No leniency for inability to repay loan, says court, jails man

Metropolitan Magistrate Arun Kumar sentenced Ashok Kumar, a Delhi-based businessman, who had availed credit facility from ICICI Bank in 2009 but was unable to repay the same, to six months in jail and ordered him to pay Rs3.4 lakh to the bank

New Delhi: Inability to repay a loan cannot be a ground for leniency in cheque bounce cases, a Delhi court has ruled while sentencing a businessman to six months in jail and ordering him to pay Rs3.4 lakh to the ICICI Bank, reports PTI.

Metropolitan Magistrate Arun Kumar sentenced Ashok Kumar, a Delhi-based businessman, who had availed credit facility from ICICI Bank in 2009 but was unable to repay the same.

The court said provisions of the Negotiable Instruments (NI) Act, 1881 are to “inculcate the faith of business community in transactions through Negotiable Instruments” and no leniency could be shown.

“In view of the aforesaid object and purposes of Section 138 (Dishonour of cheque) of the NI Act, in my considered opinion, not only benefit of Probation of Offenders Act cannot be given to the convict of offence under the NI Act but also no leniency can be shown to him in awarding sentence merely because he was not able to make the payment,” the court said.

ICICI Bank had told the court that Mr Kumar had availed Rs4.54 lakh from it in June 2009 but the cheque issued by him to repay the same was dishonoured with a remark “debit account closed” in January 2010.

The bank after issuing legal notices to Mr Kumar, lodged a complaint under the NI Act before the court.

The accused had denied the allegations saying the cheque in question was taken by the bank as a “blank signed cheque as security” along with four other cheques.

He, however, after being convicted by the court sought lenient punishment on the ground that he suffered losses in the business and was not able to repay the loan.


Lowering of interest rates to impact NIM: SBH

According to SBH managing director M Bhagavantha Rao, the Assets and Liability Committee (ALC) of the bank is expected to take a call on interest rates in a day or two

Hyderabad: Public sector State Bank of Hyderabad (SBH) said its net interest margin (NIM) will face an impact of around 20 basis points in this fiscal due to proposed lowering of interest rates, reports PTI.

According to SBH managing director M Bhagavantha Rao, the Assets and Liability Committee (ALC) of the bank is expected to take a call on interest rates in a day or two.

“We cannot go on cutting down our deposit rates. But with the Reserve Bank of India (RBI) and government indicating that the interest rates should come down, we have to maintain a very fine balance. NIM will have a problem. We would be happy to have NIM at 3.25% in FY12-13, down around 20 basis points from FY11-12,” he told reporters after announcing the Q4 results.

SBH's NIM stood at 3.47% in 2011-12.

NIM is the difference between the interest income a bank earns on its advances and the interest it pays on its deposits.

SBH's net profit rose 6.81% at Rs481.04 crore for the fourth quarter ended 31 March 2012 as against Rs450.35 crore in the corresponding quarter a year ago.

For the full year (FY11-12), net profit grew by 11.32% to Rs1,298.27 crore from Rs1,166.24 crore.

As of March 2012, net NPAs (Rs1,002 crore) stood at 1.30%. The company's infrastructure and beverages sectors contributed 15% and 13%-14% to the NPAs, respectively. Steel, textiles and sugar firms comprised the rest, Mr Rao said.

Total business of the bank grew by Rs23,146 crore to touch Rs1,80,143 crore, a rise of 14.74%, while total deposits reached a level of Rs1,01,806 crore, a year-on year growth of 11.19% over Rs91,560 crore in last fiscal.

Mr Rao said the bank aims to clock business of Rs2 lakh crore by September. The full year target will be set after ALC's meeting scheduled for next week, he said.

“We would like to grow at 21% in deposits and between 18% and 20% in advances,” he said.


Life Exclusive
Vanishing owners and the staff’s plight

What happens if the factory owners simply vanished, leaving all the debtors in distress and the staff in a mess? The 26th part of a series describing the unknown triumphs and travails of doing international business

