Telangana High Court
Shree Jaya Laboratories Pvt. Ltd vs Reserve Bank Of India on 29 November, 2023
Author: Surepalli Nanda
Bench: Surepalli Nanda
1
Wp_2015_2023
SN,J
IN THE HIGH COURT OF TELANGANA AT HYDERABAD
W.P.No.2015 of 2023
Between:
Shree Jaya Laboratories Pvt.Ltd.
... Petitioner
And
Reserve Bank of India and others
... Respondents
JUDGMENT PRONOUNCED ON: 29.11.2023
THE HON'BLE MRS JUSTICE SUREPALLI NANDA
1. Whether Reporters of Local newspapers : Yes
may be allowed to see the Judgment?
2. Whether the copies of judgment may be
marked to Law Reporters/Journals? : Yes
3. Whether Their Lordships wish to
see the fair copy of the Judgment? : Yes
_________________
SUREPALLI NANDA, J
2
Wp_2015_2023
SN,J
THE HON'BLE MRS JUSTICE SUREPALLI NANDA
W.P.No.2015 of 2023
% 29.11.2023
Between:
# Shree Jaya Laboratories Pvt.Ltd.
..... Petitioner
And
$ Reserve Bank of India and others
... Respondents
< Gist:
> Head Note:
! Counsel for the Petitioner : Mr Vimal Varma Vasireddy
^ Standing counsel for Respondent No.2 : Mr B.N.Swamiji
^Standing counsel for respondent No.3:Mr V.Nitesh
? Cases Referred:
3
Wp_2015_2023
SN,J
HON'BLE MRS JUSTICE SUREPALLI NANDA
W.P.No.2015 of 2023
ORDER:
Heard Mr Vimal Varma Vasireddy, learned counsel
appearing on behalf of the petitioner, Mr B.N.Swamiji,
learned standing counsel appearing on behalf of
respondent No.2 and Mr V.Nitesh, learned standing
counsel appearing on behalf of respondent No.3.
2. This Writ Petition is filed seeking a Writ of
Mandamus as under:
A. Declare inaction of the Respondent No.2 in not
considering the representations of the petitioner dated
05.08.2022, 22.08.2022, 03.09.2022, 08.09.2022 and
21.09.2022 as being arbitrary and illegal and contrary
to law.
B. declare that the petitioner company is not a
"defaulter" vis-à-vis Respondent No.2
C. Direct the Respondent No.2 to communicate to the
Respondent No.3 to recall the adverse entries against
the petitioner company in Respondent No.3's
report/database and consequently direct the
Respondent No. 3 to delete the adverse entries against
the petitioner company in its report/database.
3. The case of the Petitioner as per the averments
made by the petitioner in the affidavit filed by the
Wp_2015_2023
SN,J
petitioner in support of the present Writ Petition, in
brief, is as follows:
a) The Petitioner Company is having a manufacturing unit
of bulk drug intermediates located at Malkapur Village,
Choutuppal Mandal, Yadadri - Bhongir District. One P. Praful &
Company Agency (India) Pvt. Ltd., was supplying chemicals
"3,5 Lutidine" to the petitioner company and the petitioner
company has cleared all valid and legal purchase bills till
06.02.2019 and no amount is due from the Petitioner
Company to them.
b) However, the 2nd Respondent through legal notice dated
05.11.2019 demanded the Petitioner Company to pay an
amount of Rs.3,40,72,500/- to it by virtue of a Factoring
Agreement between P. Praful & Company Agency (India) Pvt.
Ltd., and itself. Upon enquiry by the petitioner company, it
was realized that P. Praful & Company Agency (India) Pvt.
Ltd. had raised ten (10) false invoices between the period of
02.04.2019 to 05.06.2019 amounting to Rs.3,40,72,500/-
with respect to raw materials (chemicals) which was never
placed by the Petitioner Company.
Wp_2015_2023
SN,J
c) Furthermore, the 2nd Respondent and P. Praful &
Company Agency (India) Pvt. Ltd., have a factoring
agreement, pursuant to which the P. Praful & Company
Agency (India) Pvt. Ltd. got the invoices raised in the
Petitioner Company's name and factored to the 2nd
Respondent. In this particular instance, the 2nd Respondent is
the assignee, the P. Praful & Company Agency (India) Pvt.
