Gujarat High Court
M/S Posco Poggenamp Electrical Steel ... vs Uco Bank on 14 September, 2023
Author: Vaibhavi D. Nanavati
Bench: Vaibhavi D. Nanavati
NEUTRAL CITATION
C/SCA/5217/2022 ORDER DATED: 14/09/2023
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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 5217 of 2022
With
CIVIL APPLICATION (FOR FIXING DATE OF HEARING) NO. 1 of 2023
In R/SPECIAL CIVIL APPLICATION NO. 5217 of 2022
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M/S POSCO POGGENAMP ELECTRICAL STEEL PRIVATE LIMITED
Versus
UCO BANK
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Appearance:
MR. ANSHIN DESAI, SR. ADVOCATE WITH NATASHA SUTARIA(7907) for
the Petitioner(s) No. 1
ARJUN R SHETH(7589) for the Respondent(s) No. 1
MR RAJU K KOTHARI(2789) for the Respondent(s) No. 2
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CORAM:HONOURABLE MS. JUSTICE VAIBHAVI D. NANAVATI
Date : 14/09/2023
ORAL ORDER
1. The brief facts leading to the filing of the present petition read thus:
1.1 The Petitioner herein is a private limited Company duly registered under the relevant provisions of Companies Act, 1956, incorporated on 23.12.2010 and is engaged in the manufacturing of CRGO/CRNGO Laminations, which are used as core of high-value Transformers and Rectifiers.
1.2. The Petitioner, for carrying out business, approached Respondent for credit facilities for the first time in the year 2013. Vide Sanction letter dated 20.03.2013, term loan total amounting to Rs 15.71 Crores including Page 1 of 26 Downloaded on : Sat Sep 16 17:20:05 IST 2023 NEUTRAL CITATION C/SCA/5217/2022 ORDER DATED: 14/09/2023 undefined fresh term loan of Rs 1.40 Crores and working capital fund based limit of Rs 15 Cr, was sanctioned in favour of the Petitioner. 1.3 The Petitioner approached Respondent No 2 bank for credit facilities for the first time in 2013 wherein, vide sanction letter dated 29.10.2013, Respondent No. 2 bank granted credit facilities to the tune of Rs 12.30 Cr, including 5 Crore Cash Credit limit. 1.4 The account of the Petitioner was a standard account with regular operations and the conduct of business in the account of the petitioner was fair, transparent and regular till 29.02.2020. There was no amount whatsoever that was due or overdrawn in relation to the account of the Petitioner.
1.5 In June, 2020, the Petitioner approached Respondent Banks through letter dated 13.06.2020, requesting working capital term loan under the "Emergency Credit Line Guarantee Scheme" (for short "ECLGS"), the Petitioner being an MSME, to regain and restart operations after being adversely affected by the lockdown and COVID-19 Pandemic. The said application is duly produced at Annexure-E. 1.6 The petitioner duly filled the requisite form and vide email dated 15.06.2020, sent the same to the respondent Bank. Page 2 of 26 Downloaded on : Sat Sep 16 17:20:05 IST 2023
NEUTRAL CITATION C/SCA/5217/2022 ORDER DATED: 14/09/2023 undefined 1.7 Due to the unexpected delay in release of the facilities under ECLGS, vide email dated 25.06.2020, the petitioner requested Respondent No. 1 Bank to sanction ad-hoc limit for cash credit for Rs.10 cr in light of the order received for supplying of transformer laminations to the tune of Rs 40 cr.
1.8 The Petitioner vide emails dated 11.07.2020.06.08.2020 and 26.08.2020 again requested Respondent No 1 bank to sanction the loan as requested for at the earliest in light of the urgent funds required to carry out supply of the order received.
