w w w . L a w y e r S e r v i c e s . i n



State Bank of India & Others v/s M/s. Southern Petrochemical Industries Corporation Limited, (SPIC) & Others


Company & Directors' Information:- SOUTHERN PETROCHEMICAL INDUSTRIES CORPORATION LIMITED [Active] CIN = L11101TN1969PLC005778

Company & Directors' Information:- THE INDIA COMPANY PRIVATE LIMITED [Active] CIN = U74999TN1919PTC000911

Company & Directors' Information:- INDIA CORPORATION PRIVATE LIMITED [Active] CIN = U65990MH1941PTC003461

Company & Directors' Information:- SOUTHERN BANK LTD [Strike Off] CIN = U65923WB1934PLC008104

Company & Directors' Information:- SOUTHERN INDUSTRIES PVT LTD [Strike Off] CIN = U51909WB1947PTC015335

    Writ Petition Nos.6579 and 6590 of 2008 and Civil Revision Petition (NPD) No.1130 of 2008 and M.P.No.1 of 2008 in W.P.No.6579 of 2008, M.P.Nos.1, 2 and 3 of 2008 in W.P.No.6590 of 2008 and M.P.No.1 of 2008 in C.R.P.(PD).No.1130 of 2008

    Decided On, 07 January 2009

    At, High Court of Judicature at Madras

    By, THE HONOURABLE ACTING CHIEF JUSTICE MR. S.J. MUKHOPADHAYA & THE HONOURABLE MR. JUSTICE R. SUBBIAH

    For the Petitioners : S. Sethuraman, Jayesh B. Dolia for M/s. Aiyar & Dolia, T.M. Hariharan, Advocates. For the Respondents: AR.L.Sundaresan, Senior Counsel for M/s. AL. Gandhimathi, G. Masilamani, Senior Counsel for M/s. Shivakumar, R. Krishnamurthy, Senior Counsel for M/s. Surana & Surana, S. Sethuraman.



Judgment Text

(Writ Petition No.6579 of 2008 filed under Article 226 of the Constitution of India, praying for issuance of a Writ of Certiorari, calling for the issue pertaining to order dated 5.3.2008 in I.A.No.165 of 2008 in M.A.No.35 of 2008 and quash the same.


Writ Petition No.6590 of 2008 filed under Article 226 of the Constitution of India, praying for issuance of a Writ of Certiorarified Mandamus, calling for the records relating to the order dated 5.3.2008 made in I.A.No.165 of 2008 in M.A.No.35 of 2008 on the file of the 8th respondent and quash the same and consequently permit the petitioners to appropriate the amount lying in the Trust and Retention Account towards payment of the devolved LCs which have not been honoured by the first respondent on the due dates.


Civil Revision Petition against the order dated 5.3.2008 in I.A.No.165 of 2008 in M.A.No.35 of 2008 on the file of the Debts Recovery Appellate Tribunal, Chennai.)


Common Order: (The Acting Chief Justice)


These petitions have been preferred by the State Bank of India (for short, 'the SBI'), the Indian Bank (for short, 'the IB'), the Central Bank of India (for short, 'the Central Bank') and the other Banks, challenging the interim order, dated 5.3.2008 passed by the Debts Recovery Appellate Tribunal (for short, 'the DRAT'), Chennai in I.A.No.165 of 2008 in M.A.No.35 of 2008, whereby and whereunder, the DRAT directed that out of Rs.180 crores lying with the IB, a sum of Rs.8 crores be disbursed to the Southern Petrochemical Industries Corporation Limited (for short, 'SPIC') until further orders, pending disposal of the appeal, to meet the urgent needs of SPIC towards electrical consumption charges, salary of the employees, provident fund, payment of superannuation amount, gratuity amount, tax and duties and minimum plant maintenance charges.


