Supreme Nutri Grain Private Limited vs Dena Bank on 18 December, 2020
Equivalent citations: AIRONLINE 2020 GUJ 1929
Author: A.J.Desai
Bench: A.J.Desai, Nikhil S. Kariel
C/LPA/597/2018 CAV JUDGMENT
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/LETTERS PATENT APPEAL NO. 597 of 2018
In R/SPECIAL CIVIL APPLICATION NO. 16833 of 2016
With
CIVIL APPLICATION (FOR STAY) NO. 1 of 2018
In R/LETTERS PATENT APPEAL NO. 597 of 2018
With
CIVIL APPLICATION (FOR JOINING PARTY) NO. 1 of 2020
In R/LETTERS PATENT APPEAL NO. 597 of 2018
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR. JUSTICE A.J.DESAI
and
HONOURABLE MR. JUSTICE NIKHIL S. KARIEL
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1 Whether Reporters of Local Papers may be allowed to see the YES
judgment ?
2 To be referred to the Reporter or not ? YES
3 Whether their Lordships wish to see the fair copy of the NO
judgment ?
4 Whether this case involves a substantial question of law as to NO
the interpretation of the Constitution of India or any order made
thereunder ?
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SUPREME NUTRI GRAIN PRIVATE LIMITED & 1 other(s)
Versus
DENA BANK
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Appearance:
ADITYA A GUPTA(7875) for the Appellant(s) No. 1,2
MR AR GUPTA(1262) for the Appellant(s) No. 1,2
MR SS PANESAR(560) for the Respondent(s) No. 1
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CORAM: HONOURABLE MR. JUSTICE A.J.DESAI
and
HONOURABLE MR. JUSTICE NIKHIL S. KARIEL
Date : 18/12/2020
CAV JUDGMENT
(PER : HONOURABLE MR. JUSTICE NIKHIL S. KARIEL)
1. Present Letters Patent Appeal arises from the judgment dated 12.04.2018 passed by the learned Single Judge in Special Civil Application No.16833 of 2016, whereby the learned Single Judge has been pleased to dismiss the said writ petition on the ground of availability of alternative remedy under Section 17 of the SARFAESI Act. Two questions arise for our consideration, namely;
(a) whether remedy under Section 17 is an efficacious remedy in the fact situation and (b) whether the respondent - Dena Bank - now Bank of Baroda was legally empowered not to release the charge over the immovable property mortgaged with the respondent bank in view of the fact that the entire dues in lieu of the loan accounts have been repaid and the respondent bank has already returned the title deeds of the property in question.
2. Brief facts, which are relevant for the purpose of deciding the present appeal, are as under:
2.1 The appellant - petitioner No.1 is a Private Limited Company incorporated under the provisions of the Companies Act, 1956 and whereas the appellant No.2 herein was the guarantor for the loan availed by the appellant No.1 from the respondent bank. The respondent being Dena Bank, now Bank of Baroda, [herein after to be referred to as the Respondent Bank] which is a Banking Company within the meaning of the Banking Regulations Act, 1949. The appellant - petitioner Company had availed a cash credit facility of Rs.
7,00,00,000/- (Rupees Seven Crores) bearing Account No.060213023949 and the term loan facility for Rs.4,50,00,000/- (Rupees Four Crores Fifty Lakhs) bearing Account No.060254023837. According to the appellants - petitioners, since they were not satisfied with the facility and services provided by the respondent bank, they had approached another bank namely M/s. Kotak Mahindra Bank Limited, which had agreed to provide the loan facilities on terms, which were more suitable to the appellants. It is the case of the appellants that Kotak Mahindra Bank Limited had issued sanction letter on 02.05.2016 subject to the various conditions mentioned in the sanction letter; conditions mentioned under the heading 'for take over facility' at the internal page 10 of the sanction letter, more particularly, condition No.3 stating that before disbursement, confirmation from Dena Bank to be obtained regarding handover all property papers; condition No.6 inter alia stating that Kotak Mahindra Bank will pay outstanding amount directly to the Dena Bank and will get property papers; and condition No.7 being that No Due Certificate shall be obtained from Dena Bank with release of Pay Order / RTGS. 2.2 That the Kotak Mahindra Bank had directly paid the full outstanding amount of Rs.6,98,48,727/- and Rs.2,05,00,000/-, totalling to Rs.9,03,48,727/- in lieu of the abovementioned loan accounts by RTGS to the respondent bank on 27.05.2016. Kotak Mahindra Bank had thereafter written a letter dated 27.05.2016 informing the respondent Bank of having sanctioned credit facilities to the appellant - petitioner and also informed regarding the details of payment made by them and further requesting the respondent Bank to adjust the payment accordingly and issue "No Objection Certificate" and also to provide original property papers with regard to the loan accounts of the appellant - petitioner with the respondent Bank. Said letter has been received by the respondent Bank. It appears that an Email communication had been sent to the respondent bank by the appellant - petitioner informing the respondent Bank inter alia that the loan accounts of the appellant - petitioner has been closed as all the dues have been paid, but mortgage has not been released and the respondent bank has not replied to Kotak Mahindra Bank or to the appellant - petitioner and whereas it was also mentioned that if any documents are required for release of the mortgage, the same may be intimated to the appellant - petitioner. In reply to the same, vide trail Email dated 04.07.2016, for the first time, the respondent bank has stated that since one of the Director of the appellant - petitioner Company Mr. Sanjay Vallabhbhai Kapuria, was a partner in one M/s. Shree Ramdev Cotton Ginning, which is a NPA on the said date and therefore, the account of the appellant - petitioner as well as M/s. Shree Ramdev Cotton Ginning have been considered as group account.