1.9 The Respondent No. 1 bank, vide email dated 14.09.2020, notified certain observations pertaining to the pending legal dispute against the promoter company i.e. Poggenamp Nagarsheth Powertronics Pvt. Ltd. and requested for clarifications on the same. The Petitioner submitted reply on the queries vide email communication dated 16.09.2020. The petitioner reiterated its request vide emails dated 29.09.2020 and 30.09.2020 requesting Respondent banks to sanction the loan. 1.10 The Respondent No 2 bank vide email dated 19.10.2020 denied extending facilities under ECLGS to the Petitioner company, citing irrelevant reasons. The said email communication dated 19.10.2020 is Page 3 of 26 Downloaded on : Sat Sep 16 17:20:05 IST 2023 NEUTRAL CITATION C/SCA/5217/2022 ORDER DATED: 14/09/2023 undefined duly produced at Annexure-K. The Respondent No 1 bank, vide email dated 22.02.2021, raised certain queries with respect to the account of the petitioner and it is the case of the petitioner that the petitioner was threatened that in the event that the petitioner failed to furnish requisite clarifications and documents, the same would result in declaration of the account of the Petitioner as Non-Performing Asset (NPA) by the end of FY 2020-21.
1.11 The Petitioner responded to the bank vide letter dated 26.02.2021. The account of the Petitioner was declared as NPA from 31.03.2021 and the same was notified to the Petitioner through email dated 04.05.2021 by the Respondent bank.
1.12 The Consortium of Banks, comprising of the Respondent Banks, in its meeting held on 26.05.2021, decided that the Petitioner would submit a restructuring proposal on or before 31.08.2021. The Petitioner duly submitted Debt Restructuring Proposal on 05.08.2021 and further on 26.08.2021 to Respondent Banks. The petitioner received demand notice dated 10.06.2021 under Section 13(2) of the Securitization and Asset Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short "SARFAESI Act") from Respondent No. 1 Bank demanding payment of Rs 11,39,60,3366.40. The Petitioner submitted a Page 4 of 26 Downloaded on : Sat Sep 16 17:20:05 IST 2023 NEUTRAL CITATION C/SCA/5217/2022 ORDER DATED: 14/09/2023 undefined reply to the said notice was furnished on 14.08.2021 stating that the facilities, as per the sanction letter, were not granted and the declaration of the account of the Petitioner as an NPA is in contravention of the guidelines issued by the Reserve Bank of India. 1.13 The Respondent No.1 Bank, vide email dated 14.09.2021 informed about the deficiencies in the Information Memorandum of the Restructuring Proposal as sought for by the Head Officer of Respondent bank and requested to provide clarifications on the same. The Petitioner, vide email dated 27.09.2021, duly furnished reply to all the queries that were raised by the Respondent No.1 bank.
1.14 It is the case of the Petitioner that despite resolving all queries and reasons raised by the Respondent Banks since the request for sanctioning of ECLGS was made, the facilities were not been granted to the Petitioner Company.
1.15 The Petitioner vide email dated 01.02.2022 again requested Respondent No. 1 bank to grant credit facilities under the ECLGS 4.0. The Respondent No. 1 bank denied sanctioning of the same on the ground that the account of the Petitioner company is an NPA, vide email dated 05.02.2022. In view of the aforesaid communication dated 5.2.2022 the Page 5 of 26 Downloaded on : Sat Sep 16 17:20:05 IST 2023 NEUTRAL CITATION C/SCA/5217/2022 ORDER DATED: 14/09/2023 undefined petitioner herein is constrained to approach this Court by filing the present petition invoking Article 226 of the Constitution of India and has prayed for the following reliefs:
"11. The Petitioner prays that this Hon'ble Court be pleased to grant interim relief as follows:
a. Release the entire limits under ECLGS vide directive circulars from NCGTC-Ministry of Finance.
b. Pending final adjudication and disposal of the present petition, direct the Respondent banks to release and grant the credit facilities pertaining to last tranche i.e. 10% under the ECGLS Scheme 4.0 that the petitioner is rightfully entitled for and whose validity is only until 31.03.2022.
c. Pending final adjudication and disposal of the present petition, direct the Respondent banks not to take any further coercive action in connection with the account of the petitioner for recovery under the application provisions of SARFAESI Act or any other provisions.
d. Such other and further reliefs, as this Hon'ble Court may deem fit and proper in the nature and circumstances of the case.
