Disposed

M/s. Mbs Jewellers Private Limited, v. The Debt Recovery Tribunal

Telangana HC25 Apr 2012WP/4271/2012

Case brief

AI extract

What is this about?

This joint order dismisses four writ petitions filed by borrowers challenging interim orders in recovery proceedings against State Bank of India. The court holds that CPC provisions need not be followed in DRT proceedings, directing the DRT to dispose of pending interlocutory applications within ten days.

What did the court decide?

Directed the Debts Recovery Tribunal Hyderabad to dispose of SBI's interlocutory applications within ten days of receiving this order.

M/s. Mbs Jewellers Private Limited, Vs The Debt… — Banking and Recovery | Telangana HC (2012)

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THE HON’BLE SRI JUSTICE V.V.S.RAO AND THE HON’BLE SRI JUSTICE G.KRISHNA MOHAN REDDY

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WRIT PETITION Nos.4229, 4271, 11141 and 11387 of 2012

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Dated:25.04.2012

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Between:

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M/s.MBS Impex Private Limited, And others.

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Petitioners

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And The Debts Recovery Tribunal, And others.

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... Respondents

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THE HON’BLE SRI JUSTICE V.V.S.RAO AND THE HON’BLE SRI JUSTICE G.KRISHNA MOHAN REDDY WRIT PETITION Nos.4229, 4271, 11141 and 11387 of 2012

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COMMON ORDER: (Per Hon’ble Sri Justice V.V.S.Rao)

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In this order disposing of all the four matters, the factual background is the same. The limited relief is common to all and therefore it is expedient to dispose of them together. State Bank of India (SBI) among many of its products has “Metal Gold Scheme” (MGS). Under this, a borrower can avail credit facilities for buying gold from the bank and repay each gold withdrawal within a period of 180 days. On availing the credit facility, the borrower has to furnish bank guarantee for 110% for the value of gold by way of term deposit/bank guarantee. M/s.MBS Impex Private Limited (MBSI) and its sister

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concern M/s.MBS Jewellers Private Limited (MBSJ) availed MGS of 2000 kgs gold (equivalent to Rs.400.00 crores) and 1500 kgs (equivalent to Rs.270.00 crores) respectively for their business. In addition to furnishing the bank guarantee from Nationalised Banks, the Directors of the Company executed guarantee agreement. This happened in the month of May 2010.

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In July 2011, the international gold market experienced extreme fluctuation. Therefore, SBI insisted upon the borrowers to maintain sufficient margin by way of additional bank guarantee to cover adequate margin. But, both the borrowers failed to arrange to maintain sufficient margins and neglected to pay the top up margins in spite of granting sufficient time. Therefore, the SBI enforced the bank guarantees and after issuing notice, filed O.A.Nos.490 of 2011 and 556 of 2011 against MBSI and MBSJ respectively. The guarantors were made codefendants.

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Along with the respective Original Applications the SBI filed as many as four Interlocutory Applications in each case. These were for attachment of properties, for appointment of Advocate Commissioner for taking inventory, for disclosure of assets and for appointment of receiver. The principal borrowers, namely MBSI and MBSJ filed two separate applications one for return of the plaint and the other for injunction against SBI not to write as defaulter to other banks as CIBIL (Credit Information Bureau of India Limited). In their two applications for attachment of properties, the Debts Recovery Tribunal passed two separate orders on 20.01.2012 directing the borrowers to furnish the security equivalent to the amount claimed in the Original Application within four weeks. Against the order in I.A.No.875 of 2011 in O.A.No.490 of 2011, MBSI filed W.P.No.4229 of 2012, and against the order in I.A.No.919 of 2011 in O.A.No.556 of 2011, MBSJ filed W.P.No.4271 of 2012. After making preliminary submissions on 17.02.2012, the Counsel sought time.

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In the meanwhile, SBI approached the Debts Recovery Tribunal with a request to take all the Interlocutory Applications for hearing, but the Debts Recovery Tribunal adjourned these matters to 07.06.2012. Therefore, SBI filed the other two writ petitions for direction to the Debts Recovery Tribunal and also for appointment of advocate commissioner for taking inventory.

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The Counsel for the MBSI and MBSJ would submit that the order passed by the Debts Recovery Tribunal on 20.01.2012 is contrary to Order XXXVIII Rule 5 of the Code of Civil Procedure, 1908 (CPC). He relies on the decision of this Court in Sripathi Panditarajula Venkanna [1] Babu v Varalakshmi Finance Corporatio n . Per contra, the Counsel for SBI relies on Bhanu Constructions Company Limited v Recovery Officer, [2] Debts Recovery Tribuna l and would submit that in recovery proceedings initiated under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, the provisions of CPC need not be followed by the Tribunals and the Appellate Tribunals. His contention that the provisions of CPC would not apply is well supported by the said judgment.

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The elaborate arguments by the Counsel notwithstanding to our mind, the issue is very limited. The two Interlocutory Applications filed by MBSI and MBSJ for return of the plaint and injunction were already rejected and no further challenge was made to them. The applications made by the SBI are still pending which now stand posted to 07.06.2012. The only request made by SBI is for expeditious disposal of the applications, probably due to the continued fluctuations in the rate of gold in international market. This seems to be justified. Keeping this in view, we deem it proper to direct the Debts Recovery Tribunal, Hyderabad, to dispose of the applications filed by the SBI in O.A.Nos.490 and 556 of 2011 within a period of ten days from the date of receipt of a copy of this order. We also observe that, if for any reason, the Presiding Officer is not able to hold a sitting in Hyderabad,

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the cases may be heard during the regular sitting in Bombay or any other place, for which the Counsel have no objection. We order accordingly.

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In the result, the writ petitions as also the W.P.M.Ps shall stand disposed of as above without any order as to costs.

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_______________ (V.V.S.RAO, J)

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________________________________ (G.KRISHNA MOHAN REDDY, J)

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25.04.2012 Note: Issue operative portion of the order by wire at party’s costs. B/o. vs

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[1] 1996 (4) ALT 253 : 1996 (1) APLJ 369 [2] 2009 (3) ALT 757 : 2010 (3) ALD 57

M/s. Mbs Jewellers Private Limited, v. The Debt Recovery Tribunal

Case brief

What is this about?

What did the court decide?

M/s. Mbs Jewellers Private Limited, v. The Debt Recovery Tribunal

Case brief

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