2. Since the issue involved is common, these cases are being disposed of by this common order.


3. The main plea taken by the petitioners-Banks is that the Original Applications have been filed by the two Banks and other Banks being the respondents, for recovery of its duties, at the instance of the borrower, one of the corresponding Banks, cannot be directed to disburse the funds for meeting the physical expenses of the borrower, particularly when the assets are declared as non-performing assets (for short, 'the NPA'). The SPIC cannot seek for such a direction in an Original Application for recovery of money from its Banker, when the assets available as on the date are not sufficient to meet the existing liability.


3(a). The SPIC, which is a fertiliser and petroleum company of South India, is in existence since 1969. Its production capacity is of one million tonnes of fertilisers per annum and the plant is spread over 1000 acres of lands in Tuticorin (Tamil Nadu). It is engaged in manufacture of urea, ammonia, complex fertilisers, phosphoric and sulphuric acid and aluminium fluoride.


According to SPIC, as per the last audited balance sheet as on 30.9.2006, the asset of SPIC stood at gross value of RS.3,329 crores. SPIC has been availing of the working capital facilities from a consortium of Bank, approximately 21 in number, for which Indian Bank is the lead Bank. There are fixed assets and current assets, which have been charged to all the secured lenders, 36 in number, there are 21 Banks, and 15 financial institutions, on a pari-passu inter-se basis without any preference or priority of one over the other.


The Reserve Bank of India (for short, 'RBI') in 2001 introduced Corporate Debt Restructuring Scheme (for short, 'the CDR') to make a timely and transparent mechanism for restructuring of corporate debts of viable entities facing problems. As per the CDR scheme, SPIC's financial re-construction application was approved on 19.3.2003 and confirmation of pari-passu agreement was made on 29.12.2004 between participating financial institutions and the Banks. In terms of the CDR package, a Trust and Retention Account (for short, 'the TRA') was opened with the lead Bank i.e. Indian Bank, to facilitate the nodal monitoring of the Company's business receivables. The consortium of banks also appointed a concurrent auditor of SPIC to report to the lead Bank by giving a monthly report.


As per SPIC, the cost of production per tonne of urea of fertiliser is Rs.21,500/-, but in view of the Fertiliser (Control) Order, the SPIC can sell it only at the levy price of Rs.4,830/- and the balance of about RS.16,700/- is to be reimbursed by the Government of India, subject to the norms under the Fertiliser Retention Price Scheme. This reimbursement takes about 3 to 9 months. The receipt of subsidy amount takes about 75 days.


In respect of phosphatics (Di-ammonium phosphaste), the percentage of market collection is 50% and the balance 50% is receivable by way of subsidy from the Government of India. Of this 50% subsidy, 85% is received after 2 to 3 months and the remaining 15% after certification from the State Government, which takes about 9-12 months. Most of the raw materials required for the manufacture of phosphatics were to be imported with a minimum lead time of 20 to 45 days. The other details relating to the subsidy scheme have been highlighted by the petitioners-Banks.


So far as the proceedings before the DRT/DRAT are concerned, on 17.8.2006, the Punjab and Sind Bank recalled credit facilities extended to SPIC. According to SPIC, it is in contravention of the consortium arrangement. In August 2006, as per SPIC, there was proposal for 'One Time Settlement' (for short, 'the OTS') of the Bank dues, which was confirmed in the minutes of the Monitoring Committee of all Banks in their meeting held on 10.10.2006, and SPIC deposited a sum of Rs.12 crores with Punjab and Sind Bank for the purpose of opening a letter of credit for purchase of raw materials. The allegation by SPIC is that the Punjab and Sind Bank unilaterally adjusted the amount for certain alleged amounts due to it by SPIC without opening the letter of credit, which is contrary to the terms of TRA.


In March 2007, the Punjab and Sind Bank filed Original Application No.25 of 2007 against SPIC for recovery of Rs.66.70 crores along with Interlocutory Application in I.A.No.154 of 2007. Another Original Application in O.A.No.89 of 2007 was filed by the Tamil Nadu Mercantile Bank for recovery of a sum of Rs.3.92 crores along with I.A.No.216 of 2007. On 5.3.2007, DRT-II, Chennai passed an ex-parte order in I.A.No.154 of 2007 directing the Government of India not to disburse a sum of Rs.66 crores as claimed by the Punjab and Sind Bank in its Original Application, from and out of the subsidy amount of Rs.409 crores.


