Bombay High Court
Aaacorp Exim India Pvt Ltd vs The Saraswat Co-Operative Bank Limited on 4 March, 2020
Author: A.K. Menon
Bench: A.K. Menon
904.comsl-16-20.doc
sbw
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
IN ITS COMMERCIAL DIVISION
INTERIM APPLICATION NO.1 OF 2020
IN
COMMERCIAL SUIT (L) NO.16 OF 2020
AAACORP Exim India Pvt. Ltd. ..Plaintiff
v/s.
The Saraswat Co-operative Bank
Limited ..Defendant
Mr. Rohaan Cama a/w Divya Bahl, Pepino Bhal i/b. Law Offices of Divya Bahl
for the plaintiff.
Mr. Mayur Khandeparkar a/w Sidharth Samantaray i/b. Vivek V. Phadke for
the defendant.
CORAM : A.K. MENON, J.
DATED : 4TH MARCH, 2020.
P.C. :
1. By this interim application, the applicant seeks a temporary injunction suspending the effect, operation and implementation of the defendant declaring the applicant as a Non-Performing Asset (NPA) and restraining the defendant bank from taking of any steps pursuant to declaring the plaintiff's account as NPA which according to the plaintiff is unlawful. The plaintiff also seeks an order directing the 1/7 ::: Uploaded on - 09/03/2020 ::: Downloaded on - 07/06/2020 13:04:50 :::
904.comsl-16-20.doc defendant to inform other credit rating agencies of such suspension.
The applicant also seeks a temporary injunction suspending the effect and operation of a notice dated 31 st October, 2019 said to be issued under Section 13(2) of the SARFAESI Act, inter alia, by restraining the defendant from taking any steps in furtherance of the notice.
2. This matter was first heard on 10 th February, 2020. At the request of the parties, this matter was adjourned to 25 th February, 2020 since in the meantime parties were attempting to find a workable solution. That attempt having been failed, I have heard the learned counsel for the parties at length. At the hearing of this Interim Application, the basis of the plaintiffs attempt to secure these reliefs is the fact that the plaintiff is an export oriented unit carrying on business of manufacturing of Recycled Plastic Crums/Agglomers/Granules/Refuse Bags/Extrudes Moulded Goods of virgin materials enjoying various credit facilities inter alia with the defendant bank which is one of the bankers providing fund based and non-fund banking financial facilities to the plaintiff. The plaintiff is said to be a Micro and Small Enterprise.
3. It is the case of the plaintiff that despite having issued a sanction order dated 20th March, 2019, granting credit facilities, the bank has failed to permit operation on certain letters of credit. Additional credit 2/7 ::: Uploaded on - 09/03/2020 ::: Downloaded on - 07/06/2020 13:04:50 :::
904.comsl-16-20.doc facilities were requested by the applicant and were approved by the Board of Directors at a meeting held on 19 th March, 2019. It is submitted that the bank has reneged on the aforesaid commitment and has therefore exposed the plaintiff to losses since it will be unable to meet its commitments unless the letters of credit are made operational.
4. In support of the case, Mr. Cama submitted that the plaintiff was required to open an import letter of credit and had called upon the defendant to open an Import Letter of credit in favour of one AAA Poly Arabia FZC on 26th June, 2019. However, the defendant has failed and neglected to co-operate. In the meantime, despite having committed sanction the defendant had declined to comply with its obligations and on 31st October, 2019 the bank proceeded to issue notice under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, thereby calling upon the plaintiff to pay the outstanding amount of Rs. 21,24,58,450.46. The said notice sets out the fact the operation and conduct of the financial assistance has become irregular and the debt has been classified as a non-performing asset on 30th September, 2019 in accordance with the relevant guidelines of the Reserve Bank of India. Apart from failure to repay the amount of Rs.21.24 crore and interest thereon, the plaintiff was put to notice that it should not sell, transfer or otherwise deal with the secured assets as contemplated under the Securitization Act. 3/7 ::: Uploaded on - 09/03/2020 ::: Downloaded on - 07/06/2020 13:04:50 :::
904.comsl-16-20.doc
5. Mr. Cama submitted that the plaintiff dealt with this demand by reply which was sent on 3rd January, 2020. However, I find that none of the contentions of the bank in my view has been dealt with on merits except that they have had multiple meetings with the Managing Director of the Bank and indicated that action has been taken for recovery of dues of M/s. J J PolyImpex Private Limited described by the plaintiff as an "associate" company and that the plaintiff was seeking operation of the credit facilities sanctioned in favour of the plaintiffs independent of those of M/s. J J PolyImpex Private Limited. A request was therefore made to withdraw the notice under Section 13(2). According to Mr. Cama the Bank has acted fraudulently and that this Court must protect the interests of the plaintiff.
