Delhi High Court - Orders
Hemant Kanoria vs Union Bank Of India & Ors on 31 May, 2022
Author: Sanjeev Narula
Bench: Sanjeev Narula
$~4
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ W.P.(C) 8025/2022 & CM APPL. 24390/2022
HEMANT KANORIA ..... Petitioner
Through: Mr. Pranjit Bhattacharya, Ms. Niyati
Kohli and Mr. G.K. Mishra,
Advocates.
Versus
UNION BANK OF INDIA & ORS. ..... Respondents
Through: Mr. Dhruv Dewan, Mr. Anoop Rawat,
Ms. Smarika Singh, Mr. Saurav
Panda, Ms. Yashna Mehta and
Ms. Mohanan N., Advocates for R-1.
Mr. Ramesh Babu, Ms. Manisha Sigh,
Ms. Nisha Sharma and Ms. Sanya
Panjwani, Advocates for R-2/RBI.
CORAM:
HON'BLE MR. JUSTICE SANJEEV NARULA
ORDER
% 31.05.2022 CM APPL 24391/2022 (for exemption from filing original/certified copies/typed copies of the annexures/documents)
1. Exemption is granted, subject to all just exceptions.
2. The Petitioner shall file legible and clearer copies of exempted documents, compliant with practice rules, before the next date of hearing.
3. Accordingly, the application stands disposed of.
W.P.(C) 8025/2022 & CM APPL. 24390/2022 (under Section 151 of the Signature Not Verified Digitally Signed W.P.(C) 8025/2022 Page 1 of 7 By:SAPNA SETHI Signing Date:04.06.2022 12:00:58 Code of Civil Procedure, 1908 seeking interim reliefs)
4. Issue notice. Mr. Dhruv Dewan, Advocate accepts notice on behalf of Respondent No. 1. Mr. Ramesh Babu, Advocate accepts notice on behalf of Respondent No. 2.
5. Petitioner - Shri Hemant Kanoria impugns the circular bearing no. RBI/ DBS/ 2016-17/ 28 DBS. CO. CFMC. BC. No. 1/ 23.04.001/ 2016-17 dated 1st July, 2016 (updated as on 3rd July, 2017) [hereinafter, "Master Circular"] issued by Respondent No. 2, which deals with the classification and reporting of fraud accounts by commercial banks and financial institutes as well as consequential action of Respondents No. 1 [Union Bank of India] declaring the accounts of Respondent No. 3 [SREI Infrastructure and Finance Limited] and Respondent No. 4 [SREI Equipment Finance Limited] (both of which, Petitioner was a former Chairman), as a 'fraud' account. Respondents No. 3 and 4 are hereinafter collectively referred to as "SREI Companies".
6. During the pendency of the petition, Petitioner presses for an interim relief for stay on the effect and operation of the aforesaid Master Circular; restrain order against Respondents No. 1 & 2 and creditors/ banks of SREI Companies from initiating any coercive steps/ action against the SREI Companies and its erstwhile management (which also includes the Petitioner).
7. The attention of this Court has been drawn to the order dated 18th Signature Not Verified Digitally Signed W.P.(C) 8025/2022 Page 2 of 7 By:SAPNA SETHI Signing Date:04.06.2022 12:00:58 May, 2022 qua Petitioner's action against Karnataka Bank Ltd., wherein the Court took note of an earlier petition filed by the Petitioner against Punjab and Sind Bank - and granted interim relief on 22nd April, 2022. Relying on the afore-noted orders, Petitioner prays for interim relief(s) against another member of the consortium of banks viz. Respondent No. 1.
8. The Court has briefly heard the counsel for the parties on this issue. At the outset, Mr. Dhruv Dewan, counsel for Respondent No. 1-Bank, objects to the maintainability of the present petition on the ground that this Court lacks the territorial jurisdiction to entertain the present petition. He points out that the concerned branch of the consortium of banks through which loans were processed to SREI Companies, is located outside the territorial jurisdiction of this Court.
9. Additionally, Mr. Dewan submits that Petitioner is indulging in forum shopping. He has not disclosed that an interim order has already been passed in the suit filed by Petitioner in the Commercial Court at Alipore, wherein Respondent No. 1-Bank is also arrayed as one of the parties. In the said suit, vide order dated 20th May, 2022, the Court has passed the order allowing prayers (a) and (c) made therein. The said interim order is still continuing. Prayers (a) and (c), as referred to in the said order, read as follows:
"a) Injunction restraining the respondents from giving any effect or further effect or acting in terms of or in furtherance to or circulating or relying upon the said purported audit report circulated by the respondent no.1 under cover of an email dated 28th December 2021 being Annexure "U"
hereof or from taking any step or measure or making any declaration under the said RBI Circular dated 1st July 2016 in any manner whatsoever;
b) xx ... xx ... xx Signature Not Verified Digitally Signed W.P.(C) 8025/2022 Page 3 of 7 By:SAPNA SETHI Signing Date:04.06.2022 12:00:58
c) Ad interim orders in terms of prayers above."
10. In view of the above order, Mr. Dewan submits that Petitioner cannot insist on any interim order(s) in the instant petition - which is identical to the reliefs sought before the Commercial Court at Alipore.
11. On the other hand, Mr. Pranjit Bhattacharya, counsel for the Petitioner, places reliance upon the orders passed by Hon'ble Mr. Justice Prateek Jalan - who is presently hearing a batch of petitions assailing the circular which has also been impugned in the present petition - which are next coming up for hearing on 13th July, 2022.1 Mr. Bhattacharya argues that the question of territorial jurisdiction has been left open for consideration in the said batch of petitions,1 and the same view may be taken by this Court as well.