Ltd. is the assignor and the Petitioner Company is the
customer and there is no contract between the assignee and
customer. The acceptance letter dated 11.04.2018 received
by the 2nd Respondent is illegal as the employee of the
petitioner, who is actively involved in perpetuating the
aforementioned acts of raising fake invoices is not an
authorized person to represent the petitioner company.
d) While things stood, the 2nd Respondent has issued Show
Cause Notice dated 19.12.2020 threatening to declare the
Petitioner Company as a "willful defaulter" and that the
Petitioner Company vide letter dated 07.01.2021 to the 2nd
Respondent, clarified that it is neither a lender nor banker to
the Company and hence, it cannot declare the Petitioner
Wp_2015_2023
SN,J
Company as a "willful defaulter". Thereafter, in response, the
2nd Respondent issued another show cause notice on
25.02.2021 reiterating the same allegations against the
Petitioner Company.
e) Thereafter, the 2nd Respondent Company filed Section 7
of IBC against the Petitioner Company alleging that the
Petitioner Company committed default in payment of
Rs.4,23,22,712/ - (principal amount of Rs.3,40,72,500/-
along with interest of Rs.82,50,212/ - calculated @ 18% per
annum from the date of alleged default occurred till
31.12.2020) and the 2nd Respondent has issued a 3rd show
cause notice dated 24.03.2021. Aggrieved by the same, the
Petitioner Company filed W.P No. 20779 of 2021 before this
Court and this Court through interim order dated 02.09.2021
suspended the said Show cause notice dated 24.03.2021.
f) Subsequently, the NCLT vide its order dated 21.07.2022
dismissed the petition filed by the 2nd Respondent holding that
there is no jural relationship of creditor and borrower between
the 2nd Respondent and the writ petitioner in respect of the
financial debt. The Tribunal also noted that the said client of
M/s Canbank Factors Ltd., i.e., P. Praful & Company Agency
Wp_2015_2023
SN,J
(India) Pvt. Ltd., adopted the same modus operandi in
committing fraud on M/s Metrochem API Pvt. Ltd also.
g) Later on, the Petitioner Company through
representations dated 05.08.2022, 22.08.2022, 03.09.2022,
08.09.2022 and 21.09.2022 requested the 2nd Respondent for
updating of CIBIL data basing on the above-mentioned order
of the NCLT, but the 2nd Respondent has not taken any steps
to delete the name of Writ Petitioner as a defaulter in CIBIL
data maintained by 3rd Respondent.
h) As a consequence of highhanded, arbitrary and illegal
action on the part of the 2nd Respondent in reporting the
name of Writ Petitioner Company as a defaulter, and
continuing to being shown in the records of Respondent Nos.
2 and 3 as a defaulter, the fundamental right of the Petitioner
to carry on business under Article 19(1)(g) is violated. Hence,
this Writ Petition.
4. Counter Affidavit filed by the Respondent No. 2, in
brief, is as under:
Wp_2015_2023
SN,J
a) P. Praful and Company Agency availed factoring limits
from 2nd respondent vide sanction letter bearing No.
CBFL/AHM/CC-13/P.PRF/2014-15/SBF, dated 23.01.2015. On
20.01.2015 M/s P. Praful and Company Agency (India) Pvt.
Ltd. entered into a Factoring Agreement with the 2nd
respondent and gave Power of Attorney to authorizing them.
b) Thereafter, M/s P. Praful and Company supplied the
materials to the petitioners and as per the Factoring
Agreement, the 2nd respondent paid the bills raised against
the petitioner company to the 2nd respondent's client
immediately after deducting the margin, upon receipt of e-
mail confirmation from the petitioner's company for receipt of
the material in good condition and if the petitioner company
has cleared all the bills till 06.02.2019 and there is no amount
due, then the 2nd respondent company should not have paid
Rs.4,16,934/- on 10.06.2019 to their client, but the 2nd
respondent did pay in Escrow Account No. 0174-201-002038
maintained in Canara Bank, Paldi, Ahmedabad Branch.
