The Supreme Court on 05.03.2020 in UCO Bank vs National Textile Corporation Ltd clarified forum for recovery against nationalised textile undertakings. UCO Bank had advanced loans to Shree Sitaram Mills Ltd. After takeover by NTC and nationalisation, Bank faced difficulty recovering. DRT issued certificate but proceedings stalled. Commissioner of Payments paid only small amount. Bank invoked PMA arbitration claiming Rs 103 cr balance. NTC challenged jurisdiction. High Court quashed arbitration and held NTC not liable. Bank appealed to Supreme Court.
Facts: Multiple Forums; Stalled Recovery Suit 3961/1988 → Transferred to DRT → R.C. issued in 2004Claim before Commissioner of Payments → Partial award only PMA Arbitration invoked in 2011 → Notice issued → NTC objected High Court quashed PMA and decided liability against Bank
Legal Reasoning: Liability Dispute Needs Evidence In DRT
Supreme Court held PMA is meant for admitted inter-PSU disputes. Here NTC disputes very basis of liability. That cannot be decided in PMA. Proper course is to continue DRT recovery proceedings. Under RDDB Act, DRT can examine whether NTC inherited liabilities under Section 4 of Nationalisation Act, 1995. Whether secured assets were taken over is also relevant. Court disapproved High Court’s final finding on liability. Said it was beyond scope of writ petition. DRT must decide independently without being influenced by High Court or Supreme Court observations. Practical Impact: What PSU Banks Must Do When borrower undertaking is nationalised, pursue remedy in DRT against new entity. File application to implead NTC/GOI as judgment debtor in existing RC proceedings. Lead evidence on takeover, vesting of assets and liabilities, and guarantee. PMA/AMRCD not applicable where fundamental liability is disputed.
Conclusion:
Bank To Prove Liability Before DRT
UCO Bank vs NTC establishes that uco bank ntc d r t recovery nationalisation act requires adjudication in DRT. Supreme Court 05.03.2020 revived recovery route for Banks. No finality on liability yet. DRT to decide after full trial. Landmark judgment for banking sector dealing with nationalised companies.
