Final Order 1

Order Details: Notice of Motion
Pdf Text: NM No.1285/2020 in
1 Com St.No.4203/2020
IN THE BOMBAY CITY CIVIL COURT AT GREATER BOMBAY
NOTICE OF MOTION N0.1285 OF 2020
IN
COMMERCIAL STAMP NO. 4203 OF 2020
(CNR NO.MHCC01-003764-2020)
1. Abhay Narendra Lodha )
Aged 48 years, Occu:Business )
Director of Suspended Board and )
Promoter of Gujarat Foils Limited )
An Adult, Indian Inhabitant, )
Having address at 308, 3rd Floor, )
Ceejay Towers, Dr.Annie Besant Road, )
Worli Sea Face, Mumbai: 400 021. ) ...Plaintiff.
Versus
1. Bank of India )
A Bank constituted under the provisions )
of the Banking Regulation Act, 1949, )
Having its head office at:Star House, )
C-5, “G” Block, Bandra Kurla Complex, )
Bandra(East), Mumbai: 4000 051. )
2. IDBI Bank Limited )
A Bank constituted under the provisions )
of the provisions of he Banking )
Regulation At, 1949, having its head )
Registered office at:IDBI Tower, )
WTC Complex, Cuffe Parade )
Mumbai: 400 005. )
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3. State Bank Of India )
A Bank constituted under the provisions )
of the provisions of the Banking )
Regulation Act, 1949, having its head )
Stressed Assets Management Branch-1, )
Mumbai, The Arcade Mumbai, 2nd Floor, )
World Trade Centre, Cuffe Parade, Colaba, )
Mumbai-400 005. ) ...Defendants.
CORAM: HIS HONOUR JUDGE SHRI R.V.KOKARE
DATE :22/12/2020 (C.R.No.31)
Appearance:-
Ld. adv. Srinivas Bobade for plaintiff.
Ld.adv. Prashant Shinde for defendant no.1.
Ld. adv.Sunil Kadam for defendant no.2.
Ld.adv.Niyati Merchant for defendant no.3.
ORDER
This is a notice of motion taken out by the plaintiff for
temporarily restraining to the defendants bank from taking any action
on notices issued by them dated 31/12/2019, 08/01/2020 and
20/01/2020.
Brief facts of notice of motion of the plaintiff are as under.
2. The plaintiff is the Director and Guarantor for Gujrath Foils
Limited(''GFL''), a company which has been incorporated and registered
under the Provisions of the Companies Act 1956 on 16/11/1992. The
defendants are the banks having their respective head office at Mumbai.
A notice dated 31/12/2019 issued by the defendant no.1 (BOI)
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declaring plaintiff and GFL Company as willful defaulter. A notice dtd.
08/01/2020, issued by the defendant no.2 (IDBI) to the plaintiff calling
upon the plaintiff to show cause as to why the plaintiff should not be
declared as “ willful defaulters ”. Show Cause Notice dated 20/01/2020,
issued by the defendant no.3 (SBI), calling upon to show cause as to
why the GFL's name should not be included in the list of “willful
defaulters”. The defendants issued notices mentioned above are illegal
vide, bad in law and in violation of guidelines of RBI Master Circular
dated 01/07/2016.
3. The plaintiff states that the GFL has been incorporated on
16/11/1992 and registered at Registrar of Companies, Mumbai under
the provisions of the Companies Act 1956, having its registered office at
Gandhi Nagar Gujarath. The GFL is mainly into the business of
manufacturing of aluminium, foils and sheets. The plaintiff states that
the GFL got publicity listed on the Bombay Stock Exchange. The
plaintiff states that the petition no.“C.P.(I.B)No.
116/7/NCLT/AHM/2017 ” was moved by the Allahabad Bank u/s. 7 of
Insolvency and Bankruptcy Code, 2016 against the GFL for non-
payment of debts owed to the bank. The National Company Law
Tribunal “ NCLT” Ahmadabad Branch vide its order dated 30/11/2017
has ordered the commencement of Corporate Insolvency Resolution
Process (CIRP) against the GFL company.
