Final Order 2

Order Details: Chamber summons
Pdf Text: CNR No.
IN THE BOMBAY CITY CIVIL COURT AT BOMBAY
NOTICE OF MOTION NO.4747 OF 2019
IN
S.C. SUIT NO.140 OF 2020
1. Mr. Kishore Krishnarao Avarsekar & Anr. ] … Plaintiffs
V/s.
Allahabad Bank ] ... Defendant
Appearances :-
Ld. Adv. Mr. Dalal for plaintiffs.
Ld. Adv. Ms. Pratibha Lakdawala for defendant.
CORAM : HIS HONOUR JUDGE
SHRI SHANKAR G .
BORLEPWAR
(C.R.No.20)
DATED : 14th October, 2020
ORAL ORDER
1. Plaintiff took out this Notice of Motion to stay the
implementation and the effect of the order dated 04.10.2019 passed by
the defendant declaring the plaintiffs as willful defaulter, to restrain
defendant or any other person on behalf of the defendant from taking
any coercive action / steps against the plaintiffs pursuant to/in
furtherance of the order dated 04.10.2019, to restrain defendant from
publishing the photographs of the plaintiffs in any newspaper with the
intention to intimate to the public at large the order dated 04.10.2019.
MHCC01-012973-2019
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2. Perused Notice of Motion, affidavit in support of Notice of
Motion and affidavit in reply of defendant.
3. Following points arise for my determination. I record my
findings thereof for the reasons mentioned below:
Sr. No. POINTS FINDINGS
1. Whether plaintiffs have made out prima
facie case to grant injunction as prayed
for ?
In the negative.
2 Whether balance of convenience lies in
favour of plaintiffs?
In the negative.
3 Whether irreparable loss will be caused
to the plaintiffs if injunction is refused?
In the negative.
4 What Order ? Notice of motion is
dismissed as per final
order.
REASONS
As to point Nos.1 to 4.
4. In brief, it is contention of the plaintiffs that plaintiff
repeat, reiterate, adopt and confirm all that is stated in the plaint.
5. It is contention of the plaintiff that this suit is filed to
declare that the plaintiff is not a willful defaulter in terms of the
regulation/ guidelines of the Reserve Bank of India and consequently
set aside the order dated 04.10.2019 passed by the defendant declaring
the plaintiffs as a willful defaulters.
6. Plaintiff No.1 was the founder/ promoter and the managing
director of M/s. Unity Infraprojects Ltd. from 09.04.1997 to till date.
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The plaintiff No.2 was Director of the said Company from 09.04.1997
till date.
7. The defendant is Nationalized Bank. The said Company of
the plaintiff sometime in the year 2014-2015 started facing financial
difficulties, as a consequence of which the Company was unable to
fulfill its obligations towards its creditors. In view of the aforesaid, the
promotors of the Company initiated corporate insolvency resolution
process under Section 10 of the Insolvency Bankruptcy Code 2016,
before the National Company, Law Tribunal (“NCLT”) by its order dated
20.06.2017.
8. In or around 2009, the plaintiff’s Company had undertaken
pipeline project from Bombay Municipal Corporation (BMC) of Section
III from Tansa to Tarali with Bombay Municipal Corporation. In order
to meet the working capital requirements of the said project, the
Company was in need for funding to the tune of Rs.82,00,00,000/- (Rs.
Eighty Two Crores only). The plaintiff Company approached the
defendant for the loan of Rs.82,00,00,000/- (Rs. Eighty Two Crores
only). The defendant sanctioned the loan of Rs.Rs.82,00,00,000/- (Rs.
Eighty Two Crores only) and disbursed the same on 31.12.2009. The
said loan amount was to be repaid by the plaintiffs Company to the
defendant by around March, 2013. The plaintiffs company repaid the
said amount during the year 2011-2012.
9. In the year 2012 the Company was awarded 2 projects No.
(1) Constructing the Lady Hardinge Medical College and (2)
Construction of Administrative Building, Girls Hostel, Laboratory,
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Scientist Quarter & Staff Quarter at Bihar Agriculture University,
Sabour, Bhagalpur, Bihar. Consequently the plaintiffs Company
approached to the defendant for loan of Rs.101,00,00,000/- (Rs. One
Hundred and One Crores Only) out of the requirement of
Rs.2,00,00,00,000/-. The loan agreement was executed between the
Company and the defendant on 25.09.2012. The defendant Company
sanction loan amount of Rs.1,00,00,00,000/- (Rs. One Hundred Crore
only). The defendant Company disbursed only 65,00,00,000/- (Rs.
