M/S. CSANGO AND 3 ORS. v. M/S. NAVRANG LEATHERS PVT. LTD. AND ANR.

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the oral Judgment dated 17th September, 2007 passed by the Debts Recovery Appellate Tribunal at Mumbai in Miscellaneous Appeal No.234 of 2006 arising out of Judgment dated 2nd November, 2006 passed by the Debts Recovery Tribunal, II, Mumbai in Appeal No.39 of 2006. In the above mentioned matter, Debt Recovery Tribunal has passed Judgment in original Application No.1368 of 1999 in favour of Respondent No.1. Thereafter, the Respondent No.1 preferred an application for recovery certificate and the Debt Recovery Tribunal issued the recovery certificate for a sum of Rs.2,21,03,974.32 against the Petitioners. It is the case of the Petitioners that on or about 5th September, 2002 i.e. after the recovery certificate issued against them, the Petitioners approached the Respondent-bank and offered one time settlement proposal in the sum of Rs.200 lakhs (Rs.2 Crores) in full and final settlement of the dues under the recovery certificate. The said proposal for one time settlement is at Exhibit-A to the Petition. Pursuant to the said one time settlement offered by the Petitioners, the Respondent-bank by their letter dated 20th September, 2002 i.e. Exhibit-B to the Petition informed the Petitioners that if the entire payment would be made as one timie payment within 3 to 4 months, they would be ready and willing to accept the same.

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Pursuant to the said one time settlement, the Petitioner-company paid certain amount leaving balance Rs.1.26 crores to the Respondent No.1-bank. Thereafter, the Respondent-bank by their letter dated 1st December, 2005 called upon the Petitioners to make good the balance payment of Rs.1.26 crores immediately, failing which Respondent No.1 would initiate recovery proceedings in the Court of law. Despite this, the Petitioners failed and neglected to pay the remaining amount as per one time settlement to the Respondent-bank. Therefore, the Respondent-Bank approached Debts Recovery Tribunal for execution as per the recovery certificate. The said action was challenged by the Petitioners before Debt Recovery Tribunal,II by preferring Miscellaneous Appeal No.39 of 2006 under Section 13(1) of the Recovery of Debt due to Bank and Financial Institution Act, 1993. The said Appeal No.39 of 2006 decided by DRT-II by Judgment dated 2nd November, 2006 and dismissed the same.

2. Being aggrieved by the said decision, Petitioners preferred Miscellaneous Appeal No.234 of 2006 before the Debts Recovery Appellate Tribunal at Mumbai. The said Miscellaneous Appeal also came to be dismissed by oral Judgment dated 17th September, 2007.

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The Appellate Tribunal observed in the Judgment that :-

"Taking advantage of the leniency of the bank shown by extending period for payment of the balance amount of Rs.1.26 crores as per the offer of settlement by the appellants it is argued that time was extended by the bank and the balance amount of Rs.1.26 crores was paid by the appellant to the bank along with their letter dated 31st May, 2006. By the said letter the bank was asked to appropriate the said amount in their account under the OTS scheme".

3. The Appellate Tribunal observed that the Petitioners hereinabove were intentionally prolonging the payment under OTS scheme though the time was extended by the bank. Considering these facts the Appellate Tribunal dismissed the Appeal preferred by the Petitioners being Miscellaneous Appeal No.234 of 2006.

4. The Petitioners contended that the Appellate Tribunal failed to consider to extend the time for payment as per OTS scheme. On the other hand, Advocate appearing on behalf of Respondent-bank pointed out that as per Revised Guidelines for Compromise Settlement of Chronic Non-Performing Assets (NPAs) of Public Sector Bank, it is not possible to settle the same if the decree is already passed. He relied on following guidelines for compromise settlement of chronic NPAs up to Rs.10 crore :-

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(A) Guidelines for compromise settlement of chronic NPAs up to Rs.10 crore.

"(i) Coverage

a) The revised guidelines will cover all NPAs in all sectors irrespective of the nature of business, which have become doubtful or loss as on 31st March, 2000 with outstanding balance of Rs.10 crore and below on the cut off date.

b) The guidelines will also cover NPAs classified as sub-standard as on 31st March, 2000, which have subsequently become doubtful or loss.

c) These guidelines will cover cases on which the banks have initiated action under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and also cases pending before Courts / DRTs / BIFR, subject to consent decree being obtained from the Courts / DRTs / BIFR.

d) Cases of wilful default, fraud and malfeasance will not be covered.

e) The last date for receipt of applications from borrowers would be as at the close of business on 30th April, 2003. The processing under the revised guidelines should be completed by 31st October, 2003.

5. Advocate appearing for the Respondent-bank relied on judgment in the matter of Chairman and M.D., NTPC Ltd. V/s. Reshmi Constructions, Builders & Contractors reported in 2004 (2) Supreme Court Cases (p-663). In that case before the Apex Court meaning of the words "without prejudice" come up for consideration.