12. The Petitioner, therefore, prays that this Hon'ble Court be pleased to issue a writ of mandamus or a writ in mandamus or a writ of certiorari or a writ in the nature of certiorari or any other appropriate writ, direction or order and be pleased to:Page 6 of 26 Downloaded on : Sat Sep 16 17:20:05 IST 2023
NEUTRAL CITATION C/SCA/5217/2022 ORDER DATED: 14/09/2023 undefined a. Direct the Respondent Bank to release the entire credit facility upto i.e. 40% from March 2020 to February 2022. b. Grant such other and further reliefs, as this Hon'ble Court may deem fit and proper in the nature and circumstances of the case in the interest of justice.
2. Heard Mr. Anshin Desai, the learned Senior Counsel with learned advocate Ms. Natasha Sutaria, the learned advocate appearing for the petitioner, Mr. Arjun Sheth, the learned advocate appearing for the respondent No.1 and Mr. Raju Kothari, the learned advocate appearing for respondent No.2.
3. Mr. Anshin Desai, the learned Senior Counsel appearing for the petitioner submitted that the respondent authority erred in not extending the benefit of ECLGS to the Petitioner herein having applied for the benefit of the said Scheme, on 13.6.2020.
3.1 Mr. Desai, the learned Senior Counsel submitted that the Government of India, through the Ministry of Finance, introduced "Emergency Credit Line Guarantee Scheme" (for short "ECLGS") on 23.5.2020, as a special scheme, in view of the COVID-19 crisis, to provide 100% guarantee coverage to banks and NBFCs which amounts to Page 7 of 26 Downloaded on : Sat Sep 16 17:20:05 IST 2023 NEUTRAL CITATION C/SCA/5217/2022 ORDER DATED: 14/09/2023 undefined approximately 3-4 times the loan amounts sanctioned, in order to enable them to extend emergency credit facilities to business enterprises/MSMEs in view of COVID-19 Pandemic to meet their additional term loan/working capital requirements.
3.2 Mr. Desai, the learned Senior Counsel placed reliance on the Circular DOR.BP.BC.NO.76/21.06.201/2019-20 dated 21.06.2020, wherein the Reserve Bank of India clarified that "Please refer to circular Ref no. 2842/NCGTC/ECLGS dated May 23, 2020, issued by National Credit Guarantee Trustee Company (for short "NCGTC") in respect of the captioned scheme announced by the Government of India to extend a guaranteed emergency credit line to MSME borrowers. As credit facilities extended under the scheme guaranteed by NCGTC are backed by an unconditional and irrevocable guarantee provided by the Government of India, it has been decided that Member Lending Institutions shall assign zero percent risk weight on the credit facilities extended under this scheme to the extent of guarantee coverage." 3.3 Mr. Desai, the learned Senior Counsel submitted that the petitioner being an MSME, is rightfully entitled to the ECGLS Scheme 1.0 and 4.0 that was propagated by the Government of India through Ministry of Page 8 of 26 Downloaded on : Sat Sep 16 17:20:05 IST 2023 NEUTRAL CITATION C/SCA/5217/2022 ORDER DATED: 14/09/2023 undefined Finance in light of the Covid-19 Pandemic. It was submitted that non-
grant of facilities under ECLGS, the Petitioner resulted in heavy losses in the business of the petitioner. The orders that were undertaken by the petitioner to have been fulfilled, pursuant to receipt of facilities under ECLGS, were also cancelled due to the liquidity crunch. It was submitted that the around 100 employees of the petitioner is suffering from tremendous liquidity crunch, initially in light of the COVID-19 pandemic and afterwards due to non-grant of requisite credit facilities by the Respondent Banks.It was submitted that the business of the Petitioner falls under the category of stressed sectors as per the KV Kamath Committee Report dated 07.09.2020. It was submitted that though the ECLGS is one such mechanism to provide support MSMEs, Non- Banking Finance Companies, agriculture, sectors allied to agriculture, contractors, street vendors, State Governments, relief in provident fund contribution, extension of subsidy on home loans etc, however, the benefit of the Scheme has not bee provided to the petitioner by the respondent authority despite being eligible for the same. It was submitted that the account of the petitioner was that of the standard asset as on 29.02.2020 and thus the Respondent No.1 bank is entitled to give 100% guarantee coverage for the GECL assistance of loan under the ECGLS Scheme as per the circular dated 