Kaluram Food Products Ltd., ... vs Punjab National Bank Thr. Its ...
2021 Latest Caselaw 15926 Bom

 Judgment                            1                         wp2465.21+1.odt




        IN THE HIGH COURT OF JUDICATURE AT BOMBAY,
                  NAGPUR BENCH, NAGPUR.

                      WRIT PETITION NO. 2465 OF 2021
                                  WITH
                      WRIT PETITION NO. 2466 OF 2021

 W.P.NO.2465/2021.

 1. Kaluram Food Products Ltd.,
    a Pvt. Ltd. Company registered under
    the Indian Companies Act, 1956,
    having its Registered Office at
    Kirana Bazar, Akola - 444 001, through
    its Director - Mr. Ajayprakash Kaluram
    Agrawal.

 2. Shivprakash S/o. Kaluram Ruhatiya,
    Aged about 64 years, Occ. Business,

 3. Shreeprakash S/o. Kaluram Ruhatiya,
    Aged about 61 years, Occ. Business,

      Both R/o. Durga Chowk, Akola.
                                                  .... PETITIONERS.
                               // VERSUS //

 1. Punjab National Bank,
    through its Branch Manager,
    Shraogi Towers Branch,
    Tilak Road, Akola - 444 001.

 2. HDFC Bank Ltd.,
    through its Branch Manager,
    Sethi Heights, Ground Floor,
    Z.P. Road, Akola - 444 001.
                                                .... RESPONDENTS.


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  _____________________________________________________
 Shri S.P.Bhandarkar, Advocate for both Petitioners.
 Shri A.S.Jaiswal, Sr.Adv. a/b. Shri V.K.Kolte, Adv. for Resp.No.1.
 Shri P.G.Mewar, Advocate for Respondent No.2.
 _____________________________________________________


 WITH

 W.P.NO.2466/2021.

 1. M/s. Omprakash Shivprakash,
    a registered Partnership Firm, having
    Office at Old Kirana Bazar, Akola-444 006,
    through its Partner - Shri Ajayprakash
     Kaluram Agrawal.

 2. Shivprakash S/o. Kaluram Ruhatiya,
    Aged about 64 years, Occ. Business,
    R/o. Durga Chowk, Akola, Tahsil &
    District : Akola.

 3. Shreeprakash S/o. Kaluram Ruhatiya,
    Aged about 61 years, Occ. Business,
    R/o. Durga Chowk, Akola, Tahsil &
    District : Akola.

                                                  .... PETITIONERS.

                               // VERSUS //

 1. Punjab National Bank,
    Branch at Shrawagi Towers,
    Tilak Road, Akola - 444 001
    through its Branch Manager.




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  Judgment                              3                           wp2465.21+1.odt




 2. HDFC Bank Ltd.,
    Branch at Sethi Heights, Ground Floor,
    Opposite Collector Office, Z.P. Road,
    Akola - 444 001, through its
    Branch Manager,
                                                    .... RESPONDENTS.
  _____________________________________________________
 Shri Avinash Gupta, Sr.Advocate a/b. Ms Nidhi Dayani, Advocate
 for Petitioners.
 Shri A.S.Jaiswal, Sr.Adv. a/b. Shri V.K.Kolte, Adv. for Resp.No.1.
 Shri P.G.Mewar, Advocate for Respondent No.2.
 _____________________________________________________

                    CORAM :        SUNIL B. SHUKRE AND
                                   ANIL S. KILOR, JJ.

DATE OF RESERVING THE JUDGMENT : 21/10/2021 DATE OF PRONOUNCING THE JUDGMENT: 17/11/2021

JUDGMENT : (Per : Anil S. Kilor, J.)

1. Heard.

2. RULE. Rule made returnable forthwith. Heard finally by

consent of the learned counsel for the parties.

3. In both these petitions, a challenge is raised to the demand

of 2% of the sanctioned loan amount towards prepayment charges

by the respondent No.1 bank from the petitioners. Hence, both

these petitions are heard together.

