CANARA BANK vs M/S RAJESH EXPORTS LTD on 20 February 2024

: - O R D E R - :

In this petition filed by the Defendants as IA under Section 19(25) of the RDB Act, 1993, permission is sought to cross examine the AW1 Shri. ArunPrasath examined on behalf of the Applicant Bank. The grounds in support of the petition are made out through an affidavit sworn to by the Defendant No.2 who is the Chairman of Defendant No.1 Company and also on behalf of the other Defendant.

1. It is submitted that these Defendants have filed the written statement along with the counter claim of Rs.20456,36,24,459/-. They claim that they have not availed any loan from the Bank. As per the sanction advice of the Bank dated 17.06.2019, the services availed by the Defendants was based upon 100% and 105% upfront cash margin payment and the entire foreign exposure was fully hedged as a condition precedent. The claim amount made by the bank in the OA for a sum of Rs.451,68,45,515.39p is based on the illegal accounting as alleged by the Defendants. It is also submitted that these accounting mistakes were pointed out to the Bank, but it has not made correct entries and inflated the amount misleading this Tribunal.

2. The Defendants also submit that the annexures at Pages 210 to 213 relied by AW1 along with the accounts statement are all forged and fabricated. The entry of Rs.383,16,82,597.36p dated 01.04.2020 is incorrect and not based on any proof to prove the opening balance. The entries amounting to Rs.380,58,97,014.00 is virtually incorrect and the balance remains nil.

3. The Defendants further submit that the calculation of interest at Page No.212 of the Annexures at the rate of 16.45% is incorrect. There is no basis for levying interest in view of sanction memorandum dated 17.06.2019. The said memorandum provided for 100% upfront cash facility for all the FLCs. The entire foreign exposure was fully hedged and adhered by the Defendants. There were no currency fluctuations since 100% upfront cash margin is maintained. Therefore it is pleaded that the entries are incorrect and fabricated and thus the counter claim is filed wherein the damages are also claimed by the Defendants for the wrongful actions of the bank under SARFAESI Act and other Acts. It is submitted that the account in dispute is to be resolved and this can be only revealed by conducting the cross examination of the witness.

4. Version of the Bank:- In the counter filed by the Bank, it is submitted that the present petition is vexatious in nature to derail the proceedings before this Tribunal. The grounds urged in support of the prayer to seek cross examination are all only to delay the proceedings. The Defendants have to independently demonstrate and present the contra evidence. The defendants cannot be permitted to pick up one particular entry and the same are to be read in conjunction with the earlier entries. If the cash margin was hedged, there was no necessity for the Defendants to have written a letter to Tamilnadu Mercantile Bank empowering them to release Rs.200 Crores in the event of the shortfall. The letters and e-mails exchanged between the parties puts up the confirmation of liability of the Defendants. The foreign exchange is subject to fluctuations and the Defendants are obliged to hedge the difference or the shortfalls as per the sanction memorandum. The claim in the OA is based on security documents and the question of cross examination would be a futile exercise costing the precious time of the Tribunal. The Defendants have not filed their counter proof affidavit and are trying to pick the holes in the documents with an oblique motive. It is denied that the security documents are forged and fabricated. It is also urged on behalf of the bank that the procedure of this Tribunal is summary in nature and cannot be equated with proceedings of Civil Court. If the claim is not established by the Bank, the Tribunal is within the powers to reject it. The Defendants may file any documents to demolish the case of the Bank. The interest is charged as per the agreement and in tune with the RBI Guidelines. The statement of accounts was also notified to the applicants.

5. The opening balance pertaining to 01.04.2020 has not been disputed in their written statement or additional written statement. The same is matching with the liability. The quarterly balance confirmation statement produced at Page No.372 of Volume – II of the counter claim itself shows the confirmation by the Defendants.

6. It is also urged that the statement of accounts can be compared and understood by the Tribunal without requiring the cross examination. The documentary evidence relied by the bank is correct and it cannot be termed as forged and fabricated, in the absence of such a contention in the written statement, the entries alleged as incorrect pertaining to dated 06.08.2020 is to be proved by the Defendants through their documents and counter proof affidavit. The Defendants did not adhere to the terms of sanction dated 17.06.2019 by not maintaining 100% cash margin on daily basis despite several requests by the bank to bridge the deficit. Therefore the bank prays for dismissal of the petition seeking cross – examination of AW1.

7. Heard the Ld. Counsel ActhinMital and Megana Nair for the Defendants and the Ld. Counsel Sh. M.L.Ganesh appearing for the bank opposing the IA.

8. In the lengthy arguments the Ld. Counsel had invited the attention of this Tribunal to the documents relied by the parties to establish their respective contentions. The Ld. Counsel for the Defendants relied on the following citations.

(a) Sonu Textiles Vs. Punjab National Bank 2008 (2) Mh.LJ P218

(b) S.P.Kanudia and Ano. Vs. Chairperson DRAT 2007 (SCC) Online All 937.

