Final Order 1

Order Details: Notice of Motion
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IN THE BOMBAY CITY CIVIL COURT AT GREATER BOMBAY
NOTICE OF MOTION N0.260 OF 2020
IN
STAMP NO.12331 OF 2019
(CNR NO.MHCC01-000631-2020)
Mr.Abhay Narendra Lodha & Ors. )...Plaintiffs
Versus
Punjab National Bank & Ors. )...Defendants.
Appearance:-
Ld.Adv.Mr.Bobade a/w. Priyanka Dubey for the plaintiffs.
Ld.Adv. Mr.Alexander for defendant No.1.
Exparte against defendant no.3.
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 acting upon notice date
16/10/2019 for declaration willful defaulters and taking any coercive
action against the plaintiffs.
Brief facts of notice of motion of the plaintiffs are as under-
2. The plaintiffs are the Guarantors/Directors (Suspended Board
due to appointment of Provisional Liquidator pursuant to order of
Hon'ble High Court, Bombay), of the defendant No.3 Topworth Steels &
Power Private Limited ( hereinafter also referred to as the “Company” or
“TSPPL”), a company which has been incorporated on May 18, 2004.
The defendant No.1 is one of the lenders of the Company (hereinafter
referred to as the “Defendant Bank”). The defendant no.2 is a
committee of defendant bank formed for the purpose of identification of
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“willful defaulters” and its review, under the Guidelines as issued by the
R.B.I in this regard. Plaintiffs are in default of repayment of loan.
Plaintiffs account went into NPA. Defendant Bank initially declared said
account as “Red flagged Account” ( herein after referred to as RFA) and
thereafter they have declared ''account as fraud''. Plaintiffs are
challenged the very declaration as fraud being without following the
procedure given in master circular and against rule of natural justice.
3. The plaintiffs further submitted that their company is
incorporated in the year 2004. It has very good track record. The
company is dealing into manufacturing of structural steel long products
like Beams, channels and Angles, M.S.Billets and sponge iron. The
company within a short period has been able to achieve the stringent
quality requirement and has been awarded various certificates for
completing the projects in time. The defendant bank is the lenders of
plaintiffs. The defendant bank has sanctioned various credit facilities
after due diligence and by accepting sufficient securities in the form of
collateral securities and personal guarantee.
4. Since 2010, the Iron Steel Industry is passing through a difficult
situations. Such industries further came under pressure by cheap import
of steel from China and Russia. In the year 2017, the Steel Industry
witnessed its toughest set back. Other reputed companies dealing in
same business. Short supply of domestic iron are led to increase in
prices thereby increasing the cost of production. The cost of raw
material and other manufacturing inputes had gone up considerably,
but the company could not pass on this increased cost to the end user
due to a slowdown in the key industry segments such as construction
and infrastructure. Moreover, non availability of working capital funds
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adversely affected the ability of the company to procure raw material at
favorable prices, pending orders from reputed clients forced the
company to procure the raw material at a higher cost, etc. resulting in a
squeeze in operating margins. Therefore, companies account became
irregular and classified as NPA. Plaintiffs are tried their best and
requested the defendant bank for reconstruction. Unfortunately it was
not materialized.
5. The plaintiffs state that thus only on account of interest and penal
interest a sum of Rs.3,295,523,416/- and on account of other financial
charges a sum of Rs.2,956,829,826/- totaling Rs.6,252,353,242/- has
been paid by company to the banks in Nine Financial years commencing
from F.Y. 2009-10 to 2017-18. This obviously demonstrates the strength
of the company and the position that by advancing various facilities to
company, the banks have always been at an advantage.
6. 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 plaintiffs have prima facie case, Balance
of convenience in favour of the plaintiffs, If this notice of motion is not
granted in favour of the plaintiffs, then plaintiffs will suffer irreparable
loss, which will not compensate in terms of money. Hence, this notice of
motion.
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7. The defendant no.2 is the committee of the defendant no.1. The
defendant no.1 resisted notice of motion of the plaintiffs by filing its
reply. The defendant no.3 is duly served, but the defendant no.3 is
absent. Hence, this notice of motion proceed without reply .
Brief facts of the reply of the defendant no.1 are as under-
8. The plaintiffs are personal guarantors to the amount owned by
defendant no.3 Topworth Steel and Power Private Ltd. Any action
initiated by the bank against these plaintiffs including penal action
under the RBI circulars cannot be considered as illegal, arbitrary and/or
bad in law without prejudice to the exact amount owed to the bank, it is
clear that the amounts owned to the various banks is to the tune of
Rs.1621.60 crores as admitted by the plaintiffs, who are the guarantors
to the repayment of dues of defendant no.3 and which is public funds.
