Maruthi Corporation Limited vs Sicom Limited
2022 Latest Caselaw 3864 Tel

       * THE HON'BLE THE CHIEF JUSTICE UJJAL BHUYAN
                                    AND
          THE HON'BLE MRS JUSTICE SUREPALLI NANDA

                + WRIT APPEAL No.473 of 2022


% Date: 26-07-2022

# Maruthi Corporation Limited
                                                               ... Appellant
                                      v.

$ SICOM Limited
                                                             ... Respondent

! Counsel for the appellant : Mr. Dammalapati Srinivas, Learned Senior Counsel

^ Counsel for respondents : Ms. B.Saroj, Representing Ms. Shireen Sethna Baria

< GIST:

      HEAD NOTE:


? CASES REFERRED:

    1. (2009) 8 SCC 257

2. Civil Appeal Nos.257-259 of 2022, dated 12.01.2022

3. Civil Appeal No.7411 of 2021, dated 15.12.2021

THE HON'BLE THE CHIEF JUSTICE UJJAL BHUYAN AND THE HON'BLE MRS JUSTICE SUREPALLI NANDA

WRIT APPEAL No.473 of 2022

JUDGMENT: (Per the Hon'ble the Chief Justice Ujjal Bhuyan)

Heard Mr. Dammalapati Srinivas, learned Senior

Counsel appearing for the appellant and Ms. B.Saroj,

learned counsel representing Ms. Shireen Sethna Baria,

learned counsel for the respondent.

2. This writ appeal has been filed assailing the legality

and correctness of the final order dated 20.04.2022 passed

by the learned Single Judge dismissing W.P.No.8272 of

2021. The appeal also assails the order dated 08.07.2022

passed by the learned Single Judge dismissing the review

petition i.e., Review I.A.No.1 of 2022 in W.P.No.8272 of

2021 filed by the appellant for review of the final order

dated 20.04.2022.

3. Respondent before us is a Non-Banking Financial

Company (NBFC). Appellant is a public limited company.

Appellant had availed financial assistance from the

respondent by way of medium term loan to the extent of

Rs.15.00 crores on 27.10.2014. The loan was obtained by

mortgaging various immovable properties of the appellant

and by depositing title deeds.

4. It is submitted that for various reasons there was

default in repayment of the loan availed of. As a result,

respondent classified the loan account of the appellant as

Non Performing Asset (NPA) on 29.11.2016. Proceedings

were initiated by the respondent for recovery of

outstanding dues from the appellant under the

Securitisation and Reconstruction of Financial Assets and

Enforcement of Security Interest Act, 2002 (briefly, 'the

SARFAESI Act' hereinafter). When notice was issued to

auction sale the mortgaged property by the respondent,

appellant filed securitisation application under Section 17

of the SARFAESI Act before the jurisdictional Debts

Recovery Tribunal, being S.A.No.229 of 2017. Though the

jurisdictional Debts Recovery Tribunal had initially granted

stay vide order dated 26.04.2017 subject to deposit of 30%

of the outstanding dues in two instalments of 15% each,

appellant could not deposit the second instalment.

Thereafter, W.P.No.16719 of 2017 questioning the order

dated 26.04.2017 was filed. This Court declined the prayer

of the appellant for stay and granted liberty to the

respondent to proceed with the auction sale with the caveat

that the auction sale should not be confirmed till the next

date of hearing. Since the scheduled auction did not

materialise for want of bidders, the writ petition was

dismissed as infructuous. In the meanwhile, appellant had

deposited a sum of Rs.50,00,000.00 on 11.05.2017.

5. Respondent filed an application under Section 19 of

the Recovery of Debts and Bankruptcy Act, 1993 (briefly,

'the 1993 Act' hereinafter), before the Debts Recovery

Tribunal - I, Hyderabad, for recovery of outstanding dues

quantified at Rs.14,20,22,506.00 with interest, which was

registered as O.A.No.325 of 2017. The same was decreed

on 19.08.2019 with costs.

6. When auction notice dated 01.06.2017 was issued,

appellant filed W.P.No.21629 of 2017 challenging the

auction notice. However, the same was dismissed as

infructuous as the auction did not take place.

7. At that stage, appellant approached the respondent

for restructuring of loan. By letter dated 06.01.2020,

appellant submitted improved One Time Settlement (OTS)

proposal for settlement of outstanding dues for principal

loan amount at Rs.9.72 crores and simple interest and

other penalty/additional interest at Rs.2.78 crores. This

was accepted by the respondent on 28.01.2020.

Thereafter, appellant submitted fresh proposal for

extension of time limit for making payment in terms of OTS

which was also accepted by the respondent on 24.11.2020.

Additionally it was mentioned that respondent would

release 14 plots of mortgaged land mentioned in the letter

dated 24.11.2020, subject to appellant making down

payment of Rs.1.00 crore.