(c) Allied Chemical LaboratoriesVs. P.O., DRT 2004 (SCC) Online Ori P42

(d) KollaSambaiahVs. State Bank of India 2019 (SCC) Online AP P233

(e) Union of India Vs. Delhi High Court Bar Association 2002 (4) SCC P275

(d) AyaaubkhanNoorkhanPathhanVs. State Bank of Maharashtra &Ors.(2013) 4 SCC 465

9. On the other hand the Ld. Counsel appearing for the Bank – opponent relied on the following rulings:

(a) M/s.TajBeedi Works &Ano Vs. Indian Bank, Vellore – CMP Nos.4857 to 4859 of 2018 of Hon’ble DB of Madras High Court decided on 10.06.2019

(b) M/s. IDENB Projects Pvt. Ltd. & 5 Ors. Vs. HDFC Bank, Indira Nagar, Bangalore – WP No.23806,23810 to 23811/2014 (GM – DRT) of Hon’ble DB, Karnataka High Court.

10. It is argued by the Ld. Counsel for the defendants that the position of law laid down by the various Hon’ble High Courts makes it imminent that there cannot be any fixed parameters for considering the applications seeking cross examination on each case would have to be examined on its own merits. The ruling of Sonu Textiles (Supra) at Para-15 is much urged.

“15. Based on non-production of documents, contradictory stand of the Bank, the documents being not supportive of each other and the controversy raised in the pleadings between the parties, it was a fit case where the request should have been allowed to completely and fully determine and decide the claim of the Bank and the counter claim of the borrower. Thus, in the interest of justice and to fully and finally adjudicate the disputes between the parties, in our opinion, the application should have been allowed by the Tribunal. In the present case, we have no hesitation in coming to the conclusion that the Tribunal has erred in law in declining the request of the applicants for cross- examination of the Bank Manager.”

The ruling of Hon’ble Allahabad DRAT in SP Kanudia (Supra) is relied. At Para-9 it was held as under: “In the present case there is a specific denial that the petitioner did not sign the agreement of guarantee. The Tribunal erred in law in interpreting the words that “such need would rarely arise” to mean that such permission has to be granted only in “rare cases”. There is clear distinction between the expression “rarely arise” and “rare cases”. Whereas the word “rarely arise” mean that such requirement may not ordinarily arise or may not arise in all the cases, the words that such power has to be exercised in rare cases will mean that the Debts Recovery Tribunal would allow the cross-examination of a witness only in a rare case. The Tribunal has clearly erred in interpreting

the judgement of the Supreme Court. The Tribunal, however, has to be cautious that the request has substance in that there are sufficient pleadings, the application is bonafide and that the application is not an attempt to delay and prolong the proceedings. By confining the power to only in rare cases the Tribunal may defeat the right of a party to bring out the truth and to test the veracity of the witness.”

In the ruling of the Hon’ble DB of Orissa High Court in Allied Chemicals (Supra), it was held at Para-9 “In the impugned order as well as in the order dated 11.11.2002, learned DRT, Cuttack not only remarked about lack of bona fide intention of the petitioner, but also said that in matters relating to claim of the Bank, there is hardly any scope for oral evidence forgetting the fact that the petitioner had challenged the claim of opp. Party No.2 on the ground of limitation and had alleged that Bank has created fake and forged balance confirmation acknowledgements and revival letters to overcome the bar of limitation. He also ignored the demand for examination of those revival letters and balance confirmation acknowledgements by an expert saying that such examination is unnecessary. This approach of the DRT is clearly violative of the principles of natural justice as well as the provision of Rule 12(6) of the Rules, 1993. In such extraordinary circumstances, the power of this Court under Article 226 and 227 of the Constitution has to be exercised to set right the injustice, which has been caused to the Petitioner”

The Hon’ble DB of the AP High Court in KollaSambiahiah (Supra) held at Para – 14 as follows:- “In this milieu of serious allegations including allegations of fraud being traded by the parties, we are of the considered view that the issue, which is to be resolved by the Tribunal in the OA, is a complex issue of fact. Therefore, having regard to the nature of the lis and the allegations, we find that it is necessary to record the oral evidence and the contents of the affidavit/s of the witnesses of the bank are required to be tested by cross-examination. Though the Tribunal has a right to regulate its own procedure, the procedure, which it is required to follow, shall be in harmony with the principles of natural justice. Though the Tribunal has given certain amount of latitudein the matter of procedure, it surely cannot fly away from the procedure established under the legal principles particularly the principles of natural justice. In that view of the matter, we hold that the order of the Tribunal brooks interference.”

In Union of India (Supra), the Hon’ble Supreme Court emphasised at Para 23 as under:-

“In other words, the Tribunal has the power to require any particular fact to be proved by affidavit, or it may order the affidavit of any witness may be read at the hearing. While passing such an order, it must record sufficient reasons for the same. The proviso to Rule 12(6) would certainly apply only where the Tribunal chooses to issue a direction, on its own, for any particular fact to be proved by affidavit or the affidavit of a witness being read at the hearing. The said proviso refers to the desire of an applicant or defendant for the production of a witness for cross-examination. In the setting in which the said proviso occurs, it would appear to us that once the parties have filed affidavits in support of their respective cases, it is only thereafter that the desire for a witness to be cross-examined can legitimately arise. It is at that time, if it appears to the Tribunal, that such a witness can be produced and it is necessary to do so and there is no desire to prolong the case that it shall require the witness to be present for cross-examination and in the event of his not appearing, then the affidavit shall not be taken into evidence.”

