that only civil suits are subject matter of inter State transfer from one civil court to another civil court. If such a power is exercised, all the rights of the plaintiff remain intact, no right is taken away and no right is diluted.<o:p></o:p></span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"> (14) What agreements are contracts</span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"> Section 10 of the Indian Contract Act, 1872 provides that - An agreement between two or more parties becomes a contract when the following conditions are satisfied: <o:p></o:p></span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"> (1) …xxx… </span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"> (2) ……xxx………….<o:p></o:p></span></em></div>
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<span style="font-familyy: Arial;"><em><span style="font-family: Georgia, "Times New Roman", serif;">(3) The parties’ <span class="style2">consent is free</span>. <o:p></o:p></span></em></span></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"> (4) ……..xxx………..<o:p></o:p></span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">14.1 “Free consent” defined</span></em></div>
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<span style="font-familyy: Arial;"><em><span style="font-family: Georgia, "Times New Roman", serif;">“Consent is said to be free when it is not caused by:</span></em></span></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"> (1) ………xxx……………<o:p></o:p></span></em></div>
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<span style="font-familyy: Arial;"><em><span style="font-family: Georgia, "Times New Roman", serif;">(2) undue influence, as defined in Section 16, or<o:p></o:p></span></em></span></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"> (3) ……xxx…...</span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"> (4) ………xxx…………...</span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"> (5) ……xxx………………<o:p></o:p></span></em></div>
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<span style="font-familyy: Arial;"><em><span style="font-family: Georgia, "Times New Roman", serif;">Consent is said to be so caused when it would not have been given but for the existence of such coercion, undue influence, fraud, misrepresentation or mistake.”<o:p></o:p></span></em></span></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"><span style="background-repeatt: initial initial; font-familyy: Arial;">(15)</span><span style="font-familyy: Arial;"> </span> <span style="font-familyy: Arial;">“Undue Influence” <o:p></o:p> </span></span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">Section 16 of the Contract Act provides that-<o:p></o:p></span></em></div>
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<span style="font-familyy: Arial;"><em><span style="font-family: Georgia, "Times New Roman", serif;">“(1) A contract is said to be induced by “undue influence” where the relations subsisting between the parties are such that <span class="style2">one of the parties is in a position to dominate the will of the other</span> and uses that position to obtain an unfair advantage over the other.<o:p></o:p></span></em></span></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"> (2) ………xxx…………….<o:p></o:p></span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"> (3) Where a person who is in a position to dominate the will of another, enters into a contract with him, and <span class="style2">the transaction appears</span>, on the face of it or <span class="style2">on evidence adduced, to be unconscionable, the burden of proving that such contract was not induced by undue influence shall lie upon the person in a position to dominate the will of other</span>.” (Emphasis supplied)</span></em></div>
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<span style="font-familyy: Arial;"><em><span style="font-family: Georgia, "Times New Roman", serif;">15.1 “Section 19-A. Power to set aside contract induced by undue influence.—When consent to an agreement is caused by undue influence, the agreement is a contract voidable at the option of the party whose consent was so caused.”<o:p></o:p></span></em></span></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">15.2 Position of dominance necessary for presumption to arise<o:p></o:p></span></em></div>
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<span style="font-familyy: Arial;"><em><span style="font-family: Georgia, "Times New Roman", serif;">The Privy Council in Raghunath Prasad v Sarju Prasad AIR 1924 PC 60 pointed out the conditions for presumption to arise. Referring to sub-section (3) of Section 16, which provides for presumption of undue influence, Lord SHAW observed as follows:<o:p></o:p></span></em></span></div>
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<span style="font-familyy: Arial;"><em><span style="font-family: Georgia, "Times New Roman", serif;">“By this sub-section three matters are dealt with. In the first place, the relations between the parities to each other must be such that one is in a position to dominate the will of the other. Once that position is substantiated the second stage has been reached, viz., the issue whether the contract has been induced by undue influence. Upon the determination of this issue a third point emerges, which is that of onus probandi. The burden of proving that the contract was not induced by the undue influence is to lie upon the person who was in a position to dominate the will of the other.<o:p></o:p></span></em></span></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"><span class="style2">Error is almost sure to arise if the order of these propositions be changed.</span> The unconscionableness of the bargain is <span class="style2">not the first thing</span> to be considered. The first thing to be considered is the relations of these parties. Were they such as to put one in a position to dominate the will of the other?” (Emphasis supplied)</span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"> 15.3 Inequality of bargaining power<o:p></o:p></span></em></div>
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<span style="font-familyy: Arial;"><em><span style="font-family: Georgia, "Times New Roman", serif;">The presumption of undue influence may also arise from the fact that there is such an inequality of bargaining power between the parties that one can cause economic duress to the other. The decision of the Court of Appeal in Lloyds Bank v. Bundy (1975) 1 QB 326. is <span class="style2">a remarkable illustration of the concept of inequality of bargaining power.</span><o:p></o:p></span></em></span></div>
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<span style="font-familyy: Arial;"><em><span style="font-family: Georgia, "Times New Roman", serif;">A contractor borrowed a sum of money from a bank. He could not pay back in time. The banker pressed for payment or for security. He suggested that his father might mortgage the family’s only residential house. The bank officer visited the father and obtained his signatures upon readymade papers. The contractor still could not pay and the banker sought to enforce the mortgage which might have meant throwing out of the family from its only residence. Accordingly, Mr Bundy relied upon the unfair character of the mortgage. He was allowed to set aside the mortgage. <o:p></o:p></span></em></span></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"> 15.4 Judicial intervention for rescuing parties from unreasonable terms<o:p></o:p></span></em></div>
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<span style="font-familyy: Arial;"><em><span style="font-family: Georgia, "Times New Roman", serif;">In Central Inland Water Transport Corpn vs. Brojo Nath Ganguly (1986 3 SCC 156, 206) the Supreme Court has noted that the word “unconscionable” means something as shows no regard for conscience and which is irreconcilable with what is right or reasonable. The matter before the court was a service contract. A clause in the contract empowered the employer (a Govt. undertaking) to remove an employee by three months’ notice or pay in lieu. The employee, who contested the validity of this clause, was removed by handing him over a three months’ pay packet. The Supreme Court regarded the clause to be constitutionally as well as contractually void. The court added that any term which is so unfair and unreasonable as to shock the conscience of the court would be opposed to public policy therefore also void under section 23 of the Contract Act. The contract was not based upon a real consent. It was rather an imposition upon a needy person. The term was unconstitutional because it was so absolute that any officer could be made a target irrespective of his conduct, good or bad. (Emphasis supplied)<o:p></o:p></span></em></span></div>
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<span style="font-familyy: Arial;"><em><span style="font-family: Georgia, "Times New Roman", serif;">15.5 Commenting upon this expanding power of the court to relieve a party from the consequences of his own contract, a learned writer J H Baker has said that “freedom of contract turns out to be a misleading guide when so many contracts are not free in the economic sense. <span class="style2">The notion of contract as private legislation appears less attractive when legislation is always drawn up one-sidedly.</span> Judges are empowered to read in terms which are not there, or read out terms which are there. They are to impose reasonableness. Whatever is not reasonable is not law. If the parties have agreed to something unreasonable, they should be treated as if they have not agreed at all and released”. (Emphasis supplied) (J. H. Baker, From Sanctity of Contract to Reasonable Expectation, Current Legal Problems 1979).<o:p></o:p></span></em></span></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"> 15.6 Serious terms of a contract must be specifically brought to the notice of the parties</span></em></div>
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<span style="font-familyy: Arial;"><em><span style="font-family: Georgia, "Times New Roman", serif;">The Bombay High Court in Road Transport Corpn Vs. Kirloskar Bros Ltd ( AIR 1981 Bom 299 ) said that it is for the carrier to plead and prove that the print on the receipt was brought to the notice of the consignor and that he had agreed to and accepted the same. The Court held that it is necessary that serious terms of a contract must be specifically brought to the notice of the parties whose rights are sought to be curtailed. In Oriental Fire and General Ins Co Vs. New Suraj Transport Co (AIR 1985 All 136) the consignment note was not even signed by the booking party or his agent, the Allahabad High Court held that the consignor was not bound by a printed term about the exclusive jurisdiction. <span class="style2">The Court said that something more must be done than merely printing the terms on consignment documents.</span> (Emphasis supplied)<o:p></o:p></span></em></span></div>
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<span style="font-familyy: Arial;"><em><span style="font-family: Georgia, "Times New Roman", serif;">15.7 In Road Transport Organisation of India vs. Barunai Powerloom Weaver’s Coop Society Ltd ( 1994 84 Cal LT 174 ) the Calcutta High Court held that the law requires that before making a person bound by any such term ( a clause in a consignment note as to exclusive jurisdiction ) it must be proved that the same was brought to the knowledge of the consignor in such a way that it should seem to be the result of a <span class="style2">mutual assent</span>. In Grandhi Pitchaiah Venkatraju & Co vs. Palukuri Jagannadham & Co ( AIR 1975 AP 32 ) where a consignment way bill contained the words “subject to Calcutta jurisdiction”, the Andhra Pradesh High Court ignored it since it was not one to which the plaintiff assented. Following these principles in East India Transport Agency vs. National Insurance Co ( AIR 1991 AP 53 FB ) the Andhra Pradesh High Court came to the conclusion that a term as to the place of suit was not binding on the insurer who had paid out the consignee and who was then suing the carrier for the negligent loss of the goods unless it could be proved that the insurer too was made or was otherwise aware of the terms. <o:p></o:p> </span></em></span></div>
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<span style="font-familyy: Arial;"><em><span style="font-family: Georgia, "Times New Roman", serif;">15.8 The law plays in this respect the role of a parent. It has been opined by the learned author Anthony T Kronman, in Paternalism and the Law of Contracts, (1988) 32 Yale Law Journal 763 “A person who would give away too much of his own liberty must be protected from himself, no matter how rational his decision or compelling the circumstances.” (J. H. Baker, From Sanctity of Contract to Reasonable Expectation, Current Legal Problems 1979). <o:p></o:p> </span></em></span></div>
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<span style="font-familyy: Arial;"><em><span style="font-family: Georgia, "Times New Roman", serif;">Therefore, it is desirable that the Courts should take cognizance of the legal gimmick being played by the Banks in drafting their documents regarding personal guarantee agreement and if the Guarantor has agreed to something unreasonable, he should be treated as if he has not agreed at all and released.<o:p></o:p></span></em></span></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"><b><span style="font-familyy: Arial;">(16) Contract of Guarantee - Scheme of Indian Contract Act, <span style="mso-bidi-font-weight: bold; text-transform: uppercase;">1872</span></span></b><span style="font-familyy: Arial;"><o:p></o:p></span></span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"> Sections 139, 140 and 141 of the Indian Contract Act, 1872 provide as follows.<o:p></o:p></span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"><span style="font-familyy: Arial; mso-bidi-font-weight: bold;">139. <span class="style2">Discharge of surety</span> by creditor’s act or omission impairing surety’s eventual remedy</span><span style="font-familyy: Arial;">.—If the creditor does any act which is inconsistent with the rights of the surety, or omits to do any act which his duty to the surety requires him to do, and the eventual remedy of the surety himself against the principal debtor is thereby impaired, the surety is discharged.<o:p></o:p></span></span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"><span style="font-familyy: Arial; mso-bidi-font-weight: bold;">140. <span class="style2">Rights of surety</span> on payment or performance</span><span style="font-familyy: Arial;">.—Where a guaranteed debt has become due, or default of the principal debtor to perform a guaranteed duty has taken place, the surety, upon payment or performance of all that he is liable for, is invested with all the rights which the creditor had against the principal debtor.<o:p></o:p></span></span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"><span style="font-familyy: Arial; mso-bidi-font-weight: bold;">141. <span class="style2">Surety’s right</span> to benefit of creditor’s securities</span><span style="font-familyy: Arial;">.—A surety is entitled to the benefit of every security which the creditor has against the principal debtor at the time when the contract of suretyship is entered into, whether the surety knows of the existence of such security or not; and if the creditor loses, or without the consent of the surety, parts with such security, the surety is discharged to the extent of the value of the security.<o:p></o:p></span></span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"><span style="background-repeatt: initial initial; font-familyy: Arial;">(17)It is undisputed that, firstly, </span><span style="font-familyy: Arial;">there is such an inequality of bargaining power between the Bank and the Guarantor that the Bank can cause economic duress to the Borrower and/or Guarantor; secondly, the personal guarantee agreement is always drawn up one-sidedly, not limited to, but including the mischievous forced waiver of certain provisions of the Contract Act; thirdly it results in inference that the personal guarantee agreement is not based upon a real consent, it is rather an imposition upon a needy person, hence the Court would regard it as opposed to public policy, therefore void under section 23 of the Contract Act; fourthly, therefore the presumption of undue influence is bound to arise between the Bank and the Guarantor while executing the personal guarantee agreement. <o:p></o:p></span></span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"><span style="background-repeatt: initial initial; font-familyy: Arial;">17.1 </span><span style="font-familyy: Arial;">The consent of the Guarantor having obtained by <span class="style2">undue influence</span> by the Bank, the personal guarantee agreement is voidable at the option of the Guarantor under section 19-A of the Indian Contract Act, 1872. <o:p></o:p> </span></span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"><span style="background-repeatt: initial initial; font-familyy: Arial;">17.2 </span><span style="font-familyy: Arial;">Section 16 of the Contract Act provides-</span></span></em></div>
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<span style="font-familyy: Arial;"><em><span style="font-family: Georgia, "Times New Roman", serif;">a. vide <span style="background-repeatt: initial initial;">Sub-section</span> (1) A contract is said to be induced by “undue influence” where the relations subsisting between the parties are such that <span class="style2">one of the parties is in a position to dominate the will of the other</span> and uses that position to obtain an unfair advantage over the other. <o:p></o:p> </span></em></span><br />
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<em><span style="font-family: Georgia, "Times New Roman", serif;"> b. <span style="font-familyy: Arial;">Vide <span style="background-repeatt: initial initial;">Sub-section</span> (3) Where a person who is in a position to dominate the will of another, enters into a contract with him, and <span class="style2">the transaction appears</span>, on the face of it or <span class="style2">on evidence adduced</span>, to be unconscionable,<span class="style2"> the burden of proving </span>that such contract was not induced by undue influence<span class="style2"> shall lie upon the person </span>in a position to dominate the will of other.” <o:p></o:p> </span></span></em><br />
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<em><span style="font-family: Georgia, "Times New Roman", serif;">c. <span style="font-familyy: Arial;">Therefore, the Guarantor is entitled to submit before DRT that the personal guarantee agreement is not based upon a real consent, but was induced by undue influence by the Bank. <o:p></o:p> </span></span></em><br />
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<span style="font-familyy: Arial;"><em><span style="font-family: Georgia, "Times New Roman", serif;">17.3 Further, the <span class="style2">Guarantor can claim discharge under Sections 139</span> and can also claim his other rights under Sections 140 and 141 of the Indian Contract Act, 1872. However, admittedly no declaratory relief can be granted by the Tribunal to the Guarantor, because as detailed above, <span style="background-repeatt: initial initial;">DRT is </span> not a court having appropriate jurisdiction. By necessary implication, the logical conclusion is that the Tribunal shall have no jurisdiction to proceed <span style="background-repeatt: initial initial;">for enforcement of the guarantee against<span class="style2"> </span></span>the Guarantor.<o:p></o:p></span></em></span></div>
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<span style="font-familyy: Arial;"><em><span style="font-family: Georgia, "Times New Roman", serif;">(18) Section 22 of the Act provides that the Tribunal shall not be bound by the procedure laid down by the Code of Civil Procedure, 1908, therefore, DRT is not obliged to undertake a full-fledged trial in terms of the provisions of the Code of Civil Procedure and/or the Evidence Act. Therefore, <span class="style2">the Guarantor would be deprived of his right in relation to the procedural mechanism as contained in the Code as also the Evidence Act. </span>Further, before the Tribunal no declaratory relief can be sought for by the Guarantor. <o:p></o:p> </span></em></span></div>
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<span style="font-familyy: Arial;"><em><span style="font-family: Georgia, "Times New Roman", serif;">18.1In Dhulabhai v. State of M.P.[ (1968) 3 SCR 662 ] a five judge Constitution Bench of hon’ble Supreme Court has opined:-</span></em></span></div>
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<span style="font-familyy: Arial;"><em><span style="font-family: Georgia, "Times New Roman", serif;">“The result of this inquiry into the diverse views expressed in this Court may be stated as follows:<o:p></o:p></span></em></span></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"> <span style="font-familyy: Arial;">“(1) Where the statute gives a finality to the orders of the special tribunals the Civil Court’s jurisdiction must be held to be excluded if there is adequate remedy to do what the Civil Courts would normally do in a suit….” <o:p></o:p> </span></span></em></div>
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<span style="font-familyy: Arial;"><em><span style="font-family: Georgia, "Times New Roman", serif;">However, as detailed above, in the scheme of the Act there is no adequate remedy to do what the Civil Courts would normally do in a suit, hence DRT is not a court having appropriate jurisdiction, consequently DRT has no jurisdiction to proceed <span style="background-repeatt: initial initial;">for enforcement of the guarantee against </span>the Guarantor (END).<o:p></o:p></span></em></span></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"><span style="font-familyy: Arial;"><strong>Note: </strong>The views expressed are my personal and a view point only.</span><span style="color: #333333; font-familyy: Arial;"><o:p></o:p></span></span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"><strong>Author: </strong> <o:p></o:p></span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"><strong>Narendra Sharma</strong><o:p></o:p></span></em></div>
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<strong><em><span style="font-family: Georgia, "Times New Roman", serif;">Consultant (Business Laws)</span></em></strong></div>
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<span lang="EN-US"><em><span style="font-family: Georgia, "Times New Roman", serif;">1. It is submitted that the recovery proceedings against the Guarantor before hon’ble Debts Recovery Tribunal (hereinafter ‘DRT’ or ‘Tribunal’) under section 19 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (hereinafter ‘DRT Act’) are absolutely without jurisdiction. As per BLACK’s Law Dictionary, Ninth Edition, at page 1389, “recovery” means the regaining or restoration of something lost or taken away. It follows that the DRT has no jurisdiction to proceed against the Guarantor as he has not taken any "debt", which he has to repay. As per section 4 of the U.S. Statutes of Frauds, 1677 a promise ‘to answer for the debt, default or miscarriage of another person’ is a contract of guarantee. The Guarantor promises to discharge the debtor’s liability if the debtor should fail to do so. The Guarantor’s liability is therefore secondary to that of the principal debtor {Guild & Co. v. Conrad (1894) 2 QB 885, 896}.<o:p></o:p></span></em></span><br />
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<span lang="EN-US"><em><span style="font-family: Georgia, "Times New Roman", serif;">1.1 Section 2(g) of the Act defines ‘debt' to mean:<o:p></o:p></span></em></span></div>
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<span lang="EN-US"><em><span style="font-family: Georgia, "Times New Roman", serif;">“any liability (inclusive of interest) which is claimed as due from any person by a bank or a financial institution or by a consortium of banks or financial institutions during the course of any business activity undertaken by the bank or the financial institution or the consortium under any law for the time being in force, in cash or otherwise, whether secured or unsecured, or assigned, or whether payable under a decree or order of any civil Court or any arbitration award or otherwise or under a mortgage and subsisting and legally recoverable on, the date of the application.”<o:p></o:p></span></em></span></div>
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<span lang="EN-US"><em><span style="font-family: Georgia, "Times New Roman", serif;">Hon’ble Bombay High Court in Centurion Bank Ltd. vs Indian Lead Ltd. And Anr. {(2000) 100 Comp Cas 537 Bom; (1999-3) 101 Bom LR 556; Decided on 20 August, 1999} has, inter alia, held as follows.<o:p></o:p></span></em></span></div>
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<span lang="EN-US"><em><span style="font-family: Georgia, "Times New Roman", serif;">"19. It has been pointed out that defendant No. 2 is a guarantor against whom the suit is only for recovery of money. The suit against the guarantor is not a suit for recovery of debt but for enforcement of the guarantee." (emphasis supplied)<o:p></o:p></span></em></span></div>
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<span lang="EN-US"><em><span style="font-family: Georgia, "Times New Roman", serif;">As per BLACK’s Law Dictionary, Ninth Edition, at page 608, “enforcement” means the act or process of compelling compliance with a law, mandate, command, decree or agreement.<o:p></o:p></span></em></span></div>
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<span lang="EN-US"><em><span style="font-family: Georgia, "Times New Roman", serif;">DRT DOES NOT HAVE ANY INHERENT POWERS AND IT IS CLEAR THAT SECTION 19(25) CONFERS LIMITED POWERS<o:p></o:p></span></em></span></div>
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<span lang="EN-US"><em><span style="font-family: Georgia, "Times New Roman", serif;">2. Hon’ble Supreme Court in Standard Chartered Bank V. Dharminder Bhohi and others {(2013) 15 SCC 341; Decided on 13.09.2013} has, inter alia, observed as follows.<o:p></o:p></span></em></span></div>
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<span lang="EN-US"><em><span style="font-family: Georgia, "Times New Roman", serif;">27. The tribunal does not have any inherent powers and it is limpid that Section 19(25) confers limited powers. In this context, we may refer to a three-Judge Bench decision in Upper Doab Sugar Mills Ltd. v. Shahdara (<st1:city w:st="on">Delhi</st1:city>) <st1:place w:st="on"><st1:city w:st="on">Saharanpur</st1:city></st1:place> Light Rly. Co. Ltd.[ (AIR 1963 SC 217] wherein it has been held that when the tribunal has not been conferred with the jurisdiction to direct for refund, it cannot do so. The said principle has been followed in Union of India v. Orient Paper and Industries Limited[(2009) 16 SCC 286]. (emphasis supplied)<o:p></o:p></span></em></span></div>
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<span lang="EN-US"><em><span style="font-family: Georgia, "Times New Roman", serif;">28. In Union of <st1:place w:st="on"><st1:country-region w:st="on">India</st1:country-region></st1:place> v. R. Gandhi, President, Madras Bar Association [(2010) 11 SCC 1], the Constitution Bench, after referring to the opinion of Hidayatullah, J. in Harinagar Sugar Mills Ltd. v. Shyam Sunder Jhunjhunwala [AIR 1961 SC 1669], the pronouncements in Jaswant Sugar Mills Ltd. v. Lakshmi Chand [AIR 1963 SC 677], Associated Cement Companies Ltd. v. P.N. Sharma [AIR 1965 SC 1595] and Kihoto Hollohan v. Zachillhu [1992 Supp (2) SCC 651], ruled thus: -<o:p></o:p></span></em></span></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"><span lang="EN-US">“45. Though both courts and tribunals exercise judicial power </span>and discharge similar functions, there are certain well- recognised differences between courts and tribunals. They are:</span></em></div>
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<span lang="EN-US"><em><span style="font-family: Georgia, "Times New Roman", serif;">(i) Courts are established by the State and are entrusted with the State’s inherent judicial power for administration of justice in general. Tribunals are established under a statute to adjudicate upon disputes arising under the said statute, or disputes of a specified nature. Therefore, all courts are tribunals. But all tribunals are not courts.<o:p></o:p></span></em></span></div>
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<span lang="EN-US"><em><span style="font-family: Georgia, "Times New Roman", serif;">(ii)…………..x………..x…………….x…………..x<o:p></o:p></span></em></span></div>
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<span lang="EN-US"><em><span style="font-family: Georgia, "Times New Roman", serif;">(iii) While courts are governed by detailed statutory procedural rules, in particular the Code of Civil Procedure and the Evidence Act, requiring an elaborate procedure in decision making, tribunals generally regulate their own procedure applying the provisions of the Code of Civil Procedure only where it is required, and without being restricted by the strict rules of the Evidence Act.”<o:p></o:p></span></em></span></div>
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<span lang="EN-US"><em><span style="font-family: Georgia, "Times New Roman", serif;">30. Section 34 of the RDB Act provides that the said Act would have overriding effect. We have referred to the aforesaid provisions to singularly highlight that the sacrosanct purpose with which the tribunals have been established is to put the controversy to rest between the banks and the borrowers and any third party who has acquired any interest. They have been conferred jurisdiction by special legislations to exercise a particular power in a particular manner as provided under the Act. It cannot assume the role of a court of different nature which really can grant “liberty to initiate any action against the bank”. It is only required to decide the lis that comes within its own domain. If it does not fall within its sphere of jurisdiction it is required to say so. Taking note of a submission made at the behest of the auction purchaser and then proceed to say that he is at liberty to file any action against the bank for any omission committed by it has no sanction of law. The said observation is wholly bereft of jurisdiction, and indubitably is totally unwarranted in the obtaining factual matrix.” (emphasis supplied)<o:p></o:p></span></em></span></div>
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<span lang="EN-US"><em><span style="font-family: Georgia, "Times New Roman", serif;">Thus, in September, 2013, hon’ble Supreme Court held that DRT and DRAT do not have any inherent powers and it is clear that Section 19(25) of DRT Act confers limited powers on the Tribunals and Appellate Tribunals. A three-Judge Bench of hon’ble Supreme Court in Upper Doab Sugar Mills Ltd. v. Shahdara (Delhi) Saharanpur Light Rly. Co. Ltd.[ (AIR 1963 SC 217] held thatwhen the tribunal has not been conferred with the jurisdiction to direct for refund, it cannot do so.The said principle has been followed in Union of India v. Orient Paper and Industries Limited [(2009) 16 SCC 286]. It is submitted that by necessary implication the Tribunals and Appellate Tribunals have no jurisdiction to lift the corporate veil in the case of a company being a borrower.<o:p></o:p></span></em></span></div>
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<span lang="EN-US"><em><span style="font-family: Georgia, "Times New Roman", serif;">Further, a Constitution Bench of Supreme Court in Union of <st1:place w:st="on"><st1:country-region w:st="on">India</st1:country-region></st1:place> v. R. Gandhi, President, Madras Bar Association [(2010) 11 SCC 1], ruled that Courts are established by the State and are entrusted with the State’s inherent judicial power for administration of justice in general. Tribunals are established under a statute to adjudicate upon disputes arising under the said statute, or disputes of a specified nature. While courts are governed by detailed statutory procedural rules, tribunals generally regulate their own procedure.<o:p></o:p></span></em></span></div>
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<span lang="EN-US"><em><span style="font-family: Georgia, "Times New Roman", serif;">Hence, hon’ble Supreme Court in Standard Chartered Bank (supra) concluded that Section 34 of the DRT Act provides that the said Act would have overriding effect. Thus, the sacrosanct purpose with which the tribunals have been established is to put the controversy to rest between the banks and the borrowers and any third party who has acquired any interest. They have been conferred jurisdiction by special legislations to exercise a particular power in a particular manner as provided under the Act. It cannot assume the role of a court of different nature. It is only required to decide the lis that comes within its own domain. If it does not fall within its sphere of jurisdiction it is required to say so. It is pertinent to note here that hon’ble Supreme Court observed that the Tribunals and Appellate Tribunals have been established to put the controversy to rest between the banks and the borrowers, however, there is no reference to guarantors. It is settled law that the terms ‘borrowers’ and ‘guarantors’ convey altogether different legal persons.<o:p></o:p></span></em></span></div>
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<strong><em><span style="font-family: Georgia, "Times New Roman", serif;">A TRIBUNAL CAN HAVE NO MORE JURISDICTION THAN WHAT IT IS GIVEN BY THE ACT WHICH BRINGS IT INTO EXISTENCES</span></em></strong></div>
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<span lang="EN-US"><em><span style="font-family: Georgia, "Times New Roman", serif;">3. A three judge bench of hon’ble Supreme Court in Upper Doab Sugar Mills Ltd. Vs. Shahdara (Delhi) Saharanpur light Railway Company Ltd. {1963 AIR 217; 1963 SCR (2) 333; Decided on 23/04/1962}, while dealing with the issue of the jurisdiction of the Railway Rates Tribunal, has held that when the tribunal has not been conferred with the jurisdiction to direct for refund, it cannot do so and, inter alia, observed as follows.<o:p></o:p></span></em></span></div>
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<span lang="EN-US"><em><span style="font-family: Georgia, "Times New Roman", serif;">“The Tribunal can have no more jurisdiction than what it is given by the Act which brings it into existences; and if on a proper construction of the words of the statute we find that the Tribunal was not given any such jurisdiction we cannot clothe it with that jurisdiction on any consideration of convenience or equity or justice.<o:p></o:p></span></em></span></div>
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<span lang="EN-US"><em><span style="font-family: Georgia, "Times New Roman", serif;">What the Tribunal has to do after a complaint is made is mentioned in s. 41 (1) itself. It is said there that the Tribunal shall hear and decide the complaint. The complaint being that something is unreasonable all that the Tribunal has to decide is whether that thing is unreasonable or not.<o:p></o:p></span></em></span></div>
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<span lang="EN-US"><em><span style="font-family: Georgia, "Times New Roman", serif;">A finding that it is unreasonable does not involve any consideration or decision of what would flow from the finding. In other words, in making the complaint the complainant can ask only for a declaration that the rate or charge is unreasonable and it is only this declaratory relief which the Tribunal has been authorised to give.<o:p></o:p></span></em></span></div>
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<span lang="EN-US"><em><span style="font-family: Georgia, "Times New Roman", serif;">There is no provision that the Tribunal can also give a consequential relief.<o:p></o:p></span></em></span></div>
