Disposed

Ace Agro Biosciences Ltd. v. State Bank of India

DRAT16 May 2024IA/290/2024

Case brief

AI extract

What is this about?

The Debts Recovery Appellate Tribunal addressed an appeal regarding the withdrawal of a One Time Settlement (OTS) offer by a bank and directed the appellants to make a pre-deposit under Section 21 of the RDB Act to proceed with the appeal without allowing them to set off the tendered amount towards the relief sought.

What did the court decide?

Appellants directed to deposit ₹17.50 crores in four instalments to entertain the appeal; appeal not allowed on merits as pre-deposit condition was invoked for filing.

Ace Agro Biosciences Ltd. versus State Bank of… — Contract and Commercial Disputes | DRAT (2024)

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BEFORE THE DEBTS RECOVERY APPELLATE TRIBUNAL, AT: MUMBAI Present: Mr Justice Ashok Menon, Chairperson

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I.A. No. 290/2024 (WoD)

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In Appeal on Diary No. 933/2024

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Between

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M/s Ace Agro Bioscience Ltd. & Anr. … Appellant/s V/s.

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State Bank of India & Ors.

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…Respondent/s

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Mr Rishabh Shah, i/b M/s Raval-Shah & Co., Advocate for Appellants.

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Mrs Rathina Maravarman, Advocate for Respondent No. 1 Bank appeared through Video Conferencing.

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-: Order dated: 16/05/2024:-

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The Appellants are the borrowers who are aggrieved by the order dated 25.04.2024 in Misc. Application (M.A.) No. 17 of 2023 on the files of the Debts Recovery Tribunal, Pune (D.R.T.) dismissing the application but imposing the cost of ₹1 lakh on the Respondent bank. 2. Whether the offer given by the bank for settlement of the debt due from the Appellants and the group companies by way of an OTS accepted by the Appellants could be unilaterally withdrawn by the creditor bank is the question that arises for the determination of this appeal. The Appellants approached the D.R.T. with the aforesaid M.A. seeking a prayer to direct the bank to accept the settlement amount of ₹2,81,75,733/- from them in full and final settlement of all their dues per the benefit of an OTS granted by the bank by declaring that there

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is a concluded contract between the bank and the certified debtors

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(CDs) and that the bank is bound by the offer made by them.

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The facts in brief can be encapsulated thus:

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The certified creditor had filed Original Applications (O.As) Nos. 186 to 189 of 2013 before the D.R.T. for recovery of amounts due from the Appellants and their group companies. All the O.As. were allowed and Recovery Certificates were issued against the CDs in all the O.As. except O.A. Nos 188 and 189 of 2013.

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The certified creditor filed Recovery Proceedings No. 174 of 2024 before the Recovery Officer and properties were attached. Attempts were made to sell the properties twice in 2017 but the attempts failed.

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On 19.09.2017, 29.09.2018 and again on 30.09.2019, the bank issued offers of OTS to the Appellants and the group companies. The offers could not be accepted by the CDs. On 29.09.2018 and 30.09.2019, the CDs made some payments but could not pay the remaining amount within the stipulated time. On 20.10.2020, the bank once again issued an offer of OTS to the Appellants and the group companies by giving an incentive of 15% of the total amount to be paid by 09.12.2020.

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On 03.11.2020, the Recovery Officer issued an e-auction sale notice on 03.11.2020 scheduling the sale of the mortgaged property on 08.12.2020. The offer made by the bank on 20.10.2020 was confirmed by yet another letter dated 09.11.2020. The intended e- auction was to take place on 08.12.2020. The Appellants visited the bank’s office and requested them to accept the entire amount of OTS

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after granting an incentive concession of 15% of the debt. Demand drafts for ₹2,81,75,733 were handed over to the bank towards the discharge of entire debts as per the OTS.

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The bank refused to accept the demand drafts and also withdrew the OTS granted to the Appellants and the group companies vide letter dated 03.12.2020. Since the sale was scheduled and expected to proceed, the Appellants filed Writ Petition No. 97415 of 2020 whereby certain protection was granted to the Appellants but ultimately on hearing the writ petition, the same was dismissed on 06.05.2022 with a direction to the Appellants to approach the D.R.T. with an application. Aggrieved by the order of dismissal, the Appellants filed a Special Leave Petition before the Hon’ble Apex Court. The SLP was dismissed on 20.02.2023. The Appellants thereafter filed the aforesaid M.A. before the D.R.T. for relief.

