Punjab-Haryana High Court
M/S Oberoi Automobile Private Limited ... vs District Magistrate And Another on 1 July, 2024
Author: Lisa Gill
Bench: Lisa Gill
CWP No. 31898 of 2019 (O&M) 1 e- a IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH CWP No. 31898 of 2019 (O&M). Date of Decision: 01.07. 2024 M/s Oberoi Automobiles Private Limited and another ssceee Petitioners Versus District Magistrate and another CORAM:- HON'BLE MRS. JUSTICE LISA GILL HON'BLE MS. JUSTICE AMARJOT BHATTI Present: Mr. Aalok Jagga, Advocate and Mr. H.S.Jagdev, Advocate for the petitioners. Mr. Sumit Gupta, Addl. AG., Haryana. Mr. Nikhil Bhardwaj, Advocate for respondent no.2-Bank. 3 ie 2s 2c 2c LISA GILL, J.
1. Prayer in this writ petition is for setting aside notice dated 08.12.2017, Annexure P-7, besides communication dated 01.07.2019, Annexure P-9, vide which the proposal for 'One Time Settlement' (OTS) submitted by petitioners on 29.06.2019 has been rejected allegedly in contravention of the Settlement Policy, Annexure P-10. Petitioners also seek a direction to respondent no.2 i.e., the Bank to reconsider proposal dated 29.06.2019 submitted by petitioners for OTS and also seek restoration of physical possession of the secured asset. It is further prayed that respondent no.2-Bank should be directed to refund the amount of ¥20 Lakhs deposited by petitioners on 29.06.2019 along with its proposal for OTS or keep it ina 'No Lien Account'.
CWP No. 31898 of 2019 (O&M) 22. Petitioner-Company represented by its director who is arrayed as petitioner no.2 is stated to have availed of credit facility of ¥4 Crores on 04.05.2014. As per sanction letter dated 03.11.2014 loan facility for a sum of ¥3,97,34,071 was sanctioned pursuant to application no.2661196. Thereafter, two term loans were sanctioned in favour of petitioner i.e. of ¥70 lakhs was sanctioned on 11.02.2015 and of ~1 Crore was sanctioned on 06.08.2015. It is pleaded that the term loan of %3,97,34,071/- was sanctioned with an intent to foreclose the previous loan of €4 Crores. It is also pleaded that the entire sanctioned amount of %4 Crores initially was not released to the petitioners. It is stated that due to financial crunch faced by the Company and decision of General Motors to stop future production by the end of 2017 led to financial indiscipline on the part of petitioners. Respondent-Bank, it is pleaded without looking into the facts and circumstances of the case declared account of the petitioners 'Non Performing Asset' (NPA) and initiated proceedings under Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short 'SARFAESI Act') with issuance of notice under Section 13(2) of SARFAESI Act on 27.06.2016 claiming a sum of €6,10,96,977/- as due on 12.06.2017. Notice under Section 13(4) of SARFAESI Act was issued on 08.09.2017. Learned counsel for petitioners submitted that proposal for OTS was submitted by the petitioners on 29.06.2019 for a sum of %4 Crores with an undertaking to deposit the amount within 6 months and in order to show their bona fides a demand draft of Rs.20 Lakhs was attached with the proposal.
3. Learned counsel for petitioners further submitted that respondent no.2 in an absolutely illegal and arbitrary manner rejected the CWP No. 31898 of 2019 (O&M) 3 proposal in a totally non speaking manner vide communication dated 01.07.2019, Annexure P-9. It was vehemently argued by learned counsel for petitioners that amount of ¥20 Lakhs was illegally adjusted by respondent- Bank towards the outstanding loan amount, though it should have been refunded in terms of the law laid down by Hon'ble the Supreme Court in the case of Kut Energy Private Limited Vs. Punjab National Bank and others, 2019 SCC Online 1057 as settlement did not fructify. Respondent no.2, it was alleged again in an illegal manner obtained an order under Section 14 of SARFAESI Act. The said order was statedly never communicated to the petitioner. In pursuance to the said order, respondent no.2 took physical possession of the secured asset on 22.08.2019. Present writ petition was thereafter filed. During pendency of this writ petition sale notice dated 27.10.2019 was issued. CM No. 18025-CWP of 2019 was filed by petitioner seeking stay of operation of the said sale notice. Vide order dated 28.11.2019 passed in this writ petition, operation of the said sale notice dated 27.10.2019 was suspended.
