Kerala High Court
Muthoot Mercantile Ltd vs Union Of India on 11 September, 2024
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR. JUSTICE P.M.MANOJ
Wednesday, the 11th day of September 2024 / 20th Bhadra, 1946
WP(C) NO. 27900 OF 2020(J)
PETITIONER:
MUTHOOT MERCANTILE LTD. HAVING ITS REGISTERED OFFICE AT 1ST FLOOR,
NORTH BLOCK, MUTHOOT FLOORS, OPP W AND C HOSPITAL, THYCAUD,
THIRUVANANTHAPURAM-695 014, REPRESENTING ITS MANAGING DIRECTOR MR.
RICHI MATHEW.
RESPONDENTS:
1. UNION OF INDIA REPRESENTED BY THE SECRETARY TO MINISTRY OF FINANCE,
NEW DELHI-110 001.
AND 8 OTHERS
Writ petition (civil) praying inter alia that in the circumstances
stated in the affidavit filed along with the WP(C) the High Court be
pleased to stay the operation of Exhibits P-2 and P-3 notifications of the
2nd respondent, pending disposal of the writ petition.
This petition again coming on for orders upon perusing the petition
and the affidavit filed in support of WP(C) and this court's order dated
15-12-2020 and tand upon hearing the arguments of M/S. JAGAN ABRAHAM
M.GEORGE, SRI.JAISON ANTONY Advocates for the petitioners,SRI.
SRI.S.VAIDYANATHAN, CENTRAL GOVERNMENT COUNSEL for the 1st respondent,
SRI.JOSEPH KODIANTHARA (SR.), alongwith M/S. V.ABRAHAM MARKOS, ABRAHAM
JOSEPH MARKOS, ISAAC THOMAS, ALEXANDER JOSEPH MARKOS, SHARAD JOSEPH
KODANTHARA, Advocates for the respondents 2 and 3, SRI.SANTHOSH MATHEW(SR)
for the respondents 4 and 9, SRI.A.S.P.KURUP, Advocate for the 5th
respondent, SRI.SUNIL SHANKAR, STANDING COUNSEL alongwith SMT.VIDYA
GANGADHARAN, Advocate for the 6th respondent and of SRI.MADHU
RADHAKRISHNAN, Advocate for the 8th respondent, the court passed the
following:
P.M.MANOJ, J.
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W.P.(C)Nos.27900, 28605, 28998 & 28999 of 2020, 5387,
7644, 8189, 8205, 11254, 13787, 14405, 14457, 14681,
14714, 14854, 15273, 15439, 15485, 15619, 15646, 18628,
23275 & 27633 of 2021, 35704 of 2022 and 17707 of 2024
-------------------------------------------
Dated this the 11th day of September, 2024
ORDER
A batch of writ petitions primarily challenging circular
dated 06.08.2020 issued by the Reserve Bank of India with
respect to imposing of certain restrictions for maintaining
accounts in other banks, other than the banks in which they
are holding an account of Cash Credit facility or Over Draft
facility. However, in one writ petition, i.e. W.P (c) No.17707
of 2024, the challenge is raised against a circular issued
later than the other, i.e. on 19.04.2022, whereby the
Reserve Bank has brought up certain restrictions, modifying
the restrictions in the earlier circular, in holding accounts in
other bank other than the bank in which they are holding
cash credit facility or overdraft facility. The main
apprehension voiced by the petitioners in all the writ
petitions is with respect to the closure of their accounts in
WP(C) Nos. 27900 of 2020 and connected cases
their respective banks in the light of the restrictions
imposed by both the Circulars, i.e. circulars dated
06.08.2020 and 19.04.2022.
2. On the other hand, the learned Senior Counsel
appearing on behalf of the Reserve Bank of India tried to
convince this Court that the restrictions imposed for
opening and operation of current account and CC/OD
accounts, with a view to enforce credit discipline among the
borrowers as well as to facilitate better monitoring by the
lenders. He argued at length that such restrictions are
essential to secure the stream line and regulate the banking
credit system in the country which has been facing a severe
crisis. Significant studies and discussions were conducted
before the issuance of said circulars. Therefore, no one can
allege any legal impropriety, malafides, unreasonableness
or arbitrariness with respect to said circulars. Since this
being a policy decision, procedural hardships faced by
individual business houses cannot be allowed to manifest as
WP(C) Nos. 27900 of 2020 and connected cases
a challenge in a writ petition under Article 226 of the
Constitution of India before this Court.