In the matter of Ayub Khan (Supra), which was dealing with the Public interest litigation held as follows:- “An affidavit is not evidence within the meaning of Section 3 of the Indian Evidence Act, 1872 and the same can be used as "evidence" only if, for sufficient reasons, the Court passes an order under Order XIX of the Code of Civil Procedure. Thus, the filing of an affidavit of one’s own statement, in one’s own favour, cannot be regarded as sufficient evidence for any Court or Tribunal, on the basis of which it can come to a conclusion as regards a particular fact-situation. However, in a case where the deponent is available for cross-examination and opportunity is given to the other side to cross- examine him, the same can be relied upon. Such a view stands fully affirmed, particularly in view of the amended provisions of Order 18 Rules 4 and 5 CPC. In certain other circumstances, in order to avoid technalities of procedure, the legislature or a court/tribunal, can lay down a procedure to meet the requirement of compliance with the principles of natural justice.(Paras 31 & 36)”

11. The rulings relied by the bank clearly establishes that whenever the permissions are sought for cross examination, valid grounds must be made out and the contractual obligations between the bank and the customers are borne out only by documents and the parties would be at liberty to seek production of documents at the request of the borrowers and non-production may be read as adverse inference against the bank. The cross examination prayers in the backdrop of the parties having the chances to establish rights and liabilities through such documents is to be understood as only to protract the case. (Pare-11 of TajBeedi Works). In the ruling of DB of the Hon’ble High Court of Karnataka M/s.IDEB (Supra) noted that internal Page-12 – 13. “It is clear from the scheme of the above Rule and the provisions of Section 22 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, that the DRT and the Appellate Tribunal are not bound by the procedure laid down by the Code of Civil Procedure, 1908, and subject to the relevant legal provisions and the rules, the Tribunals have the powers to regulate their own procedure. Under such scheme, the normal mode of proving facts before the Tribunal is by affidavit and production of documents subject to the provisions regarding affidavit of any witness being read on such condition that the Tribunal may impose. By way of a special provision, made in the proviso to sub-rule (6) of Rule 12, it is prescribed that, where it appears to the Tribunal that the party desires production of a witness for cross- examination and such witness could be produced and it is necessary to do so, the Tribunal shall, for sufficient reasons to be recorded, order the witness to be present for cross examination. After such order being made, if the witness does not appear for cross-examination, the affidavit already placed on record shall not be taken into evidence. Thus, satisfaction of the Tribunal about necessity of examination of a witness is crucial to making an order for cross-examination of a witness and non-compliance with such order has serious consequence for the parties. It is in this context that the Rule not only requires satisfaction of the Tribunal as to the necessity to do so, but also requires recording of sufficient reasons for ordering the witness to be present for cross- examination.”

12. In the above backdrop of the law laid down, it is necessary to examine the present case based on the facts pleaded; the nature of the case and the documents relied on either side. In this petition, the point for consideration is:- “Whether the Defendants have made out sufficient reasons to seek the cross examination of AW1 in conformity with the principles of natural justice and as per Rule No.12(6) of the Debt Recovery (Procedure) Rules 1993.”

13. It is clear that the defendants to seek permission to cross-examine the witness have to make out sufficient reasons in the backdrop of particular facts pleaded by the deponent adducing the evidence.

14. The case of the applicant bank as per the application and the affidavit is based on the running accounts and the dates and events are pleaded from 02.12.1996 to 14.03.2020, which runs for nearly two and half decades.

15. It is relevant to note that the pith and substance of the entire case to claim the OA amount of Rs.451,68,45,515.39p is based on the accounts. The gist of the pleadings are: “The applicant bank vide their letters 4.8.2020 and 5.8.2020 requested the defendant company to make arrangements for the overdue bills and furnish the conversion rate. The defendant company failed to comply the request of the bank .As there is an obligation on the applicant to pay the bill amount as per FLC issued, the applicant bank liquidated the deposits given by the defendant company for issuing the FLC and paid bill amounts through operative account on 6.8.2020 as per the ready market rates of conversion of Indian Rupee to CHF. The details of the credits pertaining to the above transactions are mentioned as under; SL REMARKS DEBIT CREDIT BALANCE

Balance in OD Against Deposit as on 05.08.2020

(-) 8,86,85,018.19

Bills Due for payment on 06.08.2020 – Rs.38,15,16,78,200.00 Details Given as per Annexure A-217

Fixed Deposit (Kept as margin) Closed and Credited to Customer Account on 06.08.2020 for making payment of Bills under Letter of Credit

30,74,64,31,660.00

Balance Available in OD Against Deposit Account after Closure of fixed Deposit

30,65,77,46,641.81

Payments of Bills Under Letter of Credit made on 06.08.2020 28,91,80,24,851.00

Total 16 Nos

Bills paid resulted in deficit balance in the operating Account- 5 Nos 9,23,36,53,349.00

Overdues in Account after payment of Bills under Letter of Credit

(-) 7,49,39,31,558.19

Exchange Benefits on Cancellation of Forward Contracts credited to customer account on various Dates