2.3 In the meanwhile, it appears that the respondent Bank has returned the title deeds of the property mortgaged to the respondent Bank in lieu of the loans in question, whereas there is no specific date mentioned by either parties as to when the documents were returned but suffice it to say state that the respondent Bank does not dispute this position.
2.4 The Director of the appellant Company had again issued a letter dated 08.07.2016 inter alia informing the respondent Bank that the entire dues of the 2 loans availed by the appellant - petitioner Company have been paid in full vide RTGS from Kotak Mahindra Bank on 27.05.2016, that while the original property files (title deeds) have been returned, but the property have not been released from the mortgage by the bank. It was further requested the respondent bank to release the charge on the property immediately, failing which the appellant - petitioner would be constrained to approach the Banking Ombudsmen.
2.5 In the meanwhile, the respondent bank had vide communication dated 18.07.2016 communicated the statement of account of the appellant - Company for the period between 01.04.2016 to 18.07.2016. Perusal of the said statement of account reveals that there is no outstanding dues in the loan accounts of the appellant - petitioner with the respondent bank. 2.6 It appears that a legal notice had also been sent by the appellant - petitioner through their learned Advocate, dated 06.08.2016 inter alia calling upon the respondent bank to forthwith release the charge on the property with regard to the loan account of the appellant petitioner, failing which the appellant - petitioner would be constrained to take out appropriate legal action against the respondent bank. In response to the said legal notice, the bank vide communication dated 17.08.2016 inter alia informed the learned Advocate for the appellant - petitioner that there was some ulterior motive in shifting the loan accounts from Dena Bank to Kotak Mahindra Bank, that since M/s. Supreme Nutri Grain Private Limited - appellant herein and M/s. Shree Ramdev Cotton Ginning are having common Promoters / Directors, therefore, same have been treated as group account. It was also alleged that the common Promoters / Partners had wilfully shifted their profit making Company account to Kotak Mahindra Bank. It was with an ulterior motive to dupe the bank of a huge outstanding amount of Rs.1398.41 Lakhs with uncharged interest in the account of M/s. Shree Ramdev Cotton Ginning that such shifting of account had taken place. It was also mentioned that the respondent bank has initiated recovery action under the SARFAESI Act on 26.70.2016 and also filed Recovery Suit with Debts Recovery Tribunal, Ahmedabad, on 28.07.2016 against Shree Ramdev Cotton Ginning and inter alia sought attachment before judgment against the proportionate share of Shri Sanjay Kapuria in the property in question and thus, since the matter in respect of property was sub- judice, according to the respondent bank, therefore, they could not release the charge over the property till final judgment of the Tribunal. 2.7 It appears that the appellant - petitioner had also approached Banking Ombudsmen and whereas vide communication dated 26.08.2016, the office of Banking Ombudsman had informed the appellant - petitioner that since Section 9(3)(d) of the Banking Lokpal Scheme, 2006, inter alia prohibits any complaint to the Banking Ombudsmen, if it pertains to cause of action for which the similar proceedings are pending in the Court, Tribunal or Arbitrator or any other Forum or a Decree or Award or Order has been passed by any Court, Tribunal, Arbitrator or Forum. It was informed in this regard that since a complaint was pending before the Debts Recovery Appellate Tribunal, the complaint filed by the appellant - petitioner was treated as closed under Section 13(9) of the Banking Lokpal Scheme, 2006.
2.8 It appears that the respondent bank had filed Original Application No.553 of 2016 under Section 19 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, against M/s. Shree Ramdev Cotton Ginning inter alia seeking to recover an amount of Rs.14,67,14,478.54 (Rupees Fourteen Crore Sixty-Seven Lakhs Fourteen Thousand Four Hundred Seventy-Eight and Fifty-Four paise only) together with interest etc. Said proceedings have been preferred in the month of July, 2016 and whereas Debts Recovery Tribunal - II, Ahmedabad, vide order dated 09.09.2016 had directed issuance of notice to the defendants and had further inter alia restrained the defendant No.2 therein (Shri Sanjay Kapuria) from transferring, selling, encumbering, dealing in any manner with and not creating third party rights or parting with the possession of his share in personal immovable property as shown in Schedule - C of the said Original Application and furthermore, the said defendant No.2 was restrained from transferring, selling, encumbering, dealing in any manner with and not creating any third party rights or parting with the possession of his shares in M/s. Supreme Nutri Grain Private Limited.
