Telangana High Court
M/S. G. P. Sankaram And Associates vs Union Bank Of India, Rep By Its Managing ... on 8 July, 2022
Author: G. Radha Rani
Bench: G. Radha Rani
THE HON'BLE Dr. JUSTICE G. RADHA RANI
WRIT PETITION No.1036 OF 2019
ORDER:
This writ petition is filed by the petitioner to issue Writ of Mandamus declaring the action of the Respondents 1 & 2 in removing the partner of petitioner firm from its panel of valuers without passing any final orders and communicating the same pursuant to Show Cause Letter No.2714/26/Panel Eng/1021 dated 25-11-2016 and consequential Circular No.OPR/CIR/Fr/TPE/6274 dated 13-11-2018 issued by the 4th Respondent placing the partner of the petitioner in the caution list as being illegal, arbitrary and in violation of Article 19(1)(g) of the Constitution of India and in violation of principles of natural justice as also in violation of regulations contained in Handbook on Policy, Standards and Procedures for Real Estate Valuation by Banks and HFIs in India and consequently to direct the 4th respondent to remove the name of the petitioner from the caution list of third party entities.
2. Heard Sri Mamidi Avinash Reddy, learned counsel for the petitioner and Sri A. Krishnam Raju, learned Panel Counsel for respondents 1 & 2.
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3. The learned counsel for the petitioner submitted that the petitioner firm, M/s. G.P. Sankaram & Associates, were Chartered Engineers, Approved Valuers, Consulting Engineers, and Government registered valuers for Income Tax and various banks. The petitioner firm had been offering services in the capacity of valuer to the respondents for many years. The purpose for which respondents engaged the services of the petitioner was for estimating fair market value of properties of those persons who applied to the respondents for loans. The petitioner firm was paid a paltry remuneration for the asset valued, subject to a ceiling by the respondents. During the past several years, the petitioners valued and prepared valuation reports for the respondents. The petitioners thus had a long and representative work experience with credible track record.
3. The learned counsel for the petitioner firm further submitted that the petitioner firm received a show cause notice dated 25-11-2016 from the respondents stating that there was a fraud in seven housing loan accounts with its Hitech City branch and asked the petitioner to explain why they should not be placed in caution list of Indian Banks' Association. The petitioners filed a detailed reply to the said notice on 07-12-2016 rebutting all the allegations. The petitioner approached the respondents several times personally and through representations seeking their response after Dr.GRR,J 3 WP No.1036 of 2019 submitting reply seeking to know the status, but in vain. The petitioner received a letter dated 29-11-2018, from the circle office of Canara Bank, Himayat Nagar, Hyderabad, stating that the respondents placed them in the Indian Banks' Association Caution List of Third Party Entities (TPE), for the alleged irregularities reported by one of the member banks for discrepancies in valuation. Their enquiries revealed that it was the respondents who placed the petitioners in the said list to the detriment of the petitioners. There was a standard procedure established before removing a panel valuer by the banks. There were as many as three steps contemplated for the same. The first step would be to issue Show Cause notice and receive an explanation for the same. The second step would be hearing wherein the valuer was given an opportunity to be heard so that his view point was made known. The third step would be deliberation by the Committee. The respondents followed the first step, but not the other two steps and hence violated the procedure established in the said connection. The respondents thus hastily and illegally depanelled them with malafide intention to cause damage to the petitioner's reputation. The abrupt termination of their services by the respondents caused immense hardship. The threat of the respondents to inform other banks about putting the name of the petitioner in the IBA Caution List would damage their reputation Dr.GRR,J 4 WP No.1036 of 2019 beyond repair and would deny their livelihood. The action of the respondents was unilateral, irrational and was based on false and unfounded grounds and prayed to allow the writ petition.
4. The learned counsel for the respondents 1 and 2 submitted that the procedure of issue of show cause notice was itself not contemplated or set out during the period under reference. As per the terms of appointment of the valuer, the Bank had a right to remove the valuer without assigning any reasons. The said terms were agreed to and consented by the valuer. It was only in the year 2018, a detailed circular was issued by the bank for guidance of the controlling offices vide Circular No.139 dated 20.07.2018. Even the recent circular would not provide for personal hearing. All the steps as envisaged in Para-XIII of the guidelines vide Circular No.139 dated 20.07.2018 had been taken. No requirement of personal hearing was set forth or envisaged in the guidelines prevailing and applicable during 2016. The bank was exposed on account of the acts of omissions and commissions by the petitioner firm in its professional standards. The petitioner agreed that the bank had a right to delete the petitioner's name from the panel without assigning any reasons while accepting the terms of appointment. A show cause notice was issued, the reply of the petitioner was considered and the decision to depanel was taken. The show cause Dr.GRR,J 5 WP No.1036 of 2019 notice clearly had set out the grounds upon which and the grounds wherein the professional services of the petitioner were found to be inadequate and thereby the bank was put to risk was also set out. The principles of natural justice were followed. The guidelines would not provide for any personal hearing and it was neither necessary in law nor in the circumstances of the case, and prayed to dismiss the writ petition.
