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2022 DIGILAW 477 (TS)

Maruthi Corporation Limited v. SICOM Limited

2022-07-26

SUREPALLI NANDA, UJJAL BHUYAN

body2022
JUDGMENT: (Ujjal Bhuyan, J.) 1. Heard Mr. Dammalapati Srinivas, learned Senior Counsel appearing for the appellant and Ms. B.Saroj, learned counsel representing Ms. Shireen Sethna Baria, learned counsel for the respondent. 2. This writ appeal has been filed assailing the legality and correctness of the final order dated 20.04.2022 passed by the learned Single Judge dismissing W.P.No.8272 of 2021. The appeal also assails the order dated 08.07.2022 passed by the learned Single Judge dismissing the review petition i.e., Review I.A.No.1 of 2022 in W.P.No.8272 of 2021 filed by the appellant for review of the final order dated 20.04.2022. 3. Respondent before us is a Non-Banking Financial Company (NBFC). Appellant is a public limited company. Appellant had availed financial assistance from the respondent by way of medium term loan to the extent of Rs.15.00 crores on 27.10.2014. The loan was obtained by mortgaging various immovable properties of the appellant and by depositing title deeds. 4. It is submitted that for various reasons there was default in repayment of the loan availed of. As a result, respondent classified the loan account of the appellant as Non Performing Asset (NPA) on 29.11.2016. Proceedings were initiated by the respondent for recovery of outstanding dues from the appellant under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (briefly, ‘the SARFAESI Act’ hereinafter). When notice was issued to auction sale the mortgaged property by the respondent, appellant filed securitisation application under Section 17 of the SARFAESI Act before the jurisdictional Debts Recovery Tribunal, being S.A.No.229 of 2017. Though the jurisdictional Debts Recovery Tribunal had initially granted stay vide order dated 26.04.2017 subject to deposit of 30% of the outstanding dues in two instalments of 15% each, appellant could not deposit the second instalment. Thereafter, W.P.No.16719 of 2017 questioning the order dated 26.04.2017 was filed. This Court declined the prayer of the appellant for stay and granted liberty to the respondent to proceed with the auction sale with the caveat that the auction sale should not be confirmed till the next date of hearing. Since the scheduled auction did not materialise for want of bidders, the writ petition was dismissed as infructuous. In the meanwhile, appellant had deposited a sum of Rs.50,00,000.00 on 11.05.2017. 5. Since the scheduled auction did not materialise for want of bidders, the writ petition was dismissed as infructuous. In the meanwhile, appellant had deposited a sum of Rs.50,00,000.00 on 11.05.2017. 5. Respondent filed an application under Section 19 of the Recovery of Debts and Bankruptcy Act, 1993 (briefly, ‘the 1993 Act’ hereinafter), before the Debts Recovery Tribunal – I, Hyderabad, for recovery of outstanding dues quantified at Rs.14,20,22,506.00 with interest, which was registered as O.A.No.325 of 2017. The same was decreed on 19.08.2019 with costs. 6. When auction notice dated 01.06.2017 was issued, appellant filed W.P.No.21629 of 2017 challenging the auction notice. However, the same was dismissed as infructuous as the auction did not take place. 7. At that stage, appellant approached the respondent for restructuring of loan. By letter dated 06.01.2020, appellant submitted improved One Time Settlement (OTS) proposal for settlement of outstanding dues for principal loan amount at Rs.9.72 crores and simple interest and other penalty/additional interest at Rs.2.78 crores. This was accepted by the respondent on 28.01.2020. Thereafter, appellant submitted fresh proposal for extension of time limit for making payment in terms of OTS which was also accepted by the respondent on 24.11.2020. Additionally it was mentioned that respondent would release 14 plots of mortgaged land mentioned in the letter dated 24.11.2020, subject to appellant making down payment of Rs.1.00 crore. 8. According to the appellant, it had deposited Rs.1.00 crore but notwithstanding such deposit, mentioned plots of mortgaged land were not released to the appellant which adversely affected the appellant from adhering to the extended OTS schedule. Finally respondent issued letter dated 16.03.2021 stating that there was default by the appellant in paying the instalments as per the extended OTS, as instalments for the months of November 2020, December 2020, January 2021 and February 2021 amounting to Rs.6.00 crores was yet to be paid. Appellant was called upon to make the entire payment as per OTS along with interest immediately, failing which it was mentioned that the OTS would be cancelled whereafter legal action would be initiated. 9. It is this communication dated 16.03.2021 which came to be challenged before the learned Single Judge in W.P.No.8272 of 2021. 10. After hearing the matter, learned Single Judge dismissed W.P.No.8272 of 2021 vide order dated 20.04.2022. Relevant portion of the order of learned Single Judge reads as under: “9. 9. It is this communication dated 16.03.2021 which came to be challenged before the learned Single Judge in W.P.No.8272 of 2021. 