3,56,71,81,280.44 (-) 3,92,67,50,277.75

Interst Debited to Account from Aug 2020 to April 2021 85,66,58,804.00

(-) 4,78,34,09,081.75

Mutual Funds Redemption Amount credited to account

37,74,57,753.84 (-) 4,40,59,51,327.91

Interest Reversal

7,13,24,341.87 (-) 4,33,46,26,986.04

Other charges- including Development charges and processing charges 7,49,39,058.18

(-) 4,40,95,66,044.22

Other credits to the account

8,57,27,500.04 (-) 4,32,38,38,544.18

Other Debits to the account 19,30,06,971.21

(-) 4,51,68,45,515.39 Page Nos. 47, 48, & 49 of the amended OA Vol. No.1

This is seen from the pleadings at Para-5.25 (C) of the claim (of the amended OA filed before the Ld. DRT, Bengaluru bearing date 13.04.2022) (Page No.47, 48 & 49 of the amended OA). “

16. By an order dated 28.02.2022, the Ld. Predecessor (DRT, Bengaluru) had noted the following:- “Both the Counsels are present. The applicant bank has filed an IA 3083/2021 a petition seeking amendment of the OA bringing facts for better appreciation of the case. By way of amendment, the Applicant sought for incorporation of details of debts and assets which is required for proper appreciation of the facts and the OA claim.

The IA copy was served on the defendants on 01.01.2022 by email which is also acknowledged by the counsel for D1. Though copy was served on 04.01.2022, the defendant has not filed their objections on 23.02.2022 and even on 28.02.2022. The amendment sought in the OA is to clarify the details of the debts and assets which would not prejudice the defendants. In fact the defendants themselves have admitted the sanction communication of the facilities and mortgage of the properties as securities.

By way of amendment, the applicant bank is bringing it to the notice of the Tribunal the details of debt and assets which are already included in the IA’s filed and are on records, hence by amendment it would asset the Tribunal for proper and better appreciation and facts and claims of the bank as well as claim of defendants.

Inspite of opportunities the defendants have not filed their objections and prayer sought for in the IA for amendment would not cause any prejudice to the defendants. Moreso, where the defendants also have filed counter claim against the bank. Hence, the Tribunal is of considerate opinion that IA for amendment be allowed in interest of both the parties.

Accordingly, IA No.3083/2021 stands allowed, directing the applicant bank to carry out the amendment within weeks’ time. Further applicant bank is directed to produce Order copy of Hon’ble High Court of Karnataka. For hearing list the matter on 02.03.2022.”

17. This Tribunal after going through the IA disposed finds at Para-3(A) details of debts and assets and Paras 5.25(A) to Para 5.25(E) came to be amended. It also amended Para 5.30(A) to (C), 5.40(A), 5.47(A), were allowed and accordingly the amended OA is filed before the Ld. DRT, Bengaluru on 13.04.2020.

18. It is noteworthy to quote that the defendants have not filed their additional written statements to the amended portion of the OA. In the written statement filed by the Defendants, which includes the counter claim, it is contended that “with regard to the contentions of the bank in Para 5.25, it is submitted that the sanction memorandum 17.06.2019 was not a continuation of the earlier sanctions because all the other sanctions had credit limits whereas in the sanction memorandum dated 17.06.2019 there were no credit limits because all the facilities were required to be paid upfront in the form of 100% and 105% cash margin.” (Para-L in Page 19 of WS).

19. It is also the case of the Defendants that Para-13 of the WS at Page-8, they contend that:- “13. Since REL had not availed any credit facilities after 17.06.2019 there was no need for execution of any security documents hence no security documents were executed. However in the month of February 2020, the AGM of the Bank Mr.Thyagarajan informed REL that since the facilities were unique wherein even though there were facilities, there were no credit facilities because all the facilities were covered upfront by 100% and 105% cash margin, though there was no requirement of security documents, for conducting day to day business, their existing systems require security documents without which the system will not process the services. REL refused to sign any security documents, as there was no loan or credit facility. Mr.Thyagarajan, to resolve the impasse, after taking permission from the highest authority of Bank, the Bank agreed to execute documents in such a manner that the existing system requirement would also be met and at the same time there would be no risk of enforcement of the documents against REL. The AGM suggested executing the security documents with a disclosure, that the Bank has no credit risk. Thus parties agreed to endorse the below disclosure on each page of every security document “This document is signed based on the Sanction Memorandum, wherein all the limits have been sanctioned against 100% cash margin, whereby there is no credit risk to Canara Bank” Or “This document is executed to avail facility from your bank against 100% security of our fixed deposit with your bank, Hence there is No Liability of our company towards your bank under this document.”

The above mentioned disclosure/endorsement on every page of every document served the purpose for both the parties. The Bank will have received the security documents to fill up their requirement in the computer system and REL would not have any risk from the execution of these documents. Based on this understanding, the documents with the disclosure/ endorsement on each page were presented by Mr.Thyagarajan at the office of REL on 10.02.2020, where the documents were signed by the required persons. It is clearly evident from each page of each one of the security document produced by the Bank at Annexure 156 to 174 that each page of each one of the document is endorsed and each one of the document is unenforceable. That, affixing similar disclosure/endorsement on clear understanding of transaction was practiced from the year 2014 for all facilities backed by 100% and 105% cash margin, as could be seen from Documents produced by the Bank including Document No.95 to 98, 105, 106, 108, 109 to 111, 114, 123, 124, 125, 127 to 129, 131, 137, 138, 140 to 143 and same practice was continued in the year 2020 for all the documents without an exception as all the facilities in the year 2020, were backed by 100% and 105% Cash Margin as could be seen from Annexure 156 to 174.”

