Kerala High Court

Manappuram Finance Limited vs Union Of India on 4 June, 2021

          IN THE HIGH COURT OF KERALA AT ERNAKULAM
                            PRESENT
              THE HONOURABLE MR.JUSTICE N.NAGARESH
    FRIDAY, THE 4TH DAY OF JUNE 2021 / 14TH JYAISHTA, 1943
                     WP(C) NO. 2481 OF 2021
PETITIONER:
0



           MANAPPURAM FINANCE LIMITED,
           MANAPPURAM HOUSE,
           VALAPPAD,
           THRISSUR DISTRICT, PIN-680567,
           REPRESENTED BY ITS MANAGER-LEGAL,
           PRIYALAL N G.

           BY ADVS.
           R.BINDU (SASTHAMANGALAM)
           SRI.PRASANTH M.P


RESPONDENTS:

     1     UNION OF INDIA,
           REPRESENTED BY THE SECRETARY,
           MINISTRY OF FINANCE,
           NEW DELHI-110001

     2     RESERVE BANK OF INDIA,
           CENTRAL OFFICE BUILDING,
           SHAHID BHAGAT SINGH MARG,
           MUMBAI-400001,
           REPRESENTED BY ITS CHIEF GENERAL
           MANAGER-IN-CHARGE.

     3     GENERAL MANAGER,
           DEPARTMENT OF SUPERVISION (NBFC),
           RESERVE BANK OF INDIA,
           BAKERY JUNCTION,
           THIRUVANANTHAPURAM, PIN-695033.

     4     STATE BANK OF INDIA
           HEAD OFFICE,
           STATE BANK BHAVAN,
           16TH FLOOR, MADAM CAMA ROAD,
           MUMBAI-400021.
           REPRESENTED BY ITS MANAGING DIRECTOR.
 WP(C) No.2481/2021
                            :2 :


           BY ADVS.
           SRI.N.S.DAYA SINDHU SHREE HARI
           SRI.JOSEPH KODIANTHARA (SR.)
           SRI.GEORGE THOMAS (MEVADA)(SR.)
           SRI.V.ABRAHAM MARKOS
           SRI.AMAL GEORGE, SC
           SRI.ABRAHAM JOSEPH MARKOS
           SRI.ISAAC THOMAS
           SRI.P.G.CHANDAPILLAI ABRAHAM
           SHRI.ALEXANDER JOSEPH MARKOS
           SHRI.SHARAD JOSEPH KODANTHARA
           SRI.M.JITHESH MENON, SC FOR SBI
           SRI.P.VIJAYAKUMAR, ASGI

     THIS WRIT PETITION (CIVIL) HAVING COME UP   FOR
ADMISSION ON 04.06.2021, THE COURT ON THE SAME   DAY
DELIVERED THE FOLLOWING:
 WP(C) No.2481/2021
                                 :3 :




