Final Order 1

Order Details: Notice of Motion
Pdf Text: N/m No. 1232/2020 & N/m No. 1248/2020 1 Common Order.
in Comm. Suit No. 315/21.
MHCC010034182020
Presented on : 08-06-2020
Registered on : 08-06-2020
Decided on : 29-09-2021
Duration : 1 years, 3 months, 21 days
IN THE BOMBAY CITY CIVIL COURT AT BOMBAY.
NOTICE OF MOTION NO. 1232 OF 2020
Aastha Minmet (India) Limited ...Applicant/
(Original Plaintiff)
In the matter of :
Aastha Minmet (India) Limited ...Plaintiff
Versus
IDBI Bank Limited and Another ...Defendants
AND
MHCC010035132020
Presented on : 09-07-2020
Registered on : 09-07-2020
Decided on : 29-09-2021
Duration : 1 years, 2 months, 20 days
NOTICE OF MOTION NO. 1248 OF 2020
IN
COMMERCIAL SUIT NO. 315 OF 2021
IDBI Bank Limited ...Applicant/
(Original Defendant No.1)
In the matter of :
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N/m No. 1232/2020 & N/m No. 1248/2020 2 Common Order.
in Comm. Suit No. 315/21.
Aastha Minmet (India) Limited ...Plaintiff
Versus
IDBI Bank Limited and Another ...Defendants
CORAM : HIS HONOUR JUDGE SHRI R.R.BHAGWAT.
(C.R.NO.31).
DATE : 29th SEPTEMBER, 2021.
Ms. Megha Gupta, Advocate for the plaintiff.
Mr. P.D.Gandhi, Advocate for defendant no.1.
COMMON ORDER
1. Notice of Motion No. 1232/2020 is taken out by the
plaintiff for interim reliefs of temporary injunction against the
defendants. Notice of Motion No. 1248/2020 is taken out by defendant
no.1 for setting aside exparte adinterim order dated 15/06/2020 and
also for giving direction to the plaintiff for correcting his (defendant
no.1's) address in the plaint. Perused both notice of motions, affidavit
in reply in Notice of Motion No.1232/2020, the plaint, the written
statement and documents placed on record. I have also gone through
citations relied by both sides. Heard learned counsel Megha Gupta for
the plaintiff and learned counsel Shri P.D.Gandhi for defendant no.1.
None appeared on behalf of defendant no.2.
2. The plaintiff is a company registered under the provisions
of the Companies Act, 1956. Defendant no.1 and 2 are the banks
referred as IDBI and SBI respectively. The plaintiff has questioned the
act of labelling his accounts maintained with the defendants as 'Red
Flagged Accounts' (RFA) and subsequently, declaring the same as
'Fraud' in the present suit. The plaintiff has pleaded details of his
financial position in the plaint and tried to demonstrate that the
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N/m No. 1232/2020 & N/m No. 1248/2020 3 Common Order.
in Comm. Suit No. 315/21.
plaintiff has engaged in manufacturing of mild steel billets and TMT
bars. Furthermore, growth of income to the tune of 53.90% from
Rs.2962.18 Lakhs to 16,616.05 Lakhs in FY 2012 is pleaded in para 7 of
the plaint. Such other details are pleaded in para 9 to 13 of the plaint.
3. Then, the plaintiff enumerated actual transaction with the
defendant No.1 in para 14 of the plaint. According to the plaintiff, he
had taken cash credit facilities upto 1500 Lakhs from defendant no.1 in
2013. It is case of the plaintiff that credit facility was revised by IDBI to
Rs.13.85 Crores and it was further reduced to 6 Crores. The plaintiff
had made payment of Rs.9 Crores. It is pleaded in para 16 of the plaint
that the company made a payment of Rs.13 Crores on various dates.
The plaintiff has pleaded details of his transaction with defendant no.2
in paras 30 to 40 of the plaint. The plaintiff has paid Rs.3.68 Crores out
of Rs.20 Crores to defendant no.1 during 2012 to July 2014.
