Orissa High Court
Mahal Industries vs Government Of India on 5 September, 2018
Equivalent citations: 2019 AIR CC 16 (ORI), (2019) 193 ALLINDCAS 896 (ORI), (2019) 1 CIVLJ 42, (2018) 2 ORISSA LR 1075, (2019) 127 CUT LT 100
Author: S.K.Mishra
Bench: S.K.Mishra
HIGH COURT OF ORISSA; CUTTACK
W.P.(C) No.16451 of 2017
In the matter of an application under Articles 226 and 227 of the
Constitution of India.
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Mahal Industries
represented by its proprietor
Mr. Matlub Ali ... Petitioner
Versus
Government of India
and others ... Opposite Parties
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For Petitioner : M/s. K.M.H.Niamati,
and S.K.Mohanty
For opposite party no.1 : M/s. Chandra Kanta Pradhan
Central Government Counsel
For opposite party nos.2 & 3: M/s. P.N.Mishra & S.R. Debata.
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PRESENT:
THE HONOURABLE MR. JUSTICE S.K.MISHRA Date of judgment: 05.9.2018 S.K.Mishra,J. In this writ petition the petitioner, being represented by its proprietor, has sought a direction from the Court to opposite parties 2 and 3 to place the loan account of the petitioner before the committee formed under the Central Government Notification 2 dated 29.5.2015, under Annexure-4, for revival and rehabilitation of the manufacturing unit of the petitioner.
2. It is not disputed that the petitioner is a loanee. It has availed term loan as well as cash credit loan from the opposite parties-2 i.e. the Bank. The petitioner has set up an industry for manufacturing of colour profile sheets (roofing sheets). The opposite parties-Bank sanctioned a loan of Rs.125.00 lakhs on 30.1.2016. It is the case of the petitioner that due to unavailability of raw material and other allied problems coupled with Bank's non-supportive attitude, the petitioner faced lot of problems in manufacturing unit. However, learned counsel for the petitioner submits that the petitioner was regularly paying the instalments and has already paid a sum of Rs.25 lakhs. In view of the above difficult situation, the petitioner defaulted in some payment. So it requested the Bank for restructuring or rephasement of the loan account. Without going into the merits of the case, the Bank rejected the prayer.
3. The petitioner seeks to take advantage of the Central Government Notification for Rival and Rehabilitation of Micro, Small and Medium Enterprises for providing relief to loan accounts experiencing incipient stress. In the said frame work the Bank have been directed to form committee before which the cases of MSME borrowers can be placed for revival. In the said scheme the committee was to chalk out a corrective action plan to 3 resolve the stress in the account in accordance with the procedure as laid down in the said framework. The petitioner claims that it belong to Micro, Small and Medium Enterprises, without specifying whether it is a medium, small or micro industry, and prays for issuing the aforesaid direction.
4. The Central Government has not filed any counter affidavit in this case.
5. Opposite party no.2, being the Branch Manager of Andhra Bank, filed counter affidavit himself and on behalf of opposite party no.3. It is apparent from the records that the petitioner failed to operate both the loan accounts satisfactorily in spite of repeated approaches from the Bank resultantly the accounts skipped to N.P.A. on 30.4.2017 which was intimated to the petitioner. The petitioner without regularizing the said accounts sent a letter dated 3.5.2017 under Annexure-2 to the opposite party no.2 requesting the Bank to do the needful so that its accounts can be restructured/rephased with some false allegations regarding gestation period etc. On receipt of the letter dated 3.5.2017, opposite party no.2 by its order dated 5.5.2017 under Annexure-3 gave a detailed reply to the petitioner intimating therein that despite earlier letters, telephonic advise from the Bank to submit renewal papers in O.C.C. account and to pay the over due instalments in terms loan account the petitioner did not respond to the same and failed to deposit a 4 single pie since February, 2017. It is further pleaded by the Bank that instead of repaying all the over dues including instalments in term loan, the petitioner closed the unit without intimating the Bank. Closure of the unit soon after availing the aforementioned over drawals proves that the petitioner has diverted the Bank funds for other purposes without the knowledge of the Bank. It is further pleaded that the gestation period of three months in repayment of the term loan is clearly mentioned in the sanction letter under Annexure-1 which is accepted by the petitioner with his endorsement on the sanction letter itself. Opposite party no.2 in its letter dated 5.5.2017 categorically intimated the petitioner that restructuring/rephasement of the loan accounts is not possible as the petitioner has closed the unit deliberately with oblique motive and diverted the Bank funds without knowledge of the Bank. In the said letter dtd.5.5.2017 opposite party no.2 advised the petitioner to repay the over dues in term loan and excess amount in O.C.C. account to make the accounts as performing asset and submit renewal papers for renewing the working capital limit. But the Bank has not received any response from the petitioner. It is further pleaded by the Bank that the petitioner/borrower has submitted stock statement in the Bank from time to time which reveals that the petitioner/borrower had sufficient stocks of finished goods. As per the last stock statement dated 31.1.2017 the existing stock was for Rs.1,11,96,000/- for finished goods, but the petitioner did not make any deposit in the 5 cash credit account of the sale proceeds of the stock since then. Therefore, it was pleaded that the sale proceeds of the stock has been diverted by the petitioner/borrower to some other uses and it has intentionally made the account N.P.A. Hence, it is submitted that the application for rephasement/rescheduling of the loan account does not arise.