2.9 It is at this stage, that the appellant - petitioner approached this Court by preferring Special Civil Application No.16833 of 2016 praying to this Court for a direction against the respondent bank to release the charge over movable and immovable property and also praying for further direction that the respondent bank may also issue "No Due Certificate" to the appellant - petitioner.
2.10 The respondent bank had filed two separate affidavits and had resisted grant of any prayers as prayed for in the petition. Ultimately, after hearing both the parties, learned Single Judge vide judgment dated 12.04.2018, impugned before us, had been pleased to dismiss the petition preferred by the appellant - petitioner.
3. Heard learned Senior Counsel Shri Mihir Joshi appearing with the learned Advocate Shri Aditya Gupta for the appellants and the learned Advocate Shri S.S. Panesar for the respondent bank. At this stage, it would be pertinent to mention that Kotak Mahindra Bank since it was not joined as party in the writ petition, have preferred an application being Civil Application No.1 of 2020 praying for being joined as party respondent in this Letters Patent Appeal. We have also heard Shri Nikunt K. Raval, learned Advocate for Kotak Mahindra Bank.
4. Learned Senior Counsel Shri Mihir Joshi for the appellants in his arguments has emphasized that the entire amount due to the respondent bank has been paid and the respondent bank has also readily accepted the same. Furthermore, the respondent bank has released the title deeds as regard to the property in question. Thus, there was no reason for the respondent bank not to have released the charge upon the property in question and issued "No Due Certificate" in favour of the appellant - petitioner. Learned Senior Counsel submits that the proceedings before the Debts Recovery Tribunal are against M/s. Ramdev Cotton & Ginning and not against M/s. Supreme Nutri Grain Private Limited i.e. the appellant - petitioner. Learned Senior Counsel further contends that the Debts Recovery Tribunal had been approached by the respondent bank after the payment had been received from Kotak Mahindra Bank with regard to the dues of the present appellant - petitioner and after having released the title deeds in favour of the appellant - petitioner. Learned Senior Counsel further contends that even the Debts Recovery Tribunal has granted injunction against Shri Sanjay Kapuria with regard to his proportionate share in the property and not as regard to the entire property. Learned Senior Counsel further contended that grant of "No Due Certificate"
would not impact the proceedings before the Debts Recovery Tribunal in any manner and furthermore, learned Senior Counsel states that this Court can clarify that "No Due Certificate" would operate only with regard to the loan of M/s. Supreme Nutri Grain Private Limited i.e. appellant - petitioner. Learned Senior Counsel further contended that in absence of No Due Certificate, the procedure of intimation to the Registrar of Companies with regard to the payment or satisfaction in full of charge and appropriate incorporation of the same in the Charge Register as per procedure prescribed at Section 82 of the Companies Act, 2013, is not being fulfilled and thus though the respondent Bank has received their dues in full, yet technically their charge still exists over the property as the charge which is incorporated in the register of charges is not removed. On the other hand, Kotak Mahindra Bank inspite of paying more than Rs.9 Crores, is technically an unsecured creditor since there is no charge created in favour of Kotak Mahindra Bank in the register of charges. Learned Senior Counsel further contends that since obtaining No Due Certificate from the respondent bank is an essential condition as mentioned in the sanction letter and since more than 4 years have passed after loan has been disbursed, therefore, there are all possibilities that Kotak Maindra Bank may proceed against appellant - petitioner for recovery of loan amount. Learned Senior Counsel further contends that the learned Single Judge had seriously erred in rejecting the petition, while inter alia holding that there appears to be some ulterior motive, since according to learned Senior Counsel, there cannot be any ulterior motive attributable to the appellant - petitioner, after the appellant - petitioner has paid the entire dues of the respondent bank. Learned Senior Counsel further contends that the Original Application pending before the Debts Recovery Tribunal is between the bank and respondent therein i.e. M/s. Ramdev Cotton Ginning and whereas M/s. Supreme Nutri Grain Private Limited has not joined as party. Learned Senior Counsel based upon the above contentions submits that the respondent bank had no authority whatsoever not to grant No Due Certificate with regard to the loan availed and paid for by M/s. Supreme Nutri Grain Private Limited i.e. appellant - petitioner and furthermore, the respondent bank was absolutely un-empowered not to release their charge upon the property, which had been mortgaged with the respondent bank in lieu of the facilities availed by the appellant - petitioner. In support of such contention, learned Senior Counsel relies upon the decision of the Hon'ble Supreme Court in the case of Zonal Manager, Central Bank of India Vs. Devi Ispat Ltd. reported in 2010(11) SCC 186 as well as the decision of this Court in the case of State Bank of India Vs. Radhe Shyam Pandey reported in 2019 SCC online Guj. 4121.
5. Learned Senior Counsel for the appellant - petitioner has further submitted that for the cause of action arise in the petition, remedy under Section 17 of the SARFAESI Act would not be appropriate since present dispute does not fall within the ambit and scope of dispute, which may be adjudicated under the said Section. Thus, learned Senior Counsel contended that the remedy under Section 17 in so far as present case is concerned, is not an alternative remedy and thus, the learned Single Judge had erred in dismissing the writ petition.