4. The plaintiff states that the defendants bank i.e. Bank of India,
IDBI Bank Limited, State Bank of India and other Banks namely
Allahabad Bank, Union Bank of India, Oriental Bank of Commerce and
Dena Bank are the lenders banks of the plaintiff and GFL Company.
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Allahabad Bank is leader of Consortium of Company. The defendants
bank and other Lenders banks of the plaintiff and plaintiff's GFL
Company sanctioned various debt facilities against primary security and
collateral security. The plaintiff states that no restructuring has taken
place in the Company. In FY 2016-17, LME showed continual upward
trend and was very volatile. This not only resulted in requirement of
additional working capital for business but also had put pressure on
industry to pass this price increases to customers. These factors had
adverse effect on financial performance of Companies like GFL.
5. The plaintiff states that domestic Aluminium Industry is severally
affected due to low price import from China. The domestic demand too
has been erratic. Due to cheaper imports and inconsistent demand, the
Aluminium prices were under continuous pressure for an extended
period of time which has caused huge losses. As the whole Industry has
been affected, the realization from debtors has been sluggish resulting
in tightness in liquidity. The High rates of interest and bank charges
have led to a major intact on the bottom-line as well as cash flows. In
the last few years, Company was forced to fund its Working Capital
cycle by negotiating with its creditors for either longer credit period or
paying the dues with delays. However, this has not only increased the
cost but was also unsustainable in the long run as the company ran the
risk of its reputation. The overrun in cost has also increased due to the
competitive market trend and cost escalation. The plaintiff's company
has high level of debt in its book resulting in high financial cost.
Moreover, there has not been much increased in turnover and
profitability to support the cost-burden due to micro- economic reasons.
The materials were procured for the bulk orders for trading but order
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got cancelled and later the material was sold, company suffered huge
losses. At this juncture, it would not be out of place to disclose the
achievements of Company in paying back the lenders, exchequer,
employees, statutory dues and other dues towards social responsibility.
The Company made substantial payments to the defendants and other
banks.
6. The plaintiff further submitted that the defendant no.1 (BOI) by
issuing notice dated 31/12/2019 declared to the plaintiff and GFL
Company as willful defaulter and the defendant no.2 (IDBI) issued
Show Cause Notice dated 08/01/2020 to the plaintiff calling upon the
plaintiff to show cause as to why the plaintiff should not be declared as
willful defaulters and the defendant no. 3 State Bank of India issued
Show Cause Notice dated 20/01/2020 to the GFL Company for why
the GFL's name should not be included in the list of willful defaulters.
The defendants have failed to follow the due legal procedure and
directions given in Master Circler issued by RBI. The defendants bank
with the malafide and dishonest intention and without following any
due procedure of law and totally against the principles of natural
justice, the defendant no.1 declared willful defaulter to the plaintiff and
GFL Company and the defendant nos. 2 and 3 had issued Show Cause
Notices to the plaintiff and GFL's Company dated 08/01/2020 and
20/01/2020 respectively. On these grounds, the plaintiff is submitted
that the plaintiff has made out prima facie case and balance of
convenience lies in favour of the plaintiff. If this notice of motion is not
granted in favour of the plaintiff, then the plaintiff 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. 1 resisted this notice of motion taken out by
the plaintiffs by filing its reply.
Brief facts of the reply of the defendant no.1 are as under-
8. The defendant no.1 Bank of India has submitted that the suit as
framed and filed against the defendant no.1 is false, frivolous and not
maintainable under the provisions of law. The present notice of motion
taken out by the plaintiff is seeking ad-interim and interim reliefs to
restrain the defendant no.1 Bank whereby the defendant no.1 bank
informed the plaintiff and Gujarat Foils Limited (GFL) that they have
been declared as willful defaulters. It is pertinent to note that the
defendant no. 1 Bank has completed the entire process of declaring the
plaintiff and Gujarat Foils Limited as willful Defaulters by following the
circulars/guidelines of Reserve Bank of India. The last step in declaring
any person/entity as willful defaulter is by publishing the name of the
willful defaulters in the newspapers. In the present matter, the
defendant no.1 Bank has already published the name of the plaintiff
and Gujarat Foils Limited as willful defaulter in newspapers on
18/02/2020. The process undertaken by the defendant no.1 in
declaring the plaintiff and Gujarat Foils Limited as willful defaulter is
completed.