Subsequently, SPIC sought vacation of the said ex-parte order dated 5.3.2007. On 27.3.2007, the DRT-II, Chennai, passed an order in both the I.As., vacating the ex-parte order of prohibition, recording the submission of the counsel appearing on behalf of the Indian Bank that the amounts received through subsidy is in the credit of TRA account and that the amount is disbursed only according to the consortium inter-se agreement. The DRT-II also observed that several members of the consortium were recovering the amounts due from SPIC without following the consortium agreement and therefore, the DRT-II was of the opinion that each disbursement of the subsidy given by the Government of India should be monitored by the DRT. The Indian Bank as consortium leader, was directed by the DRT to file a report regarding the fertiliser subsidy received from the Government of India in TRA account and the State Bank of Patiala which received subsidy amount from the Government of India, was also directed to inform the DRT regarding the amount received by it, since 1st January 2007 towards the subsidy. The DRT also directed that no subsidy received from the Government of India, should be disbursed without the permission of the DRT and the Indian Bank was directed to file a monthly report of the subsidy received from the Department of Fertilisers through the State Bank of Patiala.


Against the aforesaid order, none of the secured lenders including the Indian Bank, State Bank of India and the Central Bank of India, preferred any appeal before the DRAT or any Writ Petition or Civil Revision Petition before this Court.


On 20.4.2007, the DRT-II, Chennai passed an order on the basis of the reports filed by the State Bank of Patiala and the Indian Bank. It recorded the submission made by the learned counsel for SPIC that the daily monitoring by the DRT would be difficult and SPIC cannot run on its day-to-day affairs and therefore, the DRT held that the system of disbursement of the subsidy amount as per the order of the DRT should continue and refused to modify the order passed by the DRT. However, the leader of consortium was given liberty to approach the DRT once a month for permission regarding the disbursement of the subsidy received. The Indian Bank was also directed to ensure that at least one meeting of members be held per month with proper notice to all, against which, no appeal was preferred by any of the secured lenders including the Indian Bank, State Bank of India and the Central Bank of India, who have moved before this Court by filing the present Writ Petition(s)/Civil Revision Petition.


On 8.5.2007, SPIC filed I.A.No.403 of 2007 in I.A.No.154 of 2007, for a direction to the Indian Bank to pay a sum of Rs.20.77 crores out of the subsidy amount of RS.60.80 crores to meet its statutory liability and critical expenses (operational expenses) and to disburse the balance available, namely Rs.40.03 crores, only to those members of the consortium, who are agreeable to open fresh letter of credits, proportionate to the amount receivable by them. The following details of statutory and critical expenses were cited by the SPIC:


TABLE


On 19.6.2007, the DRT-II, Chennai, disposed of I.A.No.403 of 2007, against which appeal has been preferred before the DRAT by the Punjab and Sind Bank in M.A.No.15 of 2007 regarding its share of Rs.2.68 crores and the Bank of Baroda (IN.500/07) and Indian Bank (IN.495/07). The Punjab and Sind Bank has not preferred any appeal against the disbursement of statutory and critical expenses and no direct appeal has been filed by the Bank of Baroda against the disbursement of statutory and critical expenses. The Indian Bank has also not filed any appeal against the disbursement of statutory and critical expenses, but only against the production of TRA account. In fact, the Indian Bank, State Bank of India and Central Bank of India have accepted the DRT's order and opened the letters of credit for Rs.36.84 crores, Rs.16.78 crores and Rs.15.78 crores respectively. No appeal has been filed by any secured lender against the order regarding the disbursal of Rs.20.77 crores, i.e. Rs.16.77 crores for meeting statutory and critical expenses and Rs.4 crores for Bank's charges including the charges payable to the Indian Bank, State Bank of India and Central Bank of India, who have preferred the present Writ Petition(s)/Civil Revision Petition before this Court.