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The property was sold in the auction held on 08.12.2020 and the sale consideration has been deposited. Further proceedings were stalled because of the filing of the writ and the SLP.

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The Respondent bank had opposed the M.A. on the ground that the OTS proposal could not be made given the circular of RBI dated 29.01.2023 which specifically precludes banks and financial institutions from settling the dispute concerning chronic nonperforming assets and it is stated that the guidelines would cover cases in which the banks have initiated action under the SARFAESI Act and also cases pending before the Courts/DRTs/BIFR subject to the consent decree obtained from those forums. It is pointed out that in the instant case, the D.R.T. had already issued a Recovery Certificate

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after allowing the OAs. and recovery proceedings were pending. There was, therefore a bar in entertaining settlement by way of OTS.

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Accepting the contention of the creditor bank, the M.A. was dismissed. However, the D.R.T. observed that after knowing the circular the bank could not have made an OTS offer. Taking a serious view of the mistake committed by the bank, it was directed to deposit a cost of ₹1 lakh to the Prime Minister’s National Relief Fund.

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To entertain this appeal, the Appellants will first have to comply with the mandatory provisions under Sec. 21 of the RDB Act by making a pre-deposit of the amount due.

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As per the Recovery Certificate issued by the D.R.T. in O.A. No. 186 of 2013 dated 29.09.2014, the amount due is ₹11,17,96,032.70. Together with interest, the total due as of 29.04.2024 would come to ₹35,32,22,198/-. The Ld. Counsel appearing for the respondent bank submits that the Appellants would have to deposit 50% of the said amount for entertaining this appeal.

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The Ld. Counsel appearing for the Appellants submits that the Appellants have already deposited the entire amount due from the group companies and that the Appellants be allowed to deposit 25% of the sum of ₹3,52,22,039/- alone which is the total amount outstanding as due and payable towards the OTS for all the group companies together.

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After anxiously considering the rival submissions, I find that the acceptance otherwise an OTS proposal is the question that requires determination in the appeal. The Appellants are not entitled to get the benefit of the amount which has been offered by way of demand drafts

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towards settlement. Those drafts were not accepted by the bank. The Appellants seek relief to direct the bank to accept the drafts. There is no prima facie case in favour of the Appellants. The pre-deposit has to be made based on the amount that is payable by the Appellants. That amount is ₹35,32,22,198/-. The Appellants have not proved that they are under any financial strain. Hence, the Appellants are directed to deposit a sum of ₹17.50 crores as a pre-deposit for entertaining this appeal. the said amount shall be paid in four equal instalments within a gap of two weeks each as stated hereinunder.

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Number of Instalments Payment on or before
1^stInstalment of₹4,37,50,000 30.05.2024
2^ndInstalment of₹4,37,50,000 13.06.2024
3^rdInstalment of₹4,37,50,000 27.06.2024
4^thInstalment of₹4,37,50,000 11.07.2024

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Default in payment of any of the instalments/amount on time shall entail the dismissal of the appeal without any further reference to this Tribunal.

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The amount shall be deposited in the form of a Demand Draft/RTGS with the Registrar of this Tribunal.

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As and when the said amounts are deposited, they shall be invested in term deposits in the name of Registrar, DRAT, Mumbai, with any nationalised bank, initially for 13 months, and thereafter to be renewed periodically.

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With these observations, the I.A. is disposed of. The

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Respondents are at liberty to file a reply in the Appeal with an advance copy to the other side.

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Post on 31.05.2024 for reporting compliance regarding the payment of the 1^st instalment.

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Sd/Chairperson

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mks-01

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Ace Agro Biosciences Ltd. v. State Bank of India

Case brief

What is this about?

What did the court decide?

Ace Agro Biosciences Ltd. v. State Bank of India

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

Issues for consideration

Statutes considered

Parties & counsel

Coram

Case details

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