Bombay High Court
Pornima Industries Parthership Firm ... vs Central Bank Of India Through Branch ... on 20 January, 2023
Author: Mangesh S. Patil
Bench: Mangesh S. Patil
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
BENCH AT AURANGABAD
WRIT PETITION NO. 3006 OF 2018
Pornima Industries,
Partnership firm through its partners,
Ratnali Tq. Dharmabad, Dist. Nanded.
1-A) Anilkumar s/o. Gangadhar Bhojraj,
Age 50 years, Occ. Agril. & Business,
R/o. Ratnali, Tq. Dharmabad,
Dist. Nanded.
1-B] Dattatraya s/o. Wamanrao Mitkare,
Age 82 years, Occ : Business,
R/o. Ratnali, Tq. Dharmabad,
Dist. Nanded.
1-C] Nanda Anilkumar Bhojraj
Age 44 years, Occ : Business,
R/o. Ratnali, Tq. Dharmabad,
Dist. Nanded.
... Petitioners.
Versus
1] Central Bank of India,
Through its Branch Manager,
Nanded Branch, Dist. Nanded.
2] Regional Manager,
Central Bank of India,
Osmanpura, Aurangabad.
3] Field General Manager,
Central Bank of India,
M.G. Road, Camp, Pune.
4] General Manager Recovery,
Central Bank of India
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Chandramukhi Building,
Nariman Point, Mumbai.
.. Respondents.
Mr. V.J. Dixit, Senior Counsel i/b. Mr. S.v.m Dixit, Advocate for the
petitioners,
Shri Kulbhushan B. Deshpande, Advocate for resopndent Nos. 1 to 4.
CORAM : MANGESH S. PATIL
& S.G. CHAPALGAONKAR, JJ.
RESERVED ON : 20 JANUARY 2023
PRONOUNCED ON : 8 FEBRUARY 2023
JUDGMENT [ S.G. CHAPALGAONKAR, J]
1. The present writ petition is filed under Article 226 of the
Constitution of India. The petitioner articulated substantive prayers as
under:
"[A] For a writ of Certiorari, Order or direction in nature of
Certiorari calling for record and proceedings of Letter dated
08.03.2018, issued by respondent No.1 thereby rejecting
proposal of petitioner for One Time Settlement and after
examining legality, validity and propriety thereof, letter
dated 08.03.2018 issued by respondent No.1 thereby
rejecting proposal of petitioner for One Time Settlement be
quashed and set aside.
[B] For a writ of Mandamus, Order or direction in nature
of Mandamus directing respondents to consider the proposal
of One Time Settlement of petitioner as per policy of Mission
Recovery Campaign 2018 before 31.03.2018."
2. The petitioner (a registered partnership firm) availed cash
credit hypothecation facility of Rs. 70 Lakh as well as term loan to the
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tune of Rs. 41.25 Lakh for the business of Ginning and Pressing Mill
situated at village Ratnali, Taluka Dharmabad, Dist. Nanded. The
petitioner had mortgaged various properties including the factory, land,
building, plant and machinery as a security. Since the petitioner failed
to re-pay the loan, the respondent bank filed Original Application No. 9
of 2006 for recovery of the dues before the Debt Recovery Tribunal at
Aurangabad. Simultaneously, the bank issued a demand notice dated
24.12.2008 under the provisions of the Securitization and Reconstruction
of Financial Assets and Enforcement of Security Interest Act, 2002
(hereinafter referred to as, "SERFAESI Act" for sake of brevity). In
pursuance of the demand notice dated 24.12.2008, under the SERFASI
Act, the symbolic possession of the factory has been taken by the bank on
20.11.2009.
3. The petitioner and respondent bank arrived at an amicable
settlement in O.A. No. 9 of 2016. The terms of settlement were signed in
Lok Adalat dated 25.1.2012. The petitioner agreed to pay a sum of Rs.
90 Lakhs including the amount of Rs. 9 Lakhs deposited vide cheque
dated 05.09.2012. The petitioner further agreed to pay the balance
amount of Rs. 13,50,000/- on or before 25.09.2012. The rest of the
amount of Rs. 67,50,000/- with interest @ 12% p.a. was to be paid by
reducing balance method on or before 28.02.2013. It was specifically
agreed that in case of default by the petitioner, the bank was at liberty to
recover the remaining amount as per the Recovery Certificate.
4. The petitioner defaulted in complying with the terms of the
settlement recorded in O.A. No. 9 of 2006. The bank filed Misc.
