Gauhati High Court
Page No.# 1/14 vs Union Of India And 3 Ors on 26 August, 2021
Author: Prasanta Kumar Deka
Bench: Prasanta Kumar Deka
Page No.# 1/14
GAHC010179812020
THE GAUHATI HIGH COURT
(HIGH COURT OF ASSAM, NAGALAND, MIZORAM AND ARUNACHAL PRADESH)
Case No. : WP(C)/5677/2020
PUNJAB NATIONAL BANK AND ANR.
A NATIONALISED BANK INCORPORATED UNDER THE PROVISIONS OF
THE BANKING REGULATION ACT, 1949 HAVING ITS REGD. OFFICE AT
PLOT NO. 4, SECTOR 10, DWARKA, NEW DELHI- 110075 AND HAVING
VARIOUS BRANCHES AT GUWAHATI INCLUDING A BRANCH AT
GUWAHATI MAIN BRANCH,PANBAZAR, GHY, IN THE DIST. OF KAMRUP
(M), ASSAM
2: THE DY. GENERAL MANAGER AND CHIEF REGIONAL MANAGER
PUNJAB NATIONAL BANK (PREVIOUSLY UNITED BANK OF INDIA)
GHY MAIN BRANCH
HEM BARUAH ROAD
PANBAZAR
GHY-01
IN THE DIST. OF KAMRUP (M)
ASSA
VERSUS
UNION OF INDIA AND 3 ORS.
REP. BY ITS SECY. TO THE GOVT. OF INDIA, MINISTRY OF COMMERCE
AND INDUSTRIES, DEPTT. OF INDUSTRIAL POLICY AND PROMOTION,
NEW DELHI- 110001
2:THE SECRETARY
GOVT. OF INDIA
MINISTRY OF DEVELOPMENT OF NORTH EASTERN REGION
VIGYAN BHAWAN
ANNEXE
MOULANA AZAD ROAD
NEW DELHI- 110001
3:NORTH EASTERN DEVELOPMENT FINANCE CORPORATION LTD.
A PUBLIC LTD. COMPANY REGD. AND INCORPORATED UNDER THE
Page No.# 2/14
COMPANIES ACT
1956 AND HAVING ITS REGD. OFFICE AT NEDFI HOUSE
G.S.ROAD
DISPUR
GHY-06
IN THE DIST.- OF KAMRUP (M)
ASSAM
4:M/S JSB CEMENT LLP.
A LTD. LIABILITY PARTNERSHIP FIRM REP. BY ITS PARTNERS HAVING ITS
PRINCIPAL PLACE OF BUSINESS AT ANIL PLAZA
4TH FLOOR (B-1)
NEAR ABC
BHANGAGARH
G.S. ROAD
GHY-05
IN THE DIST. OF KAMRUP (M)
ASSA
Advocate for the Petitioner : MR S DUTTA
Advocate for the Respondent : SC, NEDFI
BEFORE
HONOURABLE MR. JUSTICE PRASANTA KUMAR DEKA
ORDER
Date : 26.8.2021 Heard Mr. S. Dutta, learned Senior counsel assisted by Mr. S. Dutta, learned counsel for the petitioner bank. Also heard Mr. R. Dubey, learned counsel for the respondent No. 3 and Mr.D. Boruah, learned counsel for respondent No. 4.
2. The United Bank of India (UBI) during its existence prior to amalgamation with the petitioner No. 1 Punjab National Bank (PNB) entered into a loan agreement with the respondent No. 4. Initially Rs. 20 Crores was for term loan and Rs. 6 Crores as a cash credit to the respondent No. 4 were Page No.# 3/14 sanctioned for setting up of a Cement Industry. To that effect UBI issued sanction letter dated 21.12.2009 with the following securities :
"6. Primary Security For Term Loan Primary:Hypothecation/mortgage of entire Fixed/Block Assets of the LLP(including land & building), both present & future Collateral:Charge on the current assets of the proposed project, present and future For Cash Credit Primary Hypothecation of the current assets of the proposed project, present and future Collateral (i) Charge on the Fixed/Block Assets of the LLP, (including land & building), both present & future.
