Final Order 1

Order Details: Notice of Motion
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IN THE BOMBAY CITY CIVIL COURT AT GREATER BOMBAY
NOTICE OF MOTION N0.262 OF 2020
IN
SUIT NO. 141 OF 2020
(CNR No.MHCC01-000630-2020)
Suman Vijay Gupta & Ors. )...Plaintiffs
Versus
State Bank of India & Ors. )...Defendants.
Appearance:-
Adv. Karan Bhosle a/w. Priyanka Dubey for the plaintiffs.
Adv. Mr.Chetan Agrawal for deft Nos. 1 to 10 and 13 to 15.
Exparte against defendants nos. 11 and 12.
CORAM: HIS HONOUR JUDGE
SHRI R.V.KOKARE
DATE :11/02/2020 (C.R.No.31)
O R D E R
This is a notice of motion taken out by the plaintiffs for
temporarily restrained to the defendants from dissemination,
publication, display, advertising and/or portraying the accounts of the
plaintiffs as Red Flag account and/or fraud and/or willful defaulters
and taking coercive action against the plaintiffs.
Brief facts of notice of motion of the plaintiffs are as under-
2. The plaintiffs are the directors (Suspended Board in view of
admission of Section 7 application under provisions of Insolvency and
Bankruptcy Code, 2016 by the Hon'ble NCLT, Mumbai), of “Ushdev
International Limited” (hereinafter referred to as the “Company” or
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“UIL”) a company which has been incorporated on 18/05/1994. The
defendants are the Consortium lenders of the company and are the
Banks constituted under the provisions of the Banking Regulation Act,
1949.
3. Plaintiffs are in default of repayment of loan. Plaintiffs account
went into NAP. The defendant bank initially declared the said account as
”Red Flagged Accounts”( hereinafter referred to as “RFA”) and
thereafter, they have declared as ‘’account as Fraud’’. The plaintiffs have
challenged declaring the Company’s account as Fraud/Willful defaulter
without following the due procedure of law and against the principles
of natural justice. The plaintiffs have further submitted that their
company UIL was incorporated and is duly registered under the
provisions of the Companies Act, 1956. UIL is a part of the Ushdev
Group and was formed on 14th May 1994, by Late Shri Vijay Devraj
Gupta. From being a commission agent, it has become a power
generating and a trading company and it listed on the Bombay Stock
Exchange since it’s incorporation. UIL is engaged in the business of
trading in metals (including ferrous and nonferrous) and Renewal
Power Generation business using Wind Mills. UIL is one of the India’s
largest Companies in the metal trading sector with its core businesses in
metals and power generation. The UIL deals in all kind of steel
products.
4. The plaintiffs state that the company is in power generation
business using Wind Mills since the year 1997 and has total 23 Wind
Energy Turbines having insalled Capacity of 28.3 MW in States of Tamil
Nadu, Gujarat, Karnataka, Rajasthan and Maharashtra. The UIL is
generating and transmitting power to various State Electricity Board
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and private players for distribution to final consumer. The company
within a short period to stringent quality has been avoid various
service.
5. The defendants bank had sanctioned various facilities to the
company and accordingly, various sanction letters were issued by the
defendants to the company. The defendants have sanctioned the credit
facilities to the company only after detailed due diligence of the
promoters, directors and the company’s account and it business over the
years and only after satisfaction, have renewed the credit facilities from
time to time.
6. The plaintiffs further submitted that the Corporate Insolvency
Resolution Process of the company began on 14/05/2018, pursuant to
admission of Section 7 application filed by the lead bank, one of
Financial Creditor, against the company under section 7 of the
Insolvency and Bankruptcy Code, 2016 and Rule 4 of the Insolvency
and Bankruptcy Rules, 2016 for initiation of Corporate Insolvency
Resolution Process in NCLT Mumbai. The Lead bank issued a show
cause notice dated 4th October, 2018 thereby calling upon the plaintiffs
and the company to show cause and make submissions as to why the
names of the plaintiffs and the company should not be included in the
list of the Willful defaulters as per RBI Guidelines. The plaintiffs vide
their reply dated 01/11/2018, the plaintiffs gave their detailed reply to
the aforesaid show cause notice received by the plaintiffs. The plaintiffs
pointed out that the acts of the defendants are not as per the provisions
of RBI master circular and further have urged to withdraw the show
cause notice. The plaintiffs issued a letter dated 13th December, 2019 to
the defendants asking about the dates and details as to when the
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plaintiffs and the company account has been declared as fraud/willful
defaulter. The plaintiffs further state that the defendants neither gave
any reply nor informed the plaintiffs about their apprehensions and
continued with the impugned action against the plaintiffs and the UIL
company.
