Madhya Pradesh High Court
Mittal Fresh Food Private Limited vs State Bank Of India on 26 April, 2012
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HIGH COURT OF MADHYA PRADESH AT JABALPUR
Writ Petition No : 18750 OF 2010
Mittal Fresh Food Pvt. Ltd.
- V/s -
State Bank of India and others
Present : Hon'ble Shri Justice Rajendra Menon.
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Shri Manoj Sharma, learned counsel for the petitioner.
Shri Sanjay Agrawal, learned counsel for the respondent.
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Whether approved for reporting: Yes/ No
ORDER
( /04/2012) Challenging the action of the respondents in not giving benefit of rehabilitation to the petitioner's establishment in accordance with rehabilitation scheme and the proposals circulated as per the Master Circular Annexure-P3 dated 1 st of July, 2010 and further contending that certain steps are not taken by the respondents for releasing the subsidiaries, petitioner has filed this writ petition and the following reliefs are claimed : 2
"(i) This Hon'ble Court be pleased to call upon the entire material record from the respondents pertaining to financial accommodation as extended to petitioner Unit by the respondents and as to how the revival proposal of petitioner is being dealt with, by the respondents :
(ii) This Hon'ble Court be pleased to issue a writ/ order/ direction/ command to respondents to extend the benefit of the Master Circular as issued by Reserve Bank of India ; Scheme of 2010 as propounded by the State of M.P. and any other connected benefits as flowing from the Act of 2006 and any other enactment Rules/ Regulations/ Circulars/ Notifications, etc. applicable to the instant case, forthwith ;
(iii) That, this Hon'ble Court may further be pleased to restrain the respondents from taking any coercive or deterrent action against the petitioner which may obstruct its revival in terms of the Master Circular of RBI, Scheme of 2010 or any other enactment, Rules, Regulations, Circulars, Notifications, etc.
(iii) (a) That this Hon'ble Court be pleased to direct Respondent No.2 to forward revised document Annexure-
P/25 (with the Rejoinder) to its Nodal Branch at Delhi for onwards submission to the Ministry of Food Processing Industry, Govt. of India towards compliance for release of second installment of subsidy."
2. During the course of hearing of this writ petition, parties agreed that as far as the Relief (iii)(a) is concerned, the matter is now with the Government of India for releasing of the subsidiaries and, therefore, the said relief is now rendered infructuous.
3. Shri Manoj Sharma emphasized that now the petitioner only seeks mandamus with regard to Relief No.(ii).
4. Accordingly, the question of granting the aforesaid relief to the petitioner is being considered in this order. 3
5. Facts in nutshell indicate that the petitioner is a company registered and incorporated under the provisions of Companies Act, 1956 and has established a Small Scale Industry after due registration from the State Government as is evident from Annexure-P1. The Petitioner's unit is engaged in the process of manufacturing tomato paste and other food items and for the purpose of establishing the unit, financial accommodation was taken by the petitioner from two financial institutions namely I.C.I.C.I Bank and the respondent/State Bank of India. The term lone of Rs.118.00 lacs was taken by the I.C.I.C.I. Bank and the term lone of Rs.23.60 lacs along with the Working Capital of Rs.75 Lacs was obtained from the State Bank of India. The entire project was commissioned in July 2008 at an estimation of cost of Rs.234.40 lacs. According to the petitioner, due to certain unavoidable circumstances, beyond the control of the Management and promoters, petitioner's establishment started sufferings various losses leading to erosion of capital by more than 50%, as a result, the petitioner committed default in it's commitment for re-payment of financial accommodation granted by the banks.
6. According to the petitioner, the petitioner comes within the purview of a sick industry as defined under Clause 3.5.1 of the Industrial Policy 2010 formulated by the Government of Madhya 4 Pradesh as contained in Annexure-P2. As both the conditions stipulated in Sub-Clause (a) and (b) of Clause 3.5.1 are fulfilled in the case of the petitioner, it was pointed out by learned counsel for the petitioner that for the purpose of granting assistance and lending to micro, small and medium enterprises, the Reserve Bank of India formulated a scheme which was circulated in the form of a Master Circular consolidated as appendix in 2010 i.e. M.P. Small Scale Industries Revival Scheme, 2010. The definition of micro, Small and Medium Enterprises was incorporated in Clause-1 of this scheme Annexure-P3 and, thereafter, a guideline for rehabilitation of sick, small scale industrial unit was indicated in Clause-4.6 of the Master Circular. Clause 4.6 of the Master Circular takes note of the definition of sick industry and contemplates two requirements to be fulfilled for coming within the purview of sick industry and if a industry comes within the aforesaid purview and the parameters indicated therein then they are entitled for grant of relief as indicated in Para-4.6.