c) Furthermore, as per the arrangements made through
the factorizing agreement, the 2nd respondent was paying the
Wp_2015_2023
SN,J
discounted invoices to their client and the same is collected
from Petitioner Company after expiry of credit period i.e. 90
days. For this arrangement the petitioner company submitted
a letter to the 2nd respondent on 11.04.2018 and mentioned
that they will pay the amounts to the 2nd respondent directly
in Escrow account.
d) Thereafter, the 2nd respondent discounted the bills
amounting to Rs.3,40,72,500/- and paid the amount to their
client and the 2nd respondent was sending monthly statement
of outstanding debt to petitioner company and officials of
petitioner company had received the statements of
outstanding debt and acknowledged the same with signature
& seal by the officials of the petitioner company.
e) On 22.08.2019, the 2nd Respondent received an e-mail
dated 22.08.2019 from petitioner company denying all the
legitimate dues towards factored bills. Further the 2nd
respondent continuously followed up with the petitioner
company for releasing the amounts as per the due dates but
the petitioner company failed to respond.
Wp_2015_2023
SN,J
f) It was alleged by the petitioners that they have cleared
all bills till 06.02.2019 and no amount is due but they made
payment of Rs.4,16,934/-on 10.06.2019 to the 2nd
Respondent in Escrow Account No. 0174-201-002038
maintained by M/s P Praful & Company Agency (India) Pvt Ltd
with Canara Bank and the petitioner company sent e-mail
through its representative Mr. P.L.Kameshwara Rao on
30.10.2019 to 2nd Respondent, wherein petitioner company
informed that as per their books, amount payable was
Rs.44,808/- to P Praful and co. The petitioner company had
submitted the forged books of account particularly the ledger
of client "P Praful and Company Agency Pvt. Ltd." which
shows the balance of Rs. 44,808/- outstanding only against
the total liability of Rs. 3,40,72,500 owed towards the 2nd
Respondent.
g) The petitioner company submitted a letter stating that
they will pay the bills raised by the P. Praful Company and
Agency (India) Pvt. Ltd. against their company. They further
assured that if they failed to pay the amounts, the 2nd
respondent will have right to initiate necessary recovery
Wp_2015_2023
SN,J
proceedings before competent court of law, but not as alleged
by the petitioner herein.
h) Vide letter dated 11.04.2018, petitioner guaranteed the
2nd respondent for the payment of the outstanding dues
against the invoices raised by P Praful & Company Agency
(India) Private Limited. Thus, it is clearly establishes that the
petitioner company guaranteed to the 2nd respondent that
they will pay the outstanding amounts within a period of 90
days.
i) On 11.04.2018, P. Praful Company and Agency (India)
Pvt. Ltd. addressed a Letter to petitioner requesting them to
pay the due invoice amounts to the 2nd respondent and the
petitioner company accepted the same and duly signed on the
letter that they will pay the amounts. As per the acceptance
given by the petitioner company, the petitioner has to pay the
bill amounts to the 2nd respondent, but P. Praful Company and
Agency (India) Pvt. Ltd. and petitioner colluded with each
other and not paid the amounts to this respondent.
j) Moreover, the Petitioner Company confirmed the 2nd
respondent by e-mails for receiving the materials and
Wp_2015_2023
SN,J
genuineness of transactions and also acknowledged the
monthly statement of outstanding debt, sent by this
Respondent. Hence, the 2nd respondent is having right to
recover the amounts from the petitioner company and the
petitioner company is a willful defaulter. As per the
acceptance of petitioner company dated 11.04.2018, this
respondent released the amounts to the P. Praful Company
and Agency (India) Pvt. Ltd. and given a credit time of 90
days and grace period of 30 days in total 120 days to the
petitioner company.
k) Therefore, due to non-payment of amounts by the
petitioner company, this respondent informed the CIBIL
authorities about its fraud. Till date the amounts are not paid
by the petitioner company, hence, the CIBIL authorities have
not removed the flag of willful defaulter. As per the
arrangement, the petitioner company is bound to pay the
amounts mentioned in acceptance letter dated 11.04.2018 to
the 2nd respondent. Hence, the Writ Petition is devoid of
merits and is liable to be dismissed.
