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    Debt Recovery Tribunal Slaps Rs 5 Lakh Penalty on Bank of India for Compromising Loan Recovery

    File photo of a Bank of India ATM (Image for representation)

    File photo of a Bank of India ATM (Image for representation)

    The tribunal also observed that the lender entered into a compromise to recover Rs 31.2 lakh against the loan amount. The Presiding Officer of the DRT1, Ahmedabad, Vinay Goel came down hard on the bank for sacrificing Rs 2.25 crore of taxpayers' money while making compromise with the borrowers.

    A Debt Recovery Tribunal here imposed a fine of Rs 5 lakh on Bank of India for allowing withdrawal of a plea filed to recover over Rs 2.25 crore from its borrowers. The tribunal also observed that the lender entered into a compromise to recover Rs 31.2 lakh against the loan amount. The Presiding Officer of the DRT-1, Ahmedabad, Vinay Goel came down hard on the bank for sacrificing Rs 2.25 crore of taxpayers' money while making compromise with the borrowers.

    In an order dated October 28 that was made available online Saturday, the tribunal also noted that the letter of acknowledgement of debt submitted to it by the bank was forged, which the bank said it filled up in a bona fide manner as the original letter was not traceable. The tribunal also questioned the bank as to why it accepted the property as collateral security which has value of Rs 18 lakh to grant loan of Rs 1.25 crore and not took action against its officials who recommended the property, and the valuer who recommended such property as collateral security.

    To justify its withdrawal plea, the bank had told the tribunal that the three auctions conducted by it to sell the mortgaged land with a valuation of Rs 18 lakh had failed. The tribunal raised serious questions over the process to sanction loan to the respondent borrower Krishna Tea Traders and three others, and said that the approach of the bank was against the spirit of the Reserve Bank of India guidelines.

    It then directed its Registrar to send a copy of the order to the Joint Secretary, Ministry of Finance, Deputy Governor of the RBI, Chairman of the Indian Bankers Association and Central Vigilance Commissioner for appropriate action. Litigation for recovery and commission of default in the loan accounts and general conditions of NPA accounts in the country in financial institutions can be curtailed if bankers would be made more responsible, vigilant, accountable and answerable in their initial steps at the time of processing of loan, noted the tribunal.

    Had the banking officials performed their duties while being diligently attentive and painstaking and in the interest of their banking institution, most of the accounts would not be defaulted, it observed. The tribunal further said that the officials of the bank indulged in fabricating the document with a view to commit forgery, and the conduct of the bank officials warrants strict action.

    The RBI has made provisions for audit, internal audit, external audit, legal vetting of documents, pre and post sanction audit, and vetting by experts. It is strange that no person or expert ever pointed out signature on blank document as objectionable document/act nor pointed out decrease of value of property at the time of sale, noted the court.

    The plea was filed under section 19 of the Recovery of Debts and Bankruptcy Act, 1993, and the bank is the master of its own case. The bank has filed withdrawal and the same is allowed subject to cost, but it would not preclude the bank from taking internal actions or enquiry to recover its loss if any from the erring officials, it said.

    The Bank of India had filed an application to withdraw its original application under section 19 of the Recovery of Debts Due to Banks and Financial Institution Act, 1993, after receiving a certain amount under the compromise. The bank's original plea was filed on November 26, 2014 to recover Rs 1.4 crore from one Krishna Traders and others.

    Letter of acknowledgement of debt submitted by the bank to the tribunal was found to be forged as the date of acknowledgment was September 23, 2013 while the print line said it was published in February 2014. On August 26, 2019, the bank moved the withdrawal application.

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