7. Grievance of the petitioner is that the petitioner fulfills all the requirements for being declared as a sick industry, inspite thereof, the relief with regard to benefit contained in the Master Circular is not granted to the petitioner. Shri Manoj Sharma took me through various circulars as indicated hereinabove, the 5 communication made between the parties, the balance sheets, the documents with regard to profits and losses and various other documents and tried to demonstrate before this Court that the petitioner fulfills all the requirements to come within the purview of sick industry and inspite of fulfilling all these requirements, the benefit of rehabilitation as contained in the Master Circular is not granted and, therefore, the mandamus is sought in this regard.
8. Shri Sanjay Agrawal, learned counsel for the respondents refuted the aforesaid and emphasized that the petitioner is not entitled to relief now, as the petitioner is not fulfilling the requirements of being in commercial production for a period of two years. Accordingly, it is stated that Clause-4.6 of the Master Circular having not being fulfilled, the claim made by the petitioner is liable to be rejected.
9. Shri Sanjay Agrawal pointed out that the company started commercial production on 1 st of July, 2008 and when the inspection was undertaken on 18.1.2010 as is evident from Annexure-R1, the Company was found to be not in production since 19.8.2009. Accordingly, referring to various documents i.e. report Annexure- R1, the electricity bills with regard to electricity dues of the petitioners establishment, Shri Sanjay Agrawal submitted that the unit is not functioning and is not in the commercial production 6 from the year 2009, the production has been stopped since August, 2009 and, therefore, it is stated that a mandamus for enforcing a Master Circular cannot be issued by this Court. It was also stated by Shri Sanjay Agrawal that the H.T. Electricity connection of petitioner's establishment was disconnected on February 2001, the account of the petitioner's establishment was declared as a non- performing account on 19.8.2010. Notices were issued to the petitioner to pay the dues along with the interest and on 3.12.2010, a claim has been filed by the Bank before the Debt Recovery Tribunal and as the dispute is pending before the Debt Recovery Tribunal, the matter should be left to be decided by the D.R.T and at this stage no mandamus can be issued, it is pointed out by Shri Sanjay Agrawal that after issuing notice to the petitioner and the petitioner having come to know about filing of the case before the Debt Recovery Tribunal, only to delay the proceedings of the Debt Recovery Tribunal, the petitioner has filed the writ petition before this Court on 21.12.2010 i.e. 15 days' after filing of the claim application before the Debt Recovery Tribunal. Accordingly, prayer is made for dismissal of this writ petition.
10. Shri Manoj Sharma, learned counsel for the petitioner refuted the aforesaid contention and again reiterated his submissions on the basis of the documents produced. It is emphasized by him that 7 the unit of the petitioner has been in commercial production for two years and, therefore, the pre-condition for availing of the relief of the Master Circular is fulfilled and, therefore, it is stated that the mandamus can be issued. For canvassing his contention, and for implementing a scheme of Reserve Bank of India, by way of a mandamus Shri Manoj Sharma invited my attention to a judgment rendered in the case of Central Bank of India Vs. Ravindra and others 2002 (1) SCC 367 and in the case of Sardar Associates and others Vs. Punjab & Sind Bank and others 2009 (8) SCC 257.
11. In sum and substance, it is the contention of Shri Manoj Sharma that as a case for applicability of the Master Circular is made out, the mandamus in this regard be issued.
12. I have heard learned counsel for the parties and perused the record. As far as issuing a mandamus for implementing a circular issued by the Reserve Bank of India is concerned, the Constitution Bench of the Supreme Court in the case of Central Bank of India (Supra) in Para 55 and 56 has considered this aspect of the matter and it has been held that the directives and circulars issued by the Reserve Bank of India not only have statutory flavour but in contravention thereof or in default in compliance thereof is punishable under Sub-section (4) of Section 46 of the Banking Regulation Act, 1949. Accordingly, if the principle laid down in the 8 aforesaid case is given effect to, then a mandamus can always be issued for enforcing a Master Circular. Even though after the aforesaid judgment was rendered, a bench of the Supreme Court in the case of Oriental Bank of Commerce Vs. Sunder Lal Jain and Another 2008 (2) SCC 280 had held that a mandamus cannot be issued for enforcing a circular of the Reserve Bank of India but subsequently in the case of Sardar Associates (Supra), the principles laid down in the case of Oriental Bank of Commerce (Supra) is said to be per incurim and the principles laid down in the case of Central Bank of India (Supra) is found to be laying down the correct principle of law. Accordingly, there is no dispute with regard to the fact about jurisdiction of this Court to issue a mandamus for enforcement of the Master Circular Annexure-P3 issued by the Reserve Bank of India.
13. However, for issuing the mandamus and commanding the respondents to give effect to the rehabilitation scheme, this Court has to be satisfied that the pre-conditions stipulated for applicability of the circular or scheme are fulfilled. That being so, it is thought appropriate to consider as to whether from the material available on record, the applicability of the circular is fulfilled or not.
