Bombay High Court
Pinakin Plastoforming Ltd. And Anr vs The Union Of India And 16 Ors on 20 January, 2020
Bench: S.C. Dharmadhikari, R.I. Chagla
Sherla V.
wpl.3683.2019_18.doc
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
O.O.C.J.
WRIT PETITION (LODGING) NO.3683 OF 2019
Pinakin Plastoforming Limited & another ... Petitioners
Vs
The Union of India & others ... Respondents
Mr.Mathews Nedumpara with Ms.Nikita Panhalkar, Mr.Raja
Vallecha and Ms.Mana Nedumpara i/b M/s.Rohini M. Amin for the
Petitioners
Ms.K.H. Mastakar for Respondent - Municipal Corporation
Mr.Amit Shastri, AGP, for Respondent - State
CORAM: S.C. DHARMADHIKARI &
R.I. CHAGLA, JJ.
DATED: JANUARY 20, 2020 P.C.:
1. We have heard Mr.Nedumpara in support of this petition.
2. The petitioners seek the following reliefs:
"a) Declare that the Notification dated 23.03.2018 issued by the Government of Maharashtra is unconstitutional and void inasmuch as while it excludes from its purview the multi-
national Companies and domestic giants who use multi layer plastic, which is not recyclable at all, for packaging, it bans the manufacture and sale of plastic of one time use, which is recyclable;
b) declare that the Respondent Bank being an instrumentality of the State, the Petitioner is entitled to seek remedies not merely in the realm of private law, but in the Page 1 of 9 wpl.3683.2019_18.doc realm of public law, nay, constitutional law, that even a State is accountable to a citizen and liable to compensate him where he has acted upon its assurances and promises and has suffered huge losses, nay, the very threat to his own existence, that; the Petitioners are entitled to be compensated for the loss and injury which it has suffered on account of the change of policy without any rhyme or reason and against all cannons of equity, justice and fair play, arbitrary ex-facie;
c) Declare that the Petitioner is entitled to the benefits under the Micro, Small & Medium Enterprises Development Act, 2006 as announced by the Government of India and the Reserve Bank of India;
d) Declare that in so far as, the MSME Act, while providing for rights and protection for the MSME units, did not provide for special forums for the enforcement of the Rights and redressal of grievances, the Civil Courts are empowered for the same and the jurisdiction of the Civil Court is not ousted;
e) Declare that "The Micro, Small and Medium Enterprises Development Act, 2006" of 16.06.2006 Chapter IV, Article 10, empowers the guidelines and or instructions issued by the Reserve Bank of India time to time and progressively be applied with the Force of Law. Therefore Notifications and Guidelines issued by the Reserve Bank of India specifically for MSMEs have the Force of Law by their inclusion in the MSME Act, 2006. Hence all guidelines and or instructions issued by Reserve Bank of India specifically for MSMEs from time to time are legally binding on all Banks and ARCs;
f) declare that the Petitioner's account was not liable to be declared as NPA except by authority of a circular or guideline which has the force of law, namely, one which is framed/issued by the Reserve Bank of India in exercise of the powers conferred on it by an Act of Parliament; Page 2 of 9
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g) declare that declaration of the Petitioner's as a wilful defaulter, being one involving adverse civil consequences, nay, one which meant its literal civil death, could never have been done by the Reserve Bank of India except by exercise of a power expressly invested in it by an Act of Parliament or by virtue of a rule framed and laid before the Parliament, duly published and is thus an instrument which has the force of law;
h) declare that Guidelines/Circular titled "Master Circular- Income Recognition, Asset Classification, Provisioning and Other Related matters-UCBs" by recourse to which the Petitioner's account has been classified as NPA has no force of law; that it is not framed in exercise of any power invested in the Reserve Bank of India, and, as a corollary thereof, to declare that the classification of the Petitioner's account as NPA based on the said guideline is void ab initio;
i) declare that the purported Copy of the said Circular bearing No. RBI/2011-12/73 DBOD
No.CID.BC.1/20.16.003/2011-12 dated 01.07.11 by recourse to which the Petitioner's is sought to be declared as a wilful defaulter is an instrument which has no force of law and is without the authority of law;
j) declare that the Respondent Bank is not entitled to any of the remedies which it seeks to enforce in terms of the notice under Sections 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 so also Section 14 of the said Act inasmuch as it is not the Plaintiffs who are guilty of any breach of contract and who are under obligation in terms of the contract between them and the Respondent Bank, but the latter and its officers who are guilty of gross breach of contract, culpable negligence, customer unfriendly attitude and malicious and tortious actions, and thereby have caused damage and loss to the Petitioner far in excess of the very claim of the Respondent Bank, and, to put in succinctly, to grant in favour of the Petitioners a negative declaration that no amount is due from the Petitioners to the Respondent Bank;
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k) to declare that the entire proceedings at the hands of Respondent Bank purportedly Under section 13(2) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and The Security Interest Enforcement rules are void ab initio and a consequential, executory Judgment/order quashing and setting aside the same;
l) Declare that Section 14 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 is unconstitutional and void inasmuch as it permits the learned Chief Metropolitan Magistrate/District Magistrate to order dispossession of the property of a borrower/tenant or third party, whatsoever be his right, on a mere application at the hands of a Bank of Financial Institution, often a simple mortgage, without notice and without hearing him, and thus in violation of Articles 14, 19 and 21 of the Constitution of India or, in the alternative, and may be more appropriately, to read into the said Section an obligation to issue a notice and afford a hearing to the borrower/tenant or third party;
m) Grant ad-interim injunction in favour of the Petitioners and against the Respondents, staying all further proceedings in furtherance of the proceeding further under section 13 of the SARFAESI Act, so too from proceeding under Section 14 of the SARFAESI Act pending the hearing and final disposal of the instant Writ Petition;
n) pass such further and other orders as the nature and circumstances of the case may warrant."