Due to a great money control by banks, there was spate of rumours in the market about merchants having problems in settling their dues with the bank. Some small shopkeepers had simply over extended themselves and skipped the country. And the bigger merchants were delaying settlement and asking for extensions for payment, or seeking new credit facilities in other banks. The money market was tight.
In the case of Free Zone, thanks to the very methodical work done by their financial management team, every garment manufacturer had given bank guarantee for taking care of such eventualities pertaining to the large number of workforce involved. This covered their major expense of repatriation to the home country of origin, and of course, rest of the financial burden was on the owners themselves.
But what happens, if they themselves simply vanished, leaving all the debtors in distress and the staff in a mess?
It was about 7.30 in the morning, when my wife received a call from Subha, who wanted to speak to me on an emergency, and who, at the very outset, had clarified to her that she was calling from another factory.  I was actually getting ready as my morning schedule would have covered a visit to textile market to get some urgent materials before reaching the plant.
For obvious reasons, I do not want to name the company; but from a brief talk, it transpired that her ‘boss’ was not coming to the factory for the last few days, and she got the news from the cook that he had simply left the country, with all his baggage! The staff had worked for two days and after he failed to turn up, was actually marching from their plant to the Free Zone office to lodge their complaint. After assuring her that I would come to their assistance, I changed my work schedule and rushed to the Free Zone.
By this time, the Free Zone officials also received the intimation and managed to stop the procession, except for the main speakers, simply because they spoke English. I reached just in time.
I began the discussion, not as a Finetex chief, but as secretary of JAGTA, as I also did not want the news to spread outside and my prime concern was the welfare of the staff, not the issue of whereabouts of the owner/owner’s legal representative (who managed the factory).  In less than one hour, it was confirmed that he had left the country, and there was no one to talk to. The bank concerned was reluctant to comment on the situation; all that they could say at that time was that they “were investigating the matter further”.
Abu Baker was the person who was catering to their needs in the camp, was also handling our staff. I personally got in touch with him and assured him that until the matter was resolved, he should extend all the courtesies to the staff, and ensure that food was supplied, for which I stood personal guarantee. I spoke to them, and assured them not to get panicky, and I guaranteed their jobs, excepting for those who wished to or decided to return back to Sri Lanka!
As secretary of JAGTA, I began the discussions with the Personnel department of the Free Zone; I had full cooperation from Mohammed (I think he was No: 3 in the zone at that time) and Sharif from Administration.
We listed out the staff available, and I arranged for two or three lots to be sent to Finetex for immediate placement by interview by Perera. I had spoken to Sheru in Palmon so that he could take some and by the evening almost all the staff of the factory who wanted to stay back and work was ‘absorbed’ by JAGTA members. If anyone got a job outside the Free Zone, special arrangements were at the immigration office for such a ‘transfer’, which would not have been possible under normal circumstances!
Those who decided to return back home, were repatriated within the next few days by the Free Zone.  This was the only black mark we had in the Free Zone, all due to the fault of the owners.
Outside the Free Zone, other Emirates had come out with similar proposals; Sharjah was the first; industrial licenses were being issued by Ajman, RAK and UAQ, besides Abu Dhabi. There was a spate of activity everywhere, and everyone had plenty of orders. We had agents from Hong Kong flying down practically every day with new samples, and ready supply of raw materials/accessories, and wanted the factories to take simple production contract jobs, without involving capital expenditure to import these.
It was at this time, Sundaram got in touch with me, after he had heard from my wife that I was associated with the garment industry, since he wanted to study the prospects himself.  After a brief meeting, I went to his office, from where he took me to an old unused multi-storied house (4-5 floors) that was available, which could be converted into a factory.
I felt this was possible; and we sat down to prepare a plan of conversion. In the beginning he was sceptical, but went along, and as things were shaping up, he obtained the industrial license in no time, and was assured of the visas for the staff. After explaining the situation to Zubair, I flew down with Sundaram to select the staff.
In the first wave of interview on a weekend, we were able to select some 110 workers, including a bright and chirpy young woman by name Nayana, who in the years to come was not only a role model, but an outstanding manager.
Since there were a couple of days holidays for the New Year, I took off for a brief hop to see my parents in Madras, and returned back to continue our quest for the balance of the staff. All done, we returned back to UAE.
By this time, the machinery ordered was already on high seas; the follow-up for visas was good, though no comparison to the Free Zone in Jebel Ali. The technical team arrived some ten days earlier to get the machines in place, from the CKD in which they were received. I had introduced the electrical contractor and carpenter to Sundaram to do the negotiation and finalize the details himself, as it was neither my intention nor my desire to get involved more than necessary.  Besides, Sundaram, being an engineer of standing, had years of construction experience, and we had converted an unused house into a factory-cum-residence for the staff as well.
I procured the first order for them, and introduced Sundaram to many others in the industry so that he had continuous orders for months on end. Couple of years later, again, I assisted Sundaram in building a complete factory, which was built, brick by brick, in a large area, including living facilities for the entire staff, which had grown to more than 240 by then.

AK Ramdas has worked with the Engineering Export Promotion Council of the ministry of commerce and was associated with various committees of the Council. His international career took him to places like Beirut, Kuwait and Dubai at a time when these were small trading outposts. From being the advisor to exporters, he took over the mantle of a trader, travelled far and wide, and switched over to setting up garment factories and then worked in the US. He can be contacted at [email protected].)

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Tony P Restall

4 years ago

This situation of Owners absconding and abandoning staff need not happen if the Free Zone Authority are doing their job correctly. All FTZ Investor companies are obliged to provide a SalaryBond for each employee - equivalent to One Months Salary and a Single Economy Class ticket to Home Country.

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