Sixty Five Crores only) to the plaintiff’s Company.
10. In this way total loan amount was Rs.1,66,00,00,000/- (Rs.
One Hundred Sisty Six crores only). The plaintiffs Company utilized
the said loan amount towards the respective projects for which the same
was taken. The plaintiffs company alongwith plaintiffs were being
evaluated and considered during the year 2014 by the consortium of
banks for corporate debt restructuring scheme of the Reserve Bank of
India. The plaintiffs company was entitled to additonal sanction of
Rs.341,00,00,000/- (Three hundred forty one crores only) under the
restructuring scheme of the Company. However, the additional funding
though provided for under the Master Restructuring Agreement dated
30.12.2014 and Restated Master Restructuring Agreement dated
18.02.2015, though approved was only partially disbursed. The entire
funding was not disbursed, various operational creditors involved in the
ongoing projects and eventually impacted the operations of the
company. The consortium of lenders has committed a breach of its
obligations of only releasing partial funding. The corporate debt
restructuring cell had time and again directed and insisted lenders to
release up to 50 of the sanctioned additional working capital. Despite,
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the corporate debt restructuring cell directing the lenders to release
50% of the sanctioned additional working capital, the lenders failed to
comply with the same.
11. The defendant filed the original application No.325 of 2019
before DRT – II, Delhi for the recovery of a sum of Rs.288,26,12,912.79
against the plaintiffs and others. The said original application is
pending. The plaintiffs are disputing the said claim of the defendant in
the said DRT proceedings.
12. On 19.09.2019 the defendant issued show cause notice to
the plaintiffs Company and others calling upon them to make their
submissions to satisfy the defendant as to why the plaintiffs alongwith
others named in show cause Notice should not be declared as willful
defaulters. The plaintiff through their advocate replied the said show
cause notice by letter dated 15.10.2019. According to the plaintiffs
there was no siphoning of funds on the part of the Company and the
plaintiffs. The defendant addressed a letter dated 16.01.2019 calling
upon the plaintiffs to provide a copy of the letters referred to in the
letter dated 15.10.2018. The plaintiffs through their advocate letter
dated 28.01.2019 forwarded the copy of the letters to the defendant as
requested. A personal hearing was conducted on 23.03.2019 by the
willful defaulter identification committee. Plaintiff No.2 attended the
said personal hearing. According to plaintiff No.2 no effective
opportunity was allowed to plaintiff No.2 to make out the plaintiffs case
and put forth their submissions in relation to the allegations/grounds
purportedly alleged by defendant in the show cause notice. On the
contrary during the course of the personal hearing, the defendant,
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without considering the repeated attempts made by plaintiff No.2 to put
forth the plaintiffs case, summarily and abruptly dealt and ended the
personal hearing. The defendant violated the principles of natural
justice in the said personal hearing.
13. According to the plaintiffs, they and their company are not
willful defaulter. As per Reserve Bank of India guidelines a willful
default is deemed to have occurred if any of the following events are
noted:
(a) The unit has defaulted in meeting its payment/ repayment
obligations to the lenders even when it has the capacity to honour the
said obligations.
(b) The unit has defaulted in meeting its payment/ repayment
obligations to the lenders and has not utilized the finance from the
lender for the specific purpose for which finance was availed of but has
diverted the funds for other purposes.
(c ) The unit has defaulted in meeting its payment/ repayment
obligations to the lenders and has siphoned off the funds so that the
funds have not been utilized for the specific purpose of which the
finance was availed of, nor are the funds available with the unit in the
form of other asset.
(d) The unit has defaulted in meeting its payment/ repayment
obligations to the lenders and has also deposed off or removed the
movable fixed assets or immovable property given for the purpose of
securing a term loan without the knowledge of the banker/lender.
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14. Plaintiffs through their letter dated 02.05.2019 provided
additional documents to explain the defendant that the allegations
made by the defendant is baseless and devoid of any merit.