(ii) Liquid security of Rs. 50.00 lakh in the form of Bank's Term Deposit."
3. Respondent No. 4 also sought for financial assistance from the respondent No.3 whereupon the respondent no. 3 issued a sanction letter dated 3.3.2011 informing the respondent No. 4 about the sanction of Rs. 15 Crores on the terms and conditions extracted hereinbelow:
"Primary
(i) Pari- Passu first charge by way of equitable mortgage of ownership right of Project Site measuring 14 bighas and 1 Katha under patta No. 21, 30,1,19 and 15 and Dag Nos.110,111,109,87,92,93,94 at Ambher, Jorabat, Assam alongwith factory building and other building constructed thereon standing in the name of M/s Cement ranking Pari- Passu with United Bank of India.
(ii) Pari-Passu first charge byway of equitable mortgage of leased hold rights of the Project Site measuring 5 bighas 1 katha and 16 lechas under Patta No. 30 and Dag No. 91,111,114 at Ambher, Jorabat,Assam alongwith factory building and other building constructed thereon standing in the name of M/s JSB Properties Pvt. Ltd. ranking Pari - Passu with United Bank of India.
(iii) First charge by way of hypothecation of all Plant & Machineries, Miscellaneous Fixed Assets and other Fixed Assets of the firm both present and future ranking Pari-Passu with United Bank of India.
Page No.# 4/14 Collateral
(i) Pari-Passu first charge by way of equitable mortgage of ownership rights of the Project Site measuring 5 bitha 1 katha and 16 lecha under Patta No. 30 and Dag No. 91, 111, 114 at mbher, Jorabat, Assam alongwith factory building and other building constructed thereon standing in the name of M/s JSB Properties Pvt. Ltd., ranking Pari-Passu with United Bank of India.
(ii) Personal Guarantee of all the Promoter Partners i.e Shri Adarsh Jhunjhunwala, Shri Akshat Jhunjhunwala, Smt Jayashree Devi Jhunjhunwala, Smt Soni Jhunjhunwala, Shri Kamal Harlalka, Smt Darshna Harlalka and M/s Nezone Project Consultancy Private Limited.
(iii) Corporate Guanantee of M/s Abhi Coke (P) Ltd., M/s Jaintia Coke (P) let and M/s JSB Drums."
4. Subsequent loan from the respondent No. 3 was on the basis of no objection issued by the erstwhile UBI on the representation of the respondent No. 4 . The respondent No. 4 made a proposal to UBI for enhancement of the existing loan of Rs 26 Crores to 31 Crores limit by continuing the term loan to the extent of Rs 20 Crores and enhancement of cash credit by Rs 5 crores to 11 crores . The UBI accepted the proposal of respondent No. 4 enhancing the overall limit from 26 crores to 31 crores vide sanction order dated 9.6.2012 subject to the acceptance of the terms and conditions mentioned therein . On the other hand the respondent No. 4 also approached respondent No. 3 for providing working capital term loan as hereinabove stated and to that effect the said loan was secured by the following terms and conditions:
"a Primary Security Term loan
a) First charge by way of equitable mortgage of landed property in tribal belt/ agriculture land measuring 14 bigha 1 katha covered by Patta No. 21,20,1,19 and 15 and dag No. 110,111,109,87,92,93 & 94 at 12th Mile Village Ambher, Jorabat, Dist Kamrup Assam alongwith factory building & other civil works constructed thereon ranking pari passu charge with other Page No.# 5/14 term lender i.e. NEDFi, Guwahati. The property is in the name of JSB Cement LLP as detailed below.(Valued by Dr. Pranjal Bhagabati on 28.3.2021 & 6.3.2011)
b) First Charge by way of equitable mortgage of leasehold right of landed property in tribal belt measuring 5 bigha 1 katha covered by patta No. 30 and dag No. 91, 111 & 114 at 12 th Mile, village : Ambher, Jorabat, Dist Kamrup, Assam alongwith factory building & other civil works constructed thereon ranking pari passu charge with other term lender i.e. NEDFi, Guwahati .
