Debt recovery: HC proposes to initiate vigilance enquiry against bank official

Shocked over a bank agreeing for a sum of just Rs 14 lakh as debt recovery as against a tribunal ordered Rs 1.85 crore, the Madras High Court has on its own taken up the matter and directed the bank to divulge the identity of its officer who had 'settled' the issue for the meagre sum towards the return of the loaned money.

While the borrowed sum was Rs 62 lakh in 1992, the Debt Recovery Tribunal ordered the default to return Rs 1.85 crore with interest to the bank in 2000 although the bank settled the matter for Rs 14 lakh in 2010 as a one-time payment.

And shocked over the transaction, the first bench of the Madras High Court on February 16 directed Industrial Investment Bank India Limited to divulge the identity of its officer who had 'settled' the issue for the meagre sum towards the return of the loaned money. It wanted to initiate a vigilance enquiry against the official.

"This court was compelled to take suo moto cognizance because public money is involved, which cannot be allowed to be misused in the manner aforesaid. The action of the bank in entering into a one-time settlement for Rs 14 lakh, as against the principal amount due of Rs 62 lakh and decretal amount of Rs 1.85 crore, that too, when two properties of the appellant (defaulted borrower) were available, reeks of mala fide intentions and it only shows that there is more to an entire transaction than meets the eye," the bench of Chief Justice M N Bhandari and Justice D Bharatha Chakravarthy said.

The bench was passing interim orders on an appeal from Pandian Extractions (P) Limited, by its Managing Director P Ramani Mohan of Virudhunagar district, challenging an order dated December 20, 2021, of a single judge.

Originally, the company had moved the Madras High Court to quash an order dated March 7, 2011, of the bank in Kolkata and direct the authorities concerned, including the Union Finance Ministry, to accept the one-time settlement for a sum of Rs 14 lakhs and release all the documents from the bank to the petitioner.

However, by the December 2021 order, Justice S M Subramaniam had rejected the plea. Hence, the present appeal.

The first bench observed that the court is taking note of the shocking affairs pertaining to the transaction with the appellant company.

The bench noted that the appellant company had borrowed Rs 62 lakh in 1992 from the IIBL. It had committed default in repayment. Therefore, the bank moved the Debts Recovery Tribunal, which in 2000 had directed the company to return the principal money of Rs 62 lakh with interest, which had accrued to Rs 1.85 crore.

The execution of the decree was not sought for and no effort was made by the bank to recover the amount, despite the availability of two valuable properties belonging to the appellant company. Rather, the bank had entered into a one-time settlement in 2010 for an amount of Rs 14 lakh as against the principal amount of Rs 62 lakhs and the decretal amount of Rs 1.85 crore. The settlement was not approved by the Ministry of Finance and, therefore, the appellant preferred a writ petition, which has been dismissed finding the settlement to be against the public interest and public policy, the bench noted.

Hence, "we do not find any prima facie error in the judgment, rather, as stated above, it shows the shocking affairs of the bank," the bench said.

"To find out who was the officer of the bank, who accepted the one-time settlement in 2010, let the names of Shivakumar and Suresh be shown as counsel for the bank in the cause-list, as this court is taking suo moto cognizance of the entire issue pertaining to the one-time settlement and intends to know why a direction should not be given to lodge a vigilance enquiry or register a case against the officer who was involved in entering into a one-time settlement, as also against the petitioner/appellant company, who is the beneficiary of the transaction," the bench said and posted the matter for further hearing on February 23.

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