On 3.10.2007, the DRT-II, Chennai passed orders in the I.A. filed by the Punjab and Sind Bank (I.A.No.217 of 2007) and closed the same with the observation that the points raised in the I.A. can be taken along with the main Original Application at the time of arguments. The other I.A.No.303 of 2007 seeking cash security for the claim amount of the Original Application, or otherwise, for attachment and sale of SPIC's Division's and investments, filed by the Punjab and Sind Bank, was also disposed of, directing SPIC to furnish security to the tune of Rs.30 crores, failing which its assets were to be attached. SPIC has preferred an appeal before the DRAT in M.A.No.250 of 2007, wherein interim stay has been granted in I.A.No.1550 of 2007.


4. Learned counsel appearing on behalf of the petitioner-SBI, while raising the jurisdiction of the DRAT to direct the Banks, which are formal parties in the Original Application to release the funds to the borrower, referred to the following provisions of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993:


"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 applications from the banks and financial institutions for recovery of debts due to such banks and financial institutions.


(2) An Appellate Tribunal shall exercise, on and from the appointed day, the jurisdiction, powers and authority to entertain appeals against any order made, or deemed to have been made, by a Tribunal under this Act."


He also placed reliance on Section 19 (Chapter IV) of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, which deals with the "Procedure of Tribunals", particularly Section 19(8), which is quoted hereunder:


"Chapter IV: Procedure of Tribunals:


19. Application to the Tribunal:


(1)....


....


(8) A defendant in an application may, in addition to his right of pleading a set-off under sub-section (6), set up, by way of counter-claim against the claim of the applicant, any right or claim in respect of a cause of action accruing to the defendant against the applicant either before or after the filing of the application but before the defendant has delivered his defence or before the time limited for delivering his defence has expired, whether such counter-claim is in the nature of a claim for damages or not.


..."


According to the learned counsel appearing for the State Bank of India, in the light of the above provisions, the defendant can make an application claiming set-off of the account, but no application can be filed for a direction to the lead Bank or any other Bank, particularly those who are formal/proforma parties to disburse any amount in favour of the Bank. Reliance has also been placed on the decision of the Supreme Court in the case of "Indian Bank vs. ABS Marine Products (P) Ltd.,", reported in 2006 (5) SCC 72. It was further submitted that Sections 17 and 18 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 having not been amended, the jurisdiction has not been conferred on the DRT/DRAT to try independent suits/proceedings initiated by borrowers or others against the Bank. Reliance was also placed on the decision of the Supreme Court in the case of "United Bank of India, Calcutta vs. Abhijit Tea Co. Pvt. Ltd.", reported in 2000 (7) SCC 357, to suggest that the subject matter in the Bank suit/suits of the defendants against the Banks should not be inextricably connected in the sense that the decision in the one could affect the decision in the other. It was further submitted that in the present case, there was no inextricable connection, as the Original Application has been filed for recovery of money due to the Bank, as the defendant-Company (SPIC) was unable to pay the amounts borrowed. The defendant-Company (SPIC) on the other hand, is demanding payment on the ground that it has to run the factory and maintain it. The relief claimed by the Banks and the relief claimed by the borrower are diametrically opposite. So far as the enhanced power of the DRAT is concerned, learned counsel appearing on behalf of the State Bank of India placed reliance on the decision of the Supreme Court in the case of "Transcore vs. Union of India", reported in 2008 (1) SCC 125, wherein the Supreme Court held that the DRT being a statutory body, does not have inherent powers as in the Civil Courts. It was also submitted that no interim order can be passed under Section 19(20) of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993. The respondent-Company (SPIC) took one of the pleas that the Bank having submitted to the jurisdiction of the DRT and having complied with the order passed by the DRT, cannot now plead that the DRT is not having jurisdiction. While placing reliance on the Supreme Court decisions in the case of "Chief Engineer, Hydel Project and others vs. Ravinder Nath and others", reported in 2008 (2) SCC 350, "Hasham Abbas Sayyad vs. Usman Abbas Sayyad", reported in 2007 (2) SCC 355 and the other decisions, the learned counsel for the State Bank of India submitted that if moot question is as to whether the order passed by the person lacking inherent jurisdiction would be a nullity, it will be so, and the principle of estoppel, waiver and acquiescence or even res-judicata, which are procedural in nature, would have no application in the case where the order has been passed by the DRT/DRAT/Court, which has no authority in this behalf. Any order passed by the Court without jurisdiction would be "forum non-judis" being a nullity and the same ordinarily should not be given effect to.