6. As against the same, Shri S.S. Panesar, learned Advocate appearing for the respondent bank has taken us to the RBI Master Circular - Exposure Norms dated 01.07.2015, more particularly, at Guideline No.2.1.3.6 under the head 'Group'. According to the learned Advocate the appellant - petitioner Company and M/s. Shree Ramdev Cotton Ginning have Commonality of Management as mentioned in the RBI Guidelines above and he further attempted to justify non-issuance of No Due Certificate and non-release of the charge on the ground of loan availed by M/s. Shree Ramdev Cotton Ginning being in default. On a specific query raised by this Court as regard to the specific Common Directors / Partners in both present appellant - petitioner Company as well as M/s. Shree Ramdev Cotton Ginning, the learned Advocate has taken us through the letter written by M/s. Shree Ramdev Cotton Ginning dated 22.06.2015 to the respondent bank, wherein they have provided Group Profile for M/s. Supreme Nutri Grain Private Limited i.e. appellant - petitioner to contend that there is Commonality of Management. It is submitted by learned Advocate that the appellant - petitioner Company is a Private Limited Company and at the stage of availing of the loan as can be seen from the internal page 7 of the sanction letter, one Shri Sanjay Kapuria was a Director in the appellant - petitioner Company and whereas M/s. Ramdev Cotton Ginning is a Partnership Firm in which Firm also Shri Sanjay Kapuria was partner. Learned Advocate further submits that Shri Sanjay Kapuria and another Director Shri Nilesh Govindbhai Kapuria are cousin brothers and whereas they are also related to the petitioner No.2 Mukesh Mohanbhai Khatrani, who is also a Director in the appellant - petitioner Company. Learned Advocate further argued that the financial arrangement made by the appellant - petitioner Company with Kotak Mahindra Bank was done without prior written intimation and / or before permission of the Dena Bank. Learned Advocate further contended that the facilities availed from M/s. Kotak Mahindra was in active collusion with Shri Sanjay Kapuria. Learned Advocate further argued that Kotak Mahindra had also not followed due process before granting financial facility to M/s. Supreme Nutri Grain Private Limited i.e. appellant - petitioner.
7. It was further contended that there was transfer of funds from the account of M/s. Shree Ramdev Cotton Ginning to the account of the appellant - petitioner and that it was the case of diversion of funds, that there is common tendency to take loans from different accounts and divert the funds to one account, while making other account sick. Learned Advocate has submitted that learned Single Judge has rightly held that the appellant - petitioner had an efficacious remedy by way of Section 17 of the SARFAESI Act, which provides for a remedy to any aggrieved person to move against the measures taken by the bank or any financial institutions. Thus, it was contended that this Court may not interfere with the judgment of the learned Single Judge declining to interfere in writ petition preferred by the appellant - petitioner.
8. As against arguments of Shri Panesar, learned Advocate in rejoinder, learned Senior Counsel Shri Joshi for the appellant - petitioner has argued that the land, which was mortgaged with the respondent bank being the land situated at Survey No.37/1 behind Shree Ram Proteins at village: Bhunava, Ta. Gondal, Dist. Rajkot, had been purchased by the appellant Company i.e. M/s. Supreme Nutri Grain Private Ltd. and not by Shri Sanjay Kapuria that, No Due Certificate is being sought for by M/s. Supreme Nutri Grain Private Limited i.e. appellant - petitioner and not by Shri Sanjay Kapuria. It was further submitted that as it is Shri Sanjay Kapuria is no more Director in M/s. Supreme Nutri Grain Private Limited, that the appellant - petitioner has paid the dues of the respondent bank by availing financial facilities from Kotak Mahindra Bank and it is the Company, which has filed present proceedings that since the respondent bank has already released the title deeds and thus, grant of No Due Certificate is a formality since an equitable mortgage is considered to be redeemed by return of the title deeds, which has been done by the respondent bank. Learned Senior Counsel further categorically denied that there had been any diversion of funds as alleged by the learned Advocate for the respondnet bank. Learned Senior Counsel further contended that the release of charge in respect of the appellant - petitioner would not affect the pending proceedings against M/s. Ramdev Cotton Ginning and furthermore, the respondent bank is also protected by interim order passed by the Debts Recovery Tribunal, Ahmedabad.
9. As regards the RBI Master Circular dated 01.07.2015 relied upon by the learned Advocate Shri Panesar, it is submitted by the learned Senior Counsel Shri Joshi that the said Master Circular is not at all relevant for the present purpose since the Circular comprises instructions to the Banks with regard to the credit exposure norms to be followed by the Banks. Learned Senior Counsel further argued that Clause 2.1.1.1 is what is relevant that too for Banks, which clauses regulates ceiling limits to be followed by the Banks. Learned Senior Counsel further argued that the said Circular nowhere states that Banks can take action de hors the contract between the Bank and its borrower. In any case, Shri Joshi, learned Senior Counsel argued that the appellant petitioner Company has not cross guaranteed loan availed by M/s. Shree Ramdev Cotton Ginning. Thus, it was submitted by learned Senior Counsel Shri Joshi that the learned Single Judge had committed an error by holding that the appellant - petitioner has an efficacious remedy under Section 17 of the SARFAESI Act, while rejecting the petition preferred by the petitioner.
