Telangana High Court
Nandi Grain Derivatives Pvt. Ltd., vs Bank Of Baroda on 15 July, 2024
HON'BLE SRI JUSTICE C.V.BHASKAR REDDY
WRIT PETITION No.294 of 2024
ORDER:
This Writ Petition, under Article 226 of the Constitution of India, is filed by the petitioner, seeking the following relief:
".... to issue an appropriate Writ, order or direction, one in the nature of Mandamus, or such other appropriate writ to declare the impugned proceedings of the respondent bank letter/communication bearing No. BOB/ZOSARB/HYD/NANDI/2023/87 dt.9.10.2023 is illegal, arbitrary and violative of the principles of natural justice and violative of Art. 14, 19 and 21 of Constitution of India and consequently to direct the respondent bank to reclassify and to change the status of the petitioner company on the basis of the reforensic audit report dt.30.4.2022 submitted by M/s. M.K.Agarwal and Company and take necessary steps for removing the petitioner company account as fraud account from CIBIL, CRISIL and RBI List and ...."
2. Heard Sri J. Raghu, learned counsel for the petitioner and Sri Srinivas Chitturu, learned standing counsel for respondent-Bank.
3. The petitioner is a company registered and incorporated under the provisions of the Companies Act, 1956 for doing business in the field of manufacturing of starch and its bye-products used in an extensive range of industrial applications such as food, pharma, textiles. The respondent bank has extended financial assistance to the tune of Rs.27Crores vide sanction letter dated 27.11.2012. 2 When the petitioner company failed to meet the interest obligations in terms of the agreement, after following the guidelines issued by the Reserve Bank of India, the petitioner account has been declared as NPA (Non-Performing Asset) on 31.03.2015.
4. Learned counsel for the petitioner submits that the respondents without taking into consideration of the financial constraints faced by the petitioner company have initiated action for conducting forensic audit for the period from 08.11.2012 to 31.03.2015 and such forensic audit report was submitted on 31.07.2020, in which it was found that the petitioner account is fraud and basing on the said report, the petitioner company was included in the Fraud list of RBI. Learned counsel further submits that at the time of conducting the said forensic audit, due to the sudden demise of Chairman of the petitioner company, the Directors have not provided required data, and subsequently, the petitioner requested for re-forensic audit and the re-forensic report was submitted on 30.04.2022 reporting that they did not find any evidence to conclude regarding fraud or diversion of funds by the petitioner company. Learned counsel also submits that even though a representation dated 30.06.2022 was submitted by the petitioner to reclassify and change the status of petitioner company, the respondents did not consider the same and aggrieved by the said 3 action of respondent Bank, the petitioner company filed W.P.No.34012 of 2022 on the file of this Court and this Court vide order dated 14.07.2023 directed the respondent-Bank to consider the representation dated 30.06.2022 submitted by the petitioner company by duly taking into consideration the re-forensic audit report submitted the very same Chartered Accountant which has been appointed by the respondent bank earlier. However, the respondents without considering their representation in a proper perspective had declined to remove the name of the petitioner company from the Fraud list of RBI and as such they are unable to avail the credit facility from banks or any financial institutions.
5. Learned standing counsel for the respondent bank vehemently contended that there is difference of opinion between the first forensic audit report and the second re-forensic audit report submitted by the very same audit firm. Therefore, the banks are conferred with the powers to take action basing on the first forensic audit report and due procedure was adopted by the respondent bank while issuing the impugned proceedings. There is no illegality or irregularity in the procedure adopted in declaring the petitioner company as fraud and no interference of this Court is required under Article 226 of the Constitution of India.
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6. This Court has carefully examined the impugned proceedings issued by the respondent-Bank dated 09.10.2023. In the said letter except stating that they have considered the representation of the petitioner in compliance of the orders dated 14.07.2023 in W.P.No.34012 of 2022, they have not recorded any reasons for declining the request of the petitioner.
7. Admittedly, it is stated by the respondent in the impugned proceedings that they have considered the objections and arrived at a decision that they are unwilling to recommend for removal of petitioner company's name from the fraud list of RBI. It is settled law that while passing the order, valid reasons for arriving at such decision have to be assigned or otherwise, it amounts to non- application of mind and thereby, such order shall be liable to be declared as non-est in the eye of law. In view of the said principles laid down by the various Courts, it is held that the impugned proceedings were not issued in consonance with the principles of natural justice and accordingly, the same is liable to be set aside.
8. In the result, the impugned proceedings of the respondent bank vide letter/communication dated 09.10.2023 are set aside and the respondents are directed to consider the re-forensic audit report 5 dated 30.04.2022 afresh and pass appropriate orders, in accordance with the guidelines of RBI and in accordance with law.
9. Accordingly, the Writ petition is disposed of. No order as to costs.
Miscellaneous applications, if any, pending in this writ petition, shall stand closed. No costs.
________________________________ JUSTICE C.V.BHASKAR REDDY 15.07.2024 gvl