Kerala High Court
Gilgal Cashew Exports vs Uco Bank on 1 March, 2023
W.P.(C) No. 23434/2022 :1:
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR. JUSTICE SHAJI P.CHALY
WEDNESDAY, THE 1ST DAY OF MARCH 2023 / 10TH PHALGUNA, 1944
WP(C) NO. 23434 OF 2022
PETITIONER/S:
GILGAL CASHEW EXPORTS
AVANEESWARAM R.S.P.O, PATHANAPURAM, KOLLAM REPRESENTED
BY ITS MANAGING PARTNER, SMT. SARAMMA C.E., PIN - 691 517.
BY ADVS.
B.J.JOHN PRAKASH
P.PRAMEL
HARISHMA
ASHIK TOM
CELINE JOHN
RAMSEENA N.
RESPONDENT/S:
1 UCO BANK
REPRESENTED BY THE AUTHORISED OFFICER, KHAISE BUILDING,
BEACH ROAD, KOLLAM, PIN - 691 001.
2 BANKING OMBUDSMAN
RESERVE BANK OF INDIA, BAKERY JUNCTION, SERVICE ROAD,
NANDAVANAM, VAZHUTHACAUD, THIRUVANANTHAPURAM,
KERALA, PIN - 695 033.
3 STATE LEVEL BANKERS COMMITTEE SLBC
REPRESENTED BY DEPUTY GENERAL MANAGER, SLBC, KERALA,
SLBC CELL, CANARA BANK, CIRCLE OFFICE, CANARA BANK
BUILDING, M.G. ROAD, TRIVANDRUM, PIN - 695 001.
4 MINISTRY OF MSME
GOVERNMENT OF INDIA, REPRESENTED BY THE DEPUTY
DIRECTOR, MSME DEVELOPMENT INSTITUTE, KANJANI ROAD,
AYYANTHOL P.O., THRISSUR, PIN - 680 003.
BY ADV DEEPAK JOY.K., SC
SRI. MANU S., DSGI
THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON
22.02.2023, THE COURT ON 01.03.2023 DELIVERED THE FOLLOWING:
W.P.(C) No. 23434/2022 :2:
SHAJI P. CHALY, J.
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W.P.(C). No. 23434 of 2022
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Dated this the 1st day of March, 2023.
JUDGMENT
The petitioner, a MSME unit, has filed the writ petition
challenging Exhibit P9 order passed by the Banking Ombudsman,
Reserve Bank of India, Thiruvananthapuram, and seeking a
direction to the Ombudsman to consider Exhibit P8 representation
submitted by the petitioner.
2. The subject issue relates to the loan availed by the
petitioner and the consequential action initiated by M/s. UCO Bank,
Kollam as per the provisions of the Securitization and
Reconstruction of Financial Assets and Enforcement of Security
Interest Act, 2002 [SARFAESI Act, 2002], on failure to repay the
same.
3. Brief material facts for the disposal of the writ petition are
as follows:
According to the petitioner, due to the lock-down restrictions
consequent to the pandemic covid-19, the petitioner suffered severe
loss which was aware to the Bank. The case of the petitioner is that
the crisis of the petitioner further deepened by the levy of interest
and other charges contrary to the contractual rates between the
petitioner and the respondent Bank. It is further pointed out that
the Bank, after providing a small assistance under GECL scheme
promulgated by the Central Government, failed to provide any
further support and proceeded to classify the petitioner's account as
NPA on 30.06.2021.
4. Admittedly, the Bank issued Exhibit P2 demand notice
dated 14.02.2022 under Section 13(2) of the SARFAESI Act, 2002.
However, it is submitted by the petitioner that in the light of the
crisis faced by it, it requested for referring their account to the
MSME Committee for devising a corrective action plan as envisaged
under Exhibit P3 Master Circular issued by the Reserve Bank of
India.
5. It is further pointed out that in spite of the earnest efforts
made by the petitioner, the first respondent Bank failed to refer the
matter to MSME Committee in terms of Exhibit P3 circular. It is also
stated that even though the petitioner has submitted a
representation before the Bank as well as the Reserve Bank of
India, no action was initiated and further proceed to take
possession of the property in accordance with the provisions of the
SARFAESI Act, 2002.
6. Anyhow, from the notice issued by the Bank, it is quite
clear and evident that an amount of Rs.9,94,30,906.75 is allegedly
due from the petitioner to the first respondent Bank. The petitioner
has also submitted Exhibit P4 representation before the State Level
Bankers Committee to which Exhibit P7 reply was issued stating
that the remedy of the petitioner is before the Banking Ombudsman
or the Reserve Bank of India, Thiruvananthapuram. According to
the petitioner, it was under the said circumstances, the petitioner
has approached the Banking Ombudsman.