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<span lang="EN-US"><em><span style="font-family: Georgia, "Times New Roman", serif;">The only other thing which the Tribunal is authorised to do in connection with the complaint is to fix "such rate or charge as it consider reasonable". In the absence of anything to indicate to the contrary it is reasonable to think that this fixation can only be prospective, that is, the Tribunal in making this order fixing the reasonable rate or charge will mention a future date for this to come .into operation. Even if it was assumed for the sake of argument that the Tribunal can fix these rates from the date of the complaint that would not give the Tribunal any power to order refund.” (emphasis supplied)</span></em></span></div>
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<span lang="EN-US"><em><span style="font-family: Georgia, "Times New Roman", serif;">Thus, a three judge bench of hon’ble Supreme Court in Upper Doab Sugar Mills (supra) has observed that in making the complaint the complainant can ask only for a declaration that the rate or charge is unreasonable and it is only this declaratory relief which the Railway Rates Tribunal has been authorised to give. There is no provision that the Railway Rates Tribunal can also give a consequential relief. By necessary implication, it may be safely concluded that, prima facie, the subject matter of enforcement of guarantee is not within the jurisdiction of DRT, because there is no provision in DRT Act that the DRT can also give a declaratory relief. Further, hon’ble Supreme Court in Nahar Industrial Enterprises Ltd vs Hongkong & Shanghai Banking Corp. {2009 (8) SCC 646; 2009 (2) DRTC 273 (SC); Decided on 29 July, 2009} has also observed that before DRT no declaratory relief can be sought for by the debtor.<o:p></o:p></span></em></span></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"><strong><span lang="EN-US">DRT AND DRAT HAS NO POWER TO CONFISCATE THE PASSPORTS OR CANNOT DIRECT TO SURRENDER THE PASSPORTS</span></strong><span lang="EN-US"><o:p></o:p></span></span></em></div>
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<span lang="EN-US"><em><span style="font-family: Georgia, "Times New Roman", serif;">4. Recently, the Debts Recovery Appellate Tribunal, Mumbai in Varun Industries Ltd & Ors Vs Indian Bank {2015 (1) DRTC 303 (DRAT, Mum.); Decided on 21.01.2015) has, inter alia, held as follows.<b><o:p></o:p></b></span></em></span></div>
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<span lang="EN-US"><em><span style="font-family: Georgia, "Times New Roman", serif;">“6. From the perusal of the order, this Court has to say that DRT and DRAT has no power to confiscate the passports or cannot direct to surrender the passports and to pass the impugned order.”<o:p></o:p></span></em></span></div>
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<span lang="EN-US"><em><span style="font-family: Georgia, "Times New Roman", serif;">Thus, Debts Recovery Appellate Tribunal, Mumbai in Varun Industries Ltd & Ors Vs Indian Bank(supra) has held that DRT and DRAT has no power to confiscate the passports or cannot direct to surrender the passports, and therefore, set aside the order passed by the DRT-I, Mumbai to this effect.<o:p></o:p></span></em></span></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"><strong><span lang="EN-US">NOTHING IS WITHIN THE JURISDICTION OF AN </span></strong><span lang="EN-US"><st1:street w:st="on"><st1:address w:st="on"><strong>INFERIOR COURT</strong></st1:address></st1:street><strong> UNLESS IT IS EXPRESSLY SHOWN ON THE FACE OF THE PROCEEDINGS THAT THE PARTICULAR MATTER IS WITHIN THE COGNIZANCE OF THE </strong><st1:street w:st="on"><st1:address w:st="on"><strong>PARTICULAR COURT</strong></st1:address></st1:street><strong>.</strong><o:p></o:p></span></span></em></div>
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<span lang="EN-US"><em><span style="font-family: Georgia, "Times New Roman", serif;"> 5. A nine-Judge Constitution Bench of Supreme Court, in Naresh Sridhar Mirajkar v. State of Maharashtra, AIR 1967 SC 1, has observed as under:-<o:p></o:p></span></em></span></div>
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<span lang="EN-US"><em><span style="font-family: Georgia, "Times New Roman", serif;">“60. ….. in the case of a superior Court of Record, it is for the Court to consider whether any matter falls within its jurisdiction or not. Unlike a court of limited jurisdiction, the superior court is entitled to determine for itself questions about its own jurisdiction. That is why this Court did not accede to the proposition that in passing the order for interim bail, the High Court can be said to have exceeded its jurisdiction with the result that the order in question was null and void. In support of this view, this Court cited a passage from Halsbury's Laws of England where it is observed that:-<o:p></o:p></span></em></span></div>
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<span lang="EN-US"><em><span style="font-family: Georgia, "Times New Roman", serif;">“prima facie, no matter is deemed to be beyond the jurisdiction of a superior court unless it is expressly shown to be so, while nothing is within the jurisdiction of an inferior court unless it is expressly shown on the face of the proceedings that the particular matter is within the cognizance of the particular Court." (Halsbury's Laws of England, Vol. 9, p. 349).”<o:p></o:p></span></em></span></div>
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<span lang="EN-US"><em><span style="font-family: Georgia, "Times New Roman", serif;">As detailed in my another Article (see Note-1 below), hon’ble Supreme Court in Karnataka State Financial Corporation Vs N. Narasimahaiah & Ors {2008 AIR 1797, 2008 (5) SCC 176; Decided on 13/03/2008} has observed that ordinarily, when a guarantee is sought to be enforced, the same must be done through a court having appropriate jurisdiction. Vide Halsbury's Laws of England (Vol. 9, p. 349), by necessary implication, it may be safely concluded that prima facie, the subject matter of enforcement of guarantee is not within the jurisdiction of DRT, being an inferior court, unless it is expressly shown on the face of the proceedings that the same is within the cognizance of the DRT.<o:p></o:p></span></em></span></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"><strong><span lang="EN-US">COURTS TO ENSURE THAT LEGAL PROCEEDINGS ARE NOT USED AS A DEVICE FOR HARASSMENT, EVEN OF AN APPARENT TRANSGRESSOR OF THE LAW</span></strong><span lang="EN-US"><o:p></o:p></span></span></em></div>
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<span lang="EN-US"><em><span style="font-family: Georgia, "Times New Roman", serif;">6. A three judge bench of hon’ble Supreme Court in <st1:placename w:st="on">Dashrath</st1:placename> <st1:placename w:st="on">Rupsingh</st1:placename> <st1:placename w:st="on">Rathod</st1:placename> <st1:placename w:st="on">V.</st1:placename> <st1:placetype w:st="on">State</st1:placetype> of <st1:place w:st="on">Maharashtra</st1:place> & Anr. {(2014) 9 SCC 129; Decided on 01.08.2014} has, inter alia, observed as follows.<o:p></o:p></span></em></span></div>
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<span lang="EN-US"><em><span style="font-family: Georgia, "Times New Roman", serif;"> <o:p></o:p></span></em></span></div>
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<span lang="EN-US"><em><span style="font-family: Georgia, "Times New Roman", serif;">“Courts are enjoined to interpret the law so as to eradicate ambiguity or nebulousness, andto ensure that legal proceedings are not used as a device for harassment, even of an apparent transgressor of the law. Law’s endeavour is to bring the culprit to book and to provide succour for the aggrieved party but not to harass the former through vexatious proceedings. Therefore, precision and exactitude are necessary especially where the location of a litigation is concerned. “(emphasis supplied)<o:p></o:p></span></em></span></div>
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<span lang="EN-US"><em><span style="font-family: Georgia, "Times New Roman", serif;">Thus, Hon’ble Supreme Court held that Courts are to ensure that legal proceedings are not used as a device for harassment, even of an apparent transgressor of the law. Law’s endeavour is to bring the culprit to book and to provide succour for the aggrieved party but not to harass the former through vexatious proceedings. Therefore, precision and exactitude are necessary especially where the location of a litigation is concerned.<b><o:p></o:p></b></span></em></span></div>
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<span lang="EN-US"><em><span style="font-family: Georgia, "Times New Roman", serif;">Hence, hon’ble Supreme Court in Standard Chartered Bank (supra) has observed that the Tribunals and Appellate Tribunals have been established to put the controversy to rest between the ‘banks’ and the ‘borrowers’, however, there is no reference to guarantors. It is settled law that the terms ‘borrowers’ and ‘guarantors’ convey altogether different legal persons. However, as detailed above, in the scheme of DRT Act, either in section 2(g) or in section 19 there is no reference to guarantors at all, consequently DRT has no jurisdiction to proceed for enforcement of the guarantee against the Guarantors. (END).<o:p></o:p></span></em></span></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"><span lang="EN-US"><strong>Note-1: </strong>For a detailed study of this concept the readers may refer to my another Article ‘DRT has no juris</span>diction to issue Certificate of Recovery against the Guarantor’ at </span></em></div>
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<a href="http://www.lawyersclubindia.com/articles/DRT-has-no-jurisdiction-to-issue-Certificate-of-Recovery-against-the-Guarantor-5140.asp#.UIvOLG_Mjp9" target="_blank"><em><span style="font-family: Georgia, "Times New Roman", serif;">http://www.lawyersclubindia.com/articles/DRT-has-no-jurisdiction-to-issue-</span></em></a></div>
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<a href="http://www.lawyersclubindia.com/articles/DRT-has-no-jurisdiction-to-issue-Certificate-of-Recovery-against-the-Guarantor-5140.asp#.UIvOLG_Mjp9" target="_blank"><em><span style="font-family: Georgia, "Times New Roman", serif;">Certificate-of-Recovery-against-the-Guarantor-5140.asp#.UIvOLG_Mjp9</span></em></a></div>
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<span lang="EN-US"><em><span style="font-family: Georgia, "Times New Roman", serif;"><strong>Note-2: </strong>The views expressed are my personal and a view point only.</span></em></span></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"><strong><span lang="EN-US">Author:</span></strong><span lang="EN-US"><o:p></o:p></span></span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"><strong><span lang="EN-US">Narendra Sharma</span></strong><span lang="EN-US"><o:p></o:p></span></span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"><strong><span lang="EN-US">Consultant (Business Laws)</span></strong><span lang="EN-US"><o:p></o:p></span></span></em></div>
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<strong><span lang="EN-US"><em><span style="font-family: Georgia, "Times New Roman", serif;">(Mobile-9229574214),</span></em></span></strong></div>
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<span style="background-color: yellow; font-size: x-large;"></span><em><span style="font-family: Georgia, "Times New Roman", serif;"> </span></em>Danendra Jainhttp://www.blogger.com/profile/06877409854811449220noreply@blogger.com0tag:blogger.com,1999:blog-4486476466973233733.post-24083769734620729762015-04-03T08:07:00.001-07:002015-04-03T08:17:24.825-07:00Bank Cannot Freeze Employee's Account <span style="font-size: x-large;">Bank cannot freeze employee's account on employer's request'-Deccan Herald-03.04.2015</span><br />
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<strong><span style="font-family: Georgia, "Times New Roman", serif;"><em>A bank cannot freeze the account of an employee on the request of the employer and become a judge of dispute between them, a consumer forum here has said while holding IDBI Bank Ltd guilty of deficiency for doing so.</em></span></strong><br />
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<span style="font-family: Georgia, "Times New Roman", serif;"><em>A bench of New Delhi District Consumer Disputes Redressal Forum, presided by C K Chaturevdi, made the observation while asking IDBI Bank Ltd to pay Rs 20,000 to Delhi resident Om Prakash Sharma, noting that his account was freezed from December 23 to 27, 2010, on his employer's request and without any intimation to him.<br /><br />"In our considered view, the bank cannot become a judge of dispute between the employer and employee and freeze the account of employee on the request of employer. Such a right belongs to Court or police on investigation can resort to such a request," the forum said, adding the bank did a "negligence act" in freezing Sharma's account.</em></span><br />
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<span style="font-family: Georgia, "Times New Roman", serif;"><em>It asked the bank to pay a compensation of Rs 20,000 for deficiency and litigation charges while holding the bank "guilty of gross deficiency".</em></span><br />
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<span style="font-family: Georgia, "Times New Roman", serif;"><em>Sharma had told the forum that he had some dispute with his employer and was given a cheque of Rs 59,000 towards settlement of dues.</em></span><br />
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<span style="font-family: Georgia, "Times New Roman", serif;"><em>However, Sharma said that he came to know through RTI that his employer had written to his bank to put a debit freeze on his account, alleging that complainant had stolen the said signed cheque and filled in figures and got the money transferred in his account.</em></span><br />
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<span style="font-family: Georgia, "Times New Roman", serif;"><em>In its order, the forum also noted that the employer had not lodged any FIR with police about the theft of cheque by complainant. </em></span><br />
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<span style="font-size: x-large;">Court convicts man in cheque bounce case-The Hindu</span><br />
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<em><span style="font-family: Georgia, "Times New Roman", serif;">A Delhi court has convicted a man in a cheque bounce case as the accused could not produce any defence.</span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">The complainant, Vijay Kumar, alleged that he had given a loan of Rs. 1 lakh to Kapil Dawar.</span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">Dawar later repaid the loan through a cheque. But when Kumar submitted the cheque for encashment to the bank concerned it was dishonoured with the comment that ‘the account closed’.</span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">Thereafter, the complainant sent a legal notice to the borrower, asking him to pay the loan, but the latter failed to fulfil his liability to the complainant.</span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">Then Kumar filed a case under the Negotiable Instruments Act against Dawar.</span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">During the trial, the borrower gave contradictory versions of the case.</span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">“The accused has failed to rebut the statutory presumption in favour of the complainant as the defence disclosed is quite unbelievable being contradictory. Hence, the accused has failed to disclose even the material facts relevant for his defence without contradiction,’’ Metropolitan Magistrate Deepti Devesh said.</span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">The accused in his statement before the court said he did not make the payment as he was not liable to pay in respect of the cheque.</span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">“Therefore, the fact that the payment was not made has been admitted by the accused and thus, stands proved,” the Magistrate said.</span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">The accused also denied giving the cheque in filled-up condition, but admitted his signature on it. But the court rejected this argument saying that “the law does not require that for offence under Section 138 of the Act the entire cheque has to be in the handwriting of the accused”.</span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">Convicting Dawar, the Magistrate said, “… the complainant has discharged the burden upon him to prove the above ingredients beyond reasonable doubt. Accordingly, Dawar stands convicted for the offence under Section 138 of the Act.”</span></em></div>
Danendra Jainhttp://www.blogger.com/profile/06877409854811449220noreply@blogger.com0tag:blogger.com,1999:blog-4486476466973233733.post-11331407943276451812015-02-19T16:55:00.001-08:002015-02-19T16:56:48.512-08:00Cheque Bounce Case Only At Drawee Bank's Location<span style="font-family: Georgia, "Times New Roman", serif;"><span style="background-color: yellow; font-family: Times New Roman; font-size: x-large;">Cheque bounce case can be filed in jurisdiction of 'drawee bank', says Bombay High Court-DNA 23.01.2015</span></span><br />
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<span style="font-family: Georgia, "Times New Roman", serif;"><em>In a significant judgment, the </em></span><em><span style="font-family: Georgia, "Times New Roman", serif;">Bombay high court</span><span style="font-family: Georgia, "Times New Roman", serif;"> has ruled that in cheque bounce cases, only the drawee bank's jurisdiction could be considered during criminal proceedings under Section 138 of Negotiable Instruments (NI) Act, 1881, even as the Real Time Gross Settlement (RTGS) system facility enabled citizens to draw/pay cheques at any branches all over the country.</span></em><br />
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<em><span style="font-family: Georgia, "Times New Roman", serif;"> Justice SB Shukre of the </span></em><em><span style="font-family: Georgia, "Times New Roman", serif;">Nagpur</span></em><em><span style="font-family: Georgia, "Times New Roman", serif;"> bench of the HC observed: "There can be only one drawee bank and not several. When the RTGS cheques bear an endorsement payable at all our branches', it only means 'payment instructions expedited' enabling receipt thereof immediately."</span></em><br />
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<em><span style="font-family: Georgia, "Times New Roman", serif;"> The HC was hearing a petition filed by one Sangita Shah against one Sukrant Shah. The judicial magistrate first class, Nagpur, had returned her complaint against Sukrant on November 3, 2014. Following this, she had filed a writ petition in the HC.</span></em><br />
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<em><span style="font-family: Georgia, "Times New Roman", serif;"> While dismissing Shah's petition, the judge made it clear that there is a difference between 'processing of cheque for payment', and 'giving approval to the processing branch' for the payment. "The branch which processes the cheque and obtains approval for payment from the original branch where funds are actually parked, can only be called as the facilitator. It can't be termed as the 'drawee' under Section 7 of the NI Act," observed the HC.</span></em><br />
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<em><span style="font-family: Georgia, "Times New Roman", serif;"> Nagpur-based Sangita had lodged a complaint against her father-in-law, who is based in Jamshedpur, for dishonouring a Rs2.25 crore cheque. She filed a complaint with the Nagpur magistrate under the NI Act stating that since RTGS system is in existence, the criminal proceedings should be conducted in Nagpur. However, the JMFC rejected the complaint and returned the same saying that she should file it in </span></em><em><span style="font-family: Georgia, "Times New Roman", serif;">Jamshedpur</span></em><em><span style="font-family: Georgia, "Times New Roman", serif;"> where the bank, which had bounced the cheque, was located.</span></em><br />
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<em><span style="font-family: Georgia, "Times New Roman", serif;"> She challenged this before the HC through advocate AP Raghute contending that the concept of the 'drawee bank' was enlarged after RTGS wherein payments are made at any of the branches of the same bank, across the country. Therefore, all bank branches, for offences under the NI Act, can act as the 'drawee bank'.</span></em><br />
<em><span style="font-family: Georgia, "Times New Roman", serif;"> Sukrant's advocate, Rajendra Daga, argued that RTGS is only for expediting payment and that doesn't expand the concept of 'drawee bank'.</span></em><br />
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<em><span style="font-family: Georgia, "Times New Roman", serif;"> Justice Shukre cited </span></em><em><span style="font-family: Georgia, "Times New Roman", serif;">RBI</span></em><em><span style="font-family: Georgia, "Times New Roman", serif;"> guidelines and observed that RTGS is meant for facilitating speedy payment by reducing the time for processing cheques and it has got nothing to do with the 'drawee bank'.</span></em><br />
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<em><span style="font-family: Georgia, "Times New Roman", serif;"> He said: "In conventional processing, considerable time is spent on obtaining instructions from the branch on which cheque is drawn. RTGS saves this by resorting to the modern technology which has, through web-world or Internet, made it possible to quickly access information including those contained in accounts."</span></em><br />
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<em><span style="font-family: Georgia, "Times New Roman", serif;"> The judge said the RBI has made it clear that 'Real Time' is the time taken for processing of instructions after they are received while 'Gross Settlement' means the settlement of funds transfer instructions which occurs individually.</span></em><br />
<em><span style="font-family: Georgia, "Times New Roman", serif;"> "The cheques are immediately processed by the branch to which they are presented because of the fact that funds are to be settled only in the RBI books. What is contemplated under RTGS is only transfer of funds by the 'drawee bank' to other branches which received the cheques. It means that dishonouring of cheque takes place because of failure or refusal to transfer funds which takes place at the place where the 'drawee bank' is situated," added justice Shukre while dismissing the petition.</span></em>Danendra Jainhttp://www.blogger.com/profile/06877409854811449220noreply@blogger.com0tag:blogger.com,1999:blog-4486476466973233733.post-90818203388473593832015-02-19T16:49:00.004-08:002015-02-19T16:49:36.823-08:00Court Orders Beneficial To Bank Staff<span style="font-family: Georgia, "Times New Roman", serif; font-size: x-large;"><em>Court extends interim stay on curbs on bank officers’ foreign travel-Hindu Business Line-18.02.2015</em></span><br />
<em><span style="font-family: Georgia, "Times New Roman", serif;">Thiruvananthapuram, February 18: </span></em><br />
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<em><span style="font-family: Georgia, "Times New Roman", serif;">The Madras High Court has extended an interim order against a circular issued a year ago that took away leave fare concession (LFC) to bank officers for foreign travel.</span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">The court clarified that TDS should not be imposed on LFC payments made pending final disposal of writ petition. An advice to this effect has been sent to respondent banks, according to R Vaigai, Anna Mathew and K Tamilarasan, counsels for petitioners.</span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">Justice S Nagamuthu had ordered an interim stay on the contentious circular in May last year on a writ moved by the All India State Bank Officers’ Federation, (AISBOF) Chennai, and All India Bank Officers Confederation (AIBOC), New Delhi.</span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">The petitioners had sought an interim stay on the circular of April 7 by the Chief Executive, Indian Banks’ Association (IBA) read with the e-circular dated April 15 by Deputy Managing Director and Corporate Development Officer, State Bank of India. Counsel for petitioners had cited specific provisions of leave travel/home travel concession rules to substantiate their argument against the circular. </span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">But without making amendment to these rules, SBI had issued the impugned letter saying that officers shall not be entitled to travel abroad as part of LFC. The extension of the stay comes in response to a rejoinder affidavit filed by D Thomas Franco Rajendra Dev, Vice-President, AISBOF, and joint general secretary, AIBOC. Officers are permitted to touch foreign land within the permitted limit of LFC provided the foreign travel is covered in between the domestic destinations, Dev submitted.</span></em></div>
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<b><em><span style="font-family: Georgia, "Times New Roman", serif;">Checking misuse</span></em></b><br />
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<em><span style="font-family: Georgia, "Times New Roman", serif;">Many officers and their family members use this facility to visit destinations abroad, some of which are of religious importance. With regard to the Centre’s advice to the IBA in the matter, Dev pointed out that it was to check misuse of the facility and not issue a directive to deny it entirely. </span></em><br />
<a href="http://www.thehindubusinessline.com/industry-and-economy/banking/court-extends-interim-stay-on-curbs-on-bank-officers-foreign-travel/article6909496.ece">http://www.thehindubusinessline.com/industry-and-economy/banking/court-extends-interim-stay-on-curbs-on-bank-officers-foreign-travel/article6909496.ece</a></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"><img alt="Krishna K Singh's photo." class="_46-i img" height="640" src="https://scontent-cdg.xx.fbcdn.net/hphotos-xaf1/v/t1.0-9/s480x480/10363250_10203407493057030_9081650373539149060_n.jpg?oh=5b14222cd1543555fa0f35d61b868c4e&oe=558C14D9" style="left: -28px; top: 0px;" width="388" /></span></em><br />
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<em><span style="font-family: Georgia;">Supreme Court fixes 90-day limit for suspension of govt employees-Times of India-18.02.2015</span></em><br />
<em><span style="font-family: Georgia, "Times New Roman", serif;">NEW DELHI: <strong><span style="background-color: yellow; color: blue;">Protracted period of suspension of delinquent government employee has become a norm and such practice must be curbed, the Supreme Court on Monday said while fixing a period of ninety 90 days for authorities to complete proceedings against such an employee</span></strong>. <br /><br /> The court said that an employee suffered ignominy and scorn of society due to prolonged period of suspension. "We, therefore, direct that the currency of a suspension order should not extend beyond three months ... if within this period the memorandum of charges/chargesheet is not served on the delinquent officeremployee," a bench headed by Justice Vikaramajit Sen said. It said suspension, specially preceding the formulation of charges, is essentially transitory or temporary in nature, and must be of short duration. <br /><br /> "If it is for an indeterminate period or if its renewal is not based on sound reasoning contemporaneously available on the record, this would render it punitive in nature," the bench said. <br /><br /> "Protracted periods of suspension, repeated renewal thereof, have regrettably become the norm and not the exception that they ought to be. The suspended person suffering the ignominy of insinuations, the scorn of society and the derision of his department, has to endure this excruciation even before he is formally charged with some misdemeanour or offence," the bench said The court passed the order on a petition filed by defence estate officer Ajay Kumar Choudhary who was kept suspended for a long time.</span></em><br />
<span style="background-color: yellow; font-family: Georgia, "Times New Roman", serif; font-size: x-large;"><em>FinMin closes door on campus hiring for PSU banks-14th August 2014-Indian Express</em></span><br />
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<em><span style="font-family: Georgia, "Times New Roman", serif;">Despite public sector banks facing a manpower crunch, the finance ministry has asked them not to recruit officers through campus placements.</span></em><br />
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<em><span style="font-family: Georgia, "Times New Roman", serif;">“Recruitment of officers in public sector banks against permanent direct recruitment vacancies by resorting to campus recruitment/interview method may not be in accordance with the law…,” the department of financial services has said in a missive all public sector lenders, quoting the advice of the ministry of law and justice. The move follows a decision by the Bombay High Court, which was upheld by the Supreme Court, in a case against the Central Bank of India.</span></em><br />
<em><span style="font-family: Georgia, "Times New Roman", serif;">This will mean that public sector banks can hire officers only through examinations such as those conducted by the Institute of Banking Personnel Selection (IBPS).</span></em><br />
<em><span style="font-family: Georgia, "Times New Roman", serif;">Over the last few years, many public sector lenders had taken a cue from private banks and had begun hiring some students from management schools, especially for divisions such as investment banking.</span></em><br />
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<em><span style="font-family: Georgia, "Times New Roman", serif;">Students with specialisation in marketing and finance were preferred by many lenders and they in turn chose these banks for job security, even if the pay packages were not as high as those offered by private sector banks and private sector companies.</span></em><br />
<em><span style="font-family: Georgia, "Times New Roman", serif;">But the finance ministry directive has stressed, “Since the decision of the Bombay High Court has now been confirmed in the Supreme Court, the public sector banks are requested that it may be brought to the knowledge of the Board of Directors of the Bank for meticulous compliance.”</span></em><br />
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<em><span style="font-family: Georgia, "Times New Roman", serif;">Faced with a situation where a significant number of staff were due to retire, most public sector banks have been actively recruiting to fill the vacancies and were keenly awaiting the Supreme Court judgment on the issue.</span></em><br />
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<em><span style="font-family: Georgia, "Times New Roman", serif;">“Public sector banks had largely stopped visiting business schools for placements after the Bombay High Court verdict last year. The directive is just a re-iteration that the Supreme Court judgment affects all banks and not a single entity,” said a person familiar with the development.</span></em><br />
<strong><em><span style="font-family: Georgia, "Times New Roman", serif;">‘Factor hardship when transferring women staff’</span></em></strong><br />
<em><span style="font-family: Georgia, "Times New Roman", serif;"><strong>New Delhi:</strong> The finance ministry has directed that all public sector banks to keep in mind the hardships faced by women employees while finalising their transfers. “It has been brought to the notice of this department that female employees of public sector banks, married or unmarried, when placed/transferred… to distant locations face a genuine hardship, and develop a feeling of insecurity,” the department of financial services has said in a letter to all public sector banks last week.</span></em><br />
<span style="font-family: Georgia, "Times New Roman", serif; font-size: large;"><strong><em>Bombay High Court seeks Reserve Bank of India's response to PIL on Non-Performing Assets-DNA</em></strong></span><br />
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<strong><em><span style="font-family: Georgia, "Times New Roman", serif;">The Bombay High Court has asked the Reserve Bank of India to respond to a petition which seeks CBI probe into fraudulent grant of loans and consequent rise in nationalised banks' non-performing assets.</span></em></strong><br />
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<strong><em><span style="font-family: Georgia, "Times New Roman", serif;">The division bench of Justices Abhay Oka and GS Kulkarni last week directed RBI to file a reply and posted the matter for hearing on December 9. The PIL, filed by activist Ketan Tirodkar, says the NPAs of nationalised banks jumped from Rs 455 crore in March 2008 to Rs 9,190 crore in March 2012 as per the data obtained under the Right to Information Act.</span></em></strong><br />
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<strong><em><span style="font-family: Georgia, "Times New Roman", serif;">Tirodkar further says that several banks had reported to CBI at least 140 cases of fraud in loans between 2008 to 2012. However there is no information as to whether cases were registered.</span></em></strong><br />
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<em><span style="font-family: Georgia, "Times New Roman", serif;">ALL INDIA BANK EMPLOYEES' ASSOCIATION <br /> Central Office: “PRABHAT NIVAS” Regn. No.2037<br /> Singapore Plaza, 164, Linghi Chetty Street, Chennai-600001<br /> Phone: 2535 1522, 6543 1566 Fax: 4500 2191, 2535 8853<br /> e mail ~ chv.aibea@gmail.com & aibeahq@gmail.com <span class="text_exposed_hide">...</span></span></em><br />
<em><span style="font-family: Georgia, "Times New Roman", serif;"><span class="text_exposed_hide"></span></span></em><span class="text_exposed_show"><br /><em><span style="font-family: Georgia, "Times New Roman", serif;"> CIRCULAR LETTER NO. 27/117/2015/13 16th February, 2015</span></em></span><br />
<span class="text_exposed_show"><em><span style="font-family: Georgia, "Times New Roman", serif;"><br /> TO ALL OFFICE BEARERS, STATE FEDERATIONS AND<br /> ALL INDIA BANKWISE ORGANISATIONS</span></em></span><br />
<span class="text_exposed_show"><em><span style="font-family: Georgia, "Times New Roman", serif;"><br /> Dear Comrades,<br /> Calculation of average emoluments for the purpose of pension – Determination of last months period for arriving at average emoluments – impact on account of participation in strike with loss of pay<br /> In the light of our call for strike for 4 days from 25th Feb.2015, some queries have <br /> been made to us regarding the impact on calculation of pension consequent to loss <br /> of pay for participation in strikes. In this regard, we furnish herein the clarification <br /> given by IBA ( dt. 22-5-2002 ) to one of the Banks when the issue was referred to <br /> them.<br />“ We are to inform you that the subject matter was an issue for <br /> consideration before the Working Group of IBA which met on 18th<br /> April, 2000. The members of the Group, after deliberating on the issue, decided <br /> that the participation in strike during the last 10 months before retirement should not affect the employee’s pension for all times to come and such the average emoluments for the purpose of arriving at pension payable in such cases shall be calculated as given under <br /> Regulation 38 (4) of Bank Employees pension Regulations, 1995.”<br />Our units may circulate the above for the information of our base units and <br /> members. </span></em></span><br />
