Orient Clothing Company Private ... vs State Bank Of Bikaner & Jaipur & ...
2012 Latest Caselaw 2855 Del

22.
*      IN THE HIGH COURT OF DELHI AT NEW DELHI

+                         Date of Decision: 01.05.2012

%      W.P.(C) 1579/2012 and C.M. Nos. 3475-76/2012


       ORIENT CLOTHING COMPANY PRIVATE LIMITED ..... Petitioner
                              Through:   Ms.     Maneesha       Dhir      and
                                         Mr.R.S.Paliwal, Advocates.
                         versus


       STATE BANK OF BIKANER & JAIPUR & OTHERS            ..... Respondents
                              Through:   Mr. Jai Mohan, Advocate for the
                                         respondent No. 1.
       CORAM:
       HON'BLE MR. JUSTICE VIPIN SANGHI


VIPIN SANGHI, J. (Oral)

1. The petitioner has preferred the present writ petition under

Article 226 of the Constitution of India to seek issuance of a writ, order

or direction in the nature of mandamus to direct respondent No.1, i.e.

the State Bank of Bikaner & Jaipur, Karol Bagh Branch and State Bank

of India Overseas Branch, i.e. respondents No.1 & 2 respectively to

accept the restructuring of the petitioner‟s dues as per the Corporate

Debt Restructuring (CDR) Package stated to have been submitted by

the petitioner under the parameters of the Reserve Bank of India (RBI)

guidelines, on the ground that they are binding on respondents No.1

and 2. The petitioner also seeks a declaration to the effect that the

letter dated 06.01.2012 issued by respondent No. 1 is null & void on

the ground that the same is mala fide, arbitrary, unfair & an abuse of

power. The petitioner also seeks a declaration that the notices dated

25.01.2012 under Section 13 (2) of the Securitisation and

Reconstruction of Financial Assets and Enforcement of Security Interest

Act, 2002 (SARFEASI Act) issued by respondent No. 1, i.e. the State

Bank of Bikaner & Jaipur to the petitioner is null & void, on the ground

that the same is mala fide, arbitrary, unfair and an abuse of power of

the said respondent.

2. The case of the petitioner is that the petitioner is engaged in the

business of manufacture and export of garments. The petitioner was

banking with respondents No. 1 & 2 and had obtained various facilities.

According to the petitioner, the petitioner‟s business suffered losses on

account of slump & recession in the overseas markets. The further

case of the petitioner is that the petitioner sought the restructuring of

the loan under the CDR mechanism. The petitioner submits that a

flash report was submitted to the CDR Empowered Group.

3. This was followed by the Techno-Economic Viability (TEV) Study

report prepared by an independent third party, viz, Mr. Sonalal Datta,

in June 2011, to assess the feasibility and economic viability of the

rehabilitation cum restructuring proposal. The petitioner submits that

the petitioner responded to the issues raised by the lenders upon

consideration of the TEV study. The records shows that the Monitoring

Committee of the joint lenders in its meeting held on 14.07.2011

raised various issues and also advised the petitioner to, inter alia, not

resort to concealment of facts relating to, inter alia, diversion of funds.

Respondent No. 1 vide letter dated 04.08.2011 forwarded the final

restructuring report for the petitioner company.

4. The petitioner submits that in the CDR meeting held on

12.08.2011 the respondent No. 1, State Bank of Bikaner & Jaipur, gave

its in-principle approval to the restructuring proposal subject to four

conditions, which were accepted by the petitioner. However,

respondent No. 2 had no mandate and stated that it could take a call

only upon approval of the final report by its appropriate authority.

Since there was no supermajority, the case was deferred to the next

CDR EG meeting for a decision.

5. However, the admitted position is that respondents No. 1 & 2 did

not give their final approval. It is also not in dispute that the closing

date by when the CDR had to be achieved was fixed as one hundred

eighty days beginning from 25.03.2011. This period expired on

24.09.2011. By then the restructuring of the petitioner‟s outstanding

loan had not taken place.

6. It is the case of the petitioner that, while issuing the notice under

Section 13(2) of the SARFEASI Act, respondent No. 1 observed that the

account of the petitioner had turned into a Non-Performing Asset (NPA)

on 31.08.2011, whereas till the CDR mechanism was operating the

account could not have been treated as an NPA. Learned counsel for

the petitioner Ms. Dhir has made various submissions and shown to the

Court the record in support of her submissions.

