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Judgment
This Writ Petition is filed to declare the unilateral action of 2nd respondent in foreclosing the account of the petitioner, by way of demand notice dated 01.02.2022, without taking into consideration the representation submitted by the petitioner including the reply dated 07.02.2022, as illegal and consequently direct 2nd respondent to extend/renew CC limit and review of term loan for the petitioner.
Heard Sri Maruthi Rao Srungarapu, learned counsel for the petitioner, learned Assistant Solicitor General of India appearing for 1st respondent and Sri M.V.K.Viswanadham, learned standing counsel appearing for 2nd respondent. Perused the record.
The petitioner is a private limited company doing plastic business. It had approached 2nd respondent for loan with an intention to establish the said unit. On consideration of credentials of the petitioner and a detailed Asset Valuation Report, a term loan under WCTL under GECL, Rs.14,10,000/- and cash credit of Rs.70,00,000/- was sanctioned to the petitioner vide sanction letter dated 12.01.2020. The petitioner had obtained the said loan from 2nd respondent under Micro, Small and Medium Enterprises Scheme (for short, ‘MSME scheme’). It is regular in making payments towards the loan. But the respondent Bank has stopped withdrawal from the cash credit account on 31.12.2020 without any reason. The Manager of 2nd respondent Bank has visited the unit and requested the petitioner to produce some relevant papers and the same were furnished. Even then, notice dated 01.02.2022 was issued to the petitioner declaring the loan account of the petitioner as Non Performing Asset (NPA) on 01.02.2022 and 2nd respondent has directed the petitioner to pay an amount of Rs.70,64,320/- towards cash credit and Rs.11,86,602/- towards term loan and interest from 01.02.2022 within ten days from the receipt of said notice. 2nd respondent did not consider single request made by the petitioner to re-structure the loan in spite of the circulars dated 06.08.2020 and 05.05.2021 issued by the Reserve Bank of India (RBI). Emergency Credit Line Guarantee Scheme (ECLG) was also announced by 1st respondent and the same is extended till 31.03.2022. Without considering the said facts, 2nd respondent has declared the account of the petitioner as NPA which is illegal.
On the other hand, 2nd respondent had filed counter contending that the petitioner herein has diverted funds and violated the terms of sanction. There is no violation of any of the circulars dated 06.08.2020 and 05.05.2021 issued by the RBI. The petitioner did not submit any financial papers to consider renewal of the Credit limit. Even then, the 2nd respondent bank has allowed cash credit limit till 31.01.2022 in the account. The petitioner did not either take consent from 2nd respondent bank or inform the bank for shifting to the new leased premises under an unregistered lease agreement. Bank came to know about the new address after visiting the old address and after local enquiries. The account of the petitioner was always in excess of sanction limit and equated monthly instalments are not paid in time. Therefore, 2nd respondent has declared as NPA as per the guidelines of RBI asset classification norms. The 2nd respondent has addressed the petitioner on 06.01.2022, pointed out serious lapses in running the account but the petitioner did not respond. Therefore, 2nd respondent bank has recalled vide its letter dated 01.02.2022. Only after the loan was recalled, the petitioner chose to send a mail on 07.02.2022 with untenable explanations. Thus, according to 2nd respondent, the petitioner failed to follow the terms of sanction and as also failed in paying outstanding amounts. Therefore, 2nd respondent has opted to recall the loan.
Learned counsel for the petitioner would submit that the petitioner was regular in payment of loan amount including principal and interest. Despite specific requests, 2nd respondent has not furnished copy of the statement of the petitioner’s account. The respondent has renewed the loan account of the petitioner four times and latest renewal was on 31.01.2022. On the same day i.e. on 31.01.2022, 2nd respondent has declared the account of the petitioner as NPA. Therefore, the actions of 2nd respondent are illegal. Referring to letter dated 06.01.2022, learned counsel for the petitioner would submit that in the said letter itself, 2nd respondent has sought clarification for withdrawal of the amount from cash credit account. Certain payments were also specifically mentioned in the said letter. Without considering the same, 2nd respondent has declared the account of the petitioner as NPA which is contrary to the circulars issued by 1st respondent.