4. Learned counsel for petitioners vehemently argued that action taken by respondents under SARFAESI Act against petitioners is completely de-hors the provisions of law. It is further submitted that there was complete violation of Rule 8 and 9 of Security Interest (Enforcement) Rules, 2002 and taking over of physical possession of the property in question was an arbitrary exercise of power. Learned counsel for petitioners vehemently argued that rejection of the proposal for OTS is absolutely illegal because communication dated 01.07.2019 does not even refer to the OTS Scheme formulated by the bank. As per the valuation report attached by petitioners as Annexure P-12 with the writ petition, property was valued at about %4 Crores approximately, therefore the proposal and offer by the petitioners is CWP No. 31898 of 2019(O&M) 4 clearly genuine and squarely covered under applicable Scheme of the bank. Moreover, adjustment of the amount of ~20 Lakhs deposited as upfront amount to show the bona fides of the petitioners is an absolutely erroneous and illegal act. In case, the proposal set-forth by the petitioners was not acceptable, the said upfront amount should have been refunded to petitioners or kept in a 'No Lien Account'. It was thus prayed that this writ petition be allowed.
5. Learned counsel for respondent no.2 refuted the averments on behalf of the petitioners. It was submitted that present writ petition itself is not entertainable because in so far as any grievance qua action taken under SARFAESI Act is concerned, petitioners have an efficacious remedy available to them under SARFAESI Act itself. It was denied that there was any illegality or irregularity in the proceedings undertaken under SARFAESI Act against the petitioners. Learned counsel for respondent no.2 points out that reliance by petitioners on the OTS Scheme attached as Annexure P-10 is clearly misplaced as the same applies to Micro, Small and Medium Enterprises (MSME) Sector. However, there is nothing on record to indicate that the petitioner no.1 is registered as MSME unit. There is no such plea in the writ petition itself and no documentation is available on record. It was further submitted that the proposal for OTS for a sum of %4 Crores was not acceptable to respondent-Bank as it was much on the lower side. The outstanding amount even as per notice dated 27.06.2016 was over %6 Crores. Therefore, the offer of €4 Crores in the year 2019 was clearly not reasonable. Moreover, petitioners it was contended have concealed the fact that at the time of execution of loan agreement in question, services of an approved valuer were engaged for ascertaining the market value of the mortgaged property and as per Valuation Report dated 05.02.2015 CWP No. 31898 of 2019 (O&M) 5 (Annexure R-2/1), the property was valued at %6,62,95,900/- as on 05.02.2015. Learned counsel for respondent no.2 submitted that as of now value of the property has necessarily increased and reliance by petitioners on Valuation Report dated 16.12.2019 pegging the realizable value of mortgaged property to be a meagre sum of ¥%3,83,00,000/-, is clearly incorrect and erroneous. Said report dated 16.12.2019 is stated to be a bogus one not reflecting the true state of affairs. The petitioners, it was submitted do not have any vested right to seek an OTS. In the given facts and circumstances, petitioners proposal for OTS has been correctly rejected. It was thus prayed that this writ petition be dismissed, though, it was fairly informed by learned counsel for respondent no.2 on instructions from Mr. Farid Ahmed, Regional Legal Manger of respondent no.2-IDFC First Bank that there can be no objection to refund the amount of €20 Lakhs which was deposited as upfront amount by petitioners.