9. The defendant no.1 has further submitted that a show cause
notice dated 14/02/2019 was issued by the defendant no.1 Bank to the
plaintiff and Gujarat Foils Limited with a view to give an opportunity to
plaintiff and Gujarat Foils Limited i.e. Borrower to clear the entire
outstanding amount within a period of 15 days from the date of receipt
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of the said notice, failing which it was informed to plaintiff and Gujarat
Foils Limited that the defendant no.1 shall initiate appropriate steps to
declare them as willful defaulter by following due process as prescribed
by RBI vide its Circular dated 01/07/2015. The defendant no.1 have
further submitted that reason of siphoning off the funds by plaintiff and
Gujarat Foils Limited was also stated by the defendant no.1 is Show
Cause Notice dated 14/02/2019, as the reason for declaring the
plaintiff and Gujarat Foils Limited as willful defaulters. The Show Cause
Notice was issued to the plaintiff and Gujarat Foils Limited after the
Identification Committee of the defendant no.1 Bank chaired by
Executive Director and consisting of two General Managers constituted
in terms of RBI Guidelines had identified the plaintiff and Gujarat Foils
Limited as willful defaulter.
10. The defendant no.1 has further submitted that the defendant no.
1 bank vide its Letter dated 11/06/2019 granted the plaintiff an
opportunity of personal hearing on 25/06/2019 at the schedule place
and time. It is further admitted that in reply to aforesaid Letter dated
11/06/2019, the plaintiff vide an Email dated 19/06/2019 informed
the defendant no.1 to reschedule the personal hearing to another date
as the plaintiff Mr. Abhay Lodha was not available on the said date due
to prior commitments. The defendant no.1 Bank vide Email dated
11/09/2019 informed the plaintiff and others the date of personal
hearing scheduled on 18/09/2019. The meeting scheduled on
18/09/2019 was cancelled due to unavoidable reasons at the end of
Defendant no.1 and the same was communicated to plaintiff vide Email
dated 30/09/2019 and revised date of personal hearing is fixed on
07/10/2019 was also informed. The plaintiff vide Email dated
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05/10/2019 confirmed that Mr.Abhay Lodha will attend the personal
hearing schedule on 07/10/2019.
11. The defendant no.1 bank has further submitted that though
visited the Head office of the defendant no.1 bank on 07/10/2020, the
plaintiff left the Head office without attending the personal hearing for
the reasons best known to the plaintiff. The Identification Committee
after perusing the details, recorded the fact of willful default and passed
order dated 05/12/2019, directing to declare the Borrower and plaintiff
as willful defaulters. Pursuant to the aforesaid order dated 05/12/2019
passed by the Identification Committee and as per the circular dated
01/07/2015 of the RBI, the order was presented before the Review
Committee headed by the Managing Director and CEO and consisting
in addition, two Independent Directors for its confirmation.
12. The defendant no.1 bank has further submitted that the
defendant no.1 bank has completed the entire process of declaring the
plaintiff and Gujarat Foils Limited as willful defaulters. The plaintiff
has not made out prima facie case, balance of convenience does
not lie in favour of the plaintiff. Therefore, the present notice of
motion taken out by the plaintiff be dismissed with costs.
13. The defendant no.2 IDBI Bank has resisted this notice of motion
taken out by the plaintiff by filing its reply.
Brief facts of the reply of the defendant no. 2 are as follows-
14. The present notice of motion taken out by the plaintiff is
misconceived, not tenable in law and is liable to be dismissed with
costs. The plaintiff is Promoter/Director/Guarantor of Gujarat Foils
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Limited ( “The Borrower/GFL”). The plaintiff is guilty of suppressing
material facts and have approached the Hon'ble Court with unclean
hands. The Reserve Bank of India has issued various guidelines from
time to time in order to prevent multiple financing and restrict further
illegal borrowing. In view of those guidelines, it is incumbent upon the
defendant no. 2 and other creditors to report to RBI and Credit
Information Companies (CIC) about willful default/frauds by the
Borrowers. The defendant has independently carried out impartial
investigations in view of RBI guidelines and concluded that willful
default have occurred and therefore in order to restrict and arrest
further borrowings by the Borrower/plaintiff from other banks it is
necessary to report the plaintiff as willful defaulter to RBI and other
Credit Information Companies (CIC).
