Final Order 1

Order Details: Notice of Motion
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IN THE BOMBAY CITY CIVIL COURT AT GREATER BOMBAY
NOTICE OF MOTION N0.261 OF 2020
IN
STAMP NO.13585 OF 2019
(CNR No.MHCC01-000633-2020)
Mr.Abhay Narendra Lodha )...Plaintiff
Versus
Punjab National Bank & Anr. )...Defendants.
Appearance:-
Adv.Mr.Bobade a/w Mr. Karan Bhosle a/w. Priyanka Dubey for the
plaintiff.
Adv. Alexander for defendant No.1.
Adv. A.R.Bamane for defendant No.2.
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 plaintiff for
temporarily restrained to the defendants from acting upon the
defendants declaration of the account the company as 'Fraud/Willful
defaulter' account and taking any coercive action on account or on the
basis of the said declaration, in any manner of whatsoever nature.
Brief facts of notice of motion of the plaintiff are as under-
2. The plaintiff is a director ( Suspended Board in view of admission
of Section 7 application under provisions of I & B Code, 2016 by the
Hon'ble NCLT, Mumbai) and promoter of “Topworth Pipes &Tubes
Pvt.Ltd.” ( hereinafter referred to as the “Company” or “TPTPL”), a
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company which has been incorporated on 18/11/2005. The defendants
are two of the lenders of TPTPL Company. The defendants have labeled
the company as fraud/willful defaulter.
3. The plaintiff further submitted that the company is into
manufacturing of Helical Submerged Arc Welding (H-SAW) and Electric
Resistance Welded(ERW)steel pipes. H-SAW pipes are made from helical
rolling of steel coils. The main advantage of using H-SAW pipes is that it
can be manufactured to have high thickness as well as a large diameter.
The plant was commissioned in the year 2010. It is equipped with State-
of-the art, High speed two-step Spiral pipe mill with continuous welding
speed of 10mts/mins. Commercial production of HSAW started on
16/09/2019 and for ERW on 8/04/2010. The Company's products were
certificated with prestigious American Petroleum Institute (API), which
is renowned International Institution certifying the international
standard for products used in the Oil and Gas Industry. The defendant
banks are lender of the plaintiff. The defendant banks had sanctioned
various credit facilities after due diligence and by accepting several
securities in the form of 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. The delay in sanctioning of working capital funds
adversely affected the ability of the company to procure raw material at
favorable prices. Pending orders from reputed clients forced to company
to procure the raw material at higher cost, further affecting margins.
Therefore, company account became irregular and classified as NPA.
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The plaintiff tried his best and requested the defendant bank for
reconsideration. Unfortunately, it was not materialized.
5. The plaintiff has further submitted that in the meantime Bank of
Baraoda has approached to Hon'ble National Company Law
Tribunal(NCLT) under section 7 of I & B Code, 2016 looking for
resolution. The said application has been admitted vide order dated
11/12/2018 and IRP has been appointed. In the meantime, consortium
of lenders decided to initiate recovery proceedings under the provisions
of Securitization and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002 ( referred to as SARFAESI
Act hereinafter). Punjab National Bank has already issued demand
notices under section 13(2) of SARFAESI Act, 2002 on 21/11/2016 on
behalf of the consortium. Punjab National Bank also filed an
application under section 14 of SARFAESI Act, 2002 praying for physical
possession of the property which has been allowed and order dated
15/02/2018 has been passed by Collector, Raigarh, Maharashtra to take
physical possession of the property.
6. The plaintiff has further stated that on 18/11/2015 for the first
time it was informed in consortium that Bank of Baroda has red flagged
the account based on remarks of statutory auditor. It was thus
communicated that issue of RFA needs to be cleared before SDR. Bank
of Baroda for the first time requested on 18/11/2015 to conduct
forensic audit. On 18/11/2015, plaintiff had informed the consortium
that company is ready for forensic audit. Lead bank was asked to
finalize the name of forensic auditor to complete the forensic audit with
90 days as per RBI Guidelines. On 05/01/2016, consortium decided to
appoint M/s.J.Singh & Associates as the forensic auditor. On
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22/04/2016, in the consortium meeting interim forensic report was
kept for discussion without providing the copy of the same to the
plaintiff.
7. 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
plaintiff is submitted that the plaintiff has 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.
8. The defendants resisted this notice of motion by filing its reply.
Brief facts of the reply of the defendants are as under-
9. The defendants bank state that the reliefs sought for in the notice
of motion is clearly in violation of the circulars of the RBI which is
issued under the BR Act and is having the force of law.