7. The plaintiff states that the need to file the instant civil suit has
arisen because of illegal, arbitrary impugned action on the part of the
defendants by using the provisions, guidelines contained in Master
Circular bearing No. DBS.CO.CFMC.B.C. No. 1/23.04.001/2015-16,
dated 1st July 2015.
8. There is master circular issued by R.B.I. for declaring any account
as fraud by following certain procedure. Here, defendants have not
followed due procedure given in master circular and declared plaintiffs
account as fraud. Even they have not followed the rule of natural justice
by not giving opportunity of hearing to plaintiff. There are serious
consequences of any account as fraud. Considering said serious nature
consequences, it was mandatory for defendants to follow the procedure
as well as time line given in master circular. On these grounds the
plaintiffs are submitted that the plaintiff have prima facie case, balance
of convenience in favour of the plaintiff, if this notice of motion is not
granted in favour of the plaintiff, then plaintiff will suffer irreparable
loss, which will not compensate in terms of money. Hence, this notice of
motion.
9. The defendant nos. 1 to 10 and 13 to 15 resisted this notice of
motion by filing its reply.
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Brief facts of the reply of the defendants are as under-
10. The defendants submitted that the proceedings held by the
plaintiffs and prayers made therein have become infructous as already
the action of declaring the plaintiffs account as fraud account has
attached its finality on 26/12/2019 respectively by the bank i.e.
defendant no.1 and for the investigation is being forwarded to the CBI
for the further action. The defendants being Banker are custodian of the
public money and it is the prime objection cast upon the defendants
banker to safeguard the interest and money of its account holders. The
defendants had taken every effort to help plaintiffs to overcome the
situation, it being the borrower of the defendants bank. However, the
plaintiffs felt to manage its affairs because of its illegality diversification
of funds out of India and to start new business abroad. Mismanagement
and indiscipline financial planning. The plaintiffs are well aware of the
facts that its account had already been declared as red flag account and
fraud and matter would be reported to CBI for further investigation. To
avoid the said investigation which will dig the entire fraud and illegal
diversification of the funds by the plaintiffs to abroad for their wrongful
gain by doing wrongful loss to the banks. The plaintiffs have suppressed
this material fact in its pleadings and as such, on this ground alone, the
notice of motion and it deserves to be dismissed with costs.
11. The defendants further submitted that the action of declaring the
plaintiffs account as fraud on 8/11/2019, was not abruptly done.
Before declaring fraud the plaintiffs account was declared as NPA. After
the appointment of IRP, the said IRP appointed M/s. Kirtane and Pandit
to conduct the forensic audit which has in tern submitted its report on
13/10/2018. Supplementary report on 4/12/2018 to RP and presented
to COC on 2/11/2018 and 20/12/2018. Said forensic audit report
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submitted by M/s. Kirtane and Pandit was nothing but surprise blow as
the said report has not recorded any adverse observations even though
huge amount of receivable of Rs.3,443.43 crores which includes
overseas debtors to the extent of about Rs.2,800.37 crores were/are still
recoverable by the plaintiffs company. The defendants bank had decided
to appoint of a forensic auditor for carrying out a fresh forensic audit.
The defendants bank appointed M/s. Advarise Forensic Auditor for
conducting forensic audit in the account of plaintiffs company. M/s.
Advarise submitted its draft report on 16/09/2019 and in JNM dated
20/09/2019 wherein forensic auditors told to provide conclusive report
and some additions, including evidences in their final report. In the
forensic audit report the findings are of serious nature and
incorporative huge amount of money. On these grounds, the defendants
bank are submitted that the plaintiffs have not proved prima facie case,
balance of convenience and irreparable loss. Therefore, notice of motion
of the plaintiffs may kindly be rejected with costs.