23.05.2020. It was submitted that in the Page 9 of 26 Downloaded on : Sat Sep 16 17:20:05 IST 2023 NEUTRAL CITATION C/SCA/5217/2022 ORDER DATED: 14/09/2023 undefined event the Respondent Banks would have approved and fully disbursed the amounts the Petitioner was entitled to under the ECLGS, the account of the Petitioner would have continued to remain a regular and standard account till date i.e the date of filing of the petition. There would be no requirement to declare the account of the Petitioner as a special mention account much less it being declared as an NPA. It was submitted that the actions of the Respondents are beyond the provisions, directions, guidelines and circulars issued by the statutory force of law in India and therefore, Petitioner herein is entitled to invoke the jurisdiction of this Hon'ble Court under Article 226 of the Constitution of India. 3.4 At the outset, Mr. Desai the learned Senior Counsel appearing for the petition submitted that the petitioner could noT avail the benefit of ECLGS in view of the delay caused at the instance of the respondent authority in considering the application filed by the petitioner herein seeking benefit of the said Scheme by an application dated 13.6.2020 (Annexure "E") and that the scheme came to be floated on 23.5.2020 and as per the requirement, to be eligible to avail the benefit of the said scheme, the petitioner had standard operating loan account and, therefore, the respondent authority ought not to have denied the crediti facilities of the said Scheme.
Page 10 of 26 Downloaded on : Sat Sep 16 17:20:05 IST 2023 NEUTRAL CITATION C/SCA/5217/2022 ORDER DATED: 14/09/2023 undefined
4. Mr. Desai, the learned Senior Counsel placed reliance on the following cases:
(A) Rights of party on the basis of ECLGS Scheme:
(i) Nagraj Steel Scrap & Ors. v. Union of India and Ors MANU/MH/2649/2021
(ii) Anup Kumar Daruka v. HDFC Limited and Ors, MANU/PH/0759/2022
(iii) Gajendra Sharma v. Union of India, (2021) 1 SCC 210;
(iv) Future Technologies v. The Chief Manager, Punjab National Bank, MANU/OR/0425/2020 (B) Rights will have to be determined when petition was filed:
(i) Vineet Kumar v. Mangal Sain Wadhera,
1984 3 SC 352;
(C) Beneficial Statute/ Circular is always retrospective in nature.
(i) Commissioner of Central Excise, Bangalore v. Mysore Electricals Industries Ltd., (2006) 12 SCC 448;
(D) No bar of alternative remedy against the present petitioner.
(i) Secretary Cannanore Muslim Educational Assoc BNHNN, Kanpur v. State of Kerala, 2010 (5) SCALE 184.Page 11 of 26 Downloaded on : Sat Sep 16 17:20:05 IST 2023
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5. Heard Mr. Arjun Sheth, the learned advocate appearing for the respondent No.1. Mr. Sheth, the learned advocate submitted that the present petition is filed at a belated stage only to scuttled from the SARFAESI action already initiated by the respondent No. 1 bank. At the outset, it was submitted that the prayers in the petition seek relief with respect to the action undertaken by the respondent banks under the SARFAESI Act. It was submitted that the petitioner herein be relegated to avail statutory remedy under the SARFAESI Act and this Court may not, on the aforesaid ground alone, entertain the present petition. It was submitted that the petitioner herein has no vested right to obtain facility from the Bank. To grant facility is the discretion of the bank and the bank is required to apply prudent banking judgment. 5.1 Mr. Arjun Sheth, the learned advocate appearing for the respondent No.1 bank, on merits, submitted that the respondent No.1 bank initiated SARFAESI action i.e. Section 13(2) notice came to be issued to the petitioner on 10.6.202, Section 13(4) symbolic possession notice came to be issued on 10.1.2022 under the SARFAESI Act. The present petition has been filed after a gap of 17 months and in view therefore, the petitioner suffered from delay and laches and is malafide in nature.
Page 12 of 26 Downloaded on : Sat Sep 16 17:20:05 IST 2023 NEUTRAL CITATION C/SCA/5217/2022 ORDER DATED: 14/09/2023 undefined 5.2 Placing reliance on the communication between the petitioner and
respondent No.1 bank, it was submitted that the petitioner herein was in constant communication with the respondent banks and vide communication/ email dated 19.10.2020, the petitioner was denied extending facility under the ECLGS by stating relevant reasons by the respondent Banks.