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Para 35 of the said judgment reads as under :-

"35. Meaning of the words "without prejudice"

came up for consideration before this Court in Supdt. (Tech.I), Central Excise V/s. Pratap Rai wherein it has been held: (SCC p.117, paras 6-7)

"The Appellate Collector has clearly used the words 'without prejudice' which also indicate that the order of the Collector was not final and irrevocable. The term 'without prejudice' has been defined in Black's Law Dictionary as follows:

'Where an offer or admission is made 'without prejudice' or a motion is denied or a bill in euqity dismissed "without prejudice", it is meant as a declaration that no rights or privileges of the party concerned are to be considered as thereby waived or lost, except insofar as may be expressly conceded or decided. See, also, Dismissal without prejudice.' Similarly, in Wharton's Law Lexicon the author while interpreting the term 'without prejudice' observed as follows:

'The words import an undertaking that if the negotiation fails, nothing that has passed shall be taken advantage of thereafter; so, if a defendant offers, "without prejudice", to pay half the claim, the plaintiff must not only rely on the offer as an admission on his having a right to some payment.

The rule is that nothing written or said

"without prejudice" can be considered at the trial without the consent of both parties - not even by a judge in determining whether or not there is good cause for depriving a successful litigant of costs. The word is also frequently used without the foregoing implications in statues and inter parties to exclude or save transactions, acts and rights from the consequences of a stated proposition and so as to mean "not affecting", "saving" or

"excepting".'

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In short, therefore, the implication of the term 'without prejudice' means (1) that the cause or the matter has not been decided on merits, (2) that fresh proceedings according to law were not barred."

6. The Advocate for Respondent also relied in the matter of X-Calibre Knives (P) Ltd. and Anr. V/s. State Bank of India reported in 2005 (10) Supreme Court Cases (p-265) to show that as per guidelines issued by Reserve Bank of India, Respondent-bank again settle the matter under the scheme of one time settlement if the decree is already passed by the Court. He relied on paras 3, 4, 5 and 6 of this judgment which reads as under.

"3. We are unable to accept the contention of the appellants that the guidelines of Reserve Bank of India come into play and that the Bank was unjustified in not settling the dues in accordance with the revised guidelines. The guidelines of 29-1-2003 lay down:" .......

4. It is not in dispute that the Debts Recover Tribunal has already passed an order on 31-1-2002 determining the sum payable by the appellant and, thereafter, issued a recovery certificate also by the time the matter was taken up for consideration in terms of the revised guidelines issued by Reserve Bank of India. However, our attention has been drawn to a letter sent by the Bank on 25-2-2003 in which it was stated that the dues were eligible for settlement under the guidelines of Reserve Bank of India on the terms specified in the letter. In the letter it is stated that the minimum amount required to be paid by the appellant is

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Rs.42,97,419.99 (being the outstanding balance as on 31-3-2000). By this letter the respondent bank proceeded on the basis that the guidelines of Reserve Bank of India could be applied to the appellant's case. It is apparent that the said letter was issued without being aware of the stage of the proceedings before the Debts Recovery Tribunal. Para 2 of the said letter reads as follows:

"Since your case is pending before Court/DRT/BIFR, any settlement will be subject to consent decree / necessary orders from the Court / DRT / BIFR and this letter is without prejudice to the rights and contentions of the Bank in the said proceedings.

5. Therefore, it is obvious that the letter was issued without being aware of the factual position in regard to the decision of the Debts Recovery Tribunal and the issuance of recovery certificate.

6. The stand taken by the respondent Bank is reinforced by the clarification issued by Reserve Bank of India in its communication dated 7-10-2003 that the guidelines were not applicable to cases where decrees / necessary orders have already been passed by the Tribunal."

7. For the same proposition, he relied on the decision in the matter of Sathe Biscuits and Chocolates Company Ltd. and Anr. V/s. Bank of Maharashtra & Ors. reported in 2004 Company Cases, Volume 122 (p-251) Court held : "Learned counsel for the respondent-bank did not dispute as a proposition of law that "pending proceedings" should be construed liberally. His endavour, however, is that once a decree is not

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challenged or has become final, the guidelines issued by the Reserve Bank of India would not apply because of the phraseology used in clause C. The acceptance of the argument of learned counsel for the petitioners would make second part of clause C redundant and nugatory. The reference to cases being "pending" and "subject to consent decree being obtained from the Courts/DRTs/BIFR"

makes it abundantly clear that proceedings must be pending before judicial or quasi-judicial authority and must not have finally culminated and decree/order. Since, in this case, order was final and no appeal was filed, guidelines will not apply." Considering these rulings it is crystal clear that once decree is passed by the competent Court, the banks have no right to settle the dispute as per the guidelines for compromise settlement of chronic Non-performing Assets NPAs issued by Reserve Bank of India.

8. In the present case, offer of the Petitioners for one time settlement by their letter dated 5th September, 2002 was accepted without prejudice by the Respondent by their letter dated 28th September, 2002 and the Petitioners by their letter dated 7th October, 2002 agreed to make the payment offered by them as one time settlement. The Petitioners did not keep up their

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promises and though they were granted further extension, they did not make payment within extended time and the payment which was to be completed within 3 or 4 months from 5th September, 2002 was not completed upto realization of cheque dated 8th June, 2006 for Rs.26 lakhs. The offer for one time settlement was accepted by the Bank on 5th September, 2002 even after the recovery certificate was issued by the Debt Recovery Tribunal, but the Petitioner did not act as per one time settlement. On the contrary the Petitioner misused the leniency granted by the Respondents. Under such circumstances, the Petitioner have no legal right to invoke the writ jurisdiction of this Court. We see no substance in the Writ Petition and the same is dismissed with no order as to costs.

9. Advocate appearing on behalf of the Petitioner applied for stay of the present order. Considering the facts in the present case, same is rejected. (J.N. Patel, J)

(K.K. Tated, J)