Final Order 1

Order Details: Notice of Motion
Pdf Text: 1 NM No. 1230/2020 in
Com. ST. NO. 3777/2020
MHCC010034132020
IN THE BOMBAY CITY CIVIL COURT AT GREATER BOMBAY
NOTICE OF MOTION N0.1230 OF 2020
IN
COMMERCIAL STAMP NO. 3777 OF 2020
1. Mr.Chandrakant Shankar Lad )
Son of Shri Shankar Arjun Lad )
Aged 49 years, Occu:Service, )
An adult, Indian Inhabitant, )
Having address at D/111/201, )
Plot No. 15, Sector 22, Haware, )
Green Park, Sahajivan PH-1 Chs Ltd. )
JNPT Road, Navi Mumbai 410218. )
2.Mr.Mangesh Hiraji Gorivale )
Son of Shri Heeraji Narayan Gorivale )
Aged 35 years, Occu:Service, )
An adult, Indian Inhabitant, )
Having address at Durgamata Rahiwashi )
Sangh, Waghari Wada, Datta Mandir road, )
Vakola Bridge, Santacurz East, )
Mumbai 400055. )
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3. Abhay Narendra Lodha )
Aged: 48 years, Occu:Business, )
Ex-Promoter, Akshanta Mercantile )
Pvt.Ltd.,an Adult, Indian Inhabitant, )
Having address at 308, 3rd Floor, )
Ceejay Towers, Dr.Annie Besant Road, )
Worli Sea Face, Mumbai-400 021. )...Plaintiffs
Versus
Bank of Baroda, )
A Bank constituted under the provisions of )
the Banking Regulation Act, 1949, )
having its Head Office at Baroda Bhavan )
R.C. Dutta Road, Alkapuri, Baroda: 390 007 )
and Branch Office at Fort University Branch, )
Mittal Avenue 7/9, Nanik Motwane )
Marg, Fort: Mumbai-400023 )
through its Branch Manager )...Defendant.
CORAM: HIS HONOUR JUDGE SHRI R.V.KOKARE
DATE :22/12/2020 (C.R.No.31).
Appearance:-
Ld. adv. Mr.Srinivas Bobade advocate for plaintiffs.
Ld. adv. Mr. A.R.Bamane for defendant.
ORDER
This is a notice of motion taken out by the plaintiffs for
temporarily restraining to the defendant from acting upon its
declaration of plaintiffs account as fraud.
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Brief facts of notice of motion of the plaintiffs are as under-
2. The plaintiff nos. 1 and 2 are the suspended Board of Directors
and plaintiff no.3 is the Ex-Promoter of M/s. Akshata Mercantile
Pvt.Ltd. (hereinafter referred to as the ''AMPL''). The defendant is one
of the lender of AMPL. The plaintiffs company M/s. Akshata Mercantile
Pvt.Ltd. is duly registered and incorporated under the provisions of the
Companies Act, 1956. The defendant is the lender bank of plaintiffs
company under the consortium Banking arrangement and is the Bank
constituted under the provisions of the Banking Regulation Act, 1949.
The company AMPL is into trading of Iron and Steel products like HR
Coil. The company has an established track record of supplying HR and
CR coils and sheets to large number of reputed Indian Companies. It has
been an approved supplier to large Indian Companies.
3. The plaintiffs further state that the State Bank of India is the
leader of consortium of working capital facilities. The defendant bank is
one of the member bank of the said consortium. The defendant bank
and other members of consortium sanctioned loan facilities to the
plaintiffs company against the sufficient and adequate securities. The
global steel industries witnessed one of its toughest times during FYV-
2010 till FY-2017 with demand not moving in tandem with the capacity
additions. China, which was the largest steel producer in the world was
witnessing a slow down in its economy resulting in excess steel capacity,
which was more than the total steel production capacity of India. The
excess steel produced was diverted into the International Markets
resulting in excess supply and thereby suppressing the steel product
prices. The devaluation of yawn aggravated the situation making it
more lucrative for the steel exports from China.
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4. The plaintiffs further state that resulting effect Yuan devaluation
and slowdown in Chinese Economy, it was that China started dumping
its relatively cheap steel in Indian as well as other global markets. In
2014-15, India’s steel imports were 9.3 million tones and export 5.5
million tones. China's share was 3.6 million tones, up 232% year on
year in FY 2015. This dumping of steel from China was not only
impacted the company but also other majors steel producers as well,
which was reflected in their financial statements of these periods.