Wp_2015_2023
SN,J
5. Counter Affidavit filed by the Respondent No. 3, in
brief, is as under:
a) The State Bank of India has reported the Petitioner as
willful defaulter in several quarters and thus, the 3rd
Respondent website reflects the names of the Petitioner as
willful defaulter with respect to Respondent Nos. 2 and 3.
b) Furthermore, the Petitioner has wrongly made the 3rd
Respondent party to the Writ Petition as it is not in the
domain of the 3rd Respondent to declare any person/ entity to
be a willful defaulter' and/ or to decide to publish the names
of the willful defaulters' or not and the 3rd Respondent merely
publishes names of such 'willful defaulters' following the
aforesaid declaration and therefore ,the 3rd respondent
merely abides/ follows the statutory obligation cast upon it.
c) There is a loan account no. 11309 reported by the 2nd
Respondent which is reported with NPA flag on the Petitioner's
CIR, as alleged by the petitioner and thereafter, the 3rd
respondent, in accordance with the provisions of CICRA,
raised the details of loan account No. 11309 with the 2nd
respondent and requested to confirm whether there is any
Wp_2015_2023
SN,J
change/modification/update is required in the credit
information reported by the 2nd Respondent in the said
account.
e) As per the proviso to section 21(3) of the CICRA, the
Respondent cannot make a correction, deletion or addition to
the credit information until the same has been certified as
correct by the concerned credit institution. Hence, the Writ
Petition is devoid of merits and is liable to be dismissed.
6. Paras 6 and 7 of the counter affidavit filed by the
2nd respondent, reads as under:
"6. In reply to Paras 13 to 15 of the affidavit, the
contentions and allegations of the petitioner are not
correct and there is no lots of truth in its allegations. On
11/04/2018 P. Praful Company and Agency (India) Pvt.
Ltd addressed a Letter to petitioner company and
requested them to pay the due invoice amounts to this
respondent i.e. Canbank Factors Limited. The petitioner
company accepted the same and duly signed on the
letter that they will pay the amounts to the respondent
No.2 ie. Canbank Factors Limited. As per the Factoring
Agreement between P. Prafil Company and Agency
(India) Pvt. Ltd., with this respondent, the respondent
released the entire invoice amount availed by the
petitioner company. As per the acceptance given by the
Wp_2015_2023
SN,J
petitioner company the petitioner has to pay the bill
amounts to this respondent, but P. Praful Company and
Agency (India) Pvt. Ltd. and petitioner colluded with
each other and not paid the amounts to this respondent.
The petitioner company cheated and did not abide on
their commitment for payments, hence this respondent
informed the CIBIL authorities against the petitioner
company. The respondent No.2 has not filed any appeal
against the NCLT orders. Even Non-banking finance
companies (NBFC) like respondent No.2 having power to
initiate necessary proceedings under Section 7 of
Insolvency and Bankruptcy Act against the petitioner
company but not as contended by the petitioner herein.
There is no restriction by the RBI against the NBFC's for
initiation of proceedings before NCLT as contended by
the petitioner herein. The contention of the petitioner is
that factoring business is not banking transaction as per
the provisions of Indian Law and general understanding
of trade practice is not correct and it is totally vague.
The petitioner submitted Escrow Account-Authorization
Letter that they will pay the amounts to respondent No.2
in Escrow Account 0174-201-002038 maintained by M/s
P Praful& Company Agency (India) Pvt. Ltd with Canara
Bank, against the invoices raised in their name within
the stipulated period. Petitioner Company
undertook/acknowledged in Escrow Account-
Authorization Letters that "This arrangement/Instruction
should not be altered till you (Petitioner Company) get
Wp_2015_2023
SN,J
written communications from Canbank Factors Ltd."
