SC restrains UP govt from action against Kotak Mahindra Bank

The Supreme Court has restrained the Uttar Pradesh government and others from initiating recovery proceedings against Kotak Mahindra Bank in a matter related to trading of debts by banks.

A Bench headed by Justice S B Sinha, while issuing notice to the state government and other stamp duty authorities, also stayed the operations and implementation of an order passed on May 26 this year (by the UP government) on recovering stamp duty from the Bank.

Challenging the Allahabad High Court judgment that dismissed its plea on the grounds that alternative remedy was available to it, Kotak Mahindra Bank said that it will not operate as a bar in cases where there has been a violation of the principles of natural justice.

SBI in January 2006 under agreement transferred its debts along with underlying securities of about 48 borrowers having a principal outstanding of about Rs 167.49 crore to Kotak Mahindra Bank for Rs 31.06 crore.

Kotak had paid stamp duty under the terms of the Bombay Stamp Act, 1958, as the assignment deed was executed in Mumbai and was registered in Maharashtra.

According to Kotak Mahindra Bank, advocate Sanjeev Singh, who had no association either with it or SBI, had approached the Additional District Magistrate (finance & revenue, Lucknow) in November 2006 for determining the duty in UP.