12. Heard learned counsel Mr.Karan Bhosle on behalf of the plaintiffs
and learned counsel Mr.Chetan Agrawal for defendant Nos. 1 to 10 and
13 to 15. In view of rival pleadings of both the parties, following points
arise for my determination. I have recorded my findings alongwith
reasons are as follows.
Sr.Nos. POINTS FINDINGS
1 Whether the plaintiffs prove
prima facie case ?
-yes-
2 Whether the plaintiffs prove
that balance of convenience lies
in favour of the plaintiffs ?
-yes-
3 Whether the plaintiffs prove
that plaintiffs will suffer
-yes-
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irreparable loss, if this notice of
motion is rejected?
4 What order ? As per final order.
REASONS
As to point nos.1 to 3-
13. Heard learned counsels appearing on behalf of plaintiffs and
defendants, and perused rival pleadings of both the parties. I have
perused documents produced on behalf of both the sides. It appears to
me that it is the contension of defendants Bank that plaintiff has
diverted and siphoned off the loan amount and not kept the obligations
of repayment of amount in time. Therefore, based on forensic audit
report plaintiff has declared as fraud. As against this, it is the grievance
of plaintiff that defendants have not followed due procedure laid down
in master circular while declaring them as fraud. Defendants have not
given opportunity of hearing and there by not followed the rule of
natural justice. Before going towards the factual aspect it will be better
to deal with the legal objections raised by the learned counsel on behalf
of defendants.
14. The learned counsel on behalf of the defendnat no.1 has taken
the objection is that defendants came with the case that suit is not
tenable in view of provisions of section 9 of CPC. It is argued that as per
explanation- 1 to section 9, a suit in which the right to property or to an
office is contested, is a suit of civil nature. Here, the suit is neither
related to property nor an office. Therefore, such declaratory suit is not
a Civil Suit within the meaning of section 9 and therefore, it is not
tenable. As against this, it is argued by the learned counsel on behalf of
the plaintiffs that this is a suit for declaration against the action
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initiated by defendants. Plaintiffs are challenging the virus of action
taken by defendants and therefore, suit will lie as per section 9 of Civil
Procedure Code.
15. Section 9 of CPC deals with jurisdiction of the Civil Courts and
bar thereon. It says that Court is empowered to try all Civil suits unless
barred by law. It is settled legal position is that Civil Court has every
jurisdiction to try the suit. No doubt, Civil Court cannot try and
entertain the suit which are expressly or implied barred. Here, plaintiffs
are seeking declaration against the action of defendant no.1 declaring
them as fraud. The action leveled by defendantno.1 is based on master
circular issued under R.B.I Guidelines. Therefore, in my opinion,
nothing will bar from presenting such grievance before Civil Court. As
such, I am of opinion that Civil Court has every jurisdiction to try and
entertain such nature of suit. Therefore, there is no any force for
argument of the learned counsel on behalf of the defendants for saying
that this Court has no jurisidiction to entertain and decided this suit in
view of Section 9 of Civil Procedure Code.
16. The learned counsel on behalf of the defendants has further
argued that plaintiffs are asking for injuction against action of
defendants on declaring their account as fraud. It is the right accrued
to defendant by way of master circular. Therefore, in view of provisions
of section 41 (d) of the Specific Relief Act injunction cannot be
granted. I have gone through Section 41 of Specific Relief Act. It is
regarding " injunction when refused ." As per sub section (d) injunction
cannot be granted to restrain any person from instituting or prosecuting
any proceeding any criminal matter. No doubt, in such case injunction
cannot be granted. However, here the circumstances are some what
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different. Plaintiffs are making grievance that declaration of fraud is not
as per procedure laid down in master circular. Plaintiffs are challenging
the virus of the action taken by defendants. In such circumstances, if
said decision is not taken in accordance with the procedure laid down,
then the aggrieved party has every right to ask for injunction. So, the
bar as mentioned in section 41 (d) of Specific Relief Act is not
applicable here.