Hence, going by the very statement of the plaintiffs each of the plaintiffs
are jointly and severally liable for the repayment of the dues owed by
the defendant no.3 to the bank. Furthermore, despite being solvent, the
plaintiffs have deliberately and intentional defaulted in the repayment
of the amounts owed to the Bank whereby the bank in adherence to the
RBI circular of willful defaulters will have no initiate appropriate action
after giving notice to all concerned. Any avoidance of action as
contemplated under the RBI circular will be treated as deliberate non
compliance by the RBI which entails penal action against the bank.
9. The bank states that the security provided by the plaintiffs and
the defendant no.3 are in sufficient to cover the principle amount let
alone the accrued interest. Hence, merely by stating that about the
primary security and collateral security the plaintiffs are attempting to
portray that the bank despite having sufficient security is initiating
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punitive action against the plaintiffs which is not the case. Further, from
the forensic audit done on the account of defendant no.3, it is clear that
plaintiffs have misused funds which is seen in email dated 16th
December 2017 addressed by the Bank to the defendant no.3. However,
no response was forthcoming from the defendant No.3 to the said
email. The plaintiffs have deliberately omitted to mention of the misuse
of financial limits from the lenders by providing huge advance to its
suppliers contrary to prudent business norms. This has been highlighted
in the forensic audit conducted on the financials of defendant no.3.
Hence, there are no grounds for the Directors and Guarantors to claim
any relief for misdeeds committed by them in the conduct of defendant
no.3's business.
10. The defendants bank states that implementation of the guidelines
are subject to the borrower being in genuine financial difficulty and not
applicable to the defendant no.3 or the plaintiffs in view of forensic
audit report. Furthermore, the plaintiffs seeks implementation of certain
RBI guidelines by the bank whilst seeking to restrain the bank from
proceeding under R.B.I. circulars which are mandatory in nature.
Hence, the plaintiffs are approbating and reprobating which cannot be
permitted. The prior record of the defendant no.3 may have been goods
but the actions of the plaintiffs nos.1to4 as Directors of defendant no.3
has caused losses and financial stress and thereby cannot relied upon
for the present matter. Further, the forensic audit report clearly shows
diversion of funds and deliberate advances made by the plaintiffs Nos.
1 to 4 acting for defendant no.3 and therefore, bared from claiming to
the contrary.
11. The plaintiffs are clearly committed willful default as defined in
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the RBI circular and seeks protection of this court to evade from the
consequences of such willful default. The defendant bank states that the
plaintiffs are not entitled to an injunction. On these grounds the
defendants bank requested that present notice of motion may kindly be
rejected with costs.
12. Heard learned counsel Mr.Bobade on behalf of the plaintiffs and
Ld. Counsel Mr.Alexander on behalf of defendant no.1 Bank. 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
irreparable loss, if this notice of
motion is rejected?
-yes-
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
defendant, 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 plaintiffs have
diverted and siphoned off the loan amount and not kept the obligations
of repayment of amount in time. Therefore, based on forensic audit
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report plaintiffs all declared as willfull defaulter/fraud. As against this,
it is the grievance of plaintiffs that defendant has not followed due
procedure laid down in Master Circular while declaring them as fraud/
willful defaulter. Defendant had not given opportunity of hearing and
thereby 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 defendant no.1.
14. The learned counsel on behalf of the defendnat no.1 has taken
the objection is that defendant no.1 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
initiated by defendant no.1. Plaintiffs are challenging the virus of action
taken by defendant no.1 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 willfull defaulter/fraud. The action leveled by defendant no.1 is
based on master circular issued under R.B.I Guidelines. Therefore, in
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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
defendant no.1 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 defendant no.1 has further
argued that plaintiffs are asking for injuction against action of
defendant no.1 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
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 defendant no.1. 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 defendant no.1 has argued that
the suit is not maintainable in view of declaration by NCLT about
liquidation of borrower Company and appointment of liquidator. It is
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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 empowered
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 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 plaintiffs that plaintiff is not against the
recovery proceedings nor by way of this suit plaintiffs are challenging or
restraining the recovery proceeding. No doubt, plaintiffs are not
challenging the recovery proceedings nor challenging the proceedings
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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 defendant 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 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 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. The learned counsel on behalf of the plaintiffs argued that the
defendants bank declared to the plaintiff's company as fraud without
giving opportunity to the plaintiffs. There is serious consequences after
declaring fraud and willful defaulter in view of master circular.
Therefore, the defendants bank had not followed principle of natural
justice before declaring fraud to the plaintiffs company. As against, the
learned counsel on behalf of the defendant no.1 argued that the
defendant bank has declared fraud to the plaintiffs as per master
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circular. Therefore, the plaintiffs are not entitled to ask any injunction
against the defendants. The learned counsel on behalf of the defendant
no.1 relied on the Judgment of Hon'ble Supreme Court of India in
Finolex Industries Limited & Anr. Vs. Reserve Bank of India and Ors. in
Civil Appeal No. 8918/2012 (arising out of SLP(C)No. 28477 of 2011).
