Orissa High Court
M/S. Future Technologies vs The Chief Manager on 20 October, 2020
Author: Biswanath Rath
Bench: Biswanath Rath
ORISSA HIGH COURT :: C U T T A C K
W.P.(C) No.18293 of 2020
(In the matter of an application under Articles 226 & 227 of
AFR the Constitution of India.)
M/s. Future Technologies : Petitioner
-Versus-
The Chief Manager, : Opposite party
Punjab National Bank
For Petitioner : M/s. M.K. Mishra, (Sr. Adv.)
T. Mishra,
S. Senapati,
J. Sahoo, S.S. Parida
(Advocates)
For Opposite party : M/s. M.K. Mohapatra,
C.B. Mohapatra
(Advocates)
JUDGMENT
PRESENT:-
THE HONOURABLE MR. JUSTICE BISWANATH RATH Date of hearing : 20.10.2020 :: Date of Judgment : 21.10.2020 Biswanath Rath, J. This Writ Petition is filed seeking a direction to the opposite party to sanction and release the Additional Working Capital Term Loan in favour of the petitioner under Emergency Credit Line Guarantee Scheme (ECLGS) as per 2 NCGTC Circular dtd.23.05.2020 under Annexure-1 and Reserve Bank of India (RBI) Guidelines / Circular dtd.21.06.2020 under Annexure-2 within a stipulated time and to declare the letter dtd.18.07.2020 under Annexure-4 as illegal in view of the "NCGTC" Circular dtd.23.05.2020 and RBI Circular dtd.21.06.2020 and to make the said rule absolute.
2. Short fact involving the case is that the petitioner M/s. Future Technologies is a proprietorship unit. In order to cater its need, about 13 years back petitioner establishment entered into loan through the opposite party-Bank Authority by the Loan Account bearing No.0553008700002392. Faced with Covid-19 pandemic and continuance of Nationwide lockdown the business and economic condition of the Small Business Enterprises / MSMEs in the Country including that of petitioner-establishment in the small Business Enterprise category got seriously affected. Considering the grave situation faced by Small Business Enterprises / MSMEs, Government of India with an intention to provide credit facilities to the Business Enterprises / MSMEs to at least to meet their operational liabilities, to restart their business announced and introduced several packages / schemes in the month of May, 2020 to aid all such small Business Enterprises / MSMEs in the Country through the scheduled commercial Banks, Financial Institutions and non Banking Finance Companies. One of such scheme introduced at this point of time is "Emergency Credit Line Guarantee Scheme" in short hereinafter (ECLGS) and the credit product under the scheme is named as "Guaranteed Emergency Credit Line" in short hereinafter (GECL) and the facility given under the said "Emergency Credit Line Guarantee Scheme" is fund based - Working Capital Term Loan, but fully guaranteed by 3 Government of India. The fund and the Scheme, appears to be managed and operationalized by the "National Credit Guarantee Trustee Company Limited" (NCGTC), which is a wholly owned trustee company of Government of India. To facilitate the scheme Government of India announced twenty trillion rupees of financial package only to help the Small Business Enterprises / MSMEs with a view to tide over the crisis followed by Covid-19 pandemic and nationwide lockdown for a long time. Petitioner claimed that looking to the purpose behind such scheme is to provide assistance to all the small entrepreneurs to meet with salary of employees, rent and also to help restocking expenses, which have almost suffered during pandemic situation, while the matter stood thus the National Credit Guarantee Trustee Company Ltd. a wholly owned trustee company of Government of India issued the circular Ref. No.2842/NCGTC/ ECLGS dated May 23, 2020 to the Chairman and Managing Directors, Chief Executive Officers of all scheduled commercial Banks, Financial Institutions and non-banking Financial Companies informing all of them that the Government of India through the Ministry of Finance, Department of Financial services has introduced the "Emergency Credit Line Guarantee Scheme (ECLGS) for providing 100% guarantee coverage of Additional Working Capital Term Loans upto 20% of their entire outstanding credit upto Rs.25 crores i.e. upto Rs.5 crores as on February 29, 2020 subject to the account being less than or equal to 60 days past due as on that date. Following issuance of above circular the Reserve Bank of India issued circular dated 21.06.2020 to all Scheduled Commercial Bank, Financial Institutions and all other lending institutions on the subject "Assignment of Risk Weights on Credit Facilities (Guaranteed Emergency Credit Line) under the "Emergency Credit Line Guarantee Scheme (ECLGS)" stating that as 4 credit facilities extended under the scheme guaranteed by NCGTC are backed by an unconditional and irrevocable guarantee provided by 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. It is the further case of the petitioner that as the business of the petitioner got badly affected for Covid-19 pandemic and continuous lockdown in the entire country, it became difficult on the part of the petitioner to run the business of the establishment without further assistance. Accordingly the petitioner establishment on 28.06.2020 made a representation to the Opposite party Financial Institution requesting extension of benefit of the "Guaranteed Emergency Credit Line" under the Emergency Credit Line Guarantee Scheme (ECLGS) for revival of the business. It is alleged that Opposite party instead of extending the benefit vide letter dated 18.07.2020 directed the petitioner to provide alternate security acceptable to the Bank to secure the loan facility availed by it. Copy of representation of the petitioner and the response of the Opposite party are filed at Annexures-3 & 4 to the Writ Petition respectively. In the meantime vide letter dated 24.07.2020 (Annexure-5) petitioner submitted an explanation clarifying point wise and attempted to establish that there is no requirement of any further guarantee to avail the benefit of scheme and claimed that the irregularities claimed by Opposite party are baseless. Thus by filing the Writ Petition, the petitioner prayed for grant of relief mentioned in the prayer portion of the Writ Petition.