7. At this stage itself I may note that this submission does not

appear to be correct. The CDR mechanism guidelines in clause 4.4.2

provides as follows:

"4.4.2 During pendency of the case with the CDR system, the usual asset classification norms would apply. The process of reclassification of an asset should not stop merely because the case is referred to the CDR Cell. However, if a restructuring package under the CDR system is approved by the Empowered Group, and the approved package is implemented within four months from the date of approval, the asset classification status may be restored to the position which existed when the reference was made. Consequently, any additional provisions made by banks towards deterioration in the asset classification status during the pendency of the case with the CDR system may be reversed."

(Emphasis supplied)

8. Therefore, the submission of the petitioner that respondent No. 1

had erroneously observed in its impugned notice that the account of

the petitioner company had been turned into a Non-Performing Asset

(NPA), even when the CDR mechanism was pending consideration and

the „Holding-on Operations‟ instructions had been issued, is

unsustainable and entirely untenable. In view of Clause 4.4.2 of the

CDR Guidelines which, expressly and in unequivocal words, states that

"During pendency of the case with the CDR system, the usual asset

classification norms would apply. The process of reclassification of an

asset should not stop merely because the case is referred to the CDR

Cell", there is no merit in the said submission of the petitioner.

9. It appears that the petitioner vide letter dated 22.12.2011

informed respondent No. 1 that it is trying to submit some acceptable

proposal to the member banks and also to arrange some more funds to

keep the project alive. It further requested respondent No. 1 to not

recall the account and keep in abeyance the decision and continue to

allow „Holding on Operations‟ till 31.12.2011.

10. However, no such proposal appears to have been submitted by

31.12.2011. It appears that only thereafter respondent No. 1 vide

impugned letter dated 06.01.2012 informed the petitioner that it has

been decided to initiate recovery process in line with the decisions

taken in the consortium meeting held on 21.12.2011. It was, inter alia,

stated, "that despite being allowed ample time, the company has

failed to come out with any acceptable proposal to the satisfaction of

the bankers. It has, therefore, been decided to initiate recovery

process in line with decisions taken in the consortium meeting held on

21.12.2011. Please also note that „Holding-on-Operation in your

account has ceased to exist after 31.12.2011".

11. During the course of hearing on 18.04.2012, learned counsel for

the respondent had pointed out that even according to the petitioner,

the petitioner is carrying on its business operations from its various

plants/factories. The submission of learned counsel for the respondent

was that the petitioner was not carrying on its business operations

through the respondent bank, and the petitioner had obviously started

banking with other banks without the knowledge of the respondent

bank, through whom the business operations were being carried out.

12. The petitioner was required to file an affidavit making various

disclosures including its banking operations with the other banks. The

petitioner was also required to produce before the Court the bank

statements of its other bank accounts.

13. The petitioner filed an additional affidavit which contains some

details, however, the petitioner was reluctant to disclose the details of

the banks with whom the petitioner had been banking of late, on the

ground that the running of its business operations could be adversely

affected in case the respondent is furnished with such information.

The petitioner, however, produced before this Court an account

statement of one of its bank accounts, which does not contain the

name of the bank, but only the account number. This statement of

account was for the period from 01.01.2012 to 19.04.2012.

14. On 25.04.2012, the Court directed the petitioner to provide a

copy of the said bank account statement to learned counsel for the

respondent so that the respondent bank may be in a position to study

the said account statement and to make submissions. The purpose of

this exercise was to enable the petitioner to establish its bona fides

and bring in transparency so as to generate confidence in the minds of

the respondent banker/lender. The petitioner was permitted to blank

out the account number. In this regard, I may reproduce the order

dated 25.04.2012 which reads as follows:

"The petitioner has filed an affidavit dated 23.04.2012 making certain disclosures. A copy of the same has been furnished to counsel for the respondents. The petitioner has also shown to the Court the bank statements for the period 01.01.20102 to 19.04.2012 of the account maintained for the purpose of carrying out its business with an undisclosed bank. Let a copy of the said statement be provided to counsel for the respondents by tomorrow after blanking out the account number. Counsel for the respondents may examine the same and make his submissions on that basis as well on the next date.

List on 01.05.2012."

15. A copy of the said bank account statement was furnished to the

respondent. However, the petitioner has blanked out various other

entries in the statement as furnished to the learned counsel for the

respondent.

16. The Court has retained the statement of account furnished by

learned counsel for the petitioner while the account number has been

blanked out, and all other entries are clearly visible.

