Research › Search › Judgment

Calcutta High Court · body

2013 DIGILAW 194 (CAL)

Saraf Impex Pvt. Ltd. v. Federal Bank Ltd.

2013-04-11

I.P.MUKERJI

body2013
JUDGMENT The grievance of the plaintiffs appears to be this. 2. For the purpose of honouring a Letter of Credit in favour of the fifth defendant in a particular transaction, the first defendant bank was required to procure foreign exchange for the plaintiff company in August, 2011 for US Dollar 5,209,600. At that time the exchange rate was Rs. 45.2058. However, the dollars were purchased by the bank at a much later point of time, on 2nd January, 2012, when the exchange rate rose to Rs. 53.29. The differential payment to be made by the plaintiff was a little over Rs. 4 Crores. 3. On that basis the plaintiffs have been declared to be a willful defaulter and their names are threatened to be posted by the third defendant as such, on the recommendation of the Reserve Bank of India. The plaintiff company is a very large export house having substantial business. If its name is posted in the list of willful defaulters, no bank or financial institution would lend and advance any sum to them. 4. Mr. Mantha for the first defendant bank showed me their application filed before the Debts Recovery Tribunal being O.A. No. 74 of 2013. The claim of the bank is on account of the alleged failure of the plaintiff to repay a loan granted by the bank for retirement of bills of exchange. By the letter of the plaintiff company dated 6th February, 2012 a sum of Rs. 1,97,74,068 was said to be acknowledged to be due and owing by them to the first defendant bank. 5. Learned Counsel for the bank took me in detail through the Banking Regulations Act, 1949 particularly Sections 21 and 35A thereof. Under these sections, the Reserve Bank of India is empowered to take policy decisions and issue directions, which includes the power to issue circulars. In exercise of such circulars a Master List or Master Circular is issued by the Reserve Bank of India identifying the willful defaulters. According to Mr. Mantha the plaintiff No.1 is fit to be classified as a willful defaulter because in spite of having sufficient funds they are not paying the claim of the bank. 6. In exercise of such circulars a Master List or Master Circular is issued by the Reserve Bank of India identifying the willful defaulters. According to Mr. Mantha the plaintiff No.1 is fit to be classified as a willful defaulter because in spite of having sufficient funds they are not paying the claim of the bank. 6. My attention was also drawn to Section 18 of the Credit Information Companies (Regulation) Act, 2005 where a dispute, inter alia, regarding credit information is deemed to be a dispute under the Arbitration and Conciliation Act, 1996 and is to be resolved by an Arbitrator appointed by the Reserve Bank of India. 7. In my opinion, this is a fit case where the instant dispute between the parties should be so referred. 8. Declaring a borrower as a defaulter or an alleged defaulter or a defaulter against whom recovery proceedings are pending is one thing. But declaring a borrower as a "willful defaulter" is another thing. The word "willful" denotes a state of mind. The words immediately convey the impression that the borrower is possessed with the mental intent to deprive others. This could readily be taken to mean a mental intent to defraud or to misappropriate. This kind of reputation is very bad in business circles. 9. Therefore, any agency should be very careful in ascribing this kind of a reputation to any borrower. 10. I think, the ends of justice would be subserved if I direct the Reserve Bank of India, which I do hereby, to appoint an Arbitrator in terms of Section 18 within two weeks of communication of this order to go into the question whether the plaintiffs can be described as a "willful defaulter". The Arbitrator has to make and publish his award within a period of two months from the date of his appointment. 11. I make it clear, if the plaintiff company is able to establish the case before the Arbitrator that it was because of the fault of the bank that they suffered a loss resulting from exchange fluctuation, the plaintiff cannot be declared to be a "willful defaulter". 12. In that case the bank may attempt to recover whatever claims it has against the plaintiffs but without declaring the plaintiffs as a "willful defaulter". 13. 12. In that case the bank may attempt to recover whatever claims it has against the plaintiffs but without declaring the plaintiffs as a "willful defaulter". 13. On the prima facie case as noted above the plaintiff company should not be declared as a willful defaulter by the Reserve Bank of India or the defendant Credit Rating Agency till the passing of the award. However, this order or the award will have no repercussion on-the proceedings before any other judicial forum. 14. Nothing further remains in this application. All the papers were before me. 15. This application is disposed of. All parties concerned are to act on a signed photo copy of this order on the usual undertakings.