5.3 It was submitted that respondent No.1 vide email dated 14.9.2020 (Page-87 of the petition) raised grave concerns with the petitioner company with regards to legal dispute with the two promoters of the petitioner (having combined shareholding of 77% in the petitioner company) being on Poggenamp Nagarsheth Powertronics Private Limited (holding 51% of the petitioner company) and one Posco India Pune Processing Centre Pvt. Ltd. (holding 26% in the petitioner) being in legal battle and that Posco India Pune Processing Centre Pvt. Ltd had initiated insolvency proceedings against Poggenamp Nagarsheth Powertronics Private Limited. It was submitted that the promoter company of the petitioner having name Poggenamp Nagarsheth Powertronics Private Limited (holding 51% of the petitioner) had also become NPA.
Page 13 of 26 Downloaded on : Sat Sep 16 17:20:05 IST 2023 NEUTRAL CITATION C/SCA/5217/2022 ORDER DATED: 14/09/2023 undefined 5.4 It was submitted that the promoters of the petitioner company had
very poor credit score, the respondent No.1 has not granted credit facilities though the ECLGS to the petitioner company. Reliance was placed on CIBIL report of Gauttam Nipinbhai Nagarsheth. 6.5 Reliance was placed on the credit score report dated 26.11.2019 of the petitioner company wherein delinquencies were reported on the petitioner company in the last 24 months. It was submitted that respondent No.1 duly perused the credit-worthiness of the petitioner company and on account of the promoter company being admitted into the CIRP process, there was a possibility of change in the share-holding and management structure of the petitioner company at the relevant point of time. There was complete uncertainty on the aspect of who will retain control of the petitioner company and, therefore, it became a very risky proposition on granting additional credit facilities to the petitioner company.
5.6 Reliance was placed on the Scheme itself as it envisages the particular MLI's to evaluate the credit proposals by using their banking judgment. It was submitted that on account of the petitioner company having being declared as NPA, admitted into the insolvency process, poor Page 14 of 26 Downloaded on : Sat Sep 16 17:20:05 IST 2023 NEUTRAL CITATION C/SCA/5217/2022 ORDER DATED: 14/09/2023 undefined credit score of the promoter group who also held 26% shareholding in the present petitioner company and in order to not create any further exposure, the respondent No.1 deem it fit to use its discretion under the said Scheme to deny granting ECLGS facilities to the petitioner company.
5.7 It was submitted that bankers are commercial entities and that since the customer profile, organizational structure and spread of each lending institution is widely different from others, each lending institution is best placed to assess the requirements of its customers and therefore such discretion was left to the lending institutions concerned. It was submitted that any borrowing arrangement is a commercial contract between the lender and the borrower and therefore, the RBI and / or the Union of India can provide broad guidelines whilst only recommending to provide the reliefs. It was submitted that in the case of the petitioner company, the petitioners had significant financial stress which had potential implications on the long terms viability of the petitioner company. 5.8 Placing reliance on the aforesaid submission, it was submitted that the respondent No.1 had duly considered the representations made by the petitioner to be considered eligible for ECLGS and after considering the Page 15 of 26 Downloaded on : Sat Sep 16 17:20:05 IST 2023 NEUTRAL CITATION C/SCA/5217/2022 ORDER DATED: 14/09/2023 undefined credit worthiness of the petitioner and also that of the promoter group, it was deemed that any ad-hoc limit to be granted would be against the interests of the bank and its internal guidelines. 5.9 Placing reliance on the aforesaid, it was submitted that the respondent No.1 has duly considered the risk that it will face if such additional credit facility would be granted to the petitioner company and therefore, the respondent No.1 is entitled to take such a decision based on prudent business principles, qua which decisions this Court would not be exercising jurisdiction under Article 226 of the Constitution of India. 5.10 Mr. Arjun Sheth, the learned advocate submitted that the petitioner vide email dated 16.9.2020 (at page-91 of the petition) had given certain explanations, however, the same were not found to be satisfactory by the respondent No.1.
