Calcutta High Court
Cimmco Ltd. & Others vs Export Import Bank Of India & Another on 1 August, 2019
Author: Debangsu Basak
Bench: Debangsu Basak
OD-4
ORDER SHEET
WP No. 198 of 2019
IN THE HIGH COURT AT CALCUTTA
Constitutional Writ Jurisdiction
ORIGINAL SIDE
CIMMCO LTD. & OTHERS
Versus
EXPORT IMPORT BANK OF INDIA & ANOTHER
BEFORE:
The Hon'ble JUSTICE DEBANGSU BASAK
Date : 1st August, 2019.
Appearance:
Mr. Sabyasachi Choudhury, Adv.
Mr. Sayantan Bose, Adv.
Ms. Madhurima Das, Adv.
Mr. Munir Ahmed, Adv.
For the petitioners.
Mr. Krishnaraj Thaker, Adv.
Mr. Vikram Wadehra, Adv.
Ms. Vidushi Chokhani, Adv.
For the respondent no.1.
The Court :- Petitioners seek a direction upon the first respondent to withdraw its reporting of Cimmco International to the Credit Information Company.
Learned Advocate appearing for the petitioners submits that, Cimmco International was a unit of Cimmco Limited. Cimmco Limited was referred for the Board for Industrial and Financial Reconstruction (BIFR) established under the provisions of the Sick Industrial Companies (Special Provisions) Act, 1985. A scheme was sanctioned by the BIFR in respect of the 2 sick company. He draws the attention of the Court to the particular clause of the scheme, which contemplates that, the company shall pay the crystallized amount as per decision of Court of Appeal in finality without interest and penalty within three months of receiving the Court order. According to him, Exim Bank never filed any suit for recovery. Therefore, Cimmco Limited cannot be considered as a defaulter for Exim Bank to report any alleged defaulter to any authority. He draws the attention of the Court to the Annexure-P5 of the writ petition and submits that, the petitioners became aware of such reporting from one of the bankers of the petitioners.
Learned Advocate appearing for Exim Bank submits that, by reason of a circular dated April 23, 1994 and a subsequent circular dated June 27, 2014, Exim Bank is required to report every default whether any suit was filed or not, to the Credit Information Company in terms of the Credit Information Company Act, 2005. He submits that, the circulars referred to were issued by the Reserve Bank of India under the provisions of Reserve Bank of India Act, and that, the same is binding on Exim Bank. In the present case, Cimmco Limited is admittedly a defaulter in excess of Rs.1 (one) crore to the Exim Bank. He draws the attention of the Court to the Balance Sheet as at March 31, 2008 which was considered by the BIFR. He also draws the attention of the Court to the Balance Sheet of the petitioners as at March 31, 2015 where the petitioners acknowledged the liability to Exim Bank.
Learned Advocate appearing for the petitioners in reply submits that, the petitioners never acknowledged the liability unconditionally. He refers to the qualification in the Balance Sheet. He submits that, the liability for Cimmco 3 Limited is yet to crystallize. Therefore, Cimmco Limited cannot be considered to be a defaulter to the Exim Bank.
Cimmco Limited was before the BIFR when a scheme was sanctioned. The relevant portion of the scheme relating to Exim Bank is as follows:-
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(c) Exim Bank
Exim Bank has an exposure of Rs.479.19 Lacs (consisting of principal loan of Rs.106.34 lacs and unpaid interest Rs. 367.85 lacs) as on 31.03.2008 as per company's books of accounts. At its request, BIFR has given permission to Exim Bank to pursue their recovery suit under Section 22 of SICA. Hence, company shall pay the crystallized amount as per decision of Court of Appeal in finality without interest and penalty within three months of receiving the Court order. The cut off date for rehabilitation in the sanctioned scheme was taken as at March 31, 2008. As at March 31, 2008 Cimmco Limited acknowledged a liability in excess of Rs.1 (one) crore to Exim Bank. BIFR sanctioned the scheme by its order dated March 11, 2010. Subsequent to such order sanctioning the scheme, Cimmco Limited continued to show a liability in excess of Rs. 1 (one) crore in its Balance Sheet. However, the Balance Sheet is qualified. The Balance Sheet of Cimmco Limited as at March 31, 2015 qualifies the liability of Rs. 106.34 as follows:-
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(b) In case of loan from Exim Bank, the Board for
Industrial and Financial Reconstruction (BIFR) has at the request of EXIM Bank, granted permission for recovery of their outstanding loan amount from the Company based on the decision of the Court of Appeal without any interest and penalty. Pending finalization of the aforesaid appeal, the amount has not been considered as due for payment.