10. After hearing the matter, learned Single Judge dismissed W.P.No.8272 of 2021 vide order dated 20.04.2022. Relevant portion of the order of learned Single Judge reads as under: “9. As per the RBI guidelines, the benefit of OTS cannot be prayed as a matter of right and the same is subject to liability criteria mentioned in the scheme. The banks cannot be compelled to accept a lesser amount under the OTS scheme despite the fact that the banks were able to recover the entire loan amount by auctioning the secured property/mortgaged property. When the loan is disbursed by the Bank and the outstanding amount is due and payable to the Bank, the Bank will always take a conscious decision basing on its commercial wisdom. No writ of Mandamus can be issued by the High Courts in exercise of powers under Article 226 of the Constitution of India directing a financial Institution/Bank to positively grant the benefit of OTS to a borrower. The grant of benefit under OTS is subject to the liability criteria mentioned under the OTS scheme and the guidelines issued from time to time. The counter affidavit filed by the respondent would disclose that several opportunities were given by the respondent to the petitioner to repay the outstanding dues and had also given no objection certificates to sell the mortgaged property. But, despite giving numerous opportunities to the petitioner, the petitioner failed to sell the plots or pay the outstanding amounts. Considering the conduct of the petitioner only, the bank had cancelled the OTS scheme offered by it on 01.04.2021 since the petitioner had not adhered to the payment schedule as agreed upon. The petitioner is bound by the loan agreement entered into with the respondent bank to enforce the same. Such matters were contractual in nature. A writ lies when there is an error of law apparent on the face of the record or there is violation of law. No writ lies for directing re-scheduling or for fixing instalments in connection with the loan. It is only the Bank or the financial institutions, which granted loan, which can reschedule it or fix One Time Settlement or grant instalment or take a decision in such matters. No writ lies for directing re-scheduling or for fixing instalments in connection with the loan. It is only the Bank or the financial institutions, which granted loan, which can reschedule it or fix One Time Settlement or grant instalment or take a decision in such matters. The loan is granted in terms of the contract and grant of OTS or rescheduling of the loan is a modification of the contract, which can only be done by mutual consent of the parties. There might be hardship to a party, but unless violation of law is shown, the Court cannot interfere. Holding of recoveries of loans by the Court orders might cause incurable harm to the economy. As no violation of law has been pointed out, the writ of Mandamus cannot be issued. As the petitioner failed to show that he has legal right to the performance of a public duty by the party against whom the Mandamus is sought, it is considered fit to dismiss the petition.” 11. Appellant thereafter filed a review petition for review of the order dated 20.04.2022 which was registered as Review I.A.No.1 of 2022. By order dated 08.07.2022 learned Single Judge dismissed the review petition by holding that there was no sufficient reason to entertain the review petition. Learned Single Judge held as follows: “16. Considering the law on this aspect and the ratio of the judgments as extracted above, and the contentions raised by the learned counsel for the petitioner would not show any mistake or error apparent on the face of the record and no new facts or any important matter which was not within his knowledge or could not be produced by him at the time of submitting his arguments in the writ petition are brought forth by the petitioner and no sufficient reasons to entertain the review petition are raised and all the grounds raised by him in this review petition are considered by this Court while passing the order dated 20.04.2022 and as it is not permissible for this Court to re-hear the matter, it is considered fit to dismiss the review petition.” 12. The above two orders are under impugnment in the present proceeding. 13. The above two orders are under impugnment in the present proceeding. 13. Learned Senior Counsel for the appellant submits that learned Single Judge had failed to consider the aspect that respondent did not adhere to the OTS scheme inasmuch as after the appellant had deposited Rs.1.00 crore it was mandated under the terms of OTS to release the 14 mortgaged plots, which would have enabled the appellant to take consequential steps for repayment of the outstanding dues as per the OTS. Decision of the respondent, therefore, is arbitrary and unreasonable warranting interference. He further submits that respondent has not followed the extant guidelines of the Reserve Bank of India (RBI) before closing the OTS proposal of the appellant. 14. On a query by the Court as to how the writ petition and consequential writ appeal are maintainable, learned Senior Counsel has referred to and relied upon a decision of the Supreme Court in Sardar Associates v. Punjab & Sind Bank, [ (2009) 8 SCC 257 ]. 15. Per contra, learned counsel for the respondent submits that right from the beginning, conduct of the appellant did not inspire any confidence. There was repeated delay and default on the part of the appellant in repaying the loan availed of by it from the respondent. She has referred to the bank statement from 03.12.2014 to 14.12.2020 to contend that repayment of Rs.1.00 crore by the appellant was highly erratic and irregular spanning over a long period. Since December, 2020, no payment has been made by the appellant. She submits that as a matter of fact, OTS proposal of the appellant was rejected by the respondent on 01.04.2021. She has supported the orders passed by the learned Single Judge and submits that no interference is called for. 16. Submissions made by learned counsel for the parties have received the due consideration of the Court. 