<span class="text_exposed_show"><em><span style="font-family: Georgia, "Times New Roman", serif;"><br /> Our units should also ensure that all employees who are retiring in the next few <br /> months should participate in the strike without fail. In fact, the new Settlement will <br /> benefit them because in addition to revised wages from 1-11-2012, their retirement <br /> benefits will also undergo substantial improvement due to wage revision.<br /> With greetings,</span></em></span><br />
<span class="text_exposed_show"><em><span style="font-family: Georgia, "Times New Roman", serif;"><br /> Yours Comradely,<br /> C.H. VENKATACHALAM<br /> GENERAL SECRETARY</span></em></span><br />
<em><span style="font-family: Georgia, "Times New Roman", serif;"><img alt="" aria-busy="false" aria-describedby="fbPhotosSnowliftCaption" class="spotlight" height="960" src="https://fbcdn-sphotos-f-a.akamaihd.net/hphotos-ak-xfp1/v/t1.0-9/10996667_1603156923238837_7687942491898316058_n.jpg?oh=ff7ee90bdf65d5e381b08c8778bc22ca&oe=5595A3C7&__gda__=1435775895_e07bedcfaa31b925b8ab81b690f6ecb1" style="height: 631px; width: 473px;" width="720" /></span></em></div>
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Danendra Jainhttp://www.blogger.com/profile/06877409854811449220noreply@blogger.com0tag:blogger.com,1999:blog-4486476466973233733.post-17959508382790485362015-01-29T01:19:00.000-08:002015-01-29T01:19:05.627-08:00Supreme Court Order On NPA Definition<div class="p">
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Supreme Court upholds existing definition of non-performing assets-By Sreeeja Sen- LiveMint-29.01.2015</h1>
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A bench dismissed several petitions challenging the constitutionality of Section 2(1)(o) of the Sarfaesi Act <em><strong>New Delhi:</strong> The Supreme Court on Wednesday upheld the definition of bad loans as amended in 2004 under the securitization Act, handing a victory to creditor banks and a setback to borrowers who had challenged the definition.</em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"> A bench comprising justices <span class="person">J. Chelameswar</span> and <span class="person">S.A. Bobde</span> dismissed several petitions challenging the validity of Section 2(1)(o) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (Sarfaesi) Act, 2002.</span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">They also directed the borrower companies that had challenged the definition of non-performing loans (NPAs) amended in 2004 under the Act to pay 1% of their outstanding amounts as costs to the creditor banks and other non-banking financial institutions.</span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">The Sarfaesi Act enabled borrowers to seize and sell the assets of defaulting borrowers to recover their loans among other measures.</span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">The amended definition was challenged by borrowers because by the amendment it was possible that different sets of guidelines made by different bodies could be followed by different creditors depending upon who is the administering or regulating authority of creditors while determining what was an NPA.</span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">The order comes at a time when banks’ profitability has been under pressure from a rising tide of bad loans after two years of sub-5% economic growth, delayed project approvals that stalled investments and crimped corporate cash flows, making it difficult for borrowers to pay back debts.</span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">“Recovery of money from a debto</span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">r by resorting to the filing of a suit takes painfully long time in this country, for various reasons,” the apex court observed in its judgement.</span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">“Huge amounts of money are lent by various banks and other financial institutions. Speedy recovery of the monies due to such institutions is an important element determining the efficiency not only of such institutions, but also becomes an important factor for the financial health of the country”.</span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">Bankers, while finding the ruling a positive one, spoke of loan recovery in a similar strain.</span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">“The recovery process is very lengthy. What we really want is that the defaulting companies should be given less loopholes to exploit so that we can quickly enforce the proceedings,” said <span class="person">Ranjan Dhawan</span>, executive director of <span class="company">Bank of Baroda</span>.</span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">He said the judgement acts as a morale booster, but did not want to comment on the nitty-gritties of the judgment because he hadn’t seen the order yet.</span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">In its 52-page ruling, the apex court analysed decisions from two high courts that had opposing views in relation to the definition of NPAs.</span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">Last year, the Gujarat high court and Madras high court had given contradictory decisions regarding the validity of the amendments to the Section 2(1)(o) of the Sarfaesi Act.</span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">The Gujarat high court had on 24 April found the amendment to this provision gave banking and non-banking financial institutions arbitrary powers to declare what could be termed an NPA.</span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">It struck down the amendment and restored it to its original form. However, the Madras high court, in a decision dated 18 May, upheld its validity</span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">The apex court held that “Parliament is only stipulating that the expression ‘NPA’ must be understood by all the creditors in the same sense in which such expression is understood by the expert body i.e., the RBI or other regulators which are in turn subject to the supervision of the RBI”.</span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">It also stated that “all the creditors do not form a uniform/homogenous class” as “there is nothing uniform about these creditors or their activities”.</span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">It noted that it would be “impracticable” to define NPAs in a way which would be applicable to “the millions of cases of loan transactions of various categories of loans and advances, lent or made by different categories of creditors for all time to come”.</span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">The petition challenging the definition was initiated by companies including Hyderabad-based publisher <span class="company">Deccan Chronicle Holdings Ltd</span>.</span></em></div>
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<span class="person"><em><span style="font-family: Georgia, "Times New Roman", serif;">T. Venkattram Reddy</span></em></span><em><span style="font-family: Georgia, "Times New Roman", serif;">, chairman of Deccan Chronicle Holdings, could not be contacted after office hours. His office said he had left for the day</span></em></div>
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Court dismisses petition challenging SARFAESI Act-Business Standard-23.05.15</h1>
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<b>Petitioners include Deccan Chronicle Holdings & Marg Ltd</b></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">The Madras high court has dismissed the writ petitions filed by various companies and individuals, including Deccan Chronicle Holdings and Marg Ltd, questioning the constitutionality of Section 2(1)(o) of the SARFAESI Act and the guidelines issued by the Reserve Bank of India (RBI) on the classification of assets as non-performing assets (NPAs).<br /><br /> The petitioners, who are debtors to various banks, sought the HC to declare the provisions of the Section as arbitrary, unconstitutional and opposed to public policy, null and void and the same being ultra vires the Constitution of India. They argued that issuing directions or guidelines relating to asset classification is essential legislative function and therefore it cannot be delegated.<br /><br /> They argued the guidelines issued by the RBI cannot be used for defining a “non performing asset” under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI). There has to be a separate legislation, as provided under Section 38 of the Act. They also argued the circular under challenge, which defines NPA, is very vague.<br /><br /> However, in a Common Order issued on May 8, 2014, on more than 50 writ petitions, the court said in all the cases, the petitioners have borrowed money from the respective respondent banks and had not repaid the amounts borrowed.<br /><br />“In the light of the discussion made we do not find any merit in these writ petitions. Accordingly, the writ petitions are dismissed. However, there is no order as to costs,” said the bench. It also refused to use its power of Judicial review, stating, “While dealing with a legislation pertaining to a specialised field, that too, a one like economy, the court should adopt a “dignified reluctance”.”<br /><br />As per the guidelines issued by the Supreme Court of India, when an asset is treated as a NPA by the respective banks, a rigorous recovery machinery is put into action. It is this provision, which adopts the directions or guidelines relating to asset classification issued by the RBI was put to challenge before the court as unconstitutional, said the order issued by the division bench comprising of Justice N Paul Vasantha kumar and Justice M M Sundresh.<br /><br /> The bench added the court should be aware of the fact that the Legislature is dealing with complex problems and the economic mechanism is highly sensitive “and therefore we should constantly remind ourselves of our own limit.” “We do not like to take the role of a higher authority to review a decision made by an expert body on the materials placed before it. The said attempt is to be avoided, as neither the counsels nor the court can claim a better expertise. Such an attempt would be akin to a search by a visually impaired person to find a black cat during night time in a dark room when the cat itself is not there,” added the court.</span></em></div>
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Danendra Jainhttp://www.blogger.com/profile/06877409854811449220noreply@blogger.com0tag:blogger.com,1999:blog-4486476466973233733.post-45211667440936086392015-01-27T07:32:00.001-08:002015-01-27T07:32:01.547-08:00Acquisition Is Invalid If Land Acquired But Not Used <span style="font-family: Georgia, "Times New Roman", serif; font-size: x-large;"><em></em></span><br />
<span style="font-family: Georgia, "Times New Roman", serif; font-size: x-large;"><em>Governments acquiring land but not using it; Acquisition is invalid : Supreme Court [Read the Judgment]</em></span><br />
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<em><span style="font-family: Georgia, "Times New Roman", serif;">The Supreme Court of India delivered a judgment that is going to bring in relief to persons whose land has been acquired by the government and the government has not even started using the same despite years having gone by.</span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">Addressing a bunch of petitions involving a common question of law, the Bench comprising of Justice V. Gopala Gowda and Justice C. Nagappan said, “we are of the view that physical possession of the land belonging to the appellants have neither been taken by the respondents nor compensation paid to them even though the award was passed on 06.08.2007, and more than five years have lapsed prior to date on which the Act of 2013 came into force. Therefore, the conditions mentioned in Section 24(2) of the Act of 2013 are satisfied in this case for allowing the plea of the appellants that the land acquisition proceedings are deemed to have lapsed in terms of Section 24(2) of the Act of 2013.”</span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">The appeals in the Apex Court were filed by persons who continued to have possession of the land despite a notification was issued by the government regarding its acquisition. Importantly, the persons whose land was ‘acquired’ were not paid any compensation till date.</span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">In a similar instance, the Government of Maharashtra had acquired land which belonged to Godrej & Boyce Manufacturing Co, for laying of railway tracks in Vikhroli, Mumbai. However, even after ten years, the government took no steps to use the land but it changed the land use and made it to build a road. The change in land-use was challenged by Godrej, which claimed that the Government did not have the power to do so. However, the submission failed to find favour with the Bombay High Court and the petition was dismissed.</span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">This judgment will surely bring a sigh of relief to litigants who are battling it out against the Government in courts regarding the same issue.</span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">You may read more of Live Law’s coverage on Land Acquisition </span></em><a href="http://www.livelaw.in/index.php?s=land+acquisition+"><em><span style="font-family: Georgia, "Times New Roman", serif;">here.</span></em></a></div>
Danendra Jainhttp://www.blogger.com/profile/06877409854811449220noreply@blogger.com0tag:blogger.com,1999:blog-4486476466973233733.post-12624031991566691572015-01-25T16:42:00.002-08:002015-01-25T16:42:30.320-08:00High Court Says Bank Cannot Brek Open Flat<h1>
<em><span style="font-family: Georgia, "Times New Roman", serif;">Bank cannot break into a flat in case of loan default, rules HC-Times of India-26.01.2015</span></em></h1>
<em><span style="font-family: Georgia, "Times New Roman", serif;">MUMBAI: The Bombay high court has allowed proceedings against HDFC Bank over allegations that it seized a flat in Pune by breaking open the locks after its owners defaulted on a loan. Justice Abhay Thipsay questioned whether the bank could have forcibly taken possession of the flat without a court order and directed a magistrate-ordered investigation into the case. The HC directive comes on a private complaint by the flat's owners, Milind Mahadik and his wife Aarti. <br /><br /> The bank said the couple were wilful defaulters and under law—Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFEASI) Act—it had powers to seize the flat. The judge held that while the law does not bar a bank from taking possession of a secured asset without court orders, when force is to be used, the district magistrate's orders are necessary. <br /><br /> "If breaking open the lock put on a flat and taking forcible possession... is held to be permissible on the grounds that the SARFEASI Act empowers a secured creditor to do so without the intervention of the district magistrate, then it would be extremely dangerous. The problems arising from holding such a course to be legal will be more serious in cases where such a flat is residential," said Justice Thipsay, pointing out that the bank had not taken police assistance. <br /><br /> <span style="background-color: yellow;">He said things can be complicated if the flat contains movable property and possession is taken "by a secured creditor on his own, and without involving the state machinery" by use of force.</span> The Mahadiks had alleged that household articles like a refrigerator, washing machine, and computer, and gold and silver ornaments worth over Rs 22 lakh were in the flat. The HC said the possibility of the articles being stolen or the persons who took physical possession of the flat being falsely accused of theft could not be ruled out and so it was in the interest of the bank to take the state machinery's help in such cases. <br /><br /> In 2003, the Mahadiks had taken a loan of Rs 8.5 lakh to buy the flat. They claimed that they initially paid the EMIs regularly, but stopped after suffering losses in their business and also due to ill health. They said they asked the bank to restructure the payments, but received no reply. In 2008, the bank pasted a notice on the flat under the SARFEASI Act. <br /><br /> The couple alleged that some persons also used threatening language and abused them while asking them to repay the loan. On December 24, 2010, when the couple, who were staying elsewhere, visited the flat, they found that the bank had broken open the locks and sealed the property. They lodged a complaint before the magistrate, who dismissed it saying the couple were "defaulters". Their appeal in the sessions court too was dismissed. Then they approached the HC. <br /><br /> The bank said it was empowered under law to take possession of the flat, and as such it had not committed any criminal offence. The HC did not agree. <span style="background-color: yellow;">"Whether offences have been committed in the process of taking possession of the said flat, and if so, by whom, can be properly decided only after an investigation is carried out,"</span> the judge said. </span></em><br />
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<a href="http://timesofindia.indiatimes.com/city/mumbai/Bank-cannot-break-into-a-flat-in-case-of-loan-default-rules-HC/articleshow/46015982.cms" target="_blank">Link Times of India</a>Danendra Jainhttp://www.blogger.com/profile/06877409854811449220noreply@blogger.com0tag:blogger.com,1999:blog-4486476466973233733.post-62018294958958545862015-01-22T17:06:00.003-08:002015-01-22T17:06:51.282-08:00Chequ Bounce Case May Be Filed At Drawee Location<span style="font-family: Georgia, "Times New Roman", serif; font-size: x-large;"><em>Cheque bounce case can be filed in jurisdiction of 'drawee bank', says Bombay High Court-DNA</em></span><br />
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<em><span style="font-family: Georgia, "Times New Roman", serif;">In a significant judgment, the </span></em><em><span style="font-family: Georgia, "Times New Roman", serif;">Bombay high court</span></em><em><span style="font-family: Georgia, "Times New Roman", serif;"> has ruled that in cheque bounce cases, only the drawee bank's jurisdiction could be considered during criminal proceedings under Section 138 of Negotiable Instruments (NI) Act, 1881, even as the Real Time Gross Settlement (RTGS) system facility enabled citizens to draw/pay cheques at any branches all over the country.</span></em><br />
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<em><span style="font-family: Georgia, "Times New Roman", serif;">Justice SB Shukre of the </span></em><em><span style="font-family: Georgia, "Times New Roman", serif;">Nagpur</span></em><em><span style="font-family: Georgia, "Times New Roman", serif;"> bench of the HC observed: "There can be only one drawee bank and not several. When the RTGS cheques bear an endorsement payable at all our branches', it only means 'payment instructions expedited' enabling receipt thereof immediately."</span></em><br />
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<em><span style="font-family: Georgia, "Times New Roman", serif;"> The HC was hearing a petition filed by one Sangita Shah against one Sukrant Shah. The judicial magistrate first class, Nagpur, had returned her complaint against Sukrant on November 3, 2014. Following this, she had filed a writ petition in the HC.</span></em><br />
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<em><span style="font-family: Georgia, "Times New Roman", serif;"> While dismissing Shah's petition, the judge made it clear that there is a difference between 'processing of cheque for payment', and 'giving approval to the processing branch' for the payment. "The branch which processes the cheque and obtains approval for payment from the original branch where funds are actually parked, can only be called as the facilitator. It can't be termed as the 'drawee' under Section 7 of the NI Act," observed the HC.</span></em><br />
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<em><span style="font-family: Georgia, "Times New Roman", serif;"> Nagpur-based Sangita had lodged a complaint against her father-in-law, who is based in Jamshedpur, for dishonouring a Rs2.25 crore cheque. She filed a complaint with the Nagpur magistrate under the NI Act stating that since RTGS system is in existence, the criminal proceedings should be conducted in Nagpur. However, the JMFC rejected the complaint and returned the same saying that she should file it in </span></em><em><span style="font-family: Georgia, "Times New Roman", serif;">Jamshedpur</span></em><em><span style="font-family: Georgia, "Times New Roman", serif;"> where the bank, which had bounced the cheque, was located.</span></em><br />
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<em><span style="font-family: Georgia, "Times New Roman", serif;"> She challenged this before the HC through advocate AP Raghute contending that the concept of the 'drawee bank' was enlarged after RTGS wherein payments are made at any of the branches of the same bank, across the country. Therefore, all bank branches, for offences under the NI Act, can act as the 'drawee bank'.</span></em><br />
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<em><span style="font-family: Georgia, "Times New Roman", serif;">He said: "In conventional processing, considerable time is spent on obtaining instructions from the branch on which cheque is drawn. RTGS saves this by resorting to the modern technology which has, through web-world or Internet, made it possible to quickly access information including those contained in accounts."</span></em><br />
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<em><span style="font-family: Georgia, "Times New Roman", serif;"> The judge said the RBI has made it clear that 'Real Time' is the time taken for processing of instructions after they are received while 'Gross Settlement' means the settlement of funds transfer instructions which occurs individually.</span></em><br />
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<em><span style="font-family: Georgia, "Times New Roman", serif;">"The cheques are immediately processed by the branch to which they are presented because of the fact that funds are to be settled only in the RBI books. What is contemplated under RTGS is only transfer of funds by the 'drawee bank' to other branches which received the cheques. It means that dishonouring of cheque takes place because of failure or refusal to transfer funds which takes place at the place where the 'drawee bank' is situated," added justice Shukre while dismissing the petition </span></em><br />
<a href="http://www.dnaindia.com/mumbai/report-cheque-bounce-case-can-be-filed-in-jurisdiction-of-drawee-bank-says-bombay-high-court-2054891" target="_blank">Link DNA giving above news </a>Danendra Jainhttp://www.blogger.com/profile/06877409854811449220noreply@blogger.com0tag:blogger.com,1999:blog-4486476466973233733.post-59788578965264726192015-01-15T07:19:00.002-08:002015-01-15T07:26:26.836-08:00PIL Filed Against Banks<span style="font-family: Georgia, "Times New Roman", serif; font-size: x-large;"><em>Central Bank employees union files PIL seeking direction to recover bad loans-Hindu Business Line</em></span><br />
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<em><span style="font-family: Georgia, "Times New Roman", serif;">Mumbai, December 15: </span></em><br />
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<em><span style="font-family: Georgia, "Times New Roman", serif;">Burgeoning bad debts in public sector banks has prompted an employees union to file a public interest litigation (PIL) seeking the Bombay High Court’s ‘interference and directions’ for effecting loan recoveries.</span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">Subhash S Sawant, General Secretary, Central Bank Employees Union, has filed the PIL to get four of the eight respondents — Union of India, Finance Ministry, Reserve Bank of India and Central Vigilance Commission (respondents 1 to 4) — “to immediately and forthwith intervene”. The petition, which names Central Bank of India, All India Central Bank Employees’ Federation, Central Bank Employees Federation of India, and Indian Banks’ Association as the other respondents, seeks adjudication on a host of points of law of grave public importance. </span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">Sawant has petitioned that the respondent authorities, to take legal action against various public sector banks so that they recover the loans that their clients have defaulted. </span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">The PIL has also sought legal action against various public sector banks for not prosecuting and punishing their clients, who are highly influential and powerful persons/ entities, who have defaulted in repayment of their loans running into thousands of crores of rupees. </span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">“…admittedly, if the prosecution and punishment was initiated and pursued, names of senior officials of the management of various public sector banks would be unearthed, making them vulnerable also for prosecution and punishment along with the defaulting clientele,” says the petition. </span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">The petitioners – Sawant and Central Bank Employees Union – said a ruling be issued for a writ or an order in the nature of a writ directing respondents 1 to 4 to individually and/ or collectively take legal action against various public sector banks for their actions and inactions (vis-à-vis bad loans) within a fixed time schedule that the court may deem fit and proper. Pending hearing and final disposal of the present petition, the PIL has sought a directive to respondents 1 to 4 to file and affidavit and inform the legal action taken, if any, against various public sector banks, including respondent 5 (Central Bank of India). </span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">Bad loans of public sector banks rose sharply to 5.33 per cent of total advances in September 2014 mainly due to sluggishness in the economy and other factors, including delay in environmental clearances. Bad loans of these banks stood at 4.72 per cent of total advances at the end of March 2014</span></em></div>
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<span style="font-family: Georgia, "Times New Roman", serif; font-size: x-large;"><em>PIL Sought To Allow Customers Unlimited Transactions on Own Bank ATMs</em></span></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">A <strong>Public Interest Litigation</strong> (PIL) was filed in the Delhi High Court seeking directions from the High Court to pass a resolution to allow the banking customers to use their ATMs for unlimited number of transactions without charging any fee on the customer. The PIL was filed by advocate Swati Aggrawal in the court seeking to quash the RBI direction to limit the number of transactions in ATM from one’s bank. This RBI direction came to the fore on August 14 this year. The PIL was filed by advocate Swati through advocate <strong>Vivek Kumar Tandon</strong>.</span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">The Delhi High Court had just a day ago issued notice to <strong>RBI</strong> on its decision to limit five transactions a month from the own bank ATM of the customer and also or charging Rs. 20 for every transaction beyond the five allowed transactions. The division bench comprising of Justice P.S. Teji and Chief Justice G. Rohini has issued a statement on the same to <strong>State Bank of India</strong>, the Indian Banks Association as well as the RBI and they will have to revert back to the court by February 18, 2015.</span></em><br />
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<em><span style="font-family: Georgia, "Times New Roman", serif;">The Court said that the banks are unnecessarily taxing the account holders. The <strong>PIL</strong> had further said that the directive to this RBI order came into effect on November 1<sup>st</sup>, 2014 and is implemented by many of the banks, including the State Bank of India. There is also a limit for ATM users in six metro centers like Chennai, New Delhi, Mumbai, Kolkata, Hyderabad and Bengaluru to use ATMS of other banks for free for just three transactions a month, beyond which they have to pay Rs. 20/- per transaction.</span></em><br />
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<em><span style="font-family: Georgia, "Times New Roman", serif;">The PIL has said that the direction from the RBI to charge <strong>ATM</strong> on own banks has come into force after a few banks and the Indian Banks Association called on the RBI to make changes in the free transactions at other bank ATMs. Advocate Tandon for the petitioner said that the RBI’s decision is against international practices that are prevalent across the world for use of own bank ATMs. There is no cap on the number of transactions that one can carry out on own bank ATM in the modern countries of the world and the transactions in own bank ATMs are free of charge despite the number of transactions.</span></em><br />
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<em><span style="font-family: Georgia, "Times New Roman", serif;">The plea also said that the RBI’s current decision is in complete contrast to their earlier circular dated March 10, 2008 wherein the RBI as per the international practices of usage of ATMs had “justified and given directions allowing the free usage of ATMs for unlimited number of transactions on own bank ATMs”.</span></em><br />
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<span style="font-size: x-large;">PIL seeks revamp of norms on legal professionals to help curb NPAs-Economic Times 15.01.2014</span><br />
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<em><span style="font-family: Georgia, "Times New Roman", serif;"><span>MUMBAI: Norms for the empanelment of legal professionals and company <br />secretaries by banks need to be revamped to help curb the growth of bad loans, <br />according to a review petition filed by a lawyer in the Bombay High Court.</span> <br /><br /> The Reserve Bank of India (RBI) and the Indian Banks Association (IBA) must formulate guidelines and eligibility criteria for these professionals, Sanjay Lalit, a partner of <br />Mumbai-based law firm Jupiter Legal, said in the petition, also urging the court to reconsider its decision to reject his earlier application on the matter. <br /><br /> "If these guidelines are followed, the banks' NPAs can come down by at least 10%," Lalit told ET. The petition also sought a direction by the court for banks to upload the eligibility criteria on their websites. The appeal, which was filed in November, is yet to come up for hearing. <br /><br /> <span style="background-color: yellow;"><strong>RBI Governor Raghuram Rajan has stressed the importance of restructuring some of the <br />bad loans to improve economic growth. The combined NPAs of public sector banks stand at about Rs 2.5 lakh crore, excluding restructured loans, according to data from the <br />central bank. Currently, there are no uniform guidelines for public sector banks that hire lawyers.</strong></span> <br /><br /> The empanelment of advocates should be on the basis of execution capabilities, experience, skills and competence, according to the petition, a copy of which was reviewed by ET. <br /><br /> The court had rejected the first application in September on grounds that it would not be justified in entertaining the petition. <br /><br /> "It is for the banks to consider what eligibility criteria should be adopted for engaging legal professionals," a division bench comprising Chief Justice Mohit Shah and Justice MS Sonak said while dismissing the petition. <br /><br /> Girish Dave, a senior advocate representing the IBA, said he is not aware of a fresh appeal <br />being filed after the first PIL was dismissed by the court</span></em><br /><br /><br />
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Read more at:<br /><a href="http://economictimes.indiatimes.com/articleshow/45895602.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst">http://economictimes.indiatimes.com/articleshow/45895602.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst</a></div>
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<!-- Copying this AtContent publication you agree with Terms of services AtContent™ (https://atcontent.com/Terms/) -->Danendra Jainhttp://www.blogger.com/profile/06877409854811449220noreply@blogger.com0tag:blogger.com,1999:blog-4486476466973233733.post-11064565416472097132014-12-27T07:54:00.001-08:002014-12-27T07:54:44.016-08:00Court Order Against Bank And Bank Officer<h1 itemprop="headline" style="color: #1c3c65;">
<em><span style="font-family: Georgia, "Times New Roman", serif;">CBI chargesheets Gujarat-based branch manager of Indian Overseas Bank for cheating-Business Standard</span></em></h1>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">The CBI has filed a charge sheet against a Gujarat-based branch manager of Indian Overseas Bank (IOB) and three others for allegedly cheating the bank to the tune of Rs 2.5 crore.<br /><br /> In its charge sheet filed before a Special CBI court in Ahmedabad, the agency has charged the branch manager and his accomplices with criminal conspiracy, cheating, forgery and under provisions of the Prevention of Corruption Act.<br /><br /> The agency has accused them of conspiring to cheat Indian Overseas Bank, Himmatnagar Branch, Sabarkantha (Gujarat), and causing an alleged loss to the tune of Rs 2.53 crore, a CBI spokesperson said here today.<br /><br /> Speaking on the allegations, the CBI spokesperson said, "The branch manager, in conspiracy with the private persons, sanctioned agricultural term loans for making Green House projects without obtaining any document." "However, no such Green House projects were undertaken and the loans were disbursed without following the laid down norms," the spokesperson added.</span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">5 entities file lawsuit against ICICI Bank UK alleging mis-selling</span></em></h1>