Learned counsel for the respondent bank would submit that the petitioner is irregular in clearing loan, it has diverted the funds, it has changed the address without consent of the bank and therefore, 2nd respondent left with no other option but to declare the account of the petitioner as NPA . There is no error in it. The deponent of the present writ petition i.e. Veera Vijay Bhaskar Vemuru, is not having any authority to represent the petitioner Company and he has not filed authorization, resolution of the petitioner company i.e. Sri Venkata Krishna Industries Private Limited. With the said submissions, he sought to dismiss the writ petition.
Thus, it is not in dispute that the petitioner has availed cash credit facility of Rs.14,10,000/- on 12.06.2020 under ECLG Scheme and in paragraph No.6 of the counter affidavit, 2nd respondent has specifically mentioned alleging that the date of Credit Sanction Advice is changed by the petitioner without realizing that “any alteration in the sanction letter requires authentication”. It is further mentioned that there was no such authentication when the date was changed, therefore, the petitioner cannot change the Credit Sanction Advice with interpolations and insertions. In paragraph No.7, there is specific allegation against the petitioner that the petitioner has diverted the funds. 2nd respondent bank has detected that the funds were diverted to Margadarshi Chit Fund from its account, to MS Plastic of which his wife is the Proprietor, to the personal account with ICICI bank of the deponent, to the account of Sure Akhil with HDFC bank and to the account with Axis bank of Mrs. Vajipeyjulu Padmavati Sravani. The said diversion of funds are suspicious in nature. The same are only examples of diversion of funds unrelated to the nature of the business of the petitioner for which the petitioner raised loan. The account of the petitioner was always in excess of sanction limit and equated monthly instalments (EMIs) are not paid within time. Paragraph Nos.13 of the counter it is mentioned that the petitioner did not make any request or representation for re-structuring of loan as per the RBI directives dated 05.05.2021. It says that the above measures shall be contingent on the lending institution satisfying themselves that the same is necessitated on account of the economic fallout from COVID-19.
In paragraph No.15 of the counter, there is specific allegation against the petitioner herein that the petitioner neither took consent of the bank nor informed for shifting of the new leased premises under an unregistered lease agreement. The bank came to know about the new address after local enquiries. In paragraph No.13 of the counter affidavit, 2nd respondent further alleged against the petitioner herein that 2nd respondent addressed a letter to the petitioner on 06.08.2021 and pointed out serious lapses in running the account but the petitioner did not respond. Therefore, 2nd respondent bank has recalled the loan of the petitioner vide letter dated 07.02.2022. Soon after the loan was recalled, the petitioner sent a mail on 07.02.2022 with untenable explanations.
In paragraph No.18, it is alleged that since petitioner did not adhere to the terms of sanction and not submitting documents as required and not paying outstanding amounts to the respondent, the respondent bank has no option except to demand and recall the loan. It is also relevant to note that in paragraph No.3 of the counter, 2nd respondent has specifically contended that the deponent of the writ affidavit is not authorized by the petitioner company and is not competent to file writ petition. Despite the said specific allegation made by the 2nd respondent, petitioner herein has not filed any reply or rejoinder to the said counter denying the said allegations. Therefore, the said allegation amounts to admission by the petitioner herein.
Thus, the aforesaid facts and contents of the counter would reveal that there are specific allegations against the petitioner herein. It has altered the credit sanction advice. It has diverted the funds. It has shifted the premises without consent of the bank. It has not submitted any request or representation for re-structuring of loan.
It is relevant to note that the credit facility should be utilized for the specific purpose for which it was sanctioned and if the Bank has reason to believe that the borrower has violated or apprehends that the borrower is about to violate the said conditions, the Bank shall have the option to exercise its right to recall the entire loan or any part thereof at once.
As stated supra, it is the specific contention of 2nd respondent that the petitioner has diverted the funds sanctioned. The said diversion is also specifically mentioned in the counter by 2nd respondent. There is no denial of the same by the petitioner by way of filing rejoinder to the counter filed by 2nd respondent can be considered as a clear admission.