10. Mr. Nikunt Raval, learned Advocate for Kotak Mahindra Bank, who has preferred an application for being joined as party respondent submitted that Kotak Mahindra Bank is a necessary and proper party in present appeal, more particularly, since it would be directly and vitally affected by any decision of this Court as regard the No Due Certificate to be issued by the respondent Dena Bank and release of charge by the respondent bank. Learned Advocate also contended that Kotak Mahindra is an unenviable position inasmuch as even after making a payment of Rs.9.3 Crores approximately to the respondent bank in lieu of closing loan facilities availed by the appellant - petitioner from the respondent Bank yet even after more than 4 years, they are not able to register their charge over the property and are as such, technically, an unsecured creditor. Learned Advocate also relied upon a communication by the respondent bank dated 04.01.2017 to the Deputy Industries Commissioner, wherein the respondent bank has informed the said Authority that the term loan account of the appellant - petitioner is closed. It was submitted that such closure was on account of M/s. Kotak Mahindra Bank Ltd. paying up all the outstanding in the loan account of the appellant - petitioner due to the respondent bank. Learned Advocate thus, contended that Kotak Mahindra bank may be joined as party respondent and furthermore, the judgment impugned before us by the learned Single Judge, may be set aside and appropriate directions may be issued to the respondent bank to issue No Due Certificate and release their charge upon the property in question.
11. No other submissions have been made by any of the parties before us.
12. At the outset, we would deal with Civil Application preferred by Kotak Mahindra Bank for being joined as party respondent in the present proceedings. While we are mindful of the fact that Kotak Mahindra Bank was not a party in the original proceedings before the learned Single Judge at the same time, we are of the considered opinion that Kotak Mahindra Bank would be vitally affected by outcome of the present proceedings inasmuch as having paid up the dues of the appellant Company amounting to approximately more than Rs.9 Crores to the respondent Bank, they have been waiting since 4 years for their charge to be created over the property mortgaged with them in lieu of loan availed by the appellant - petitioner. Under such circumstances, we hold that Kotak Mahindra Bank is a necessary party and is joined as respondent in the present appeal. We direct the Registry to incorporate the name of the Kotak Mahindra as respondent No.2 in the present appeal.
13. Reverting back to the principal issue upon hearing the learned counsels for the respective parties and after perusing the records as well as judgment of the learned Single Judge, following undisputed facts emerge.
The land in question referred to at para No. 7 above had been purchased by the appellant petitioner Company. Apart from the said property, a residential building in the name of the petitioner No.2 and a LIC policy and certain term deposits were kept as collateral security in lieu of the loan/s availed by the appellant petitioner from the respondent Dena Bank. At this stage, we may state that the arguments were advanced from both the sides as regard to the parcel of land referred to at para No.7 above, more particularly, to contend / deny that the land had been purchased and / or there was some interest upon the land in favour of Shri Sanjay Kapuria. That Kotak Mahindra Bank had taken over the loan from the respondent bank and had repaid the entire dues of the respondent bank as regard to the loan availed by the appellant petitioner on 02.05.2016 and communication had also been addressed by the Kotak Mahindra Bank under heading of takeover the financial facilities of M/s. Supreme Nutri Grain Private Limited i.e. appellant - petitioner requesting to issue No Objection Certificate as well as original property papers kept as collateral security for the loan accounts of the appellant - petitioner. Said letter is shown to be received by the respondent Bank. The respondent Bank has initiated the proceedings against M/s. Ramdev Cotton Ginning under Section 19 of the RDDB & FI Act, 1993 and whereas the Debts Recovery Tribunal - II, Ahmedabad had injuncted the partners of the said Partnership Firm including Shri Sanjay Kapuria from transferring, alienating or creating any third party rights as regard to their share in the immovable property, which includes the property purchased by M/s. Supreme Nutri Grain Private Limited i.e. appellant - petitioner, the description of which is given at para 7. Further, Shri Sanjay Kapuria is also restrained from transferring, alienating or in any manner creating third party rights over his shares in present appellant Company. That the respondent bank has not joined M/s. Supreme Nutri Grain Private Limited i.e. appellant - petitioner as party in the proceedings of Original Application No.553 of 2016 against M/s. Ramdev Cotton Ginning pending before the Debts Recovery Tribunal, Ahmedabad.