54. Pursuant to notice in the Writ Petition the sole opposite party while flatly opposing the claim of the petitioner, in filing counter affidavit in paragraph nos.4 & 6 contended as follows:
"4. That, it is respectfully submitted that the averments made in Para-1 of the Writ Petition, the petitioner stated that the Sole-Opp. Party delaying, not sanctioning and not releasing the Covid Loan i.e. the Additional Working Capital Term Loan as per Govt. Policy under "Emergency Credit Line Guarantee Scheme (ECLGS)" as per NCGTC Guideline/Circular dtd.23.05.2020 and RBI Circular dtd.21.06.2020. Here it is stated that as per the guidelines of ECLGS & PNB-CECF the petitioner is not eligible for both the schemes, due to the loan account of the petitioner has already been declared as NPA before the cutoff date & also some irregularities in the secured mortgaged properties of the loan account of the petitioner.
6. That it is respectfully submitted that the averments made by the petitioner in para - 8 of the Writ Petition is false & baseless. Here it is stated that the eligible borrowers in Para -7 of the guidelines / circular of "Emergency Credit Line Guarantee Scheme (ECLGS)" dtd.23.05.2020 clearly stated that "The Scheme is valid for existing customers on the books of MLIs. Borrower accounts should be less than or equal to 60 days past due as on 29th February 2020 in order to be eligible under the Scheme i.e. All borrowers which have not been classified as SMA 2 or NPA by any of the MLIs as on 29th February 2020 will be eligible for the scheme"
Business Enterprises / MSME borrower accounts which had NPA or SMA-2 business status as on 29.02.2020 shall not be eligible under the Scheme. & Para-5 of the PNB COVID- 19 EMERGENCY CREDIT FACILITY (PNB CECF) clearly stated that "All SMA-2 accounts and NPA accounts as on date of sanction are not eligible". In this case the petitioner's loan account 6 has already been declared as NPA on dated 28th February, 2020 prior to the date fixed in the guideline of both the schemes. Hence the petitioner not at all eligible / entitled to get the Additional Working Capital Term Loan under ECLGS & PNB CECF Scheme & Statement of Loan Account are annexed herewith as Annexure - 1, 2 & 3 respectively."
From the counter affidavit it appears, though the sole opposite party did not dispute the introduction of Emergency Credit Line Guarantee Scheme (ECLGS) on 23rd May, 2020, but however, submitted that petitioner has already got into NPA status on 28th February, 2020 i.e. much prior to the cutoff date 29.02.2020 as mentioned under the Emergency Credit Line Guarantee Scheme (ECLGS) referred to by both the parties and thus is not entitled to the benefit under the Scheme referred to herein.
5. After filing of the counter affidavit the petitioner filed rejoinder affidavit claiming that the submission of the opposite party that the petitioner has been declared as NPA on 28th February, 2020 i.e. much prior to the cutoff date 29.02.2020, is false and baseless. In paragraph no.4 of the rejoinder affidavit the petitioner averred as follows:
"4. That the averments made in the counter affidavit that the Account of the petitioner became NPA on dtd.28.02.2020 prior to cut off date dtd.29.02.2020 for which he is not eligible for the "Additional Working Capital" under the Scheme "ECLGS" is completely false, afterthought, incorrect and misleading which fact is apparent on the Bank's communications/letters so also the Statement of the 7 Account of the petitioner's Loan Account No.0553008700002392.
The averments made in the counter affidavit regarding NPA and non-eligibility of the petitioner is afterthought and false because of the following points.
(i) On dtd.28.06.2020, the petitioner made the application/representation to the Opp. Party-Bank requesting to extend the benefit of "Additional Working Capital" under the Scheme "ECLGS" FOR Revival of the business.
(ii) On dtd. 24.07.2020, the Bank credited Rs.5,00,000/- in the Account of the petitioner ANNEXURE-6. It is humbly submitted here that in a NPA Account, no amount is ever credited by the Bank from its source.
(iii) On dd.19.08.2020, the Bank allowed the petitioner to withdraw Rs.1,65,000/- from the Account (ANNEXURE-6). Thus, in other words, the petitioner's loan account is active not NPA.
(iv) On dtd.18.07.2020, the Opp. Party-Bank asked/directed the petitioner to provide alternate security acceptable to Bank to secure the loan facility availed by him (ANNEXURE-4). Nowhere in the said letter, it is stated that the Account of the petitioner became NPA on dtd.28.02.2020 and he is not eligible for the "Additional Working Capital"
under the Scheme "ECLGS".
(v) On dtd.07.08.2020, this Hon'ble Court issued Notice in this writ petition and the counsel for the Opp. Party-Bank appeared in Court on instruction and copy of writ petition was served on him by Mail on the same day.
(vi) On dtd.12.08.2020, the Bank through its Mail instructed/directed the petitioner to swear an affidavit (in attaching the Draft Affidavit drafted by Bank Advocate Sukant Mallick) for availing Additional Working Capital under "ECLGS". It has not been stated in the said "EMAIL Letter dtd.12.08.2020" or in Draft Affidavit that the Account of the petitioner became NPA on dtd.28.02.2020 and he is not eligible for the benefit under the scheme "ECLGS". Thus, the NPA strategy 8 of the Bank is an afterthought by manipulating the documents.