Clause-4.6 of the circular Annexure-P3 reads as under : 9
"4.6 Guidelines on rehabilitation of sick (now MSE) units (based on Kohli Working Group recommendations) As per the definition, a unit is considered as sick when any of the borrowal account of the unit remains substandard for more than 6 months or there is erosion in the net worth due to accumulated cash losses to the extent of 50% of its net worth during the previous accounting year and the unit has been in commercial production for at least two years. The Criteria will enable banks to detect sickness at an early stage and facilitate corrective action for revival of the unit. As per the guidelines, the rehabilitation package should be fully implemented within six months from the date the unit is declared as potentially viable/ viable. During this six months period of identifying and implementing rehabilitation package banks/FIs are required to do "holding operation" which will allow the sick unit to draw funds from the cash credit account at least to the extent of deposit of sale proceeds.
Following are broad parameters for grant of relief and concessions for revival of potentially viable sick SSI units :
(i) Interest on Working Interest 1.5% below the Capital : prevailing fixed/prime lending rate, wherever applicable.
(ii) Funded Interest Term Interest Free
Loan :
(iii) Working Capital Term Interest to be charged 1.5%
Loan : below the prevailing fixed/
prime lending rate, wherever
applicable.
(iv) Term Loan : Concessions in the interest to
be given not more than 2%
(not more than 3% in the case
of tiny/ decentralised sector
units) below the document
rate.
(v) Contingency Loan The Concessional rate
Assistance : allowed for working capital
A circular was issued to all scheduled commercial banks vide RPCD.No.PLNFS.BC.57/06.04.01/2001-02 dated January 16, 2002 thereby advising implementation of the Kohil Committee Recommendations."10
14. It is clear from the aforesaid requirement that a unit is considered as sick when any of the borrowal account of the unit remains substandard for more than 6 months or there is erosion in the net worth due to accumulated cash losses to the extent of 50% of its net worth. This is the first condition, which should be fulfilled and from the documents and material available on record, it is clear that this condition is fulfilled.
15. However, further condition is that the unit has been in commercial production for at least two years. Even though by referring to the documents available on record particularly the balance sheet showing earnings from sales and the electricity consumed even if on a lower rate, Shri Manoj Sharma tried to emphasize that the unit has been in commercial production for a period of two years but from the documents filed by the respondents particularly the inspection report, this Court is not in a position to give a specific finding in this regard. In the return Annexure-R1 dated 18.1.2010, reference is made to certain statement made by one Shri Mukul Mittal, a representative or the office bearer of the Company and the statements recorded in this inspection report indicate that there is no sign of production since 19.8.2009 and it was indicated at the time of inspection that due to 11 non-production, the management is thinking to sell or lease out the unit. The competent authority of the Bank in Para-5 of the report indicates that the commercial production is stopped since 2009.
16. Even though, Shri Manoj Sharma by referring to a communication available on record along with I.A.No.13950/2011 referred to certain observations made by the Bank indicating that the functioning of the unit is in low level but the fact remains that the documents and the rival affidavits filed by the parties indicate different aspects of the matter and there is serious dispute with regard to the fact, as to whether the unit in question has been in continuous commercial production for two years after 1 st of July, 2008. This Court on the basis of the documents and material available on record cannot record a positive finding in this regard. It is a disputed question of fact and it is not safe for this Court to record any finding, based on divergent submissions and documents in this regard filed by the parties.
17. Accordingly, as there is serious dispute with regard to fulfillment of the condition for seeking benefit of the circular in question, it is not appropriate for this Court to issue any mandamus. Once, disputed question of facts are available on record of the writ petition and when the records show that the question is already sub- judice before the Debt Recovery Tribunal, the petitioner can always 12 raise a counter claim with regard to the same relief, as is claimed before this Court, by approaching the Debt Recovery Tribunal. The Debt Recovery Tribunal is a forum where a detailed enquiry and trial can be held and after recording of evidence and cross examination the tribunal would in a better position to decide the questions of fact which are in dispute by recording a finding with regard to the unit being in commercial production for two years or not.
18. Accordingly, in the light of the disputed question of facts involved and further considering the fact that the matter is already sub-judice before the Debt Recovery Tribunal, where the dispute in question can be more appropriately dealt with, it is not appropriate for this Court to interfere in the matter. Instead, by approaching the Debt Recovery Tribunal and if on an enquiry, the Debt Recovery Tribunal comes to the conclusion that the requirements of the Master Circular are fulfilled, the Debt Recovery Tribunal can issue direction for grating benefit to the petitioner as per the scheme or circular of the Reserve Bank of India.
19. Accordingly, finding no case made out for interference, the petition is disposed of with the following directions :
"On the petitioner's raising a counter claim before the Debt Recovery Tribunal seeking a relief as per the Master Circular 13 Annexure-P3 and Para-4.6 of the same, the Debt Recovery Tribunal after conducting an enquiry, as may be necessary, shall pass appropriate orders with regard to the relief as prayed for by the petitioner, after considering the claim of the Bank ."
20. With the aforesaid, the petition stands disposed of.
(Rajendra Menon)
Judge
nd
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HIGH COURT OF MADHYA PRADESH AT JABALPUR
Writ Petition No : 18750 OF 2010
O R D E R
Post for /04/2012
( RAJENDRA MENON )
JUDGE
/04/2012