20. The above gist of the pleadings is taken note of in so far as the point for determination in the IA is concerned since the question of allowing the cross – examination of the witness is to be considered not as a strait jacket formula, but on a case to case basis as held in M/s.Sonu Textiles (Supra), while in the said ruling, the bank admitted that they were not in possession of certain documents, but averments in that regard have been made in the affidavit. A very material controversy was observed by the Hon’ble DB of the Bombay High Court, by holding that “if such an averment is not supported by the proper documents, which even partially is concluded before the court, then the appellants would be entitled to cross – examine the witness in regard to such averments made in the affidavit tendered in the evidence. There cannot be a fixed parameters for consideration of such applications and each case would have to be examined on its own merits.” (Para-14 of the ruling)

21. In the instant case, it was argued on behalf of the Defendants that the cross examination of the witness is very much necessary to bring the truth on record. The Ld. Counsel appearing for the Defendants submit that Page 939 of Volume III of the amended OA speaks of statement of accounts. The Ld. Counsel submits that the entry of the transaction dated 01.04.2020 shows a brought forward balance of Rs.-

3,831,682,597,36p. This entry is seriously disputed. The Ld. Counsel submits that the cross examination of AW1 with regard to this brought forwarded entry needs to be explained by the witness. He submits that the cross examination be allowed to bring forth the truth.

22. Having taken note of the above, this Tribunal considered the amended paragraphs to the OA at Paragraphs 5.25(A) to (E). Having noted the details of the FLCs issued in Swiss francs (CHF) at the asking of the Defendants almost daily upon acceptance of the sanction memorandum dated 17.06.2019, 224 FLCs amounting to CHF, 4,88,33,65,612.45p out of which 21 FLCs involving CHF 48,49,39,012.47p issued between 20.02.2020 and 20.03.2020 with various expiry dates. The details of the agreement executed by the Defendants Company are produced as Annexure 12. The Para-25(C) of the amended OA speaks of the details of the FLCs accepted and the corresponding bill enclosed as Annexure – 12.

23. The case of the bank producing the accounts statement at Page No.939 of Volume – III shows a minus entry noted above. The clarifications of the same are found in the amended portions of the OA, which were allowed by the Ld. Predecessor and certain documents are also relied by the applicant bank. This is not the case where the averments made in the affidavit of AW1 are without the documentary basis. Therefore, the contention of the Ld. Counsel that the minus entry shown in the account statement of the date 01.04.2020 is required to be cross- examined – cannot be accepted.

24. The ruling of the Hon’ble DB of Madras High Court relied by the Ld. Counsel for the applicant bank in M/s.TajBeedi Works (Supra) noted that where the defendants had filed the written statement along with the counter claim and the relationship between the bank and their customers are purely contractual in nature and borne out of the documents, the party claiming that the bank had suppressed to produce the documents are at liberty to file such application seeking for production of documents that has to be relied upon by the borrowers. Non production of such documents would lead to the Tribunal drawing adverse inference against the bank. Thus holding the order passed by the DRT, declining the cross examination, which order was confirmed by the Hon’ble DRAT was not interfered by the Hon’ble DB. In the instant case there is a counter claim for a sum of Rs.20456,36,24,459.00 by the Defendants and the Defendants have also produced documents along with their pleadings at Annexure D1 to D189.

25. The second leg of the argument by the Ld. Counsel for the Defendant is that the statement of interest charged at Page No.937 of Volume – III of the amended OA is mindboggling. He submits that the rate of interest shown as 6.75% for the entries dated 01.08.2020, 03.08.2020, 05.08.2020. All of a sudden by 06.08.2020, the rate of interest is raised to 16.55%. Thereafter on 07.08.2020, it was 16.45%. The daily rate of interest ranging from above 16% from 06.08.2020 till 21.05.2021 is not supported by any agreements to pay the interest and therefore the calculation of interest itself is running into crores is without basis. He argues that when the bank had charged the interest @6.75% till 05.08.2020 had enhanced the interest rate above 16%. He submits that his clients are not the borrowers from the bank and that there has been no agreement between the parties to pay the interest as charged in the statement of accounts.

26. On the other hand, the Ld. Counsel appearing for the bank draws the attention of the Tribunal to the sanction memorandum dated 08.02.2017, which is produced at Page No.752 of Volume-III in unamended OA. He points to point No.5 of the sanction memorandum. The point 5(i) reads “Company ensure that the stipulated margins as per the sanctions are available for all the limits permitted. Wherever the stipulated margin is not arranged, the over drawn limit will be charged interest @clean rate i.e. MCLR + 7% = 15.45% at present.” It is argued that since

certain FLCs payments were challenged by the very defendants in WP No.6957/2020 by the Defendants before the Hon’ble High Court of Karnataka, the payments fell due and lacked the arrangements. Therefore, the interest charged cannot be questioned and the same needs no cross examination of the witness. He points out to Para 18 of the order passed by the Hon’ble High Court of Karnataka dated 22.07.2020, which reads as under:- “To sum up, Canara Bank has issued L/Cs at the petitioners’ request. Petitioner has received the gold and LCs have been discounted. Therefore Canara Bank is duty bound to honour the LCs and make payment. Further, Petitioner has not made out a case that it has a legal right over the performance of the legal duty by the Canara Bank against whom the mandamus is sought. Therefore petitioner is not entitled for a writ of mandamus”.