Had the petitioner not eligible to get the Additional Working Capital under "ECLGS", the Bank would not have asked for affidavit for sanction of loan under "ECLGS".
Copies of the Account Statement of the account of the petitioner and the "EMAIL Letter dtd.12.08.2020" along with attached Draft affidavit are annexed hereto as ANNEXURE-6 AND 7 Series respectively."
6. Further pleading of the parties as it appears, in filing a memo along with affidavit the petitioner filed copy of the letters dated 15.06.2020, 22.06.2020 & 9.07.2020 issued by some other Branch of the Principal Bank to one M/s.Vishnu Enterprises and in the process attempted to challenge the action of the opposite party Bank for being discriminatory and selective. The opposite party also filed a memo accompanying therein the latest Master Circular of the Reserve Bank of India in the matter of declaration of NPA and the call history details involving the petitioner in order to counter the claim of petitioner on the manner of declaration of NPA vide earlier Master Circular and that there is no communication of NPA status involving petitioner at any point of time.
Relating to latest Master Circular of RBI and call history to counter the claim of the petitioner on the basis of an old circular involving the mode of declaration of NPA claimed to be not in existence and further through the call history details the opposite party attempted to establish its case that even though there has been no written communication on the declaration of the NPA status involving the petitioner, it has been claimed by the opposite party that the petitioner has been intimated regarding its NPA 9 status since 28th February, 2020 during telephonic conversation and is established though call history details.
7. Based on the pleadings Mr. Mishra, learned Senior Advocate appearing on behalf of the petitioner taking this Court to the pleadings raised by the petitioner, advanced a multifaceted fold of argument. In the first instance Mr. Mishra, learned Senior Advocate taking this Court to the pleadings of both the parties submitted that there is no dispute that the petitioner establishment belongs to small Business Enterprises category and it has the application of Emergency Credit Line Guarantee Scheme (ECLGS). The second limb of argument in opposition to the claim of opposite party that the petitioner-establishment has already been declared under NPA status Mr. Mishra, learned Senior Advocate taking this Court to the documents on record through Annexures-4&7 the correspondences at the instance of the opposite party dated 18.07.2020 and 12.08.2020 respectively, contended that from their own record particularly through the above documents, it appears, at least till issuing letters dated 12.08.2020 at page 69 of the brief and the draft affidavit-cum-undertaking accompanied therein at running page 70 of the brief, the Bank remained absolutely silent on the aspect of the petitioner becoming NPA. Mr. Mishra, learned Senior Advocate therefore contended that it is for the first time after receipt of copy of the Writ Petition and the documents enclosed therein, the opposite party has created the story that the petitioner is already in NPA status since 28.02.2020 and thus it could not be entitled to the benefit of the Emergency Credit Line Guarantee Scheme (ECLGS) relied on.
Mr. Mishra, learned Senior Advocate advancing his submission in challenge to petitioner's NPA status as claimed by its 10 counterpart, taking this Court to the clause 2.1.6 of Master Circular of RBI contended that for the Master Circular of the Reserve Bank of India, a Bank is required to make provision for NPAs at the end of each calendar quarter i.e. as at the end of March / June / September / December. It is, in view of the above provision mentioned in the Master Circular of the Reserve Bank of India Mr. Mishra, learned Senior Advocate contended that it was otherwise also not possible to declare a customer NPA prior to end of March and the claim of declaration of the petitioner under NPA status is stated to be a story hatched by the opposite party for the purpose of keeping the petitioner away from the benefit of the Emergency Credit Line Guarantee Scheme (ECLGS). Coming to the other limb of submission Mr. Mishra, learned Senior Advocate also contended that the intention behind the Emergency Credit Line Guarantee Scheme (ECLGS) is to support the small Business Enterprises struggling to meet their operationalization liabilities due to Covid-19 pandemic and Nationwide lockdown and any transaction involving the original loan should not have any bearing in dealing with the case of the petitioner involving claim of benefit under the Emergency Credit Line Guarantee Scheme (ECLGS).
In supplementing his claim Mr. Mishra, learned Senior Advocate taking this Court to the circulars at Annexures-1 & 2 claimed that the opposite party should simply provide benefit of Emergency Credit Line Guarantee Scheme (ECLGS) to the petitioner-establishment for revival of its business for being affected due to Covid-19 pandemic and Nationwide lockdown, keeping in view that the entire guarantee is given by the Government of India.
118. It is, in the above view of the matter, Mr. Mishra, learned Senior Advocate contended that for the purpose behind the scheme under the circulars vide Annexures-1 & 2, there was no occasion for the opposite party to claim for alternate security acceptable by the Bank to secure the loan facility availed by the petitioner. Mr. Mishra, learned Senior Advocate also claimed that such action of the opposite party is arbitrary and also contrary to the policy of the Government of India as well as the Reserve Bank of India and as such the attempt of the opposite party, appears to be frustrating the implementation of the Emergency Credit Line Guarantee Scheme (ECLGS) otherwise. Reverting back to the opposition to the claim of the opposite party regarding the petitioner's becoming NPA since 28.02.2020 Mr. M.K. Mishra, learned Senior Advocate contended that for their own conduct in making correspondence upto August, 2020, such a plea not only appears to be a cock and bull story created by the opposite party but even assuming the stand of the opposite party that the Master Circular of the Reserve Bank of India referred to by the petitioner does not have any existence and there surfaced, Master Circular of the Reserve Bank of India 2015 takes out the provision at clause 2.1.6. For the introduction of new provision in clause 2.1.4 there is classification of NPA, possible only in terms of paragraph 4.2.4 of the Master Circular 2015 and there is no following of the provision by the opposite party. Mr. Mishra, learned Senior Advocate further taking this Court to the claim of communication of NPA status to the petitioner by the opposite party through telephonic conversation contended that there is no such discussion with the Bank and on the other hand the petitioner came to know about such allegation only through the counter affidavit filed after receipt of notice in the Writ Petition.