3. It is further contended that except in the State of
Kerala, the other High Courts as well as the Supreme Court
have not entertained the challenges raised in this issue. In
this regard, the learned counsel has brought to my notice
an earlier judgment of this Court, i.e., judgment dated
09.04.2021 in W.P.(C) No. 22768 of 2020 and connected
cases, wherein, after hearing the Standing Counsel for the
Reserve Bank of India, State bank of India and the counsel
appearing for the petitioners, it is opined that issues pointed
out by the petitioners should be dealt with an appropriate
manner; protecting the interests of the petitioners and at
the same time recognizing the spirit of Circular of the
Reserve Bank of India. Accordingly, there was a direction
that the petitioners and their banks may sit together and try
to arrive at an effective solution in the matter. In case
issues were not resolved or any issue remains, the
WP(C) Nos. 27900 of 2020 and connected cases
constituent banks are allowed to approach the Reserve
Bank of India for a workable resolution of their issue. Till
the issues were resolved by mutual consultation or till such
time the Reserves Bank of India passes orders on specific
issues raised by the petitioners, status quo as regards the
accounts of the petitioners, as on the date of filing of the
writ petitions, also granted. Further, it was made clear in
the said judgment that all the interim orders earlier passed
in these writ petitions will stand vacated. The State Bank of
India was directed to strive to resolve the issue by mutual
consultation with the petitioners with an upper limit of six
months, failing which they are allowed to approach the
Reserve Bank of India for resolution of the issue. In such an
event, the RBI can take appropriate decisions.
4. The learned Senior Counsel further argued that
under such circumstances, he has no objection regarding
the earlier circular since the issue, which was considered by
this Court as mentioned earlier. Now the grievance voiced
WP(C) Nos. 27900 of 2020 and connected cases
by the Senior Counsel is against the interim order granted
in W.P.(C) No.17707 of 2024, pertains to Circular dated
19.04.2022. It is not appropriate to interfere with Circular
dated 19.04.2022 at this distance of time, which is brought
into action to enforce credit discipline among the borrowers
as well as to facilitate better monitoring by lenders. The
practical difficulty pointed out by the learned Senior Counsel
is that after obtaining cash credit facility/overdraft facility in
a particular bank, the customers like the petitioners are
opening their regular accounts in some other bank and
ultimately resulting in the accrual of NPAs to the respective
bank which offers Cash Credit facility or Over Draft facility.
5. In response to that, the Senior counsel as well as
the other counsel appearing on behalf of the petitioners
submitted that there are certain practical difficulties faced
by the petitioners. The banks, in which cash credit facility or
overdraft facility obtained by the petitioners, imposes
certain restrictions with respect to withdrawal of amounts
WP(C) Nos. 27900 of 2020 and connected cases
especially the banks like State Bank of India. The conditions
imposed on aggregate exposures will ultimately resulting in
loss to their business and their livelihood which is against
the fundamental right guaranteed under Article 19(1)g and
right to life guaranteed under Article 21 of the Constitution
of India. The Reserve Bank being a constitutional body,
which comes under Entry 38 of the Seventh Schedule under
Article 246, cannot impose such restrictions which amounts
to arbitrariness as well as that affects the fundamental
rights of the petitioners guaranteed under Article 19(1) g of
the Constitution. Moreover, the Circular issued on
19.04.2022 is not an independent circular which is a
consolidation of earlier circulars issued by the RBI.
Therefore it is not necessary to challenge the same as they
have already challenged the earlier circular dated
06.08.2020. Even in the light of judgment dated
09.04.2021 no issue mentioned in the said judgment is
resolved yet. Even then, the Reserve Bank is going further
by imposing such restrictions, which ultimately leads to the
WP(C) Nos. 27900 of 2020 and connected cases
closure of accounts maintained by the petitioners for their
business operations and will ultimately result in denial of
their right to life under Article 21 of the Constitution.
6. On considering all these arguments and grievances
voiced on both the sides, I feel it apposite not to interfere
or modify the earlier order granted by this Court until the
entire matters are heard and finally disposed of. Accordingly
I decline to interfere with the earlier order in W.P.(C)
No.17707 of 2024 whereby a direction was issued to
respondent Nos.4 to 17 on 17.05.2024 in the afore writ
petition not to take any coercive action pursuant to Circular
dated 19.04.2022.
sd/-
P.M.MANOJ
JUDGE
sss/ttb/das
11-09-2024 /True Copy/ Assistant Registrar