14. Keeping above undisputed fact in mind, we would now analyze whether the respondent bank was legally empowered not to issue No Objection Certificate to the appellant Company or not to release their charge upon the property mortgaged with it in lieu of the loan facilities availed by the appellant Company since the entire loan has been paid up by the appellant Company after availing the loan from Kotak Mahindra Bank. Learned Advocate for the respondent bank, while trying to justify the actions of the respondent Dena Bank, could only rely upon the Master Circular of RBI dated 01.07.2015 with regard to the Exposure Norms. Plain reading of the said Circular leads us to agree with the submissions of the learned Senior Counsel for the appellant petitioner that the said Circular was not at all relevant for deciding present issue. We observe that the covering letter, which is found in the said Master Circular inter alia states that "Please refer to the Master Circular No.Dir.BC.12/13.03.00/2014-15 dated July 1, 2014 consolidating the instructions / guidelines issued to banks till June 30, 2014 relating to Exposure Norms. This Master Circular consolidates instructions on the above matter issued up to June 30, 2015". Furthermore, the purpose of Master Circular is stated therein reads as thus:
Purpose "This Master Circular provides a framework of rules/ regulations/ instructions issued by the Reserve Bank of India to Scheduled Commercial Banks relating to credit exposure limits for single / group borrowers and credit exposure to specific industry or sectors and the capital market exposure of banks." (Emphasis supplied)
15. Having perused the Master Circular, more particularly the purpose mentioned in the Master Circular as well as the covering letter to the same it becomes abundantly clear that the said Circular contains instructions issued by the RBI to the scheduled Commercial Banks relating to their credit exposure limits for single / group borrower etc. In our considered opinion, this Master Circular in no way empowers banks to consider the properties mortgaged by one borrower as being cross guarantee to a loan availed by a different borrower, albeit both the borrowers may have commonality of management and effective control. This Master Circular imposes ceiling limits upon the Banks with regard to their exposure to a single borrower or borrowers group. Thus having come to the above conclusion, we hold that reliance placed by the respondent bank upon the Master Circular of RBI dated 01.07.2015 is of no avail and does not in any manner advance the case of the respondent bank.
16. At this stage, we may also take note of the submissions made by the learned Advocate for the respondent Bank with regard to the manner and method in which the loan had been sanctioned, taken over and disbursed by Kotak Mahindra Bank to the appellant - petitioner. We are of the opinion that such arguments are of no avail whatsoever inasmuch as the manner of taking over the loan by Kotak Mahindra, cannot be the yardstick for the respondent Bank to decide whether No Due Certificate should be issued or not and charge upon the property should be released or not. At this stage, we have noted that the respondent bank has been paid their entire dues in the month of May, 2016. While the respondent Bank is joining an issue with regard to the procedure followed or rather not followed by Kotak Mahindra Bank, while taking over the loan of the appellant - petitioner, yet from record, we do not find any document, whereby the respondent bank had ever communicated such a grievance to the Kotak Mahindra Bank. Furthermore, for the sake of argument, even if it is assumed that the letters written by Kotak Mahindra Bank dated 02.05.2016 and 17.05.2016, as contended by the respondent bank have not been received by them, yet letter dated 27.05.2016 with regard to taking over of financial facility of the appellant by Kotak Mahindra Bank had been received by the respondent Bank more particularly since such receipt is not disputed by them. Moreover, in any case, the respondent bank could not be oblivious of the fact of an amount of Rs.9 Crores being transferred to them by Kotak Mahindra Bank. From the record, there is nothing to show that the respondent Dena Bank had joined an issue with Kotak Mahindra Bank for having transferred the amount of loan due from the appellant - petitioner nor do we find any document, which would show that the respondent bank had ever attempted to refund / re-transfer the amount received from Kotak Mahindra Bank on the ground of proper procedure not being followed by the Kotak Mahindra Bank. Under such circumstances, we are of the opinion that all such contentions, which are being raised now with regard to the proper procedure not being followed is nothing, but a lacklustre justification by the respondent bank in not issuing No Due Certificate to the appellant - petitioner and/or not releasing their charge upon the property mortgaged as collateral with them.
17. At this stage, we deem it appropriate to refer the judgment of the Apex Court in the case of Zonal Manager, Central Bank of India Vs. Devi Ispat Ltd. (Supra), paras 20, 28 and 29 would be relevant for the purpose of present appeal.
20. In the case on hand, the respondent- Company has demonstrated that based on the advise of the appellant-Bank, they shifted their accounts to another Nationalized Bank and through an arrangement with the State Bank of India, a cheque of Rs.15 crores was deposited by their Bank and in token of the same, by statement of accounts dated 14.05.2009 the appellant- Bank clearly mentioned that there is no due or nil balance from the respondent-Company (Emphasis supplied). In such circumstances, when the relief sought for does not relate to interpretation of any terms of contract, the Bank being a Nationalized Bank, a Writ Court can issue appropriate direction in certain circumstances as mentioned above. In such a factual matrix, the reliance placed on these two decisions is not helpful to the appellant-Bank.
28. It is clear that, (a) in the contract if there is a clause for arbitration, normally, writ court should not invoke its jurisdiction; (b) the existence of effective alternative remedy provided in the contract itself is a good ground to decline to exercise its extraordinary jurisdiction under Art. 226; and (c) if the instrumentality of the State acts contrary to the public good, public interest, unfairly, unjustly, unreasonably discriminatory and violative of Art. 14 of the Constitution of India in its contractual or statutory obligation, writ petition would be maintainable. However, a legal right must exist and corresponding legal duty on the part of the State and if any action on the part of the State is wholly unfair or arbitrary, writ courts can exercise their power.