Judgment 4 wp2465.21+1.odt

4. In Writ Petition No. 2465 of 2021 the petitioner No.1, a

Private Limited Company, engaged in a business of manufacture,

sale and purchase of Soyabean and Edible Oils and petitioner Nos. 2

and 3, who are the Directors of petitioner No.1-Company, have

offered their properties as collateral securities against the loan taken

by petitioner No.1-Company from respondent No.1-Punjab

National Bank.

5. Petitioner No.1 in Writ Petition No.2466 of 2021, a sister

concern of petitioner No.1 in Writ Petition No.2465 of 2021, had

loan accounts, cash credit accounts with the respondent No.1-

Punjab National Bank and for the same, an agricultural land and a

plot in M.I.D.C. area Akola, owned by the petitioners No. 2 and 3,

who are the Directors of petitioner No.1, were mortgaged as

collateral securities for cash credit loan facility.

6. In both the cases, some issues were cropped up between the

petitioners and the respondent No.1-Bank. It is alleged that since the

Judgment 5 wp2465.21+1.odt

respondent No.1-Bank did not take any remedial measure in spite of

repeated requests by the petitioners, the aforesaid loan facilities

under the takeover facilities were decided to be shifted to

respondent No.2 bank, by the petitioners. Accordingly, the

formalities were completed and the respondent No.2 granted

working capital facilities to the petitioners. The respondent No.2

Bank in pursuance to the same, issued pay order dated 02/11/2020

for Rs.1,15,00,000/- towards final payment of facilities availed by

the petitioner No.1 (in Writ Petition No.2466 of 2021) and

requested the respondent No.1 to release securities held by

respondent No.1-Bank, in favour of respondent No.2-Bank.

7. Whereas, in Writ Petition No.2465 of 2021, respondent

No.2 issued pay order dated 02/11/2020 for Rs.4,35,00,000/-

towards full and final payment and similar request to release the

securities mentioned in the letter issued by respondent No.2, was

made vide letter dated 18/11/2020 addressed to the Manager of the

respondent No.1-Bank.

Judgment 6 wp2465.21+1.odt

8. However, vide letter dated 10/12/2020 the respondent

No.1-Bank demanded penal interest @ 2% towards prepayment

charges from the petitioner No.1 in both the petitions. The validity

and legality of the said demand has been questioned in the present

writ petitions. The prayers made in both the petitions are as follows:

Prayer clause in Writ Petition No.2465 of 2021 "i) hold and declare that Clause-28(iii) of the Deed of Hypothecation dated 16/11/2017 (Annex-B) executed by the petitioner No.1 Company in favour of the respondent No.1/Punjab National Bank is illegal and unenforceable being contrary to Sections 23 and 74 of the Indian Contract Act and violative of Articles 14, 19(1)(g) and 300A of the Constitution of India and accordingly be pleased to quash and same;

ii) quash and set aside the communication dated 03/11/2020 (Annex-F) issued by the respondent No.2/HDFC Bank to the petitioner No.1 Company to deposit 2% pre-payment charges alongwith GST on sum of Rs.22.89 Crores for closure of accounts;

iii) issue a writ of mandamus or any other appropriate writ or order directing the respondent No.1/Punjab National Bank to return the title deeds pertaining to Agricultural Land bearing Survey No.36/1, admeasuring 4637.85 Square Meters of Village-Umari, Tahsil & Distict-Akola and Gut Nos.85 and 86 of Village Anjankhed, Tahsil and District Washim, admeasuring 1.4150 HR to the petitioners or the respondent No.2/HDFC Bank Ltd. without insisting upon payment of prepayment charges as demanded in the letter dated 10/12/2020 (Annex-H);

Judgment 7 wp2465.21+1.odt

iv) pass suitable interim orders directing the respondent No.1/Punjab National Bank to return the title deeds pertaining to Agricultural Land bearing Survey No.36/1, admeasuring 4637.85 Square Meters of Village-Umari, Tahsil & Dist-Akola and Gut Nos.85 and 86 of Village Anjankhed, Tahsil and District Washim, admeasuring 1.4150 HR to the petitioners or the respondent No.2/HDFC Bank Ltd. without insisting upon payment of prepayment charges as demanded in the letter dated 10/12/2020 (Annex-H), pending the final disposal of the present petition;

v) grant ex-parte ad-interim relief in terms of Prayer Clause-(iv) above;

vi) grant any other appropriate relief, which this Hon'ble Court deems fit and proper, in the facts and circumstances of the case."

