STATE BANK OF INDIA Vs. BUSINESS FORMS LIMITED

JUDGEMENT

(1.) WHILE delivering the judgment in TA 86 of 2002, this Tribunal has become keenly interested in dealing with and determining an issue, necessarily arising hereinbelow- whether the impleadment of any Bank or Banks or any financial institution or financial institutions in a legal action has been perfect and lawful by another Bank which has no concrete or direct proof, at the relevant point of time of impleading either of them or each of them, as to the facts to establish that the impleading Bank stands, so far as the ranking of charge is concerned, as the first charge holder of the assets (current or fixed) of its borrowers or on a part passu treatment likely to be given effect to along with its other co-creditors which may bo no doubt the other impleaded Bank/Banks or financial institution or financial institutions.

(2.) For the reason of giving a satisfactory reply to such query which has been framed on the basis of the application filed by the applicant Bank, the written statements jointly filed by the borrowers (being the constituents of such Bank), the written statement filed on behalf of State Bank of India Home Finance Limited (hereinafter referred to as the defendant No. 8), the written statement filed on behalf of the Industrial Reconstruction Bank of India (hereinafter called the defendant No. 6), the evidence-on-affidavit filed by the applicant Bank, the cross-examination of the Bank's witness and objection filed by the borrower defendants which have constituted the materials on record, it is being highly necessary to make mention summarily of the background of the commercial relationship between the applicant Bank and the constituent borrowers. In the general meeting of the shareholders of the defendant company, which is a "public company" within the meaning of Section 3, Clause (iv) of the Companies Act, 1956 (Act No. 1 of 1956), it was resolved, in amendment and supersession of the earlier Resolution passed and adopted, under Clause (d) of Sub- section (1) of Section 293 of the said Act, in another meeting which was factually held on December 30,1985, in relation to the exercise of borrowing power by the Board of Directors of the said Company (herein for short called "the Board"), after consenting to and giving the power to the said Board "for borrowing moneys from time-to-time not exceeding in aggregate Rs. 3 (three) crores outstanding at any one time notwithstanding that the moneys to be borrowed, together with the moneys already borrowed by the Company (apart from temporary loans obtained from its Bankers in the ordinary course of business) may exceed the aggregate of the paid up capital of the Company and its free reserves, that is to say, reserves not set apart for any specific purpose". After deriving substantively the strength from the adopted Resolution, the defendant Nos. 1 and 2 made one application to the applicant Bank's Shyam Bazaar Branch for grant of the cash credit account to the said Company, that application was able to receive response from the said Bank through its letter of sanction bearing No. (CAD) (Genl.) 1013 dated 15.10.1990 being addressed to the said Company. In that letter the Bank's intention was expressed in clear words that it was willing to grant or continue the following credit facilities to such company payable on demand but subject to a periodical review at the Bank's discretion. Again, the applicant Bank expressed its intention through the above letter of itself to grant the credit facility like cash credit to the extent of a sum of Rs. 83 lakhs, working capital to the extent of Rs. 18 lakhs and D.D. purchase (cheques) to the extent of Rs. 5 lakhs-all to be covered within the overall cash credit limit of Rs. 83 lakhs. All these facilities were designated as the 'fund based facility' by the applicant Bank in its letter. The non-fund based facility was also specifically meant to consist of the letters of credit (including foreign and inland credits) to the extent of Rs. 15 lakhs and Bank guarantee to the extent of Rs. 22 lakhs. In that letter it was clearly postulated that the working capital term loan of Rs. 18 lakhs would be made repayable in twelve equal monthly instalments, each of which would be for a sum of Rs. 1.50 lakhs by the said Company. Such repayment would commence from October 1990. In this regard the rate of interest to constitute the amalgam of itself with the principal amount would be 17.5% per annum with quarterly rests.

(3.) BY its letter dated November 20, 1990, the defendant company informed the applicant Bank of that Shri Arun Sud being the defendant No. 2 had already been empo wered and authorized to act for and on behalf of the said company; to that effect the extract of the Resolution passed in the meeting of the Board of Directors held on December 16,1989 at 6A. Middleton Street, Kolkata-700071 after being duly certified by the Chairman of itself was forwarded to the Shyam Bazaar Branch of the said Bank for its information and necessary action.