5. Perused the record. The record would disclose that a show cause notice was issued by the Andhra Bank on 25.11.2016 to the petitioner firm stating that they observed fraud in 7 housing loan accounts with Hitech City Branch. On the basis of the valuation report submitted by the petitioner, the bank financed the housing loan account against the security provided to the bank and gave the details of the borrowers. The details of the primary security and the discrepancies with regard to the primary security as observed by them were stated in the show cause notice and it was further stated that the properties had not been identified correctly and that the petitioner was negligent in their duties, which led to perpetration of fraud by the borrowers and builder. Due caution was not taken in property valuation and the valuation report was based on the statement of the borrower which led to wrong identification of the properties. Thus, the petitioner had fallen short in meeting the service standards by not giving Dr.GRR,J 6 WP No.1036 of 2019 proper attention in identifying the properties and made the bank to credit losses and asked the petitioner to show cause his explanation as to why his name should not be entered in IBA caution list. A reply was given by the petitioner on 07.12.2016. The petitioner explained that they were asked by the Hitch City Branch of Andhra Bank during the year 2011 to assess the plots being built on land in Sy.No.100/A and they were informed that the bank had already released the loan and the report from them was only to fulfil the official procedure/formalities. They observed a discrepancy regarding name of the apartment. The copies of the documents served on them would indicate the name of the apartment as "Sai Alex", but the name painted there was 'Sai Avenue' and the same was brought to the notice of the bank with a note on the same in their report. The property was jointly identified by the valuer along with the bank officers Sri Nageswara Rao & Ms. Priyadarshini. After four years they were asked to revalue the same and copies of the same documents which were given to them earlier during the year 2011 were provided and they again highlighted the discrepancy regarding the name of the apartment, but the bank took it lightly.
6. Learned counsel for the petitioner submitted that no action was taken by the respondents after submitting the reply by the petitioners and Dr.GRR,J 7 WP No.1036 of 2019 the petitioners only received a letter dated 29.11.2018 from the Circle Office, Canara Bank, Himayat Nagar, Hyderabad informing them that the respondents placed them in the Indian Bank Association caution list of TPE. The Indian Bank Association is the consortium of all the national banks approved by the Reserve bank of India and it shared the information with all its Member Banks, annexing the details of the Third Party Entities, who were alleged to have committed irregularities, as reported to them by one of the member banks. The name of the petitioner was shown at Serial No.833, basing on the report given by Andhra Bank wherein it was stated that the valuer failed to identify the survey number of the property and the valuation was given without verification of correct location and name of the apartment at Bank's Hi-tech City Branch.
7. The contention of the learned counsel for the petitioner was that putting the name of the petitioner in the IBA caution list would damage the reputation of the petitioner beyond repair and would deny him of his livelihood and the action of the respondents was unilateral and irrational. His contention was that the respondents had not followed the standard procedure established before removing the petitioners as panel valuers of the banks and there was violation of principles of natural justice.
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8. Learned counsel for the respondents 1 and 2 contended that there was no necessity of issuing the show cause notice itself as per the terms of the appointment of the petitioner as valuers and the bank has a right to remove the valuer without assigning any reasons.
9. But, the rules of natural justice are fundamental and foundational concepts of law which are indispensable part of the legal and judicial system. They ensure protection of individual rights against arbitrary procedures and miscarriage of justice by the authorities. The said principles are applied to each and every quasi judicial or statutory authority who have upon them the responsibility of determining the obligations and rights of the people. The principle of audi alteram partem is the basic concept of natural justice. The Rule of fair hearing or no one should be condemned unheard is sine qua non of every civilized society and it covers the various stages of administrative adjudication process. Issuance of prior notice which is specific and unambiguous and giving adequate time to enable him to make his representation, giving reasoned orders and providing a copy of the same are also part of ensuing transparency in decision making. Thus, the respondents cannot escape from their obligation stating that there was no necessity of issuing show cause notice as per the terms of the appointment of the petitioner as valuers. Even when Dr.GRR,J 9 WP No.1036 of 2019 the terms of appointment are silent, the principles of natural justice have to be read into it.