5. The plaintiffs further state that in light of the above position, if
the request of restructuring made in the financial year 2015-2016 had
been accepted the present situation would not have been arisen. In the
meantime and operational creditor of plaintiffs company “AMPL”
approached to Hon'ble National Company law Tribunal (NCLT) u/s.9 of
I & B Code, 2016 looking for resolution. The said application was
admitted vide order dated 23/07/2018, and IRP has been appointed.
Committee of Creditors (''COC'') was formed for the purpose of
resolution.
6. The plaintiffs further state that since the beginning of F.Y.2009-
2010 till F.Y.2017-2018 only on the above three counts, made
substantial payments to the banks i.e. total amount of
Rs.3,931,702,952/- which is detailed described in para no.11 of the
plaint. The examination of details of the repayments made from the
chart which is mentioned in para no.13 of the plaint would without any
doubt disclose the factual and the actual position of the work done by
the company in operating the company successfully except during the
period when there was a problem with the industry as a whole. This
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establishes that the company is not and cannot be a fraud. The AMPL
would not meet its payment/repayment obligations to the defendant
due to various factors which were out of control and has been alleged to
have diverted, siphoned the financial assistance taken from the
defendant bank which is under challenged.
7. The plaintiffs further submitted that during a routine meeting the
plaintiffs came to know that the defendant bank has declared fraud to
the account of AMPL company. The defendant bank has not furnished
the documents to the AMPL Company or to the plaintiffs on which the
defendant bank has been declared fraud to the account of AMPL
Company. The defendant bank without following due process of law
and without following the guideline of RBI and without giving notice or
letter to the AMPL declared fraud to the AMPL Company. The said
action for declaring fraud to the account of AMPL Company is illegal,
arbitrary and violative of principles of natural justice, in grave and
serious violation of law of land contained in Guidelines of RBI would
destroy the reputation of AMPL Company and its Promoters in business
world which operates only or words by mouth.
8. The plaintiffs have further submitted that the defendant has
failed to follow the due legal procedure while declaring the account of
the AMPL Company as fraud and thus, the plaintiffs have serious
apprehension that the defendant with the malafide and dishonest
intention and without following any due procedure of law and totally
against the principles of natural justice would go ahead and report the
name of the plaintiffs as fraud. Hence, this notice of motion.
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9. The defendant resisted this notice of motion taken out by the
plaintiffs by filing its reply.
Brief facts of reply of the defendant are as under-
10. The plaintiffs have filed the present notice of motion and this suit
deliberately suppressing several vital facts and by making blatantly false
and untenable allegations and averments with a view to prejudice the
mind of this Hon'ble Court. The accounts of M/s. Akshata Mercantile
Pvt.Ltd. “AMPL”, M/s. Topworth Pipes and Tubes Pvt.Ltd., and
M/s.Topworth Urja and Metals Ltd., have been declared as fraud in
accordance with and as per the Master Circular dated 01/07/2015 ( for
classification and reporting fraud) issued by the Reserve Bank of India.
In the said circular no remedy or no rights have been given or provided
to the persons whose account has been declared as fraud to file any suit
or any appeal against declaring of account as fraud. No alternative
remedy is provided under the said circular. Therefore, the intention of
RBI is to give finality to the classification of accounts as fraud and
therefore no suit or appeal can be filed in any Court to challenge the
legality or validity of classification of accounts as fraud. Thus, this
Hon'ble Court has no jurisdiction to entertain and try the present suit.
11. Without prejudice to the forgoing submissions, the defendant
submits that the present suit is filed u/s. 9 of C.P.C. This Court has no
jurisdiction to try and entertain the suit of civil nature. In view of
provisions contained in Sec. 41(d) and (i) of the Specific Reliefs Act
1963, the plaintiffs are not entitled for any relief of whatsoever prayed
for by the plaintiffs in plaint as well as in the present notice of motion
and therefore, the present suit as well as the notice of motion has
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become infructous and therefore, the same is liable to be and should
be summarily dismissed with costs. The plaintiff no.3 has already filed
a S.C.Suit (St.) No.13585 of 2019, in this Hon'ble Court on the same
cause of action and therefore, the present suit is liable to be stayed u/s.
10 of the Code of the Civil Procedure and therefore, the present notice
of motion is liable to be and should be summarily dismissed with costs.
12. The defendant further submitted that the plaintiffs company
AMPL as well as M/s. Topworth Pipes and Tubes Pvt. Ltd. and M/s.