Learned counsel for the other Banks, i.e. Indian Bank, Central Bank of India., inter-alia contended that:


(a) the DRAT has no jurisdiction to pass such order;


(b) no disbursal can be given to a Company classified as NPA (non-performing asset) which is a defaulter;


(c) the Company did not keep up its demand to honour the devolved letters of credit;


(d) the Company has not shown progress despite receipt of RS.389 crores;


(e) existing assets are not sufficient to meet the existing liability and


(f) the demand for payment of critical expenses is not maintainable.


5. Asset Recovery Company (India) Ltd., (for short, 'the ARCIL') (i.e. tenth respondent in W.P.No.6590 of 2008), which is a Company registered under the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (for short, 'the SARFAESI Act'). According to the tenth respondent-ARCIL, it is the single largest lender in respect of the credit and other financial facilities obtained by SPIC, having been assigned the debts of SPIC with IDBI, ICICI, Bank of Baroda, Allahabad Bank and Indian Overseas Bank. The SPIC has availed of various credit facilities and was unable to repay and the debts due to various lending agencies were restructured under the CDR mechanism. The guidelines of the CDR Scheme provides for revocation of the CDR package only by 75% of the lenders. It is not in dispute that various agreements, such as inter-se creditor agreement, debtor-creditor agreement, TRA, etc., were all executed so as to create a legal and binding obligation on all parties concerned. It is relevant to mention that the lead Bank has been given the power and authority to act and represent all other consortium Banks. The stand of the tenth respondent-ARCIL is that the TRA lays down the mechanism for control and monitor the cash flow of the borrower's operation with a view to maintain strict, vigil and corrective action as and when necessary, by operating a TRA through which all cash flow is to be routed. Under this TRA agreement, the priority of cash flow, mode and manner of withdrawal was laid down. The Monitoring Committee consists of representative of Banks and tenth respondent-ARCIL is also in place. The TRA is monitored to ensure that the cash flows follow the waterfall mechanism and no money goes out of the system. The present system has been put in place to ensure that all the lenders get their due share without any preference or priority and the borrower is allowed to function under vigil. This object sought to be achieved by strict adherence to the mechanism provided under the TRA. Clause 14.4. of the TRA provides that the agreement would terminate only upon mutual consent and no bank can unilaterally terminate the TRA with a view to wriggle out of their obligations. Giving reference to the orders passed by the DRT and the DRAT, learned counsel appearing for the ARCIL submitted that the Punjab and Sind Bank having approached the DRT for recovery of its dues, the first respondent-SPIC got opportunity to file an application for a direction to the Indian Bank to take necessary action for utilisation of the sum of RS.186.28 crores in the TRA of the petitioners-Banks towards settlement of Letters of Credit commitments fallen due up to February 2008 and the DRT having dismissed the said application on 3.1.2008, the first respondent-SPIC moved in appeal before the DRAT, wherein Interlocutory Application was filed for a direction on the Indian Bank (Lead Bank) or any other Bank in which the subsidy amount of Rs.180 crores is deposited as per the proceedings of the DRT-II, Chennai, dated 3.1.2008 to disburse a sum of Rs.8 crores per month. The DRAT directed to release a sum of Rs.5 crores immediately to restart the Company and Rs.8 crores monthly for meeting the operational expenses. Giving reference to Clause 31.3 of the TRA agreement, the learned counsel appearing for tenth respondent-ARCIL supported the stand of the first respondent-SPIC that the operational expenses of the SPIC should be met on top priority. In such a situation, unless the money is released, it is not possible for the Company (SPIC) to meet its day-to-day expenses and therefore, in a meeting dated 15.2.2008, it was resolved that the realisable value for the lenders would be more if the plant resumes operations. It was submitted on behalf of the tenth respondent-ARCIL that the petitioners-Banks cannot challenge the order of the DRAT as it was considered to release the money by filing Memo before the DRAT. It was further submitted on behalf of the tenth respondent-ARCIL that the petitioners-Banks not only not objected for the release of the money, but also prayed for permitting them to adjust the said amount to their earlier outstanding and they being the party to the consortium agreement, are required to act as per the terms of the consortium, the interest of every member of the consortium being involved.