Prayer clause in Writ Petition No.2466 of 2021 "i) hold and declare that Clause-19(h) in the Overall Terms and Conditions of the sanction letter dated 28/11/2018 (Annex-A) issued by the respondent No.1/Punjab National Bank is illegal and uneforceable being contrary to Sections 23 and 74 of the Indian Contract Act and violative of Articles 14, 19(1)(g) and 300A of the Constitution of India and accordingly be pleased to quash and same;

ii) quash and set aside the communication dated 10/12/2020 (Annex-K) issued by the respondent No.1/Punjab National Bank to the petitioner No.1 Firm to deposit 2% pre-payment charges alongwith GST on sum of Rs.13.00 Crores for closure of accounts;

iii) issue a writ of mandamus or any other appropriate writ or order directing the respondent No.1/Punjab National Bank to return the title deeds pertaining to MIDC Plot No.66, Phase-III, Akola

Judgment 8 wp2465.21+1.odt

MIDC Area, Akola and Agricultural Land bearing Survey No.36/1, admeasuring 4637.85 Square Meters of Village-Umari, Tahsil and District-Akola to the petitioners or the respondent No.2/HDFC Bank Ltd. without insisting upon payment of prepayment charges as demanded in the letter dated 10/12/2020 (Annex-K);

iv) pass suitable interim orders directing the respondent No.1/Punjab National Bank to return the title deeds pertaining to MIDC Plot No.66, Phase-III, Akola MIDC Area, Akola and Agricultural Land bearing Survey No.36/1, admeasuring 4637.85 Square Meters of Village-Umari, Tahsil and District-Akola to the petitioners or the respondent No.2/HDFC Bank Ltd. without insisting upon payment of prepayment charges as demanded in the letter dated 10/12/2020 (Annex-K), pending the final disposal of the present petition;

v) grant ex-parte ad-interim relief in terms of Prayer Clause-(iv) above;

vi) grant any other appropriate relief, which this Hon'ble Court deems fit and proper, in the facts and circumstances of the case."

9. We have heard learned counsel for the respective parties.

10. Shri Avinash Gupta, learned Senior Advocate assisted by

Ms Nidhi Dayani, learned counsel for the petitioners, submits that

once the total amount outstanding against petitioner No.1 was paid

to the respondent No.1 under the takeover facility, the respondent

Judgment 9 wp2465.21+1.odt

No.1-Bank is duty bound to release the securities held by

respondent No.1-Bank in favour of the respondent No.2-Bank, who

has issued pay orders for repayment of the loan of the petitioner

No.1.

11. It is submitted that withholding of securities despite the

payment of outstanding loan amount is arbitrary and unreasonable.

It is argued that, the respondent No.1-Bank is a "State" within the

meaning of Article 12 of the Constitution of India and was bound to

follow the equality clause contained in Articles 14 of the

Constitution of India and act in fair and non-arbitrary manner. For

this purpose, reliance is placed on the judgment in the case of

Punjab National Bank ..vs.. Astamja Dash1.

12. It is further pointed out that in an Undertaking, submitted

by the petitioner No.1 and its partners, Clause 28(iii) clearly states

that borrower agrees to pay Facility Cancellation Charges @ nil% on

the sanctioned limit, irrespective of the period the said facilities are

1 (2008) 14 SCC 370

Judgment 10 wp2465.21+1.odt

availed of from the bank, in the event of cancellation of limit by

payment not made out of own sources. It is submitted that in view

of the said clause respondent No.1-Bank has no authority to demand

2% amount towards prepayment charges from the petitioners. For

this purpose, reliance has been placed on the judgment of Delhi

High Court in the case of DLF Limited ..vs.. Punjab National Bank2.