17. The learned counsel on behalf of defendants has argued that the
suit is not maintainable in view of declaration by NCLT about
liquidation of borrower Company and appointmen of liquidator. It is
argued that NCLT has passed liquidation order and appointed the
official liquidator. Therefore, in view of section 17 of I.B.Code as well as
per section 231 of I.B.Code suit is not maintainable. As against this, the
Ld. Counsel for plaintiffs relied on judgment of our High Court ( Nagpur
bench ) in the case of Bank of India v/s. Gupta Coal Company ( Civil
Revision 97/2017 decided on 04.09.2018) about maintainability of suit
before Civil Court.
18. I have gone through section 17 of the I.B.Code 2016. Said chapter
is regarding Corporate Insolvency Resolution Process (CIRP). As per
said section after appointment of Interim Resolution Professional (IRP)
the management of affairs of corporate debtor vest in (IRP). So also the
power of directors, partners and guarantors stand suspended. So also as
per section 231 of said Code no Civil Court have jurisdiction in respect
of any matter in which the adjudicating authority is empowed by or
under, this court to pass any order and no injunction shall be granted by
court in respect of any action taken in pursuance of order passed by
adjudicating authority. So on going through above sections and more
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particularly section 231 of I.B.Code there is a bar in respect of matter
within the jurisdiction of adjudicating authority i.e. NCLT. So also there
is bar to pass injunction order in respect of any action taken by said
authority.
19. It is an admitted position on record that defendant has
approached before NCLT, DRT and also started recovery proeeding
under the SARFAESI and other available Acts. Since beginning it is
made clear by Ld. Counsel for plaintiff that plaintiff is not against the
recover proceedings nor by way of this suit plaintiffs are challenging or
restraining the recover proceeding. No doubt, plaintiffs are not
challenging the recovery proceedings nor challenging the proceedings
which is pending before NCLT. Here, plaintiffs being suspended
directors are challenging their declaration as fraud as without following
the procedure given in master circular. Therefore , in my opinion the
bar as contemplated under section 231 of I.B Code will not apply here.
20. Moreover, Ld. Counsel for plaintiffs invited my attention towards
the decision of Hon'ble High court in the case of Bank of India v/s.
Gupta Coal (Nagpur bench ) decided on 04/09/2018. As per facts of
said case the company accounts declared as fraud and said action of
bank is challenged before the Court. Bank has raised the objection that,
Civil Court has no jurisdiction to entertain the suit. It is observed that
the relief sought is a declaration that the action of defendants bank in
declaring plaintiffs account as fraud is illegal and without following due
process of law. It is further observed that in the light of challenge as
raised , it would be Civil Court that would retain jurisdiction to
entertain suit. So on considering both the citation as above, I am of the
opinion that the ratio in citation relied on by plaintiff of Nagpur Bench
(Supra) is much more applicable here. Here also plaintiff is seeking
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declaration against the action of defendant declaring them as fraud
under the master circular issued by R.B.I. Therefore, such suit of
declaration is maintainable before Civil Court.
21. It is argued on behalf of defendants that plaintiffs are seeking
relief against account of borrower Company. However, said Company is
not made party to this litigation and therefore, in absence of company
as party plaintiffs have no locus to file the suit. As against this, it is
argued by Ld. Counsel for plaintiffs that though the account of
Company is declared as RFA and fraud, consequences on declaration as
fraud are personally applicable against the promoters and directors of
suspended borrower company. Therefore, plaintiffs can very well seek
relief before Civil Court in absence on comapany as a party. Admittedly,
plaintiffs have challenged the declaration of Companies account as
fraud. However, it is made clear that plaintiffs are not seeking any relief
against recovery proceedings. As per Rule 8.12 of the Master Circular
the penal majors on declaration of account as fraud are directly
applicable against the directors and promoters . They cannot be director
of any Company nor can avail loan from any financial institutions. So
also there is every aprehension of criminal proceedings against them. As
such, consequences are directly affecting the personal rights of directors
and promoters. Therefore, in my opinion suit is maintable without
adding Company as party.