29. In the light of the legal position, writ petition is maintainable even in contractual matters, in the circumstances mentioned in the earlier paragraphs. In the case on hand, it is not in dispute that the appellant- Bank, being a public sector Bank, discharging public functions is "State" under Article 12. In view of the settlement of the dues on the date of filing of the writ petition by arrangement made through another Nationalized Bank, namely, State Bank of India and the statement of accounts furnished by the appellant-Bank subsequent to the same i.e. on 14.05.2009 is 0.00 (nil) outstanding, we hold that the High Court was fully justified in issuing a writ of mandamus for return of its title deed
18. A plain reading of the above paras would make it clear that the case before the Apex Court and case on hand are based upon similar facts and whereas the case of the appellant - petitioner stands on a better footing inasmuch as in the present case, the respondent bank after having been paid their dues in total, had released title deeds and now only No Due Certificate as well as formal release of charge have to be issued by the respondent bank. Above view has been followed by learned Single Judge of this Court in judgment dated 08.04.2015 in Special Civil Application No.18426 of 2013.
19. Learned Advocate for the respondent bank had also relied upon the judgment of this Court in the case of State Bank of India Vs. Radhe Shyam Pandey (Supra). We find that in similar set of facts, the bank therein had raised plea that under Section 171 of the Indian Contract Act, 1982, the bank had a right of general lien to hold title deeds of one Company as liabilities of another Company, where there were common Directors/ Partners etc. Such a contention had been negated by the judgment of the learned Single Judge of this Court in Special Civil Application No.13890 of 2017 confirmed by judgment of the Division Bench of this Court in the case State Bank of India Vs. Radhe Shyam Pandey (Supra).
20. At this stage, it would be pertinent to mention that no such contention has been raised in present appeal and whereas only the case of the respondent bank was to rely upon the Master Circular of RBI dated 01.07.2015.
21. As regards the judgment of the learned Single Judge, the learned Single Judge had principally dismissed the writ petition on the ground of availability of an alternative remedy under Section 17 of the SARFAESI Act, which is reproduced herein below:
Section 17 Right to appeal.--
"(1) Any person (including borrower), aggrieved by any of the measures referred to in sub-section (4) of section 13 taken by the secured creditor or his authorised officer under this Chapter, 1[may make an application along with such fee, as may be prescribed] to the Debts Recovery Tribunal having jurisdiction in the matter within forty-five days from the date on which such measures had been taken:--(1) Any person (including borrower), aggrieved by any of the measures referred to in sub-section (4) of section 13 taken by the secured creditor or his authorised officer under this Chapter, 1[may make an application along with such fee, as may be prescribed] to the Debts Recovery Tribunal having jurisdiction in the matter within forty-five days from the date on which such measures had been taken\:" 2[Provided that different fees may be prescribed for making the application by the borrower and the person other than the borrower.] 3[Explanation.
--For the removal of doubts it is hereby declared that the communication of the reasons to the borrower by the secured creditor for not having accepted his representation or objection or the likely action of the secured creditor at the stage of communication of reasons to the borrower shall not entitle the person (including borrower) to make an application to the Debts Recovery Tribunal under sub- section (1) of section
17.]3[Explanation.--For the removal of doubts it is hereby declared that the communication of the reasons to the borrower by the secured creditor for not having accepted his representation or objection or the likely action of the secured creditor at the stage of communication of reasons to the borrower shall not entitle the person (including borrower) to make an application to the Debts Recovery Tribunal under sub- section (1) of section
17.]" 4[(2) The Debts Recovery Tribunal shall consider whether any of the measures referred to in sub- section (4) of section 13 taken by the secured creditor for enforcement of security are in accordance with the provisions of this Act and the rules made thereunder.
(3) If, the Debts Recovery Tribunal, after examining the facts and circumstances of the case and evidence produced by the parties, comes to the conclusion that any of the measures referred to in sub- section (4) of section 13, taken by the secured creditor are not in accordance with the provisions of this Act and the rules made thereunder, and require restoration of the management of the secured assets to the borrower or restoration of possession of the secured assets to the borrower, it may by order, declare the recourse to any one or more measures referred to in- sub- section (4) of section 13 taken by the secured assets as invalid and restore the possession of the secured assets to the borrower or restore the management of the secured assets to the borrower, as the case may be, and pass such order as it may consider appropriate and necessary in relation to any of the recourse taken by the secured creditor under sub- section (4) of section 13.
(4) If, the Debts Recovery Tribunal declares the recourse taken by a secured creditor under sub- section (4) of section 13, is in accordance with the provisions of this Act and the rules made thereunder, then, notwithstanding anything contained in any other law for the time being in force, the secured creditor shall be entitled to take recourse to one or more of the measures specified under sub- section (4) of section l3 to recover his secured debt. (5) Any application made under sub- section (1) shall be dealt with by the Debts Recovery Tribunal as expeditiously as possible and disposed of within sixty days from the date of such application: Provided that the Debts Recovery Tribunal may, from time to time, extend the said period for reasons to be recorded in writing, so, however, that the total period of pendency of the application with the Debts Recovery Tribunal, shall not exceed four months from the date of making of such application made under sub- section (1).