13. Shri Gupta, learned Senior Advocate would further point

out the correspondence between respondent No.2-Bank and

respondent No.1-Bank for release of securities, dated 18/11/2020. It

is further pointed out that respondent No.2-Bank vide said letters

made a request to the respondent No.1 that in case, release of charge

and security over the mortgaged and/or hypothecated and/or

pledged assets is withheld by the respondent No.1-Bank for any

reason or in case of any reservations in handing over of the

documents in respect of the securities to respondent No.2-Bank,

the funds so sent be immediately returned to respondent No.2-Bank

through a pay order. It is urged that, in spite of the said request, the

2 2011 SCC OnLine Del 2465

Judgment 11 wp2465.21+1.odt

respondent No.1-Bank failed to return back the amount to the

respondent No.2-Bank by issuing the pay order on failure of release

of securities held by respondent No.1-Bank. It is thus, submitted

that the whole action on the part of the respondent No.1-Bank is

arbitrary and unreasonable.

14. Shri Bhandarkar, learned counsel for the petitioner in Writ

Petition No. 2465 of 2021 reiterates the contentions raised by the

petitioner in Writ Petition No.2466 of 2021 and prays for

declaration that the demand of prepayment charges, at the instance

of the respondent No.1-Bank, is illegal and not sustainable in the

eyes of law.

15. Shri Anand Jaiswal, learned Senior Advocate, assisted by

learned counsel Shri V.K. Kolte, for respondent No.1-Punjab

National Bank, at the outset, points out that no arguments have

been advanced in relation to prayer clause (i) and therefore, it be

treated as 'not pressed' by the petitioners.

Judgment 12 wp2465.21+1.odt

16. The learned Senior Advocate has opposed the present

petition and he submits that the issues involved in both these

petitions are arising out of a contractual matter. It is submitted that

the writs are impermissible when the allegation is solely with regard

to a contractual right or duty. It is thus, submitted that the present

petitions are not maintainable.

17. On merit, the learned Senior Advocate pointed out the

relevant clauses mentioned in the terms and conditions of sanction

letter signed by both the parties and it is submitted that Clause 18 of

the same permits the respondent No.1-Bank to charge penal interest

@ 2% in the eventuality of prepayment through takeover facility by

other Bank or financial institution. Thus, he submits that as per the

agreed terms and conditions of the sanction letter, the demand of

2% prepayment charges has been made by respondent No.1-Bank,

which cannot be termed as arbitrary or unreasonable. By arguing so,

he prays for dismissal of the writ petition.

Judgment 13 wp2465.21+1.odt

18. Shri Mewar, learned counsel appearing for respondent

No.2-Bank argues that though a request was made by the

respondent No.2-Bank to the respondent No.1-Bank to refund back

the amount by issuing pay orders in case the respondent No.1-Bank

withholds the securities, the amount has not been paid back to the

respondent No.2.

19. The learned Senior Advocate Shri Gupta, in reply to the

preliminary objection raised by learned Senior Advocate Shri Jaiswal

as regards maintainability of the petition, has submitted that in

contractual matters, the writ petition is maintainable and for this

purpose, he has relied upon a judgment of the Hon'ble Supreme

Court of India in the case of Noble Resources Ltd..vs. State of

Orissa3, and the judgment in the case of Central Bank of India vs..

Devi Ispat Ltd.4.

20. To consider the rival contentions of the parties, we have

perused the record and gone through the judgments cited by both

the parties.

 3     (2006) 10 SCC 236
 4     (2010) 11 SCC 186




  Judgment                              14                         wp2465.21+1.odt

21. The learned counsel for the petitioners, have not argued or

made any submissions as regards prayer clause (i) and therefore, we

are of the opinion that in absence of any arguments advanced on

prayer clause (i) it is not necessary for us to consider the prayer

clause (i), accordingly, we dismiss the petition as regards prayer

clause (i).

22. We move further to consider the contentions raised by

both the parties as regards other prayer clauses i.e. prayer clause (ii)

and (iii) in both the petitions. There is no dispute that the

respondent No.2-Bank, while granting working capital facilities and

providing take over facilities in favour of the petitioners in both the

petitions, paid the outstanding amount due to the petitioner No.1 in

both the petitions, to the respondent No.1 by orders dated

02/11/2020, amounting to Rs.4,35,00,000/- and Rs.1,15,00,000/-,

respectively. There is also no dispute that in spite of the demand by

the respondent No.2 to release the securities, held by respondent

No.1 in favour of respondent No.2, the securities were not released

on the ground that the petitioners in both the petitions have not

Judgment 15 wp2465.21+1.odt

paid 2% prepayment charges, even though the demand was made by

respondent No.1.