22. So far as factual aspect is concerned, it is the grievance of
plaintiffs that, defendant bank has not followed the guidelines and
procedure as given in master circular and therefore the declaration of
plaintiff as fraud is not proper. As against this, it is the defence of
defendant bank that before declaring plaintiff as fraud bank has
followed the guidelines and procedure given in master circular by
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giving fair opportunity to plaintiffs to place their case. So the nature of
dispute is that it is the contention of plaintiffs that defendant has not
followed proper procedure before declaring them as fraud while it is the
defence of defendants bank that plaintiffs are declared as fraud by
following due procedure laid down in master circular. It is settled legal
position that, Court will not expect nor anyone can bring negative
evidence. Court will expect positive evidence and in case of failure to
bring it, negative inference has to be drawn. So little more burden is on
defendants to show that it has followed due procedure before declaring
plaintiff as fraud.
23. It is first grievance of plaintiffs that in master circular certain time
line is given for completing the process of declaring any account as
fraud. As per said circular the maximum time limit is six months. Here,
there is no information on record as to when plaintiffs account was
declared as RFA. There is only information is that plaintiffs account is
declared as fraud on 8/11/2019. So, it goes to show that defendants
have not observed the time limit given in Master Circular.
24. I have gone through the Master Circular issued on 01/07/2015. It
is master circular on fraud. Chapter 8 of said Master Circular deals with
loans fraud, new frame work. Rule 8.8 deals with Bank as sole lender.
As per said Rule in case of Sole Lender the fraud monitoring group
(FMG) will take a call on whether an account in which early warning
signals are observed should be classifiled as RFA. The exercise should
be done within a month from EWS being noticed. The bank may used
external auditiors including forensic experts. However, said exercised,
has to be done within six months from declaration as RFA. Here, no
where defendant bank came with clear statement as to when plaintiffs
account is declared as RFA. It is only contention that plaintiffs account
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was declared as fraud on 8/11/2019. In absence of exact date of
declaration as RFA it is difficult to conclude whether defendant bank
has declared plaintiffs account has fraud within six months from RFA.
As defendant bank is silent about date of declaration of the account as
RFA, adverse inferance can be drawn that defendant bank has to
adhered the time limit of six months in declaring plaintiffs account as
fraud. Even no explnation is given on behalf of defective bank for
keeping mum regarding date of declartion of the plaintiffs account as
RFA. So, this point will go against defendant bank.
25. Lending under consortium or multiple banking arrangement.
Admittedly here is case of multiple Banking. As per sub rule 8.9.4 after
declaration of fraud by individual bank it has to be reported to R.B.I
within 21 days. Further within 15 days of fraud classification the
individual bank has to ask consortium leader to convene a meeting to
discuss the issue. Such meeting must be convened withing 15 days of
such request. In case there is a broad arrangement the account should
be classified as a fraud else based on the majority decision can be taken
subjected to a Forensic Audit. As per rule 8.9.5 the Forensic Audit must
be completed within a maximum period of three months and within 15
days of completion of Forensic Audit the JLF shall reconvene and decide
on the status of account. As per rule 8.9.6 the over time allowed for the
entire exercise is of six months from the date when the first member
bank reported the account as fraud. Admittedly, there is no any
prima facie evidence produced by the defendants as to show that
the defendants bank followed time limit as specified in master
circular in respect of declaring fraud to the plaintiff. Even no any
explnation is coming forth from defendants about not following the
time limit.
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26. Relying on such delay the Ld. Counsel for plaintiffs submitted that
considering the serious consequences on declaration as fraud it can be
said that the time limit given in Master Circular is mandatory. The Ld.
Counsel for defendant submitted that the issue of time limit is in
between defendant bank and R.B.I and R.B.I will take care of not
following the time limit. I have gone through the chapter of
consequences on declaration as fraud. Considering said serious nature
consequences it can be construed that the time limit given in Master
Circular is mandatory in nature. So this issue will go against
defendants.
