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IN THE SUPREME COURT OF INDIA

CIVIL  APPELLATE JURISDICTION

CIVIL  APPEAL  NOS. 4553-4556  OF 2008

[Arising out of SLP(C) Nos. 15432-15435/2008]

CENTRAL BANK OF INDIA ... APPELLANT(S)

:VERSUS:

M/S. MARUTI ACETYLENE CO. PVT. LTD. ... RESPONDENT(S)

O R D E R

Leave granted.

These appeals are directed against the judgment and order dated 13.6.2008

passed by the Madras High Court in C.R.P. No.1137/2008 and CRP No. 1471/2008.

The basic fact of the matter is not in dispute.

The respondent herein took advance from the appellant-Bank.  On its failure

to  pay  back  the  amount,  a  proceeding  was  initiated  before  the  Debt  Recovery

Tribunal  at  Chennai.  It  was  later  on  transferred  to  Coimbatore.  A proposal  was

mooted  between  the  parties  as  to  whether  they  should  enter  into  a  One  Time

Settlement in terms of the guidelines issued by the Reserve Bank of India; wherefor

an application was filed before the Debt Recovery Tribunal, praying inter alia:

“It is therefore prayed that this Hon'ble Tribunal may be pleased to direct that respondent bank to comply with the RBI guidelines and

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accept the sum of Rs. 70,00,000/-  in full and final satisfaction of all their claims and settle the account and on failure of the respondent bank to comply with the said direction, dispose the main application T.A. 937 of 2002 by passing a decree for only the agreed sum of Rs. 70,00,000/- and thus render justice.”  

The said application was dismissed by the Debt Recovery Tribunal opining

that the offer made by the respondent was on the lower side. An appeal was preferred

thereagainst before the Debt Recovery Appellate Tribunal.  The Appellate Tribunal

by reason of its order dated 9th October, 2007 directed:

“Interim stay  on  condition  of  deposit  of  Rs.  25,00,000/-  (Rupees Twenty Five Lakhs Only) with the respondent bank on or before 12.11.2007. On such deposit, the respondent Bank is directed to keep the said amount in interest earning 'no-lien account' until  further orders.”

Pursuant thereto and in furtherance thereof the said sum of Rs. 25 lakh was

deposited.  The matter came up before the Debt Recovery Appellate Tribunal again

on 29.11.2007 on which date the following order was passed:

“The amount of Rs. 25 lakhs deposited as per the conditional order dated 9.10.2007 is ordered to be adjusted towards the loan account due by the

appellant to the respondent bank. Adjourned to 19.12.2007 for reporting settlement or arguments.  Interim stay extended till then.”

A civil  revision  application  was  filed  thereagainst  by  the  respondent  was

disposed of with the following direction:

“Admittedly, certain amount is payable by the petitioner-Company to the respondent-Bank, which is more than Rs. 25 lakhs.  In this

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background,  the  Debt  Recovery  Appellate  Tribunal's  order adjusting the amount of Rs. 25 lakhs towards the loan amount due by  the  petitioner-Company  to  the  respondent-Bank,  requires  no interference.

However,  we  make  it  clear  that  the  amount  of  Rs.  25  lakhs  so deposited by the petitioner-Company shall be subject to the decision in the appeals preferred by the petitioner-Company and that will not  stand  in  the  way  of  the  respondent-Bank  to  make  one-time settlement  with  the  petitioner-Company,  taking  into  account  the adjustment of Rs. 25 lakhs as made pursuant to the Debt Recovery Appellate Tribunal's order.”  

When the matter went back to the Appellate Tribunal, the appeal preferred

by the respondent was dismissed opining:

“On  a  careful  consideration  of  the  entire  factual  aspects  of  the matter,  in  the  light  of  the  above  principles  of  law  laid  in  the decisions referred to above, this Tribunal has no other option except to conclude that since the OTS offer made by the Appellate had not been accepted by the Respondent-Bank, it is no longer necessary to call  either  the  Branch Manager of  the Bank as  a witness  for the cross-examination. In any view of the matter, I am unable to find any  irregularity  or  illegality  in  the  impugned  orders  so  as  to interfere with the same and it follows that the Appeals have to be dismissed by confirming the orders passed by the DRT.”  