23. In the above referred backdrop, a question arises, whether

the demand of 2% of the sanctioned loan amount towards

prepayment charges, raised by respondent No.1, is as per the agreed

terms and conditions of the loan facility?

24. On perusal of the record, it is revealed that a sanction letter

stipulating terms and conditions which had been accepted and

countersigned by the petitioners. Clause 18(g) of aforesaid terms

and conditions, which reads thus:

"18. The Bank shall charge penal interest @2% under the following circumnstances:

(a) to (f) .....

(g) Any other eventuality/situation to be decided by the bank."

25. On the other hand a clause in the undertaking submitted

by the petitions to the respondent No.1 Bank shows that the

borrower agrees to pay Facility Cancellation Charges @nil% on the

sanctioned limit irrespective of the period the said facilities are

Judgment 16 wp2465.21+1.odt

availed of from the bank in the event of cancellation of limit by

payment not made out of own sources.

Thus, both the above referred clauses are in conflict with

each other.

26. As far as the submission of the petitioners that the

respondent No.1-Bank ought to have repaid the amount to the

respondent No.2-Bank on not releasing the securities is concerned,

it is pertinent to note here that, the respondent No.2-Bank has not

initiated any action for recovery of the amount from the respondent

No.1-Bank, on failure of the respondent No.1-Bank to release the

securities in favour of the respondent No.2-bank. Except the letter/

correspondence no steps have been taken by the respondent No.2

against respondent No.1 for recovery of the amount. Moreover, in

none of the said letter-correspondence, the petitioners are party. In

the circumstances, the grievance relating to making the payment

back by the respondent No.1 to the respondent No.2 cannot be

raised in these petitions at the instance of the petitioners.

Judgment 17 wp2465.21+1.odt

27. It is pertinent to note here that the petitioners have not

produced on record the sanction letter, if any, issued by respondent

No.2-Bank and signed by both the parties, pointing out the terms

and conditions of sanction of takeover facility by respondent No.2-

Bank. In absence of any such document on record, it is difficult to

determine the rights of the petitioners to ask for repayment by

respondent No.1 in favour of respondent No.2, on failure of

respondent No.1 to release the securities.

28. The Hon'ble Supreme Court of India in the case of Bharat

Coking Coal Ltd. ..vs.. Amr Dev Prabha5 has held thus:

"29. This position of law has been succinctly summed up in Tata Cellular v. Union of India, where it was famously opined that: (SCC pp.677- 78, para 77) "77. ... Therefore, it is not for the court to determine whether a particular policy or particular decision taken in the fulfilment of that policy is fair. It is only concerned with the manner in which those decisions have been taken. The extent of the duty to act fairly will vary from case to case. Shortly put, the grounds upon which an administrative action is subject to control by judicial review can be classified as under :

 5     (2010) 16 SCC 759




  Judgment                                18                          wp2465.21+1.odt

(i) Illegality: This means the decision-maker must understand correctly the law that regulates his decision making power and must give effect to it.

                     (ii)    Irrationality, namely,     Wednesbury
                     unreasonableness,
                     (iii) Procedural impropriety."

30. But merely because the accusations made are against the State or its instrumentalities does not mean that an aggrieved person can bypass established civil adjudicatory processes and directly seek writ relief. In determining whether to exercise their discretion, the writ courts ought not only confine themselves to the identity of the opposite party but also to the nature of the dispute and of the relief prayed for. Thus, although every wrong has a remedy, depending upon the nature of the wrong there would be different forums for redress.

31. In cases where a constitutional right is infringed, writs would ordinarily be the appropriate remedy. In tender matters, such can be either when a party seeks to hold the State to its duty of treating all persons equally or prohibit it from acting arbitrarily; or when executive actions or legislative instruments are challenged for being in contravention to the freedom of carrying on trade and commerce. However, writs are impermissible when the allegation is solely with regard to violation of a contractual right or duty. Hence, the persons seeking writ relief must also actively satisfy the Court that the right it is seeking is one in public law, and not merely contractual. In doing so, a balance is maintained between the need for commercial freedom and the very real possibility of collusion, illegality and squandering of public resources."