27. Rule 2.2 of Master Circular deals with classification of fraud. It
says that fraud have been classified as under based mainly on the
provisions of the Indian Penal Code.
a) Misappropriation and criminal breach of trust.
b) Fraudulent encashment through forged instrument,
manupulation of books of account or through fictitious accounts
and conversion of property.
c) Unauthorized credit facilities extended for reward or for illegal
gratification.
d) Cash shortages.
e) Cheating and forgery.
f) Fraudulent transactions involving foreign exchange.
g) Any other type of fraud not coming under the specific
heads as above.
28. Here, it is alleged by defendant that plaintiffs have diverted the
funds to sisters Companies, they had used the loan amount for purpose
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other than the purpose for which it was sanctioned. Plaintiff also
siphoned off huge amount and there is falsification and manipulation of
accounts. As per reply of defendants all above detected in Forensic
Audit Report conducted by M/s. Kirtane and Pandit dated 13/10/2018
and supplementary report on 4/12/2018. However, neither the copy of
Forensic Audit Report is supplied to plaintiffs nor defendant has taken
care to place it on record to corroborate their contension about
irregularities carried out by plaintiffs in Criminal nature as mentioned
in master circular. So without going through Forensic Audit Report the
decision of defendants declaring plaintiff as fraud cannot be justified. It
is defendants contention that plaintiff has diverted and siphoned off the
funds. It is also their contention that said facts is noticed in Forensic
Audit. In such circumstances, Forensic Audit report is the best and
relevant evidence to decide the issue. In absense of said report, the
order of defendant declaring plaintiffs as fraud will not sustain. As such,
plaintiffs have made out prima facie case.
29. Now next question is of following rule of natural justice i.e
opportunity of hearing to the other party. Here, as per Master Circular
no where it is mentioned that before taking such decision Bank should
give hearing the defaulter/borrower. It is argued by Ld. counsel for
plaintiff that cosidering this procedural aspect and consequences on
declaration as fraud it is quite but natural and it is explicit that chance
of hearing should have been given to plaintiff. Here, there is one letter
issued by plaintiff dated 15/01/2019 to defendant calling upon to
submit the documents and material relied by bank in declaring plaintiffs
account as fraud. It is admitted position on record that despite said
demand the defendant has not provided document or Forensic Audit
Report to plaintiff.
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30. On the point of opportunity of hearing and rule of natural justice
the learned Counsel for plaintiff has relied on following citations.
1) Writ Petition ( Lodg.) No. 345/2011 Finolex Industries Limited
& Anr. v/s. Reserve Bank of India & Ors. Bombay High Court
dated 23/24 August, 2011.
2) Writ Petition No. 2483/2016 Parekh Alumix Limited v/s.
Allahbad Bank & Ors. with Writ Petition no. 2485/2016 Devanshu
Praveen Desai v/s. Allahbad bank with Writ Petition No.
2487/2016 Deepen Arun Parikh Vs. Allahabad Bank & Ors.
Bombay High Court dated 27.06.2017.
3)Civil Writ Petition No. 3307/2016 M/s. Oswan Apparels
Pvt.Ltd., Ludhiyana & Ors. Vs. State Bank of India, Ludhiyana &
Anr. Punjab and Haryana High Court dated 14/02/2017.
4) S.B. Civil Writ Petition No.7488/2016 Moserbaer India Ltd.
v/s. State Bank of Bikaner & Jaipur & Anr. Rajeshthan at Jaipur
Bench Jaipur Dated 07.09.2016.
31. I have gone through all the citations. The ratio is that a
determination in regard to an entity being a fraud can only be made
after complience with the procedure laid down in master circular.
Absent complience with the procedural norms and upon a breach of
principals of natural justice, the decision would stand vitiated. It is
further observed that it is settled principal of law that the documents
that are relied upon by any authority in arriving at a conclusion must be
made available to the affected party to confirm to the principle of
natural justice. So also the party ought to have been afforded adequate
oppourunity to presnet their case. So considering above ratio, I am of
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the opinion that opportunity of hearing ought to have been given to
plaintiffs before taking decision of fraud. Therefore, the balance of
convenience lies in favour of plaintiffs.