(6) If the application is not disposed of by the Debts Recovery Tribunal within the period of four months as specified in sub- section (5), any party to the application may make an application, in such form as may be prescribed, to the Appellate Tribunal for directing the Debts Recovery Tribunal for expeditious disposal of the application pending before the Debts Recovery Tribunal and the Appellate Tribunal may, on such application, make an order for expeditious disposal of the pending application by the Debts Recovery Tribunal.
(7) Save as otherwise provided in this Act, the Debts Recovery Tribunal shall, as far as may be, dispose of application in accordance with the provisions of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993) and the rules made thereunder.]
22. Plain reading of Section 17 makes it clear that the Debts Recovery Tribunal can be approached by any person including a borrower, who is aggrieved by any measures referred in Sub-section (4) of Section 13 take by the secured creditor or its Authorized Officer. Now the question would be as to whether the action of the respondent bank in not issuing the No Due Certificate inspite of having received entire amount due to it from loan accounts of the respondent bank was in any manner covered under Section 13(4) of the Act. We therefore, deem it appropriate to refer Section 13(4) of the Act, which reads as under:
Section 13(4) "(4) In case the borrower fails to discharge his liability in full within the period specified in sub- section (2), the secured creditor may take recourse to one or more of the following measures to recover his secured debt, namely:-
(a) take possession of the secured assets of the borrower including the right to transfer by way of lease, assignment or sale for realising the secured asset;
(b) take over the management of the secured assets of the borrower including the right to transfer by way of lease, assignment or sale and realise the secured asset;
(c) appoint any person (hereafter referred to as the manager), to manage the secured assets the possession of which has been taken over by the secured creditor;
(d) require at any time by notice in writing, any person who has acquired any of the secured assets from the borrower and from whom any money is due or may become due to the borrower, to pay the secured creditor, so much of the money as is sufficient to pay the secured debt."
23. Plain reading of Sub-section 4 of Section 13 makes it abundantly clear that the action of the respondent Dena Bank in not issuing No Due Certificate to the appellant - petitioner and not taking appropriate steps to release its charge over the property inspite of entire loan being paid up by the appellant - petitioner by availing loan from Kotak Mahindra Bank Ltd., would not fall under the scope and ambit of the said Sub-section. Said Sub-section states about recourse to which a secured creditor may take, in case a borrower fails to discharge his liability in full. It is not the case of the respondent Bank that non-issuance of No Due Certificate and non-release of charge was on account of the appellant - petitioner not discharging its liability towards the respondent Bank. On the contrary, the appellant - Petitioner has discharged its liability to the respondent Bank in full. But the respondent Bank has taken the collateral security given by the appellant - petitioner in lieu of the loans availed by it, as cross guarantee to loan availed by M/s. Ramdev Cotton & Ginning. Under such circumstances, we are of the considered opinion that the action of the bank in not releasing No Due Certificate and not taking steps to release its charge upon the collateral security, cannot be termed to be an action taken under Section 13(4) of the SARFAESI Act, which would entitle the appellant - petitioner to invoke remedy under Section 17 of the SARFAESI Act. Thus, we hold that the remedy under Section 17 of the SARFAESI Act was neither an alternative remedy nor an efficacious remedy for cause of action raised in the present petition.
24. In view of the discussions and conclusions hereinabove, we have no hesitation in holding that the action of the bank, in not releasing No Due Certificate after loan availed by the appellant petitioner, had been repaid and in not releasing the charge over the property kept as loan availed by the appellant petitioner, as being without any authority of law. We also hold that the learned Single Judge had erred in rejecting the petition on the ground of availability of an alternative remedy under Section 17 of the SARFAESI Act. Consequently, we quash and set aside the judgment passed by the learned Single Judge in Special Civil Application No.16833 of 2016 dated 12.04.2018. We further direct the respondent bank i.e. erstwhile Dena Bank now Bank of Baroda to issue "No Due Certificate" to M/s. Supreme Nutri Grain Private Limited - appellant herein forthwith within a period of four weeks from the date of receipt of this order and we further direct the respondent bank to issue consequential letter to the Registrar of Companies with a copy to the appellant - petitioner informing the Registrar about full and complete satisfaction of loan and to release the charge upon the property / collateral in lieu of loans availed by the appellant - petitioner. Such intimation shall also be communicated within a period of four weeks from the issuance of No Due Certificate. At this stage, we also make it clear that the No Due Certificate to be issued by the respondent Dena Bank now Bank of Baroda would be with regard to the loans availed by the appellant
- petitioner M/s. Supreme Nutri Grains Pvt. Ltd. We further make it clear that all the observations and conclusions arrived at in the present judgment are only qua the cause of action raised in this appeal.
In view of the above, present Letters Patent Appeal is allowed. In view of the order passed in the Letters Patent Appeal, Civil Application No.1 of 2018 is disposed of.
(A.J.DESAI, J) (NIKHIL S. KARIEL,J) DIPTI PATEL/YNVYAS
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