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Coimbatore , Dec. 8

THE Debts Recovery Tribunal (DRT), Coimbatore, has directed the Central Bank of India to accept the offer of Rs 2.61 crore from Radhakrishna Mills Ltd as a one-time settlement (as per the guidelines of the RBI that enjoined upon all public sector banks to uniformly implement them) so that `maximum realisation of dues is achieved from the stocks of NPAs within the stipulated time'.

In its order passed on November 25, the Presiding Officer of the Tribunal, Mr Ashok C. Parkash, has turned down the demand of the bank for Rs 6.77 crore in final settlement on the ground that the bank could demand only the outstanding due on the date on which the company's account became a NPA (non-performing asset). The Tribunal has directed the bank to accept the same and report settlement in three weeks (by December 19, 2003).

The Tribunal also conceded the prayer of the Mill that it should not be classified as a `wilful defaulter' and denied the benefit of a one-time settlement of the NPA with the bank as the mill had `neither siphoned off funds for unspecified uses nor had funds available with it in the form of assets'.

The Tribunal further asserted that it had the exclusive jurisdiction under Section 17 and 18 of the RDB Act to adjudicate the issue under reference.

This composite textile unit with 50,000 spindles and 300 looms, located at Peelamedu in Coimbatore turned sick since 1982. The manufacturing activities came to a grinding halt from the latter part of 1985 leading to the passage of the Order by the Madras High Court in July 1987 for winding up of the company.

According to the petitioners, at the time of passing the Orders for winding up of the company, the amount it owed the bank was Rs 2.61 crore, which it offered to pay as a one time settlement as per the RBI's guidelines issued in January 2003. The petitioner contended that the Chairman of the Bank - as a competent authority - to whom this offer was made neither accepted nor rejected this proposal (as he was expected to do under the RBI guidelines) while the General Manager of the Bank interfered voluntarily, asking for a substantial improvement in the offer.

The petitioner contended that the Bank, instead of settling the issue on the basis of the offer made attempted to avoid the applicability of the RBI guidelines by characterising the company as a `wilful defaulter' without any basis and without affording any opportunity of being heard in this connection.

The defendants reiterated that based on the information furnished by the bank and the RBI, the Finance Minister had made a commitment to Parliament that the total outstanding of Radhakrishna Mills to the bank was Rs 5.08 crore as on March 1999.

The bank submitted that the concept of prudential norms for classification of NPA accounts into substandard, doubtful and loss assets had come into force only from 1993. Whereas the Bank had filed a suit for recovery in March 1988, long before the guidelines came into force. At the time of filing the suit, the ledger balance was Rs 5.18 crore, with an up-to-date interest for an amount of Rs 6.77 crore with a further interest at 18 per cent with quarterly rests.

It was contended on behalf of the Bank that the company's self-serving offer of Rs.2.61 crore was made in March 2003 unilaterally fixing the cut off time as of the year 1984, though the company had operated its accounts on numerous occasions subsequently.

On hearing both sides and after referring to the Apex Courts judgments cited by them, the Tribunal conceded the prayer of the petitioners that they `should not be classified as wilful defaulters' and that the bank should settle the issue by accepting the offer of Rs 2.61 crore, as it had failed to negotiate the terms of settlement as required by the RBI guidelines through specific alternative proposals and instead attempted to prolong the dispute.

The verdict passed after prolonged dispute for about two decades has come as a shock to the banking fraternity.

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