5.11 Mr. Sheth, the learned advocate submitted that the credit department of respondent No.1 vide letter dated 30.9.2020 had intimated the local branch at Gandhinagar that due to the insolvency proceedings which could then result in the impact on management control of the petitioner, the competent authority was then not inclined to consider the proposal for granting of the scheme in question, the same is attached at Page 16 of 26 Downloaded on : Sat Sep 16 17:20:05 IST 2023 NEUTRAL CITATION C/SCA/5217/2022 ORDER DATED: 14/09/2023 undefined Annexure "K", which issued by the credit department of the respondent No.1 to the local branch at Gandhinagar. Mr. Sheth submitted that the petitioner was declared NPA by communication dated 31.3.2021. 6.12 Reliance was placed on the order passed in SCA No.7558 of 2008 dated 19.11.2019.
6. Heard Mr. Raju Kothari, the learned advocate appearing for the respondent No.2. Mr. Kothari at the outset submitted that respondent No.2 is a private bank and no writ would lie against the respondent No.2. The Respondent No.2 cannot be construed as State under the Article 12 of the Constitution of India and the writ would not be maintainable against respondent No.2 as it is a private bank. Mr. Kothari, the learned advocate supported the contentions and submissions advanced by Mr. Arjun Sheth, the learned advocate appearing for the respondent No.2. Mr. Kothari, the learned advocate appearing for the respondent No.2 submitted that as back as on 19.10.2020 (Annexure K) informed the petitioner that the petitioner was not eligible to be considered for the benefit of ECLGS. It was lastly submitted that the Scheme is not in existence and in view thereof in absence of the Scheme, not being in Page 17 of 26 Downloaded on : Sat Sep 16 17:20:05 IST 2023 NEUTRAL CITATION C/SCA/5217/2022 ORDER DATED: 14/09/2023 undefined existence, the reliefs, as prayed, even otherwise are such, it cannot be granted.
6.1 Reliance was placed on the order passed in SCA No. 15813 of 2019 dated 28.11.2019 6.2 Mr. Arjun Sheth, the learned advocate appearing for the respondent No.1 Bank, placing reliance on the aforesaid submissions, submitted that the present petition being devoid of merits be dismissed and also emphasized on the fact that the Scheme in question is not in force.
ANALYSIS
7. The petitioner herein being a private limited company, duly incorporated on 23.12.2010 under the provisions of the Companies Act and is engaged in the manufacturing of CRGO/CRNGO Laminations, which are used as core of high-value Transformers and Rectifiers. 7.1 The account of the Petitioner was a standard account with regular operations and the conduct of business in the account of the petitioner was fair, transparent and regular till 29.02.2020. 7.2 The Government of India through the Ministry of Finance introduced on 23.05.2020 a scheme in the name of "Emergency Credit Page 18 of 26 Downloaded on : Sat Sep 16 17:20:05 IST 2023 NEUTRAL CITATION C/SCA/5217/2022 ORDER DATED: 14/09/2023 undefined Line Guarantee Scheme" (hereinafter referred to as ECLGS) as a special scheme in view of the COVID-19 crisis to provide 100% irrevocable and unconditional guarantee to all financial institutions in order to enable them to extend emergency credit facilities to business enterprises/MSMEs like the Petitioner in view of COVID-19 Pandemic and to meet their additional working capital requirements to overcome the pandemic situation and to keep the business sailing. The Circulars dated 23.5.2020 and 21.6.2020 are duly produced at Annexure "D". 7.3 The petitioner herein approached the respondent banks, by letter dated 13.6.2020 to avail the benefits of the aforesaid Scheme. The petitioner entered into various communications with respondent authority for sanctioning the benefit of the said Scheme. By communication dated 19.10.2020, the respondent No.2 bank declined to extend facilities under the said Scheme to the petitioner. The said communication dated 19.10.2020 is duly produced at Annexure "K" at Page-322. 7.4 The petitioner and the respondent No.1 bank were in continuous communication by various emails. The last correspondence in relation to the scheme in question is of September, 2020 which is duly produced at Page-96. The main bone of contention raised by Mr. Anshin Desai, the Page 19 of 26 Downloaded on : Sat Sep 16 17:20:05 IST 2023 NEUTRAL CITATION C/SCA/5217/2022 ORDER DATED: 14/09/2023 undefined learned Senior Counsel was with regard to the delay caused by the respondent bank and the delay which was caused in considering sanctioning of the facilities, with regard to said Scheme in question, at the end of the respondent banks and in view thereof, prayers as prayed for by the petitioner be allowed for the reasons that had the respondent banks acted within time, the petitioner could have availed the facilities of ECLGS.