8. According to the appellant, it had deposited Rs.1.00

crore but notwithstanding such deposit, mentioned plots of

mortgaged land were not released to the appellant which

adversely affected the appellant from adhering to the

extended OTS schedule. Finally respondent issued letter

dated 16.03.2021 stating that there was default by the

appellant in paying the instalments as per the extended

OTS, as instalments for the months of November 2020,

December 2020, January 2021 and February 2021

amounting to Rs.6.00 crores was yet to be paid. Appellant

was called upon to make the entire payment as per OTS

along with interest immediately, failing which it was

mentioned that the OTS would be cancelled whereafter

legal action would be initiated.

9. It is this communication dated 16.03.2021 which

came to be challenged before the learned Single Judge in

W.P.No.8272 of 2021.

10. After hearing the matter, learned Single Judge

dismissed W.P.No.8272 of 2021 vide order dated

20.04.2022. Relevant portion of the order of learned Single

Judge reads as under:

"9. As per the RBI guidelines, the benefit of OTS cannot be prayed as a matter of right and the same is subject to liability criteria mentioned in the scheme. The

banks cannot be compelled to accept a lesser amount under the OTS scheme despite the fact that the banks were able to recover the entire loan amount by auctioning the secured property/mortgaged property.

When the loan is disbursed by the Bank and the outstanding amount is due and payable to the Bank, the Bank will always take a conscious decision basing on its commercial wisdom. No writ of Mandamus can be issued by the High Courts in exercise of powers under Article 226 of the Constitution of India directing a financial Institution/Bank to positively grant the benefit of OTS to a borrower. The grant of benefit under OTS is subject to the liability criteria mentioned under the OTS scheme and the guidelines issued from time to time. The counter affidavit filed by the respondent would disclose that several opportunities were given by the respondent to the petitioner to repay the outstanding dues and had also given no objection certificates to sell the mortgaged property. But, despite giving numerous opportunities to the petitioner, the petitioner failed to sell the plots or pay the outstanding amounts. Considering the conduct of the petitioner only, the bank had cancelled the OTS scheme offered by it on 01.04.2021 since the petitioner had not adhered to the payment schedule as agreed upon. The petitioner is bound by the loan agreement entered into with the respondent bank to enforce the same. Such matters were contractual in nature. A writ lies when there is an error of law apparent on the face of the record or there is violation of law. No writ lies for directing re-scheduling or for fixing instalments in connection with the loan. It is only the Bank or the financial institutions, which granted loan, which can re-

schedule it or fix One Time Settlement or grant instalment or take a decision in such matters. The loan is granted in terms of the contract and grant of OTS or rescheduling of the loan is a modification of the contract, which can only be done by mutual consent of the parties. There might be hardship to a party, but unless violation of law is shown, the Court cannot interfere. Holding of recoveries of loans by the Court orders might cause incurable harm to the economy. As no violation of law has been pointed out, the writ of Mandamus cannot be issued. As the petitioner failed to show that he has legal right to the performance of a public duty by the party against whom the Mandamus is sought, it is considered fit to dismiss the petition."

11. Appellant thereafter filed a review petition for review

of the order dated 20.04.2022 which was registered as

Review I.A.No.1 of 2022. By order dated 08.07.2022

learned Single Judge dismissed the review petition by

holding that there was no sufficient reason to entertain the

review petition. Learned Single Judge held as follows:

"16. Considering the law on this aspect and the ratio of the judgments as extracted above, and the contentions raised by the learned counsel for the petitioner would not show any mistake or error apparent on the face of the record and no new facts or any important matter which was not within his knowledge or could not be produced by him at the time of submitting

his arguments in the writ petition are brought forth by the petitioner and no sufficient reasons to entertain the review petition are raised and all the grounds raised by him in this review petition are considered by this Court while passing the order dated 20.04.2022 and as it is not permissible for this Court to re-hear the matter, it is considered fit to dismiss the review petition."

12. The above two orders are under impugnment in the

present proceeding.

13. Learned Senior Counsel for the appellant submits

that learned Single Judge had failed to consider the aspect

that respondent did not adhere to the OTS scheme

inasmuch as after the appellant had deposited Rs.1.00

crore it was mandated under the terms of OTS to release

the 14 mortgaged plots, which would have enabled the

appellant to take consequential steps for repayment of the

outstanding dues as per the OTS. Decision of the

respondent, therefore, is arbitrary and unreasonable

warranting interference. He further submits that

respondent has not followed the extant guidelines of the

Reserve Bank of India (RBI) before closing the OTS

proposal of the appellant.

14. On a query by the Court as to how the writ petition

and consequential writ appeal are maintainable, learned

Senior Counsel has referred to and relied upon a decision

of the Supreme Court in Sardar Associates v. Punjab &

Sind Bank1.