3. Mr.Nedumpara has submitted that prayer clauses (a) to (e) of the petition have direct bearing on the declaration sought in terms of prayer clauses (f) to (l) of the petition. Page 4 of 9
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4. The petitioners are aggrieved by the notification of 23.3.2018 issued by the Government of Maharashtra.
5. It is stated that the petitioners manufacture the Polypropylene cups, which are known as PP cups. The cups and glasses have a thickness of above 50 microns. They are used for serving hot and cold beverages. According to the petitioners, they are recyclable and environmental friendly. There is no substitute for them. The non-plastic glasses are breakable. The petitioners say that the cups and glasses manufactured by them are fit for one time use but the same are not comparable to the glassware in which hot and cold beverages are supplied. The petitioners say that the copy of the notification at exhibit A to the petition, in categorical terms, says that the plastic products are used worldwide. There was no occasion for the Government of Maharashtra through its Environment Department to issue the notification by which there is a ban imposed on plastic bags of less than 50 microns. The notification now says that there would be regulation for manufacture, usage, sale, transport, handling and storage of the products made from plastic and thermocol, which generate bio-degradable waste. This notification has definitions Page 5 of 9 wpl.3683.2019_18.doc and the notification which notifies Maharashtra Plastic and Thermocol Products (Manufacture, Usage, Sale, Transport, Handling and Storage) Notification, 2018 regulates the activities, which are set out in extenso in paragraph 3 of this notification. The petitioners are manufacturing these products and it is claimed that these products were manufactured by the petitioners from its factory at Vadodara in the State of Gujarat. The petitioners are stating that now there is a ban imposed on manufacture and sale of PP cups and glasses having thickness of even above 50 microns in the name of preventing pollution. The petitioners have challenged this notification on several grounds.
6. The petitioners inter alia contend that their Directors have borrowed loans from Respondent No.7 Bank. The Government of Gujarat encourages investment in plastic industry. However, the Government of Maharashtra feels otherwise. The petitioners, having borrowed this money, were obliged to repay the loans but came this notification, which has upset their repayment schedule. The petitioners submit that the problems faced by the small enterprises are to be addressed by the concerned Ministry and there has to be encouragement to the small scale industries. Page 6 of 9
wpl.3683.2019_18.doc Mr.Nedumpara has placed reliance upon the exhibits to this petition, which include the Reserve Bank of India Circulars. The petitioners say that there are many schemes operated and made functional through Small Industries Development Bank of India to assist the medium, small and micro enterprises. The petitioners, therefore, relied upon all these policies and sought restructuring of the loan with Respondent No.7. That was not agreed to and now, the petitioners face recovery proceedings. Respondent No.7 Bank has invoked the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 (SARFAESI Act, for short) on the premise that the petitioners have failed to service its account. It is, therefore, classified as a non- performing asset in terms of the guidelines of the Reserve Bank of India. Now, applying the stringent measures, the bank is seeking to recover the outstanding loan. It is in these circumstances that this Writ Petition claims the aforenoted reliefs.
7. However, it is apparent that the petitioners are aware that until their account was being serviced regularly and smoothly, the ban imposed by the Government of Maharashtra posed no difficulty. However, they are now relying upon this notification to Page 7 of 9 wpl.3683.2019_18.doc claim protection against the recovery measures proposed by respondent No.7. The petitioners are apprehending that respondent No.7 will go ahead and enforce its notice under section 13(2) of the SARFAESI Act by further steps and measures in accordance therewith. There is a likelihood of the assets and properties being taken over. Thus, the mortgaged properties would be taken over and later on, auctioned or sold so as to recover the outstanding amounts. This would mean complete closure of all business activities.
8. We are aware of the fact that this Court has admitted several petitions challenging the notification issued by the Government of Maharashtra. There were extensive arguments canvassed in support of the prayers for interim relief. However, the interim reliefs in that behalf have been rejected. The matters are pending.
9. Once there is an order passed by this Court of the aforesaid nature, there is a presumption of constitutionality of the notification and not otherwise. Therefore, we proceed to admit this petition. However, as far as the steps taken by the Bank under section 13 of the SARFAESI Act are concerned, Mr.Nedumpara, on instructions, says that the petitioners are in receipt of a notice Page 8 of 9 wpl.3683.2019_18.doc under sub-section (2) of section 13 but they have not replied to it and, therefore, the petitioners will not press for any interim reliefs for the time being until they reply to such notice.
(R.I. CHAGLA, J.) (S.C. DHARMADHIKARI, J.) Digitally signed by Vishwanath Vishwanath S. Sherla S. Sherla Date:
2020.01.24 11:26:19 +0530 Page 9 of 9