7.5 The respondent No.1 placed the application dated 15.6.2020 preferred by the petitioner herein before the higher authority.
8. The following communications emerge between the parties:
(1) The respondent No.1 vide email dated 14.9.2020 (page-87 of the petition) raised grave concerns with the petitioner company with regards to legal dispute with the two promoters of the petitioner (having combined shareholding of 77% in the petitioner) one Poggenamp Nagarsheth Powertronics Private Limited (holding 51% of the petitioner) and one Posco India Pune Processing Centre pvt. Ltd. holding 26% in the petitioner) being in legal battle and that Posco India Pune Processing Centre Pvt. Ltd. had initiated insolvency proceedings against Poggenamp Nagarsheth Powertronics Private Limited. The said details of promoters of the Page 20 of 26 Downloaded on : Sat Sep 16 17:20:05 IST 2023 NEUTRAL CITATION C/SCA/5217/2022 ORDER DATED: 14/09/2023 undefined petitioner company is duly produced at page-121 of the present petition.
(2) The promoter Company of the petitioner i.e. Poggenamp Nagarsheth Powertronics, holding 51% of the petitioner, had also become NPA. (Para-34, page-183) (3) The petitioner vide email dated 16.9.2020 (at page-91 of the petition) had given certain explanations, however, the same was not found satisfactory by the respondent No.1.(Para-35) (4) The credit department of respondent No.1 vide letter dated 30.09.2020, had intimated the local branch at Gandhinagar that due to insolvency proceedings which could then result in the impact on management control of the petitioner, the competent authority was then not inclined to consider the proposal for granting of the scheme in question. (Annexure "K") (5) Dispute between two promoters of the petitioner was evident from insolvency admission order dated 22.1.2020 passed by the NCLT at Annexure "L".
(6) Poggenamp Nagarsheth Powertronics Private Limited (holding 51% of the petitioner) and the petitioner company having Page 21 of 26 Downloaded on : Sat Sep 16 17:20:05 IST 2023 NEUTRAL CITATION C/SCA/5217/2022 ORDER DATED: 14/09/2023 undefined similar Directors, being members of Nagarsheth Family, who also have 23% share-holding in the petitioner company. (7) The petitioner company was suffering from loses and was in poor financial position, as is evident from the financial statements of the petitioner as of 31.3.2021 and 31.3.2020, at Annexure "O" (8) Considering the fact that the promoters of the Company had very poor credit score, the respondent No.1 had not granted credit facility of ECLGS to the petitioner company. (para-40, page-184) (9) The credit score of the petitioner company dated 26.11.2019 is duly produced at Annexure "P" and the CIBIL report of Gauttam Nipinbhai Nagarsheth is duly produced at Annexure "Q". (10) On perusal of the credit score dated 26.11.2019 of the petitioner company, delinquencies have been reported on the petitioner company since then.
(11) Credit score of the promoter of the petitioner company records the following reasons for giving poor credit score: (Para-42 page-185) i. PRESENCE OF DELINQUENCY AS OF RECENT UPDATE.
ii. PRESENCE OF SEVERE DELINQUENCY. iii. PRESENCE OF DELINQUENCY. Page 22 of 26 Downloaded on : Sat Sep 16 17:20:05 IST 2023 NEUTRAL CITATION C/SCA/5217/2022 ORDER DATED: 14/09/2023 undefined iv. HIGH BALANCE BUILD-UP ON NON-MORTGAGE LOANS. v. PAYMENT MADE IN PROPORTION TO TOTAL BALANCE OUTSTANDING IS LOW.