6. We have heard the learned counsel appearing for the respective parties and noticed their rival contentions.


7. In fact, it has not been disputed by learned counsel appearing for the petitioners-Banks that both the DRT and the DRAT have the powers to pass interim orders during the pendency of the Original Application and the appeal, as the case may be.


8. It is relevant to notice the decision of the Supreme Court in the case of "Mardia Chemicals Ltd. vs. Union of India" reported in 2004 (4) SCC 311, wherein, the Supreme Court held that the Tribunal, in exercise of its ancillary powers, shall have the jurisdiction to pass any stay/interim order, subject to the condition as it may deem fit and proper to impose. This decision of the Supreme was followed by a Division Bench of this Court in the case of "M/s.Ramco Super Leathers Ltd. and four others vs. UCO Bank and another" reported in 2007 (5) MLJ 986, wherein, the Division Bench observed that there is no automatic stay or prohibition on the secured creditor to take recourse to one or more measures under sub-section (4) to Section 13 of the SARFAESI Act, to recover its secured debts, till an interim order is passed by the Tribunal. The said decision of the Supreme Court in the case of "Mardia Chemicals" was also followed by a Full Bench of this Court in the case of "M/s.Lakshmi Shankar Mills (P) Ltd. & Others vs. The Authorised Officer/Chief Manager, Indian Bank and others", reported in 2008 (2) L.W. 381 (FB).


9. The only question that arises for determination is as to whether the impugned order passed by the DRAT directing the lead Bank to release Rs.8 crores every month to meet the operational and critical expenses, is justified or not?


10. Section 9 of the SARFAESI Act relates to measures for assets reconstruction and under the said provision, the Securitisation Company or Reconstruction Company, may for the purposes of asset reconstruction, having regard to the guidelines framed by the RBI in this behalf, provide for any one or more of the measures as mentioned in Section 9, including proper management of the business of the borrower. Under Section 10 of the SARFAESI Act, the Securitisation Company or Reconstruction Company, can also act as an agent for any Bank or financial institution for the purpose of recovering their dues from the borrower. Therefore, it will be evident that the tenth respondent-ARCIL has main role to play on the question of release of funds in favour of the first respondent-SPIC, out of subsidy amount, when the other Banks whose liabilities were only to the tune of 30% approximately, are bound by the terms of the consortium.


11. In the present cases, it is informed that the tenth respondent-ARCIL has taken over the liabilities of approximately 70% of the debt amounts of the first respondent-SPIC, and thereby, the debts due to various lending agencies have been reconstructed under the CDR mechanism. Various inter-se agreements, such as creditor-agreement, debtor-creditor agreement, TRA agreement, etc., all of which were executed so as to create a legal and binding obligation on all parties concerned. The lead Bank had been given the power and authority to act and represent to act on behalf of all the consortium members, i.e. Banks and Financial Institutions. The TRA agreement was entered amongst the borrower-company (SPIC) and the lender Banks, as per which the borrower established in its own name, an account, titled "Trust and Retention Account" (i.e. TRA) bearing Account No.2244, maintained with the Thousand Lights Branch, Chennai-600 006, of the Indian Bank (under Clause 2.1). As per Clause 2.2 of the TRA agreement, all the amounts deposited in the TRA shall be held in the Trust and the monies received and applied will be as provided under the said agreement. As per Clause 3.13 of the agreement, the Account Bank, viz., Indian Bank is supposed to withdraw amounts from the TRA with the borrower's (SPIC) instructions for meeting the expenses, such as operational expenses, to pay certain amounts into the Debt Service Reserve Account, Capital Expenditure Account, Working Capital Banks and to transfer the balance amount to the Distribution Account.


