DRAT Rejects Lohia Corp's Plea against Joint Debt Recovery Order, Upholds Liability of Bill Acceptors [Read Order]
The Tribunal noted that company had failed to appear or provide any documentary evidence during initial stages
- In a recent ruling, the Debts Recovery Appellate Tribunal (DRAT) in Allahabad, recently dismissed an appeal by Lohia Corp Ltd. regarding their liability in a debt recovery matter involving ING Vysya Bank.The dispute centered on whether Lohia Corp and its various divisions could be held responsible for unpaid dues, despite the company's insistence that it was neither a borrower nor a guarantor for the loan in question.
The case began when ING Vysya Bank disbursed certain credit facilities, including a bill discounting limit, to M/s Y. A. Fidelity Engineering Pvt. Ltd. The bank attempted to collect its debts from both the principal borrower and the appellants after the borrower failed to maintain financial discipline and the account was designated as a Non-Performing Asset.
The bank's rationale was simple: even though Lohia Corp did not directly take loan, they were legally liable for the payments once the bank discounted the bills because they were the "acceptors" of the bills produced by the borrower.
The legal team for Lohia Corp. argued during the hearings that the recovery order had been issued ex-parte and was based on "Hundies," or bills, which they asserted the bank had never presented. They further argued that these financial instruments shouldn't have been associated with them at all because in reality, they belonged to M/s LML Ltd.
However, the Tribunal, presided over by Justice R. D. Khare, found these arguments to be unpersuasive. The bank was able to produce the original bills and Hundies which were clearly raised against Lohia Packaging Machines and M/s Precitex Components Manufacturing Company, both divisions of the appellant, along with the corresponding delivery challans and invoices.
The Tribunal also pointed out that the company had neither shown nor offered any supporting documentation to refute the bank's allegations.
Ultimately, because the appellants could not produce any records to disprove their status as acceptors of the unpaid bills, the DRAT upheld the lower tribunal's decision.
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