Judgment 19 wp2465.21+1.odt

29. It is thus, clear that merely because the accusations made

are against the State or its instrumentality, it does not mean that an

aggrieved person can bypass established civil adjudicatory processes

and directly seek writ relief. In determining whether to exercise their

discretion, the writ courts ought not only confine themselves to the

identity of the opposite party but also to the nature of the dispute

and of the reliefs prayed for. The writs are impermissible when the

allegation is solely with regard to violation of a contractual right or

duty and unless the right is one in public law, and not merely

contractual.

30. The learned counsel for the petitioners have placed reliance

on the judgments of the Hon'ble Supreme Court of India in the case

of Noble Resources Ltd. (supra) and Central Bank of India (supra)

to urge that even in contractual matters the writ petition would be

maintainable.

31. In the case of Noble Resources Ltd. (supra), the Hon'ble

Supreme Court of India has held that, it is trite that if an action on

Judgment 20 wp2465.21+1.odt

the part of the State is violative of the equality clause contained in

Article 14, writ petition would be maintainable even in the

contractual field. However, the Hon'ble Supreme Court of India has

further observed that a distinction indisputably must be made

between a matter which is at the threshold of a contract and a breach

of contract; whereas in the former the court's scrutiny is more

intrusive, in the latter the court may not ordinarily exercise its

discretionary jurisdiction of judicial review, unless it is found to be

violative of Article 14. It is further observed that where a public law

element is involved, judicial review would be permissible.

32. In the case of Central Bank of India (supra), the Hon'ble

Supreme Court of India has held thus:

"28. It is clear that, (a) in the contract if there is a clause for arbitration, normally, a writ court should not invoke its jurisdiction; (b) the existence of effective alternative remedy provided in the contract itself is a good ground to decline to exercise its extraordinary jurisdiction under Article 226; and (c) if the instrumentality of the State acts contrary to the public good, public interest, unfairly, unjustly, unreasonably discriminatory and violative of Article 14 of the Constitution of India in its contractual or statutory obligation, writ petition would be

Judgment 21 wp2465.21+1.odt

maintainable. However, a legal right must exist and corresponding legal duty on the part of the State and if any action on the part of the State is wholly unfair or arbitrary, writ courts can exercise their power. In the light of the legal position, writ petition is maintainable even in contractual matters, in the circumstances mentioned in the earlier paragraphs."

33. There is no dispute about the legal position of law as laid

down in both the above referred cases that contractual matters are

not totally beyond the scope of judicial review albeit its ambit is

limited and unless the instrumentalities of the State act contrary to

the public good, or public interest or act unfairly, unjustly,

unreasonably, and/or in a discriminatory way as being violative of

Article 14 of the Constitution of India in its contractual or statutory

obligation, writ petition would not be maintainable.

34. In the present case, the petitioners failed to point out that

the respondent No.1 in the present matter has acted contrary to the

public good, public interest, unfairly, unjustly, unreasonably

discriminatory and violative of Article 14 of the Constitution of

India in its contractual obligations. On the contrary, from the terms

Judgment 22 wp2465.21+1.odt

and conditions stipulated in the sanction letter which has been

accepted and countersigned by the petitioner there is a specific

clause in respect of prepayment of charges @2%. The question

involved in this petition is as regards 2% prepayment charges.

35. The said question is a pure matter of contract between the

petitioners and respondent No.1 and it being a matter of contract, it

is in the realm of private law and therefore, it is governed by the

provisions of the contract. Any dispute relating to the interpretation

of the terms and conditions of such contract cannot be agitated in

writ petition and therefore, the judgments cited by the petitioners

are distinguishable on facts and are of no help to the petitioners.

36. Having held so, we have no hesitation to hold that looking

to the controversy involved in the present petition, the present

petitions are not maintainable, accordingly, we pass the following

order:

        i)     Both the writ petitions are dismissed.




            Judgment                                 23                           wp2465.21+1.odt




                  ii)    The parties are at liberty to resort to alternate remedy as
                         available in law, if so advised.

Rule stands discharged accordingly. No order as to costs.

                             ( ANIL S. KILOR, J )           ( SUNIL B. SHUKRE, J.)


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