15. The defendant no. 2 has further submitted that there is no
urgency since the plaintiff is already declared as willful defaulter by
defendant no.2. The defendant no.2 issued Show Cause Notice dated
15th December, 2018 and also allowed personal hearing to the plaintiff
before the Willful Defaulter Committee (WDC) of the Bank. The
plaintiff appeared for personal hearing before WDC in its meeting held
on May 27th , 2019 accompanied by Shri Jitendra Jain (official of
Gujarat Foils Ltd) and Shri Saurabh Sharma ( official of Topworth Steel
& Power Pvt. Ltd.). Hence, only after following due process of law, the
plaintiff is classified as willful defaulter. All the subsequent steps viz.
Initiating criminal prosecution and reporting to Reserve Bank of India
and to other credit agencies are merely ministerial acts and same
cannot be challenged by the plaintiff. The present motion is filed with
ulterior motive. Plaintiff has indirectly sought to say detailed
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investigation in the matter by the Statutory investigating agencies which
otherwise could be stopped only by competent court of law.
16. The defendant no.2 has further submitted that after carefully
analysing the financial data of the GFL, willful defaulter Identification
Committee ('Committee') of the defendant no.2 found that there have
been acts of willful default on the part of the borrower in view of
aforesaid guidelines. Therefore, the defendant no.2 issued Show Cause
Notice dated 15th December, 2018 to the plaintiff for submissions as to
why they should not be declared as willful defaulter. In response to the
said notice, the plaintiff has given frivolous reply. However, the plaintiff
has failed to provide explanation in regard to discrepancies mentioned
in the reply of paragraph 6. The plaintiff initially avoided hearing but
subsequently he appeared for personal hearing before the Committee
and after giving adequate opportunity to the plaintiff, he has been
declared as willful defaulter. The amount of Rs.95.21 crores ( as on
September 16, 2019 plus the interest accrued thereon) are due and
payable by the GFL and the plaintiff to the defendant. The defendant
no.2 examined observations given in the Forensic Audit & Transaction
Audit report and also verified the documents/records of the borrower
available with defendant and found the discrepancies mentioned in the
paragraph 6 above in this reply. The account of GFL is NPA since March
31st , 2016. Since the account has been NPA for such a long period and
there is considerable amount of Public Money to be recovered, Hon'ble
Court may please direct the plaintiff to pay the default amount to the
defendant without any further delay. On these grounds, the defendant
no.2 has requested that the present notice of motion as well as suit be
dismissed with costs.
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17. The defendant no. 3 has resisted this notice of motion by filing its
reply.
Brief facts of the reply of the defendant no.3 are as follows-
18. The present case and this notice of motion filed on behalf of the
plaintiff on the basis of an imaginary cause of action. The suit/plaint is
filed without disclosing any present live cause of action and is therefore
not maintainable and deserves to be dismissed with costs. None of the
defendants have declared the plaintiff as willful defaulter. The same is
apparent from a mere perusal of the plaint where the plaintiffs claim
that the plaintiffs have filed the suit on the basis of an apprehension
that the defendants shall without following due process of law and
against the principles of natural justice declare them as willful defaulter.
The defendants have merely given a Show Cause Notice giving them an
opportunity of being heard and showing why they should not be
declared as willful defaulters.