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<b><em><span style="font-family: Georgia, "Times New Roman", serif;">Bank dismisses mis-selling charges, says lawsuit filed after it initiated legal recovery action over loan default</span></em></b></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">Five entities belonging to an investor have filed a lawsuit against ICICI Bank UK in Belgium, where the bank has a branch, claiming compensation of about $130 million, lawyers close to the development have said.<br /><br /> The entities have accused the bank of mis-selling financial products, which led to a loss of a $32 million to the group.<br /><br /> The claim for compensation is for the loss incurred, mis-selling and consequential damages.<br /><br /> The bank has, however, denied any wrongdoing.<br /><br />“ICICI Bank has lending relationships with the customer. After the customer defaulted on its payments, the bank has initiated legal recovery actions against the assets of the customer to protect its interests. As a counter, the customer has filed a complaint against the bank for an old facility, which the customer repaid a few years ago.<br /><br />“The bank has vigorously denied and rebutted all allegations and claims made by the customer. The matter is sub judice in a Belgium court,” an ICICI Bank spokesperson said in an e-mailed response to query by Business Standard.<br /><br /> It is learnt the bank attached the customer’s assets in Hong Kong after it defaulted on the loan.<br /><br /> According to people familiar with the development, the alleged mis-selling was in 2007-08; the lawsuit was filed early this year. Currently, the plaintiffs and ICICI Bank UK are giving submissions to the court. A hearing is scheduled for June 2015.<br /><br /> It has been alleged though the bank sold financial products such as snowball interest rate swaps, targeted accrual redemption note options and Box options, it did not explain the risks.<br /><br /> ICICI Bank UK is one of the three foreign subsidiaries of ICICI Bank; the others are in Canada and Russia.<br /><br /> ICICI Bank UK has nine branches in the UK and one each in Belgium and Germany.<br /><br /> At the end of September this year, ICICI Bank UK’s total assets stood $4.16 billion, while loans and advances were $2.71 billion.<br /><br /> For the quarter ended September, the bank recorded a profit after tax of $5.1 million.<br /><br /> At the end of the quarter, the bank’s capital adequacy ratio was 23.1 per cent. </span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">Wilful defaulter tag: high court rules in favour of Kingfisher Airlines directors-LiveMint</span></em></h1>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">Calcutta HC rejects United Bank of India’s decision to tag Kingfisher Airlines directors as wilful defaulters on technical grounds </span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">The Calcutta high court has said that state-owned lender <span class="company">United Bank of India</span>’s decision to tag directors at <span class="company">Kingfisher Airlines Ltd</span> as wilful defaulters has been rejected on technical grounds, two people close to the development said.</span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"> On Friday, the court said that the grievance redressal committee at United Bank, which called the shots on tagging promoter <span class="person">Vijay Mallya</span> and three other directors at Kingfisher Airlines as wilful defaulters, constituted of four members, instead of three, as mandated by Reserve Bank of India (RBI).</span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">“The decision was taken by the court on very technical grounds. We have an option to do the whole process again and declare him (Mallya) as a wilful defaulter again, which will take roughly a month’s time. We can also appeal against the court’s decision since no prejudice was caused against the borrower by having one extra member. We will take that call shortly,” said United Bank executive director <span class="person">Deepak Narang</span>.</span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">Narang said that even though the court decided against the wilful defaulter tag, it had upheld all the evidences that the bank had produced against Kingfisher Airlines.</span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">In its master circular for classification of borrowers as wilful defaulters released in July 2012, the banking regulator states that in order to maintain transparency in the process, the decision to classify the borrower as wilful defaulter should be entrusted to a committee of higher functionaries headed by the executive director and consisting of two general managers or deputy general managers as decided by the board of the concerned bank or financial institution.</span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">“Decision of the Hon’ble Court is self explanatory. No further comment,” a Kingfisher Airlines spokesperson said in a one-line response.</span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">On 1 September, the Kolkata-based bank became the first lender to have tagged Mallya, A.K. Ganguly, Subhash Gupte and Ravi Nedungadi as wilful defaulters as per the RBI norms. United Bank has an exposure of around <span style="font-family: "Utopia Std_Rupee";"><span class="WebRupee">Rs.</span></span>350 crore to the beleaguered airline which has been grounded since October 2012.</span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">In an official statement, Kingfisher Airlines had then vowed to pursue “all available legal remedies” to secure its interest. The airline had been demanding that United Bank permit it to have legal representation of its choice at the hearing to be held before the grievance redressal committee set up by the lender. The court had directed Vijay Mallya to be present in person or through a company official when dealing with the committee.</span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">The statement had alleged that the bank took the step even though the airline’s special leave petition against the Calcutta high court order is pending in the Supreme Court.</span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">A wilful default occurs when either a borrower has not repaid when he can do so; when sanctioned funds have been diverted for other purposes; when the borrower has siphoned off funds; or when the borrower disposes of the assets pledged for availing of the loan without the bank’s knowledge. </span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">Once a director of a borrowing company is tagged as a wilful defaulter, banks could deny further loans to any company where he is present as a director. Banks would also be empowered to use loan recovery options aggressively.</span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">Kingfisher Airlines owes <span style="font-family: "Utopia Std_Rupee";"><span class="WebRupee">Rs.</span></span>6,521 crore to a lender consortium led by State Bank of India (SBI), according to the finance ministry. A few other state-owned banks, including SBI, are also in the process of deciding on the wilful defaulter tag for the airline.</span></em></div>
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Danendra Jainhttp://www.blogger.com/profile/06877409854811449220noreply@blogger.com0tag:blogger.com,1999:blog-4486476466973233733.post-63631662085839874842014-12-22T01:30:00.004-08:002014-12-22T06:15:03.177-08:00RTI Information For NPA Accounts<h1 style="background-color: #ffcc00; border-top-left-radius: 5px; border-top-right-radius: 5px; color: #4a8714; padding-left: 7px;">
<em><span style="font-family: Georgia, "Times New Roman", serif;">CIC: there is a provision in the rules of the bank to publish certain NPA details in newspapers & such information can be shared with the appellant; inspection of record for accounts where action under SARFAESI Act is being taken permitted</span></em></h1>
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</span></em><strong><em><span style="font-family: Georgia, "Times New Roman", serif;">Facts:</span></em></strong><br />
<em><span style="font-family: Georgia, "Times New Roman", serif;"> 1<strong>. </strong>The appellant, Shri Sandeep Godika, vide his RTI application dated the 13th March, 2013 sought certain information from the CPIO of SBBJ, Jaipur.</span></em><br />
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<em><span style="font-family: Georgia, "Times New Roman", serif;"> 2. Vide letter dated 4.4.2013, the CPIO provided the information requested for. However, in respect of Point No. 2(b) he denied the information on the ground that the same pertains to other Account Holders and is exempt under clauses (d), (e) and (j) of subsection (1) of section 8 of the RTI Act and that no larger public interest exists to disclose the same. He filed first appeal questioning the reply with regard to Point 1(b) and 2(b). His first appeal dated 9.5.2013 against the reply of CPIO was rejected vide order dated 18.5.2013 as in his opinion the requested for information falls under the exempted categories of section 8(1).</span></em><br />
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<em><span style="font-family: Georgia, "Times New Roman", serif;"> 3. Against the order of the First Appellate Authority, Shri Godika has filed second appeal. His main grounds of challenge are that – (i) the CPIO has failed to provide details of each account separately and also failed to provide copy of note sheet; (ii) As per the information supplied by the CPIO, there is a provision of publishing the names and photos of Account Holders in the newspapers. Therefore, if the names and photos can be published in the newspapers, then the requested for information cannot be confidential; (iii) It is clearly stated in section 8 that “Provided that the information which cannot be denied to the Parliament or a State Legislature shall not be denied to any person.”</span></em><br />
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<em><span style="font-family: Georgia, "Times New Roman", serif;">4. The stand of the CPIO and the First Appellate Authority is that since the information asked for by the appellant relates to other account holders, it is exempt under clauses (d), (e) and (j) of section 8 (1) of the RTI Act and there is no public interest in disclosing the information.</span></em><br />
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<em><span style="font-family: Georgia, "Times New Roman", serif;"> 5. The matter was heard today. The respondent has not filed any written reply to the appeal. I have gone through the documents on record and the arguments advanced during the hearing. It is noticed that both the CPIO and the FAA have not given any reason for coming to the conclusion that the information is exempt under clauses (d), (e) and (j) of section 8 (1) of the RTI Act and that there is no public interest involved in disclosing the information.</span></em><br />
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<em><span style="font-family: Georgia, "Times New Roman", serif;"> 6. It has already been held by the Commission in its order dated 16.9.2009 passed in Appeal No. CIC/PB/A/2008/00946/SM etc. that the Bank assigns the NPA accounts of borrowers only after it fails to recover its dues. This act marks an end of any confidential relationship that might have existed between the Bank and those borrowers.</span></em><br />
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<em><span style="font-family: Georgia, "Times New Roman", serif;"> 7. As per the information sought in Point No. 1(b), the respondents stated that the information relating to different stages of recovery of the loans given is not readily available with them. Collecting such information would result in disproportionate diversion of resources. Besides, the recovery situation changes from day to day.</span></em><br />
<em><span style="font-family: Georgia, "Times New Roman", serif;"> 8. The contention of the appellant that there is a provision to publish the names and photos of the NPA account holders in the newspapers is not disputed.</span></em><br />
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<em><span style="font-family: Georgia, "Times New Roman", serif;"> 9. For Point No. 2(b), the respondents stated that the information of 111 cases is not available with them in a consolidated manner; therefore, it will require time and manpower to collect it. The CPIO stated that he will be able to provide the names of newspapers where the name, photograph are published in case of those accounts in which action under SARFAESI Act is being taken. </span></em><br />
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<em><span style="font-family: Georgia, "Times New Roman", serif;">CPIO’s contention that the information is denied under 8(1)(d), (e) &(j) of the RTI Act, 2005, cannot be upheld. The CIC decision dated 16.9.2009 in appeal no. CIC/PB/A/2008/000946SM & SM/A/2008/000015 refers to in this matter according to which “The bank assigns the NPA accounts of borrowers only after it fails to recover its dues. This act marks an end of any confidential relationship that might have existed between the bank and those borrowers.”</span></em><br />
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<em><span style="font-family: Georgia, "Times New Roman", serif;">10. However, the Commission has also held in its order dated 18.04.2012 passed in Appeal No.CIC/SG/A/2012/000471 in which the present appellant was also the appellant wherein it is held as follows: “In the present matter, very clearly a fiduciary relationship exists, since all customers of the Respondent public authority come to it because of the implicit trust they have; and they provide information to the bank for their own benefit. </span></em><br />
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<em><span style="font-family: Georgia, "Times New Roman", serif;">Customers also have a choice of which bank they wish to approach. Hence, unless a large public interest is shown the information is exempted from disclosure and no case of larger public interest has been established in the instant case. Therefore, the names and details of NPA borrowers is exempt under Section 8(1)(e) <span class="hide"> Notwithstanding anything contained in this Act, there shall be no obligation to give any citizen, information available to a person in his fiduciary relationship, unless the competent authority is satisfied that the larger public interest warrants the disclosure of such information; </span> of the RTI Act.” </span></em><br />
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<em><span style="font-family: Georgia, "Times New Roman", serif;">11. In the instant case admittedly there is a provision in the rules of the bank to publish certain NPA details in newspapers and, therefore, the information which is already published in the newspaper can be shared by the CPIO with the appellant.</span></em><br />
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<em><span style="font-family: Georgia, "Times New Roman", serif;"> 12. In view of the larger public interest involved in the matter as the volumes of NPAs are huge amounting to over two lac crore in case of nationalized and public sector banks alone (source, Deportment of Banking Supervision, RBI) as on 31.3.1013, the CPIO is directed to allow inspection of record with reference to point 1(b) of the RTI request only for accounts where action under SARFAESI Act is being taken, severing any confidential information at a mutually convenient date and time and give the details regarding news papers with dates on which the details of 111 NPA cases were published, within three weeks of the receipt of the order of the Commission The CPIO‘s decision is upheld with respect to the other points of the RTI application.</span></em><br />
<em><span style="font-family: Georgia, "Times New Roman", serif;"> 13. The appeal is disposed of with above directions.</span></em><br />
<em><span style="font-family: Georgia, "Times New Roman", serif;"> 14. Copy of this order be given free of cost to the parties.</span></em><br />
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<strong><em><span style="font-family: Georgia, "Times New Roman", serif;">(Manjula Prasher)</span></em></strong><br />
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<em><span style="font-family: Georgia, "Times New Roman", serif;"><strong style="line-height: 20.79px;">Citation: </strong><span style="line-height: 20.79px;">Shri Sandeep Godika v. SBBJ in Appeal: No. CIC/VS/A/2013/001062/MP</span></span></em><br />
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<a href="http://www.rtifoundationofindia.com/cic-there-provision-rules-bank-publish-certain-npa">http://www.rtifoundationofindia.com/cic-there-provision-rules-bank-publish-certain-npa</a>Danendra Jainhttp://www.blogger.com/profile/06877409854811449220noreply@blogger.com0tag:blogger.com,1999:blog-4486476466973233733.post-26151801636808213332014-12-17T07:40:00.002-08:002014-12-17T15:47:17.912-08:00Supreme Court On Vehicle Insurance <span style="font-family: Georgia, "Times New Roman", serif; font-size: large;"><em>Source:Business Standard 14/12/2014<br /> Financier not liable to pay damages<br /> If a motor vehicle is hypothecated to a finance company and the borrower does not insure it, the claim for compensation must be paid by the latter, and not the financier, the Supreme Court has held in the judgment, HDFC Bank Ltd vs Kumari Reshma. </em></span><br />
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<span style="font-size: large;"><em><span style="font-family: Georgia, "Times New Roman", serif;">It set aside the Madhya Pradesh High Court view that it was the lender who was liable to pay compensation if the borrower does not insure the vehicle and meets w<span class="text_exposed_hide">...</span><span class="text_exposed_show">ith a road accident, raising claims by the victim. </span></span></em></span><br />
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<span style="font-size: large;"><span class="text_exposed_show" style="font-family: Georgia, "Times New Roman", serif;"><em>The high court relied on the term in the loan agreement that the bank was required to get the vehicle insured if the borrower failed, to or neglected to, get the vehicle insured. Overruling that view, the Supreme Court asserted that "the person in possession of the vehicle under the hypothecation agreement is the owner", according to the provisions of the Motor Vehicles Act. </em></span></span><br />
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<em><span style="font-family: Georgia, "Times New Roman", serif;"><span style="font-size: large;"><span class="text_exposed_show">T</span></span><span style="font-size: large;"><span class="text_exposed_show">hough the bank was the registered owner of the vehicle along with the borrower, the latter was "in control and possession of the vehicle". If he neglects to take insurance and causes injury to a road user as in this case, the borrower is liable to pay compensation.</span></span></span></em><br />
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<em><span style="font-family: Georgia, "Times New Roman", serif;">Settlement must be free from duress-Business Standard</span></em></h1>
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<strong><em><span style="font-family: Georgia, "Times New Roman", serif;">M J Antony</span></em><em><span style="font-family: Georgia, "Times New Roman", serif;"> 14th December 2014 </span></em></strong></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">Settlement of disputes can be challenged in court if a dominant corporation uses coercion, duress or undue influence of various types against a weak party. But the duress must be proved by showing evidence and documents that show undue influence around the time when the settlement was thrust upon the other party. The protest must be made without loss of time, not after undue delay. A bald allegation of duress would not be sufficient, the Supreme Court has stated in the appeal case, New India Assurance Co vs Genus Power Infrastructure Ltd. In this case, the firm purchased a "standard fire and special perils policy" from the insurance company. There was a fire explosion in the nearby Indian Oil Corporation (IOC) terminal causing extensive damage to the firm's unit. Though it claimed Rs 29 crore as its loss, the insurer's surveyor assessed it at Rs 6 crore. However, the firm signed a letter of subrogation in favour of the insurers for Rs 6 crore in full and final settlement. It assigned all its claims to the insurance company for recovery of amounts from IOC, RIICO, the Rajasthan government and others who are liable. Later Genus declared that the document was signed under duress and moved the Delhi High Court for appointment of an arbitrator in the disputes. The high court appointed an arbitrator. The insurance company appealed to the Supreme Court, pointing out the settlement document, objecting to arbitration. The Supreme Court set aside the high court order of arbitration. <span style="background-color: yellow;">It said that the allegation of duress and undue influence was not supported by evidence and the objection was raised late.</span><br /><br /><span style="color: firebrick;"><span style="font-size: 16px;"><strong>FCI told to regularise casual labour</strong></span></span><br /><br /> The Supreme Court directed </span></em><em><span style="font-family: Georgia, "Times New Roman", serif;">Food Corporation of India </span></em><em><span style="font-family: Georgia, "Times New Roman", serif;">(FCI) last week to regularise 49 workers who were kept as casual employees for a long time, holding the practice to be an <span style="background-color: yellow;">"unfair labour practice".</span> They were earlier working in a rice mill of FCI at Durgapur under various contractors. The mill was closed in 1990 and the contract system abolished. Thereafter, the workers were directly employed by FCI as casual employees on daily wage basis. The workers, then, demanded regularisation and the dispute was referred to the labour tribunal. It held that the continued casualisation of the service was unfair labour practice according to the fifth schedule of the Industrial Disputes Act and against social justice principles. FCI was asked to regularise them. The management moved the Calcutta High Court ,which set aside the tribunal's award. Durgapur Casual Workers Union appealed to the Supreme Court. It set aside the high court decision and upheld the tribunal's order.<br /><br /><span style="font-size: 16px;"><span style="color: firebrick;"><strong>Financier not liable to pay damages</strong></span></span><br /><br /> <span style="background-color: yellow;">If a motor vehicle is hypothecated to a finance company and the borrower does not insure it, the claim for compensation must be paid by the latter, and not the financier, the Supreme Court has held in the judgment, HDFC Bank Ltd vs Kumari Reshma. It set aside the Madhya Pradesh High Court view that it was the lender who was liable to pay compensation if the borrower does not insure the vehicle and meets with a road accident, raising claims by the victim. </span></span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"><span style="background-color: yellow;">The high court relied on the term in the loan agreement that the bank was required to get the vehicle insured if the borrower failed, to or neglected to, get the vehicle insured. Overruling that view, the Supreme Court asserted that "the person in possession of the vehicle under the hypothecation agreement is the owner", according to the provisions of the Motor Vehicles Act. Though the bank was the registered owner of the vehicle along with the borrower, the latter was "in control and possession of the vehicle". If he neglects to take insurance and causes injury to a road user as in this case, the borrower is liable to pay compensation.</span><br /><br /><span style="color: firebrick;"><span style="font-size: 16px;"><strong>Arbitration can't be opposed midway</strong></span></span><br /><br /> A party to the arbitration proceedings cannot raise objections regarding jurisdiction of the tribunal midway, the Supreme Court stated in the judgment, M/s MSP Infrastructure Ltd vs M P Road Development Corporation Ltd. The disputes in this case were referred to arbitration and the tribunal partly allowed the claim of the contractor. The corporation appealed against it under the </span></em><em><span style="font-family: Georgia, "Times New Roman", serif;">Arbitration and Conciliation Act </span></em><em><span style="font-family: Georgia, "Times New Roman", serif;">before the district judge. He dismissed it as the appeal was filed two years late, calling the action absolutely unjust and unfair. However, the Madhya Pradesh high court allowed the corporation's appeal. The firm appealed to the Supreme Court, which quashed the high court order.<br /><br /><span style="color: firebrick;"><span style="font-size: 16px;"><strong>Mining federation petition dismissed</strong></span></span><br /><br /> The Delhi High Court dismissed the writ petition of the </span></em><em><span style="font-family: Georgia, "Times New Roman", serif;">Federation of Indian Mineral Industries </span></em><em><span style="font-family: Georgia, "Times New Roman", serif;">last week seeking a declaration that the notification of the Union Ministry of Mines issued on July 18 amending Rule 24A(6) of the Mineral Concession Rules is prospective in nature. The federation had raised several technical objections and cited Supreme Court cases to get the declaration. The rules regarding extension of leases were unreasonable and arbitrary, it was argued. However, the high court rejected all challenges and stated that a court would not give a declaration on hypothetical or speculative facts, unless there is a real cause of action or injury. "It is not the exercise of judicial power to write legal essays or to give advisory legal opinions. A judge never gives a decision until the facts necessary for that decision have arisen because the imagination of judges, like that of other persons, is limited," the judgment said.<br /><br /><span style="font-size: 16px;"><span style="color: firebrick;"><strong>Dispute over condom name resolved</strong></span></span><br /><br /> The Delhi High Court stated last week that in a suit for violation of trade mark, if the alleged offender was not aware of the existence of a registered trade mark and admits the mistake at the threshold, it could not be compelled to pay damages and rendition of accounts. It would save the time of the court and the award of damages would be harsh and unjustified. In this case, DKT India vs HLL Lifecare Ltd, the former claimed that HLL, a government of India undertaking that is the largest seller of condoms in the world, had violated its trade mark MoodsXXX. It demanded Rs 45 lakh in damages. The government firm admitted its mistake and undertook not to use the name. It offered Rs 1 lakh to DKT. But the latter was not satisfied. The high court stated that the government company was willing to settle the dispute amicably throughout and had stopped the sale of the brand. Therefore, the demand of a huge compensation was unjustifiable. Moreover, the </span></em><em><span style="font-family: Georgia, "Times New Roman", serif;">Trade Marks Act </span></em><em><span style="font-family: Georgia, "Times New Roman", serif;">and the </span></em><em><span style="font-family: Georgia, "Times New Roman", serif;">Copyright Act </span></em><em><span style="font-family: Georgia, "Times New Roman", serif;">take a liberal view in such cases.</span></em></div>
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<a href="http://www.business-standard.com/article/opinion/settlement-must-be-free-from-duress-114121400629_1.html" target="_blank">Link Business Standard</a></div>
Danendra Jainhttp://www.blogger.com/profile/06877409854811449220noreply@blogger.com0tag:blogger.com,1999:blog-4486476466973233733.post-26022862321445814512014-12-16T15:31:00.003-08:002014-12-16T15:46:59.496-08:00DRT Gives Pain Or Relief <em><span style="font-family: Georgia, "Times New Roman", serif;"></span></em><br />
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Debt recovery tribunals: More pains than gains for banks-Business Standard-17.12.2014</span></em></h1>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">The functioning of debt recovery tribunals (DRTs), created to help financial institutions recover dues speedily without being subjected to the lengthy procedures of usual civil courts, appears to cause more pain than gain for banks.</span></em><br />
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<em><span style="font-family: Georgia, "Times New Roman", serif;">Consider this: The amount recovered from cases decided in 2013-14 under DRTs was Rs 30,950 crore, while the outstanding value of debt sought to be recovered was Rs 2,36,600 crore. In other words, recovery was only 13 per cent of the amount at stake. Also, while the law indicates that cases before DRTs must be disposed off in six months, only about a fourth of the cases pending at the beginning of the year were disposed during the year.</span></em><br />
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<em><span style="font-family: Georgia, "Times New Roman", serif;">“The functioning of DRTs needs to improve to ensure banks are able to recover their existing loans and offer fresh advances at cheaper rates... In the current scheme of things, there is no mechanism in place to ensure that the tribunal disposes the case in a timely manner. There is a strong need to bring in more accountability for the DRT,” said Shashwat Sharma, partner (management consulting), KPMG in India.</span></em><br />
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<em><span style="font-family: Georgia, "Times New Roman", serif;">One problem is the small number of DRTs and Debt Recovery Appellate Tribunals, where judgments of DRTs can be appealed. While there are 33 DRTs, there are only five Debt Recovery Appellate Tribunals in the country. “There is certainly a need for more number of DRTs. The biggest challenge, it appears, is their ability to deal with a subject with speed. The system that was designed is clearly not working. Probably, there should be a feedback mechanism and people involved with DRTs should be encouraged to point out the areas of pain,” said Ashvin Parekh, managing partner at Ashvin Parekh Advisory Services.</span></em><br />
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<em><span style="font-family: Georgia, "Times New Roman", serif;">Deepak Haria, senior director at Deloitte in India, echoed a similar view. “The challenge is that our judicial system is both clogged and inadequate in infrastructure, which slows down any redressal. Recovery can be speeded up only when there is a fixed time-frame for all disposals, and realisation of assets could be speeded up by having special courts to deal with such recoveries,” he said.</span></em><br />
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<em><span style="font-family: Georgia, "Times New Roman", serif;">A consequence of this is credit cost increases even for borrowers who repay loans on time. For instance, banks now demand a credit-risk premium of close to six per cent from power companies to compensate for the risk of default. The average interest rate on loans to these companies is close to 14 per cent.</span></em><br />
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<em><span style="font-family: Georgia, "Times New Roman", serif;">The functioning of DRTs is also keeping the Reserve Bank of India (RBI) worried. “If bankers cannot get their money back, they are not going to give you loans at cheap price. So, making sure debt recovery tribunals work better, making sure that you don’t have excess number of stays, excess number of appeals – that is what we need to focus on,” RBI governor Raghuram Rajan said earlier this month following the central bank's fifth bi-monthly monetary policy review.</span></em><br />
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<em><span style="font-family: Georgia, "Times New Roman", serif;">Experts suggest that the law should be strengthened to ensure mandatory time-bound disposal of cases. Also, performance indicators of the adjudicating officer could be used to improve the efficiency of the system. A few recommended that stay petitions should be analysed before being accepted as there have been instances where advocates exploit the loopholes of the Act and plead for stays, leading to piling up of cases.</span></em></div>
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<tr><td bgcolor="#54717e"><span style="color: white;"><span style="font-size: 16px;"><strong><em><span style="font-family: Georgia, "Times New Roman", serif;">HOW TO OFFLOAD?</span></em></strong></span></span></td></tr>
<tr><td bgcolor="#e4eaed"><em><span style="font-family: Georgia, "Times New Roman", serif;"><strong>Rs 30,950 crore</strong> Amount recovered in 2013-14 under DRTs<br /><br /><strong>Rs 2,36,600 crore</strong> Outstanding debt sought to be recovered in 2013-14<br /><br /><strong>13 per cent</strong> Actual recovery for the period (2013-14) </span></em><br />
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<li><em><span style="font-family: Georgia, "Times New Roman", serif;"> While law indicates cases before DRTs must be disposed off in 6 months, only about a fourth of pending cases at the beginning of the year were disposed during the year<br /> </span></em></li>
<li><em><span style="font-family: Georgia, "Times New Roman", serif;"> The small number of DRTs and Debt Recovery Appellate Tribunals may be a reason for the dismal scene.</span></em></li>
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<a href="http://www.business-standard.com/article/finance/debt-recovery-tribunals-more-pains-than-gains-for-banks-114121600139_1.html">http://www.business-standard.com/article/finance/debt-recovery-tribunals-more-pains-than-gains-for-banks-114121600139_1.html</a><br />
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<span><span style="color: #222222;">Thursday, June 12, 2014</span></span></h2>
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Fast Track Court For Loan Defaults Above Rs.100cr </h3>
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<b><i><span style="font-size: medium;"><span style="background-color: white; font-family: Arial, Helvetica, sans-serif;">Government mulls roping fast-track courts to chase bad loans of Rs 100cr+ -Economic times 13th June 2014</span></span></i></b><br /><b><i><span style="font-size: medium;"><span style="background-color: white; font-family: Arial, Helvetica, sans-serif;"><br /></span></span></i></b> <b><i><span style="font-family: Georgia, Times New Roman, serif;"><span style="background-color: white;">NEW DELHI: The government is mulling fast-track courts to try loan default cases of over Rs 100 crore as part of a plan to reduce the pileup of bad loans at state-run banks. </span><br style="background: rgb(255, 255, 255); margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;" /><br style="background: rgb(255, 255, 255); margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;" /><span style="background-color: white;">The finance ministry has set up a committee headed by VK Bhasin, former secretary in the law ministry's legal department, to suggest measures to deal with high-value willful defaulters. </span><br style="background: rgb(255, 255, 255); margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;" /><br style="background: rgb(255, 255, 255); margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;" /><span style="background-color: white;">"The committee will also revisit recovery laws to make them more effective," a senior </span><span style="background-color: white;">government official said on condition of anonymity. There are over 40,000 cases worth Rs 1.73 lakh crore pending before various debt recovery tribunals.</span><span style="background-color: white;"> </span></span></i></b><br /><b><i><span style="font-family: Georgia, Times New Roman, serif;"><br style="margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;" /><span style="background-color: white;">"These (fast-track) courts will have the mandate to settle issues within a time frame," the official said, adding that they will be empowered to auction personal assets of promoters to recover money. </span><br style="margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;" /><br style="margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;" /><span style="background-color: white;">The finance ministry is also looking at ways to make promoters accountable for the defaults. </span><br style="margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;" /><br style="margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;" /><span style="background-color: white;">"Promoters often hide behind </span><span style="background-color: white;">a corporate veil and take no responsibility for failed ventures. The committee will suggest legal routes to make such promoters accountable," the official said. The top 30 non-performing accounts of state-run banks account for 40.2 per cent of their gross bad loans. </span><br style="margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;" /><br style="margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;" /><span style="background-color: white;">In 2013, bank unions had put out a list of top corporate defaulters, which included Kingfisher AirlinesBSE 3.31 %, Winsome Diamond, Zoom Developers and Electrotherm IndiaBSE 1.29 %. </span><br style="margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;" /><br style="margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;" /><span style="background-color: white;">Gross NPAs of public sector bank </span><span style="background-color: white;">rose to 4.44 per cent in March from 3.84 per cent in the year-ago month. "In the case of Kingfisher Airlines, the banks could not seize the promoter's personal assets because of the existing legal complications. </span><br style="background: rgb(255, 255, 255); margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;" /><br style="background: rgb(255, 255, 255); margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;" /><span style="background-color: white;">We need to work out a mechanism where there should not be a rich promoter and an ailing company," said one of the committee members, which, besides banks, has representation from Indian Banks' Association. </span><br style="background: rgb(255, 255, 255); margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;" /><br style="background: rgb(255, 255, 255); margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;" /><span style="background-color: white;">The government is also .. </span></span></i></b><br /><div style="background: rgb(255, 255, 255); margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;">