32. In Citations at serial no.4 (Supra) in the case of Moserbae India
Limited is is observed that " An opportunity of hearing ought to be
effective hearing. Fair play demand that the documents/evidence on
which identification comittee relied before issuing a show cause notice,
must be shared or shown to the petitioner/borrower company so that
they can put forward their defence and explaination purport of the
documents ." Similarly in other citation of M/s. Oswal Apparels Privated
Limited (supra) it is observed that " It is also settled principle of law
that the documents that are relied upon by any authority in arriving at a
conclusion must be made available to the affected party to confirm to
the principles of natural justice. That apart, the petitioners ought to
have been afforded adequate opportunity to present their case in its
correct perspective. " So considering above ratio I am of opinion to
have given opportunity of hearing to plaintiff / borrower. In absence of
its balance of convenience lies in favour of plaintiffs.
33. Here, plaintiffs are not claiming the relief against the recovery
proceedings initiated by lenders Bank. The learned counsel for plaintiffs
fairly submitted that plaintiffs are not making any grievance here about
the recovery proceeding initiated by defendants under various forums.
As per learned counsel plaintiffs is only seeking relief against
declaration of fraud being without following due procedure. As per the
consequences of declaration as fraud there is no bar for taking steps for
recovery of loan amount. It goes to show that defendant Bank can go
ahead with recovery proceedings . However , considering above
discussion I am of the opinion that prima - facie there is material on
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record to show that defendant has not followed due procedure before
declaring plaintiff account as fraud. Therefore balance of convenience is
in favour of plaintiff.
34. The learned counsel for defendants relied on citation of Hon'ble
Apex court reported in (2012) 6 Supreme Court Cases 792. Said
citation is on the point of factors to be considered while granting
temprory injunction. It is observed that prim facie case in favour of
party seeking relief is not enough. It must be shown that injury suffered
by plaintiff on refusal of temprory injunction would be irreparable. No
doubt while granting injunction it is necessary to consider above
mention factors. Here, as per above discussion prima facie case and
balance of convenience is in favour of plaintiff. Therefore, if defendant
bank is allowed to go ahead without following due procedure, then it
amounts to causing irreparable loss to plaintiff.
35. It is a matter of record that the consequences of declaration of
fraud are much serious in nature inclusive of penal consequences.
Therefore, without giving opportunity and without following the
procedure given in master circular it is not expected to take such
decision. If it is allowed to go ahead, then it will cause irreparable loss
to plaintiff. As such, plaintiffs have made out prima facie case to grant
relief in his favour. So with this discussion, I have answered point nos.
1 to 3 are in affirmative. Hence, I have proceed to pass following
order.
ORDER
1. Notice of Motion No. 262/2020 is hereby allowed.
2. Defendants banks personally or through their agents, servants or
representatives, officers and/or any person or authorities claiming
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through them are hereby temporarily restrained from taking coercive
action and from acting on their declaration of plaintiffs account as red
flag, fraud and willful defaulter based on master circular, defendants or
their representatives are restrained from publishing the name of
plaintiffs as willful defaulter till further order.
3. Defendants may submit their written statement in detail to expedite
hearing.
4. It is needless to say that defendants banks are at liberty to proceed
against the plaintiffs regarding recovery proceedings, attachment, sale
of attachment property to recover the defaulted loan.
5. Cost as in cause.
6. Notice of motion No. 262/2020 is disposed off accordingly.
Date : - 11/02/2020 (R.V.Kokare)
Judge,
City Civil Court, Gr. Bombay.
Dictated on : 11/02/2020
Transcribed on: 12/02/2020
Signed by HHJ: 18/02/2020
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CERTIFIED TO BE TRUE AND CORRECT COPY OF THE ORIGINAL
SIGNED JUDGEMENT/ORDER”
UPLOAD DATE TIME NAME OF STENOGRAPHER
18/02/2020 5.00p.m. Mrs. V.V.Malgaonkar
Name of the Judge HHJ Shri R.V.Kokare(CR
No.31)
Date of Pronouncement of
Judgment/Order
11/02/2020
Judgment/order signed by P.O on 18/02/2020
Judgment/order uploaded on 18/02/2020
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