Karnataka HC junks firm’s plea on bank move to recover debt

Justice M Nagaprasanna passed the order while dismissing the petitions filed by the company, which is engaged in the business of timber trading and its directors, due to lack of merits.
Karnataka High Court (Photo | EPS)
Karnataka High Court (Photo | EPS)

BENGALURU: The Karnataka High Court dismissed petitions filed by Mumbai-based Associate Lumbers Private Limited and its directors, questioning the registration of crime by the Union Bank of India before the CBI, under the provisions of the Prevention of Corruption Act.

“If the account is declared to be a fraud and account holders to be willful defaulters, then it would become open to initiate such proceedings in terms of the Master Circular of the RBI. Therefore, having initiated recovery proceedings before the Debt Recovery Tribunal and having a recovery certificate in their hand would not mean that proceedings cannot be initiated against these petitioners... it is too premature for this court to interfere in the allegations of the nature that is made in the case at hand. The petitioners always have remedies in law at a later stage of the proceedings,” the court said.

Justice M Nagaprasanna passed the order while dismissing the petitions filed by the company, which is engaged in the business of timber trading and its directors, due to lack of merits. It is the claim of the petitioner-company that due to economic slowdown in the domestic market there was a severe cash crunch and the company was not in a position to pay debts in time. With the account becoming a non-performing asset, the bank took several actions against the petitioner by initiating proceedings under the SARFAESI Act, through which a portion of the outstanding dues to the credit facility was recovered.

After initiating proceedings under SARFAESI Act and gaining possession of the recovery certificate from the competent fora, the bank registered a complaint against the company on February 15, 2022, terming the account to be a fraud and alleging offences of cheating, criminal conspiracy by the petitioner and its directors.

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