17. In the instant case, appellant has complained that respondent acted arbitrarily and unreasonably in not adhering to the OTS schedule as accepted by the parties. Respondent is under obligation to comply with the statutory instructions of the RBI while dealing with OTS proposals. Without entering into the merit of the rival contentions what is immediately noticeable is that respondent before us is an NBFC, called SICOM Limited, which is undoubtedly a private financial institution. Respondent is under obligation to comply with the statutory instructions of the RBI while dealing with OTS proposals. Without entering into the merit of the rival contentions what is immediately noticeable is that respondent before us is an NBFC, called SICOM Limited, which is undoubtedly a private financial institution. Being a private financial institution, the question which falls for our consideration is whether the respondent would be amenable to the writ jurisdiction of this Court under Article 226 of the Constitution of India? At this stage we may mention that though it is contended that respondent is bound by the statutory instructions of RBI, RBI is not a party before us. 18. There is also no averment in the writ affidavit as well as in the grounds of appeal to show that respondent discharges any public function. 19. In Sardar Associates’s case (supra) relied upon by learned Senior Counsel for the appellant the question before the Supreme Court was the source of power on the part of RBI to issue circulars and guidelines as regards OTS. In that case the respondent, Punjab & Sind Bank, was a public sector bank and it was held that it was bound by the guidelines of RBI. Thereafter, Supreme Court delved into the RBI guidelines pertaining to OTS. In that context, Supreme Court observed that if a public sector bank is otherwise bound by any guidelines issued by the RBI, there was no reason as to why the same could not be enforced in terms of the statute. Supreme Court further observed that Board of Directors of a public sector bank could not have taken recourse to a policy decision which is per se discriminatory. Respondent bank i.e., Punjab & Sind Bank was a ‘State’ within the meaning of Article 12 of the Constitution of India. Supreme Court was satisfied in the facts of that case that respondent bank was guilty of violation of Article 14 of the Constitution of India. 20. In Phoenix ARC Private Limited v. Vishwa Bharati Vidya Mandir (Civil Appeal Nos.257-259 of 2022, dated 12.01.2022) Supreme Court has held that a writ petition against a private financial institution or Asset Reconstruction Company (ARC) under Article 226 of the Constitution of India against the proposed action/actions under the SARFAESI Act would not be maintainable. 20. In Phoenix ARC Private Limited v. Vishwa Bharati Vidya Mandir (Civil Appeal Nos.257-259 of 2022, dated 12.01.2022) Supreme Court has held that a writ petition against a private financial institution or Asset Reconstruction Company (ARC) under Article 226 of the Constitution of India against the proposed action/actions under the SARFAESI Act would not be maintainable. During the course of a commercial transaction and under the contract, the private bank or ARC lends money to the borrowers and such activity of the banks/ARC cannot be said to be as performing a public function which is normally expected to be performed by the State authorities. Therefore, Supreme Court held that if a borrower is aggrieved by any of the actions of the private bank or ARC, it has to avail the remedy under the SARFAESI Act; no writ petition would lie and/or would be maintainable and/or entertainable. 21. The above decision of the Supreme Court therefore is a clear pointer that the action of a private bank while dealing with loan repayment of a borrower would not be amenable to the writ jurisdiction of the High Court. 22. Insofar OTS is concerned, it is nothing but a contract between two parties. If there is allegation that one party has not adhered to the terms of the contract or a party seeks enforcement of the contract of OTS, it has to seek enforcement of the contract or specific performance of the contract. Certainly the remedy is not by way of a writ petition. 23. As a matter of fact, Supreme Court in Bijnor Urban Cooperative Bank Limited, Bijnor v. Meenal Agarwal (Civil Appeal No.7411 of 2021, dated 15.12.2021) has made it categorically clear that no writ of mandamus can be issued by the High Court in exercise of powers under Article 226 of the Constitution of India directing a financial institution/bank to positively grant the benefit of OTS to a borrower. The grant of benefit under the OTS is always subject to the eligibility criteria mentioned under the OTS scheme and the guidelines issued from time to time. A decision as to whether OTS should be accepted or not should be left to the commercial wisdom of the bank. 24. Viewed in the above context, we do not find any error or infirmity in the view taken by the learned Single. A decision as to whether OTS should be accepted or not should be left to the commercial wisdom of the bank. 24. Viewed in the above context, we do not find any error or infirmity in the view taken by the learned Single. Therefore, without adverting to the merit of the rival contentions, we are not inclined to entertain the appeal. However, notwithstanding the same, it would be open to the parties to mutually settle their dispute, if so advised or if it is still possible. 25. Subject to the above, writ appeal is dismissed. 26. Miscellaneous applications pending, if any, shall stand closed. However, there shall be no order as to costs.