The Debt Recovery Tribunal (DRT) at Chennai has ordered Syndicate Bank to pay about Rs 31 crore, inclusive of interest, to Allahabad Bank.
The case pertains to a bank guarantee that Syndicate Bank had issued in favour of Mangalore Chemicals & Fertilisers Ltd (MCFL), which, in turn, was a customer of Chennai-based Dhanalaxmi Consolidated Industries Ltd.
Dhanalaxmi Consolidated had in 1989 availed a loan of Rs 3.75 crore from Allahabad Bank and endorsed and delivered to Allahabad Bank 60 bills of exchange drawn on and accepted by MCFL.
Further to this Dhanalaxmi Consolidated had also assigned in favour of Allahabad Bank all the benefits under the bank guarantee executed by Syndicate Bank.
Allahabad Bank had in 1997 filed an interim application with the DRT seeking an interim decree on the basis of the admitted liability under the bank guarantee issued by Syndicate Bank.
According to DRT sources, when MCFL defaulted on payments in 1990, Allahabad Bank invoked the bank guarantees given by Syndicate Bank.
For some time Syndicate Bank made payments to Allahabad Bank and termed the payments as lease rentals.
Syndicate Bank then subsequently stopped payment in 1991, when Dhanalaxmi Consolidated filed a suit against Syndicate Bank seeking injunction, restraining them from paying Allahabad Bank under the bank guarantee.
Simultaneously, Dhanalaxmi Consolidated also filed a case against Allahabad Bank restraining them from availing any amount from the bank guarantees.
The suit restraining Allahabad Bank was dismissed by the City Civil Court, Chennai in 1999.
The DRT has in its order now ordered Syndicate Bank to pay Allahabad Bank with interest of 20.75 per cent an amount estimated to be around Rs 31 crore.
The DRT has indicated that Syndicate Bank should deposit the amount in the no-lien account with Allahabad Bank within four weeks, failing which will issue an interim recovery certificate.