4. As the plaintiff started facing financial problems due to
sluggish recovery from debtors, it affected liquidity of the plaintiff and it
led to major impact on the bottom line cash flows. By pointing out
these compelling circumstances resulting into delayed payment of loan
amount received as per credit facility, the plaintiff denied himself to be
fraudulent. By stating so, the plaintiff has sought interim relief of
temporary injunction restraining the defendants from disseminating,
publishing and displaying name of the plaintiff as 'red flagged account'
or 'fraud' and also to prevent them from taking action on the basis of
declaration of ‘red flagged account’. He has further sought relief of
restraining the defendants from declaring the account of plaintiff as 'red
flagged account' or 'fraud'. Ultimately, relief of reversing the impugned
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N/m No. 1232/2020 & N/m No. 1248/2020 4 Common Order.
in Comm. Suit No. 315/21.
action of declaration of red flagged account is prayed.
5. The defendant no.1 has taken stand that the plaintiff paid
only Rs.10,430/ towards court fees. The plaintiff is liable to pay
Rs.13.29 Crores to the defendants. Declaration sought in the present
suit is susceptible to monetary consideration. This Court lacks
pecuniary jurisdiction to decide the present suit. No civil court can
decide grievance of the plaintiff regarding declaration of the account as
a 'fraud'. Only criminal court can deal with such issue. Defendant no.1
has also relied upon Order VII Rule 11 (d) of the CPC and Section 34 of
the SARFAESI Act, 2016 and contended that no civil court has the
jurisdiction to entertain any suit or proceeding in respect of any matter
which a DRT or an appellate tribunal is empowered to determine.
Defendant no.1 has already filed proceeding against the plaintiff for
recovery in the DRT, Mumbai. The plaintiff filed the suit to pressurize
the lenders to gain undue and unfair advantage from them. Defendant
no.1 prayed for dismissal of notice of motion with cost.
6. Learned counsel Megha Gupta for the plaintiff reiterated
her case pleaded in the plaint and further submitted that principles of
natural justice have not been followed by the defendants. Documents
are not supplied to the plaintiff. RBI guidelines have serious
implications on the directors and the company. She relied upon
observations of Hon'ble Telangana High Court in para 56 to 60 in the
case of Rajesh Agrawal V/s. RBI and others – 2020 SCC OnLine TS
2021 and submitted that principles of natural justice have not been
followed. Repercussions of declaration to the company or borrower as
a fraudulent are elaborated by Hon'ble Telangana High Court in the
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in Comm. Suit No. 315/21.
said citation. She further submitted that the said decision of Hon'ble
Telangana High Court is subjudice before Hon'ble Supreme Court in
Special Leave Petition No. 3931/2021 filed by SBI against Rajesh
Agrawal and Hon'ble Supreme Court directed that minutes / order
dated 15/02/2019 passed by the Joint Lenders' Meeting is not to be
acted upon and the High Court insofar as it observed that a personal
hearing be given is stayed. She further submitted that Hon'ble Bombay
High Court considered these developments in Rajesh Agrawal’s case
(cited supra) in the case of Surana Developers (Wadala) LLP V/s. RBI
and others in Writ Petition No. 826/2021 and granted adinterim
relief pending hearing of rule to the effect that the impugned decision
of 17/02/2021 shall not be acted upon till next date. She further
submitted that this court should also grant similar relief and abstain
from deciding the Notice of Motions on merit until Hon’ble Supreme
Court decides above referred case.
7. Learned counsel Megha Gupta further submitted that cash
credit facility of the plaintiff was increased up to Rs.15 Crores and he
has paid total Rs.9 Crores within four years time span to defendant
No.1. Fraudulent cannot pay Rs.9 Crores. RBI circular is misused by
the defendants. The defendant did not follow the circular. She further
submitted that steel produced by the plaintiff could not be sold in the
market due to sale of the steel at cheaper rates by chinese companies.
She reiterated the circumstances pleaded in the plaint creating
difficulties in payment of due amount. She further referred para 23 of
the plaint and submitted that amount of Rs.2.64 Crores was paid to
defendant No.1. She further submitted that the plaintiff made one time
settlement with defendant no.2 and account of the plaintiff is closed.
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N/m No. 1232/2020 & N/m No. 1248/2020 6 Common Order.
in Comm. Suit No. 315/21.