<b><i><span style="font-family: Georgia, Times New Roman, serif;">Read more at:</span></i></b><br /><a href="http://economictimes.indiatimes.com/articleshow/36453058.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst" style="background-color: transparent; color: #024d99; font-family: arial; font-size: 12px; margin: 0px; outline: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">http://economictimes.indiatimes.com/articleshow/36453058.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst</a></div>
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<a href="http://importantbankingnews.blogspot.in/2014/06/fast-track-court-for-loan-defaults.html">http://importantbankingnews.blogspot.in/2014/06/fast-track-court-for-loan-defaults.html</a></ul>
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Danendra Jainhttp://www.blogger.com/profile/06877409854811449220noreply@blogger.com0tag:blogger.com,1999:blog-4486476466973233733.post-65270883993325548132014-12-11T16:25:00.002-08:002014-12-11T16:27:57.212-08:00Declare Defaulter As Wilfull Defaulter Or No<h1 itemprop="headline" style="color: #1c3c65;">
<em><span style="font-family: Georgia, "Times New Roman", serif;">Banks in no hurry to declare wilful defaulters-Business Standard-12.12.2014</span></em></h1>
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<b><em><span style="font-family: Georgia, "Times New Roman", serif;">Kingfisher Airlines may have been designated a wilful defaulter by its lenders, but the lengthy process and prospect of court cases deter banks</span></em></b></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">In September this year, United Bank of India declared the now-grounded Kingfisher Airlines and its Chairman Vijay Mallya as wilful defaulters for non-payment of dues of Rs 400 crore. Three other directors -Subhash R Gupte, Ravi Nedungadi and Anil Kumar Ganguly - also figured in that list. The airline had described the bank's action as "post-haste" and had vowed to pursue all legal remedies against the decision.<br /><br /> It is more than three months now, and United Bank is still the only bank to have declared Kingfisher a wilful defaulter despite the airline owing close to Rs 6,500 crore, much of it borrowed from a consortium of 17 banks. Kingfisher, meanwhile, has secured a stay from the Calcutta High Court on United Bank's decision to declare the airline and its directors as wilful defaulters. A few lenders, including the country's largest bank, the State Bank of India (SBI), have identified Mallya's company as a wilful defaulter but are yet to declare it as such.<br /><br /> Kingfisher's case is not a stray example. Bankers, on condition of anonymity, reveal that they are yet to initiate action against several other corporate borrowers, whom they want to classify as wilful defaulters, but haven't yet due to lack of sufficient evidence.<br /><br /> "It is more or less certain that if we declare a borrower a wilful defaulter, he will move court. Then it becomes our responsibility to justify our action with supporting evidence," explains a senior banker in charge of loan recovery at a mid-sized public sector bank. It is not always possible to establish that the borrower has siphoned off the money or used it for a purpose other than the one for which the loan was taken. "Hence, we need to be extremely cautious before we declare someone a wilful defaulter. Otherwise, we will not only lose the case, but we will also let the defaulter off the hook," he says.<br /><br /> According to the master circular released by the Reserve Bank of India (RBI) on July 1, 2014, a borrower is classified as a wilful defaulter in any of the following events: (a) the borrower defaults despite having the capacity to repay his dues, (b) the borrower defaults and has not used the money for the specific purpose for which the loan was availed of, (c) the borrower defaults, has siphoned off the funds, and the money is not available with him in the form of other assets, and (d) the borrower defaults and has disposed of the assets given as security against the loan without informing the lenders.</span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"> Bankers say that in the case of loans for working capital, it is sometimes difficult to prove the end-use of the funds in a court of law. The banking regulator's powers also appear restricted in cases like this. "I think sometimes there is a misconception that RBI is a superhuman," concedes RBI deputy governor SS Mundra. "There is a legislative process in the country, there is a judicial system. We can provide the regulations, we can provide the framework but we cannot say that the Reserve Bank can override everything."<br /><br /> Mundra also says that after getting feedback from banks, RBI marks these issues for the attention of the government. "What we can do and what we do is that we always flag these issues whenever we get feedback from banks," he adds. "We flag these issues in the right forum, for the government. Then in course of time we, seek the resolution. But I cannot just say that ours is the last word and courts cannot override us."<br /><br /><strong>Not an overnight job</strong><br /> The whole process can be time consuming, and bankers say that the lenders need to follow certain processes before identifying and declaring a borrower a wilful defaulter. "It does not happen overnight," says another banker with a Kolkata-based public sector bank. "There is an internal committee that examines cases of wilful defaults. The loan recovery department gives its report on borrowers who are deemed to have wilfully defaulted to this committee. This panel then examines the repayment capacity of the borrower, end-use of the funds, recovery efforts before identifying him as wilful defaulter."<br /><br /> Once a borrower is identified as a wilful defaulter, the bank has to send him a notice detailing the reasons why the borrower has been deemed as such. Sometimes, the lender has to make available to the borrower the documents that it has relied upon to arrive at the decision. Generally, the borrower gets two weeks to make a representation before the bank's grievance redressal committee. Only if the borrower fails to offer a proper explanation for non-payment of dues or fails repeatedly to appear before this committee in spite of notices served, will he be declared a wilful defaulter.<br /><br /> This lengthy and fraught process is why most banks are wary about taking on people and corporate with unpaid dues. Some analysts believe that the banks should be empowered through amendments in laws and allowed to take action without every case going to court. "I don't think it (the delay in classifying a borrower as wilful defaulter) is because of a problem with our judiciary," explains Ashvin Parekh, managing partner at Ashvin Parekh Advisory Services and senior expert advisor on global financial services at Ernst & Young (E&Y). "The problem is with the Banking Regulation Act and the RBI Act. These need to be amended to empower both the banks and the regulator. It will reduce the incidence of referring such cases to the court."<br /><br /> Till that happens, lenders will probably continue to tread cautiously on declaring cases of deliberate non-payment as wilful defaulting.</span></em><br />
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<tr><td bgcolor="#e4eaed"><em><span style="font-family: Georgia, "Times New Roman", serif;"><strong>WILFUL DEFAULTER</strong><br /> A borrower is classified as a wilful defaulter in any of the following events: </span></em><br />
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<li><em><span style="font-family: Georgia, "Times New Roman", serif;"> The borrower defaults despite having the capacity to repay his dues<br /> </span></em></li>
<li><em><span style="font-family: Georgia, "Times New Roman", serif;"> The borrower defaults and has not used the money for the specific purpose for which the loan was given<br /> </span></em></li>
<li><em><span style="font-family: Georgia, "Times New Roman", serif;"> The borrower defaults, has siphoned off the funds, and the money is not available with him in the form of other assets<br /> </span></em></li>
<li><em><span style="font-family: Georgia, "Times New Roman", serif;"> The borrower defaults and has disposed the assets given as security against the loan without informing lenders</span></em></li>
</ul>
<em><span style="font-family: Georgia, "Times New Roman", serif;"><strong>PENAL MEASURES</strong><br /> Banks are advised to send their list of wilful defaulters to RBI, the Securities and Exchange Board of India and the Credit Information Bureau India. This is aimed at preventing wilful defaulters from accessing capital markets and borrowing money from other banks and financial institutions. The penal measures include the following: </span></em><br />
<ul>
<li><em><span style="font-family: Georgia, "Times New Roman", serif;"> No additional facilities will be granted to listed wilful defaulters by banks and financial institutions<br /> </span></em></li>
<li><em><span style="font-family: Georgia, "Times New Roman", serif;"> Promoters of companies that have been identified for siphoning off funds, misrepresentation of accounts and fraudulent transactions will be debarred from institutional finance for floating new ventures for a period of five years<br /> </span></em></li>
<li><em><span style="font-family: Georgia, "Times New Roman", serif;"> Legal process against wilful defaulters will be initiated. Lenders may initiate criminal proceedings as well.<br /> </span></em></li>
<li><em><span style="font-family: Georgia, "Times New Roman", serif;"> Banks will adopt a proactive approach for a change of management of the willfully defaulting borrower unit</span></em></li>
</ul>
<a href="http://www.business-standard.com/article/finance/banks-in-no-hurry-to-declare-wilful-defaulters-114121101294_1.html">http://www.business-standard.com/article/finance/banks-in-no-hurry-to-declare-wilful-defaulters-114121101294_1.html</a><br />
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Danendra Jainhttp://www.blogger.com/profile/06877409854811449220noreply@blogger.com0tag:blogger.com,1999:blog-4486476466973233733.post-74601527308683680412014-12-11T16:20:00.001-08:002014-12-11T16:20:06.856-08:00Ultimatum To Provide ATM Security<span style="font-size: x-large;">Case against bank for lax ATM security-The Hindu-12.12.2014</span><br />
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December 31 deadline for ATM security</h2>
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<em><span style="font-family: Georgia, "Times New Roman", serif; font-size: large;">The city police have booked a case against Punjab National Bank for lax security at one of their ATM kiosks in Vasanthnagar, where a man confronted a woman and took her cellphone even as her friend waited outside. </span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif; font-size: large;">The police have booked a case under Section 188 of the Criminal Procedure Code (CrPC) for violating the ATM security instructions issued by the Police Commissioner in 2013. The instructions were issued in the wake of the attack on a Corporation Bank employee in an ATM kiosk near N R Square on November 19, 2013. </span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif; font-size: large;">The city police on Thursday met representatives of various banks to discuss ATM security. Around 30 representatives from various banks were present. </span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif; font-size: large;">Additional Commissioner of Police (Law and Order) Alok Kumar said that, following a review of security measures at ATM kiosks across the city, the new deadline for complete compliance is December 31. He said jurisdictional police officers will evaluate the safety measures after December 31 and book cases for non-compliance. </span></em></div>
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<a href="http://www.thehindu.com/news/cities/bangalore/case-against-bank-for-lax-atm-security/article6683292.ece" target="_blank">http://www.thehindu.com/news/cities/bangalore/case-against-bank-for-lax-atm-security/article6683292.ece</a></div>
Danendra Jainhttp://www.blogger.com/profile/06877409854811449220noreply@blogger.com0tag:blogger.com,1999:blog-4486476466973233733.post-76777406320722220782014-11-21T16:19:00.003-08:002014-11-21T16:19:31.295-08:00Important News For All Bankers<h1 class="detail-title">
<em><span style="font-family: Georgia, "Times New Roman", serif;">Supreme Court ruling on e-records is a timely reminder for banks -Hindu Business Line-22.11.2014</span></em></h1>
<em><span style="font-family: Georgia, "Times New Roman", serif;">
By <span class="author">Vinson Kurian</span> </span></em><br />
<em><span style="font-family: Georgia, "Times New Roman", serif;"></span></em><br />
<em><span style="font-family: Georgia, "Times New Roman", serif;">Thiruvananthapuram, November 21: </span></em><br />
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<em><span style="font-family: Georgia, "Times New Roman", serif;"></span></em><div class="body">
<em><span style="font-family: Georgia, "Times New Roman", serif;">Banks will ignore at their own peril a Supreme Court ruling that electronic records without proper safeguards are non-admissible as evidence. </span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">Computer outputs (printed on paper, stored, recorded or copied in optical or magnetic media produced by a computer) are “secondary”, the court said. These are susceptible to tampering, alteration, transposition and excision and a whole trial based on them could lead to a travesty of justice, it observed in a concurrent order on Civil Case No 4226 of 2012. Failings in the banking sector on this count are best reflected in the CAG findings pertaining to the farm loan waiver scheme of 2008.</span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"></span></em> </div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">Of the 9,334 cases taken for scrutiny, 2,824 records were found to have been tampered with, overwritten or altered.</span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"></span></em> </div>
<b><em><span style="font-family: Georgia, "Times New Roman", serif;">Audit trails</span></em></b><br />
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<em><span style="font-family: Georgia, "Times New Roman", serif;">Responding to an RTI query, the RBI told S Dheenadhayalan, an activist, that it had advised banks to identify key risks that threaten computerised banking operations.</span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">Banks must develop or design adequate internal control policies and procedures to mitigate risks, the RBI had said in a circular way back in February 1998. All transactions must be entered and accepted “once and only once, data accurately entered, standing data changes authorised and accurately entered.”</span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"></span></em> </div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">Sufficient audit trails, it said, must be maintained and placed with security procedures so that they cannot be altered. </span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"></span></em> </div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">But not many banks, including those in the public sector, seem to have gone the distance to ensure compliance. For instance, Indian Bank, according to Dheenadhayalan, admitted under the RTI that at least one of its branches was in possession of a standalone computer. In March 2010, the bank told Deepak Flexo Packs of Virudunagar, Tamil Nadu, that it had revised the waiver claim on its account from ₹32.53 lakh to ₹5.84 lakh. </span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">Related data on how it arrived at the figure could not be retrieved since the system had crashed, he said. Pressed further, the bank merely said it was an isolated incident because it had occurred in a standalone computer.</span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"></span></em> </div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">As for policy of providing standalone computers at branches, there existed none. In some cases, standalones were provided for training staff. Some banks use them for routine administrative work which need not be connected to or fall under electronic data processing (EDP). </span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"></span></em> </div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">Standalone does not imply parallel tracking of factual reports. These computers could be used to generate convenient statement of claims, according to Dheenadhayalan. </span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">In another case, Punjab National Bank made an inadvertent error in notifying claims while invoking the Sarfaesi Act on Raju Industries, Bangalore. A corrigendum issued by the bank in June 2010, said the figure of ₹33.92 lakh quoted in the possession notice was a mistake, and it must be read as ₹12.60 lakh.</span></em></div>
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<b><em><span style="font-family: Georgia, "Times New Roman", serif;">Vigilance Commission alert</span></em></b></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">The Central Vigilance Commission (CVC) was forced to take note of frauds perpetrated on banks using passwords of other employees. </span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"></span></em> </div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">The CVC observed in a circular dated November 30, 2010, that bank employees in certain cases were not maintaining secrecy of their passwords.</span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"></span></em> </div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">“Instances are still coming to our notice where frauds of large amount have been committed by misusing the passwords of employees,” it noted. It should be ensured that all employees maintain secrecy of their passwords and keep changing them as frequently as possible, the circular said, adding that banks may evolve systems and procedures to ensure the same.</span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">Instances of casual approach by any password holder should be dealt with ruthlessly by the bank concerned as the same may put huge amounts of funds at risk, the CVC noted.</span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"></span></em> </div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">Chief Vigilance Officers, it said, may take suitable action and regularly monitor the secrecy of passwords and apprise the Commission of action taken. They should report compliance in the matter by including this aspect in monthly reports being submitted to the Commission.</span></em></div>
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<a href="http://www.thehindubusinessline.com/industry-and-economy/banking/supreme-court-ruling-on-erecords-is-a-timely-reminder-for-banks/article6622367.ece" target="_blank"><em><span style="font-family: Georgia, "Times New Roman", serif;">Link Hindu Business Line</span></em></a></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">Loan recast hides stress in banks</span></em></h1>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">Times of India 22.11.2014</span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">NEW DELHI: Banks seem to have undertaken massive restructuring exercise in recent months, which has helped them show lower bad debt. <br /><br /> Data collated by the finance ministry for a meeting of bank chiefs on Thursday reveals that in case of at least five state-run lenders, the ratio of assets which have turned non-performing or have been restructured is as high as one-fifth of their loan book. <br /><br /> By restructuring debt — through conversion into equity, extension of repayment period and other changes —banks have managed to ensure that these loans don't turn sticky. For instance, in case of Dabhol Power, banks have converted a part of their loans into equity and deferred immediate provisioning to report healthier finances although the company is not earning any revenue and therefore unable to pay installments. </span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">So, Central Bank of India's gross NPA level may be 6.25% at the end of September, but if you look at the ratio of restructured loans and NPAs, it adds up to close to 20.5%. For the entire public sector banking segment the level is around 12.6%, when gross NPAs are 5.3% of the loan portfolio. <br /><br /> The prolonged economic slowdown has resulted in companies facing earning pressure, resulting in loan defaults. Among the various sectors, SMEs are at the top of the heap with 7.2% of the loans turning NPA, followed by large corporates at 5.55%. Despite the perceived stress, real estate is performing better with 1.8% of the loans turning sticky. <br /><br /> At 14.2% of the loans, the highest level of NPA is in the gems and jewellery space, where export demand has been hit by the slowdown in the US and Europe. Then come coal, a sector which is in the grip of controversy, and cement, which has been hit by excess capacity. </span></em></div>
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<span style="font-family: Georgia, "Times New Roman", serif; font-size: x-large;"><em>Saradha scam: Major embarrassment for Mamata as CBI arrests TMC MP Srinjoy Bose-IBN</em></span></div>
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<span style="font-family: Georgia, "Times New Roman", serif; font-size: x-large;"><em></em></span> </div>
<em><span style="font-family: Georgia, "Times New Roman", serif;"><b>Kolkata:</b> In yet another blow to the ruling Trinamool Congress, party
MP Srinjoy Bose has been arrested by the Central Bureau of Investigation in
connection with the multi-crore Saradha chit fund scam. </span></em><br />
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<em><span style="font-family: Georgia, "Times New Roman", serif;">
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<em><span style="font-family: Georgia, "Times New Roman", serif;">Bose, who owns Bengali daily Sambad Praitidin, allegedly had stuck a deal
with Sudipta Sen, the main accused in the Saradha scam. He is being probed for
criminal conspiracy and misappropriation of funds, said CBI sources. </span></em><br />
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<em><span style="font-family: Georgia, "Times New Roman", serif;">
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<em><span style="font-family: Georgia, "Times New Roman", serif;">Bose was seen entering the CBI office around 11 am and after 6 hours of
grilling, his arrest was confirmed only at around 4:30 pm. His arrest is being
considered as the biggest in the case. He has been questioned by the CBI sleuths
twice earlier also</span></em><br />
<em><span style="font-family: Georgia, "Times New Roman", serif;"></span></em><br />
<em><span style="font-family: Georgia, "Times New Roman", serif;">The ED has frozen five bank accounts of Bose, of which three are personal and
two are that of the company's. It has also begun the process of attaching Samvad
Pratidin, the Bengali daily owned by Srinjoy Bose. </span></em><br />
<em><span style="font-family: Georgia, "Times New Roman", serif;">
</span></em><br />
<em><span style="font-family: Georgia, "Times New Roman", serif;">The CBI has also summoned TMC MP Hasaan Ahmed Imran for questioning in the
case. </span></em><br />
<em><span style="font-family: Georgia, "Times New Roman", serif;">
</span></em><br />
<em><span style="font-family: Georgia, "Times New Roman", serif;">Under fire, the TMC has called CBI "political manipulated". Speaking to
CNN-IBN, party MP Sougata Roy lashed out at the CBI as he said, "Srinjoy Bose's
arrest is unfortunate, CBI is politically manipulated. TMC as a party remains
strong." </span></em><br />
<em><span style="font-family: Georgia, "Times New Roman", serif;">
</span></em><br />
<em><span style="font-family: Georgia, "Times New Roman", serif;">Party chief Mamata Banerjee has demanded the arrest of the guilty. She said,
"Why is the CBI not catching the real culprits of the Saradha scam? They should
arrest those who are actually responsible of cheating poor people." </span></em><br />
<em><span style="font-family: Georgia, "Times New Roman", serif;">
</span></em><br />
<em><span style="font-family: Georgia, "Times New Roman", serif;">Another party MP Derek O' Brien tweeted, "The CBI is a political tool used by
the previous government to settle political scores. Now the BJP is doing an
action replay. They cannot combat the Trinamool politically. They have tried and
failed. So what do they do? Let loose a discredited CBI." </span></em><br />
<em><span style="font-family: Georgia, "Times New Roman", serif;">
</span></em><br />
<em><span style="font-family: Georgia, "Times New Roman", serif;">The ED has also frozen two bank accounts held by painter Shubhaprasanna, a
close aide of CM Mamata Banerjee. It has also frozen as many as 24 fixed
deposits held by the painter. His possible involvement in the scam is under the
scanner of the central probe agencies. </span></em><br />
<em><span style="font-family: Georgia, "Times New Roman", serif;">
</span></em><br />
<em><span style="font-family: Georgia, "Times New Roman", serif;">Bose's arrest comes on a day when another Trinamool leader Shyama Prasad
Mukherjee was grilled by the CBI. West Bengal Transport Minister Madan Mitra was
also asked to turn up for questioning but he didn't and checked himself into a
Kolkata hospital. </span></em><br />
<em><span style="font-family: Georgia, "Times New Roman", serif;">
</span></em><br />
<em><span style="font-family: Georgia, "Times New Roman", serif;">Former Trinamool Congress MP Kunal Ghosh, one of the prime accused in the
scam, attempted suicide in the Presidency prison in Kolkata last week demanding
the arrest of the guilty. </span></em><br />
<em><span style="font-family: Georgia, "Times New Roman", serif;">
</span></em><br />
<em><span style="font-family: Georgia, "Times New Roman", serif;">Seven high profile arrests have been made in the case as of now. It includes
Sudipta Sen, Debjani Mukherjee, ex-TMC MP Kunal Ghosh, ex-DGP,West Bengal, Rajat
Majumdar, East Bengal Club official Debabrata Sarkar, Sadanand Gogoi who is a
singer from Assam and businessman Sajjan Agarwal, other than Srinjoy Bose. </span></em><br />
<em><span style="font-family: Georgia, "Times New Roman", serif;">
</span></em><br />
<em><span style="font-family: Georgia, "Times New Roman", serif;">Mamata Banerjee had earlier in the month claimed that nobody from her party
had taken money from chit fund-aided companies, and hit out at a section of the
media for showing Trinamool leaders as "thieves".</span></em><br />
<a href="http://ibnlive.in.com/news/saradha-scam-major-embarrassment-for-mamata-as-cbi-arrests-tmc-mp-srinjoy-bose/514077-37-64.html"><em><span style="font-family: Georgia, "Times New Roman", serif;">http://ibnlive.in.com/news/saradha-scam-major-embarrassment-for-mamata-as-cbi-arrests-tmc-mp-srinjoy-bose/514077-37-64.html</span></em></a></div>
Danendra Jainhttp://www.blogger.com/profile/06877409854811449220noreply@blogger.com0tag:blogger.com,1999:blog-4486476466973233733.post-38154210548293291162014-10-17T16:33:00.004-07:002014-10-17T16:41:58.295-07:00SUpreme Court Rejects Claim Of Bank<h1 class="sty_head_38">
<em><span style="font-family: Georgia, "Times New Roman", serif;">
Sugar-coated political risk hits public banks-LiveMint--By Ravi Ananthanarayanan </span></em></h1>
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<span style="color: blue; font-family: Georgia, "Times New Roman", serif;"><em>After the SC rejecting appeal against an HC order directing sugar mills to sell stocks to repay cane farmers, banks will suffer as they may fall short on collateral</em></span></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"><span style="color: blue;">In India, political risk is not only impeding business but also spilling over to the financial institutions. On Monday, the Supreme Court rejected an appeal against an Allahabad high court order directing sugar mills to sell stocks to repay cane farmers.</span> </span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"> Banks had argued they had first charge over sugar stocks and they should be used to repay the loans taken by the mills. The apex court observed, according to a news report on the Times of India website, that the cane growers’ right to life is more important than the banks’ right to carry on business. That is no doubt a humane way of looking at things, but also presents a rather chilling prospect for banks and their ability to ring-fence their collateral.</span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">A fundamental question that arises is whether a financial institution’s interests will now be secondary to public interest, even if the business in question is reliant on loans. Claims of shareholders, for instance, are secondary to creditors. But now, one more element of public interest may have been added to this equation.</span></em></div>
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<span style="color: blue; font-family: Georgia, "Times New Roman", serif;"><em>Of course, this observation is specific to this case. And, this case itself has some peculiarities. It results from a public interest litigation (PIL) filed to ensure that mills pay farmers’ sugarcane arrears. They were asked to pay the dues to farmers by 31 October by selling stock. The high court said that the mills were not disputing the liability but banks were opposing the move.</em></span></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">Now, sugar mills operate on a long working capital cycle, being a seasonal business, and raising bank funds is common practice. Under Uttar Pradesh state law, mills are allowed to borrow money against their sugar stocks but on condition that a percentage of these loans are used to settle dues to sugarcane farmers. The judgement mentions that up to 85% of the stocks should be earmarked for payment of the farmers’ dues by the mills. however, farmer dues remained uncleared, prompting a PIL. The high court asked mills to sell the stock to repay farmers, but banks objected. Their contention was that their loans entitle them to a first claim over the stock.</span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">But the high court clarified that if the arrears due to farmers are already tagged on to the sugar inventory, then banks cannot have a prior claim. But note that the court did not go into allegations of whether funds were diverted by the mills. Normally, they should have used these loans to repay farmers, freeing the stocks of any claims. The high court order even clarifies that once the arrears are cleared, the bank’s right over the stock is restored. Banks now need to enquire why mills did not use their loans to clear arrears, and whether any action can be taken against them. If mills had cleared dues, then the stocks would have been available as valid collateral.</span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">What are the implications of this case? In the near term, banks are sufferers as they may fall short on collateral. Sugar mills are relatively unaffected, except that large sales of sugar will keep prices down. In the medium term, banks may become wary of lending to Uttar Pradesh sugar mills. Or, they may put in a foolproof mechanism to ensure that no arrears remain on inventory that is held as collateral.</span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">But the mess in the Uttar Pradesh sugar industry continues. The state government succeeded in not only imposing a high state advised price but also cleared arrears of the current season. Earlier, mills typically carried over dues into the next season. That is going to see both the state government and farmers unlikely to back down in the current sugar season as well. Expect fireworks in the coming months.</span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">Banks should have ensured that their loans were collateralized properly. However, they also need to become prudent about lending to sectors where government interference is high, and where public and private interests often clash. More importantly for state-owned banks, the ones affected in this case, succumbing to political pressure in lending can be hazardous for their health.</span></em></div>
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<a href="http://www.livemint.com/Money/FX5lCLYQgTQtXoXsgVgZgM/Sugarcoated-political-risk-hits-public-banks.html" target="_blank"><em><span style="font-family: Georgia, "Times New Roman", serif;">http://www.livemint.com/Money/FX5lCLYQgTQtXoXsgVgZgM/Sugarcoated-political-risk-hits-public-banks.html</span></em></a></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">Right to life overrides right to do business, Supreme Court rules</span></em></span></h1>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">NEW DELHI: Right to life outweighed right to do business with the Supreme Court on Monday rejecting State Bank of India's petition challenging an Allahabad high court order directing sugar mills in Uttar Pradesh to sell the sugar stock hypothecated to SBI against loans to pay sugarcane farmers' dues.<br /><br /> Sugar mills had taken loans totaling Rs 3,000 crore from SBI by hypothecating their sugar stock. Under law, the creditor bank has the first right on the hypothecated sugar to realize its dues if the mills default on repayment of loans.<br /><br /> Acting on a PIL filed by Rashtriya Kisan Mazdoor, the HC had invoked Section 17(5) of UP Sugarcane (Regulation of Supply and Purchase) Act, 1953 and extinguished the right of secured creditors and directed collectors to grant permission to sugar mills to sell the sugar stock for payment of dues to cane growers.</span></em><br />
<em><span style="font-family: Georgia, "Times New Roman", serif;">Appealing against the HC order through advocate Sanjay Kapur, SBI told the SC on Monday that the mills were now disposing of sugar stock, which was a security against loans. SBI apprehended that the Rs 3,000 crore loans it had advanced to mills would turn non-performing assets.<br /><br /> SBI also said the HC order for disposal of sugar stock could potentially turn sugar mills sick as it would proceed under the coercive Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (Sarfaesi) Act to sell the mills' assets to recover its dues.<br /><br /><img class="gwt-Image" src="http://timesofindia.indiatimes.com/photo/44808730.cms" height="264" width="400" /><br /><br /><br /> It also said no bank would come forward to grant any advance/loan to these sugar mills in case it was held that first charge on sugar stock would be in favour of cane growers and not banks, as held by the HC.<br /><br /> A bench headed by Chief Justice H L Dattu felt the cane growers' right to life was more important than the bank's right to carry on business, especially in the face of hardships faced by farmers leading to many suicides.<br /><br /> "In view of the suicides among farmers, let us put a quietus to this," the bench observed before dismissing SBI's appeal.<br /><br /> Similar considerations had weighed with the court in dismissing the appeals filed by four public sector insurance companies on settlement of claims filed by Jammu & Kashmir flood victims. The court had refused the insurance companies' plea to conduct preliminary survey before settling claims.</span></em><br />