129. Mr. Mishra, learned Senior Advocate further taking this Court to the letters dated 15.06.2020, 22.06.2020 & 9.07.2020 appearing to be correspondences in between another branch under the Punjab National Bank and M/s. Vishnu Enterprises issued in the middle of June and first week of September this year respectively, claimed that even in case of finding one establishment in NPA status the Punjab National Bank itself is not only accommodating its clients but also facilitating regularization of such accounts. Mr. Mishra, learned Senior Advocate therefore contended that behaviour of the opposite party towards petitioner remains not only discriminatory but also targeting parties to their sweet will.
Mr. Mishra, learned Senior Advocate appearing on behalf of the petitioner taking this Court to the materials available at page 66 in Annexure-6 submitted that the claim of opposite party that the petitioner's account is already in the NPA status since 28.02.2020 remains contrary to their own documents available on record as in several transactions taking place in the middle of August, 2020 the opposite party-Bank has allowed for operation involving the petitioner's account involved herein.
10. In concluding his submission taking support of the principles laid down by the Hon'ble apex court that on the validity of an order it must be judged by reasons so mentioned and cannot be supplemented by the fresh reasons in shape of affidavits, Mr. Mishra, learned Senior Advocate relied on some judgments of the Hon'ble apex Court in the case of Manohar Singh Gill and Another Vrs. The Chief Election Commissioner, New Delhi and 13 others, as reported in (1978) I SCC 405, in the case of East Coast Railway and another Vrs. Mahadev Appa Rao and Others as reported in (2010) 7 SCC 678 and in the last taking this Court to the development taken place in the case of Gajendra Sharma Vrs. Union of India & Anr. vide Writ petition (s) (Civil) No.825/2020, contended that the view taken by the Hon'ble apex Court involving NPA status of a party is also applicable to the case of the petitioner.
It is, in the above circumstance Mr. Mishra, learned Senior Advocate while claiming for declaring the action of the opposite party as bad also made request for issuing suitable direction to the opposite party to forthwith extend the benefit of the Emergency Credit Line Guarantee Scheme (ECLGS) to the petitioner at least in the interest of survival of the petitioner-establishment who has already entered into bad financial condition for continuous Lockdown due to Covid-19.
11. To the contrary Mr. M.K. Mohapatra, learned counsel for the opposite party-Bank while denying each claim made by the petitioner submitted that the Emergency Credit Line Guarantee Scheme (ECLGS) as per the NCGCT Guideline / circular dated 23.05.2020 and the Reserve Bank of India circular dated 21.06.2020 appearing at Annexures-1 & 2 has a clear stipulation disentitling the benefit of the Emergency Credit Line Guarantee Scheme (ECLGS) to the parties declared as NPA as on 28.02.2020 i.e. prior to the cutoff date on 29.02.2020. This apart, there were also some irregularities in the secured mortgaged properties involving the loan account of the petitioner disentitling the petitioner from the benefits of the Scheme. Similarly, taking this Court to the plea of the opposite party in the paragraph 6 of the counter affidavit and also referring to the paragraph 7 of the 14 guideline / circular of Emergency Credit Line Guarantee Scheme (ECLGS) dated 23.05.2020 Mr. Mohapatra, learned counsel for the opposite party submitted that the scheme is valid only for existing customer on the book of MLIs and the Borrower accounts should be less than or equal to 60 days past due as on 29.02.2020 in order to be eligible under the scheme. In other words, borrowers which have been classified as SMA-2 or NPA by any of the MLIs as on 29.02.2020 will be eligible for the Emergency Credit Line Guarantee Scheme (ECLGS). In the premises and as the petitioner's loan account had already been declared as NPA on 28.02.2020 i.e. much prior to the cutoff date fixed in the guideline of both the scheme, it is claimed that the petitioner is not eligible or entitled to get the additional working capital term loan.
While disputing the existence of the Master Circular of Reserve Bank of India referred to by Mr. Mishra, learned Senior Advocate for the petitioner, taking this Court to the 2015 Master Circular of the Reserve Bank of India Mr. Mohapatra, learned counsel for the Bank submitted that as the old provision at clause 2.1.6 in the old master circular remains non-existence for the introduction of the 2015 master circular, there is no requirement of declaring one NPA at the end of each quarter year and the Bank involved can declare its borrower in the NPA status at any point of time. In reference to the statement of telephonic conversation filed by the Bank through its memo dated 23.09.2020 Mr. M.K. Mohapatra, learned counsel for the opposite party taking this Court to the call details at page 31 of its memo dated 23.09.2020 involving Mobile No.919337102281 dated 22nd May, 2020 1.46 p.m and 29th February, 2020 4.57 p.m. attempted to establish that there is oral communication to the petitioner for becoming NPA by the Bank through the above telephonic conversations. Mr. Mohapatra, 15 learned counsel for the Bank however did not dispute the allegation of the petitioner that as of now there is no written communication declaring the status of the petitioner as NPA from the side of opposite party Branch.