She referred clauses 2.2, 8.2, 8.3.1, 8.9.1 and 8.9.4 in RBI circular
dated 01/07/2016 and submitted that the plaintiff has not played any
fraud and the manner, in which fraud account can be declared, is not
followed by the defendants. Forensic audit is essential. Action taken by
defendant no.1 is arbitrary. She prayed that notice of motion no.
1232/2020 may be allowed.
8. Learned counsel Shri P.D.Gandhi for defendant no.1
submitted that RBI guidelines dated 01/07/2015 are annexed with the
plaint and prayers are made in the plaint. The plaintiff did not pay the
loan amount after receiving financial assistance from defendant no.1.
Property of the plaintiff is attached. Default notices (Exh.D to G filed
with the plaint) were given to the plaintiff. According to him, Economic
Offences Wing had asked to Collector of Kurnool District to attach
properties of the plaintiff. Defendant no.1 being under control of RBI,
is bound to follow RBI guidelines. Purpose of RBI guidelines dated
01/07/2016 is explained at the beginning of the said circular. He
further pointed out guidelines in clause no.8.9.4 quoted in para 43 of
the plaint and submitted that the plaintiff referred guidelines in part in
the plaint and he does not approach with clean hands. Defendant no.1
has acted as per RBI circular dated 01/07/2016 and there is no
illegality in it. Defendant no.1 has no role in report lodged against the
plaintiff by Economic Offences Wing. As per Central Fraud Report,
penal action can be taken against defendant no.1 by RBI as per clause
3.3 of the circular. Clause 8.9 is not in guidelines dated 01/07/2015
and the plaintiff misguided the court to obtain interim relief. The
plaintiff filed the suit in June 2020 to kill the time. By making all these
submissions, learned counsel Shri P.D.Gandhi relied upon two citations
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in Comm. Suit No. 315/21.
as under :
1. J.K.Paper Limited V/s. Securities and Exchange Board of
India Writ Petition (L) No. 3441/2020 decided by Hon'ble Bombay
High Court (Original side) on 06/10/2020 and
2. R.S.Dass V/s. Union of India and others 1986 Supp SCC 817.
With the help of observations in both these citations, learned counsel
Shri P.D.Gandhi submitted that principle of natural justice is not
required to be followed in all contingencies. According to him, it would
affect administrative efficiency and expedition. By raising these points,
he supported the decision taken by defendant no.1 and prayed that
interim relief granted to the plaintiff may be set aside by allowing
Notice of Motion No.1248/2020. He also prayed for dismissal of Notice
of Motion No. 1232/2020.
9. After considering rival contentions and material on record ,
it appears that the plaintiff has not clarified the aspect of declaring his
account as 'red flagged account' or 'fraud' by giving details of the date of
action or other particulars which would demonstrate that defendant
no.1 has actually resorted such type of measure. But there is reference
of email dated 25/05/2020 (Exh.I annexed with the plaint) in para 29
of the plaint in which the plaintiff requested defendant no.1 to review
the account and remove the fraud remark on the company. Learned
counsel Megha Gupta submitted that defendant No.1 did not give reply
to email dated 25/05/2020. Documents on record further
demonstrates that action was taken against the plaintiff under
provisions of SARFAESI Act. Properties of the plaintiff were directed to
be attached. Defendant no.1 has filed documents relating to action
taken against the plaintiff with his affidavit in reply (Exh.B colly.)
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N/m No. 1232/2020 & N/m No. 1248/2020 8 Common Order.
in Comm. Suit No. 315/21.
Defendant no.1 has further referred one time settlement made by
defendant No.1 with the plaintiff. The plaintiff deposited 10% of OTS
amount i.e. Rs.34,00,000/ during 12/06/2020 and 18/06/2020. It
means that amount to be paid was worked out as Rs.3.4 Crores in OTS
offer. The plaintiff has made payment of dues as referred earlier by
learned counsel Megha Gupta.
10. Clause 2.2 of RBI circular dated 01/07/2016 classifies the
types of frauds in 7 categories based upon provisions of the Indian
Penal Code. Out of these 7 categories, defendant no.1 has not clarified
particularly which type of fraud is applicable to the acts of the plaintiff.