10. For the purpose of determining whether the plaintiff is entitled to
the interim reliefs at all, the banks state that it is important to peruse
the circulars issued by the RBI in this regard. The very purpose of the
issuance of the willful defaulter circular by the RBI is to ensure financial
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discipline by borrowers/corporates in utilizing the funds availed from
the public coffers are not misused to the benefit of unscrupulous
borrowers/promoters and default in the repayment of the credit
facilities availed from banks and financial institutions. The plaintiff is
seeking reliefs which are clearly in violation of prevalent law and
therefore,it is not entitled to the same.
11. The defendants further submitted that without prejudice to the
exact amount owed to the bank, it is clear that amounts owed to the
various banks is to the tune of Rs.1097.04 crores as admitted by the
plaintiff, who is the guarantor to the repayment of dues of Borrower
Company and which is public funds. Hence, going by the very statement
of the plaintiff, the plaintiff is liable for the repayment of the dues
owned by Borrower company to the bank. The security provided by the
plaintiff and the Borrower Company are insufficient to cover the
principal amount let alone the accrued interest. Hence, merely by
stating that about the primary security and collateral security, the
plaintiff is attempting to portray that the Bank despite having sufficient
security is initiating punitive action against the plaintiff, which is
contrary to facts. The plaintiff failed and neglected to bring on record
the actual facts which pertains to misuse of credit facilities by the
Borrower Company acting through the plaintiff. Further, from the
forensic audit done on the account of defendant no.3 it is clear that the
plaintiff has misused funds which is seen in letter dated 4/10/2016
addressed by the Bank to Borrower Company, whereby several financial
irregularities were pointed out to Borrower Company and which the
Borrower Company through its Director, plaintiff replied by letter dated
22nd November, 2016. The Borrower Company by letter dated 9th May
2017 provided additional reply which clearly shows that the Borrower
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Company acting through its Director, plaintiff, made out of turn
payment to an unsecured creditor of the Borrower Company.
12. The defendants further submitted that the plaintiff is attempting
to blame the financial lenders for the losses sustained by the Borrower
Company. The bank states that the business failure caused to the
Borrower Company was on account of mismanagement of funds by the
plaintiff. The bank had obtained a techno economic viability report and
a forensic audit report of the Borrower Company financials. The
restructuring of the Borrower Company could not be undertaken on
account of fund diversion and fraud committed by the Directors of the
Borrower Company, including the plaintiff. Hence for any restructuring
to be considered , a change of management was required and hence the
same was not possible. The defendant no. 2 bank had already red
flagged the account (RFA) of the Borrower Company based on their
statutory auditor's report and hence any restructuring could be
undertaken only after the RFA was withdrawn which Borrower
Company through the plaintiff failed to do. On these grounds, the
defendants bank are requested that the present notice of motion of the
plaintiff may kindly be dismissed with costs.
13. Heard learned counsel Mr.Karan Bhosle on behalf of the plaintiff
and Ld.Counsels Mr.Alexender on behalf of defendant no.1 and
Mr.A.R.Bamne on behalf of defendant no.2. 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 plaintiff proves
prima facie case ?
-yes-
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2 Whether the plaintiff proves
that balance of convenience lies
in favour of the plaintiffs ?
-yes-
3 Whether the plaintiff proves
that plaintiff 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-
14. Heard learned counsels appearing on behalf of plaintiff 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 willfull defaulter/fraud. As against this,
it is the grievance of plaintiff that defendants have not followed due
procedure laid down in master circular while declaring him as willfull
defaulter/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.
15. The learned counsels on behalf of the defendants have 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
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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 plaintiff that this is a suit for declaration against the action initiated
by defendants. Plaintiff is challenging the virus of action taken by
defendants and therefore, suit will lie as per section 9 of Civil Procedure
Code.
16. 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, plaintiff
is seeking declaration against the action of defendants declaring them
as willfull defaulter/fraud. The action leveled by defendants 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.
17. The learned counsel on behalf of the defendants have further
argued that plaintiff is asking for injuction against action of defendants
on declaring his account as fraud. It is the right accrued to defendants
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
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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 diffrent. Plaintiff is
making grievance that declaration of fraud is not as per procedure laid
down in Master Circular. Plaintiff is 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.
18. The learned counsel on behalf of defendants have argued that
the suit is not maintainable in view of declaration by NCLT about
liquidation of borrower Company and appointment 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
learned counsel for plaintiff 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.
19. 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
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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.
20. It is an admitted position on record that defendants have
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
recovery proceedings nor by way of this suit plaintiff is challenging or
restraining the recovery proceeding. No doubt, plaintiff is not
challenging the recovery proceedings nor challenging the proceedings
which is pending before NCLT. Here, plaintiff being suspended director
is challenging his 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.
