Punjab-Haryana High Court
M/S Simbholi Sugars Ltd. And Others vs Oriental Bank Of Commerce And Others on 11 December, 2019
Author: Rakesh Kumar Jain
Bench: Rakesh Kumar Jain, Alka Sarin
C.W.P No. 37836 of 2019 -1-
213
IN THE HIGH COURT OF PUNJAB AND HARYANA AT
CHANDIGARH
-.-
C.W.P No. 37836 of 2019 (O&M)
Date of decision:11.12.2019
M/s Simbholi Sugars Ltd. & Ors. ... Petitioners
Vs.
Oriental Bank of Commerce & Ors. ...Respondents
CORAM: HON'BLE MR. JUSTICE RAKESH KUMAR JAIN
HON'BLE MRS. JUSTICE ALKA SARIN
Present:- Mr. Alok Jagga, Advocate, for the petitioners.
Mr. A.K. Ahuja, Advocate, for respondent No.1.
RAKESH KUMAR JAIN, J.
The petitioners have prayed for the issuance of a writ in the nature of certiorari for quashing the order dated 25.10.2018 (Annexure P-20), passed by respondent No.1, by which the petitioners have been declared wilful defaulter.
Counsel for the petitioners has relied upon a decision of the Supreme Court rendered in the State Bank of India Vs. M/s Jah Developers Pvt. Ltd. & Ors. 2019 (3) R.C.R. (Civil) 114 to contend that in the process of declaring a borrower as a wilful defaulter, the Screening Committee has to give reasons and communicate the same the borrower, enabling him to make a representation to the Review Committee, who has to decide the same after affording an opportunity. Paragraph 21 of the decision rendered in the case of M/s Jha Developers Pvt. Ltd. (supra), is reproduced as under:-
" Given the above conspectus of case law, we are of the view that there is no right to be represented by a lawer in the in-house proceedings contained in paragraph 3 of the Revised Circular dated 1 of 4 ::: Downloaded on - 12-01-2020 01:57:40 ::: C.W.P No. 37836 of 2019 -2- 01.07.2015, as it is clear that the events wilful default as mentioned in paragraph 2.1.3 would only relate to the individaul facts of each case. What has typically to be discovered is whether a unit has defaulted in making its payment obligations even when it has the capacity to honour the said obligations; or that it has borrowed funds which are diverted for other purposes, or siphoned off funds so that the funds have not been utilised for the specific purpose for which the finance was made available. Whether a default is intentional, deliberate, and calculated is again a question of fact which the lender may put to the borrower in a show cause notice to elicit the borrower's submissions on the same. However, we are of the view that Article 19(1)(g) is attracted in the facts of the present case as the moment a person is declared to be a wilful defaulter, the impact on its fundamental right to carry on business is direct and immediate. This is for the reason that no additional facilities can be granted by any bank/financial institutions, and entrepreneurs/promoters would be barred from institutional finance for five years. Banks/financial institutions can even change the management of the wilful defaulter, and a promoter/director of a wilful defaulter cannot be made promoter or director of any other borrower company. Equally , under Section 29A of the Insolvency and Bankruptcy Code, 2016, a wilful defaulter cannot even apply to be a resolution applicant. Given these drastic consequences it is clear that the Revised Circular, being in public interest must be construed reasonably. This being so, and given the fact that paragraph 3 of the Master Circular dated 01.07.2013 permitted the borrower to make a representation within 15 days of the 2 of 4 ::: Downloaded on - 12-01-2020 01:57:40 ::: C.W.P No. 37836 of 2019 -3- preliminary decision of the First Committee, we are of the view that first and foremost, the Committee comprising of the Executive Director and two other senior officials, being the First Committee, after following paragraph 3(b) of the Revised Circular dated 01.07.2015, must give its order to the borrower as soon as it made. The borrower can then represent against such order within a period of 15 days to the Review Committee. Such written representation can be a full representation on facts and law (if any). The Review Committee must then pass a reasoned order on such representation which must then be served on the borrower. Given the facts that the earlier Master Circular dated 01.07.2013 itself considered such steps to be reasonable, we incorporate all these steps into the Revised Circular dated 01.07.2015. The impugned judgment is, therefore, set aside, and the appeals are allowed in terms of our judgment. We thank the learned Amicus Curiae, Shri Parag Tripathi, for his valuable assistance to this Court."
Learned counsel for the petitioners has submitted that though the petitioners were given an opportunity by the Screening Committee pursuant to the letter dated 30.07.2018 but the decision taken in the meeting held on 25.10.2018 by the Screening Committee is not conveyed to the petitioners and is not a reasoned order. It is further submitted that the decision has been taken by the Review Committee without giving any opportunity to the petitioners. The present petitioners did not get the opportunity to represent against the decision of the Screening Committee.
Learned counsel for respondent No.1 could not deny the fact that decision of the Screening Committee dated 03.08.2018 is sans reasons and were 3 of 4 ::: Downloaded on - 12-01-2020 01:57:40 ::: C.W.P No. 37836 of 2019 -4- not conveyed to the petitioners and submitted that there is no law contrary to the decision of the Supreme Court rendered in case of M/s Jha Developers Pvt. Ltd. (supra).
In view of the afore-said circumstances, the present petition is hereby allowed, order dated 25.10.2018 (Annexure P-20) is set aside and the matter is remanded back to the Screening Committee (Respondent No.1), with a direction to take into consideration the order dated 03.08.2018 once again and after affording opportunity to the petitioners decide the same by giving reasons and communicate the same to the petitioners enabling them to file a review application or the appeal before the Review Committee, as the case may be.
Parties are directed to appear before the Screening Committee on 23.01.2020.
Disposed of.
(RAKESH KUMAR JAIN)
JUDGE
December 11, 2019 (ALKA SARIN)
tripti JUDGE
Whether speaking/reasoned : Yes/No
Whether Reportable : Yes/No
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