6. Admittedly, the petitioner is a borrower and has defaulted payment of the amount due. The loan was initially sanctioned on 30.1.2016 and it became N.P.A. on 30.4.2017, within barely a year and three months. Annexure-4 has been issued by the Central Government invoking Section 9 of the Micro, Small and Medium Enterprises Development Act, 2006. However, such remedial measures, on a reading of the entire document is attracted only to those cases of Small, Medium or Micro Industries, which are viable and the borrower is not a wilful defaulter and there is no diversion of funds, fraud or malfeasance etc. It is apparent from Annexure-4 at page 19 that in restructuring the Bank shall consider the possibility of restructuring the account if it is prima facie viable and the borrower is not a wilful defaulter, i.e. there is no diversion of funds, fraud or malfeasance etc. This aspect is reflected in Clause-(ii) of paragraph-5 which provides for Corrective Action Plan by the Committee. The same aspect is reflected at page-22, which is a part of paragraph-6 of Annexure-4, which provides at sub-para (ii) that wilful defaulters shall not be eligible for 6 restructuring. The said clause provided that the Committee may review the reasons for classification of the borrower as a wilful defaulter and satisfy itself that the borrower is in a position to rectify the wilful default and the decision to restructure such cases shall have the approval of the board of concerned bank within the committee who has classified the borrower as wilful defaulter.
7. Now the only question that remains to be determined in this case is whether the petitioner's case for restructuring/Rephasement is possible and whether it is not a wilful defaulter and the Bank's action in proceeding under the SARFAESI Act is illegal in view of the fact that there is possibility of restructuring/rephasement and, therefore, the same has to be adhered to by the Bank.
8. From the materials available on record, it is found that on 30.1.2016 the Bank has sanctioned loan of Rs.125.00 lakhs to the petitioner and it is the petitioner's positive case that it has deposited only a sum of Rs.25 lakhs till now. At present more than Rs.2 crores (rupees two crores) are outstanding in its name and the last O.C.C. credit advance in favour of the petitioner to the tune of Rs.15 lakhs was on 27.2.2017. It is also seen that stock statement was submitted to the Bank on 31.1.2017. The existing stock finished produced was to the tune of Rs.1,11,96,000/-, but thereafter no payment has been made to 7 the Bank. If the petitioner has so much of finished produce of its own possession, there is no reason why it should not have paid money to the Bank. No rejoinder affidavit has been filed by the petitioner denying this aspect. Thus, it is apparent from the record that the petitioner is a wilful defaulter as per the provisions of the notification under Annexure-4. The Bank is not in any obligation to refer its case for reconstructing/rephasement. So it has taken a proper step in taking recourse to the SARFESI Act and, therefore, this Court is of the opinion that there is no merit in the writ petition and the petitioner is not at all entitled to its relief it has claimed for.
9. Hence the writ petition is dismissed being devoid of any merit.
10. There shall be no order to as to costs.
11. Urgent copies as per rules.
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S.K.Mishra, J Orissa High Court, Cuttack Dated 5th September, 2018/A.K.Behera.
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