12. Referring to the judgment cited by Mr. Mishra, learned Senior Advocate appearing on behalf of the petitioner Mr. Mohapatra, learned counsel for the opposite party - Bank contended that for the involvement of different fact and scenario the cases cited on behalf of the petitioner are not applicable to the case at hand. Mr. Mohapatra, learned counsel for the opposite party - Bank, however, did not dispute the mode of declaring NPA under the 2015 Master Circular of the Reserve Bank of India. Mr. Mohapatra, learned counsel for the opposite party however contended that there is no established procedure to intimate regarding NPA status involving any borrower and therefore, claimed that there is no difficulty in communicating such information through telephone.
In the hearing dated 20.10.2020, Sri Mohapatra, learned counsel for the Bank taking this Court through the comprehensive written note of argument on behalf of the O.P. dated 12.10.2020 on a reiteration of his earlier submission submitted that due to NPA status of the petitioner's loan account as on 28.2.2020, i.e., prior to the cut off date 29.2.2020, the petitioner is not eligible for ECLGS Credit facility and referred to Paragraph-7 as well as Paragraph-8 at Annexure-1 of the counter affidavit to justify his such case. Further referring to Clause 2.1.2 of RBI Master Circular 2015 attempted to submit that under the above provision, the petitioner was clearly barred to get the benefit of ECLGS Scheme. In reiteration of his submission made earlier, Sri Mohapatra again submitted that the 16 Master Circular referred to by Sri Mishra, Sr.Advocate, has no application to the case at hand. Sri Mohapatra also reiterated his stand that there is no established provision to communicate the NPA Status to a borrower and by telephonic conversation as claimed in counter affidavit be deemed to be communication of NPA Status to the petitioner already. Referring to the judgment relied on by Sri Mishra, Sr.Advocate, Sri Mohapatra, learned counsel submitted that none of the citations supports the case of the petitioner and accordingly prayed for dismissal of the writ petition.
13. Considering the submissions made by the respective parties this Court finds, there is no dispute that petitioner is a small Business Entrepreneur and entitled to the benefit under the scheme vide Annexures-1 & 2 provided it satisfies the specific criteria mentioned therein. Submissions of the respective counsel further boil down to the extent, opposite party claims that petitioner establishment is already got into NPA status prior to 29.02.2020, whereas petitioner-entrepreneur claims, there is no such determination as on the date of filing of Writ Petition on 4.08.2020 and Bank is just lying in making such a claim. Sum and substance of submissions of respective counsel also makes it clear that there is a subsequent Master Circular of Reserve Bank of India in the year 2015 and the previous Master Circular may not have an application to the case at hand.
14. From the submission of Mr. Mishra, learned Senior Advocate appearing on behalf of the petitioner it appears, even assuming that a party is already in NPA status, but the Bank is accommodating such party as clearly borne through the letters dated 15.06.2020, 17 22.06.2020 & 9.07.2020, whereas treating the petitioner differently. There is no denial to such statement of Sri Mishra, learned Senior Advocate by Sri Mohpatra, learned counsel who counters such claim only with the statement that letters referred to belongs to some other Branch and may not have application to the case at hand. This Court takes here note of certain facts i.e. to the application of the petitioner vide Annexure-3 on 28.06.2020 following the circulars at Annexures 1 & 2. For first time vide Annexure-4, the Bank-opposite party on 18.07.2020 responded the petitioner but did not mention about petitioner in NPA status by 28.02.2020.
Similarly by the document vide Annexure-7 series a mail communication dated 12.08.2020 finds place at page 69 of the brief the Bank appears to have made a mail correspondence with the petitioner on 12.08.2020 accompanying therein a draft affidavit again it did indicate regarding petitioner getting into NPA status rather from the contents therein it appears, the Bank was moving to consider the case of the petitioner under the scheme referred to. Surprisingly it took a u-turn and started opposing the claim of entitlement of petitioner on the basis of oral claim of petitioner getting into NPA status. Taking into account the contentions raised by Mr. Mohapatra, learned counsel for the opposite party that the letters referred to hereinabove belongs to some other Branch and that has no application to the case of the petitioner, this Court finds, the Bank is not denying the fact that the Punjab National Bank providing opportunity to the similarly situated persons, may be by a different Branch. Hence this Court here observes, there cannot be different principles applied by different Branches functioning under the main Institution i.e. Punjab National Bank and accordingly, not only holds the allegation of the petitioner that 18 there is no communication to the petitioner of becoming NPA status, has force but the Bank has also the practice of communicating a party becoming a NPA status and giving chances to overcome from such status. It is, in the circumstance, this Court is compelled to observe that story created by the Bank for the petitioner becoming NPA status and therefore not eligible to get the benefit of scheme, becomes illegal and has no foundation. Here taking into consideration the provision at Clause 2.1.4 read with 4.2.4 of the 2015 Master Circular of the R.B.I this Court finds, the opposite party-establishment being an Institution under the Reserve Bank of India is bound by the provision at clause 2.1.4 as well as 4.2.4 and as such, the oral stand taken by the Bank for declaration of an Industrial Establishment under NPA status also remains contrary to the provisions in the Master Circular of the Reserve Bank of India 2015.
