DRT upholds Mardia suit against ICICI Bank

The Debt Recovery Tribunal (DRT) has upheld an appeal by Mardia Chemicals Ltd against a recovery suit filed by ICICI Bank on the grounds that the Board for Industrial & Financial Reconstruction (BIFR) is yet to complete its proceedings in the matter.

Mardia Chemicals had argued that ICICI Bank cannot initiate recovery proceedings against it and its guarantors (Rasiklal Shantilal Mardia, Rakesh Shantilal Mardia and Rajeev Shantilal Mardia) unless BIFR takes a decision.

DRT Mumbai stayed the proceedings in an order passed on June 21. Mardia Chemicals had filed a reference with the BIFR in May 2003.

A company is required to inform the BIFR once its net worth is eroded by 50 per cent and is required to make a reference with the board once if its entire net worth is wiped out.

On June 1, DRT Ahmedabad had stayed ICICI Bank's notice of July 16, 2002, to Mardia Chemicals under the Securitisation Act.

The ad-interim ex-parte injunction will be in force till July 1, when Mardia Chemicals' next appeal comes up for a hearing.

The two DRT orders come after the Supreme Court judgement of April 8, which allowed lenders to approach the DRT freely by striking down a provision of the Securitisation Act that required a borrower to deposit 75 per cent lender's claim before it could file an appeal with the DRT. It was expected that the judgement would open the floodgates for litigation against notices sent by banks and financial institutions.