21. Moreover, learned counsel for plaintiff 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 plaintiff 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
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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 defendants declaring him as fraud under the
Master Circular issued by R.B.I. Therefore, such suit of declaration is
maintainable before Civil Court.
22. It is argued on behalf of defendants that plaintiff is 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 plaintiff has no locus to file the suit. As against this, it is argued by
learned counsel for plaintiff 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, plaintiff can very well seek relief before
Civil Court in absence on comapany as a party. Admittedly, plaintiff has
challenged the declaration of Companies account as fraud. However, it
is made clear that plaintiff is 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 him. 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.
23. So far as factual aspect is concerned, it is the grievance of plaintiff
that, defendants have 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 defendants that
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before declaring plaintiff as fraud, banks have followed the guidelines
and procedure given in Master Circular by giving fair opportunity to
plaintiff to place his case. So the nature of dispute is that it is the
contention of plaintiff that defendants have not followed proper
procedure before declaring him as fraud while it is the defence of
defendants bank that plaintiff is 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.
24. It is first grievance of plaintiff 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 plaintiff's account was
declared as RFA. There is only information is that plaintiff's account is
declared as fraud on 8/10/2018. So, it goes to show that defendants
have not observed the time limit given in master circular. As against
this, it is the submission of learned counsel for defendants that
plaintiff's account is declared as fraud on 8/10/2018. Admittedly, there
is no any prima facie evidence produced by the defendants that the
defendants bank followed time limit as specified in master circular in
respect of declaring fraud to the plaintiff. So, it goes to show that
defendants have not followed the time limit as specified in master
circular. Even, no any explantion is coming forth from defendants about
not following the time limit.
25. I have gone through the Master Circular issued on 01/07/2015. It
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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 defendants bank came with clear statement as to when plaintiff's
account is declared as RFA. It is only contention that plaintiff's account
was declared as fraud. In absence of exact date of declaration as RFA it
is difficult to conclude whether defendants bank have declared
plaintiff's account has fraud within six months from RFA. As defendants
bank is silent about date of declaration of the account as RFA, adverse
inferance can be drawn that defendants bank have to adhered the time
limit of six months in declaring plaintiff's account as fraud. Even no
explnation is given on behalf of defendants bank for keeping mum
regarding date of declartion of the plaintiff's account as RFA. So, this
point will go against defendant's 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
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
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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.
27. Relying on such delay the learned counsel for plaintiff 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 defendants submitted that the issue of time limit is
in between defendants 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,
manupulation of books of account or through fictitious accounts
and conversion of property.
c) Unauthorized credit facilities extended for reward or for illegal
gratification.
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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 defendants that plaintiff has diverted the
funds to sisters Companies, he 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 plaintiff nor defendants have taken care to place it on
record to corroborate their contension about irregularities carried out
by plaintiff 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 absence of said report, the order of defendant
declaring plaintiff as fraud will not sustain. As such, plaintiff has 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
no where it is mentioned that before taking such decision Banks 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
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of hearing should have been given to plaintiff. Here, there is one letter
issued by plaintiff dated 15/01/2019 to defendants calling upon to
submit the documents and material relied by bank in declaring
plaintiff's account as fraud. It is admitted position on record that despite
said demand the defendants have not provided document or Forensic
Audit Report to plaintiff.
31. 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.
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
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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
plaintiff before taking decision of fraud. Therefore, the balance of
convenience lies in favour of plaintiff.
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 Private
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 decesion, the defendants bank ought to have given
opportunity of hearing to plaintiff / borrower. In absense of its balance
of convenience lies in favour of plaintiff.
34. Here, plaintiff is not claiming the relief against the recovery
proceedings initiated by lenders Banks. The learned counsel for plaintiff
fairly submitted that plaintiff is not making any grievance here about
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the recovery proceeding initiated by defendants under various forums.
As per learned counsel for plaintiff 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 defendants 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 defendants have not followed due procedure before
declaring plaintiff account as fraud. Therefore, balance of convenience
is in favour of plaintiff.
35. 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 defendants
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
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 plaintiff has made out prima facie case to grant
relief in his favour. So with this discussion, I have answered point nos.
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1 to 3 are in affirmative. Hence, I have proceed to pass following
order.
ORDER
1. Notice of motion No. 261/2020 is hereby allowed.
2. Defendants banks personally or through their agents, servants or
representatives, officers and/or any person or authorities claiming
through them are hereby temporarily restrained from taking coercive
action and from acting on their declaration of account of the plaintiffs
company as fraud and willful defaulter and/or taking any coercive
action on account of and/or basis of the said declaration, in any manner
of whatsoever nature based on master circular, defendants or their
representatives are restrained from publishing the name of plaintiff 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. 261/2020 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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