15. The defendant addressed a letter on 31.07.2019 to the
plaintiffs and thereby forwarded a copy of the order passed by the
Willful Defaulter Identification Committee declaring the plaintiffs and
the Company as a willful defaulter. It is also informed by the said letter
dated 31.07.2019 that if plaintiffs are aggrieved by the said order then
the plaintiffs can submit their representation in writing before the
Willful Defaulter Identification Committee. The plaintiffs through their
advocates letter dated 21.08.2019 repeated and reiterated all what was
stated by them in their earlier correspondence and responded to the
letter dated 31.07.2019.
16. On 04.10.2019 the defendant passed an order and thereby
declared the plaintiffs as willful defaulters on the ground that the
plaintiffs have advanced the funds taken from the defendant to its
subsidiaries / associate and group companies where the plaintiffs have
stake without the permission of the defendant. Once again plantiffs
vide their letter dated 18.11.2019 reiterated the submissions and
further requested the defendant to allow them reasonable opportunity
to show them relevant documents and make submission to their
baseless allegation. Inspite of the said letter, the defendant did not
reply the said letter dated 18.11.2019 and did not provide any
opportunity to the plaintiffs to make representation.
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17. The plaintiffs have strong apprehensions that the
defendants will implement/initiate actions against the plaintiff in a
guise to follow the Reserve Bank of India Guidelines.
18. The defendant violated the principles of natural justice and
passed the order dated 04.10.2019 declaring the plaintiffs as a willful
defaulters. The defendant failed to consider the relevant details,
submissions and documents available with them and additionally
provided by the plaintiffs to answer the alleged grounds raised by the
defendants for declaring plaintiff as willful defaulters. The said order
dated 04.10.2019 is bad in law, arbitrary, illegal and not in compliance
with the regulations/circulars/ guidelines issued by the Reserve Bank of
India for declaring as willful defaulters. If the said order dated
04.10.2019 is not stayed and if the Notice of Motion is not allowed as
prayed for then the applicant/ plaintiffs shall suffer grave harm, loss
and injury.
19. Defendant filed affidavit in reply which is read and
recorded on 16.12.2019. In brief, it is contention of the defendant that
the Company was in a need of funding to the tune of Rs.82,00,00,000/-
(Rs. Eighty Two Crores only). Thereafter, the company and defendant
entered into the agreement of loan on 30.12.2009 which was to be
repaid by around March, 2013.
20. The Company again approached the defendant in the year
2012 to the defendant Bank for fresh project specific loan to the tune of
Rs.101,00,00,000/- (Rs. One Hundred and One Crores only) for
completing its two new projects. On 25.09.2012 loan agreement was
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executed between M/s. Unity Infraprojects Limited and Defendant
Bank.
21. The M/s. Unity Infraprojects Limited again approched
defendant Bank in the year 2013 for sanction of loan to the tune of
Rs.1,00,00,00,000/- (Rs. One Hundred Crore only). The defendant
Bank sanctioned and disbursed Rs.65,00,00,000/- (Rs. Sixty Five Crores
only).
22. The M/s. Unity Infraprojects Limited were unable to pay
back its debts as such the account was declared as NPA on 31.12.2014.
The defendant Bank filed original Application No.325 of 2018 on
24.12.2018 before the Debts Recovery Tribunal-II, Delhi for recovery of
Rs.288,26,12,912.79 only. It is still pending.
23. The defendant issued show cause Notice on 19.09.2018 to
M/s. Unity Infraprojects Limited and its six directors to explain as to
why they should not declare as willful defaulters. Principals of natural
justice have been followed by the defendant Bank. Personal hearing
was given to the borrower Company and its Directors on 23.04.2019.
The willful Defaulter Identification Committee observed that huge
amount of loans and advances and also investment were made to
subsidiary / associates and group companies where directors were
interested. This was done without taking any permission from the
lenders. The loans also did not carry any interest. Further, huge
recovery amount to the tune of Rs.223.44 crores was (over 365 days)
outstanding from associate concerns for which no action was taken.