Topowrth Urja and Metals Ltd. have not made repayments to the
defendant bank and also not used the sanctioned loan for the purpose
on which the plaintiffs company have obtained loan amount from the
defendant bank and other members of the consortium. Therefore, on
14th December, 2017, the account of the AMPL as well as M/s. Topworth
Pipes and Tubes Pvt. Ltd. and M/s. Topwarth Urja and Metals Ltd. were
classified as fraud and the same was reported by the defendant bank to
the RBI by filing a consolidated flash report dated 14th December, 2017.
The defendant also published and filed/submitted the Fraud Monitoring
Returns (FMI) on 18th December, 2017 in respect of the said fraud. The
defendant bank accordingly filed a complaint with the Central Bureau
of Investigation on 13/11/2018 and FIR has also been registered on
13/11/2018.
13. The present plaintiff no.3 is the Managing Director of the said
borrowers and was/is having over all control of the entire affairs of the
said borrowers company. The plaintiff no.3 being the Manger Director
of the said borrower was fully aware that, as per the terms and
conditions of the said sanction letters, the said borrowers were under
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obligations to deposit a cash margin with defendant.
14. The defendant bank further submitted that the plaintiffs company
Akshata Mercantile Pvt. Ltd. has intentionally diverted, siphoned the
financial assistance taken from the defendant bank. The defendant
bank by following due process of law and guidelines issued by RBI
circular have declared fraud to the account of Akshata Mercantile
Pvt.Ltd. The plaintiffs have not made out prima facie case, balance of
convenience does not lies in favour of the plaintiffs, the plaintiffs will
not suffer any irreparable loss, if this notice of motion is not granted in
favour of the plaintiffs. On these grounds, the defendant has submitted
that the present notice of motion may kindly be dismissed with costs.
15. Upon hearing arguments of the learned counsels of both the
parties, on perusal documents produced on record on behalf of both the
sides, during the course of arguments, the learned counsel on behalf of
the defendant has been raised various objection such as, this court has
no jurisdiction to try and decide this matter, the plaint does not disclose
cause of action, this suit is barred and etc.
16. The learned counsel on behalf of the defendant has argued that
the present suit is not tenable in view of provisions of Section 9 of the
Civil Procedure Code. It is argued by the learned counsel on behalf of
the plaintiffs that this is a suit for declaration against the action
initiated by the defendant bank. The plaintiffs have challenged the virus
of action taken by defendant bank and therefore, suit will lie as per
Section 9 of Civil Procedure Code.
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17. Section 9 of C.P.C. 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 bank. The action
levelled by defendant bank 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 the
opinion that Civil Court has every jurisdiction to try and entertain such
nature of suit. Therefore, there is no any force for argument advanced
by the learned counsel on behalf of the defendant for saying that this
Court has no jurisdiction to entertain and decided this suit in view of
Section 9 of Civil Procedure Code.
18. The material question whether present suit is teneble before this
court. In Bank of India V/S Gupta Coal (Civil revision 97/2017 decided
on 04.09.2018), it is observed that suit relating to red flag and fraud
account as per master circular is maintainable before the Civil Court.
The observations of the Hon'ble Lordship of Hon'ble High Court of
Bombay, Bench at Nagpur are reproduced for sake of convenience,
" The relief as sought is declaration that the action of the defendants in
declaring the account of the Plaintiff- Company as fraud is illegal
followed by prayer for permanent injunction. Various documents
including the Forensic Audit Report have been filed on record."
"The relief as sought in the suit is with regard to declaration of the
account of the plaintiff- Company as a fraud account. The same cannot
be said to be a dispute arising out of ordinary transactions of bankers
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and traders. It is the case of the Plaintiff Company that in view of
various guidelines of the Reserve Bank of India and Master circular, its
accounts has been declared as fraud account without following the due
procedure and in breach of principles of natural justice. In the light of
the challenge as raised , it would be the Civil court that would retain
jurisdiction to entertain the suit."
" Same can not be a reason to reject the plaint. In view of the fact that
the reliefs sought in the plaint are not those reliefs which are
impermissible in view of provisions of the Sections 17 and 18 of the Act
of 1993 as well as Section 34 of the Act of 2002 , the cognizance of the
suit is not barred the civil court."
19. In view of aforesaid finding of the Hon'ble High Court of Bombay
in Gupta Coal Case (supra)it is crystal clear that present suit is tenable
before the civil court.
20. The learned counsel on behalf of the defendant has argued that
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 or any criminal matter.
