NEURAL MAGIC SYSTEM LTD. AND ORS. Vs. CANARA BANK AND ORS.
LAWS(DR)-2014-8-3
DEBTS RECOVERY APPELLATE TRIBUNAL
Decided on August 11,2014

Appellant
VERSUS
Respondents

JUDGEMENT

Ranjit Singh, J. (Chairperson) - (1.) THE appellant borrowers have impugned the order passed by the Tribunal below allowing the Original Application filed by the respondent -Bank and ordering recovery of Rs. 36,96,813/ - together with pendente lite and future interest @ 12% p.a. with quarterly rests from the date of filing the Suit till the actual realization of the entire amount. This appeal is filed by three appellants. One of the defendants, namely Mr. Atanu Kumar Ghosh, a proforma respondent, has not filed any appeal against the impugned order. Appellant Nos. 2 and 3 are the Directors of the appellant No. 1 Company. The appellant company had an account with the respondent -Bank. The company was engaged in the business of developing and exporting of software being a 100% Export Orient Unit registered under the Software Technology Parks of India (STPI), Ministry of Information Technology, Government of India. The company claims to be doing no business at present but states to have availed credit facility from the respondent -Bank for the export orders received in the years 2001 -2002 in respect of East West Pharmaceutical, USA. As per the appellants, respondent -Bank had sanctioned Clean Packing Credit (CPC Limit) of Rs. 30 lac period of CPC not to exceed 90 days, margin 25% with interest as per RBI guidelines which was then 8%; Foreign Discounting Bill (FDB/FBE) rate of interest 8%, issuance for FBE equivalent to 90 days. The terms and conditions are contained in the sanctioned Letter No. 279 Cr. BBS 2249 2002 dated 19th March, 2002.
(2.) AS per the appellant, CPC Limit and FDB/FBE Limit were duly insured and secured by Export Credit Guarantee Corporation Ltd. (for short, ECGC). A comprehensive ECGC cover was obtained to secure the interest of the Bank, which was a term of the sanction letter. It is explained that the comprehensive policy cover is nothing but insurance to cover commercial risk of the exporters. This comprehensive policy cover was both for pre -shipment and post -shipment (specific buyer wise cover) granted to the exporters. As per the appellants, in the instant case, pre and post shipment financial assistance, i.e., CPC Limit and FDB/FBE, the buyer was fully covered under the comprehensive insurance cover from ECGC for a sum of Rs. 50 lacs and post -shipment guarantee cover along with individual buyer wise policy limit for ECGC for shipment advance of Rs. 15 lac covering the buyer East West Pharmaceutical, 4421, NE 25th Avenue, Ft. Lauderbale, Florida, USA. As per the appellant, the original policy in this regard was in the custody of the respondent -Bank. The case set up by the appellant is that in case of a comprehensive ECGC policy, as regards CPC limits/pre -shipment limit is concerned, it can be said that the same needs to be recovered from the borrower. However, as regards post -shipment limit -FDB - buyer wise limit, the same is nothing but like any insurance cover and in case of loss of money, it is the Bank which could have lodged its claim with ECGC to recover the amount of the said loan.
(3.) THE appellant -Company through its authorized Director had approached the respondent -Bank for assistance in July 2000. At the request of the appellants, the Bank sanctioned CPC Limit to the tune of Rs. 40 lacs and FDB/FBE Limit to the tune of Rs. 45 lacs. The defendant company through its Authorized Signatory/Director executed and delivered various documents on 26th July, 2000 and 31st August, 2000 and agreed to pay interest at such rate or rates as may be revised by Reserve Bank of India from time -to -time subject to minimum of 10% p.a. with quarterly rests. The appellant Nos. 2 and 3 and proforma respondent No. 2 who were the directors of the appellant company also became co -applicants/guarantors and executed and delivered the following documents: "(i) Guarantee covering letter along with guarantee agreement and undertaking all dated 26th July, 2000 for Rs. 85 lacs signed by Shaswat Sud for Kranti Kumar Sud. (ii) Guarantee covering letter along with guarantee agreement and undertaking all dated 26th July, 2000 for Rs. 85 lacs signed by Atanu Kumar Ghose. (iii) Guarantee covering letter along with Guarantee agreement and undertaking all dated 31st August, 2000 for Rs. 85 lacs signed by Kranti Kumar Sud." Appellant No. 2 confirmed execution of his personal guarantee dated 31st August, 2000 through his letter dated 23rd July, 2002.;


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