Further Petitioner Company confirmed the Respondent
No.2 by e-mails for receiving the materials and
genuineness of transactions and also acknowledged the
monthly statement of outstanding debt, sent by this
Respondent No. through RPAD. Hence the respondent
No.2 is having right to recover the amounts from the
petitioner company, but not as stated by the petitioner
herein. Once the petitioner company assured the
respondent No.2 by way of the aforementioned authority
letter, e-mails to pay the outstanding amounts directly
to this respondent is sufficient to initiate necessary
recovery proceedings against the petitioner company.
Hence the petitioner company is a willful defaulter. As
per the acceptance of petitioner company Dt:
11/04/2018, this respondent released the amounts to
the P. Praful Company and Agency (India) Pvt. Ltd. and
given a credit time of 90 days and grace period of 30
days in total 120days to the petitioner company. After
lapse of 120 days this respondent continuously followed
up the petitioner company and P. Praful Company and
Agency (India) Pvt. Ltd. for payment. But one pretext or
the other the petitioner company dragged the matter
without paying any amount to this respondent. There is
no other alternative left with this respondent except to
initiate necessary action against the petitioner company.
This respondent not violated the Article 19(1) 9(g) as
alleged by the petitioner herein.
Wp_2015_2023
SN,J
7. In reply to para 16 to 19 of the affidavit, due to non-
payment of amounts by the petitioner company, this
respondent informed the CIBIL authorities about its
fraud. P. M/s Praful Company and Agency (India) Pvt.
Ltd. supplied chemicals to the petitioner company and
certain amounts on different dates. On the basis of
purchase orders the material supplied to the petitioner
company and petitioner company is having responsibility
to pay the amounts to this respondent as per the letter
Dt: 11/04/2018. The petitioner company not availed any
factoring limits from this respondent, but they have
given undertaking to pay the amounts which were
already received by P. Praful Company and Agency
(India) Pvt. Ltd. from this respondent. Till date the
amounts are not paid by the petitioner company to this
respondent, hence the CIBIL authorities not removed
the flag of willful defaulter. Once the petitioner company
accepted to pay the amounts which were already
received by P. Praful Company and Agency (India) Pvt.
Ltd. who is none other than the customer of this
respondent. As per the arrangement the petitioner
company is bound to pay the amounts mentioned in
acceptance letter Dt: 11/04/2018 to this respondent.
The contention of the petitioner company is that there is
no jural relationship between the petitioner and this
respondent as a borrower nor creditor is not correct.
Once the petitioner company steps into the shoes of P.
Wp_2015_2023
SN,J
Praful Company and Agency (India) Pvt. Ltd. for making
the payment as per its acceptance letter Dt: 11/04/2018
this respondent submitted a representation to the CIBIL
authorities i.e. 3rd respondent herein to show as a willful
defaulter. The NCLT bench, Hyderabad vide in its Order
Dt: 21/07/2022 stating that the petitioner is not a willful
defaulter, but as per the knowledge of this respondent
the NCLT not given any finding not to liable for payment
of petitioner company to this respondent."
7. Paras 4(h) and 4(i) of the counter affidavit filed by
respondent No.3, reads as under:
"4(h) In the backdrop of the above, the respondent No.3
states that on receipt of the said writ petition, the
respondent No.3 checked the petitioners name in its suit
filed database. It was observed that the petitioner's
name was not reflecting in both Suit Filed Accounts -
Willful Defaulters Rs.25 lacs and above along with Suit
Filed Accounts - Defaulters Rs.1 crore and above
maintained by respondent No.3.
4(i) Further, it is submitted that on perusal of the
petition along with annexures, it was observed
that there is no loan account No.11309 reported
by respondent No.2 which is reported with NPA
flag on the petitioner's CIR, as alleged by the
petitioner. As a matter of abundant caution and
with regard to provisions of CICRA, respondent
No.3 raised the details of loan account No.11309
Wp_2015_2023
SN,J
with respondent No.2 and requested to confirm
whether there are any change/modification
/update is required in the credit information
reported by respondent No.2 in the said account.
The response from respondent No.2 is awaited.
On receipt of the response from respondent No.2,
respondent No.3 craves leave to file the
correspondence during the course of hearing or
file an additional affidavit, if this Hon'ble Court
allows at a later stage."