No doubt, in such case injunction cannot be granted. However, here the
circumstances are somewhat different. Plaintiffs are challenged the
action taken out by the defendant bank for declaring fraud to the
accounts of the plaintiffs company Akshata Mercantile Pvt.Ltd. by
submitting that the defendant bank are not followed due procedure as
per Master Circular. In such circumstances, if said decision is not taken
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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.
21. The learned counsel on behalf of the defendant has argued that
the National Company Law Tribunal (NCLT) has jurisdiction to
entertain or dispose of any application or proceeding or any claim made
by or against the Corporate Debtor. Section 63 r/w. Section 231 of the
Insolvency Code, no Civil Court or authority has jurisdiction to entertain
any Civil Suit or proceedings in respect of any matter with respect to
which the NCLT as jurisdiction. As against this, the learned counsel for
the plaintiffs has argued that the Civil Court has jurisdiction to entertain
and decide the present suit filed on behalf of the plaintiffs.
22. 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.
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23. It is an admitted position on record that defendant has
approached before NCLT, DRT and also started recovery proceeding
under the SARFAESI and other available Acts. Since beginning it is
made clear by Ld. Counsel for plaintiffs that the plaintiffs and the
plaintiffs company are not against the recovery proceedings nor by way
of this suit plaintiffs is challenging or restraining the recovery
proceeding. No doubt, plaintiffs are not challenging the recovery
proceedings nor challenging the proceedings which is pending before
NCLT. Here, plaintiffs are challenging the action of the defendant bank
for declaring fraud to the account of the plaintiffs company. Therefore,
in my opinion, the bar as contemplated under section 231 of I.B Code
will not apply here and so the present suit and notice of motion filed on
behalf of the plaintiffs are maintainable.
24. The learned counsel for the defendant argued that the plaintiffs
have filed the present suit as a commercial suit which is not
maintainable and cause of action shows in the plaint does not fit within
the ambit of commercial dispute which is defined under Section 2(c) of
the Commercial Court Act 2015. Thus, the suit is not maintainable as
Commercial Suit. As against this, the learned counsel on behalf of the
plaintiffs has argued that the present suit is maintainable in view of
Section 2 (c) of the Commercial Court Act 2015. I have reproduced the
definition 2(c) of the Commercial Court Act 2015 “the Commercial
dispute means a dispute arising out of (i) ordinary transaction of
merchants, bankers, financiers and traders such as those relating to
mercantile documents, including enforcement and interpretation of
such documents. From the definition contained in sec. 2(c) (i), it is
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clear that ordinary transactions of bankers and financier are covered in
the definitions. The definition is all inclusive which is reflected from use
of words “such as those relating to mercantile documents including
enforcement and interpretation of such documents”. The definition
makes it clear that the documents which are connected with the
transaction of bankers and financiers are covered. In the present case,
the action of defendant bank for declaring fraud to the accounts of the
plaintiffs company i.e “Akshata Mercantile Pvt. Ltd." is based on Master
Circular which is applicable to all the accounts where under the
defendant has lent money in ordinary course of its transaction. Thus,
the action of the defendant bank declaring fraud to the accounts of the
plaintiffs Company i.e. Akshata Mercantile Pvt. Ltd. is maintainable as
a Commercial Suit.
25. The material question is whether essential conditions as per
master circular are followed by the defendant bank before the plaintiffs
account declared as ''fraud''. It is necessary to pursue some basic
conditions as mentioned in the master circular issued by the RBI dated
01.07.2016 Para no. 3.2 from said circular is reproduced as follows.
3.2 Reporting of frauds to Reserve Bank of India.
3.2.1. Banks need to furnish Fraud monitoring Return (FMR) in
individual fraud cases , irrespective of the amount involved, to RBI
electronically using FMR Application in XBRL system supplied to them
within three weeks from the date of detection.
3.2.2. A monthly certificate , as per Annex- 1, (mentioning that
soft copy of all the FMRs have been submitted to RBI ) is to be
submitted by the bank to CFMC , Bengaluru with a copy to the
respective SSM of the bank , within seven days from the end of the
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month.
The para no 3.2.6 speaks about time limit for flash report. It runs as
follows :
3.2.6. In addition to the FMR , Banks ar e required to furnish a
Flash Report (FR) for fraud involving amounts of Rs. 50 million and
above within a week of such frauds coming to the notice of the bank's
head office. The FR is to be furnished in the form of a DO letter
addressed to the PCGM/ CGM-in-charge , DBS ,RBI , Central Office ,
Mumbai with a copy to CFMC,Bengaluru. The FR , inter alia,should
include amount involved , nature of fraud , modus operandi in brief ,
name of the branch/office, names of parties involved, their constitution,
names of proprietors/partners and directors , names of officials involved
and lodging of complaint with police / CBI.