The Ld. Counsel Sh. M.L.Ganesh submits that the writ was filed seeking a mandamus against the Bank to defer the payments in respect of letters of credit issued by the bank at their request in the light of Covid-19. He submits that the minus entries found in the account statement pertains to such of the LCs cleared which obligation could not have been escaped by the applicant bank and therefore the Defendants are not justified in seeking cross examination over the accounts statement or the interest charged table, which are borne out of the records produced by the applicant bank.

27. It is also argued by the ld Counsel for the defendants seeking cross examination of AW1 that the bank has not filed any documents in acknowledgement of the debts from time to time. He submits that though document no-D119 Page- 372 of Vol-2 of the Counter Claim seeking a counter claim which is a letter from the bank addressed to the Defendant No-1 showing the total liability at Rs.10,516.10/- in crores as on 31.3.2020 asking the Defendant to confirm such balances debited to the OD account towards making of the sixty FLCs, the same is not acknowledged by the Defendant. The bank has not produced any acknowledgement of debts from time to time. On the other hand the ld Counsel Sh.M.L.Ganesh invites the attention to the request for OD facilities dt 10.2.2020 duly signed by the Defendant No-1 along with the Pronote and the letter of revival which had indicated the liability through the letter of the Defendant No-1 dt 10.2.2020 and the liability as on 16.9.2019 was Rs.12.308.50 in crores towards the ILC/FLC apart from the other liabilities like OD against deposit, FDB/FBE/BRD( Pg-697,698,699 of Vol-3/5 of the proof affidavit). He also points out to the documents at A172,A174,A175 to A187 ,A189 to A193 which are at Pages 726 A to 750 of Vol-4/5 of the proof affidavit. He particularly points out to the emails sent by the first Defendant. Page -745 of Vol-4 of Proof affidavit is one email dt 25.7.2020 in which it is seen that “as per the latest sanction we were required to bridge 1/3rd each of the cash margin deficit at the end of months July,August and September.Currently due to the pandemic situation prevailing across the world, our importers have sought time between 25.12.2020 to 7.1.2021 for clearing the dues of about 3800 Crores. We will begin to receive the export receivables during the last week of December, based on which we request for extension of payment of cash margin deficit from July, August and September to the end of December. This email is dated 7/27/2020.” The ld Counsel after such pointing to the emails received which are at pg nos-745 to 750, submits that these emails are self-explanatory and therefore does not require any cross examination. Therefore the ld Counsel for the bank submits the contention raised by the ld Counsel for the Defendants that there are illegal entries and not explained by the Applicant bank, which warrants cross examination of AW1 need cannot be accepted and such a contention is frivolous.

28. The ld Counsel for the applicant bank also invites the attention of the Tribunal to Page no-797 of Vol-4 of the Proof Affidavit which is a document addressed by the bank to the Defendant no-1 in which it was made clear demanding the Defendant no-1 company to make the payments of FLC’s amounting to CHF 484.94 Mio . It is also pointed out that because of the delay the LC discounting bank i.e, the Hong Kong and London Branches have claimed overdue interest and swap charges to the tune of CHF 2.116 Mio and USD 796061 which were to be paid along with the bill amount. It was also notified that the Canara Bank would be making the payments of LC’s by following the Judgement of the Hon’ble High Court and RBI directives. The details were also sent along with this letter dt 5.8.2020 through speed post. In spite of this the Defendant did not pay heed. He also invites to the other correspondence and the documents from page no-745 to 1183 of the Proof affidavit.

29. The ld Counsel for the defendants insisting permission for cross examination submits that the memo of calculation furnished at Page No-936 of Vol-3 of the amended OA had capitalised the interest which is not in accordance with the terms of sanction or the terms of the agreements between the parties. The rate of interest charged on compounding basis is against the contractual obligations. Referring to the statement of accounts at page No-939 of Vol-3 of amended OA and the page No-937 and 938, the interest part itself is about 80 crores from 6.8.2020 on compounding basis which is not in accordance with the terms of the sanction and the understanding. He has also questioned the immediate spurt in the rate of interest from 5.8.2020 to 6.8.2020 from 6.75% to 16.55%. The same is compounded interest which cannot be allowed as per the version of the Defendants and therefore the Defendants seek an explanation from the witness examined.

30. The above argument of the ld Counsel to elicit the explanation with regard to the rate of interest, and whether it was a compounded interest and particularly whether such compounding is permitted under the terms of sanction letters/ agreements reached if any are all to be deduced from the large volume of the documents produced by the parties. The Defendant is yet to file the counter proof affidavit and such of the documentary evidence by which he can demolish the say of the Applicant bank.

31. The other contention raised by the Defendants through their Counsel is that the documents relied by the bank are forged and fabricated. While denying such allegations, the bank submits that if such documents are forged and fabricated it is for the Defendants to establish the same and they have to take different legal recourse. This itself cannot be the ground to seek the cross examination of AW1. It is common prudence that a party alleging forgery and fabrication has to establish by proper means of pleadings and the positive evidence to establish such an allegation. This cannot be done by the cross examination of the official witness who had deposed based on the records.