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24. The M/s. Unity Infraprojects Limited done the said
transaction despite the fact that the company had not paid the
undisputed tax liabilities and has defaulted in payments of Banks and
FI. The representative of the company was unable to provide any
satisfactory reply in the hearing held on 23.04.2019 however they
stated that their huge funds were blocked in Lady Hardinge Medical
College Project of Bihar Agricultural University Projects which were
completed over 60% and they can provide its documentary evidence if
WDIC permitted further time for its submission. The said company
submitted further reply and additional documents vide letter dated
02.05.2019. The said company falled to provide any satisfactory reply
of documents denying the allegations levelled by the defendants.
25. The committee members of WDIC observed that the
borrower company and its directors are eligible for declaration of willful
defaulters on the following grounds specified by the Reserve Bank of
India:
(a) The unit has defaulted in meeting its payment/repayment
obligations’ to the lender and has siphoned off the funds so that the
funds have been utilized for the specific purpose for which finance was
availed of, nor are the funds available with the unit in the form of other
assets.
(b) As the charge against the company for siphoning off funds
stood proved as per RBI guidelines, the committee unanimously passed
the order declaring M/s. Unity Infra Projects & its directors Kishore
Krishnarao Avarsekar and Abhijit Kishore Avarsekar as Willful defaulters
and WDIC directed the Head Office of Recovery Department to place
this order for declaring them as Willful Defaulter before the Wilful
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Defaulter Review Committee for review and approval for declaration of
the borrower company M/s. Unity Infra Projects Ltd., & its directors
Kishore Krishnarao Avarsekar, Abhijit Kishore Varsekar as Willful
Defaulter. It was also directed that the copy of the order of Willful
Defaulter should also be served to the borrower and its directors who
have been identified by the WDIC for declaration of wilful defaulter and
15 days’ time was given to the borrowers and directors, informing that
it aggrieved by the order of the WDIC, they can submit their
representation to WDRC for the date of receipt of above said order.
(c ) After receiving the WDIC order dated 29.07.2019, a
letter/representation vide reference no.NN/379/2029-20 DATED
21.08.2019 was perceived from M/s. Naik and Naik Company,
advocates on behalf of the borrower company wherein it was alleged
that WDIC of bank has not given them reasonable opportunity to
present their case and has not considered their representation and the
order of WDIC is not in confirmation with the RBI guidelines.
26. Therefore, the order dated 04.10.2019 is passed following
due process and principals of natural justice. Ample opportunity had
given to the plaintiffs by issuing show cause notice to explain as to why
the Company and others should not declare as willful defaulter.
Therefore, Noticie of Motion be dismissed.
27. Mr. Dalal advocate for plaintiff. Advocate Pratibha
Lakadawala for defendant.
28. The Learned Advocate appearing for the plaintiff relied
upon order passed by the Court Room No.31 by City Civil Court in
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Notice of Motion No.738 of 2019 in Suit No.824 of 2019 dated
12/07/2019 in the case of Mr. Abhay Narendra Lodha Vs. Allahabad
Bank and order dated 10.10.2019 in Notice of Motion No.2247 of 2019
in Suit No.2078 of 2019 in the case of Abhay Narendra Lodha Vs.
Allahabad Bank. Both the said orders are filed with list on 03.01.2020
29. The Learned Advocate appearing for the defendant relied
upon the citation of Hon’ble Calcutta High Court in the case of M/s.
Atlantic Projects Ltd. & Ors. Vs. The Allahabad Bank & Ors. Decided in
Writ Petition No.7471 (W) of 2019 dated 03.05.2019. She has
submitted that the defendant Bank has followed due process of law
before declaring the plaintiffs and others as willful defaulters.
30. I have gone through the citation. In the citated case, show
cause notice was issued by a person who was not a member of
Identification Committee. Therefore, Petitioners therein challeged the
said show cause notice contending that the said show cause notice is
without jurisdiction and it is issued without guidelines of Master
Circular of willful defaulter on 01.07.2015. It was contended that the
Identification Committee was required to issue the show cause notice by
itself. Show cause notice dated 24.07.2018 was issued by the Deputy
Manager (recovery) of Allahabad Bank under the Master Curcular of the
Reserve Bank of India relating to the declaration of Willful Defaulters
dated 01.07.2015. The issues before the Hon’ble High Court were as
under:
(1) Can the Identification Committee acting under the Master
Circular for Wilful Defaulters dated 01.07.2015 delegate its
power to issue a show cause notice?