The property is the name of JSB properties Pvt Ltd as detailed below.(valued by Er Pranjal Bhagabati on 5.7.2021)
c) First charge by way of hypothecation on the entire fixed assets of the firm both movable and immovable including building , plant & machinery and miscellaneous fixed assets both present and future ranking pari passu charge with other term lender i.e. NEDFi, Guwahati.
Cash Credit:
d) 1st charge by way of hypothecation of the entire current assets of the firm including inventory i.e. raw materials, stock in transit, semi finished goods, finished goods, consumable stores and book debts both present and future on the basis of pari passu charge with NEDFi( for WCTL of Rs. 900.00 Lacs)
e) Primary Security for Term Loan to be considered as 2nd charge for Cash Credit & Vis a Vis.
Additional Security:
a. Equitable Mortgage of office space to be purchased in the name of JSB Cement LLP, measuring about 4037 sq ft. in the fourth floor of the building known as Sunshine Tower at G.S.Road, Guwahati on Exclusive charge."
b. Liquid Security in the form of Bank's own TDR Rs. 50.00 lac."
5. Vide sanction letter dated 20.09.2013 the UBI again enhanced the existing limit of Rs. 31 Crores to 41.66 Crores on the following securities:
"Primary Security Term Loan a. First charge by way of equitable mortgage of landed property in tribal belt in the name of Amiyo Islary measuring 14 bigha 1 katha covered by Patta No. 21, 30,1,19 & 15 and Dag No. 110,111,109,87,92,93 & 94 at 12 th Mile, Village: Ambher, Jorabat, Dist : Kamrup Assam alongwith factory building & other civil works constructed thereon ranking pari passu with the other term lender i.e. NEDFi, Guwahati. (Valued at Rs 5.30 crores by Er. Pranjal Bhagabati Page No.# 6/14 on 6.3.2011).
b. First charge by way of equitable mortgage of leasehold right of landed property in tribal belt in the name of JSB Properties Ltd( represented by the Tribal Partner Mr. Amiyo Islary), measuring 5 bigha 1 katha 16 lecha covered by Patta No. 30 and Dag No. 91,111 & 114 at 12 th Mile Village : Ambher, Jorabat, Dist: Kamrup Assam alongwith factory building & other civil works constructed thereon ranking pari passu with other term lender i.e. NEDFi, Guwahati(valued at Rs. 2.81 crores by Er. Pranjal Bhagabati on 6.3.2011).[The branch has obtained legal opinion dated 9.3.2011 from empanelled advocate Aktar Parvez who has opined that the factory land falls under tribal belt and the said property is mortgageable subject to limitation of chapter 10 of Assam land & Revenue Regulation, 1886. As per the Chapter 10, the land can be sold only to persons notified as backward classes under Section 160(2) of the Act. In order to comply with the same the firm has inducted a partner of tribal origin into the firm. As informed by the firm equitable mortgage on the land has already been created.] c. First charge by way of hypothecation on the entire fixed assets of the firm both movable and immovable including building, plant & machinery and miscellaneous fixed assets both present and future ranking pari passu with other term lender i.e. NEDFi, Guwahati.
Cash Credit d. First charge by way of hypothecation of the entire current assets of the firm including consumable stores and book debts both present and future.
Primary Security for Term Loan to be considered as 2nd charge for Cash Credit & vice versa."
6. The industry of the respondent No.4 falls within the scheme North East Industrial and Investment Promotion Policy, (NEIIPP,2007) and in terms of the said scheme respondent No. 4 is entitled to various subsidies on account of Interest Subsidy Scheme, Central Capital Investment Subsidy Scheme and on account of Transport Subsidy Scheme. As of now the following subsidies were granted to the respondent No. 4:
(i) On account of Interest Subsidy
Sl. No. Date of Receipt Amount received(Rs)
Page No.# 7/14
1 11.12.2017 94,33,058/-
2 31.3.2018 22,34,000/-
Total 1,16,67,058/-
(ii) On account of Central Capital Investment Subsidy Scheme:
Sl.No. Date of Receipt Amount received(in
Rs)
01 13.9.2018 6,93,85,500/-
(iii) On account of Transport Subsidy
Sl.No. Date of Receipt Amount received(in
Rs.)