32. Rule 12(6) of the Debts Recovery Tribunal(procedure) Rules 1993 provides for proving a fact by way of affidavit and if any party desires such witness for cross examination , the Tribunal is obligated to call for such witness for cross examination for sufficient reasons.

33. In the instant case whether sufficient reasons are made out to summon the AW1 for cross examination is examined from the contents of the supporting affidavit. The grounds urged are;

a) That the Annexure 210 to 213 of the affidavit of AW1 is forged and fabricated. It is not pleaded as to when such forgery and fabrication took place. If such fabrication has taken place arising out of the document that is at page-939 of vol-3 of the amended OA which is the statement of accounts dt 21.5.2021 and the such fabrication of accounts are in dichotomy to the pleadings in the written statements cum counter claim. These Defendants had mentioned at Para 18 of their defence that “further the entire alleged balance of 451.68 crores being inclusive of the unheard and non-justifiable interest claimed by the bank has arisen only because the bank making huge arbitrary payments without the required expertise from the account of RBL to its own foreign branches in the guise of making payments of the FLC’s by usurping the huge cash balance available in the account of REL in the form of fixed deposits.” It is also pleaded at Para 17 that “However to the shock and surprise of REL, despite consent of the supplier the bank did not agree for deferment and arbitrarily made the payments of the FLC’s--- alleged dues were caused only because of fluctuation in foreign currency and making of excess payments for the FLC’s exceeding 100% cash margin was admitted by the bank.” In view of such contradictory pleadings , the aspect of forgery and fabrication would remain a figment of imagination and cross examination cannot be allowed on this ground of allegation of forgery and fabrication. b). As far as the ground for cross examination regarding the rate of interest and the nature of interest namely the aspect of capitalising the interest etc. are only the matter of documentary evidence. Since the documents would speak for itself, no cross examination is required. It is relevant to note that the aspect of imposing the interest, which sought to be cross examined, is a matter of evidence based on the contractual rates agreed between the parties.It is always open to the Defendant to point out the discrepancies/excesses if any and this Tribunal can ask the applicant bank to submit such of the re-worked out calculation of interest only upon rendering a finding based on the documentary evidence after hearing the parties at the relevant stage of the progression of the case.

c) As regards the contention of the defendants that the witness needs to be cross examined as the defendants found out certain wrong entries made and the wrong debits made to their account, the same can be pointed out by filing the counter proof affidavit. The ld. Counsel for the bank had taken this Tribunal through the orders passed by the Ld XIII Additional City Civil and Sessions Judge, Bangalore in OS No.25034/2021 dated 11.10.2022. In the said suit filed by Defendant No.1 against the bank a declaration and consequential injunctions were sought. The Ld. Judge while rejecting the claim under Order

VII Rule XI of CPC had given a finding. The relevant paragraphs are Para-9 & 10 which reads as under: -

“However, what is glaringly evident on reading of the plaint is that, although it is a fairly detailed plaint running to 11 pages, the details are conspicuous by their absence. It is repeated ad infinitum in the plaint that, defendants have made wrong entries by either making wrong debts or denying legitimate credits. However nowhere in the plaint is it stated which are the wrong debits made to the plaintiffs account and the total quantum of wrong debits made to the plaintiffs account and the total quantum of credits which are wrongfully denied to the plaintiff. Similarly, although it is pleaded that, the defendants have relied upon certain guidelines and regulations issued by Foreign Exchange dealers Association of India to make wrongful entries, there is absolutely no pleading which are the wrongfull entries made on the basis of the said guidelines and on what basis the plaintiff claims that the said entries are wrongful.

10. Ultimately, it is to be noted that, the plaint being totally bereft of details regarding which are the wrongful entries which or sought to be rectified and what is the total value of the entries, and what is the correct balance to be derived by rectifying the entries, even accepting all the plaint averments at face value, the plaintiff cannot be granted the relief. The prayer and the plaint averments are so vague that, even in the absence of contest by the defendants and even accepting all the plaint averments as the gospel truth, the court will not be able to pass an effective decree because there is no pleading as to which are the entries to be rectified and what is the correct balance to be derived to the plaints account after so rectifying the entries.”

In view of the above findings it was urged by the Ld. Counsel for the Bank that in the instant case also, the pleadings do not pin point any of such wrong debit entries. In the IA filed for seeking cross-examination, no such particular entries are espoused. On the other hand the Ld. Counsel appearing for the Defendants submits that a regular first appeal is filed against the findings of Ld. City Civil Judge, Bangalore and this matter is subjudice. However, since the IA does filed for permission to cross examine does not specify, plead and point out such of the wrong debit entries with reference to such of the particular FLCs involved leading to the debt claimed, this Tribunal is unable to find the merits to seek to allow the cross examination of AW1.

34. The other contention of the Defendants that the entire foreign exchange exposure was required to be fully hedged, which was fulfilled by the Defendant and that no currency fluctuation could have created an outstanding claim after having paid 100% upfront cash margin and hedging the entire foreign exchange position leading to no claim status on behalf of the applicant bank is only a matter of argument to be examined through the records to be submitted by the parties either.

