DRT throws out ANZ suit against loan guarantor

The Mumbai Debt Recovery Tribunal (DRT-I) has dismissed a suit filed by the erstwhile ANZ Grindlays Bank (which got merged with Standard Chartered Bank) against an alleged guarantor of a loan.

The Mumbai police followed the DRT ruling "" announced on July 15 "" and submitted a report on August 27 against the foreign bank for failing to follow laid down procedures while appointing the guarantor.

The case is a landmark one as it sets a precedent for individuals to bring to book financial institutions.

The case had been pending before the Mumbai High Court as well as the DRT for over a decade.

The DRT-I judge dismissed the suit filed by the erstwhile ANZ Grindlays Bank against Surendra Mor for defaulting, by repeatedly failing (on 11 occasions since 2002) to submit original documents related to the loan.

A final date was set for July 7 when the DRT gave the bank a last chance to produce the original documents failing which the suit would be dismissed with costs in Mor's favour.

Counsel for Standard Chartered, Mahesh Shukla (of Little and Co) who appeared before the DRT told Business Standard: "We will move an application for restoration of the case before the DRT. The presiding officer (judge) is likely to impose a cost upon us for the default. We will then submit our claim affidavit and compilation of original documents while seeking a restoration of the case."

Police sub-inspector Vishwas Jatak, who submitted the police report based on the complaint of cheating made by Mor against the bank (a copy of his report is available with Business Standard), told this paper, "The investigations are complete and I have submitted my report to the deputy commissioner of police Naval Bajaj. It was found that even though Mor was not even an income-tax payee, he was made a guarantor to the loan issued to a third party by ANZ."

Jatak added that even the terms of the loan (read overdraft facility) offered by the bank were clear that it was extended against a collateral security of shares by the borrower and there was no requirement for the guarantor.

"Moreover, the bank has repeatedly failed to appear before the police, despite repeated oral and written missives sent to them," the police report said.

Mor, who had been waging a legal battle against the bank, said, "The DRT, which is a fast track forum for banking institutions to recover their outstandings from debtors, has in this instance favoured the individual against the institution. The scheme under which the loan was issued against securities had no requirement for a guarantor but still I was induced to issue a guarantee. Within a fortnight, I revoked it as I came to know that the bank manager was playing some mischief. The people on whose behalf the guarantee was obtained by the bank also denied knowledge of any guarantee which was fraudulently obtained."