Application in O.A. No. 9 of 2006 under SERFAESI Act for the Recoveries
of dues. The said application was finally allowed vide order dated
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30.04.2014. Consequently, Recovery Certificate No.55 of 2014 is issued
in favour of the bank. The bank was also given liberty to attach and sell
the personal assets of the petitioners in case the sale-proceeds of
hypothecated and mortgaged assets were not sufficient to realize the
assets. The bank took physical possession of the property in terms of
Section 14 of the SERFASI Act. The property was put to auction. At this
stage, the petitioner filed S.A. No. 33 of 2017 under section 37 of the
SERFESI Act, thereby challenging the proceedings initiated by the bank
for sale of the property. The DRT, Pune, accepted the technical objection
of the petitioner and set aside the sale notice dated 17.02.2017. The
bank issued fresh notice dated 24.01.2018 putting the factory of
petitioner to public auction. The highest bidder - Mr. Hanuman Agrawal
deposited the amount of Rs. 3,05,01,000/- (Rupees Three Crore Five
Lakhs One Thousand Only). The Sale Certificate was also issued in his
favour which was made subject to decision in S.A. No. 79 of 2017 filed by
the petitioner before D.R.T., Aurangabad.
5. It appears that on 15.01.2018. the respondent bank
announced and approved "Mission Recovery Campaign" under circular
No. 1835 dated 15.01.2018. The Special Recovery Campaign "Q-4" was
announced for the period from 25.01.2018 to 31.03.2018. The tailor-
made tool to field functionaries by formulating a non-discretionary, non-
discriminatory Special OTS scheme for NPA A/cs with O/S RLB up to Rs.
100 Lakh was made operational.
6. The Mission Recovery Campaign Q-4, provides various
guidelines. The accounts already allotted to recovery agents/enforcement
agents, were held eligible if there was no recovery for last 12 months.
The Clause (9) indicated that sanctioned OTS lapsed on or before
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31.12.2017 were eligible under the scheme. OTS declined by any other
authority other than BM were also eligible under the Scheme.
7. On 29.1.2018, the petitioner addressed a communication to
the Chief Manager of the respondent Bank requesting to consider his
Loan Account for settlement under the OTS scheme. The petitioner
assured that it would manage the entire amount within 30 days, if
settlement of his account approved under the Mission Recovery
Campaign 2018. Similar communications were addressed to the
Chairman & Managing Director as well as General Manager, Recovery.
9. The respondent Bank vide communication dated 8.3.2018
refused to consider the request for OTS made by the petitioner on the
ground that SERFASI action was initiated before the launching of
"Mission Recovery Campaign". The campaign started from 25.01.2018,
whereas, the notice for tender-cum-auction sale was published in
prominent newspaper on 24.01.2018. The present petition takes
exception to this decision of the respondent bank. The petitioner has
further prayed for a direction to consider his proposal for OTS as per the
policy of "Mission Recovery Campaign 2018".
13. We have heard the learned advocates appearing for the
respective parties. Mr. V.J. Dixit, Senior Advocate, appearing on behalf of
the petitioner would submit that the bank is under statutory obligation to
follow the guidelines issued by the RBI. The "Mission Recovery
Campaign scheme was introduced for the period from 25.01.2018 to
31.03.2018. The petitioner had proposed to consider its accounts for
settlement as per the scheme He would submit that the sanctioned OTS
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proposal which had lapsed on or before 31.12.2017 was also eligible
under the scheme. The rejection of the proposal of the petitioner is
unfair. The respondent bank cannot exercise discretion in arbitrary and
capricious manner. The reasons recorded under the impugned
communication dated 8.3.2018 are alien to the scheme.
14. The Mr. K.B. Deshpande, learned Advocate appearing for
respondent Nos. 1 to 4 would submit that the petitioner is persistent
defaulter. The bank has taken commercial decision considering the
possibility of recoveries of the loan amounts under the SERFASI Act by
auction of mortgaged property. The bank cannot be compelled to accept a
lesser amount under OTS scheme though the bank is in a position to
recover the entire loan amount by realizing the secured property. He
would submit that no borrower can, as a matter of right, ask for the
benefit of OTS Scheme.
15. We have given our anxious consideration to the submissions
advanced on behalf of both sides as well as the documents on record. It
is not in dispute that the petitioner had submitted a proposal to consider
its account for one-time settlement (OTS) under the Mission Recovery
Campaign i.e. special recovery campaign initiated by the respondent
bank under circular dated 15.01.2018. The scheme, was valid from
25.01.2018 to 31.03.2018. The petitioner had made applications dated
11.01.2017, 23.1.2018, 29.1.2018, 7.2.2018 and 17.2.2018 requesting to
consider its account for OTS.
16. This Court, vide order dated 25.2.2018 passed in W.P. No.
3104 of 2017 had directed that if the petitioner had submitted the
proposal for OTS, the bank may take decision upon it on its own merit in
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accordance with the policy. The respondent bank under impugned
communication dated 8.3.2018 refused to consider the proposal of the
petitioner mainly on the ground that the SERFASI action was initiated
against the petitioner before launching the Mission Recovery Campaign
which is made operative from 25.1.2018 and notice for tender-cum-
auction sale was published in newspaper on 24.1.2018 i.e. a day before
the date of commencement of Mission Recovery Campaign.