19. The defendant no. 3 has further submitted that the present suit is
not maintainable as the plaintiffs lack locus, power and authority to
seek reliefs on behalf of the said Company. The defendant no.3 further
submitted that the plaintiff can seek any relief for any on behalf of the
said Company, the same ought to be sought before the Adjudicating
Authority viz. National Company Law Tribunal and or the Hon’ble High
Court and this Hon’ble Court does not have jurisdiction to grant any
relief on account of a statutory bar. The present suit is also bad for
misjoinder and/or non-joinder of parties. The plaintiff has failed to
implead the said Company and/or RP/liquidator as a necessary and/or
proper party plaintiff and/or defendant to the present proceedings
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despite seeking specific relief arising out of and/or in relation to the
business and affairs of the said Company. The present suit is not
maintainable as a commercial suit and the plaint ought to be rejected
on this ground alone. The relief of injunction sought are barred under
section 41 of the Specific Relief Act.
20. The defendant no.3 has further submitted that the plaintiff is the
Promoter, Directors (Suspended Board) and Personal Guarantor of the
said Company, who has availed and enjoyed various credit facilities
from this defendant and the other consortium banks and accounting in
tune of Rs.339.21 crores. It is pertinent to note that a sum of Rs.53.45
crores is due and payable as on 31st July, 2020 along with further
interest from the said Company and the plaintiff to this defendant. The
said Company and the Guarantors, despite restructuring of the account
by this defendant and the other consortium banks, the said Company
has failed and neglected to pay the amounts due and payable to this
defendant and other consortium banks. In spite of the restructuring, the
Company failed and neglected to regularize the account and defaulted
in making repayment of the loan, and thus the Borrower Company
Account was declared NPA on 28th November, 2016.
21. The defendant no.3 has further submitted that there is no breach
or violation of any RBI Guidelines as alleged by the plaintiff. On the
contrary, the plaintiff has approached this Hon’ble Court with unclean
hands suppressing the true and correct material facts to this Hon’ble
Court. On these grounds, the defendant no.3 has requested that the
present notice of motion taken out by the plaintiff may kindly be
dismissed with costs.
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22. Upon hearing arguments of the learned counsels of both the
parties, on perusal of notes of arguments and documents produced on
record on behalf of both the sides, during the course of arguments and
in the pleadings and written notes of arguments, the learned counsels
on behalf of the defendant nos.1 and 2 have raised objection that the
plaintiff has filed this false suit and notice of motion without any
grounds. The learned counsels have further raised objection that the
defendant nos. 1 and 2 Banks have already declared willful defaulters
to the plaintiff and the plaintiff's Company i.e. GFL Company by
following due procedure of guideline issued by RBI Bank. The learned
counsel of defendant no.3 has raised various objections such as the suit
of the plaintiff is premature, the plaintiffs have no locus standi, the
plaint does not disclose cause of action, the suit is barred, this court has
no jurisdiction to try and decide this matter, this suit is not commercial
suit and etc.
23. During the course of arguments, the learned counsels for the
defendants bank have argued that the plaintiffs have filed the present
suit on presumption that the defendant nos. 1 and 2 have already
declared the account of GFL Company as willful defaulter. It is not the
fact that the defendants have not declared willful defaulter to GFL
Company. As a matter of fact, the defendant nos. 1 and 2 have already
declared willful defaulter to the plaintiff and GFL Company. Therefore,
the present suit and notice of motion are not maintainable.
24. On perusal of the pleadings of the plaintiffs, it appears to me that
in the present suit and notice of motion have challenged show cause
notice issued by the defendants dated 31/12/2020, 08/01/2020 and
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20/01/2020 respectively. It is the allegation of the plaintiff that the
defendants have been taken steps for declaring willful defaulter and
classified to the GFL Company's account as Red Flagged without giving
opportunity for hearing to the plaintiff. Therefore, the plaintiff has
apprehension that in hurriedly the defendants bank will initiate criminal
action against the plaintiff. The learned counsel for the defendant no.3
has argued that the present suit and notice of motion has been filed
premature till this date the defendant no.3 have not declared willful
defaulter to the plaintiff and GFL Company. Admittedly, the defendant
nos. 1 and 2 Banks have declared willful defaulters to the plaintiff and
GFL Company. Under such circumstances, I am of the opinion that the
plaintiff has right to challenge any action taken by the defendants.
Therefore, the present suit and notice of motion are not premature and
the cause of action arose for filing the present suit.