The Hon'ble Supreme Court has observed in para no.38- “ We do not
also find any force in submission of Mr. Bhaskar P. Gupta that the Master
Circular has penal consequences and, therefore, has to be literally and
strictly construed. Clause 4.3 of the Master Circular, which contemplates
criminal action by banks/financial institutions, is extracted
hereinbelow:
“4.3 Criminal Action by Banks/Fls
It is essential to recognize that there is scope even under the
exiting legislations to initiate criminal action against willful
defaulters depending upon the facts and circumstances of the
case under the provisions of Section 403 and 415 of the
Indian Penal Code (IPC) 1860. Banks/Fls are, therefore,
advised to seriously and promptly consider initiating criminal
action against willful defaulters or wrong certification by
borrowers, wherever considered necessary, based on the facts
and circumstances of each case under the above provisions of
the IPC to comply with our instructions and the
recommendations of JPC.
It should also be ensured that the penal provisions are used
effectively and determinedly but after careful considerations
and due caution. Towards this end, banks/Fls are advised to
put in place a transparent mechanism, with the approval of
their Board, for initiating criminal proceedings based on the
facts of individual case .”
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22. Admittedly, before declaring fraud to the plaintiffs by defendants
bank, the defendants bank have not heard to the plaintiffs, as such
defendants bank have not followed principle of natural justice.
Therefore, the observations in para no.38 of the above citation with
due respect is not applicable to the present case in my hand in favour of
the defendants due to differ of facts and circumstances.
23. 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 plaintiffs as fraud, bank has
followed the guidelines and procedure given in master circular by
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
defendant to show that it has followed due procedure before declaring
plaintiff as fraud.
24. 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. So it goes to show that defendant no.1 has not
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observed the time limit given in Master Circular. As against this, it is
the submission of learned counsel for defendant that the defendant
has followed the time limit given in master circular.
25. 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
was declared as fraud. 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 defendant bank for keeping mum
regarding date of declartion of the plaintiffs account as RFA. So, this
point will go against defendant bank.
26. 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
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discuss the issue. Such meeting must be convened within 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. There is no evidence on behalf of
the defendant bank while declaring fraud to plaintiffs company, the
defendant bank followed the time limit. Even no any explanation is
coming forth from defendant about not following the time limit.
27. Relying on such delay the learned 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
learned 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.
28. 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,
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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.
29. Here, it is alleged by defendant that plaintiffs have diverted the
funds to sisters Companies, they had used the loan amount for purpose
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. 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 plaintiffs have 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/willful defaulter will not sustain. As such,
plaintiffs have made out prima facie case.
30. Now next question is of following rule of natural justice i.e
opportunity of hearing to the other party. Here, as per master circular
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no where it is mentioned that before taking such decision Bank should
give hearing the defaulter/ borrower. It is argued by Ld. counsel for
plaintiffs 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 plaintiffs. Here, there is one letter
issued by plaintiffs dated 19.10.2019 to defendant calling upon to
submit the documents and material relied by bank in declaring plaintiffs
account as fraud/willful defaulter. It is admitted position on record that
despite said demand the defendant has not provided document or
Forensic Audit Report to plaintiffs.
31. On the point of opportunity of hearing and rule of natural justice
the learned Counsel for plaintiffs have 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
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Jaipur Bench Jaipur Dated 07.09.2016.
32. 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 present their case. So considering above ratio, I am of
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.
33. In Citations at serial no.4 (Supra) in the case of Moserbae India
Limited it 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 explain 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 that
before taking decisions, the defendants bank ought to have given
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opportunity of hearing to plaintiff / borrower. In absense of its balance
of convenience lies in favour of plaintiffs.
34. Here, plaintiffs are not claiming the relief against the recovery
proceedings initiated by lenders Bank. The Ld. Cousel 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 are 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
record to show that defendant has not followed due procedure before
declaring plaintiffs account as fraud. Therefore, balance of convenience
is in favour of plaintiffs.
35. The learned counsel for defendant 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 plaintiffs. Therefore, if defendant
bank is allowed to go ahead without following due procedure then it
amounts to causing irreparable loss to plaintiff.
36. It is a matter of record that the consequences of declaration of
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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 plaintiffs. As such plaintiffs have made out prima facie case to grant
relief in their 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. The notice of motion no.260/2020 is allowed.
2. Defendants personally or through their agents, servants or
representatives, officers and/or any person or authorities claiming
through them are hereby temporarily restrained from taking any
coercive action upon notice dated 16/10/2019 and from branding the
plaintiffs as willful defaulters and taking any coercive action including
publication of names 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 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 260/2020 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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