9. For the same reason in the year 2018, a detailed circular was issued by the bank for guidance of the Controlling Officers vide Circular No.139 dated 20.07.2018. The relevant clause is para-XIII in the said Circular and the same is pertaining to de-panelling of the valuers. The same is extracted for ready reference.
"XIII. Guidelines for calling explanation where approved valuers were negligent and their certification turns out to be untrue and factually in correct, exposing the Bank to avoidable risks, Depaneling and Reporting to IBA for placing the name in Third Party Caution List.
1. Circle Office of the respective zone, upon receipt of request for depanelment from zone, will assess the need if warranted, will issue a Show Cause Notice duly signed by the Circle General Manager to the Valuer marking a copy to Zonal Office.
2. The reasons for depanelment should be spelt out clearly in the notice
3. The valuer has to submit his reply within 15 days to Circle Office marking a copy to Zonal Office
4. Zonal Office on receipt of reply from the Concerned Valuer, has to give their views and Recommendations to Circle Office taking into account the explanation given by the Valuer
5. Circle office after examination of the explanation along with the views of zonal office shall decide about depanelment and communicate the same to the empanelled Chartered Engineer/Firm. A copy of the same has to be marked to CMRD Head Office."
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10. As per the learned counsel for respondents 1 and 2, all the steps as envisaged in the said guidelines had been taken and there was no requirement of personal hearing to be provided to the valuer before depanelment as per the said guidelines. But on perusal of Clause-5 of Para-XIII of the guidelines it would contemplate that Circle Office after examination of the explanation along with the views of Zonal Office should decide about empanelment and communicate the same to the empanelled Chartered Engineer/ Firm and a copy of the same had to be marked to CMRD Head Office. Admittedly, no such copy of the order after deciding about the depanelment of the petitioners before making a publication in the IBA was communicated to the petitioners.
11. The valuation report submitted by the petitioner dated 26.07.2011 also would show that the Officers of the Bank Sri Nageswara Rao and Ms. Priyadarshini accompanied the petitioner for identifying the property and the petitioner had also stated that the scope of the valuation was only to assess the fair market value of the property as on 25.07.2011, the date of the inspection of the subject property as physically identified by the said Officers along with reference to the copy of the agreement of sale and old report. The petitioner also stated that during their inspection, they observed that the apartment name mentioned in the document as 'Sai Alex' Dr.GRR,J 11 WP No.1036 of 2019 but on their enquiry with the flat owners (who occupied some flats in the apartment) that the apartment name was changed as 'Sai Avenue'. Thus, the petitioner brought to the notice of the bank with regard to change in the name of the property and also stated that the property was jointly identified along with the Officers of the Bank. In his explanation the petitioner also stated as to how in his opinion the fraud might have committed. He stated that the original documents were never seen by them and only a copy of the document was supplied to them by the Bank, the property was jointly identified by the valuers along with the Bank Officers. The borrower with a criminal intent might have created two sets of documents with different survey numbers and might have taken the loan from SBI with original documents and the forged documents might have been given to the Hitech City Branch and borrowed the loans.
12. The petitioner also sought for information from the respondents 1 and 2 with regard to the copy of the letter written by them to the IBA vide letter reference dated 30.10.2018 but the same was not provided by the respondents citing that they were exempted under Section 8(2) of the RTI Act, 2005 and could not provide the same in commercial confidence.
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13. Thus, no opportunity was provided to the petitioner to know the reasons for their depanelment after submitting their explanation and the said views of the Zonal Office deciding about their depanelment was also not communicated to the petitioners as required under clause (5) of Para- XIII of the guidelines of the Controlling Offices issued vide Circular No.139 dated 20.07.2018. Non-compliance of the principles of natural justice by the respondent Bank amounts to arbitrariness in dealing with the matter. Deleting the name of the person from the rolls or panel without assigning any reasons is unfair and arbitrary and hence, it is considered fit to allow the writ petition.
14. Accordingly, the writ petition is allowed declaring the action of the respondents 1 and 2 in removing the partners of the petitioner firm from the panel of approved valuers as violative of principles of natural justice and the 4th respondent is directed to remove the name of the petitioner firm from the caution List of the Third Party Entities. No order as to costs.
Miscellaneous Petitions pending, if any, shall stand closed.
_____________________ Dr. G. RADHA RANI, J July 08, 2022 KTL