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<em><span style="font-family: Georgia, "Times New Roman", serif;">The SC asked them to implement the HC order, which had directed them to pay up 95% of the claim amount if the insurance cover was below Rs 25 lakh and 50% for those with insurance cover exceeding Rs 50 lakh.<br /><br /> In the recent past, SBI has been at the receiving end also due to scams. Close on the heels of NPAs after cancellation of 2G spectrum licences by the apex court, it suffered a jolt when the SC cancelled all coal block allocations to private companies, which had taken huge loans from SBI.<br /><br /> The Coal Producers Association had informed the court that loans worth Rs 2.5 lakh crore advanced by banks and financial institutions would become non-performing assets because of en masse cancellation of coal blocks. It had said that SBI might suffer the biggest jolt as it could suffer a hit of up to Rs 78,263 crore, which was almost 7.9% of its net worth for 2012-13.</span></em></span><em><span style="font-family: Georgia, "Times New Roman", serif;"></span></em><br />
<span style="font-size: x-large;">Banks give over Rs 4,000 crore interest-free loans to sugar mills-ET 27th June 2014</span><br />
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<em><span style="font-family: Georgia, "Times New Roman", serif;">Banks have so far disbursed over Rs 4,000 crore interest-free loans of the total Rs 6,600 crore approved by the government to cash-starved sugar mills for clearing dues to cane farmers.</span></em><br />
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<em><span style="font-family: Georgia, "Times New Roman", serif;"> In December, the Cabinet Committee on Economic Affairs ( CCEA) had approved Rs 6,600 crore interest-free loans to the sugar industry exclusively for clearing sugarcane arrears. It decided to give loans via banks equivalent to the excise duty paid by the mills in the past three years.</span></em><br />
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<em><span style="font-family: Georgia, "Times New Roman", serif;">"As on June 3, banks have disbursed Rs 4,072 crore interest-free loans to sugar mills," a senior Food Ministry official told PTI.</span></em><br />
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<em><span style="font-family: Georgia, "Times New Roman", serif;"> Of which, Rs 1,412 crore and 1,461 crore have been disbursed to mills located in Maharashtra and Uttar Pradesh, the country's top-two sugar producing states, he said.</span></em><br />
<em><span style="font-family: Georgia, "Times New Roman", serif;"> Banks have been given June-end as deadline for sanctioning the entire loan amount. The total interest burden, estimated at Rs 2,750 crore over the next five years, is being borne by the government.</span></em><br />
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<em><span style="font-family: Georgia, "Times New Roman", serif;"> Mills have to repay the loans in five years and can avail of a moratorium on repayment for the first two years.</span></em><br />
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<em><span style="font-family: Georgia, "Times New Roman", serif;"> The Rs 80,000-crore sugar industry has been facing a cash crunch due to higher cost of production and lower selling prices in the wake of surplus output over the past few years.</span></em><br />
<em><span style="font-family: Georgia, "Times New Roman", serif;"> Currently, sugarcane arrears stand at about Rs 11,000 crore across the country, with the maximum of Rs 7,200 crore in Uttar Pradesh.</span></em><br />
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<em><span style="font-family: Georgia, "Times New Roman", serif;"> Amid concerns over rising cane arrears, the Food Ministry is also examining providing additional interest-free loans of Rs 4,400 crore to sugar mills to clear dues to cane farmers.</span></em><br />
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<em><span style="font-family: Georgia, "Times New Roman", serif;"> It is also looking at hiking sugar import duty from 15 per cent to 40 per cent to curb cheap imports and increase ethanol blending in petrol to 10 per cent as an effort to improve the liquidity of mills. </span></em><br />
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Danendra Jainhttp://www.blogger.com/profile/06877409854811449220noreply@blogger.com0tag:blogger.com,1999:blog-4486476466973233733.post-74111482563316767932014-09-20T23:53:00.000-07:002014-09-20T23:53:44.263-07:00Fraud Cases Cannot Be Quashed <em><span style="background-color: lime; font-size: x-large;">Cases of Financial Frauds shall not be quashed on the ground of Compromise as it is a social wrong and it has immense societal impact: Supreme Court [Read the Judgment]</span></em><br />
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<em><span style="font-family: Georgia, "Times New Roman", serif;">Hearing an appeal filed by State of Maharashtra against the judgment of the Bombay High Court, the Supreme Court held that High Courts should not quash FIR in cases of financial frauds where public is at a loss, even if there is a settlement.</span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">The judgment written by Justice Dipak Misra, relied on the judgment delivered by the Supreme Court in CBI v Jagjit Singh [(2013) 3 SCC 686]“wherein the court being moved by the CBI had overturned the order of the High Court quashing the criminal proceeding and in that backdrop had taken note of the fact that accused persons had dishonestly induced delivery of the property of the bank and had used forged documents as genuine.”</span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">The present case arose when a case was registered after written complaint by the Chief Vigilance Officer, Bank of Baroda in 2006. Investigation revealed that a bank officer was involved in fraud and case under Section 120-B, Section 406, 20, 467, 468 and 471 IPC were registered against him and other accused persons.</span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">The charge sheet that had been filed by the investigating authority also states that some persons made applications to Bank of Baroda for sanction of various credit facilities, stating that they wanted to induct the said bank as a new consortium member to replace the existing members, namely, the UTI Bank and the Federal Bank. They requested the said Bank to sanction 15% of the total Working Capital facility sanctioned by the consortium of Banks, so that, that much amount could be transferred to the UTI bank and Federal Bank to take over the existing liabilities with the said two banks.</span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">Further investigation revealed that “account of the company, with the consortium of banks as well as the finance institutions, was highly irregular. In the application to the Bank, the accused persons concealed the fact relating to the dues outstanding against them. Thereafter, when asked for the outstanding position with the existing consortium members, the accused persons wilfully and with the criminal intent to mislead the Bank of Baroda, furnished wrong statements about the outstanding position by giving considerably lesser amount as outstanding than the actual.”</span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">Meanwhile, while the case was pending, the accused Vikram Doshi,settled the disputes and paid Rs.42 lacs for settling the dispute. On that basis, Kotak Mahindra Bank issued a “no due certificate”.The said bank also confirmed that the guarantees issued by Vikram Doshi stood discharged.</span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">After getting the no dues certificate, the accused approached the High Court under S. 482 of the Code of Criminal Procedure, and court ordered “Both the offices under Sections 406 and 420 are compoundable with the permission of the court. As already discussed here in above, the Bank has already given its No Due Certificate to the borrower i.e. ATCOM. It can clearly be seen that even if the matter is permitted to go for trial, no fruitful purpose would be served, except burdening the criminal Courts which are already over-burdened.”</span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">To arrive at the same conclusion the High Court relied on the decision in Madan Mohan Abbot v. State of Punjab and distinguished the pronouncement in A. Ravishanker Prasad case.</span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">Then State then preferred an appeal to the Apex Court.</span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">Additional Solicitor General Pinky Anand submitted to the Court that High Court had erroneously opined that the remaining offences are 406 and 420 of IPC whereas the charge sheet, also included other offences against the accused persons. On the other hand, the counsel for the respondents claimed that the order of the High Court was correct.</span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">Stating the point of law clearly, the judgment of the Supreme Court noted, “High Courthas the jurisdiction to quash a criminal proceeding under Section 482 of the Code in respect of non-compoundable offences barring certain nature of crimes.”</span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">The Court then went through plethora of judgments on the issue, stating finally, “Be it stated, that availing of money from a nationalized bank in the manner, as alleged by the investigating agency, vividly exposits fiscal impurity and, in a way, financial fraud. The modus operandi as narrated in the chargesheet cannot be put in the compartment of an individual or personal wrong. It is a social wrong and it has immense societal impact. </span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"> It is an accepted principle of handling of finance that whenever there is manipulation and cleverly conceived contrivance to avail of these kind of benefits it cannot be regarded as a case having overwhelmingly and predominantingly of civil character. The ultimate victim is the collective. It creates a hazard in the financial interest of the society. The gravity of the offence creates a dent in the economic spine of the nation. The cleverness which has been skilfully contrived, if the allegations are true, has a serious consequence.</span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;"> A crime of this nature, in our view, would definitely fall in the category of offences which travel far ahead of personal or private wrong. It has the potentiality to usher in economic crisis. Its implications have its own seriousness, for it creates a concavity in the solemnity that is expected in financial transactions. It is not such a case where one can pay the amount and obtain a “no due certificate” and enjoy the benefit of quashing of the criminal proceeding on the hypostasis that nothing more remains to be done. The collective interest of which the Court is the guardian cannot be a silent or a mute spectator to allow the proceedings to be withdrawn, or for that matter yield to the ingenuous dexterity of the accused persons to invoke the jurisdiction under Article 226 of the Constitution or under Section 482 of the Code and quash the proceeding. It is not legally permissible.”</span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">Stating the role of judiciary while dealing with such cases, the judgment states, “The Court is expected to be on guard to these kinds of adroit moves. The High Court, we humbly remind, should have dealt with the matter keeping in mind that in these kind of litigations the accused when perceives a tiny gleam of success, readily invokes the inherent jurisdiction for quashing of the criminal proceeding. The court’s principal duty, at that juncture, should be to scan the entire facts to find out the thrust of allegations and the crux of the settlement. </span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">It is the experience of the Judge comes to his aid and the said experience should be used with care, caution,circumspection and courageous prudence. As we find in the case at hand the learned Single Judge has not taken pains to scrutinize the entire conspectus of facts in proper perspective and quashed the criminal proceeding. The said quashment neither helps to secure the ends of justice nor does it prevent the abuse of the process of the Court nor can it be also said that as there is a settlement no evidence will come on record and there will be remote chance of conviction. </span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">Such a finding in our view would be difficult to record. Be that as it may, the fact remains that the social interest would be on peril and the prosecuting agency, in these circumstances, cannot be treated as an alien to the whole case. Ergo, we have no other option but to hold that the order of the High Court is wholly indefensible.”</span></em></div>
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<em><span style="font-family: Georgia, "Times New Roman", serif;">The Court allowed the appeal filed and the order of the High Court was set aside.</span></em></div>
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<a href="http://www.livelaw.in/cases-financial-frauds-shall-quashed-ground-compromise-social-wrong-immense-societal-impact/" target="_blank">http://www.livelaw.in/cases-financial-frauds-shall-quashed-ground-compromise-social-wrong-immense-societal-impact/</a></div>
Danendra Jainhttp://www.blogger.com/profile/06877409854811449220noreply@blogger.com0tag:blogger.com,1999:blog-4486476466973233733.post-23084475761669223772014-09-10T17:04:00.001-07:002014-09-10T17:07:18.204-07:00Court Gives Relief To Directors Of Wilful Defaultr Company<strong><span style="font-size: x-large;">Gujarat High Court strikes down part of RBI default note-Financial Express-11.09.2014</span></strong><br />
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<em><span style="color: #cc0000; font-family: Georgia, "Times New Roman", serif;">Even as the Reserve Bank of India (RBI) looks to tighten rules relating to wilful defaulters, the Gujarat High Court on Wednesday struck down a part of the RBI circular that allows banks to declare all directors of a defaulting company wilful defaulters and bar them from banking services or other business ventures for five years. </span></em><br />
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<em><span style="color: #cc0000; font-family: Georgia, "Times New Roman", serif;">While the judgment may not mean Kingfisher Airlines promoter Vijay Mallya’s troubles are over, it is possible the airline’s directors who have been declared as wilful defaulters by United Bank of India may get a reprieve. </span></em><br />
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<em><span style="color: #cc0000; font-family: Georgia, "Times New Roman", serif;">A bench comprising justices Akil Kureshi and JB Pardiwala, while declaring a part of the RBI’s July 1, 2013, circular as ultra vires and violative of of the Constitution, observed: “... (the) circular shatters the concept of the identity of a company different and distinct from its directors without providing any safeguards. It does not distinguish between a director who is involved in the day-to-day functioning of a company as against those who are not. The circular paints all directors with the same brush. Therefore, we have reached to a conclusion that the master circular, so far as it is sought to be made applicable to all the directors of the company is arbitrary and unreasonable.” </span></em><br />
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<em><span style="color: #cc0000; font-family: Georgia, "Times New Roman", serif;">However, the court clarified that these observations will not apply to the promoters or entrepreneurs. </span></em><br />
<em><span style="color: #cc0000; font-family: Georgia, "Times New Roman", serif;">“The Master Circular does not impose an unreasonable restriction upon the promoters/entrepreneurs, being violative of the Article 19(1)(g) of the Constitution of India as it has the effect of debarring them from availing of any additional facilities for floating a new venture for a period of five years from the date the name of the wilful defaulter is published in the list of ‘wilful defaulters’ by the RBI,” the HC said in its 162-page judgment delivered on Tuesday. </span></em><br />
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<em><span style="color: #cc0000; font-family: Georgia, "Times New Roman", serif;">It also termed as “arbitrary and unreasonable” Punjab National Bank's three wilful defaulter show-cause notices to Ahmedabad-based Ionic Metalliks and Ionic Castings and their two directors. Saying they were bereft of basic details and material particulars, the HC added that a bank, before issuing show-cause notices, should disclose the source of information justifying its action. The lender, it noted, must show that despite adequate cash flow and good net worth, the borrower had failed to repay the loan. </span></em><br />
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<em><span style="color: #cc0000; font-family: Georgia, "Times New Roman", serif;">The court refused to look into the show-cause notice issued by Standard Chartered Bank (SCB) to Aquafil Polymers and its two directors. “Although it has been included as one of the Scheduled Banks in the Second Schedule to the RBI Act, 1934, yet, being a private bank, is not amenable to the writ jurisdiction of this court. “Merely because a company is carrying on the banking business, it cannot per se become a public authority nor can be considered as discharging public functions... It has its own Board of Directors. It works like any other private company in the banking business,” the court said. </span></em><br />
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<em><span style="color: #cc0000; font-family: Georgia, "Times New Roman", serif;">According to the judges, SCB has no duty towards the public and it's duty is towards its account holders, which may include the borrowers having availed of the loan facility. “It has no power to take any action, or pass any order affecting the rights of the members of the public. The binding nature of its orders and actions is confined to its account holders and borrowers and to its employees. Its functions are also not akin to governmental functions,” it added. </span></em><br />
<em><span style="color: #cc0000; font-family: Georgia, "Times New Roman", serif;">Point of order </span></em><br />
<em><span style="color: #cc0000; font-family: Georgia, "Times New Roman", serif;"></span></em><br />
<em><span style="color: #cc0000; font-family: Georgia, "Times New Roman", serif;">Kingfisher Airline’s directors, who have been declared as wilful defaulters by UBI, may get a reprieve. </span></em><br />
<em><span style="color: #cc0000; font-family: Georgia, "Times New Roman", serif;"></span></em><br />
<em><span style="color: #cc0000; font-family: Georgia, "Times New Roman", serif;">However, the judgment may not mean Kingfisher Airlines promoter Vijay Mallya’s troubles are over</span></em><br />
<em><span style="color: #cc0000; font-family: Georgia;"><a href="http://www.financialexpress.com/news/gujarat-high-court-strikes-down-part-of-rbi-default-note/1287671/0" rel="nofollow" target="_blank">Link Financial Express</a></span></em><br />
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<em><span style="font-size: x-large;">RBI: Guarantor can also be declared wilful defaulter-Financial Express 09.09.2014</span></em><br />
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<span style="color: #cc0000; font-family: Georgia, "Times New Roman", serif;"><em>The Reserve Bank of India (RBI) has clarified that entities that provide guarantee or surety for a loan are also liable to be tagged as wilful defaulters in cases where they refuse to make payment to the bank when the principal borrower has defaulted. </em></span><br />
<span style="color: #cc0000; font-family: Georgia, "Times New Roman", serif;"><em></em></span><br />
<span style="color: #cc0000; font-family: Georgia, "Times New Roman", serif;"><em>In a notice on Tuesday, the central bank said that not just companies but even individuals who manage companies and other companies within the group can be tagged as wilful defaulter by banks. “In cases where guarantees furnished by the companies within the group on behalf of the wilfully defaulting units are not honoured when invoked by the banks /FIs, such group companies should also be reckoned as wilful defaulters,” it said. </em></span><br />
<span style="color: #cc0000; font-family: Georgia, "Times New Roman", serif;"><em></em></span><br />
<span style="color: #cc0000; font-family: Georgia, "Times New Roman", serif;"><em>Further, the RBI said that in case of a default on a loan by a borrower, the onus of repayment falls on the guarantor immediately. In cases where the guarantor refuses to pay despite having sufficient funds, such guarantors can also be declared as wilful defaulter by the bank. </em></span><br />
<span style="color: #cc0000; font-family: Georgia, "Times New Roman", serif;"><em></em></span><br />
<span style="color: #cc0000; font-family: Georgia, "Times New Roman", serif;"><em>“As such, where a banker has made a claim on the guarantor on account of the default made by the principal debtor, the liability of the guarantor is immediate. In case the said guarantor refuses to comply with the demand made by the creditor/banker, despite having sufficient means to make payment of the dues, such guarantor would also be treated as a wilful defaulter,” the RBI said. </em></span><br />
<span style="color: #cc0000; font-family: Georgia, "Times New Roman", serif;"><em></em></span><br />
<span style="color: #cc0000; font-family: Georgia, "Times New Roman", serif;"><em>However, this would apply to only prospective cases and not those that have already emerged, the central bank said. Indian banks are in a bitter battle with Kingfisher Airlines and promoter Vijay Mallya over a loan default by the latter. United Bank of India declared Mallya and three other directors of the company as wilful defaulters recently.</em></span>Danendra Jainhttp://www.blogger.com/profile/06877409854811449220noreply@blogger.com0tag:blogger.com,1999:blog-4486476466973233733.post-66604351064513741522014-09-03T16:24:00.002-07:002014-09-03T16:29:58.321-07:00Effective Court Orders In Cheque Bouce Case<em><span style="font-family: Georgia;">I would like to refer the latest ruling of Supreme Court ( Details given below) on jurisdiction of court in connection with cases pertaining to cheque bounce ie. Return of cheque unpaid in want of adequate fund. Clearing all controversy, the Supreme Court ruled that the jurisdiction of such cases have to be the location where the cheque bounced, meaning the bank of the person, who issued the cheque and not the bank location of the complainant. </span></em> <br />
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<span style="font-family: Georgia; font-size: small;"><i>Suppose I live at Kolkata. I went Delhi to buy a car. Car owner who lives at Delhi and who has a shop at Delhi delivered the car to me on trusting the payment made by me by cheque. It is obvious that since I am having account at Kolkata i.e. at my place of residence, cheque is drawn on Kolkata bank.</i></span> <br />
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<span style="font-family: Georgia; font-size: small;"><i>At a later date cheque is presented by seller of car at Delhi in his bank for clearance and unfortunately cheque bounces on the ground that drawer of the cheque (in this case me) do not have sufficient balance. </i></span> <br />
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<span style="font-family: Georgia; font-size: small;"><i>It means seller of the car is cheated by a person of Kolkata i.e. by me. Cause of action arises at Delhi. It is seller at Delhi who favoured me. And since he has sold the car he wants payment at Delhi itself. He will therefore like to file a case in court at Delhi only. Delhi is a place of payee and not that of drawer of the cheque.</i></span> <br />
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<span style="font-family: Georgia; font-size: small;"><i>Supreme Court has given the ruling that the jurisdiction of such cheque bounce case have to be the location where the cheque bounced, meaning the bank of the person who issued the cheque i.e. drawer of the cheque. Apex court has ruled that case cannot be filed at the location of complainant. In the case given by me drawer of the cheque is at Kolkata and hence complainant who lives at Delhi has to file the case at Kolkata. </i></span> <br />
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<span style="font-family: Georgia; font-size: small;"><i>As such if the drawer of the cheque and the payee both lives at one location, there is no problem, complainant will not face any difficulty in recovery of dues from defaulter, i.e. drawer of the cheque.</i></span> <br />
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<span style="font-family: Georgia; font-size: small;"><i>But if when buyer and seller live at two different places, real problem of jurisdiction arises. </i></span> <br />
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<span style="font-family: Georgia; font-size: small;"><i>If 100 people like me go to Delhi from different corners of the country and buy car by giving payment through cheque and seller deliver the cars to all trusting cheques and then these cheques are returned unpaid by drawee bank, payee, the seller will have to file court case in different parts of the country from where buyer had come to Delhi to buy car. </i></span> <br />
<span style="font-family: Georgia; font-size: small;"><i>I would like to give here another example of Saree dealer in Surat, where variety of sarees are manufactured and sold all over the country .Retailers from different part of the country go to Surat to buy Saree at cheaper rate and then handover signed cheque to seller to create confidence and trust in seller. It also happens that salesmen of saree dealer moves from one town to other town to market saree and collects orders of various amounts from different retailers in different towns and cities. </i></span><br />
<span style="font-family: Georgia; font-size: small;"><i></i></span><br />
<span style="font-family: Georgia; font-size: small;"><i>In return, retailers/ buyers handover current dated or postdated cheques to the party as a token of payment. In such case if buyer i.e. the drawer of the cheques returns the cheque unpaid when presented for payment, seller will have only legal recourse to recover the money from such cheat retailer. In past, such sellers used to file case in Surat itself. But now in view of Supreme Court order, they will have to file cases in different towns where the retailer failed to honour the cheque. </i></span> <br />
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<span style="font-family: Georgia; font-size: small;"><i>The clear message is that now onwards all dealers and all sellers will insist for local cheques in lieu of goods sold or to be sold or they will prefer cheques drawn on local banks only i.e. Draft if it comes from location away from that of seller’s location. It means that the trust on cheque is diluted by Supreme Court order mentioned above. Latest order of apex court is nothing but direct attack on reliability and trust of cheque which was created during last five to ten years after introduction of advance technology in almost all banks. </i></span> <br />
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<span style="font-family: Georgia; font-size: small;"><i>I do not mean to say that court order is right or wrong, what I mean to stress that it has caused erosion in value and respectability of cheque. In foreign countries, cheques issued in payment is treated as good as cash payment. </i></span> <br />
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<span style="font-family: Georgia; font-size: small;"><i>Hence I am of strong opinion that cheques should be so much reliable and trustworthy that people treat it as cash. If it happens so, it will help in reduction of cash transaction to a great extent and also have positive impact on the economy. Rather GOI should make it mandatory for all citizens to make payment only by account payee cheques and drafts if the payment is of value more than Rs.5000o. Such rule will help is reduction of cases of tax evasion and increase tax compliance to a great extent. GOI can multiply revenue income many times only by restricting cash payment system.</i></span> <br />
<span style="font-family: Georgia; font-size: small;"><i> </i></span> <br />
<span style="font-family: Georgia; font-size: small;"><i>Here it will be proper to mention that after adoption of Core Banking Solution (CBS) by almost all banks, cheques issued and drawn by a person or a commercial entity is normally Multi-city cheques. Or you can say majority of cheques issued now-a-days are payable all over the country. The system of sending of outstation cheque to the location of drawer and waiting for 10 to 15 days for payment is no more needed. In most of the cases cheques issued from anywhere in the country are cleared in the location where bank of payee is situated. </i></span> <br />
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<span style="font-family: Georgia; font-size: small;"><i>A few years ago, when Court and GOI made the law related to cheque bounce case stringent, drawer of cheque became alert in fear of punishment. Reliability of cheques moved to greater height first in fear of legal action and secondly due to its encashability anywhere in the country.</i></span> </div>
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<span style="font-family: Georgia; font-size: small;"><i>But now after the said ruling of Supreme Court, people will not like to accept outstation cheque as payment for goods sold or services extended or to be extended. . Because if the cheque is returned unpaid in want of adequate fund, he or she will have to bear with loss or spend time, manpower and money in filing a case in the location of issuer of cheque. </i></span><br />
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<span style="font-family: Georgia; font-size: small;"><i>The fact is that real guilty is issuer of cheque who issued the cheque and then did not keep adequate balance to ensure honoring of cheque. It is issuer and drawer of cheque who cheated the seller of goods and services by issuing false cheque. But unfortunately the Apex court instead of punishing the real guilty thought it better to force payee to go through difficult course of action of filing and contesting the case till its logical end. There may be some good logic and good reason in the minds of learned Judge before signing such orders. However GOI or RBI should look into the matter and ponder over the consequences of the said order in the larger interest of the country.</i></span> <br />
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<span style="font-family: Georgia; font-size: small;"><i>It is necessary to point out there that issuer of cheque can manage at his location required papers and attend court in time if payee files a case against him in local court. But the payee will have to manage person, money, time, and ticket for journey and lastly severe harassment in attending hundreds of dates at remote location. Obviously to avoid such awkward situation majority of sellers will avoid accepting outstation cheques or deliver the goods only after the cheques is paid into his account. </i></span> <br />
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<span style="font-family: Georgia; font-size: small;"><i>Obviously the consequence of latest order given by Supreme court, value and usage of cheques will be limited and confined to local areas i,e, within the area of jurisdiction of local court. It will reduce the importance of multi-city cheques so far its acceptability is concerned. Perhaps Supreme Court desires that buyer of cheque uses it only in the location where he lives. </i></span> </div>
<span style="font-family: Georgia; font-size: small;"><i>It is also true here that lacs of cases related to cheque bounce case are pending at various courts of the country either due to manpower shortage or due to ill—motivated moves of advocates of drawers of cheques .It is a subject of inefficiency of court and rampant corruption at all levels. In many cases advocates also have a vested interest in taking frequent dates and postponing hearing for abnormal period.</i></span> <br />
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<span style="font-family: Georgia; font-size: small;"><i>Last but not the least, in view of increasing number of cheque bounce case in courts, either court or GOI should make arrangement for disposal of such cases in time bound programme of say 15 days. In recent past Court issued guideline for quick disposal of causes related to cheque bounce cases. If GOI frames adequate rule in unison with spirit of court order, it will be a great help to people who have been cheated by fraud-minded drawers of cheques.</i></span><br />
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<em><span style="font-family: Georgia, "Times New Roman", serif;"><strong><span style="background-color: lime; font-size: x-large;">Cheque bouncing: Supreme Court's verdict on jurisdiction</span> <br /><span style="color: blue;"><span style="font-size: small;">Clearing all controversy, the Supreme Court ruled that the jurisdiction of such cases have to be the location where the cheque bounced, meaning the bank of the person, who issued the cheque and not the bank location of the complainant</span> </span></strong></span></em><br />
<em><span style="font-family: Georgia, "Times New Roman", serif;"><strong><span style="color: blue;"><span style="font-size: small;">Prosecuting jurisdiction in a cheque bouncing case has been a highly contested issue since very long. The issue has revolved around the point of determination.</span> <br /><br /><span style="font-size: small;">Where would someone file a case for cheque bouncing out of the following venues?</span> <br /><br /><span style="font-size: small;">• Location of the bank of Complainant</span> </span></strong></span></em><em><span style="font-family: Georgia, "Times New Roman", serif;"><strong><span style="color: blue;"><span style="font-size: small;">• Location of bank of issuer</span> </span></strong></span></em><em><span style="font-family: Georgia, "Times New Roman", serif;"><strong><span style="color: blue;"><span style="font-size: small;">• Location of origin of legal notice </span> </span></strong></span></em><em><span style="font-family: Georgia, "Times New Roman", serif;"><strong><span style="color: blue;"><span style="font-size: small;">• Where the legal notice was received</span> </span></strong></span></em><br />
<em><span style="font-family: Georgia, "Times New Roman", serif;"><strong><span style="color: blue;"><span style="font-size: small;">In the Dasrath Rupsingh case, a three Judge Bench of the Supreme Court has finally laid the controversy to rest.</span> </span></strong></span></em><br />
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<em><span style="font-family: Georgia, "Times New Roman", serif;"><strong><span style="color: blue;"><span style="font-size: small;">By and large, complaints pertaining to cheque bouncing are instituted where the bank of the complainant is. Before the Supreme Court decided the case of Harman Electronics, complainants used to file a large number of cases on the basis of the location of their attorney, not of any bank, who would send the legal notice for a cheque having bounced. </span></span></strong></span></em><br />
<em><span style="font-family: Georgia, "Times New Roman", serif;"><strong><span style="color: blue;"><span style="font-size: small;"></span></span></strong></span></em><br />