35. The deponent to the IA seeking permission to cross examination submitted that the accounts statement filed by the bank and that of the Defendant maintained with them are to be resolved based on the different accounting systems and this is basically an accounting dispute. He submits that cross examination is required to resolve the accounting dispute. It is relevant to note that the Bankers Book Evidence Act gives a legal presumption in favour of the duly certified accounts statements maintained in the ordinary course of Banking Business. The relevant provisions of the said Act reads as under:- “4. Mode of proof of entries in bankers’ books.—Subject to the provisions of this Act, a certified copy of any entry in a banker’s book shall in all legal proceedings be received as prima facie evidence of the existence of such entry, and shall be admitted as evidence of the matters, transactions and accounts therein recorded in every case where, and to the same extent as, the original entry itself is now by law admissible, but not further or otherwise.”

It is the argument of the ld. Counsel for the Defendant that the account statement maintained by the Defendants cannot be penalised / set at naught since the evidence of the Bankers is taken as the prima facie evidence of the existence of such entries. In this context it is to be noted that the Defendant is always at his defence to disprove such entries by way of positive evidence. If any entry is wrong, the same can be established by the documentary evidence by the Defendant showing such and such debit is unwarranted/paid/satisfied referring to each of such FLCs. The Defendant was notified as far back as 11.01.2021 seeking certain compliances (Page No.805 to 808 of Volume - IV of Proof Affidavit). The documents sought by the bank are detailed in Para-12 of the said letter dated 11.01.2021. After going through the said letter produced as evidence, it is seen that the Defendant Company was informed that the bank will not be in a position to take up the matter with RBI unless all the required clarifications/documents/certifications are made available. It was also notified that till the date of writing the letter, the Defendant Company has not submitted the documents. Be that as it may, the statement of accounts duly certified under the Bankers Book Evidence Act would go to show the existence of such entry would be admitted as evidence of the transactions. If the Defendant has its own account statement, such of the entries in their statements ought to be proved by them and the burden of proof cannot be sought to be shifted resorting to the cross examination.

36. After careful examination of the voluminous records and after hearing the Ld. Counsel on either side the contentions urged by the Defendant are examined in the peculiar facts of the case based on the OA and the counter claim. The present case which is being contested and also a counter claim having been made by the Defendants, it is for the Defendants to prove such of the facts they plead in their version and the same facts cannot be established by cross examining the witness of the bank. Therefore, this Tribunal is of the considered opinion that the application lacks merits to order for AW1 to undergo the cross examination.

37. The ruling of the Hon’ble Madras High Court in TajBeedi works (Supra) wherein it was opined “the parties who claim that the bank had suppressed to produce certain documents, are at liberty to file such application seeking for production of the documents that has to be relied upon by the borrowers. Any failure to produce such documents, despite there being an order of the Tribunal, the Tribunal can always draw adverse inference against the bank.” (Para-11).

38. Following the said ruling, the Defendants are always having the liberty to call for such documents from the bank to support their contention or to rebut the claim of the bank based on the arguments now advanced towards the prayer in the IA. They can ask for the detailed account statement prior to opening balance as on 01.04.2020 to get themselves satisfied with regard to the much contested opening balance amounts. They can also ask for the periods of drained out cash reserves and non hedging of the FLCs and the detailed break up statement of the rate of interest debited to their account. The bank would also furnish whether it has debited the interest into the account of the defendants after the classification of the account as NPA.

39. It is pertinent to note that the deponent AW1 Mr.ArunPrasath has stated that he is serving as the Manager in the applicant bank and competent to file the proof affidavit. After deposing to the facts, and the prayer, there is no proper verification of the affidavit. It is not forthcoming from the contents of the affidavit whether this deponent is speaking to the facts based on his personal knowledge or based on the records. No doubt he stated that he is well acquainted with the facts. Whether such acquaintance is based on personal knowledge or on records is not forthcoming from the affidavit, since there is no proper verification of the affidavit. There are 84 paras in the affidavit and the same does not reveal which of the paragraphs are based on his personal knowledge/records and which of the paragraphs are based on the statements that he believes them to be true and which of the paragraphs are deposed based on the legal advice. In the circumstances, this Tribunal feels that a supplemental affidavit disclosing the proper verification of the proof affidavit be also filed by the AW1.

40. In the peculiar circumstances, the present IA stands disposed of by the following:-

: - O R D E R - :

The prayer of the defendants in IA No.26/2024 seeking permission to cross examine AW1 is hereby rejected.

However, the defendants may make such of the interrogatories for production any of the suppressed documents after coming to a reasonable conclusion by comparing their own accounts statement with that of the bank to get themselves satisfied with the entries and to know the rate of interest charged and the reasons thereof for the break up periods showing the variations of interest.

The bank is also hereby directed to file supplement affidavit verifying to the contents of the Proof Affidavit para wise by the next date.

Put up this matter for supplement affidavit verifying the contents of the PA and for CPA by 26.02.2024. Sd/- (A.S.JAYACHANDRA)

PRESIDING OFFICER

DRT-I, CHENNAI

(Dictated to PS, in the computer, corrected, signed and pronounced by me on this 20TH Day of February, 2024)