A decreed account is one where a settlement has been reached between a bank and a defaulter, and with the mutual agreement, a consent decree has been obtained either by a civil court or the debt recovery tribunal (DRT).
The decree is non-appealable in nature. The judgment was passed by a high court bench headed by Justice R S Lodha in a case between Union Bank of India and Chemosyn Ltd. Chemosyn is a New Delhi-based pharmaceutical company.
The bank had filed a case with the Delhi DRT after Chemosyn turned into a substandard asset.
After hectic negotiations, a settlement was arrived whereby, Union Bank agreed tot settle the case by accepting 80 per cent of the total dues. Subsequently, a consent decree was obtained from the DRT in December last year.
In the meantime, the RBI came out with the guidelines on one-time settlement (OTS) of NPA dues. Legal sources said realising the benefits of the OTS scheme where the settlement amount worked out to 40 per cent less than the original dues, Chemosyn approached the bank for an OTS.
However, the bank refused to follow this route as an agreement had already been reached and the settlement amount was also fixed. Following this, a case was filed in the Bombay High Court in May this year.
The high court sought the mediation of the RBI, which was made a third party to the case.
The RBI filed an affidavit supporting the stance of the UBI and stated that the OTS should be made applicable to cases pending settlement and not to those where settlement has been cleared with a consent decree obtained either by the DRT for cases above Rs 10 lakh or from civil courts in cases below Rs 10 lakh.
Legal sources said the decision is based on the premise that OTS is not meant to help defaulting parties to settle their dues at lesser cost but to expedite the recovery process.
Following the affidavit, the court rejected the plea of Chemosyn and upheld that the OTS cannot be made applicable to cases where a decree has been obtained but will be only valid for pending ones.