15. It is here, taking into consideration the decisions referred to hereinabove relied on by Mr. Mishra, learned Senior Advocate appearing on behalf of the petitioner, this Court here finds, the decisions reads as follows:
Vide (1978) 1 SCC 405 the Hon'ble apex Court in para-8 observed as follows:
"8. The second equally relevant matter is that when a statutory functionary makes an order based on certain grounds, its validity must be judged by the reasons so mentioned and cannot be supplemented by fresh reasons in the shape of affidavit or otherwise. Otherwise, an order bad in the beginning may, by the time it comes to court on account of a challenge, get validated by additional grounds later brought out. We may here draw attention to the 19 observations of Bose J. in Commissioner of Police, Bombay v. Gordhandas Bhanji, AIR 1952 SC 16 Public orders, publicly made, in exercise of a statutory authority cannot be construed in the light of explanations subsequently given by the officer making the order of what he meant, or of what was in his mind, or what he intended to do. Public orders made by public authorities are meant to have public effect and are intended to affect the actings and conduct of those to whom they are addressed and must be construed objectively with reference to the language used in the order itself.
Orders are not like old wine becoming better as they grow older:
Similarly in 2010(7) SCC 678 the Hon'ble apex Court in para- 9 observed as follows:
"9. There is no quarrel with the well-settled proposition of law that an order passed by a public authority exercising administrative/ executive or statutory powers' must be judged by the reasons stated in the order or any record or file contemporaneously maintained. It follows that the infirmity arising out of the absence of reasons cannot be cured by the authority passing the order stating such reasons in an affidavit field before the court where the validity of any such order is under challenge. The legal position in this regard is settled by the decision of this Court in Commissioner of Police v. Gordhandas Bhanji, reported in AIR 1952 SC 16, wherein this Court observed : (AIR p.18, para9) "9.........public orders, publicly made, in exercise of a statutory authority cannot be construed in the light of explanations subsequently given by the officer making the order of what he meant, or of what was in his mind, or what he intended to do. Public orders made by public authorities are meant to have public effect and are intended to affect the actings and conduct of those to whom they are addressed and must be construed objectively with reference to the language used in the order itself."20
The Hon'ble apex Court in the case of Gajendra Sharma Vrs. Union of India and another (Writ Petition (s) (Civil) No(s).825 of 2020) adjourned the matter with the following observation:
"............The affidavit, which does not give necessary details, as were required by this Court's order dated 10.09.2020, Shri Tushar Mehta, learned Solicitor General and Shri V. Giri, learned senior counsel, pray for further time to file additional affidavit bringing on record the relevant decisions and circulars issued. Learned counsel appearing for the petitioners including the writ petitioners, related to different sectors, have also prayed for time to file reply to the affidavit, which we are inclined to grant. We, thus, allow one week's time to file reply to the additional affidavit dated 02.10.2020. During the said period, the learned counsel appearing for the Reserve Bank of India and learned Solicitor General as well as learned counsel appearing for the different banks and the Indian Bank Association may also file their additional affidavit bringing on record the relevant policy decisions, guidelines consequent to decision of the Government and Reserve Bank of India. The Union of India and the Reserve Bank of India may also file counter affidavit in other writ petitions where certain additional issues have been raised. The Government of India as well as Reserve Bank of India in the additional affidavit may also give their response with regard to different sectors grievances highlighted by different writ petitioners in the 19 intervention applications. Shri Tushar Mehta, learned Solicitor General, as well as Shri V. Giri, learned senior counsel, pray that they shall be filing consolidated affidavit, copy of which shall be sent to all. Let the affidavit be filed by 09.10.2020. List on 13.10.2020."
For there being no following of provisions required before declaring a borrower NPA and as this Court finds, telephonic communication to a borrower to have come in NPA status, 21 petitioner since denied to have received any such communication, this Court observes, petitioner here is entitled to the benefit of interim order dated 3.09.2020 passed in W.P.(s) (civil) No(s).825 of 2020 in the case of Gajendra Sharma Vrs. Union of India & Anr., which reads as follows :
"At the request of the Mr. Tushar Mehta, learned Solicitor General, the matter is adjourned for 10.092020.
Mr. Harish Salve, learned Senior Advocate, submitted that no account shall become NPA at least for a period of two months.
In view of the above, the accounts which were not declared NPA till 31.08.2020 shall not be declared NPA till further orders."
This Court from Annexure-6, page 66-an account statement of petitioner's account involved herein finds, petitioner has been permitted to draw a sum of Rs.1,65,000/- in a transaction on 19.08.2020, this apart, there is also some transaction involving the same account on 14.08.2020 as appearing at page 66 again, thus the claim of opposite party that petitioner's account remains in NPA status and thus not in operation, mismatches with their own materials available on record.
On reading the decisions referred to hereinabove this Court finds, the decisions have application to the stand of the petitioner that there cannot be oral communication in the matter of such serious decisions.
16. Attending to the response of the Bank the opposite party that there is no established practice to notice of one's becoming NPA to the borrower this Court from Section 13 of the Securitization and Reconstruction of Financial Assets and 22 Enforcement of Security Interest Act, 2002 finds the provision reads as follows:
"13. Enforcement of security interest.-
(1) Notwithstanding anything contained in section 69 or section 69A of the Transfer of Property Act, 1882 (4 of 1882 ), any security interest created in favour of any secured creditor may be enforced, without the intervention of the court or tribunal, by such creditor in accordance with the provisions of this Act.
