‘Banks can’t Escape Scrutiny if Public Interest’s Violated’
DRAT says banks are answerable if they enter into one-time settlement with defaulters
New Delhi: At a time when ‘generosity’ of banks towards Vijay Mallya and other ‘defaulters’ is under scanner, the Debt Recovery Appellate Tribunal (DRAT) on Monday ruled that banks are “not immune from scrutiny”, especially if they act against public interest by offering rebates to a ‘defaulter’ by entering into a one-time settlement (OTS).
In a judgement which will have wide ramifications, Justice (retd) Ranjit Singh, the chairperson of the Appellate body, has held that the principle of public accounting applies to banks, too. The DRAT has ruled that if banks want an approval of tribunals for the agreements they (banks) enter into with those failing to pay back loans, they will have to satisfy the tribunals that such compromises are lawful. The judgement was passed on Monday by Justice Ranjit Singh on an appeal filed by SBI against an order passed by a tribunal which had asked the CBI to investigate a case in which SBI and Oriental Bank of Commerce had offered a whopping rebate of .₹ 40 crore to a Haryana-based entrepreneur.
A consortium of three banks — SBI, Oriental Bank of Commerce and Punjab National Bank (PNB) — had offered a loan of .₹ 168 crore to a Haryana-based Veetee Fine Foods. After the company failed to pay the loan, SBI and OBC offered a rebate of .₹ 40 crore, accepting an OTS offered by the company.
Refusing to accept the same, PNB chose to sell off properties of Verma to recover the total outstanding amount. Crying foul, the company moved the DRAT demanding a stay on sale of the properties. The same was rejected by the tribunal.
Much to the surprise of the tribunal, PNB’s partners supported the company’s case and opposed the sale of its properties as desired by PNB. Raising eyebrows over the stand taken by the two banks, the tribunal had asked CBI to probe the matter and had passed strictures against officials of the two banks. An appeal against the said order was filed by SBI before the DRAT. During the pendency of the appeal, PNB also accepted an OTS with the company. Since the challenge to the tribunal’s order became infructuous, the only contention left to be decided was whether the tribunals have the power to “interfere” in OTS or “compromise” made by banks.