15. Per contra, learned counsel for the respondent

submits that right from the beginning, conduct of the

appellant did not inspire any confidence. There was

repeated delay and default on the part of the appellant in

repaying the loan availed of by it from the respondent. She

has referred to the bank statement from 03.12.2014 to

14.12.2020 to contend that repayment of Rs.1.00 crore by

the appellant was highly erratic and irregular spanning

over a long period. Since December, 2020, no payment has

been made by the appellant. She submits that as a matter

of fact, OTS proposal of the appellant was rejected by the

respondent on 01.04.2021. She has supported the orders

passed by the learned Single Judge and submits that no

interference is called for.

(2009) 8 SCC 257

16. Submissions made by learned counsel for the parties

have received the due consideration of the Court.

17. In the instant case, appellant has complained that

respondent acted arbitrarily and unreasonably in not

adhering to the OTS schedule as accepted by the parties.

Respondent is under obligation to comply with the

statutory instructions of the RBI while dealing with OTS

proposals. Without entering into the merit of the rival

contentions what is immediately noticeable is that

respondent before us is an NBFC, called SICOM Limited,

which is undoubtedly a private financial institution. Being

a private financial institution, the question which falls for

our consideration is whether the respondent would be

amenable to the writ jurisdiction of this Court under Article

226 of the Constitution of India? At this stage we may

mention that though it is contended that respondent is

bound by the statutory instructions of RBI, RBI is not a

party before us.

18. There is also no averment in the writ affidavit as well

as in the grounds of appeal to show that respondent

discharges any public function.

19. In Sardar Associates's case (supra) relied upon by

learned Senior Counsel for the appellant the question

before the Supreme Court was the source of power on the

part of RBI to issue circulars and guidelines as regards

OTS. In that case the respondent, Punjab & Sind Bank,

was a public sector bank and it was held that it was bound

by the guidelines of RBI. Thereafter, Supreme Court delved

into the RBI guidelines pertaining to OTS. In that context,

Supreme Court observed that if a public sector bank is

otherwise bound by any guidelines issued by the RBI, there

was no reason as to why the same could not be enforced in

terms of the statute. Supreme Court further observed that

Board of Directors of a public sector bank could not have

taken recourse to a policy decision which is per se

discriminatory. Respondent bank i.e., Punjab & Sind Bank

was a 'State' within the meaning of Article 12 of the

Constitution of India. Supreme Court was satisfied in the

facts of that case that respondent bank was guilty of

violation of Article 14 of the Constitution of India.

20. In Phoenix ARC Private Limited v. Vishwa Bharati

Vidya Mandir (Civil Appeal Nos.257-259 of 2022, dated

12.01.2022) Supreme Court has held that a writ petition

against a private financial institution or Asset

Reconstruction Company (ARC) under Article 226 of the

Constitution of India against the proposed action/actions

under the SARFAESI Act would not be maintainable.

During the course of a commercial transaction and under

the contract, the private bank or ARC lends money to the

borrowers and such activity of the banks/ARC cannot be

said to be as performing a public function which is

normally expected to be performed by the State authorities.

Therefore, Supreme Court held that if a borrower is

aggrieved by any of the actions of the private bank or ARC,

it has to avail the remedy under the SARFAESI Act; no writ

petition would lie and/or would be maintainable and/or

entertainable.

21. The above decision of the Supreme Court therefore is

a clear pointer that the action of a private bank while

dealing with loan repayment of a borrower would not be

amenable to the writ jurisdiction of the High Court.

22. Insofar OTS is concerned, it is nothing but a contract

between two parties. If there is allegation that one party

has not adhered to the terms of the contract or a party

seeks enforcement of the contract of OTS, it has to seek

enforcement of the contract or specific performance of the

contract. Certainly the remedy is not by way of a writ

petition.

23. As a matter of fact, Supreme Court in Bijnor Urban

Cooperative Bank Limited, Bijnor v. Meenal Agarwal

(Civil Appeal No.7411 of 2021, dated 15.12.2021) has made

it categorically clear that no writ of mandamus can be

issued by the High Court in exercise of powers under

Article 226 of the Constitution of India directing a financial

institution/bank to positively grant the benefit of OTS to a

borrower. The grant of benefit under the OTS is always

subject to the eligibility criteria mentioned under the OTS

scheme and the guidelines issued from time to time. A

decision as to whether OTS should be accepted or not

should be left to the commercial wisdom of the bank.

24. Viewed in the above context, we do not find any error

or infirmity in the view taken by the learned Single.

Therefore, without adverting to the merit of the rival

contentions, we are not inclined to entertain the appeal.

However, notwithstanding the same, it would be open to

the parties to mutually settle their dispute, if so advised or

if it is still possible.

25. Subject to the above, writ appeal is dismissed.

26. Miscellaneous applications pending, if any, shall

stand closed. However, there shall be no order as to costs.

______________________________________ UJJAL BHUYAN, CJ

______________________________________ SUREPALLI NANDA, J 26.07.2022 vs