25. The learned counsels on behalf of the defendants have argued
that in the present suit, the plaintiff has not made party to the Company
of the Plaintiff i.e '' GFL Company'' which is necessary party in the
present suit and the plaintiff has filed the present suit without adding to
the Company. Therefore, the present suit is not maintainable. The
learned counsel on behalf of the defendant have relied on the
Judgement of the Supreme Court of India in Innoventive Industries Ltd.
V/s. ICICI Bank and Ors., reported in MANU/SC/1063/2017, the
Hon'ble Supreme Court has observed in para no 11 of the Judgement
that once an insolvency professional is appointed to manage the
company, the erstwhile directors who are no longer in management,
obviously, cannot maintain an appeal on behalf of the company.
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26. A perusal of the observations held in the above citations it
appears to me that with due respect the ratio held in above citations is
not applicable to the present case in my hand due to differ of facts and
circumstances. In the present case in my hand, the plaintiffs are the
Directors as well as Guarantors of the loan amount granted by the
defendants bank to the plaintiffs company i.e “GFL Company''.
27. The learned counsels on behalf of the defendants have 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 plaintiff that this is a suit for declaration against the action
initiated by the defendants. The plaintiff is challenging the virus of
action taken by defendants and therefore, suit will lie as per Section 9
of Civil Procedure Code.
28. 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, plaintiff
is seeking declaration against the action of defendants. The action
levelled 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 the 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 counsels on
behalf of the defendant no.3 for saying that this Court has no
jurisdiction to entertain and decide this suit in view of Section 9 of Civil
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Procedure Code.
29. The learned counsel on behalf of the defendants have argued that
in view of provision 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 some what different. Plaintiff is challenged show
cause notice issued by the defendants dated 31/12/2020, 08/01/2020
and 20/01/2020 respectively, which are not as per procedure laid down
in Master Circular. Plaintiff is challenging the virus of the action taken
by the 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.
30. The learned counsels on behalf of the defendants have 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 plaintiff has argued that the Civil Court has jurisdiction to entertain
and decide the present suit filed on behalf of the plaintiff.
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31. The learned counsels on behalf of the defendants has relied on
the judgement of the Hon'ble Supreme Court of India in the case of Mr.
Anand Rao Korada Resolution Professional V/s. M/s. Varsha Fabrics (P)
Ltd. & Ors. In Civil Appeal Nos.8800-8801 of 2019, the Hon' ble
Supreme Court has observed in para No. 8 of the Judgement that, ''
Section 231 of the IPC bars the jurisdiction of civil courts in respect of
any matter in which the Adjudicating Authority i.e. the NCLT or the
NCLAT is empowered by the Code to pass any order. '' The learned
counsel on behalf of the defendants has relied on the another
judgement of Hon'ble High Court at Calcutta in the case of Vikram
Jairath And Ors. Vs. Middleton Hotels Private Limited, decided on 27th
September, 2019. The Hon'ble High Court has observed in last para of
the judgement that, ''in the light of such fraud, from having the
company proceedings or the suit proceedings being rendered
infructuous. In view of my prima facie finding that this court does not
have the jurisdiction to grant any of the reliefs prayed for in the plaint
and having regard to the fact that all the reliefs claimed in the plaint
could be claimed before the NCLT in the pending proceeding and in fact
if the prayer made before the NCLT is allowed it could have the same
effect or consequence or bearing.''
32. 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
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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.
33. I have gone through the observations held in above citations. It
appears to me with due respect the above observations are not
applicable to the present case in my hand due to defers facts and
circumstances. It is an admitted position on record that defendant no.3
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 plaintiff that plaintiff and GFL Company
are not against the recovery proceedings nor by way of this suit plaintiff
is challenging or restraining the recover proceeding. No doubt, plaintiff
is not challenging the recovery proceedings nor challenging the
proceedings which is pending before NCLT. Here, plaintiff is being
suspended directors and guarantors are challenging the show cause
notice issued dated 31/12/2020, 08/01/2020 and 20/01/2020
respectively by the defendants 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 and so the present
suit and notice of motion filed on behalf of the plaintiff are
maintainable.