7. However, the Banking Ombudsman, unmindful of the
contentions raised by the petitioner, dismissed the writ petition
assigning the reason that there is no deficiency of service and
therefore, the complaint is not maintainable under clause 10(2)(a)
(i) of the RBI-Integrated Ombudsman Scheme, 2021. The case
projected by the petitioner is that as per the Integrated
Ombudsman Scheme, 2021 and Exhibit P3 circular dated
17.03.2016, the Bank was liable to refer the matter to the MSME
Committee in order to consider the claim of the petitioner.
8. The Bank has filed a counter affidavit refuting the claims
and demands raised by the petitioner. It was further pointed out
that the Bank has provided maximum benefits to the petitioner,
when the petitioner submitted a representation under Section
13(3A) of the SARFAESI Act, 2002. It is also submitted that Exhibit
R1A reply dated 10.05.2022 was issued by the Bank, from which it
is clear that the following benefits were provided to the petitioner:
As per the RBI directions moratorium of six months was permitted to
your accounts and FITL was sanctioned to provide you a breathing
period to revive your business.
To tide over your position due lo the effect of Pandemic Covid-19,
Bank additionally sanctioned one GECL loan to the lune of Rs. 170.00
lacs., and one UCECL loan of Rs.85.00 lacs and FITL loan of Rs. 22.98
lacs.
Pre pandemic Bank has enhanced your Packing Credit limit from
450.00 lacs to 500.00 Iacs, FBP/ FBN limit from 75.00 lacs lo 150.00
lacs, Cash Credit limit from Rs.100.00 lacs to Rs.200.00 lacs and Fresh
Term Loan of Rs.50.00 lacs for your business purpose.
You have availed the Packing Credit limit to execute your export
order. But till date you have not submitted any export documents lo
this effect and your Packing Credits are overdue for more than 360
days which attracts the ECNOS rate of interest as per the guidelines
issued by Reserve bank of India."
9. Therefore, according to the Bank, the argument advanced
by the petitioner that the Bank has not considered the difficulties
faced by the petitioner, cannot be sustained under law. However, it
is the prime contention of the bank that the petitioner has no locus
standi to invoke the extraordinary jurisdiction of this Court under
Article 226 of the Constitution of India, since the petitioner is left
with a remedy under Section 17 of the SARFAESI Act, 2002,
consequent to the action initiated by the Bank. The Bank has relied
upon various judgments of the Apex Court in that regard and seeks
dismissal of the writ petition.
10. A reply affidavit is filed by the petitioner reiterating the
stand adopted in the writ petition.
11. I have heard learned counsel for the petitioner Sri. John
Prakash, learned Standing Counsel for the Bank Sri. Deepak Joy and
the Deputy Solicitor General of India Sri. S. Manu, and perused the
pleadings and material on record.
12. The sole question to be considered is whether any
manner of interference is required to the order of the Ombudsman
in the light of the peculiar facts and circumstances of the case. It is
an admitted fact that the Bank has initiated action under the
provisions of the SARFAESI Act, 2002. Even though the petitioner
has raised a contention that the Bank has failed to refer the matter
to the MSME Committee in accordance with the provisions of Exhibit
P3 Master Circular of the Reserve Bank of India, it is quite clear
and evident that the Bank has provided various stress related reliefs
to the petitioner. Moreover, the petitioner has raised all these
contentions when the account has become a Non Performing Asset
and the consequential action initiated by the Bank under the
SARFAESI Act, 2002.
13. The question with respect to the remedy available to an
aggrieved person, when an action was initiated by the Banking
company, as per the provisions of the SARFAESI Act, 2002, was
considered by the Apex Court in United Bank of India v.
Satyawati Tondon, [(2010) 8 SCC 110] and held that when an
action is initiated under the Act, 2002, an effective remedy is
available to an aggrieved person under the provisions of the
SARFAESI Act, 2002 and the High Court ordinarily must insist that
before availing a remedy under Article 226 of the Constitution of
India, the alternative remedy available under a statute must be
exhausted. It was further held therein that unfortunately, the High
Court overlooked the settled law that the High Court will ordinarily
not entertain a petition under Article 226 of the Constitution, if an
effective remedy is available to the aggrieved person, and that this
rule applies with greater rigour in matters involving recovery of
taxes, cess, fees, other types of public money and the dues of
banks and other financial institutions.
