APC Aluminum Pvt Ltd v Union of India and others

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** **THE HONOURABLE MR.JUSTICE V.G.ARUN** **MONDAY, THE 25[TH] DAY OF JULY 2022 / 3RD SRAVANA, 1944 WP(C) NO. 20381 OF 2022** ## **PETITIONER/S:** APC ALUMINUM PVT LTD REGISTERED OFFICE AT PANDARAN TOWER, TB ROAD, KOKKALAI, THRISSUR - 680021 REPRESENTED BY ITS MANAGING DIRECTOR, MIDHUN P.S., S/O SATHYAN, AGED 34 YEARS PANDARAN HOUSE, EAST NADA, GURUVAYUR THRISSUR - 680101 BY ADVS. SAIBY JOSE KIDANGOOR BENNY ANTONY PAREL PRAMITHA AUGUSTINE IRINE MATHEW ADITHYA KIRAN V.E ANJALI NAIR NAAIL FATHIMA ABDULLA A. ## **RESPONDENT/S:** 1 UNION OF INDIA REP BY SECRETARY, MINISTRY OF FINANCE CENTRAL SECRETARIAT, NEW DELHI 110001 2 DEPUTY GOVERNOR RESERVE BANK OF INDIA, 19TH FLOOR, CENTRAL OFFICE BUILDING SHAHID BHAGAT SINGH ROAD MUMBAI-400 001. 3 REGIONAL DIRECTOR RESERVE BANK OF INDIA, BAKERY JUNCTION ROAD, NANDAVANAM, PALAYAM, THIRUVANANTHAPURAM, KERALA -695033 4 APPELLATE AUTHORITY CONSUMER EDUCATION AND PROTECTION DEPARTMENT, RESERVE BANK OF INDIA, CENTRAL OFFICE AMAR BUILDING, 1ST FLOOR, SIR PM ROAD, FORT MUMBAI400001 5 THE OMBUDSMAN, OFFICE OF THE BANKING OMBUDSMAN, JUNCTION ROAD, BAKERY NANDAVANAM, PALAYAM, THIRUVANANTHAPURAM, KERALA -695033 6 SOUTH INDIAN BANK LTD REPRESENTED BY ITS MANAGER CORDIAL COURT, W.P.(C) No.20381 of 2022 -2- PATTALAM ROAD, CROSS ROAD, MAR THIMOTHEUS HIGH ROAD, HIGH RD, THRISSUR, KERALA -680001 7 AXIS BANK LTD, REPRESENTED BY ITS MANAGER 2ND FLOOR, CITY CENTRE ROUND WEST, THRISSUR, KERALA -68001 BY ADVS. MANU S., ASG OF INDIA SUNIL SHANKER MADHU RADHAKRISHNAN VIDYA GANGADHARAN **THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON** **18.07.2022, THE COURT ON 25.07.2022 DELIVERED THE FOLLOWING:** W.P.(C) No.20381 of 2022 -3- ## **JUDGMENT** Dated this the 25[th] day of July, 2022 The petitioner Company had availed a cash credit facility from the 6[th] respondent Bank by offering immovable properties as collateral security. The loan was sanctioned under Ext.P1 loan sanction/renewal letter dated 18.02.2020. As the interest rate and other charges of the 6[th] respondent was found to be higher than other banks, the petitioner sent Ext.P2, requesting to rework interest and other charges. The 6[th] respondent refused to accede to the petitioner's request. Hence, petitioner approached the 7[th] respondent Bank for taking over the cash credit facility. The 7[th] respondent expressed willingness to take over the cash credit facility. Thereupon, petitioner issued Ext.P3 letter to the 6[th] respondent on 06.02.2021, stating that the entire amount outstanding in its account is being W.P.(C) No.20381 of 2022 -4- cleared through the 7[th] respondent. The amount outstanding to the 6[th] respondent was paid by the 7[th] respondent Bank and thereafter, the petitioner demanded the 6th respondent to transfer the collateral securities in favour of the 7[th] respondent. To the petitioner’s dismay, the 6[th] respondent demanded Rs.45 lakhs towards preclosure charges and processing fees. As the demand was contrary to the conditions in the loan sanction letter and Circulars of the RBI, petitioner approached the 5th respondent Banking Ombudsman with Ext.P7 complaint. Simultaneously, the petitioner preferred W.P.(C) No.12205 of 2021 before this Court challenging the untenable stand taken by the respondent bank. On being informed that the petitioner had approached this Court, 5th respondent closed Ext.P7 complaint. Thereafter, the writ petition was disposed of vide Ext.P9 judgment, directing the Ombudsman to reopen the complaint and take a decision on ## W.P.