CENTRAL BANK OF INDIA Vs. KIRTI SANJANWALA

JUDGEMENT

(1.) THIS appeal is filed by the appellants/ original applicants Central Bank of India being aggrieved by the judgment and order dated 31.7.2003 passed by the learned Presiding Officer of the Debts Recovery Tribunal -I, Mumbai in Original Application No. 2766 of 1999. By the impugned judgment and order, the learned Presiding Officer allowed the original application in favour of the Bank against the defendant Nos. 1 to 3 with costs and ordered them to jointly and severally pay to the Bank a sum of Rs. 1,67,27,825.65 with future interest at the rate of 30.25% per annum with quarterly rests from the date of the application till realization of the amount. He also gave certain consequential declarations. The learned Presiding Officer, however, dismissed the original application as against the defendant Nos. 4,6,7 and 8. It is this portion of the order, which is hurting the applicant Bank and hence, this appeal to that limited extent.

(2.) Few facts, which are required to be stated are as follows:

(3.) NOBODY appeared in the DRT -II, Mumbai to contest the original application except the defendant Nos. 4 Navneet Electronics Pvt. Ltd. and defendant No. 8 Gujarat Industrial Investment Corpn. Ltd. The defendant No. 4 filed its written statement and stated that at no point of time, the defendant No. 4 had agreed to create mortgage on any of its properties nor it had guaranteed the repayment of the amounts due against the defendant Nos. 1 and 2. It was stated that the resolution dated 20.5.1991 produced by the applicant Bank was never adopted by the Board of Directors of the defendant No. 4 and no such resolution was ever passed by the defendant No. 4. It was alleged that the said resolution was fabricated. It was also averred that the manner in which the applicant Bank had relied on the said resolution of creating charge on the assets of the defendant No. 4 company for repayment of the personal debts of the defendant Nos. 1 and 2 clearly showed that the applicant Bank had acted against elementary principles of Banking. It was contended that as per common practice, the personal guarantees of the directors are ordinarily secured for the repayment of the debts owed by the company, but the assets of the company are never secured for repayment of personal debts of the Directors. It was pointed out that the Director of the company is both; trustee and an agent of the company and cannot create any security on any of the properties of the company for repayment of his personal debts. It was contended that the applicant Bank had been grossly negligent and/or naive in dealing with the defendant Nos. 1 and 2 and/or had acted in collusion with them in order to foist their liability on the defendant No. 4, and that the applicant Bank ought to have taken reasonable care before acting on the alleged resolution dated 20.5.1991, which was ex facie invalid.