It is admitted at the bar that, Exim Bank did not file any proceeding for recovery against Cimmco Limited as on date.
The balance sheet of Cimmco Limited as at March 31, 2015 may not acknowledge any liability to Exim Bank unconditionally. However, the entries in such balance sheet are an acknowledgement of existence of jural relationship between Exim Bank and Cimmco Limited.
There are two circulars of Reserve Bank of India requiring disclosure of information regarding defaulting borrowers of banks and financial institutions. The circulars are dated April 23, 1994 and June 27, 2014. The reporting apparently happened subsequent to the circular dated June 27, 2014. The circular is binding on Exim Bank. The relevant portion of the circular dated June 27, 2014 is as follows:-
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4. Presently, banks/FIs submit the following data to RBI:
(i) Defaulting borrowers (non-suit filed accounts) of Rs. 1 (one) crore and above on a half-yearly basis, and
(ii) Wilful Defaulters (non-suit filed accounts) of Rs. 25 lakhs and above on a quarterly basis.
RBI compiles this data and disseminates two separate lists viz. List of Defaulters [(non-suit filed accounts) of Rs. 1 crore and above] and wilful Defaulters [(non-suit filed accounts) of Rs. 25 lakh and above] to the banks/FIs.
5. Banks/FIs had been advised vide our circular DBOD.No.CID. BC.30/20.16.042/2011-12 dated September 5, 2011 to submit to Credit Information Companies (CICs) the following information:
(i) Quarterly list of suit filed accounts of Rs. 1 crore and above, classified as doubtful or loss and
(ii) List of suit filed accounts of wilful defaulters of Rs. 25 lakhs and above, as at end-March, June, September and December, every year.
Further, CICs have also been advised to disseminate credit information covering data supplied by banks/FIs on such suit- filed accounts on their respective websites.
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7. In view of the above and after examining the recommendations of the Committee, it has been decided to implement the following measures with regard to reporting and dissemination of information on defaulters/wilful defaulters:
i. Banks/FIs may continue to furnish the data on wilful defaulters (non-suit filed accounts) of Rs. 25 lakhs and above for the quarter ending June 30, 2014 and September 30, 2014 to RBI.
Similarly, in respect of defaulters (non-suit filed accounts) of Rs. 1 crore and above, they may continue to submit the data to RBI for the half year ending September 30, 2014 in the existing format.
ii. In terms of Credit Information Companies (Regulation) Act, 2005, banks/FIs are advised to furnish the aforementioned data in respect of wilful defaulters (non-suit filed accounts) of Rs. 25 lakhs and above for the quarter ending December 31, 2014 and the data on defaulters (non-suit filed accounts) of Rs. 1 crorer and above for the half year ending December 31,2014 to CICs and not to RBI. Thereafter, banks/FIs may continue to furnish data in respect of defaulters/wilful defaulters to CICs on 7 a monthly or a more frequent basis. This would enable such information to be available to the banks/FIs on a near real time basis.
iii. In order to facilitate banks/FIs to furnish the above data in respect of defaulters/wilful defaulters, CICs are advised to make necessary changes in the commercial data format so that all the fields viz. Director's Name and type (whether Nominee or Independent director), DIN No., Address, date of classification of default, etc. in the existing format used for submitting data to RBI are captured.
As at March 31, 2008 Cimmco Limited was a defaulter to Exim Bank. On the date of sanction of the scheme by the BIFR, Cimmco Limited continued to be a defaulter to the Exim Bank. From the point of view of Exim Bank, Cimmco Limited continues to be a defaulter till date in the sense of Exim Bank is yet to recover the amount from the Cimmco Limited. The circular dated June 27, 2014 obliges a bank to disseminate credit information in respect of the non-suit filed accounts of defaulting borrowers in excess of Rs. 1 (one) crore. From the point of view of Exim Bank, therefore, the circular dated June 27, 2014 required Exim Bank to report the defaulting borrowers, in this case, Cimmco Limited to the relevant authority, which it did. Such reporting is not an adjudication of liability of Cimmco Limited to the Exim Bank, but is a compliance 8 of Exim Bank with the terms of the circular dated June 27, 2014 of Reserve Bank of India.
The contention that, Exim Bank not having filed a suit for recovery, Cimmco Limited is not defaulter cannot be accepted. In terms of the circular dated June 27, 2014 of Reserve Bank of India, Cimmco Limited in the books of accounts of Exim Bank continues to remain as a defaulter. Exim Bank is required to report such fact to the appropriate authority which it did.
In the facts of the present case, therefore, no relief can be granted to the petitioners.
WP No. 198 of 2019 is dismissed. No order as to costs.
(DEBANGSU BASAK, J.) snn.