12. The further facts have been brought to the notice of the Court that while the Original Application of the Punjab and Sind Bank in O.A.No.25 of 2007 was pending before the DRT, on the agreement of the Bank, it was agreed upon to disburse the Letter(s) of Credit which were actually released.


13. The stand taken by the first respondent-SPIC is that the Letters of Credit were used for manufacture and sale of fertilisers, but they could not get back the full amount, as the Fertilisers were sold at subsidised rates and awaiting the release of subsidy amount from the Government of India.


14. Learned counsel appearing for the SBI gave much stress on the question as to whether at the instance of the borrower (SPIC), the Bank can be directed to release the money, but that is not the issue required to be determined in the present cases, as the borrower itself had not moved initially for release of any amount in their favour. Admittedly, the Government of India released the subsidy amount in favour of the borrower for payment to it (SPIC) from time to time, which was deposited with one of the Banks, which is also a secured creditor.


15. The Punjab and Sind Bank whose liability is much less, they moved in Original Application in O.A.No.25 of 2007 for adjusting its dues out of the subsidy amount. In the said O.A.No.25 of 2007, the DRT did not choose to pass any specific order and decided to monitor the matter. It is in this background, the borrower (SPIC) had to prefer I.A.No.791 of 2007 for a direction o

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n the Indian Bank to take necessary action for utilisation of a sum of Rs.186.28 crores deposited in the TRA of the borrower towards the settlement of Letters of Credit, which were falling due up to January 2008. Therefore, it will be evident that the borrower-SPIC had not moved any application for direction on the Banks for release of any fund out of the funds of the Banks, but as one of the Banks, namely, Punjab and Sind Bank, approached the DRT for recovery of the dues out of the subsidy amount, the borrower-SPIC wanted to settle the sum towards the Letters of Credit of the Bank. It is at this stage, when finally Letters of Credit were not issued subsequently in favour of the borrower-SPIC by any of the Banks, it preferred appeal before the DRAT, apart from some other appeals preferred by one or other Banks, except the tenth respondent-ARCIL. 16. When the matters were pending before the DRAT, in the absence of any Letters of Credit or the amount with the borrower-SPIC, it stopped functioning. It was also facing difficulty to maintain day-to-day expenditure of the Company (SPIC) for retaining its machineries, to pay its dues of the employees, etc., and to ensure that there should not be any theft of its movable assets, and to pay certain dues of its employees, like salary, provident fund, gratuity, electricity charges, etc., the SPIC applied for release of certain amounts for month to month out of the subsidy amount, which otherwise could have been adjusted towards the earlier Letters of Credit for getting fresh Letters of Credits from different Banks. 17. Therefore, it cannot be said that the borrower-SPIC moved for a direction on the Bank for payment of certain amounts from the Bank out of their account. Further, it will be evident from the affidavit filed by the tenth respondent-ARCIL, dated 31.3.2008 in W.P.No.6590 of 2008 that they have taken over the liabilities of about 60% and stated in its counter affidavit dated 27.3.2008 that it has already decided in its meeting that the borrower-Company (SPIC) should remain in operation and the TRA agreement lays down the mechanism for control and monitor the cash flow of the borrower's operation, with a view to maintain strict, vigil and corrective action as and when necessary. 18. Taking into consideration all the relevant facts, if the DRAT, by the impugned order dated 5.3.2008, allowed the petition filed by the borrower-SPIC for release of Rs.8 crores per month out of the subsidy amount for day-to-day maintenance towards electricity charges, payment of salary to its employees, etc., it cannot be held to be illegal. 19. We find no merits in any of the petitions, which are accordingly dismissed. No costs. The Miscellaneous Petitions are closed. 20. However, as the appeal seems to be pending since long, and there are other appeals/applications appeared to have been filed by certain Banks or other parties, and pending consideration by the DRAT, it is desirable that the DRAT decides those cases including the appeal in question in the present cases, at an early date.
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