6. We had heard learned counsel for the parties and have carefully perused the file.
7. Primary grouse raised by learned counsel for petitioners is that the proposal for OTS submitted by petitioners should have been accepted by respondent no.2 and its rejection vide communication dated 01.07.2019 is illegal and arbitrary. It is the case of petitioners that the proposal set-forth by them was absolutely reasonable and should have been accepted keeping in view the policy attached as Annexure P-10 which lays down certain guidelines to be followed by the bank in respect to the realizable value and marketability of securities charged to the bank; besides general and operational principles for compromise and settlement. It is to be noted at this juncture that apart from the fact that there is no documentation available on record and in-fact not even a plea in the writ petition that petitioner no.1 is CWP No. 31898 of 2019 (O&M) 6 registered as MSME, thus attracting applicability of the Scheme attached as Annexure P-10, it is a settled position that the borrower/guarantor does not have a vested right to seek an OTS. It has been held by Hon'ble the Supreme Court in The Bijnor Urban Cooperative Bank Limited, Bijnor and others Vs. Meenal Aggarwal and others, 2022 AIR (SC) 56 as under:-
"Q, Even otherwise, as observed hereinabove, no borrower can, as a matter of right, pray for grant of benefit of One Time Settlement Scheme. In a given case, it may happen that a person would borrow a huge amount, for example Rs.100 crores. After availing the loan, he may deliberately not pay any amount towards installments, though able to make the payment. He would wait for the OTS Scheme and then pray for grant of benefit under the OTS Scheme under which, always a lesser amount than the amount due and payable under the loan account will have to be paid. This, despite there being all possibility for recovery of the entire loan amount which can be realised by selling the mortgaged/secured properties. If it is held that the borrower can still, as a matter of right, pray for benefit under the OTS Scheme, in that case, it would be giving a premium to a dishonest borrower, who, despite the fact that he is able to make the payment and the fact that the Bank is able to recover the entire loan amount even by selling the mortgaged/secured properties, either from the borrower and/or guarantor. This is because under the OTS Scheme a debtor has to pay a lesser amount than the actual amount due and payable under the loan account. Such cannot be the intention of the Bank while offering OTS Scheme and that cannot be purpose of the Scheme which may encourage such a dishonesty.
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11. The sum and substance of the aforesaid discussion would be that no writ of mandamus can be issued by the High Court in exercise of powers under Article 226 of the Constitution of India, directing a financial institution/Bank to positively grant the benefit of OTS to a borrower. The grant of benefit under the CWP No. 31898 of 2019 (O&M) 7 OTS is always subject to the eligibility criteria mentioned under the OTS Scheme and the guidelines issued from time to time. If the Bank/financial institution is of the opinion that the loanee has the capacity to make the payment and/or that the Bank/financial institution is able to recover the entire loan amount even by auctioning the mortgaged property/secured property, either from the loanee and/or guarantor, the Bank would be justified in refusing to grant the benefit under the OTS Scheme. Ultimately, such a decision should be left to the commercial wisdom of the Bank whose amount is involved and it is always to be presumed that the financial institution/Bank shall take a prudent decision whether to grant the benefit or not under the OTS Scheme, having regard to the public interest involved and having regard to the factors which are narrated hereinabove."
8. Valuation of the property at ¥4 Crores vide Valuation Report dated 16.10.2019 relied upon by petitioners is specifically denied by respondent-Bank, which in its commercial wisdom has rejected the proposal for OTS submitted by the petitioners. Reference has been made to an earlier report claiming value of the property to be much more even at the time of sanction of the loan facility in question. In the given factual matrix, it is not for this Court to delve into the matter and issue a positive direction to respondent-Bank to enter into a particular OTS with the petitioners.
9. Insofar as the question of proceedings initiated under SARFAESI Act against petitioners is concerned, they admittedly had efficacious alternate remedies under SARFAESI Act itself. No interference by the High Court in exercise of jurisdiction under Article 226 of the Constitution of India is called for in the given circumstances. Gainful reference in this respect can be made to judgments of Hon'ble the Supreme Court in Union Bank of India Vs. Satyawati Tandon and others, 2010(8) SCC 110, M/s South Indian Bank Limited and others Vs. Naveen CWP No. 31898 of 2019 (O&M) 8 Mathew Philip and another, 2023(1) RCR (Civil) 771 and PHR Invent Educational Society Vs. UCO Bank and others, 2024 AIR (Supreme Court) 1893
10. In our considered opinion, no ground whatsoever is made out for interference by this Court in this writ petition. However, it is to be noted that in terms of the stand of respondent no.2 as conveyed by learned counsel for respondent no.2, the upfront amount of Rs.20 Lakhs as deposited by petitioners along with their proposal dated 29.06 2019, be refunded on an application being made by petitioner no.1 in this respect.
11. With the aforesaid direction, this writ petition is dismissed with liberty to petitioners to avail remedy(ies) as may be available to them in accordance with law for challenging proceedings under SARFAESI Act. Furthermore, it is always open to the parties to arrive at any mutually acceptable settlement. There is no expression of opinion on the merits of the matter qua proceedings under SARFAESI Act.
( LISA GILL ) JUDGE (AMARJOT BHATTI) July 01, 2024. JUDGE s.khan Whether speaking/reasoned : Yes/No. Whether reportable : Yes/No.