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(2) Is a borrower receiving a show cause notice under the
Master Circular on Wilful Defaulters dated 01.07.2015 entitled to
be represented by an agent before the Identification committee?
31. The Learned Advocate appearing for defendant submitted
before me that the show cause Notice is issued as per the said Master
Circular on Willful Defaulter dated 01.07.2015 and thereby the
defendant Bank has followed due process of law. The Hon’ble High
Court held show cause notice issued is illegal. Therefore, the Hon’ble
High Court pleased to answer the said both issues in negative and
further pleased to quash the said show cause notice.
32. Admittedly on 24.12.2018 defendant Bank filed Original
application bearing No.325 of 2018 before the Hon’ble debts recovery
Tribunal II, Delhi for recovery of a sum of Rs.288,26,12,912.79.
Accordidng to the defendant Bank ample opportunities gave to the M/s.
Unity Infraprojects Ltd and its six Directors for enabling them to explain
as to why they should not declare as willful defaulter. The borrower
Company participated in the personal hearing before W.D.I.C. on
23.04.2019 through its Directors Mr. Abhijit i.e. plaintiff No.2. In this
way an opportunity was given to the said borrower company to give
explanation and thereby the defendant Bank has followed the principle
of natural justice.
33. According to the defendant Bank the Willful Defaulter
Identification Committee (W.D.I.C.) observed that huge amount of loans
and advances and also investments were made to subsidiary /associates
and group Company where Directors were interested. That was done
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without taking any permission from the lenders. The loans also did not
carry any interest. Huge recovery of Rs.23.44 crores was outstanding
from the associates concerned for which no action was taken. The said
(W.D.I.C.) was not satisfied from the representative of the Company in
the hearing held on 23.04.2019. The said representative had submitted
before the (W.D.I.C.) Company that huge funds were blocked in Lady
Hardinge Medical College Projects and Bihar Agriculture University,
Sabour (projects) which were completed over 60%.
34. Huge amount of loan and advances and also investment to
subsidary and associates and group Company where Directors were
interested without taking any permission from the defendant Bank is
not proper on the part of the borrower company. It prima facie appears
that the Company and the plaintiffs breached Reserve Bank of Indian
guidelines by defaulting in payment obligations to the lenders and has
not utilised the finance from the lender for the specific purpose for
which finance was availed of but has diverted the funds for other
purposes without permission of the defendant Bank.
35. Huge amount of Rs.223.44 crores outstanding from the
associates concerned and for that purpose original application No.325
of 2018 is pending before the DRT, Delhi. Under such circumstances, I
am of the opinion that plaintiffs failed to make out prima facie case.
Balance of convenience does not lie in favour of the plaintiff and if the
injunction is refused then the irreperable loss will not be caused to the
plaintiff. Therefore, I record my findings to point Nos.1, 2 and 3 in the
negative and point No.4 the Notice of Motion is dismissed as per final
order. Hence, I proceed to pass following order:
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ORDER
1. Notice of Motion No.4747 of 2019 is dismissed.
2. Costs in cause.
( SHANKAR G. BORLEPWAR )
Judge, (C.R.No.20)
Dt.: 14/10/2020 City Civil Court, Gr. MUMBAI
Dictated on : 29/09/2020,
30/09/2020,
01/10/2020 &
14/10/2020.
Transcribed on : 17th & 19th /10/2020.
Draft gave for
checking on : 20/10/2020
checked on : 21/10/2020
Signed on : 21/10/2020.
( SHANKAR G. BORLEPWAR )
Judge, (C.R.No.20)
City Civil Court, Gr. MUMBAI
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“CERTIFIED TOBE TRUE AND CORRECT COPY OF THE ORIGINAL
SIGNED JUDGMENT/ORDER”
22.10.2020 at 11.15 a.m.
UPLOAD DATE AND TIME
(VARSHA U. PAWAR)
NAME OF STENOGRAPHER
Name of the Judge HHJ SHRI S. G.
BORLEPWAR
(COURT ROOM NO.20)
Date of pronouncement of judgment/order 14.10.2020
Judgment/order signed by P.O. on 21.10.2020
Judgment/order uploaded on 22.10.2020
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