3.3 Delays in reporting of frauds.
3.3.1 Bank should ensure that the reporting system is suitably
streamlined so that delays in reporting of frauds, submissionof delayed
and incomplete fraud reports are avoided. Banks must fix staff
accountability in respect of delays in reporting fraud cases to RBI.
3.3.2 Delaying in reporting of frauds and the consequent delay in
alerting other banks about the modus operandi and dissemination of
information through Caution Advice/CFR against unscrupulous
borrowers could result in similar frauds being perpetrated elsewhere.
Bank should therefore , strictly adhere to the time frame fixed in this
circular for reporting of fraud cases to RBI failing which they would be
liable for penal action prescribed under Section 47 (A) of the Banking
Regulation Act , 1949.
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It is material to note that the delay as expected in para no. 3.3 of
the Master Circular is not explained by the defendants bank nor
responsibility of staff is fixed for avoiding to report the fraud to RBI , if
any.
Para no 4.4 of master circular speaks about special committee of
the board, which includes MD and C.E.O of the company. Defendant is
failed to clarify in respect of such committee formed by defendant.
Para no 8.3 of master circular is in a respect of EWS and RFA
(early warning signals and red flagged accounts). It expects detail
investigation into RFA . The modalities for monitory and detailed study
of annual report as whole is expected by FMG ( fraud monitoring
group). The report require to submit to the special committee of the
board . Para no 8.7 and 8.8 are in respect of prompt reporting. The
material part is reproduced as follows .
Delay, for the purpose of this circular, would mean that the fraud
was not flashed to CFMC , RBI or reported on thie CRILC platform, RBI
within a period of one week from its (i)classification as a fraud through
the RFA route which has a maximum time lime of six months or (ii)
detectiojn / declaration as a fraud ab initio by the bank as hitherto.
8.8 Bank as a sole lender.
8.8.1 In cases where the bank is the sole lender , the FMG will
take a call on whether an account in which EWS are observed should
be classified as RFA or not. This exercise should be completed as soon as
possible and in any case within a month of the EWS being noticed.
In case the account is classified as RFA , the FMG will stipulate the
nature and level of further investigations or remedial measures
necessary to protect the bank's interest within a stipulated time which
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can not exceed six months.
It is surprising to note that defendant bank is silent in respect of
prompt reporting and stipulated time, as mentioned above. It is
incumbent on the part of bank to use external auditors, including
forensic experts and internal team to investigate before taking final
view on the RFA. (Red Flagged Accounts ) .
26. The learned advocate for the defendant bank has argued that the
courts are not interfere with economic policy which is the function of
the expert bodies. The Ld. counsel on behalf of the defendant bank has
relied on the following judgements.
1. In the matter of Peerless General Finance & Investment Co. Ltd and
another v. Reserve Bank of India [(1992) 2 SCC 343 ] wherein it has
been held by Hon'ble Supreme Court that Courts are not interfere with
economic policy which is the function of the expert bodies and
submitted that the view taken by the RBI that dues under derivative
transactions covered by the Master Circular should not be disturbed by
the Court. Hereunto annexed and marked as Exhibit "A" is the copy of
the Order of the Hon'ble Supreme Court in the matter of Peerless
General Finance & Investment Co. Ltd and another v. Reserve Bank of
India [(1992) 2 SCC 343].
2. In the matter of Kotak Mahindra Bank Ltd Vs. Hindustan National
Glass & ind. Ltd ( CIVIL APPEAL No. 8916 OF 2012 ( Arising out of SLP
(C) NO. 29599 of 2009 ) the Hon'ble Supreme Court had observed in
Para 5. That the Master Circular had been issued by the RBI inter alia in
exercise of its power under the Banking Regulation Act , 1949 ( for
short 'the 1949 Act) and that sections 21 and 35A of the 1949 Act make
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it clear that the directions/guidelines issued by the RBI are mandatory
and binding on the clients . Paragraph 2.1 of the Master Circular defines
the term "willful Default " as a default by a unit in meeting its
payment / repayment obligations to the lender Hereunto annexed and
marked as Exhibit "B" is the copy of the order of the Hon'ble Supreme
Court in the matter of Kotak Mahindra Bank Ltd Vs. Hindustan National
Glass & Ind . Ltd.
3. In the case of Piyush Kumar Goyal Vs Union of India and others,
reported in (2020) 426 ITR 546 (Delhi), in the Delhi High Court,
decided on January 28, 2020.