(12) Considering the credit-worthiness of the petitioner company and on account of the promoter company being admitted into the CIRP process, there was a possibility of change in the share- holding and management structure of the petitioner company at the relevant point of time.
(13) There was complete uncertainty on the aspect of who will retain control of the petitioner company and, therefore, it became a very risky proposition on granting additional credit facilities to the petitioner company.
(14) The Scheme ECLGS itself envisages the particular MLI's to evaluate the credit proposals by using their banking judgment. (15) On account of the petitioner company having being declared as NPA, admitted into the insolvency process, poor credit score of the promoter group who also held 26% shareholding in the present petitioner company and in order to not create any further Page 23 of 26 Downloaded on : Sat Sep 16 17:20:05 IST 2023 NEUTRAL CITATION C/SCA/5217/2022 ORDER DATED: 14/09/2023 undefined exposure, the respondent No.1 deem it fit to use its discretion under the said Scheme to deny granting ECLGS facilities to the petitioner company.
9. From the aforesaid, the proposition laid by the learned Senior Counsel Mr. Anshin Desai that ECLGS is a beneficial Scheme, which requires to be applied retrospectively in accordance with the ratio laid down by the Hon'ble Apex Court in CIT v. Vatika Township, reported in (2015) 1 SCC 1, in the opinion of this Court, while the Scheme is a beneficial Scheme, respondent No.1 bank has taken due efforts to consider the eligibility of the petitioner company's entitlement for the ECLGS and denied the benefit of the said Scheme by communication dated 5.2.2022. In the meantime, the petitioner company came to be duly classified as Non-Performing Asset (NPA) on 31.3.2021. The aforesaid proposition would be of no avail to the petitioner herein.
10. By e-mail dated 1.2.2022, the Petitioner vide email dated 01.02.2022 again requested Respondent No. 1 bank to grant credit facilities under the ECLGS 4.0., but the same came to be denied by the Respondent No. 1 bank vide email dated 05.02.2022. (page-170-171) Page 24 of 26 Downloaded on : Sat Sep 16 17:20:05 IST 2023 NEUTRAL CITATION C/SCA/5217/2022 ORDER DATED: 14/09/2023 undefined
11. On the aforesaid grounds, considering the facts of the present case, the contention raised by Mr. Anshin Desai, the learned Senior Counsel appearing for the petitioner that there is a delay on the part of the respondent banks, does not weigh with this Court.
12. On a pertinent query raised by this Court with regard to whether the said Scheme is in vogue, it was answered by Mr. Anshin Desai, the learned Senior Counsel appearing for the petitioner that the said Scheme is not in force.
13. Considering the aforesaid, this Court is not inclined to exercise its extra-ordinary jurisdiction under Article 226 of the Constitution of India, in view of the following:
(i) The petitioner herein was informed by the respondent No. 2 AXIS Bank as back as on 19.10.2020 that the benefit of the said Scheme could not be granted to the petitioner;
(ii) The respondent bank was in constant communication vide emails and such communications, as has been considered above, and the petitioner was informed on 5.2.2022 by the respondent No.1 with regard to denial of the benefit of the ECLGS. Page 25 of 26 Downloaded on : Sat Sep 16 17:20:05 IST 2023
NEUTRAL CITATION C/SCA/5217/2022 ORDER DATED: 14/09/2023 undefined
(iii) The present petition is held to be not maintainable qua respondent No.2 being a private bank and the same issue, as held by in AIR 2003 SC 4325.
(iv) Civil Application No.1 of 2023 seeking preponement of date of hearing of the present Special Civil Application and/ or to direction to the respondent banks to extend the facilities is unadjudicated.
(v) The Scheme itself is not in force;
(vi) Considering the ratio as laid down and that the Scheme is
not in force, the prayers, as prayed for, qua the action initiated against the petitioner herein under SARFAESI Act, it is open for the petitioner to avail statutory remedy challenging any action undertaken by the respondent banks under the SARFAESI Act, in accordance with law.
For the foregoing, the petition fails and the same is dismissed. Since the main matter is already listed on board, the Civil Application stands disposed of.
(VAIBHAVI D. NANAVATI,J) SAJ GEORGE Page 26 of 26 Downloaded on : Sat Sep 16 17:20:05 IST 2023