14. After considering the gamut of the issues, it was held
therein by the Apex Court that the practice of entertaining the writ
petition by the High Court in exercise of the jurisdiction under
Article 226 of the Constitution of India without exhausting
alternative statutory remedy available under the law, is
deprecating.
15. The proposition of law laid down by the Apex Court was
being followed continuously in various judgments by the Apex Court
as well as this Court. [See the judgments in Phoenix Arc Private
Limited vs Vishwa Bharati Vidya Mandir (Civil Appeal Nos. 257-
259 of 2022 dated 12.01.2022], Y. Sleebachan v. State of Kerala
and others [2020 (4) KLT Online 1024], Federal Bank v Sagar
Thomas (2003) 10 SCC 733), United Bank of India v. Satyavati
Tandon and Others [AIR 2010 SC 3413], Authorised Officer,
State Bank of Tranvancore v. K.C.Mathew [(2018) 3 SCC 85
and Varimadugu Obi Reddy v. B. Sreenivasulu and Ors.
[MANU/SC/1495/2022]. Therefore, I am convinced that the issues
raised by the petitioner on the basis of the action initiated by the
first respondent Bank resorting to the provisions of the SARFAESI
Act, 2002, cannot be sustained under law.
16. However, the contention advanced by the petitioner is
that since the petitioner has raised a claim on the basis of Exhibit
P3 Master circular issued by the Reserve Bank of India and having
not referred the matter to the MSME Committee, it is an arbitrary
and illegal action liable to be interfered with by this court. Further it
is contented that the issue cannot be considered by the Debt
Recovery Tribunal invoking the power conferred under Section 17
of the SARFAESI Act, 2002.
17. However, on an analysis of sub-Section 1 of Section 17 of
the Act, 2002, it is quite clear and evident that any person
(including borrower), aggrieved by any of the measures referred to
in sub-section (4) of section 13 taken by the secured creditor or his
authorised officer may make an application along with such fee, as
may be prescribed, to the Debts Recovery Tribunal having
jurisdiction in the matter within forty-five days from the date on
which such measure had been taken.
18. Sub-Section (4) of Section 13 makes it clear that in case
the borrower fails to discharge his liability in full within the period
specified in sub-section (2), the secured creditor is vested with
powers to take recourse to one or more of the measures to recover
his secured debt. Therefore, if the petitioner has a contention that
the Bank has not considered the relevant materials before initiating
action as per the provisions of the Act, 2002 it is for the petitioner
to raise the said aspect before the Debt Recovery Tribunal, which is
empowered, and competent enough to consider the said issue and
pass appropriate orders.
19. Considering the facts and circumstances and the law, I
have no hesitation to hold that the petitioner has not made out a
case for interference in a proceeding under Article 226 of the
Constitution of India. Therefore, the writ petition is dismissed.
However, I make it clear that all the questions of law and facts
raised by the petitioner in the writ petition are left open to agitate
before an appropriate and competent forum.
sd/- SHAJI P. CHALY, JUDGE.
Rv
APPENDIX OF WP(C) 23434/2022
PETITIONER'S EXHIBITS:
Exhibit-P1 TRUE COPY OF THE UDHYOG AADHAR REGISTRATION
CERTIFICATE OF THE PETITIONER
Exhibit-P2 TRUE COPY OF THE DEMAND NOTICE DATED
14.02.2022.
Exhibit-P3 TRUE COPY OF THE MASTER CIRCULAR NO. RBI/2015-
16/338 FIDD.MSME & NFS. BC. NO.
21/06.02.31/2015-16 DATED ON 17.03.2016
Exhibit-P4 TRUE COPY OF THE LETTER DATED 29.04.2022
ISSUED BY THE PETITIONER
Exhibit-P5 TRUE COPY OF THE LETTER DATED 01.05.2022
ISSUED BY THE PETITIONER
Exhibit-P6 TRUE COPY OF THE POSSESSION NOTICE DATED ON
25.05.2022
Exhibit-P7 TRUE COPY OF THE REPLY DATED 09.06.2022 ISSUED
BY THE 4TH RESPONDENT
Exhibit-P8 TRUE COPY OF THE COMPLAINT FILED BY THE
PETITIONER
Exhibit-P9 TRUE COPY OF THE CLOSURE INTIMATION DATED
13.07.2022 ISSUED BY THE 2ND RESPONDENT
Exhibit-P10 TUE COPY OF THE INTEGRATED OMBUDSMAN SCHEME
RESPONDENTS' EXHIBITS:
Exhibit R1A TRUE COPY OF THE REPLY LETTER DATED 10.05.2022
ISSUED BY THE 1ST RESPONDENT BANK.
True Copy
PS To Judge.
rv