01 9.1.2019 6,87,87,740/-
02 11.03.2019 22,07,707/-
03 15.03.2019 2,25,64,796/-
04 30.3.2019 1,94,344/-
Total 9,37,54,587/-
Page No.# 8/14
7. Vide notification dated 27.7.2007 issued by the Ministry of Commerce and Industry, Govt. of India and in pursuance of North East Industrial and Investment Promotion Policy, 2007(NEIIPP-2007) the respondent No. 3 was appointed as the Designated Agency for disbursement of subsidy in respect of all the three schemes . In terms of the said NEIIPP-2007 scheme the respondent No. 3 as the nodal agency received in total Rs. 17,48,07,145/- as on 30.3.2019 for disbursal of the same to the various entities directly involved in financing the respondent No. 4 including the petitioner bank (UBI). Subsequent thereto another additional subsidy of Rs 15,11,32,536/- was also received by the respondent No. 3 as the subsidy in the name of respondent No. 4 as the beneficiary. The petitioner Bank filed this writ petition on the ground that respondent No. 3 on specific violation to the guidelines issued by the Central Government as the nodal agency for disbursing the subsidy appropriated Rs. 17,48,07,145/- against the loan account standing in the name of respondent No. 4 maintained by the respondent No.3 depriving the petitioner bank.
8. It would not be out of place to mention herein that the respondent No. 4 defaulted to regularize the loan account standing with UBI following which O.A. No. 384/2015 was filed in the Debt Recovery Tribunal (DRT), Guwahati against the respondent No.4 seeking for recovery certificate of an amount of Rs. 46,45,01,865.31 paisa. The said OA 384/2014 was disposed of thereby granting the recovery certificate to the extent of Rs.46,45,01,865.31 paisa in favour of UBI. Thereafter UBI entered into onetime settlement with respondent No. 4 at an amount of Rs. 30 Crores subsequent whereto vide order dated 15.2.2018 passed by the Debt Recovery Tribunal, Guwahati in OA 384/2015 a fresh recovery certificate to the extent of the settled amount was issued. As against Page No.# 9/14 the amount settled the respondent No. 4 paid a substantial amount thereby leaving an amount of Rs. 19,50,49,638.99 paisa and as on date till filing of the writ petition by the petitioner the said amount was due. The petitioner Bank is aggrieved due to the contrary action indulged by respondent No. 3 on the face of specific direction from the Director (FP), Commissioner of Industries & Commerce, Assam to the Chairman of NEDFi, respondent No. 3 for disbursement of the subsidy amount approved by the State Level Committee (SLC) and empowered committee in the meetings held on various dates to the petitioner Bank.
9. In support of the said submission by Mr. Dutta, learned Senior Counsel referred to the revised format annexed to the disbursal order under 30% C.C I.S.S. duly signed by the Member Secretary, State Level Committee (SLC) dated 14.9.2018 addressed to the respondent No. 3. Therein the revised prescribed format the the name of the respondent no. 4 is shown as the applicant Unit and the name of the Banker is shown as the UBI and date of approval of the subsidy amount in the SLC meeting is also referred and on the basis of said format vide the said letter dated 14.9.2018 it was directed to the Chairman cum Managing Director, NEDFI to disburse an amount of Rs. 6,93,85,500.00 to the UBI. But even on such direction the said subsidy was not disbursed to the UBI and instead the respondent No. 3 appropriated the same in the loan account of the respondent No. 4 maintained by the said respondent No. 3. Citing specific violation of the provision more specifically, Section 31B of the Recovery of Debts and Bankruptcy Act, 1993 , Mr. Dutta sought for an appropriate direction thereby mandating the respondent No. 3 to release the subsidy amount appropriated by respondent No. 3 in the loan account of respondent No. 4 maintained by it.