It is the contention of the plaintiffs that the said judgement is not
relevant in deciding the instant matter as the said writ petition filed by
Mr.Piyush Goyal is for seeking relief against the Look Out Circular
issued against the petitioner, thereby being found diametrically opposite
in nature to the present suit.
I have gone the citations supra referred on behalf of the ld.
Counsel of the Defendant bank, with due respect the ratio held in above
citation are not applicable to the present case in my hand in favor of the
defendant bank due to defer of the facts and circumstances.
27. The learned counsel on behalf of the plaintiffs has argued that the
defendants bank has declared fraud to the account of the plaintiffs
company without following Master Circular and therefore, the
defendant has not followed the principles of natural justice. The learned
counsel on behalf of the plaintiffs has relied on Judgement reported in
MANU/PH/1231/2017, in the case of Oswal Apparels Private Limited
and Ors. Vs. State Bank of India, Ludhiana and Ors., the Hon'ble Punjab
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and Haryana High Court has held 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 conform 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.” In this judgement the Hon'ble Court clearly states
that not just an opportunity of being heard is mandated under
principles of natural justice but also, documents which are relied upon
by the authority should be made available to the affected party.
The defendant bank is bound in law to provide the documents desired
by the plaintiffs company, in view of law let down by Hon’ble Bombay
High Court in the case of Finolex Industrices Ltd And Ors Vs Reserve
Bank Of India And Ors.
28. From above my discussion, I come to the conclusion that the
defendant bank has failed to follow the procedure laid down in Master
Circular for declaration of the account of the plaintiffs company i.e.
Akshata Mercantile Pvt.Ltd. as fraud.
29. It appears from the contention of the plaintiffs that the Akshata
Mercantile Pvt.Ltd.company started facing financial problems. The
realization from debtors of the company has been sluggish resulting in
tightness in liquidity and led to a major impact on the bottom line as
well cash flows. The company could not recover dues from its customers
facing restrictions in their cash flows. The plaintiffs have filed various
suits for recovery of amount against companies debtors.
30. It is contended by the learned counsel for the defendant that
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plaintiffs or plaintiffs company i.e. Akshata Mercantile Pvt.Ltd. may
repay the loan, thereafter no action will be initiated against the
plaintiffs or plaintiffs company. It appears that the defendant bank has
initiated the action for recovery of the loan under the grab of Master
Circular. Moreover, the plaintiffs asked documents to the defendant
bank for supply of the concerned documents on which the defendant
bank has declared a fraud to the Akshata Mercantile Pvt.Ltd. by issuing
email dated 21/04/2020. Admittedly, the defendant bank has not
furnished any documents to the plaintiffs in respect of email dated
21/04/2020. It means the defendant bank has not followed the
guidelines of RBI i.e. Master Circular dated 01/07/2015.
31. Considering wide scope of Master Circular, the balance of
convenience lies in favour of plaintiffs. Obviously, irreparable loss will
be caused to the plaintiffs, if the court refuse to grant injunction as
prayed. Hence, the order.
ORDER
1. The Notice of Motion No. 1230/2020 is allowed.
2. The defendant bank personally or through its representatives are
restrained from taking coercive action against plaintiffs on account of
“fraud”, based on Master Circular. Defendant bank or its representatives
are restrained from branding the plaintiffs as fraud and publishing the
name of plaintiffs as fraud till final disposal of the suit.
3. It is needless to say that defendant bank is at liberty to proceed
against the plaintiffs regarding recovery proceedings, attachment, sale
of attachment property to recover the defaulted loan.
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20 NM No. 1230/2020 in
Com. ST. NO. 3777/2020
4. Cost in cause.
5. Notice of Motion No. 1230/2020 is disposed off accordingly.
Dtd:22/12/2020 Judge
City Civil & Sessions Court,
Gr.Mumbai.
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21 NM No. 1230/2020 in
Com. ST. NO. 3777/2020
CERTIFIED TO BE TRUE AND CORRECT COPY OF THE ORIGINAL
SIGNED JUDGEMENT/ORDER”
UPLOAD DATE TIME NAME OF STENOGRAPHER
28/12/2020 2.00p.m Mrs. V. V.Malgaonkar
Name of the Judge H.H.J.Shri R.V. KOKARE (C.R.31)
Date of Pronouncement of
Judgement/Order
22/12/2020
Judgement/order signed by P.O on 28/12/2020
Judgement/order uploaded on 28/12/2020
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