2000 (3) TMI 1013 - HC - Companies Law

Summary

Issues:
1. Failure to regularize overdraft by providing securities.
2. Dismissal of writ petition due to availability of alternate remedy.
3. Evasion of deposit requirement for filing an appeal under the Act.

Issue 1: Failure to regularize overdraft by providing securities
The judgment highlights a case where a debtor, Kavita Pigments & Chemical (P.) Ltd., overshot its cash credit limit with Allahabad Bank, Bokaro Steel City Branch. Despite running an overdraft and being requested by the bank to fortify the position by providing securities, the debtor failed to comply. The bank eventually issued a notice dated 27-2-1997, signaling the end of their patience. Subsequently, the bank filed an application under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, before the Tribunal. The Tribunal dismissed the debtor's request to cross-examine the bank's witnesses, leading to a writ petition challenging the lack of a final order determining the debt.

Issue 2: Dismissal of writ petition due to availability of alternate remedy
The writ petition was initially dismissed by a learned Judge on the grounds that the debtor could utilize the alternate remedy available under the Act. The debtor then filed a letters patent appeal against this dismissal. Lengthy arguments were made emphasizing the illegality of the learned Judge's order, contending that the alternate remedy could only be utilized after total adjudication on the determination of debts. The bank indicated a debt of Rs. 18,38,475.24 as of 28-12-1997, highlighting the debtor's failure to maintain creditworthiness and clear the overdraft.

Issue 3: Evasion of deposit requirement for filing an appeal under the Act
The judgment also addresses the debtor's reluctance to file an appeal under the Act, citing the requirement to deposit 75% of the amount due. The debtor claimed that the amount was yet to be determined by a final order, making the appeal non-maintainable. However, the court pointed out that the legislature provided this deposit requirement to ensure the deposit of three-quarters of the undisputed amount. The debtor's evasion of this deposit obligation was seen as an attempt to avoid their financial responsibility.

In conclusion, the Court dismissed the appeal, emphasizing that interference was not warranted in this case. The judgment underscores the importance of upholding banking ethics, maintaining creditworthiness, and fulfilling financial obligations to prevent bad debts that could disrupt the economy and burden innocent taxpayers.