DISCUSSION AND CONCLUSION
8. A bare perusal of the averments made in the counter
affidavit filed by respondent No.2 and duly considering the
submissions put forth by the learned counsel appearing on
behalf of the 2nd respondent it is evident that the 2nd
respondent based on the confirmation of the petitioner
company made to the 2nd respondent by e-mails for receiving
the materials and based on the genuineness of the said
transactions, and the petitioner company having
acknowledged the monthly statement of outstanding debt sent
by respondent No.2 through RPAD, the respondent No.2
contends that the respondent No.2 has a right to recover the
amounts from the petitioner company and to initiate
Wp_2015_2023
SN,J
necessary recovery proceedings against the petitioner
company and hence, therefore, the petitioner company is a
willful defaulter.
9. It is further evident through the averments made in the
counter affidavit filed by respondent No.2 that as per the
acceptance of petitioner company dated 11.04.2018, the
respondent No.2 released the amounts to the P.Praful &
Company Agency (India) Pvt. Ltd. and extended a credit of 90
days and grace period of 30 days, in total 120 days to the
petitioner company and after lapse of 120 days the 2nd
respondent continuously followed up the petitioner company
and P.Praful Company and Agency (India) Pvt. Ltd. For
payment, but on one pretext or the other the petitioner
company dragged the matter without paying any amount to
the 2nd respondent and therefore, the 2nd respondent was left
with no other alternative except to initiate necessary action
against the petitioner company.
10. A bare perusal of the averments made in the
counter affidavit filed by the 3rd respondent in June,
2023 and duly considering the submissions made by the
learned counsel appearing on behalf of the 3rd
Wp_2015_2023
SN,J
respondent, it is evident that respondent No.3 raised
the details of loan Account No.11309 which is reported
with NPA Flag on the petitioner's CIR to confirm
whether any change/modification/update is required in
the credit information reported by respondent No.2 in
the said account and that the response from respondent
No.2 is awaited. The averments in the counter affidavit
filed by the 3rd respondent further clearly indicate that
the respondent No.3 being a Credit Information
Company cannot make any changes unilaterally and the
3rd respondent has no role to play in a bank/financial
institution declaring any of its borrower as a willful
defaulter.
11. Taking into consideration, the fact as borne on record
that the petitioner addressed representations, dated
05.08.2022, 22.08.2022, 03.09.2022, 08.09.2022 and
21.09.2022 to the 2nd respondent pertaining to petitioner's
request for updation of CIBIL data base basis and also the
request of the 3rd respondent made to the 2nd respondent to
confirm whether there are any changes/modification/update
required in the credit information reported by respondent No.2
Wp_2015_2023
SN,J
in the loan account No.11309, which is reported with NPA flag
on the petitioner's CIR and since response from respondent
No.2 is awaited as averred by the respondent No.3 specifically
in para 4(i) of the counter affidavit filed in the present writ
petition, this Court opines that the 2nd respondent is bound to
consider the request of the petitioner made vide
representations dated 05.08.2022, 22.08.2022, 03.09.2022,
08.09.2022 and 21.09.2022 pertaining to updation of CIBIL
data base basis and also the request of the 3rd respondent
pertaining to updation of petitioner's loan account No.11309,
within a reasonable period.
12. Taking into consideration the aforesaid facts and
circumstances, the writ petition is disposed off directing
the 2nd respondent to consider the request of the
petitioner made vide representations dated 05.08.2022,
22.08.2022, 03.09.2022, 08.09.2022 and 21.09.2022
pertaining to updation of CIBIL data base basis and also
the request of the 3rd respondent pertaining to updation
of petitioner's loan account No.11309 and pass
appropriate orders in accordance to law duly
communicating the decision to the petitioner and the 3rd
Wp_2015_2023
SN,J
respondent herein within two weeks from the date of
receipt of the copy of the order. However, there shall
be no order as to costs.
Miscellaneous petitions, if any, pending shall stand
closed.
___________________
SUREPALLI NANDA, J
Date: 29.11.2023
Note: L.R.Copy to be marked.
b/o
kvrm