It is also relevant to note that as per RBI directives dated 05.05.2021, the above satated measures shall be contingent on the respondent bank satisfying itself that the same is necessitated on account of the economic fallout from COVID-19 pandemic. According to 2nd respondent, the petitioner has already availed GECL for Rs.14,10,000/-from 07.06.2022 itself. It has to convince the bank for further financial assistance for doing business. Though the petitioner herein has not submitted any financial papers to consider renewal of the Credit limit, the bank has allowed credit limit till 31.02.2022. As per the guidelines issued by the RBI, classification of the Account as NPA is not the act of human agency, it is a computerized environment. The account was always in excess of sanctioned limit and equated monthly instalments (EmIs) are not paid in time. Thus, there are serious lapses in running the account of the petitioner. Despite pointing out of the same, there is no response from the petitioner. Therefore, 2nd respondent has declared the account of the petitioner as NPA as per the RBI assets classification norms, the respondent No.2 has classified the account of the petitioner on 31.01.2022 as NPA..
In the letter dated 01.02.2022, the said facts are specifically mentioned. Vide letter dated 06.01.2022, the 2nd respondent has sought clarifications for withdrawal of amounts from the cash credit account of the petitioner. However, vide email dated 07.02.2021, the petitioner has purchased moulds from Ram Engineering works and delivery challans are collected by AGM for Rs.10 Lakhs and Rs.2 lakhs as advance salary to employees.
According to 2nd respondent, the said explanation given by the petitioner is not satisfactory as the same is suspicious. Thus, according to this Court, there is no violation of any circular or guidelines issued either by 1st respondent or by the RBI, committed by 2nd respondent in declaring the petitioner’s account as NPA.
The Hon’ble Apex Court in State of Gujarat Vs. Meghji Pethraj Shaj Charitable Trust (1994) 3 SCC 552 categorically held that the termination is not a quasi judicial act by any stretch of imagination; hence it was not necessary to observe the principles of natural justice. It is also an executive or administrative act to attract the duty to act fairly. If the matter is governed by a contract/agreement, the writ petition is not maintainable since it is a public law remedy and is not available in private law field i.e. where the matter is governed by a non-statutory contract.
In the present case also, the petitioner herein has failed to establish violation of any rule, statute, guideline and circular issued by either 1st respondent or RBI in declaring the account of the petitioner as NPA.
In Kerela State Electricity Board Vs. Kurien E.Kalathil (2000) 6 SCC 293, the Apex Court held that a statute may expressly or impliedly confer power on a statutory body to enter into contracts in order to enable it to discharge its functions. Dispute arising out of the terms of such contracts or alleged breaches have to be settled by the ordinary principles of law of contract. The fact that one of the parties to the agreement is a statutory or public body will not of itself affect the principles to be applied. The disputes about the meaning of a covenant in a contract or its enforceability have to be determined according to the usual principles of the Contract Act. Every act of a statutory body need not necessarily involve an exercise of statutory power. Statutory bodies, like private parties, have power to contract or deal with property. Such activities may not raise any issue of public law. In the present case, it has not been shown how the contract is statutory. The contract between the parties is in the realm of private law. It is not a statutory contract. The disputes relating to interpretation of the terms and conditions of such a contract could not have been agitated in a petition under Article 226 of the Constitution of India. That is a matter for adjudication by a civil court or in arbitration if provided for in the contract. Whether any amount is due and if so, how much and refusal of the appellant to pay it is justified or not, are not the matters which could have been agitated and decided in a writ petition. The contractor should have been relegated to other remedies.
In the present case also, the petitioner failed to establish violations of any rule, provision or guideline or circular issued either by 1st respondent or RBI to maintain the present writ petition.
In a judgment dated 17.11.2021 in W.P.No.2465 of 2021 and W.P.No.2466 of 2021, the Division Bench of High Court of Judicature at Bombay, Nagpur Bench, Nagpur categorically held that to maintain writ petition, the petitioner has to establish that the authorities have acted contrary to the public good, public interest, unfairly, unjustly, unreasonably, discriminatory and violative of Article 14 of the Constitution of India in its contractual obligations. In the present case, the petitioner herein failed to establish that the 2nd respondent bank has acted contrary to any of them.
As discussed supra, viewed from any angle, the present writ petition is liable to be dismissed.
Therefore, the writ petition is dismissed. Consequently, miscellaneous Petitions, if any, pending, shall also stand closed.