Debt collection: HC proposes to open a vigilance investigation against a bank manager

Shocked by a bank accepting a sum of just Rs 14 lakh as debt collection against a court ordered Rs 1.85 crore, the Madras High Court took the case on its own and ordered the bank to disclose the identity of his officer who had ‘settled’ the matter for the meager sum towards the return of the loaned money.

The court wanted to open a vigilance investigation against the head of the bank in the running.

While the sum borrowed was Rs 62 lakh in 1992, the debt recovery court ordered the default to return Rs 1.85 crore with interest to the bank in 2000, although the bank settled the case for Rs 14 lakh in 2010 in a single payment.

And shocked by the transaction, the First Bench of the High Court of Madras on February 16 ordered Industrheial Investment Bank India Limited to disclose the identity of its leader who had “settled” the issue for the meager sum for the return of the money lent.

“This court has been compelled to take notice suo motu because public funds are involved which cannot be allowed to be misused in the above manner. The action of the bank in reaching a single settlement for Rs 14 lakh, against the principal amount due of Rs 62 lakh and decretal amount of Rs 1.85 crore, this too, when two properties of the appellant (defaulting borrower) were available, reeks of bad faith intentions and it only shows that there is more to the whole transaction than meets the eye,” said the bench of Chief Justice MN Bhandari and Justice D Bharatha Chakravarthy.

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

The company originally petitioned the Madras High Court to quash an order dated March 7, 2011 from Kolkata Bank and order the relevant authorities, including the Union Finance Ministry, to accept the single settlement for the sum of Rs 14 lakhs and release all bank documents to the applicant.

However, by the December 2021 order, Judge SM Subramaniam had dismissed the plea. Hence this appeal.

The first bench finds that the court takes note of the shocking facts relating to the transaction with the appellant company.

The bench noted that the appellant company had borrowed Rs 62 lakh in 1992 from the IIBL. She had defaulted. Consequently, the bank applied to the debt recovery court, which in 2000 ordered the company to return the principal of Rs 62 lakh with interest, which had amounted to Rs 1.85 crore.

Execution of the decree was not sought and no effort was made by the bank to recover the amount, despite the availability of two valuable assets belonging to the appellant company. Instead, the bank had reached a single settlement in 2010 for an amount of Rs 14 lakh against the principal amount of Rs 62 lakh and the decree amount of Rs 1.85 crore.

The settlement was not approved by the Department of Finance and therefore the appellant preferred a motion in writ, which was dismissed, finding that the settlement was contrary to the public interest and public order , noted the bench.

Therefore, “we find no prima facie error in the judgment, but rather, as noted above, it shows the shocking business of the bank,” the bench said.

“To find out who was the officer of the bank, who accepted the single settlement in 2010, let the names of Shivakumar and Suresh be listed as lawyers for the bank in the list of causes, because this court takes notice suo motu of the whole question relating to the Single Settlement and intends to know why instructions should not be given to open a due diligence investigation or register a file against the agent who participated in the conclusion of a Single Settlement, as well as against the plaintiff/appellant company, which is the beneficiary of the transaction,” the bench said and released the case for a rehearing on February 23.

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