(C) No.20381 of 2022 -5- merits after hearing the parties. Accordingly, the 5th respondent heard the parties, considered the documents and passed Ext.P10 award. The bank’s argument that the complainant company had not produced documents prior to the validity of the sanction order and continued to operate the renewed limits after expiry, was not accepted. As the issue was pending before the Managing Director of the Bank, the Ombudsman directed the competent authority in the bank to take a decision on petitioner’s representation, after considering the facts and circumstances of the issue. The levy of penal interest was held to be wrong and the interest already levied was directed to be refunded. It was also observed that the bank may release either whole or part of the title deeds on a proportionate basis, depending on the dues realisable. After the award, the representation filed by the petitioner, with regard to the pre-closure W.P.(C) No.20381 of 2022 -6- charges, was rejected by the 6[th] respondent under Ext.P11 and P11(a). Faced with such a situation, the petitioner went back to the Ombudsman, complaining about the bank’s refusal to abide by the terms of Ext.P10 award. The second complaint was rejected by the Ombudsman under Ext.P14 finding it to be not maintainable under Clause 16(1)(a) r/w Clause 10(2)(b)(i) of the Reserve Bank-Integrated Ombudsman Scheme, 2021. In the meanwhile, the petitioner preferred an appeal under Clause 17 before the 4[th] respondent. This writ petition is filed challenging Ext.P10 order and to declare Ext.P11 order passed by the 6[th] respondent to be bad in law and against the guidelines issued by the Reserve Bank of India on Fair Practices Code for Lenders. 2. When the writ petition was taken up for consideration, Adv.Sunil Shankar, learned Standing counsel for the first respondent Bank, insisted to hear the question of maintainability W.P.(C) No.20381 of 2022 -7- first. Accordingly, maintainability is considered as the preliminary issue. 3. Adv.Saiby Jose, learned Counsel appearing for the petitioner, contended that the Ombudsman had committed an illegality in relegating the petitioner to the Managing Director of the 6[th] respondent, after being convinced that the demand for preclosure charges is illegal. The patent illegality committed by the 6[th] respondent got further aggravated by the cryptic manner in which the petitioner’s representation was rejected under Ext.P11, despite the Ombudsman’s direction to take a decision after considering the facts and circumstances of the issue. Therefore, the Ombudsman ought to have entertained the subsequent complaint and directed the 6th respondent to act as per the directions in Ext.P10 award. It is contended that, even though the petitioner has preferred appeal against the ## W.P.(C) No.20381 of 2022 -8- award, the appellate remedy is not efficacious, since delay in returning the title deeds may result in the 7[th] respondent Bank withdrawing the financial facility extended by it. Being so, the writ petition is maintainable. 4. Adv.Madhu Radhakrishnan appearing for the second respondent Bank contended that insofar as the first respondent is dealing in public money and is bound by the guidelines laid down by the Reserve Bank of India, the illegal and high handed act of the first respondent is liable to be corrected, by exercising the extraordinary jurisdiction under Article 226. It is contended that the issue is not confined to the petitioner alone and if the stand of the 4[th] respondent is not corrected judicially, it will adversely affect the conduct of businesses and consequently, the economy itself. 5. Adv.Sunil Shankar. contended that the first respondent Bank is a private limited ## W.P.(C) No.20381 of 2022 -9- company and not ‘State’ amenable to writ jurisdiction. To bolster the contention reliance is placed on the decision in _**Federal Bank v Sagar Thomas [(2003) 10 SCC 733]** and_ _**Y. Sleebachan v State of Kerala [2020 (4) KLT OnLine 1024]**_ . It is further contended that the dispute is with respect to the enforcement of a contractual obligation, the writ petition is liable to be dismissed _in limine_ . In support of this contention, learned Counsel relied on the decision in _**Unimoni Financial Services Ltd v IDBI Bank Ltd and others [2020 SCC OnLine Ker 7347]**_ . Finally, it is contended that, the petitioner cannot seek enforcement of the Ombudsman’s award, as the award had lapsed for reason of the petitioner's failure to furnish letter of acceptance within 30 days of the award. 