<em><span style="font-family: Georgia, "Times New Roman", serif;"><strong><span style="color: blue;"><span style="font-size: small;">The Court noted that the law of cheque bouncing was being misused rampantly. Complaints were filed in Delhi just because lawyers were issuing notices from there, even though the bank of the payer or the payee were outside Delhi.</span> <br /><br /><span style="font-size: small;">The Supreme Court has effectively put an end to this harassment at the hands of the Drawee.</span> </span></strong></span></em><em><span style="font-family: Georgia, "Times New Roman", serif;"><strong><span style="color: blue;"><span style="font-size: small;">Last year, in the Nishant Aggarwal case, the Supreme Court again addressed the prosecuting jurisdiction aspect. A two Judges Bench of the Supreme Court held that the complaint under Section 138 can be filed at the jurisdiction where the bank of the Complainant is situated.</span> </span></strong></span></em><br />
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<em><span style="font-family: Georgia, "Times New Roman", serif;"><strong><span style="color: blue;"><span style="font-size: small;">In the Dasrath Rupsingh case, the apex court has cleared the controversy once and for all. The Bench stated that the factor for determining jurisdiction has to be the location where the cheque bounced, meaning thereby, the bank of the person who issued the cheque and not at the place the intimation of dishonour reaches, i.e, bank of the complainant. </span></span></strong></span></em><br />
<em><span style="font-family: Georgia, "Times New Roman", serif;"><strong><span style="color: blue;"><span style="font-size: small;"></span></span></strong></span></em><br />
<em><span style="font-family: Georgia, "Times New Roman", serif;"><strong><span style="color: blue;"><span style="font-size: small;">The Bench further held that the offence under the section shall occur when the cheque is returned unpaid.</span> </span></strong></span></em><em><span style="font-family: Georgia, "Times New Roman", serif;"></span></em><strong><span style="color: blue;"> </span></strong><span style="color: blue; font-family: Georgia, "Times New Roman", serif; font-size: small;"><em><strong>The Bench notes that the cheque bouncing law should not be allowed to become a tool for harassment. There had been cases where the complainant would deposit the cheque and/or issue a legal notice from a place that was totally unrelated to the transaction in question-- in a possibe attempt to harass the other party.</strong></em></span><em><span style="color: blue; font-family: Georgia, "Times New Roman", serif;"><strong> </strong></span></em><br />
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<em><span style="font-family: Georgia, "Times New Roman", serif;"><strong><span style="color: blue;"><span style="font-size: small;">The Bench also safeguarded the interests of genuine creditors in such a scenario. A person/ company can insist that the payment shall be made through cheque in question, payable at a particular location convenient to the creditor.</span> </span></strong></span></em><em><span style="font-family: Georgia, "Times New Roman", serif;"></span></em><strong><span style="color: blue;"> </span></strong><br />
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<em><span style="font-family: Georgia, "Times New Roman", serif;"><strong><span style="color: blue;"><span style="font-size: small;">It is also important to note that the remedy under the Negotiable Instruments Act is in addition to the provisions of the Indian Penal Code (IPC) and not as an alternative. Meaning that the case for cheque bouncing will be maintainable only where the bank of the drawee is, but if the creditor can demonstrate that various acts of the transaction took place in another jurisdiction, like his office/ residence, then he can maintain a separate action for fraud, cheating and forgery. </span></span></strong></span></em><br />
<em><span style="font-family: Georgia, "Times New Roman", serif;"><strong><span style="color: blue;"><span style="font-size: small;"></span></span></strong></span></em><br />
<em><span style="font-family: Georgia, "Times New Roman", serif;"><strong><span style="color: blue;"><span style="font-size: small;">Then there is also an option before the Complainant to institute a civil suit for recovery against the person who issued the dishonoured cheque.</span> </span></strong></span></em><em><span style="font-family: Georgia, "Times New Roman", serif;"></span></em><strong><span style="color: blue;"> </span></strong><em><span style="font-family: Georgia, "Times New Roman", serif;"><strong><span style="color: blue;"><span style="font-size: small;">Status of the pending cases:</span> </span></strong></span></em><em><span style="font-family: Georgia, "Times New Roman", serif;"></span></em><strong><span style="color: blue;"> </span></strong><em><span style="font-family: Georgia, "Times New Roman", serif;"><strong><span style="color: blue;"><span style="font-size: small;">After ruling that the proper jurisdiction to hold trial in a cheque bouncing case is where the bank of the alleged accused is situated, the Bench passed an order dealing with the currently pending cases.</span> </span></strong></span></em><br />
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<em><span style="font-family: Georgia, "Times New Roman", serif;"></span></em><strong><span style="color: blue;"> </span></strong><em><span style="font-family: Georgia, "Times New Roman", serif;"><strong><span style="color: blue;"><span style="font-size: small;">In all those matters where the alleged accused has appeared after summoning and his evidence under Section 145 has commenced, those cases will remain where they are already pending. In all other matters where the evidence by examination under Section 145 has not begun, the case will be returned to the complainant to institute at the jurisdiction where the bank of the accused is situated.</span> </span></strong></span></em><br />
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<em><span style="font-family: Georgia, "Times New Roman", serif;"></span></em><strong><span style="color: blue;"> </span></strong><em><span style="font-family: Georgia, "Times New Roman", serif;"><strong><span style="color: blue;"><span style="font-size: small;">Reading any judgement by Justice Vikramajit Sen is an excellent experience and this one is no different. However, in a separate judgement, Justice TS Thakur has also given elaborate findings regarding the confusionaround cheque bouncing matters.</span> </span></strong></span></em><br />
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<strong><span style="background-color: lime; font-size: large;">When offence of dishonour of cheque is not made even though accused has given stop payment instruction?</span></strong> <br />
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<em><span style="color: purple; font-family: Georgia, "Times New Roman", serif;">Stop payment instructions whether are covered by Section 138 of the Negotiable Instruments Act, 1881 (NI Act) or not, was the subject matter of controversy before the Court.</span></em><br />
<em><span style="color: purple; font-family: Georgia, "Times New Roman", serif;">High Court in its impugned finding had held that provisions of Section 138 of the NI Act are attracted where a cheque is returned by the bank on the ground that there is insufficient amount or that the amount of cheque exceeds the amount arranged to be paid from that account by an agreement made with the bank. </span></em><br />
<em><span style="color: purple; font-family: Georgia, "Times New Roman", serif;"></span></em><br />
<em><span style="color: purple; font-family: Georgia, "Times New Roman", serif;">It was further held that the cheque in question was returned on account of "stop payment" instructions given by the accused in view of the fact that the complainant had failed to discharge its obligations as per the agreement executed between them. The High Court had further observed that the complainant had not disclosed complete facts as required under provisos (b) and (c) of Section 138 of the NI Act and accordingly had quashed the complaint. </span></em><br />
<em><span style="color: purple; font-family: Georgia, "Times New Roman", serif;"></span></em><br />
<em><span style="color: purple; font-family: Georgia, "Times New Roman", serif;">The Court held that the impugned finding of the High Court was incorrect as even "stop payment" instructions issued to the bank are held to make a person liable for offence punishable under Section 138 of the NI Act in case cheque is dishonoured on that count. Once the cheque is issued by the drawer a presumption under Section 139 of the NI Act must follow and merely because the drawer issues a notice to the drawee or to the bank for stoppage of the payment it will not preclude an action under Section 138 of the NI Act by the drawee or the holder of the cheques in due course. </span></em><br />
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<em><span style="color: purple; font-family: Georgia, "Times New Roman", serif;">The Supreme Court relied upon its previous judgement in the matter of MMTC Limited Vs Medchl Chemicals and held even when the cheque is dishonoured by reason of stop-payment instructions by virtue of Section 139 the court has to presume that the cheque was received by the holder for the discharge, in whole or in part, of any debt or liability. of course this is a rebuttable presumption. The accused can thus show that the "stop-payment" instructions were not issued because of insufficiency or paucity of funds. If the accused shows that in his account there were sufficient funds to clear the amount of the cheque at the time of presentation of the cheque for encashment at the drawer bank and that the stop-payment notice had been issued because of other valid causes including that there was no existing debt or liability at the time of presentation of cheque for encashment, then offence Under Section 138 would not be made out. </span></em><br />
<em><span style="color: purple; font-family: Georgia, "Times New Roman", serif;"></span></em><br />
<em><span style="color: purple; font-family: Georgia, "Times New Roman", serif;">The important thing is that the burden of so proving would be on the accused. Thus a court cannot quash a complaint on this ground. Whether complainant had failed to discharge its obligations or not could not have been decided by the High Court conclusively at the stage when it was dealing with a petition filed under Section 482 of the Code for quashing the complaint. Whether any money is paid by the accused to the complainant is a matter of evidence. The accused has ample opportunity to lead his defence.</span></em><br />
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<strong><span style="background-color: lime; font-size: x-large;">When cheques bounce-Hindu Business LIne</span></strong><br />
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<em><span style="font-family: Georgia, "Times New Roman", serif;">Cheque bouncing is one of the most common offences in the country, with over 40 lakh pending cases in the Supreme Court. A cheque can bounce for several reasons such as insufficiency of funds, mismatch in signature, stale cheques, post-dated cheques or if there are corrections in the cheque without authentication. The bank collects a penalty from the defaulter when a cheque bounces. The person issuing the cheque can even get a jail term. </span></em><br />
<em><span style="font-family: Georgia, "Times New Roman", serif;">All that’s fine, but what are the remedies if you’ve been issued a cheque which has bounced?</span></em><br />
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<b><em><span style="font-family: Georgia, "Times New Roman", serif;">Legal action </span></em><br /><em><span style="font-family: Georgia, "Times New Roman", serif;"></span></em><br /><em><span style="font-family: Georgia, "Times New Roman", serif;"></span></em> </b><em><span style="font-family: Georgia, "Times New Roman", serif;">Almost every bank gives a ‘cheque return memo’ along with the returned cheque stating the reason for the bounce. If you hold the cheque, you need to inform the drawer and ask if you can re-present it to the bank within the 3-month period. </span></em><br />
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<em><span style="font-family: Georgia, "Times New Roman", serif;">If cheque is dishonoured even the second time, then you can take legal action. As a first step, you can send a legal notice to the defaulter within a period of 30 days from receiving the cheque return memo. The notice should contain all necessary details. </span></em><br />
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<em><span style="font-family: Georgia, "Times New Roman", serif;">The defaulter needs to make a fresh payment within a period of 15 days from the receipt of this notice. If he still doesn’t make the payment within this time period, then you can file a complaint in the magistrate court. This case should be filed within a maximum period of 1 month from the date of expiry of the 15-day period. </span></em><br />
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<em><span style="font-family: Georgia, "Times New Roman", serif;">Remember that the complaint should be filed within the time frame. If complaints are made outside the time frame, then the case becomes time barred and will not be entertained. When your case comes for hearing, the defaulter can be punished with a jail term for two years and/or a penalty which can be up to twice the cheque amount. The defaulter can appeal against the order within a period of 1 month of judgement. </span></em><br />
<em><span style="font-family: Georgia, "Times New Roman", serif;">However, it may not be so straightforward all the time. Here are two common instances when cheques bounce and what can be done. </span></em><br />
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<b><em><span style="font-family: Georgia, "Times New Roman", serif;">Rent cheques </span></em><br /><em><span style="font-family: Georgia, "Times New Roman", serif;"></span></em><br /><em><span style="font-family: Georgia, "Times New Roman", serif;"></span></em> </b><em><span style="font-family: Georgia, "Times New Roman", serif;">Sometimes, it may so happen that the tenant does not have the funds simply because the landlord did not drop the cheque at the expected time. Therefore, the landlord is bound to first inform the tenant and only then proceed with the legal process. There may be another case when the tenant wishes to set off an amount from a particular month’s rent towards some expense he incurred on behalf of the landlord, which the latter refuses to pay. If there is a cheque bounce because of this, the criminal case will continue against the tenant till he is able to establish that there was a legitimate set-off. </span></em><br />
<b><em><span style="font-family: Georgia, "Times New Roman", serif;">EMI cheques </span></em><br /><em><span style="font-family: Georgia, "Times New Roman", serif;"></span></em><br /><em><span style="font-family: Georgia, "Times New Roman", serif;"></span></em> </b><em><span style="font-family: Georgia, "Times New Roman", serif;">Banks don’t normally file cases against bounced EMI cheques as the first step. Hefty penalties, loan default charges and cheque bounce charges are levied first. These keep building up for every month of default and added to the EMI amount. Also, the defaulter’s credit rating gets affected with every default he makes. In case of secured loans, banks also have the security as collateral. If the borrower does not make payments even after repeated reminders, the bank can give sufficient notice and auction the security to recover the dues.</span></em><br />
<a href="http://www.thehindubusinessline.com/money-wise/when-cheques-bounce/article5204611.ece" target="_blank"><span lang=""><span style="color: #0066cc;">http://www.<wbr></wbr>thehindubusinessline.com/<wbr></wbr>money-wise/when-cheques-<wbr></wbr>bounce/article5204611.ece</span></span></a><br />
<b><span lang=""><span style="background-color: lime; font-size: x-large;">To fast-track cheque-bounce cases, SC issues guideline</span></span><span style="font-size: x-large;"></span><br /> </b><span style="color: blue;"><em><span style="font-family: Georgia, "Times New Roman", serif;">Written by </span></em><u><span style="font-family: Georgia, "Times New Roman", serif;"><span lang=""><em>Utkarsh Anand</em></span></span></u><span lang=""><em><span style="font-family: Georgia, "Times New Roman", serif;"> | New Delhi | April 26, 2014 1:51 am</span></em></span></span><br />
<em><span style="color: blue; font-family: Georgia, "Times New Roman", serif;">With more than 40 lakh cheque-bounce cases choking the justice delivery system in the country, the Supreme Court has issued slew of guidelines, including issuance of summons through e-mails and completion of evidence within three months, to prevent further piling up.</span></em><br />
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<em><span style="color: blue; font-family: Georgia, "Times New Roman", serif;">A bench of Justices K S Radhakrishnan and Vikramjit Sen laid down guidelines to be uniformly followed by all magisterial courts dealing with cheque-bounce cases under pertinent provisions of the Negotiable Instruments Act for a "speedy and expeditious disposal".</span></em><br />
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<em><span style="color: blue; font-family: Georgia, "Times New Roman", serif;">Directing for a day-to-day trial, the court said that a magistrate shall issue summons on the same day he receives a complaint, provided documents are in order. It held that a magistrate need not call a complainant twice for recording his statement, once at pre-summoning stage and another after issuance of summons, and taking an appropriate affidavit from him should suffice.</span></em><br />
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<em><span style="color: blue; font-family: Georgia, "Times New Roman", serif;">The summons should be issued immediately by post as well through e-mails. The court said that summons should apprise an accused that he could show up in the court and compound the offence on the same day.</span></em><br />
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<em><span style="color: blue; font-family: Georgia, "Times New Roman", serif;">"Once the court issues summons and the presence of the accused is secured, an option be given to the accused whether, at that stage, he would be willing to pay the amount due along with reasonable interest and if the accused is not willing to pay, court may fix up the case at an early date and ensure day-to-day trial," it said.</span></em><br />
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<em><span style="color: blue; font-family: Georgia, "Times New Roman", serif;">At the stage of recording of evidence, the bench said, the court concerned must ensure that examination-in-chief, cross-examination and re-examination of the complainant is conducted within three months of assigning the case. "The court has option of accepting affidavits of the witnesses, instead of examining them in court," it added.</span></em><br />
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<em><span style="color: blue; font-family: Georgia, "Times New Roman", serif;">The order came on a petition by the Indian Banks Association, which is the representative body of banks in India with over 174 banks and financial institutions as its members. Its counsel Lalit Bhasin had asserted the need to have uniform practice across courts in the country to ensure cases do not drag in courts on account of unnecessary and unwarranted procedural delays.</span></em><br />
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<b><em><span style="color: blue; font-family: Georgia, "Times New Roman", serif;">What the court says</span></em><br /><em><span style="color: blue; font-family: Georgia, "Times New Roman", serif;"></span></em> </b><em><span style="background-color: yellow; color: blue; font-family: Georgia, "Times New Roman", serif;">* No need for complainant to record his statements in court more than once; affidavit can be filed.<br /> * Summons to be issued to the accused on the same day the magistrate receives the complaint.<br /> * Summons to be issued also through e-mails, besides normal post.<br /> * Accused can offer a settlement the day he shows up in court and the magistrate shall dispose of the case.<br /> * All evidence to be recorded within three months and verdict to be delivered shortly.<br /> * Magistrate can receive affidavits from the witnesses too, dispensing their personal presence.</span></em><br />
<a href="http://indianexpress.com/article/india/india-others/to-fast-track-cheque-bounce-cases-sc-issues-guidelines/" target="_blank"><span lang=""><span style="color: #0066cc;">http://indianexpress.com/<wbr></wbr>article/india/india-others/to-<wbr></wbr>fast-track-cheque-bounce-<wbr></wbr>cases-sc-issues-guidelines/</span></span></a><br />
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<span lang=""><em><strong><span style="background-color: lime; font-size: x-large;">SC: No overkill in cheque bounce cases</span></strong></em><br /><em><span style="font-family: Georgia, "Times New Roman", serif;"><span style="background-color: orange;">Once the amount in a dishonoured cheque is paid with interest and compensation, the payee cannot insist on criminal prosecution of the directors of a firm who issued the cheque. The object of <u><span style="color: blue;"><span lang="">Section 138 </span></span></u></span></span></em><span lang=""><em><span style="background-color: orange; font-family: Georgia, "Times New Roman", serif;">of the Negotiable Instruments Act, which makes issuing of cheques without sufficient balance in the account an offence, is meant to "inculcate faith in the efficacy of banking operations and credibility of transactions. It is not meant only to punish the guilty," the Supreme Court has stated in the judgment, Lafarge Aggregates & Concrete India Ltd vs Sukarsh Azad.<br /><br /> In this case, directors of a construction company issued a cheque to Lafarge, but it was dishonoured by the bank leading to a criminal complaint before the magistrate. The directors moved the high court and offered to pay the amount with interest. The high court, therefore, quashed the complaint. Lafarge was not satisfied with that and appealed to the Supreme Court for prosecution of the directors.<br /><br /> The court dismissed the appeal observing that the directors were willing to pay double the amount. It stated that Lafarge did not appear before the high court without sufficient reason, leading to an ex parte order quashing the complaint. Moreover, it approached the Supreme Court after a long lapse of time. Under these circumstances, "if the amount offered including interest and compensation was not acceptable to Lafarge, it is their choice," the judgment said, "but that would not allow them to prosecute the directors in pursuance of the complaint."</span></em></span></span><br />
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<span style="font-family: Georgia; font-size: x-large;">Dishonour of post dated cheques may not be an offence!</span> <br />
<span style="font-family: sans-serif; font-size: x-small;">Dishonour of any post dated cheque issued as an advance payment by any purchaser cannot be considered in discharge of legally enforceable debt or any other liability and thus would not amount to an offence, the Supreme Court has ruled</span> <span style="font-family: sans-serif; font-size: x-small;">In the world of lending, banks/ financial institutions insisting on taking post-dated cheques (PDCs) from borrowers as a security has been a common norm. These PDCs have been astras (weapons) in the hands of the financial institution used for arm-twisting the borrowers and also acting as a deterrent to ensure that borrowers do not default. Wherever the borrower would explicitly or implicitly give indications of not having the ability to pay, the lender would present these PDCs to the bank; and once these PDCs bounce, the legal team of the lender would jump to action to initiate a case against the borrower under section 138 of the Negotiable Instruments Act, 1881 (NI Act).</span> <span style="font-family: sans-serif; font-size: x-small;">It is one of the most common legal actions being undertaken by lenders against borrowers and as we are all aware section 138 of the NI Act is the most dreaded section with regard to dishonour of cheque, which could lead you to some months of imprisonment to the drawer of the cheque. The text of the section is mentioned below for your ready reference:</span> <span style="font-family: Georgia; font-size: small;"><b><i>Dishonour of cheque for insufficiency, etc., of funds in the account</i></b></span> <br /><span style="font-family: sans-serif; font-size: x-small;">138. Dishonour of cheque for insufficiency, etc., of funds in the account. Where any cheque drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person from out of that account for the discharge, in whole or in part, of any debt or other liability, is returned by the bank unpaid either because of the amount of money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with that bank, such person shall be deemed to have committed an offence and shall, without prejudice to any other provision of this Act, be punished with imprisonment for a term which may extend to one year, or with fine which may extend to twice the amount of the cheque, or with both:</span> <span style="font-family: sans-serif; font-size: x-small;">Provided </span><span style="font-family: Georgia; font-size: small;"><i>that nothing contained in this section shall apply unless-</i></span> <span style="font-family: sans-serif; font-size: x-small;">(138.a) the cheque has been, presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier;</span> <span style="font-family: sans-serif; font-size: x-small;">(138.b) the payee or the holder in due course. of the cheque as the case may be, makes a demand for the payment of the said amount of money by giving a notice, in writing, to the drawer of the cheque, within fifteen days of the receipt of information by him from the bank regarding the return of the cheque as unpaid; and</span> <span style="font-family: sans-serif; font-size: x-small;">(138.c) the drawer of such cheque fails to make the payment of the said amount of money to the payee or, as the case may be, to the holder in due course of the cheque, within fifteen days of the receipt of the said notice.</span> <span style="font-family: sans-serif; font-size: x-small;">Explanation.-For the purposes of this section, "debt or other liability" means a legally enforceable debt or other liability. (emphasis ours at relevant places)</span> <span style="font-family: sans-serif; font-size: x-small;">So there are two things. which are most critical to fall under the section apart from the basic conditions as stated in the section above. One, that the PDC needs to be a cheque at the time of presentation and second the cheque should be for discharging debt or liability, which is a legally enforceable debt or liability. That is to say, to institute a suit under Section 138 of the Act, there should be a legally enforceable debt or other liability subsisting on the date of drawal of the cheque.</span> <span style="font-family: sans-serif; font-size: x-small;">The matter whether PDCs are cheque at the time of presentation to the bank has been a contentious issue for long now. In a Supreme Court ruling of Anil Sawhney vs Gulshan Rai, the Court held that a post dated cheque is composed of two elements. At the time the post- dated cheque is drawn, it is in the nature of a bill of exchange and they assume the character of a cheque from the date appearing on the cheque. The extract of the ruling explains the fact:</span> <span style="font-family: sans-serif; font-size: x-small;">A "Bill of Exchange" is a negotiable instrument in writing containing an instruction to a third party to pay a stated sum of money at a designated future date or on demand. A "cheque" on the other hand is a bill of exchange drawn on a bank by the holder of an account payable on demand. Thus a "cheque" under Section 6 of the Act is also a bill of exchange but it is drawn on a banker and is payable on demand. It is thus obvious that a bill of exchange even through drawn on a banker, if it is not payable on demand, it is not a cheque. A "post- dated cheque" is only a bill of exchange when it is written or drawn, it becomes a "cheque" when it is payable on demand. The post-dated cheque is not payable till the date which is shown on the face of the said document. It will only become cheque on the date shown on it and prior to that it remains a bill of exchange under Section 5 of the Act. As a bill of exchange a post-dated cheque remains negotiable but it will not become a "cheque" till the date when it becomes "payable on demand</span> <span style="font-family: Georgia; font-size: small;">The Apex Court further stated that</span> <br /><br /><span style="font-family: Georgia; font-size: small;">“An offence to be made out under the substantive provisions of Section 138 of the Act it is mandatory that the cheque is presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier.... When a post-dated cheque is written or drawn it is only a bill of exchange and as such the provisions of Section 138(a) are not applicable to the said instrument.</span> <span style="font-family: Georgia; font-size: small;">One of the main ingredients of the offence under Section 138 of the Act is the return of the cheque by the bank unpaid….A post-dated cheque cannot be presented before the bank and as such the question of its return would not arise. It is only when the post-dated cheque becomes a "cheque", with effect from the date shown on the face of the said cheque, the provisions of Section 138 come into play.”</span> <span style="font-family: Georgia; font-size: small;">The ruling above made the fact clear that if a PDC was withdrawn or cancelled before the date on which it was to be presented to the bank then such cancellation of PDC would tantamount to cancellation of a Bill of exchange and not of a cheque per se.</span> <span style="font-family: Georgia; font-size: small;">The recent ruling of the Supreme Court in the matter of Indus Airways Pvt Ltd & Ors. vs Magnum Aviation Pvt Ltd& Anr. brought out clarity on conditions for attracting 138 action clearly stating that dishonour of any post dated cheque issued as an advance payment by any purchaser cannot be considered in discharge of legally enforceable debt or any other liability and thus would not amount to an offence under Section 138 of the Negotiable Instruments Act, 1881.</span> <br /><br /><span style="font-family: Georgia; font-size: small;">Fact of the Case:</span> <br /><br /><span style="font-family: Georgia; font-size: small;">Indus Airways Pvt Ltd & Ors. (hereinafter referred to as the ‘purchaser’) placed two purchase orders on 19 February 2007 and 26 February 2007 with Magnum Aviation Pvt Ltd (hereinafter referred to as the ‘supplier’) for supply of certain aircraft parts. Two post dated cheques were issued by the purchaser in this regard. The date on the face of such two post dated cheques been 15 March 2007 and 20 March 2007. It is important to note that such post dated cheques were issued as an advance payment to the supplier as the terms of </span><span style="color: #00a000; font-family: Georgia; font-size: small;"><u>the contract</u></span><span style="font-family: Georgia; font-size: small;"> stated to facilitate the supplier procure the parts from abroad. Subsequently on presentation of these cheques to the bank, they were dishonoured on the ground that the purchaser had stopped payment for the same. A cancellation letter was received by the supplier on 22 March 2007 cancelling the order and requesting the return of the cheques.</span> <br /><br /><span style="font-family: Georgia; font-size: small;"><b>Judgement:</b></span> <br /><span style="font-family: Georgia; font-size: small;">The Supreme Court quashed several conflicting views of the subordinate courts on the captioned subject. The important crux in this case as highlighted in the judgement was that one of the conditions of the contract entered into between the parties contended that the purchaser needed to make an advance payment to the supplier to enable him to purchase the aircraft parts from abroad. The fact that purchaser cancelled the purchase order and that the purchase order was not carried to its logical conclusion clearly meant that the cheque did not represent a debt or liability. The Apex Court placed reliance on the ruling in the matter of Swastik Coaters Pvt Ltd vs Deepak Brothers and others (1997 Cri LJ 1942 (AP)), whereby the Andhra Pradesh High Court held that</span> <br /><br /><span style="font-family: Georgia; font-size: small;">“……<i>..Explanation to Section 138 of the Negotiable Instruments Act clearly makes it clear that the cheque shall be relateable to an enforceable liability or debt and as on the date of the issuing of the cheque there was no existing liability in the sense that the title in the property had not passed on to the accused since the goods were not delivered. ……..”</i></span> <br /><span style="font-family: Georgia; font-size: small;">The ruling will have a far reaching consequence as there are thousands of cheque bouncing cases pending in the country.</span> <br /><br /><span style="font-family: Georgia; font-size: small;"> </span> <br /><br /><span style="font-family: Georgia; font-size: small;">Typically in non-recourse factoring transactions since the factors have exposure on the obligors, factors commonly use section 138 route as a recovery tactic. Particularly so, the ruling may come as a respite to several borrowers/ obligors in factoring cases these days, where the factors use PDCs as a means to arm-twist the obligors and initiate section 138 action against them disregarding the fact that the debt may not be a valid and enforceable debt at all.</span> <br /><span style="font-family: Georgia; font-size: small;">(Nidhi Bothra is executive vice president, while Debolina Banerjee is an associate at Vinod Kothari & Company)</span> <br /><a href="http://www.moneylife.in/article/bounced-cheques-and-section-138-of-ni-act/37274.html" target="_blank"><span style="color: blue; font-family: Georgia; font-size: small;"><u>http://www.moneylife.in/<wbr></wbr>article/bounced-cheques-and-<wbr></wbr>section-138-of-ni-act/37274.<wbr></wbr>html</u></span></a> <br />
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<span style="font-family: Georgia; font-size: small;"><i>But if when buyer and seller live at two different places, real problem of jurisdiction arises. </i></span> <br />
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<span style="font-family: Georgia; font-size: small;"><i>If 100 people like me go to Delhi from different corners of the country and buy car by giving payment through cheque and seller deliver the cars to all trusting cheques and then these cheques are returned unpaid by drawee bank, payee, the seller will have to file court case in different parts of the country from where buyer had come to Delhi to buy car. </i></span> </div>
<span style="font-family: Georgia; font-size: small;"><i>I would like to give here another example of Saree dealer in Surat, where variety of sarees are manufactured and sold all over the country .Retailers from different part of the country go to Surat to buy Saree at cheaper rate and then handover signed cheque to seller to create confidence and trust in seller. It also happens that salesmen of saree dealer moves from one town to other town to market saree and collects orders of various amounts from different retailers in different towns and cities. </i></span><br />
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<span style="font-family: Georgia; font-size: small;"><i>In return, retailers/ buyers handover current dated or postdated cheques to the party as a token of payment. In such case if buyer i.e. the drawer of the cheques returns the cheque unpaid when presented for payment, seller will have only legal recourse to recover the money from such cheat retailer. In past, such sellers used to file case in Surat itself. But now in view of Supreme Court order, they will have to file cases in different towns where the retailer failed to honour the cheque. </i></span> <br />