Page No.# 10/14
10. Mr.Dubey on the other hand referring to the various stand taken in the affidavit in opposition of respondent No.3 submitted that the respondent No. 4 in the loan agreement signed as against the loan account agreed to the following terms and conditions :
"ix. Agree that in case the firm receives any subsidy from any sources, term loan will get reduced by the same amount. All subsidies/ grants receivable by the firm towards the project from State Govt./ Central Govt. or any other institution/agency/organization shall be paid to NEDFi which shall be utilized for neutralizing the loan component of the project or towards adjustment of principal, interest, additional interest or penal interest due to NEDFi."
It is further submitted by Mr. Dubey that the subsidy does not fall under the term current assets rather, the same is the income of respondent No.4 which forms part of a contract enabling the respondent No. 3 to adjust in the loan account maintained by the respondent No. 3 as the secured creditor . Referring to the charge/charges created by the erstwhile UBI it is the contention of Mr.Dubey that the petitioner Bank has the right over fixed and current assets of the respondent No. 4 and as the subsidy does not fall within the term current asset, under such circumstance the respondent No. 3 as the secured creditor adjusted the said subsidy amount. Mr. Dubey wanted to project that as the respondent No. 4 agreed to and allowed the respondent No. 3 to appropriate the said amount as such the claim of the petitioner bank does not survive . From the submission of learned counsel of respondent No. 3 it can be concluded NEDFi while acting as designated agency under the notification 27.7.2007 referred hereinabove is the trustee of the beneficiaries but the respondent No. 3 exercised its power as the loanee bank on the strength of the agreement wherein the respondent No.4 authorised the respondent No.3 to appropriate the subsidy to the loan account maintained by the respondent Page No.# 11/14 No.3.
11. Mr. Baruah, learned counsel for the respondent No. 4 submits that the subsidy amount is the current assets of the petitioner over which the petitioner bank has right as per the terms of the sanction letter referred hereinabove. As the nodal agency, the respondent No. 3 is bound to follow the direction of SLC and there cannot be any deviation inasmuch as any deviation would frustrate the intent of the said scheme of 2007. It is also relevant to mention herein that all subsidy adjustments are duly reported to DIPP, Govt. of India through PFMS module from time to time as a part of the procedure. The format submitted alongwith the intimation of grant of subsidy to the respondent No. 4 is always annexed with the format which indicates the name of the bank to whom the subsidy is required to be released and the date of the decision taken in the SLC including the name of the applicant Unit. In the present case in hand against each and every disbursement proposal of subsidies under the scheme, the said format is annexed and under such circumstances the respondent No. 3 cannot appropriate the said amount of subsidy merely on the basis of agreement entered into by the respondent No. 4 with respondent No. 3. It is further stated by Mr. Baruah, that respondent No.3 is under the specific direction from the Ministry of Commerce and Industries, Govt. of India that the fund released by the said department shall be utilized for the purpose for which it was sanctioned and the amount shall be released without delay after completing all necessary formalities. The said direction of Ministry of Commerce and Industry is still binding the respondent No. 3 and the respondent No. 3 cannot deviate from the said direction including the one of the SLC.
12. I have considered the submissions of the learned counsel. Erstwhile UBI is the secured creditor in respect of the loan sanctioned to the respondent No. 4 Page No.# 12/14 and on the other hand respondent No. 3 is also a secured creditor in respect of the respondent No. 4. From the terms of the sanction letters of the UBI it is seen that the current assets of the respondent No. 4 were charged with the said loan account. On the other hand, from the sanction letter dated 3.3.2011 issued to the respondent No. 4 by the respondent No. 3 no charges were created over the current assets of respondent No. 4. The notifications dated 27.7.2007 referred hereinabove specifically designated the respondent No. 3 as the nodal agency for disbursement of capital investment subsidy under the scheme NEIIPP-2007 alongwith other subsidies on the basis of recommendation of SLC of the concerned State Government and the empowered committee and the Union Cabinet as the case may be . In the present case in hand, it is the SLC who is authorized to recommend for disbursement of capital subsidy under the scheme indicating to whom the subsidy should go. The respondent No. 3 is authorised to act as the nodal agency for release of all subsidies etc on the basis of recommendation of SLC as per notification dated 3.7.1971 which was subsequently inserted vide notification dated 29.1.1998 of the Ministry of Commerce and Industry. From the aforesaid notification it is clear that the respondent no. 3 cannot deviate from the act assigned to it as the designated agency and the respondent No.3 is bound to disburse the subsidy as per the recommendation of SLC of the concerned State Government .