17. Learned counsel for the respondent on the basis of the truncated

statement of account submitted by the petitioner points out that the

cash withdrawals during the period 01.01.2012 to 24.04.2012 are to

the tune of Rs.5.12 Crores. The foreign remittance receipt during the

said period are to the tune of Rs.17 Crores. According to the

petitioner, the cash withdrawals during the said period are to the tune

of Rs. 4,16,35,000/-. However, the petitioner claims that it has paid

salaries to the tune of Rs.3,43,57,191/-, from out of the said cash

withdrawals. Ms. Dhir submits that the petitioner has the vouchers in

respect of the said salaries which had been paid by the petitioner.

18. Pertinently, the petitioner has furnished yet another statement

before this Court which shows the inflows & outflows during the period

from January 2012 to March 2012. This statement under the column

„Outflows‟ shows an entry of Rs.1,38,44,404/- towards salaries, wages

and other payments to staff/workers. The amount of Rs.3,43,57,191/-

claimed to have been paid as salaries, wages and other payments to

staff/workers from the cash withdrawal is in addition to the said

salaries of Rs.1,38,44,404/- paid through the banking channel.

19. Learned counsel for the respondent points out that the business

done by the petitioner, whereby it has earned remittances of

approximately Rs. 17 Crores during the said period, has been done by

utilizing the limits granted by the respondent bank and, consequently,

the receipts should have been credited to the respondent bank‟s

accounts. He also points out that even before 01.01.2012, the

petitioner was maintaining the said bank account. In this respect, he

points out that the first entry in the account statement furnished by

the petitioner is a withdrawal of Rs.84,402/-. Even after the said

withdrawal, there is a balance of Rs.1,29,046/- which shows that the

said account was in existence and in operation even before

01.01.2012. This, according to the respondent, is in breach of the RBI

guidelines, which prohibits a customer from operating different bank

accounts with different banks, when the customer has obtained loans

from one of the banks, without the consent and without information to

the bank from whom the loan had been taken.

20. Learned counsel for the respondent further points out that there

are large amounts of transfers from the account of the petitioner

company into the personal accounts of the Directors, namely Ms. Ranju

Dhingra and Mr. Ravi Dhingra. He further points out by reference to

entry No. 203 dated 17.01.2012 that the petitioner company is

maintaining yet another account since the amount of Rs.50 Lakhs and

Rs.38 Lakhs were transferred through RTGS from the account

"VYSAH12013706503/M/S Orient Clothing Company" and

"VYSAH12017700710/M/S Orient Clothing Company" into the account

of the petitioner company, whose statement of account has been

furnished to the Court. A close scrutiny of the statement of accounts

for the period from January 2012 to April 2012, reveals the

maintenance of several bank accounts by the petitioner company in

different banks. It appears that the petitioner has been maintaining

around 12 bank accounts - 4 with Axis Bank Ltd, 8 with UTI Bank Ltd.

However, the petitioner has not disclosed the said account even to the

Court, let alone the respondents.

21. The inflow and outflow statement furnished by the petitioner in

respect of the account whose statement of account has been furnished

shows an inflow of over Rs.25,72,00,000/- during the said period of

January to March 2012. It also shows an outflow of nearly

Rs.25,71,00,000/-, which includes cash withdrawals of Rs.4,16,35,000/-

22. The aforesaid analysis casts serious doubts about the bona fides

of the petitioner. It is clear that the petitioner has suppressed vital

information not only from the respondents, but also from the Court and

it appears to me, that the petitioner is a willful defaulter and it cannot

be said that the petitioner is merely a victim of bad business

environment or recession. Clearly the petitioner is carrying on its

business operations of garments export and is receiving substantial

amounts and remittances which are being siphoned off by cash

withdrawals of very large amounts and by also transferring various

amounts to the personal accounts of the Directors. The petitioner has

not been able to explain as to why such large amounts, i.e. to the tune

of Rs.4,13,48,454/- are being expended in cash which includes salaries,

wages and other payments to staff & workers of Rs.3,43,57,191/- and

administrative and other expenses of Rs.35,72,719/-. I may hasten to

add that these are the figures given by the petitioner itself.

23. The extraordinary jurisdiction of this Court under Article 226 of

the Constitution of India cannot be invoked by a person or an entity

who does not come to the Court with full disclosure and with clean

hands. Clearly, the petitioner is guilty of suppression of information

from this Court and also from the respondent No. 1 and it has also not

come to the Court with clean hands. I may also observe that when this

Court sought to pursue the matter to require the petitioner to make

further disclosure, learned counsel for the petitioner has stated that

this Court may take its own decision and may dismiss the petition. The

petitioner is, however, not willing to make further disclosure.

24. Accordingly, I dismiss this petition with Costs quantified at

Rupees Five Lakhs to be paid to the respondent No. 1.

VIPIN SANGHI, J MAY 01, 2012 'BSR'