12. As regards the suit before the Commercial Court at Alipore, Mr. Bhattacharya clarifies that in the said suit, there was no challenge to the declaration of Petitioner's account by Respondent No. 1-Bank as a fraud account. He emphasises that there is no overlap as the relief sought in the present petition is distinct from the reliefs sought in the suit therein.
13. Having heard the submissions, at the outset, the Court would like to record the averments made in the petition qua the jurisdiction of this Court, which read as follows:
1Order dated 22nd March, 2021 in W.P. (C) 3800/2021.Signature Not Verified Digitally Signed W.P.(C) 8025/2022 Page 4 of 7 By:SAPNA SETHI Signing Date:04.06.2022 12:00:58
"97. The Petitioner submits that action taken by the Respondent No. I Bank is pursuant to a decision of the consortium, in which a lot of banks are within the territorial jurisdiction of this Hon'ble Court. Respondent No. I also has its office in New Delhi. The Respondent No.2 also has an office in New Delhi. Therefore, this Hon'ble Court has territorial jurisdiction to adjudicate the Writ Petition. The Petitioner submits that additionally, challenging a similar action of another bank forming part of the consortium of lenders i.e. Punjab and Sing Bank Ltd., the Petitioner filed writ petitions before this Hon'ble Court being W.P.(C) No. 7579 of 2022 and W. P. (C) No. 6460 of 2022. As such, the cause of action arose within the territorial limits of this Hon'ble Court and hence, this Hon'ble Court has the requisite jurisdiction to try and dispose the present petition."
14. The above-noted averment has to be read in conjunction with the following averment made in the petition:
"85. Because Clause 8.9 of the RBI Directions stipulates a distinct framework for the reporting of accounts that have been lent monies under a consortium. The RBI Directions require such consortium to take 'coordinated action' based on commonly agreed strategy, for legal / criminal actions etc. In the present case, as the facts above would demonstrate, it is the Consortium of Lenders that has commenced its inquiry as a collective, under the RBI Directions, against the Petitioner. The forensic audit of the Petitioner too has been commenced by the Consortium of Lenders. In this backdrop of actions by the Consortium of Lenders, the Respondent's unilateral declaration based on the RBI Directions, is ex facie illegal, and contrary to the mandate of the RBI Directions. In any event, such declaration at the very least, necessitates that the grounds for such decision are disclosed to the Petitioner and an opportunity of being heard is given to deal with such conclusion. If any coercive decision is taken by the Respondent, it will prejudicially affect all the stakeholders of the Petitioners (including the consortium banks themselves). The Petitioner states that it is rigorously following up on the debt resolution plan and successful conclusion of such debt resolution plan will be in the best interest of every stakeholder in the Petitioner. It is therefore, necessary that Respondent be prevented by an order of the Hon'ble High Court of Delhi from taking any unwarranted steps or decision pursuant to its purported declaration of the Petitioner's account as 'Fraud' under the RBI Directions. It is also incumbent on the Respondent to conduct themselves responsibly and not form opinions based on bias, perceptions, assumptions, presumptions, suspicion, surmises or conjectures. Further, the Respondent bears the burden of proof of proving the existence of each element or ingredient of fraud before appropriate judicial fora."Signature Not Verified Digitally Signed W.P.(C) 8025/2022 Page 5 of 7 By:SAPNA SETHI Signing Date:04.06.2022 12:00:58
15. The Court prima facie finds merit in the objection raised by Respondent No. 1-Bank qua the jurisdiction of this Court. However, since Petitioner's writ petition qua other members of the consortium (of which Respondent No. 1-Bank is a member) have been entertained in the batch of petitions being led by W.P.(C) 3800/2021, and this Court is already in seisin of the said petitions, the Court is inclined to entertain the present petition, keeping the issue of territorial jurisdiction open for final decision at an appropriate stage.
16. In so far as the grant of interim protection is concerned, in light of the afore-noted orders passed by Co-ordinate Benches and this Court, the Court finds a prima facie case in favour of the Petitioner. A batch of petitions is already pending consideration before the Bench of Hon'ble Mr. Justice Prateek Jalan, wherein the validity of the Master Circular itself has been challenged.
17. Accordingly, till the next date of hearing, Respondent No. 1-Bank shall not take any action prejudicial to the Petitioner in furtherance of the letter dated 19th May, 2022 declaring the bank account of SREI Companies as 'fraud'. It is however, clarified that since Petitioner has alleged that no opportunity of hearing was granted to him to challenge the master circular, Respondent No. 1-Bank may provide an opportunity of hearing to the Petitioner, if it is inclined to do so, notwithstanding pendency of the present petition. It is also clarified that the Respondents are free to continue/ initiate/ file any complaint/ proceedings/ FIR against the Petitioners/ SREI Signature Not Verified Digitally Signed W.P.(C) 8025/2022 Page 6 of 7 By:SAPNA SETHI Signing Date:04.06.2022 12:00:58 Companies, as per law, independent of the impugned order declaring the account of SREI Companies as a fraud account or initiate action for issuance of a look-out circular in accordance with law.
18. Mr. Ramesh Babu, counsel for Respondent No. 2 [Reserve Bank of India], has also requested for a clarification citing that Respondent No. 1- Bank has already initiated proceedings against Respondents No. 3 and 4 before NCLT under provisions of the Insolvency and Bankruptcy Code, 2016. Though the instant petition is not impugning any such action, however, by way of abundant caution, it is ordered accordingly.
19. Re-notify on 20th July, 2022.
SANJEEV NARULA, J MAY 31, 2022 nk Signature Not Verified Digitally Signed W.P.(C) 8025/2022 Page 7 of 7 By:SAPNA SETHI Signing Date:04.06.2022 12:00:58