17. It is the matter of record that the scheme was floated under
circular dated 15.01.2018. The petitioner had time and again represented
his interest to go for the OTS. Even before commencement of the scheme,
the petitioner had made such representations. Nothing is brought to our
notice to show that the petitioner was in-eligible for consideration under
the scheme. The auction sale notice was published in newspaper on
24.1.2018 i.e. after the issuance of circular dated 15.01.2018 launching
the scheme. Even it is not the case of the respondent bank that cases
where auction sale notice has been published, are ineligible under the
scheme. We are, therefore, of the considered view that the respondent
bank ought to have considered the proposal of the petitioner regarding
OTS as per object of the scheme. The reasons mentioned in the
impugned communication dated 8.3.2018 are insufficient to deny
consideration of proposal of the petitioner under the OTS scheme.
18. We are aware about the parameters of judicial review in the
matters of OTS scheme under Article 226 of the Constitution. It is trite
that no Mandamus can be issued to accept the proposal for OTS.
However, the discretion available with the bank is excepted to be
exercised in tune with the object of the scheme. Further, though scheme
is stated to be non-discriminatory, indifferent treatment is given while
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dealing with the proposal of petitioner for OTS. The respondent /
Nationalized Bank, is expected to act fairly and also consider the
proposals in tune with the RBI guidelines.
19. At this stage, learned Senior Advocate Mr. V.J. Dixit would
rely upon the judgments in the matter of Sardar Associates and others vs.
Punjab and Sind Bank and others reported in AIR 2010 SC 218; The
Supreme Court held that if public bank is otherwise bound by the
guidelines issued by the RBI, there is no reason why the same cannot be
enforced in terms of the provisions of the Act by the Tribunal. The
Supreme Court in para.41 of its judgment, observed thus:-
"The question pertaining to the present matter is regarding
whether or not a circular issued by a statutory body for the
governance and regulation of certain agreement confers a
legal right upon the aggrieved party in case of non-
compliance or complete and absolute deviation from the said
guidelines by the body formulating such circulars.
Alternately, can the aggrieved party, then, claim its right of
judicial review under Article 32 or 226 to quash the said
circular in case of discriminatory application of such
rules/guidelines so mentioned in the circular."
21. Mr. K.B. Deshpande, learned advocate for respondent relied
upon the judgment of the Division Bench of the Allahabad High Court in
the matter of Shyam Ice and Cold Storage (P) Ltd. And others Vs.
Syndicate Bank (Civil Writ Petition No. 8377 of 2012 decided on
20.2.2012) as well as Bijnor Urban Cooperative Bank Ltd, Bijnor vs.
Meenal Agarwal reported in AIR 2022 SC 56. Relying upon said
judgments, he would submit that no borrower can, as a matter of right,
pray for grant of One Time Settlement Scheme. He would invite our
attention to para.11 of the said judgment which reads thus :-
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"11. If the bank/financial institution is of the opinion that
the loanee has the capacity to make the payment and/or that
the bank/financial institution is able to recover the entire
loan amount even by auctioning the mortgaged
property/secured property, either from the loanee and/or
guarantor, the bank would be justified in refusing to grant
the benefit under the OTS scheme. Ultimately, such a
decision should be left to the commercial wisdom of the
bank whose amount is involved and it is always to be
presumed that the financial institution/bank shall take a
prudent decision whether to grant the benefit or not under
the OTS Scheme, having regard to the public interest
involved and having regard to the factors which are narrated
hereinabove."
22. After considering the submissions and the law laid down by
the Supreme Court, we are of the opinion that, in the facts of the present
case, the bank has failed to implement its policy in tune with the
guidelines of the RBI. The impugned communication does not specify
any reason justifying or non-consideration of the proposal of petitioner
seeking benefit of OTS scheme under the circular dated 15.01.2018.
Therefore, we are inclined to quash and set aside the impugned
communication dated 8.3.2018.
23. At this stage, we are informed that the respondent bank has
issued a fresh circular bearing No. 3199 dated 6.7.2022 and promulgated
Special One Time Settlement Scheme 2022-23 valid up to 31.03.2023.
Presently, the said scheme is under operation. The learned Advocate for
the respondent has not disputed the said fact. We are therefore inclined
to direct the respondent bank to consider OTS proposal of petitioner
under existing scheme as per terms and condition and applicable RBI
guidelines.
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24. In view of the discussion, we dispose of the writ petition by
passing the following order: -
ORDER
(a) The writ petition is partly allowed.
(b) The impugned communication dated 8.3.2018 is quashed and set aside.
(c) The respondent/bank shall consider the petitioner's proposal under the Special OTS scheme 2022-23 as per the terms & conditions of the said scheme as well as applicable guidelines issued by the RBI from time to time and communicate its decision to the petitioner within a period of two weeks from the date of this order.
(d) No orders as to costs.
[S.G. CHAPALGAONKAR] [MANGESH S. PATIL]
JUDGE JUDGE
grt/-
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