On careful reading of clause 2.2 of the said circular, only contingency of
cheating can be the aspect to be looked into in the case of the plaintiff.
For applying the concept of cheating, intention to cheat must be present
at the inception. Overall conduct of the plaintiff demonstrates that he
had been regularly paying dues to defendant no.1 in the past. The
plaintiff continued to negotiate the aspect of payment of remaining
amount at defendant no.1. In short, there is shortage of material to
demonstrate fraudulent intentions of the plaintiff.
11. In such circumstances, the plaintiff is pressing for interim
relief in order to protect himself from adverse effects of declaration of
accounts as 'red flagged account' as enumerated in clause 8.12 of the
said circular. The plaintiff has made out prima facie case to grant
interim reliefs. As the defendants have already resorted to legal
remedies under various legal provisions against the plaintiff for
recovery of the amount and reliefs in present notice of motion
proceedings are not touching to those legal actions, balance of
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N/m No. 1232/2020 & N/m No. 1248/2020 9 Common Order.
in Comm. Suit No. 315/21.
convenience is in favour of the plaintiff. If declaration of the plaintiff’s
accounts as ‘red flagged account’ is allowed to remain in operation, it
would cause many hurdles in the way of business activities of the
plaintiff by mainly affecting to its reputation in the business field.
Reputation in the form of goodwill influences the performance of a
company as well as commercial units. Therefore, apprehensions of the
plaintiff regarding irreparable loss likely to be caused to him due to said
declaration are well founded.
12. For all these reasons, the plaintiff is entitled to reliefs in
part to the extent of prayer clauses (a), (b) and (c) in Notice of Motion
No. 1232/2020. So far as prayer clause (d) in this notice of motion is
concerned, granting such relief would amount to granting main relief at
initial stage of the matter. Developments taken place in the past are
going to remain part of the record and directions can be given only to
prevent effects of such acts in the past.
13. While granting a relief in above terms, Notice of Motion
No. 1248/2020 is liable to be dismissed in part so far as prayer clause
(a) and (c) are concerned. Prayer clause (b) in this notice of motion is
pertaining to addition of current or existing address of defendant no.1
in the title clause of the plaint and it can be considered having been in
the form of formal amendment in the plaint.
14. While disposing off both these notice of motions,
observations of Hon'ble Bombay High Court in J.K.Papers Ltd.'s case
(cited supra) are taken into consideration with regard to issues which
are subjudice before Hon’ble Supreme Court as referred earlier.
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N/m No. 1232/2020 & N/m No. 1248/2020 10 Common Order.
in Comm. Suit No. 315/21.
Therefore, no comment is passed on maintainability of the plaintiff's
claim with regard to opportunity of hearing in the process of action
taken as per the said circular of RBI. For all above reasons, I pass the
following order :
ORDER
1. Notice of Motion No. 1232/2020 is made absolute in terms
of prayer clause (a), (b) and (c).
2. Notice of Motion No. 1248/2020 is made absolute in terms
of prayer clause (b).
3. The plaintiff is directed to carry out amendment in the
plaint within 14 days from today.
'
4. Notice of Motions No. 1232/2020 and 1248/2020 are
disposed off accordingly.
(R.R.BHAGWAT)
Judge,
City Civil & Sessions Court,
(Court Room No.31)
Date : 29/09/2021. Mumbai.
1. Dictated online on : 29/09/2021.
2. Signed on : 30/09/2021.
3. Delivered to Certified :
Copy Section on
“CERTIFIED TO BE TRUE AND CORRECT COPY OF THE ORIGINAL
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in Comm. Suit No. 315/21.
SIGNED JUDGMENT/ORDER”
UPLOAD DATE AND TIME NAME OF STENOGRAPHER
30/09/2021. 1.52 p.m. Miss M.A.Kulkarni.
Name of the Judge (with Court Room no.) HHJ Shri R.R.Bhagwat.
(Court Room No.31).
Date of Pronouncement of Judgment/Order 29/09/2021.
Judgment/Order signed by P.O. on 30/09/2021.
Judgment/Order uploaded on 30/09/2021.
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