(2) Where any borrower, who is under a liability to a secured creditor under a security agreement, makes any default in repayment of secured debt or any installment thereof, and his account in respect of such debt is classified by the secured creditor as on- performing asset, then, the secured creditor may require the borrower by notice in writing to discharge in full his liabilities to the secured creditor within sixty days from the date of notice failing which the secured creditor shall be entitled to exercise all or any of the rights under sub- section (4).
(3) The notice referred to in sub- section (2) shall give details of the amount payable by the borrower and the secured assets intended to be enforced by the secured creditor in the event of non- payment of secured debts by the borrower."
From the above it becomes clear that once one is declared NPA still there is scope for the borrower to overcome such situation and Bank is required to provide opportunity to the party facing NPA status. Here even assuming that petitioner was declared NPA though not communicated but it having taken place in the month of February, no action as contemplated in Section 13 of the Act, 2002 is undertaken even till now. Thus creating a grave doubt in the claim of the opposite party so far its claim of NPA involving the petitioner is concerned, such a stand does not stand any taste.
That in deciding several issues Hon'ble apex Court in the case of Mardia Chemicals Ltd. Etc. Vs. U.O.I. & Ors. Etc. Etc decided on 8.04.2004 as reported in AIR 2004 SC 2371 in the matter of dealing with NPA status involving a borrower has observed as follows:
23"44. As a matter of fact, the Narasimham Committee also advocates for a legal framework which may clearly define the rights and liabilities of the parties to the contract and provisions for speedy resolution of disputes, which is a sine qua non for efficient trade and commerce, especially for financial intermediation. Even the guidelines of the Reserve Bank of India in relation to classifying the NPA's while stressing the need of expeditious steps in taking a decision for classifying and identification of NPA's says, a system be evolved which should ensure that the doubts in asset classification are settled through specified internal channels within the time specified in the guidelines. It is thus clear that while recommending speedier steps for recovery of the debts it is envisaged by all concerned that within the legal framework, such provisions may be contained which may curtail the delays. Nonetheless dues or disputes regarding classification of NPAs should be considered and resolved by some internal mechanism. In our view, the above position suggests the safeguards for a borrower, before a secured asset is classified as NPA. If there is any difficulty or any objection pointed out by the borrower by means of some appropriate internal mechanism it must be expeditiously resolved."
Similarly in the case of M/s. Sardar Associates & Ors. Vrs. Punjab & Sind Bank & Ors. decided on 31st July, 2009 in para 14 & 15 therein observed as follows:
"14. The Reserve Bank of India is a statutory authority. It exercises supervisory power in the matter of functionings of the Scheduled Banks. The matter relating to supervision of Scheduled Banks is also governed by the Reserve Bank of India Act. For the aforementioned purpose, the Reserve Bank is entitled to issue guidelines from time to time.
15. The Parliament also enacted the 1949 Act to consolidate and amend the law relating to banking.
Section 5(l) of the 1949 Act defines "Reserve Bank" to mean the Reserve Bank of India constituted under Section 3 of the Reserve Bank of India Act, 1934.
By reason of various provisions of the 1949 Act, the Reserve Bank is empowered to control and supervise the functioning of the Scheduled Banks. The 1949 Act also provides for power of the Reserve Bank to control advances 24 by banking companies in terms of Section 21 of the 1949 Act which reads as under:
21 - Power of Reserve Bank to control advances by banking companies (1) Where the Reserve Bank is satisfied that it is necessary or expedient in the public interest or in the interests of depositors or banking policy so to do, it may determine the policy in relation to advances to be followed by banking companies generally or by any banking company in particular, and when the policy has been so determined, all banking companies or the banking company concerned, as the case may be, shall be bound to follow the policy as so determined.
(2) Without prejudice to the generality of the power vested in the Reserve Bank under sub- section (1) the Reserve Bank may give directions to banking companies, either generally or to any banking company or group of banking companies in particular, as to-
(a) the purposes for which advances may or may not be made,
(b) the margins to be maintained in respect of secured advances,
(c) the maximum amount of advances or other financial accommodation which, having regard to the paid-up capital, reserves and deposits of a banking company and other relevant considerations, may be made by that banking company to any one company, firm, association of persons or individual,
(d) the maximum amount up to which, having regard to the considerations referred to in clause
(c)guarantees may be given by a banking company on behalf of any one company, firm, association of persons or individual, and
(e) the rate of interest and other terms and conditions on which advances or other financial accommodation may be made or guarantees may be given.
(3) Every banking company shall be bound to comply with any directions given to it under this section."
25First decision taken note hereinabove decides the manner and steps to be undertaken before declaring a borrower in NPA status whereas the second decision holds the Reserve Bank guidelines are of binding nature on the Banks. This Court, therefore, observes that there is no following of established practice by the opposite party Bank before the so called self declaration of NPA status in the petitioner.
17. Now coming to deal with the claim of the petitioner that the stand of opposite party that petitioner already stood in NPA status on 28.02.2020 i.e. much prior to the cutoff date prescribed in the scheme, is just a creation to oppose applicability of the scheme to the petitioner establishment and runs contrary to their own case, this Court from the materials available on record and the observations made hereinabove finds, admittedly, there is no document establishing any communication to the petitioner- establishment that it has already been declared in NPA status. Except such a stand, for the first time it surfaces only through the stand of opposite party in para 4 of its counter affidavit and surprisingly to establish such stand, the Bank is taking help of some telephonic conversations in between the parties. This practice is unknown to law.