6. In spite of the assertive submissions of the learned Counsel for the petitioner, I find ## W.P.(C) No.20381 of 2022 -10- merit in the challenge against maintainability of the writ petition. It is pertinent to note that the petitioner had moved the Ombudsman seeking relief and the Ombudsman had passed an award pursuant to the direction of this Court. Moreover, the petitioner has challenged award in appeal, as provided under Clause 17 of the Ombudsman Scheme, 2021. Being so, it will be inappropriate for this Court to entertain a parallel proceeding on the premise that the appellate remedy is not efficacious. 7. The contention regarding the Ombudsman's failure to pass an award in terms of the Scheme, refusal of the bank to abide by the terms of the award and the Ombudsman's power to take appropriate action, in such situation, are matters which can be urged before the appellate authority also. The petitioner can also seek expedient orders from the appellate authority, pointing out the quandary in which it is placed, W.P.(C) No.20381 of 2022 **==> picture [23 x 8] intentionally omitted <==** as a result of the Bank's stand that the title deeds will not be returned unless its demand for pre-closure charges is met. For the aforementioned reasons, the challenge as to maintainability is upheld and the writ petition dismissed, reserving the petitioner's liberty to raise all contentions before the 4[th] respondent. Sd/- **V.G.ARUN JUDGE** Scl/ W.P.(C) No.20381 of 2022 -12- ## **APPENDIX OF WP(C) 20381/2022** |PETITIONER EXHIBITS|PETITIONER EXHIBITS| |---|---| |Exhibit P1|TRUE COPY OF THE SANCTION/RENEWAL| ||LETTER ISSUED BY THE 6TH RESPONDENT| ||DATED 18.02.2020| |Exhibit P2|TRUE COPY OF THE COMMUNICATION SENT BY| ||THE PETITIONER TO THE 6TH RESPONDENT| ||SEEKING REWORK IN INTEREST AND OTHER| ||CHARGES ON THE CASH CREDIT FACILITY,| ||DATED 02.12.2020| |Exhibit P3|TRUE COPY OF THE LETTER INTIMATING THE| ||6TH RESPONDENT TO SHIFT THE CASH| ||CREDIT FACILITY TO AXIS BANK DATED| ||6.2.2021| |Exhibit P4|TRUE COPY OF THE LETTER SENT BY THE| ||7TH RESPONDENT SEEKING TAKEOVER OF THE| ||CASH CREDIT FACILITY OF FACILITY OF| ||THE PETITIONER DATED 08.02.2021| |Exhibit P5|TRUE COPY OF THE LETTER DATED| ||15.02.2021 ISSUED BY THE 6TH| ||RESPONDENT TO THE PETITIONER DEMANDING| ||PRE CLOSURE CHARGES| |Exhibit P6|TRUE COPY OF THE LETTER DATED| ||20.02.2021 SENT BY THE PETITIONER TO| ||THE SENIOR MANAGER OF THE 6TH| ||RESPONDENT BANK| |Exhibit P7|TRUE COPY OF THE COMPLAINT DATED| ||27.01.2021 3 LODGED BY THE PETITIONER| ||AGAINST THE 6TH RESPONDENT BANK BEFORE| ||THE BANKING OMBUDSMAN| |Exhibit P8|TRUE COPY OF THE REPRESENTATION DATED| ||29.05.2021 MADE TO THE 3RD RESPONDENT| |Exhibit P9|TRUE COPY OF THE JUDGEMENT DATED| ||18.11.2021 PASSED BY THE HONOURABLE| ||HIGH COURT IN |WP(C) 12205/2021| |Exhibit P10|RUE COPY OF THE ORDER PASSED BY THE| ||5TH RESPONDENT BANKING OMBUDSMAN DATED| ||30.12.2021| |Exhibit P11|TRUE COPY OF THE LETTERS/ORDERS ISSUED| ||BY THE 6TH RESPONDENT TO PETITIONER| ||DATED 10.01.2022| -13- ## W.P.(C) No.20381 of 2022 |Exhibit P11A|TRUE COPY OF THE LETTERS/ORDERS ISSUED| |---|---| ||BY THE 6TH RESPONDENT TO PETITIONER| ||DATED 19.02.2022| |Exhibit P12|TRUE COPY OF THE COMPLAINT DATED| ||21.02.2022 PREFERRED BY THE PETITIONER| |Exhibit P13|TRUE COPY OF THE LETTER DATED| ||07.03.2022 ISSUED TO THE PETITIONER BY| ||THE 4TH RESPONDENT| |Exhibit P14|TRUE COPY OF THE EMAIL COMMUNICATION| ||DATED 10.03.2022| |Exhibit P15|TRUE COPY OF THE REPLY SENT BY THE| ||PETITIONER TO THE 4TH RESPONDENT| ||STATING REASONS FOR THE DELAY DATED| ||14.03.2022| |RESPONDENT ANNEXURES|| |Annexure R6(b)|True copy of the letter of the| ||Petitioner dated 04.01.2021| |Annexure R6(c)|True copy of the reply letter of the| ||6th Respondent dated 02.06.2021| |Annexure R6(a)|True copy of the renewal application| ||of the Petitioner dated 20.11.2020|