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<span style="font-family: Georgia; font-size: small;"><i>The clear message is that now onwards all dealers and all sellers will insist for local cheques in lieu of goods sold or to be sold or they will prefer cheques drawn on local banks only i.e. Draft if it comes from location away from that of seller’s location. It means that the trust on cheque is diluted by Supreme Court order mentioned above. Latest order of apex court is nothing but direct attack on reliability and trust of cheque which was created during last five to ten years after introduction of advance technology in almost all banks. </i></span> <br />
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<span style="font-family: Georgia; font-size: small;"><i>I do not mean to say that court order is right or wrong, what I mean to stress that it has caused erosion in value and respectability of cheque. In foreign countries, cheques issued in payment is treated as good as cash payment. </i></span> <br />
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<span style="font-family: Georgia; font-size: small;"><i>Hence I am of strong opinion that cheques should be so much reliable and trustworthy that people treat it as cash. If it happens so, it will help in reduction of cash transaction to a great extent and also have positive impact on the economy. Rather GOI should make it mandatory for all citizens to make payment only by account payee cheques and drafts if the payment is of value more than Rs.5000o. Such rule will help is reduction of cases of tax evasion and increase tax compliance to a great extent. GOI can multiply revenue income many times only by restricting cash payment system.</i></span> <br />
<span style="font-family: Georgia; font-size: small;"><i> </i></span> <br />
<span style="font-family: Georgia; font-size: small;"><i>Here it will be proper to mention that after adoption of Core Banking Solution (CBS) by almost all banks, cheques issued and drawn by a person or a commercial entity is normally Multi-city cheques. Or you can say majority of cheques issued now-a-days are payable all over the country. The system of sending of outstation cheque to the location of drawer and waiting for 10 to 15 days for payment is no more needed. In most of the cases cheques issued from anywhere in the country are cleared in the location where bank of payee is situated. </i></span> <br />
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<span style="font-family: Georgia; font-size: small;"><i>A few years ago, when Court and GOI made the law related to cheque bounce case stringent, drawer of cheque became alert in fear of punishment. Reliability of cheques moved to greater height first in fear of legal action and secondly due to its encashability anywhere in the country.</i></span> </div>
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<span style="font-family: Georgia; font-size: small;"><i>But now after the said ruling of Supreme Court, people will not like to accept outstation cheque as payment for goods sold or services extended or to be extended. . Because if the cheque is returned unpaid in want of adequate fund, he or she will have to bear with loss or spend time, manpower and money in filing a case in the location of issuer of cheque. </i></span><br />
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<span style="font-family: Georgia; font-size: small;"><i>The fact is that real guilty is issuer of cheque who issued the cheque and then did not keep adequate balance to ensure honoring of cheque. It is issuer and drawer of cheque who cheated the seller of goods and services by issuing false cheque. But unfortunately the Apex court instead of punishing the real guilty thought it better to force payee to go through difficult course of action of filing and contesting the case till its logical end. There may be some good logic and good reason in the minds of learned Judge before signing such orders. However GOI or RBI should look into the matter and ponder over the consequences of the said order in the larger interest of the country.</i></span> <br />
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<span style="font-family: Georgia; font-size: small;"><i>It is necessary to point out there that issuer of cheque can manage at his location required papers and attend court in time if payee files a case against him in local court. But the payee will have to manage person, money, time, and ticket for journey and lastly severe harassment in attending hundreds of dates at remote location. Obviously to avoid such awkward situation majority of sellers will avoid accepting outstation cheques or deliver the goods only after the cheques is paid into his account. </i></span> <br />
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<span style="font-family: Georgia; font-size: small;"><i>Obviously the consequence of latest order given by Supreme court, value and usage of cheques will be limited and confined to local areas i,e, within the area of jurisdiction of local court. It will reduce the importance of multi-city cheques so far its acceptability is concerned. Perhaps Supreme Court desires that buyer of cheque uses it only in the location where he lives. </i></span> </div>
<span style="font-family: Georgia; font-size: small;"><i>It is also true here that lacs of cases related to cheque bounce case are pending at various courts of the country either due to manpower shortage or due to ill—motivated moves of advocates of drawers of cheques .It is a subject of inefficiency of court and rampant corruption at all levels. In many cases advocates also have a vested interest in taking frequent dates and postponing hearing for abnormal period.</i></span> <br />
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<span style="font-family: Georgia; font-size: small;"><i>Last but not the least, in view of increasing number of cheque bounce case in courts, either court or GOI should make arrangement for disposal of such cases in time bound programme of say 15 days. In recent past Court issued guideline for quick disposal of causes related to cheque bounce cases. If GOI frames adequate rule in unison with spirit of court order, it will be a great help to people who have been cheated by fraud-minded drawers of cheques.</i></span><br />
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<em><span style="font-family: Georgia, "Times New Roman", serif;"><strong><span style="background-color: lime; font-size: x-large;">Cheque bouncing: Supreme Court's verdict on jurisdiction</span> <br /><span style="color: blue;"><span style="font-size: small;">Clearing all controversy, the Supreme Court ruled that the jurisdiction of such cases have to be the location where the cheque bounced, meaning the bank of the person, who issued the cheque and not the bank location of the complainant</span> </span></strong></span></em><br />
<em><span style="font-family: Georgia, "Times New Roman", serif;"><strong><span style="color: blue;"><span style="font-size: small;">Prosecuting jurisdiction in a cheque bouncing case has been a highly contested issue since very long. The issue has revolved around the point of determination.</span> <br /><br /><span style="font-size: small;">Where would someone file a case for cheque bouncing out of the following venues?</span> <br /><br /><span style="font-size: small;">• Location of the bank of Complainant</span> </span></strong></span></em><em><span style="font-family: Georgia, "Times New Roman", serif;"><strong><span style="color: blue;"><span style="font-size: small;">• Location of bank of issuer</span> </span></strong></span></em><em><span style="font-family: Georgia, "Times New Roman", serif;"><strong><span style="color: blue;"><span style="font-size: small;">• Location of origin of legal notice </span> </span></strong></span></em><em><span style="font-family: Georgia, "Times New Roman", serif;"><strong><span style="color: blue;"><span style="font-size: small;">• Where the legal notice was received</span> </span></strong></span></em><br />
<em><span style="font-family: Georgia, "Times New Roman", serif;"><strong><span style="color: blue;"><span style="font-size: small;">In the Dasrath Rupsingh case, a three Judge Bench of the Supreme Court has finally laid the controversy to rest.</span> </span></strong></span></em><br />
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<em><span style="font-family: Georgia, "Times New Roman", serif;"><strong><span style="color: blue;"><span style="font-size: small;">By and large, complaints pertaining to cheque bouncing are instituted where the bank of the complainant is. Before the Supreme Court decided the case of Harman Electronics, complainants used to file a large number of cases on the basis of the location of their attorney, not of any bank, who would send the legal notice for a cheque having bounced. </span></span></strong></span></em><br />
<em><span style="font-family: Georgia, "Times New Roman", serif;"><strong><span style="color: blue;"><span style="font-size: small;"></span></span></strong></span></em><br />
<em><span style="font-family: Georgia, "Times New Roman", serif;"><strong><span style="color: blue;"><span style="font-size: small;">The Court noted that the law of cheque bouncing was being misused rampantly. Complaints were filed in Delhi just because lawyers were issuing notices from there, even though the bank of the payer or the payee were outside Delhi.</span> <br /><br /><span style="font-size: small;">The Supreme Court has effectively put an end to this harassment at the hands of the Drawee.</span> </span></strong></span></em><em><span style="font-family: Georgia, "Times New Roman", serif;"><strong><span style="color: blue;"><span style="font-size: small;">Last year, in the Nishant Aggarwal case, the Supreme Court again addressed the prosecuting jurisdiction aspect. A two Judges Bench of the Supreme Court held that the complaint under Section 138 can be filed at the jurisdiction where the bank of the Complainant is situated.</span> </span></strong></span></em><br />
<strong><em><span style="color: blue; font-family: Georgia;"></span></em></strong><br />
<em><span style="font-family: Georgia, "Times New Roman", serif;"><strong><span style="color: blue;"><span style="font-size: small;">In the Dasrath Rupsingh case, the apex court has cleared the controversy once and for all. The Bench stated that the factor for determining jurisdiction has to be the location where the cheque bounced, meaning thereby, the bank of the person who issued the cheque and not at the place the intimation of dishonour reaches, i.e, bank of the complainant. </span></span></strong></span></em><br />
<em><span style="font-family: Georgia, "Times New Roman", serif;"><strong><span style="color: blue;"><span style="font-size: small;"></span></span></strong></span></em><br />
<em><span style="font-family: Georgia, "Times New Roman", serif;"><strong><span style="color: blue;"><span style="font-size: small;">The Bench further held that the offence under the section shall occur when the cheque is returned unpaid.</span> </span></strong></span></em><em><span style="font-family: Georgia, "Times New Roman", serif;"></span></em><strong><span style="color: blue;"> </span></strong><span style="color: blue; font-family: Georgia, "Times New Roman", serif; font-size: small;"><em><strong>The Bench notes that the cheque bouncing law should not be allowed to become a tool for harassment. There had been cases where the complainant would deposit the cheque and/or issue a legal notice from a place that was totally unrelated to the transaction in question-- in a possibe attempt to harass the other party.</strong></em></span><em><span style="color: blue; font-family: Georgia, "Times New Roman", serif;"><strong> </strong></span></em><br />
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<em><span style="font-family: Georgia, "Times New Roman", serif;"><strong><span style="color: blue;"><span style="font-size: small;">The Bench also safeguarded the interests of genuine creditors in such a scenario. A person/ company can insist that the payment shall be made through cheque in question, payable at a particular location convenient to the creditor.</span> </span></strong></span></em><em><span style="font-family: Georgia, "Times New Roman", serif;"></span></em><strong><span style="color: blue;"> </span></strong><br />
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<em><span style="font-family: Georgia, "Times New Roman", serif;"><strong><span style="color: blue;"><span style="font-size: small;">It is also important to note that the remedy under the Negotiable Instruments Act is in addition to the provisions of the Indian Penal Code (IPC) and not as an alternative. Meaning that the case for cheque bouncing will be maintainable only where the bank of the drawee is, but if the creditor can demonstrate that various acts of the transaction took place in another jurisdiction, like his office/ residence, then he can maintain a separate action for fraud, cheating and forgery. </span></span></strong></span></em><br />
<em><span style="font-family: Georgia, "Times New Roman", serif;"><strong><span style="color: blue;"><span style="font-size: small;"></span></span></strong></span></em><br />
<em><span style="font-family: Georgia, "Times New Roman", serif;"><strong><span style="color: blue;"><span style="font-size: small;">Then there is also an option before the Complainant to institute a civil suit for recovery against the person who issued the dishonoured cheque.</span> </span></strong></span></em><em><span style="font-family: Georgia, "Times New Roman", serif;"></span></em><strong><span style="color: blue;"> </span></strong><em><span style="font-family: Georgia, "Times New Roman", serif;"><strong><span style="color: blue;"><span style="font-size: small;">Status of the pending cases:</span> </span></strong></span></em><em><span style="font-family: Georgia, "Times New Roman", serif;"></span></em><strong><span style="color: blue;"> </span></strong><em><span style="font-family: Georgia, "Times New Roman", serif;"><strong><span style="color: blue;"><span style="font-size: small;">After ruling that the proper jurisdiction to hold trial in a cheque bouncing case is where the bank of the alleged accused is situated, the Bench passed an order dealing with the currently pending cases.</span> </span></strong></span></em><br />
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<em><span style="font-family: Georgia, "Times New Roman", serif;"></span></em><strong><span style="color: blue;"> </span></strong><em><span style="font-family: Georgia, "Times New Roman", serif;"><strong><span style="color: blue;"><span style="font-size: small;">In all those matters where the alleged accused has appeared after summoning and his evidence under Section 145 has commenced, those cases will remain where they are already pending. In all other matters where the evidence by examination under Section 145 has not begun, the case will be returned to the complainant to institute at the jurisdiction where the bank of the accused is situated.</span> </span></strong></span></em><br />
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<em><span style="font-family: Georgia, "Times New Roman", serif;"></span></em><strong><span style="color: blue;"> </span></strong><em><span style="font-family: Georgia, "Times New Roman", serif;"><strong><span style="color: blue;"><span style="font-size: small;">Reading any judgement by Justice Vikramajit Sen is an excellent experience and this one is no different. However, in a separate judgement, Justice TS Thakur has also given elaborate findings regarding the confusionaround cheque bouncing matters.</span> </span></strong></span></em><br />
<strong><em><span style="font-family: Georgia;"></span></em></strong><br />
<strong><span style="background-color: lime; font-size: large;">When offence of dishonour of cheque is not made even though accused has given stop payment instruction?</span></strong> <br />
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<em><span style="color: purple; font-family: Georgia, "Times New Roman", serif;">Stop payment instructions whether are covered by Section 138 of the Negotiable Instruments Act, 1881 (NI Act) or not, was the subject matter of controversy before the Court.</span></em><br />
<em><span style="color: purple; font-family: Georgia, "Times New Roman", serif;">High Court in its impugned finding had held that provisions of Section 138 of the NI Act are attracted where a cheque is returned by the bank on the ground that there is insufficient amount or that the amount of cheque exceeds the amount arranged to be paid from that account by an agreement made with the bank. </span></em><br />
<em><span style="color: purple; font-family: Georgia, "Times New Roman", serif;"></span></em><br />
<em><span style="color: purple; font-family: Georgia, "Times New Roman", serif;">It was further held that the cheque in question was returned on account of "stop payment" instructions given by the accused in view of the fact that the complainant had failed to discharge its obligations as per the agreement executed between them. The High Court had further observed that the complainant had not disclosed complete facts as required under provisos (b) and (c) of Section 138 of the NI Act and accordingly had quashed the complaint. </span></em><br />
<em><span style="color: purple; font-family: Georgia, "Times New Roman", serif;"></span></em><br />
<em><span style="color: purple; font-family: Georgia, "Times New Roman", serif;">The Court held that the impugned finding of the High Court was incorrect as even "stop payment" instructions issued to the bank are held to make a person liable for offence punishable under Section 138 of the NI Act in case cheque is dishonoured on that count. Once the cheque is issued by the drawer a presumption under Section 139 of the NI Act must follow and merely because the drawer issues a notice to the drawee or to the bank for stoppage of the payment it will not preclude an action under Section 138 of the NI Act by the drawee or the holder of the cheques in due course. </span></em><br />
<em><span style="color: purple; font-family: Georgia, "Times New Roman", serif;"></span></em><br />
<em><span style="color: purple; font-family: Georgia, "Times New Roman", serif;">The Supreme Court relied upon its previous judgement in the matter of MMTC Limited Vs Medchl Chemicals and held even when the cheque is dishonoured by reason of stop-payment instructions by virtue of Section 139 the court has to presume that the cheque was received by the holder for the discharge, in whole or in part, of any debt or liability. of course this is a rebuttable presumption. The accused can thus show that the "stop-payment" instructions were not issued because of insufficiency or paucity of funds. If the accused shows that in his account there were sufficient funds to clear the amount of the cheque at the time of presentation of the cheque for encashment at the drawer bank and that the stop-payment notice had been issued because of other valid causes including that there was no existing debt or liability at the time of presentation of cheque for encashment, then offence Under Section 138 would not be made out. </span></em><br />
<em><span style="color: purple; font-family: Georgia, "Times New Roman", serif;"></span></em><br />
<em><span style="color: purple; font-family: Georgia, "Times New Roman", serif;">The important thing is that the burden of so proving would be on the accused. Thus a court cannot quash a complaint on this ground. Whether complainant had failed to discharge its obligations or not could not have been decided by the High Court conclusively at the stage when it was dealing with a petition filed under Section 482 of the Code for quashing the complaint. Whether any money is paid by the accused to the complainant is a matter of evidence. The accused has ample opportunity to lead his defence.</span></em><br />
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<strong><span style="background-color: lime; font-size: x-large;">When cheques bounce-Hindu Business LIne</span></strong><br />
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<em><span style="font-family: Georgia, "Times New Roman", serif;">Cheque bouncing is one of the most common offences in the country, with over 40 lakh pending cases in the Supreme Court. A cheque can bounce for several reasons such as insufficiency of funds, mismatch in signature, stale cheques, post-dated cheques or if there are corrections in the cheque without authentication. The bank collects a penalty from the defaulter when a cheque bounces. The person issuing the cheque can even get a jail term. </span></em><br />
<em><span style="font-family: Georgia, "Times New Roman", serif;">All that’s fine, but what are the remedies if you’ve been issued a cheque which has bounced?</span></em><br />
<em><span style="font-family: Georgia, "Times New Roman", serif;"> </span></em><br />
<b><em><span style="font-family: Georgia, "Times New Roman", serif;">Legal action </span></em><br /><em><span style="font-family: Georgia, "Times New Roman", serif;"></span></em><br /><em><span style="font-family: Georgia, "Times New Roman", serif;"></span></em> </b><em><span style="font-family: Georgia, "Times New Roman", serif;">Almost every bank gives a ‘cheque return memo’ along with the returned cheque stating the reason for the bounce. If you hold the cheque, you need to inform the drawer and ask if you can re-present it to the bank within the 3-month period. </span></em><br />
<em><span style="font-family: Georgia;"></span></em><br />
<em><span style="font-family: Georgia, "Times New Roman", serif;">If cheque is dishonoured even the second time, then you can take legal action. As a first step, you can send a legal notice to the defaulter within a period of 30 days from receiving the cheque return memo. The notice should contain all necessary details. </span></em><br />
<em><span style="font-family: Georgia;"></span></em><br />
<em><span style="font-family: Georgia, "Times New Roman", serif;">The defaulter needs to make a fresh payment within a period of 15 days from the receipt of this notice. If he still doesn’t make the payment within this time period, then you can file a complaint in the magistrate court. This case should be filed within a maximum period of 1 month from the date of expiry of the 15-day period. </span></em><br />
<em><span style="font-family: Georgia;"></span></em><br />
<em><span style="font-family: Georgia, "Times New Roman", serif;">Remember that the complaint should be filed within the time frame. If complaints are made outside the time frame, then the case becomes time barred and will not be entertained. When your case comes for hearing, the defaulter can be punished with a jail term for two years and/or a penalty which can be up to twice the cheque amount. The defaulter can appeal against the order within a period of 1 month of judgement. </span></em><br />
<em><span style="font-family: Georgia, "Times New Roman", serif;">However, it may not be so straightforward all the time. Here are two common instances when cheques bounce and what can be done. </span></em><br />
<em><span style="font-family: Georgia;"></span></em><br />
<b><em><span style="font-family: Georgia, "Times New Roman", serif;">Rent cheques </span></em><br /><em><span style="font-family: Georgia, "Times New Roman", serif;"></span></em><br /><em><span style="font-family: Georgia, "Times New Roman", serif;"></span></em> </b><em><span style="font-family: Georgia, "Times New Roman", serif;">Sometimes, it may so happen that the tenant does not have the funds simply because the landlord did not drop the cheque at the expected time. Therefore, the landlord is bound to first inform the tenant and only then proceed with the legal process. There may be another case when the tenant wishes to set off an amount from a particular month’s rent towards some expense he incurred on behalf of the landlord, which the latter refuses to pay. If there is a cheque bounce because of this, the criminal case will continue against the tenant till he is able to establish that there was a legitimate set-off. </span></em><br />
<b><em><span style="font-family: Georgia, "Times New Roman", serif;">EMI cheques </span></em><br /><em><span style="font-family: Georgia, "Times New Roman", serif;"></span></em><br /><em><span style="font-family: Georgia, "Times New Roman", serif;"></span></em> </b><em><span style="font-family: Georgia, "Times New Roman", serif;">Banks don’t normally file cases against bounced EMI cheques as the first step. Hefty penalties, loan default charges and cheque bounce charges are levied first. These keep building up for every month of default and added to the EMI amount. Also, the defaulter’s credit rating gets affected with every default he makes. In case of secured loans, banks also have the security as collateral. If the borrower does not make payments even after repeated reminders, the bank can give sufficient notice and auction the security to recover the dues.</span></em><br />
<a href="http://www.thehindubusinessline.com/money-wise/when-cheques-bounce/article5204611.ece" target="_blank"><span lang=""><span style="color: #0066cc;">http://www.<wbr></wbr>thehindubusinessline.com/<wbr></wbr>money-wise/when-cheques-<wbr></wbr>bounce/article5204611.ece</span></span></a><br />
<b><span lang=""><span style="background-color: lime; font-size: x-large;">To fast-track cheque-bounce cases, SC issues guideline</span></span><span style="font-size: x-large;"></span><br /> </b><span style="color: blue;"><em><span style="font-family: Georgia, "Times New Roman", serif;">Written by </span></em><u><span style="font-family: Georgia, "Times New Roman", serif;"><span lang=""><em>Utkarsh Anand</em></span></span></u><span lang=""><em><span style="font-family: Georgia, "Times New Roman", serif;"> | New Delhi | April 26, 2014 1:51 am</span></em></span></span><br />
<em><span style="color: blue; font-family: Georgia, "Times New Roman", serif;">With more than 40 lakh cheque-bounce cases choking the justice delivery system in the country, the Supreme Court has issued slew of guidelines, including issuance of summons through e-mails and completion of evidence within three months, to prevent further piling up.</span></em><br />
<em><span style="color: blue; font-family: Georgia;"></span></em><br />
<em><span style="color: blue; font-family: Georgia, "Times New Roman", serif;">A bench of Justices K S Radhakrishnan and Vikramjit Sen laid down guidelines to be uniformly followed by all magisterial courts dealing with cheque-bounce cases under pertinent provisions of the Negotiable Instruments Act for a "speedy and expeditious disposal".</span></em><br />
<em><span style="color: blue; font-family: Georgia;"></span></em><br />
<em><span style="color: blue; font-family: Georgia, "Times New Roman", serif;">Directing for a day-to-day trial, the court said that a magistrate shall issue summons on the same day he receives a complaint, provided documents are in order. It held that a magistrate need not call a complainant twice for recording his statement, once at pre-summoning stage and another after issuance of summons, and taking an appropriate affidavit from him should suffice.</span></em><br />
<em><span style="color: blue; font-family: Georgia;"></span></em><br />
<em><span style="color: blue; font-family: Georgia, "Times New Roman", serif;">The summons should be issued immediately by post as well through e-mails. The court said that summons should apprise an accused that he could show up in the court and compound the offence on the same day.</span></em><br />
<em><span style="color: blue; font-family: Georgia;"></span></em><br />
<em><span style="color: blue; font-family: Georgia, "Times New Roman", serif;">"Once the court issues summons and the presence of the accused is secured, an option be given to the accused whether, at that stage, he would be willing to pay the amount due along with reasonable interest and if the accused is not willing to pay, court may fix up the case at an early date and ensure day-to-day trial," it said.</span></em><br />
<em><span style="color: blue; font-family: Georgia;"></span></em><br />
<em><span style="color: blue; font-family: Georgia, "Times New Roman", serif;">At the stage of recording of evidence, the bench said, the court concerned must ensure that examination-in-chief, cross-examination and re-examination of the complainant is conducted within three months of assigning the case. "The court has option of accepting affidavits of the witnesses, instead of examining them in court," it added.</span></em><br />
<em><span style="color: blue; font-family: Georgia;"></span></em><br />
<em><span style="color: blue; font-family: Georgia, "Times New Roman", serif;">The order came on a petition by the Indian Banks Association, which is the representative body of banks in India with over 174 banks and financial institutions as its members. Its counsel Lalit Bhasin had asserted the need to have uniform practice across courts in the country to ensure cases do not drag in courts on account of unnecessary and unwarranted procedural delays.</span></em><br />
<em><span style="color: blue; font-family: Georgia;"></span></em><br />
<b><em><span style="color: blue; font-family: Georgia, "Times New Roman", serif;">What the court says</span></em><br /><em><span style="color: blue; font-family: Georgia, "Times New Roman", serif;"></span></em> </b><em><span style="background-color: yellow; color: blue; font-family: Georgia, "Times New Roman", serif;">* No need for complainant to record his statements in court more than once; affidavit can be filed.<br /> * Summons to be issued to the accused on the same day the magistrate receives the complaint.<br /> * Summons to be issued also through e-mails, besides normal post.<br /> * Accused can offer a settlement the day he shows up in court and the magistrate shall dispose of the case.<br /> * All evidence to be recorded within three months and verdict to be delivered shortly.<br /> * Magistrate can receive affidavits from the witnesses too, dispensing their personal presence.</span></em><br />
<a href="http://indianexpress.com/article/india/india-others/to-fast-track-cheque-bounce-cases-sc-issues-guidelines/" target="_blank"><span lang=""><span style="color: #0066cc;">http://indianexpress.com/<wbr></wbr>article/india/india-others/to-<wbr></wbr>fast-track-cheque-bounce-<wbr></wbr>cases-sc-issues-guidelines/</span></span></a><br />
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<span lang=""><em><strong><span style="background-color: lime; font-size: x-large;">SC: No overkill in cheque bounce cases</span></strong></em><br /><em><span style="font-family: Georgia, "Times New Roman", serif;"><span style="background-color: orange;">Once the amount in a dishonoured cheque is paid with interest and compensation, the payee cannot insist on criminal prosecution of the directors of a firm who issued the cheque. The object of <u><span style="color: blue;"><span lang="">Section 138 </span></span></u></span></span></em><span lang=""><em><span style="background-color: orange; font-family: Georgia, "Times New Roman", serif;">of the Negotiable Instruments Act, which makes issuing of cheques without sufficient balance in the account an offence, is meant to "inculcate faith in the efficacy of banking operations and credibility of transactions. It is not meant only to punish the guilty," the Supreme Court has stated in the judgment, Lafarge Aggregates & Concrete India Ltd vs Sukarsh Azad.<br /><br /> In this case, directors of a construction company issued a cheque to Lafarge, but it was dishonoured by the bank leading to a criminal complaint before the magistrate. The directors moved the high court and offered to pay the amount with interest. The high court, therefore, quashed the complaint. Lafarge was not satisfied with that and appealed to the Supreme Court for prosecution of the directors.<br /><br /> The court dismissed the appeal observing that the directors were willing to pay double the amount. It stated that Lafarge did not appear before the high court without sufficient reason, leading to an ex parte order quashing the complaint. Moreover, it approached the Supreme Court after a long lapse of time. Under these circumstances, "if the amount offered including interest and compensation was not acceptable to Lafarge, it is their choice," the judgment said, "but that would not allow them to prosecute the directors in pursuance of the complaint."</span></em></span></span>Danendra Jainhttp://www.blogger.com/profile/06877409854811449220noreply@blogger.com0tag:blogger.com,1999:blog-4486476466973233733.post-68253204391181569402014-08-02T21:54:00.001-07:002014-08-02T21:54:24.702-07:00Supreme Court Order On Cheque Bounce Case<h2 style="font-family: Arial, Helvetica, sans-serif; margin: 0px 0px 3px; padding: 0px;">
<span style="background-color: lime; font-size: x-large;">Cheque bouncing: SC settles law on where to file a complaint-Business Standard</span></h2>
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<span style="font-family: Georgia, Times New Roman, serif; font-size: large;"><b><i>The Supreme Court (SC) ruled on Friday that a complaint about a bounced cheque must only be filed at the place where the bank dishonoured it, settling doubts raised by its own earlier conflicting judgments on the jurisdiction of a magistrate.</i></b></span><br />
<span style="font-family: Georgia, Times New Roman, serif; font-size: large;"><b><i><br /></i></b></span>
<span style="font-family: Georgia, Times New Roman, serif; font-size: large;"><b><i>Some judgments had specified the place where the cheque was issued, others from where the notice of dishonour was sent and still others the place of receipt. Owing to this confusion in law, the matter was referred to a larger bench of the SC.</i></b></span><br />
<span style="font-family: Georgia, Times New Roman, serif; font-size: large;"><b><i><br /></i></b></span><span style="font-family: Georgia, Times New Roman, serif; font-size: large;"><b><i>A three-judge bench headed by T S Thakur unanimously laid down that the place of dishonour is the right place to file a complaint. However, to avoid inconvenience to persons already prosecuting such cases, the new rule is to come into force only with respect to cases in the future. Those in which trials have begun will remain in the same courts.</i></b></span><br />
<span style="font-family: Georgia, Times New Roman, serif; font-size: large;"><b><i><br /></i></b></span>
<span style="font-family: Georgia, Times New Roman, serif; font-size: large;"><b><i>The judgment was delivered on a large number of appeals, including those moved by Videocon Industries and Kitchen Appliances Ltd, which raised the question of jurisdiction of the magistrate who can try cases under Section 138 of the Negotiable Instruments Act. According to this provision, it is an offence to issue cheques without a sufficient balance in the account, if the payment is made to discharge a debt or liability. If the amount is not paid within two weeks, the payee can file a criminal complaint.</i></b></span><br />
<span style="font-family: Georgia, Times New Roman, serif; font-size: large;"><b><i><br /></i></b></span>
<span style="font-family: Georgia, Times New Roman, serif; font-size: large;"><b><i>This is the second major ruling in recent months dealing with this Act. There are a little more than four million cheque-bounce cases at courts. In April, another bench issued a series of guidelines, including issuance of summons through e-mails and completion of evidence within three months.</i></b></span><br />
<span style="font-family: Georgia, Times New Roman, serif; font-size: large;"><b><i><a href="http://smartinvestor.business-standard.com/market/Econnews-256857-Econnewsdet-Cheque_bouncing_SC_settles_law_on_where_to_file_a_complaint.htm#.U9yvpeOSxv8" target="_blank">http://smartinvestor.business-standard.com/market/Econnews-256857-Econnewsdet-Cheque_bouncing_SC_settles_law_on_where_to_file_a_complaint.htm#.U9yvpeOSxv8</a></i></b></span></div>
Danendra Jainhttp://www.blogger.com/profile/06877409854811449220noreply@blogger.com0