18. It further appears, in consideration of bad financial conditions in such establishments Government in its appropriate department resolved to waive the compound interest on loan upto rupees twenty million under separate Covid-19 support plan, which is a move to bring relief to millions of borrowers. The Emergency Credit Line Guarantee Scheme (ECLGS) referred to hereinabove by both the parties also makes it clear that intention of Central Govt. by infusion of money by different process is an attempt to see 26 survival of small Industrial Enterprises including M.S.M.Es and for the attitude of the opposite party-Bank in targeting the case of the petitioner in the garb of so called self declaration of back dated NPA, this Court finds, the same appears to be contrary to the intention of the Central Government, which is not in the better interest of the Nation.
19. So far as the opposite party disentitling the petitioner from the benefit of the scheme on the premises of some irregularities in the secured mortgaged properties involving the loan account bearing No.0553008700002392 is concerned, it appears, it is for the first time vide letter dated 12.08.2020 at Annexure-7 it is intimated to the petitioner that there has been some irregularities in the running of the particular account nearly 13 years, only in August, 2020. This Court here observes, in the event there were some irregularities existing and the petitioner was accommodated for such long period, the same could have been dealt with separately and could not have been attached as a condition to the grant of benefit under the Emergency Credit Line Guarantee Scheme (ECLGS) and this Court, therefore, directs the opposite party-Bank, in the event any such irregularities are there, that should not stand on the way of petitioner from getting the benefit of the Scheme and if any such ground exists, that shall be dealt independent of such consideration.
20. Before proceeding to final part of the judgment, this Court taking into account the written submission made in the written note of submission dated 12.10.2020 by the opposite party that this Court did not give similar opportunity of hearing like that given to the learned counsel for the petitioner, finds, this is an 27 unfortunate statement made by the counsel on behalf of the opposite party. Every time the case is taken, it ended only after completion of submissions of respective counsels. Except on one occasion when Video Conferencing was snapped, for which hearing opportunity was given on the next date. There was an attempt by Sri Mohapatra, learned counsel for the Bank to block the hearing of the case, who though filed the counter affidavit, but did not serve copy of the counter affidavit on the learned counsel for the petitioner. Considering this, this Court by order dated 27.08.2020 directed the learned counsel for the Bank to serve a copy of counter affidavit on the learned counsel for the petitioner. Then the case was next taken up on 3.09.2020 for final hearing, on which date on request of learned counsel for the petitioner including learned counsel for Bank the matter was postponed to 7th of September 2020 for hearing. Thereafter the case was posted on 8.09.2020 and accordingly the case was taken up for hearing and though the learned counsel for the Bank joined through Video Conferencing but he could not get contact for hearing through Video conferencing, after hearing him continued for some time, therefore, the matter was adjourned to 11.09.2020 giving opportunity to the opposite party-Bank. On posting of the case on 11.09.2020 Sri Mohapatra, learned counsel for the Bank after arguing at length attempted for adjournment of the matter to meet with the queries made by the Court and thus the matter was adjourned to the week commencing 21st of September, 2020. Matter next came up on 23.09.2020 and was adjourned to next week in view of order dated 8.09.2020, by another Bench. Matter next came up on 30.09.2020, when the matter remained further part heard and posted to next week. On 8.10.2020 after long hearing the matter was closed for judgment. In the meantime, learned Senior Advocate appearing on behalf of the 28 petitioner filed a further note and to provide natural justice to the opposite party-Bank, this Court suo motu directed for listing of the matter on 16.10.2020 under the heading "To be mentioned". On this date counsel for the Bank neither appeared nor prayed for adjournment and this Court suo motu adjourned the matter to 20.10.2020 for further hearing in view of notes of submission by both sides in the meantime. On 20.10.2020 there was again long argument by the learned counsel for the Bank and finally the matter was reserved for judgment to today (21.10.2020). This Court here observes, In spite of giving fullest opportunity of hearing to both the counsels this Court finds an unfortunate statement made by Sri M.K. Mohapatra learned counsel for the opposite party - Bank. This Court taking strong exception on the approach of Sri Mohapatra, learned counsel for the Bank while finding adoption of novel attempt for putting pressure on the assigned Court and/or with an ulterior motive to be utilized in future hopes and trusts that the opposite party as well as it's counsel shall refrain themselves from making such casual statements in written note of submissions in future.
21. In the above circumstance, this Court while declaring the letter dated 18.07.2020 vide Annexure-4 issued to the petitioner as bad, also declares that the communication vide Annexure-7 cannot come in the way of petitioner's getting benefit from the Scheme at Annexure-1 and Reserve Bank of India guideline / circular dated 21.06.2020 Annexure-2. This Court since declared the claim of opposite party that the petitioner-establishment has already come to NPA status, remains non-existence, directs the opposite party to release the required financial assistance in favour 29 of the petitioner in terms of ECLGS Scheme as per NCGTC circular dated 23.05.2020 by completing entire exercise within a period of ten days from the date of this judgment.
22. The Writ Petition succeeds, but in the circumstances, there is no order as to cost.
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(Biswanath Rath, J.) Orissa High Court, Cuttack.
The 21st day of October, 2020/ A. Jena, Sr. Steno