34. The learned counsels for the defendants have argued that the
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plaintiff has 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
plaintiff 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 2(c) (i), it is 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 defendants by issuing show cause notice under challenge
are based on Master Circular which is applicable to all the accounts
where under the defendants have lent money in ordinary course of its
transaction. Thus, the action of the defendants bank by issuing show
cause notices under challenge are maintainable as a Commercial Suit.
35. The learned counsels for the defendants have argued that the
present suit is not maintainable as a commercial suit and therefore, the
plaint ought to be rejected on this ground alone. The learned counsel in
their submissions relied on the following Judgements.
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(i) Bank of India V/s. Gupta Coal India Pvt. Limited & Anr. In the High
Court of Judicature at Bombay, Nagpur Bench, in Civil Revision
Application No. 97/2017. In this Judgement, the objection raised before
the Hon'ble High Court was that the suit should be treated as
Commercial Suit and not an ordinary suit, but the Hon'ble High Court
held that the suit of the present nature cannot be a Commercial Suit.
(ii) In the Judgement of Supreme Court of India in Civil Appeal No
75/1962 in MANU/SC/0227/1963 in Raizada Topandas and Ors. V/s
Gorakhram Gokalchand. The Hon'ble Supreme Court has held that the
plaint can be returned for presentation before appropriate court when a
court lacks territorial or pecuniary jurisdiction but not when it lacks
inherent jurisdiction. Thus, this Hon'ble Court lacks inherent jurisdiction
and cannot and ought not to grant any relief. The Court ought to reject
the plaint entirely forthwith.
36. I have gone through the above citations with due respect the ratio
held in above citations are not applicable to the present case in my
hand. In the present case the nature of the suit is a Commercial Suit and
not an ordinary Suit.
37. The learned counsels on behalf of defendants have argued that
the plaintiff has not paid sufficient court fees. It regard to this objection
of the defendant no.3 regarding court fees, the plaintiff has submitted
that the plaintiff has paid court fees accordingly. However, the plaintiff
is ready to pay the deficient court fees, if any, as adjudicated by the
court. Therefore, I am of the opinion that at this stage for deciding this
notice of motion does not require to give findings about the court fees
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while the plaintiff has submitted that the plaintiff shall pay the deficient
court fees, if any, as adjudicated by the court.
38. The learned counsel on behalf of the plaintiff has argued that the
defendants have issued show cause notices to the plaintiff and GFL
Company without following Master Circular and therefore, the
defendants have not followed the principles of natural justice.
39. The learned counsel on behalf of the plaintiff 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 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.
40. It appears from the contention of the plaintiff that the GFL
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 ers facing
restrictions in their cash flows. The plaintiff has filed various suit for
recovery of amount against companies debtors.
41. It is contended by the learned counsels for the defendants that
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the plaintiff may repay the loan, thereafter no action will be initiated
against the plaintiff. It appears that the defendants bank had initiated
the action for recovery of the loan under the grab of Master Circular.
42. Considering wide scope of Master Circular, the balance of
convenience lies in favour of plaintiff. Obviously, irreparable loss will be
caused to the plaintiff, if the court refuse to grant injunction as prayed.
Hence, the order.
ORDER
1. The Notice of Motion No.1285/2020 is hereby allowed.
2. The defendants bank personally or through their representatives are
restrained from taking coercive action against plaintiff on account of
notice issued by the defendant no.1 Bank dtd. 31/12/2019, notice
issued by defendant no.2 dated 08/01/2020 and notice issued by
defendant no.3 dated 20/01/2020. Defendants or their representatives
are restrained from branding the plaintiff as willful
defaulter/dissemination and publishing the name of plaintiff as willful
defaulter till final disposal of the suit.
3. It is needless to say that defendants are at liberty to proceed against
the plaintiff regarding recovery proceedings, attachment, sale of
attachment of property to recover the defaulted loan.
4. Cost in cause.
5. Notice of Motion No.1285/2020 is disposed off accordingly.
Dtd: 22/12/2020. Judge
City Civil & Sessions Court,
Gr.Mumbai.
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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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