                           JUDGMENT

~~~~~~~~~

Dated this the 4th day of June, 2021

The petitioner seeks to set aside Ext.P1, P3 and P4

Circulars issued by the 2nd respondent-Reserve Bank of India

to the extent it is made applicable to the NBFCs including the

petitioner-Company. The petitioner further seeks to direct the

2nd respondent to formulate a viable alternative for seamless

flow of funds essential for the smooth operations of NBFCs in

general and the petitioner-Company in particular in

consultation with NBFCs and stakeholders.

2. The petitioner is a Non-Banking Financial Company

registered with the Reserve Bank of India under the provisions

of Chapter IIIB of Reserve Bank of India Act, 1934. The

petitioner is running the business of non-banking financial

institution without accepting public deposit as per the

provisions of the Reserve Bank of India Act. The petitioner

states that they have 3524 Branches all over India and 486 WP(C) No.2481/2021

Branches in the State of Kerala and about 20,500 employees

are working in different Branches.

3. The petitioner avails term loans from the 4 th

respondent-State Bank of India and 30 other Banks across the

country for running their business. The sanctioned term loan

is credited to the appropriate current accounts maintained by

the petitioner-Company with those banks. The loans are in

the form of cash credit, overdraft, working capital, term loans,

etc.

4. The 2nd respondent-RBI issued Ext.P1 Circular

dated 06.08.2020 by which all Scheduled Commercial Banks

are barred from opening current accounts for customers who

have facilities in the form of Cash Credit and Over Draft. The

Circular directed that all transactions should be rooted through

CC/OD accounts only. By Ext.P3 Circular, the 2 nd respondent

extended the date for compliance of Ext.P1 Circular till

15.12.2020. By Ext.P4 Circular, the 2 nd respondent reiterated

the stand that the banks shall not open current accounts for

customers who have availed credit facilities in the form of WP(C) No.2481/2021

CC/OD from the banking system and all the transactions to be

rooted through CC/OD account.

5. Exts.P1, P3 and P4 Circulars are issued without

application of mind to the volume of daily transactions carried

out by the petitioner and similarly placed NBFCs in rural India,

contends the petitioner. If Exts.P1, P3 and P4 are

implemented, it would create chaos and confusion in the

banking system itself. The Circulars are issued ignoring the

statutory provisions that mandate opening of current accounts

for monitoring flow of funds in respect of NCDs, sub-debts,

etc.

6. The petitioner would state that they are maintaining

the current accounts in a disciplined manner without any

instance of default or other misconduct. If the Circulars issued

by the RBI are to be complied with, the entire operations of the

petitioner in rural areas will have to be stopped, resulting in

untold misery and hardships to its customers. It is under such

circumstances that the petitioner seeks to set aside Exts.P1,

P3 and P4 Circulars of the 2nd respondent. WP(C) No.2481/2021

7. When this writ petition came up for hearing today,

the learned Standing Counsel for the 2nd respondent-RBI

pointed out that this Court has considered the same issue and

disposed of W.P.(C) Nos.22768, 25652 and 27692 of 2020 on

09.04.2021 leaving the issue to be appropriately dealt with by

the Reserve Bank of India. The directions contained in the

aforesaid judgment dated 09.04.2021, read as follows:

"5. After hearing the Standing Counsel for the Reserve Bank of India and the State Bank of India and the learned counsel appearing for the petitioners, this Court is of the opinion that the issues pointed out by the petitioners should be dealt with in an appropriate manner protecting the interest of the petitioners and at the same time recognising the spirit of the circulars of the Reserve Bank of India. In that view of the matter, the petitioners and their Banks may sit together and try to arrive at a workable solution in the matter. In case issues are not resolved or any issue remains, the constituent Banks may approach the Reserve Bank of India for a workable resolution of the issue. Till such time the issues are resolved as stated above by mutual consultation or till such time the Reserve Bank of India passes orders on the specific issues raised by the petitioners, the status quo as regards the accounts of the petitioners as on the date of filing of the writ petitions shall be maintained.

It is made clear that all interim orders passed in these writ petitions earlier will stand vacated. The State Bank of India shall strive to resolve the issues by mutual consultations with the petitioners, within an upper limit of six months, failing which they shall approach the Reserve Bank of India WP(C) No.2481/2021

for resolution of the issues. In such an event, the RBI shall take appropriate decision, which shall be communicated to the petitioners."

8. The learned counsel for the petitioner submitted

that the petitioner will be satisfied if a similar order is passed

in this writ petition also, in which event the petitioner would not

insist on quashing of the Circulars issued by the RBI, for the

time being.

9. As the issues involved in this writ petition and the

issues involved in W.P.(C) Nos.22768, 25652 and 27692 of

2020 are same, this Court finds it appropriate to dispose of

this writ petition by extending the benefit of the judgment

dated 09.04.2021, to the petitioner also.

Accordingly, the writ petition is disposed of holding