Respondent preferred a civil revision application before the High Court once

again.  The High Court passed an interim order on or about 30th April, 2008, wherein

referring to an earlier order dated 16th April, 2008 it directed as under:

“From the earlier order it will  be evident that this Court, with a view to put an end to the dispute, wanted the bank to reach one time settlement for Rs. 1 crore, inclusive of Rs. 25 lakhs already deposited by the petitioner pursuant to the Court's order. The bank was allowed time to inform the Court in this matter vide order dated 16th April, 2008 and it was observed that the rest of the amount of Rs. 75 lakhs may be ordered to be paid by the Court in favour of the bank.

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Learned counsel appearing on behalf of the bank submitted that for one or other reason the Board of Directors of the bank could not deliberate on the issue and will take a decision.  

In the circumstances,  while  we  grant  further  time to the respondent-Bank,  allow  the  petitioner  to  deposit  the  rest  of  the amount of Rs. 75 lakhs by 30th May, 2008 with the bank with further direction to the bank to accept the same and keep it in an interest bearing no-lien account subject to the decision of this case. It is also made clear that if the bank do not accept the offer of the one time settlement, then this Court may direct the Bank to refund the entire amount, i.e. the amount of (Rs. 25 lakhs and Rs. 75 lakhs) paid by the petitioner in view of court's order along with the accrued interest and, therefore, may remit the matter back to the Tribunal/Appellate Tribunal to decide the case on merits.”    

It  is  now  accepted  at  the  Bar  that  the  respondent  did  not  agree  to  the

aforementioned proposal of the High Court that the One Time Settlement should be

confined to Rs.1 crore.  When the matter came up before the High Court again on

13.6.2008, by reason of the impugned judgment the appellant-Bank was directed to

refund the entire amount of Rs.1 crore with interest at the same rate to which the

respondent  was  liable  to  pay i.e.  the  contractual  rate  of  interest,  in  favour  of  the

respondent within 7 days. The appellant is, thus, before us.

Mr.  Jaideep  Gupta,  learned  senior  counsel  appearing  on  behalf  of  the

appellants would raise two contentions in support of these appeals.  Firstly, that the

sum of Rs. 25 lakhs having been adjusted against the amount of loan payable by the

respondent,  no  direction  could  have  been  issued  for  refund  in  relation  thereto.

Secondly, it was contended that having regard to the fact that the amount of Rs. 75

lakhs  was  deposited  on  no-lien  account  which  carries  a  low  rate  of  interest,  the

direction by the High Court to refund the said sum with contractual rate of interest

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must be held to be illegal.

Mr.  Gurukrishna  Kumar,  learned  counsel  appearing  on  behalf  of  the

respondent,  on  the  other  hand,  contended  that  the  impugned  judgment  has  been

passed in continuation of the High Court's order dated 30th April, 2008 and in view of

the fact that the correctness of the said order has not been questioned, the appellant

should not be permitted to raise the aforementioned contentions before us.  

It is accepted at the Bar that the matter is likely to be taken up by the High

Court on 21.7.2008.  Indisputably, when the High Court enters into the merit of the

revision  application,  it  shall  take  into  consideration  all  aspects  involved  therein,

including the offer of the respondent vis-a-vis the orders passed by the Debt Recovery

Tribunal and the Appellate Tribunal.   

Be that as it may, having regard to the fact that the Appellate Tribunal in its

order directed adjustment of the aforementioned amount of Rs. 25 lakhs, which in

view of  the dismissal  of  the  civil  revision  application  has  attained  finality,  in  our

opinion,  at  this  interlocutory  stage  the  High  Court  was  not  correct  in  issuing  a

direction in that behalf.   

So  far  as  the  rest  of  the  amount  of  Rs.  75  lakhs  is  concerned,  it  stands

accepted that the amount was deposited in a no-lien account.

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The High Court, therefore, should have directed refund of the said amount

with interest only accruing thereupon having regard to the fact that the same was

deposited in a no-lien account.  The High Court, therefore, in our opinion, was not

correct in directing that the interest payable on the sum of Rs. 75 lakhs would be the

contractual rate.    

We, therefore, set aside only that part of the impugned order by which the

Bank was directed to refund the entire amount with the contractual rate of interest.

The High Court while hearing the matter shall consider the same on its own merit.  

The appeals are allowed accordingly. There shall be no order as to costs.

..........................J (S.B. SINHA)

..........................J   (CYRIAC JOSEPH)    NEW DELHI, JULY 17, 2008.