13. Now if we consider the forwarding letter of the disbursing proposal dated 14.9.2018 issued by the Additional Director(FP) office of the Commissioner Industry, Assam it is the disbursement proposal which was forwarded to the NEDFi to act and disburse the amount stated therein as the subsidy to the specific banker named in the format annexed to the said letter dated 14.9.2018. Considering the authority given to respondent No. 3 and the Page No.# 13/14 format annexed to the forwarding letter for disbursal, in my considered opinion the NEDFi is required to disburse the amount shown as the subsidy in the disbursal proposal to the Banker named therein. Mr. Dubey submitted that the action of appropriation of the said subsidy amount in the loan account of respondent No. 4 maintained by the respondent no. 3 was not as the nodal agency but as the loanee bank read with the consent given to respondent No. 3 by respondent No. 4 at the time of sanction of the said loan. This submission is not acceptable to me.
14. Admittedly both the UBI and the respondent No. 3 are the loanee banks in respect of respondent No. 4.During the course of the arguments Mr. Dubey submitted that there are other claims made by the taxation department of the State Government showing outstanding against the respondent No. 4 and the said department made a claim out of the subsidy amount for satisfaction of the due amount to the said department by the respondent No.4. In my considered opinion the said claim of the taxation department would come later but the priority must be always given to the secured creditor. Now in order to differentiate the priority between the UBI and the respondent No. 3 as the loanee banks I have looked into the terms of the sanction letters of both the banks. From the sanction letter issued by the UBI, the first charge was created with the movable assets on the other hand, the respondent No. 3 has the charge on the immovable properties of the respondent No. 4. In view of the same and considering the direction of the Ministry of Industry and Commerce, Union of India at the time of appointing the respondent No. 3 as nodal agency it is mandated that the respondent No. 3 NEDFi cannot avoid the SLC direction for disbursal of the subsidy amount.
15. It is submitted by Mr. Dubey that almost 17 crores and odd was Page No.# 14/14 appropriated in the loan account of respondent No. 4. On the other hand it is the contention of Mr. Dutta, learned Senior Counsel for the petitioner Bank that as of now almost 19 crores and odd is outstanding against the loan account of the respondent No. 4 which Mr. Dutta clarified that after the one time settlement proposal was abandoned, the outstanding would be much more higher than the amount stated in the writ petition There is no dispute at the Bar that the respondent no. 3 is currently the custodian of the subsidy amount of Rs.15Crores yet to be disbursed. The respondent No. 3 is accordingly directed to release the said Rs. 15 crores and odd to the petitioner bank as per terms of the disbursal order alongwith an additional amount of Rs. 10 crores adjusted against the loan account of respondent No. 4 maintained by the respondent No. 3 as the loanee bank. The respondent No. 3 shall release a total amount of Rs.25 Crores to the petitioner bank. Subsequent subsidy is required to be disbursed by the respondent No. 3 as per the recommendation made by SLC. It would be proper further to approach the SLC by the respondent No.3 in order to direct disbursal of the subsidy to the NEDFi as the loanee bank but the respondent No.3 cannot deviate from the recommendation of the SLC. Accordingly the said transaction directed shall be carried out by the respondent No. 3 within a period of one month from today. The writ petition accordingly stands disposed of . Interim order stands vacated.
JUDGE Comparing Assistant