6. The defendant Bank has opposed the application on the basis of its affidavit in reply dated 21st February, 2019. The bank has stated that it had sanctioned packing credit/post shipment credit facilities upto a limit of Rs.3 crores and L/C limit of Rs.1775 lakhs and three term loan facilities. The financial position of the applicant had deteriorated resulting in wiping out of the reserves completely as on 31 st March, 2018. The applicant did not generate enough cash to service the existing debt and the applicant had diverted their term funds for repayment of term loans and unsecured facilities. Since the earlier 4/7 ::: Uploaded on - 09/03/2020 ::: Downloaded on - 07/06/2020 13:04:50 :::
904.comsl-16-20.doc L/Cs had devolved resulting in the cash credit facility of the applicant being overdrawn the defendant could not provide further L/C facilities. Furthermore, stock audit reports reveal that stock statement submitted by the applicant were faulty. The account thus become irregular and had to be recognized as NPA.
7. In the course of hearing I called upon Mr. Cama to demonstrate the various acts constituting fraud. In response, my attention was invited to the averments in paragraphs 33, 34, 35 and 41 of the plaint. None of these averments in my view substantiate the allegations of fraud. Furthermore, the nature of relief sought is mandatory. Admittedly notice dated 30th October, 2019 under Section 13(2) was received on 5th November, 2019 which was replied by the Advocate for the plaintiff on 3rd January, 2020.
8. This Court in Bank of Baroda v/s. Paramount Conductors Ltd. 2020(1) ABR 362, had occasion to consider a revision application challenging an order passed by the Civil Judge, Junior Division, rejecting an application under Order 7 Rule 11 of the CPC by which rejection of the plaint had been sought. In paragraph 19 of that judgment, while considering the aspect of fraud, the Court observed that the bare perusal of the plaint and prayers revealed that the word "fraud and fraudulent" have been used without any material to support that 5/7 ::: Uploaded on - 09/03/2020 ::: Downloaded on - 07/06/2020 13:04:50 :::
904.comsl-16-20.doc contention the failure of the applicant bank to apply the relevant RBI Circular denied of restructuring of the loan and pleadings which according to the respondent had resulted in a fraud. The contention of the defendant was that by virtue of Section 34 jurisdiction of the Civil Court being barred, mere use of the words "fraud and fraudulent"
would not vest jurisdiction of this Court. In the instant case as well, Mr. Cama has pointed out paragraphs 33, 34, 35 and 41 of the plaint as evidence of fraud. I am not satisfied that the plaintiffs have succeeded in prima facie establishing that the defendant had behaved fraudulently.
9. Having found albeit prima facie, that allegations of fraud are baseless, it is seen that despite the receipt of the section 13(2) notice on 5 th November, 2019, the plaint is filed on 4th January, 2020 and interim application was first made only on 10th February, 2020. The urgency now shown is on the basis that pursuant to the notice, defendant is likely to move in pursuance of the notice and take possession of the property on 6th March, 2020. Prima facie, no case of fraud is made out. No case is made out for grant of ad-interim relief in terms of the reliefs sought which are in any event by way of mandatory reliefs and which calls upon this Court to go into merits of the declaration of NPA and that cannot be done in this suit because the bar under Section 34 6/7 ::: Uploaded on - 09/03/2020 ::: Downloaded on - 07/06/2020 13:04:50 :::
904.comsl-16-20.doc also operates against the applicant especially in the absence of any prima facie evidence of fraud. In view thereof, no relief can be granted at this stage.
10. The following order is therefore passed;
(i) Ad-interim relief is refused.
(ii) Additional reply if any to be filed within eight weeks. Rejoinder if any within eight weeks thereafter.
(iii) IA to be listed in the normal course.
(A.K. MENON, J.) wadhwa 7/7 ::: Uploaded on - 09/03/2020 ::: Downloaded on - 07/06/2020 13:04:50 :::