Ramachandran H v Union Bank of India & Others

W.P.(C). Nos.8291 & 9291 of 2023 1 ## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** **THE HONOURABLE MR. JUSTICE SHAJI P.CHALY** **TUESDAY, THE 4[TH] DAY OF APRIL 2023 / 14TH CHAITHRA, 1945** ## **WP(C) NO. 8291 OF 2023** ## **PETITIONER:** **RAMACHANDRAN.H, AGED 64 YEARS RESIDING AT GAYATHRI NIVAS, CHANDRAPURA, MANJAPRA P.O., KALADY, ERNAKULAM., PIN - 683581 BY ADVS. B.KRISHNA MANI H.RAMNATH N.V.SANDHYA DHANUJA M.S** ## **RESPONDENTS:** |**1**|**THE BRANCH MANAGER,**| |---|---| ||**UNION BANK OF INDIA, KALADY BRANCH, KALADY P.O.,**| ||**ERNAKULAM DISTRICT, PIN - 683574**| |**2**|**THE SECRETARY,**| ||**DEPARTMENT OF ECONOMIC AFFAIRS, MINISTRY OF FINANCE,**| ||**NORTH BLOCK, NEW DELHI-110001., PIN - 110001**| |**3**|**THE CHAIRMAN,**| ||**PRADHAN MANTRI MUDRA YOJANA (PMMY), SWAVALAMBAN BHAVAN,**| ||**C-11, G-BLOCK, BANDRA KURLA COMPLEX, BANDRA EAST,**| ||**MUMBAI, PIN - 400051**| |**4**|**THE DISTRICT COLLECTOR,**| ||**ERNAKULAM., PIN - 682030**| |**5**|**THE DEPUTY COLLECTOR, (RR)**| ||**ERNAKULAM, PIN - 682030**| |**6**|**THE DEPUTY TAHSILDAR (RR)**| ||**ALUVA TALUK, ALUVA, ERNAKULAM DISTRICT, PIN - 683101**| W.P.(C). Nos.8291 & 9291 of 2023 2 **BY ADVS. SRI.ASP.KURUP, STANDING COUNSEL R2 & R3 BY SRI.MANU.S., DSGI R4 & R6 BY SMT.DEEPA NARAYANAN** **THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 04.04.2023, ALONG WITH WP(C).9291/2023, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** W.P.(C). Nos.8291 & 9291 of 2023 3 ## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** **THE HONOURABLE MR. JUSTICE SHAJI P.CHALY** **TUESDAY, THE 4[TH] DAY OF APRIL 2023 / 14TH CHAITHRA, 1945** **WP(C) NO. 9291 OF 2023** ## **PETITIONER:** **RAMACHANDRAN.H, AGED 64 YEARS S/O HARIHARAN RESIDING AT GAYATHRI NIVAS, CHANDRAPURA, MANJAPRA P.O., KALADY, ERNAKULAM., PIN - 683581 BY ADVS. B.KRISHNA MANI N.V.SANDHYA DHANUJA M.S** ## **RESPONDENTS:** |**1**|**THE BRANCH MANAGER,**| |---|---| ||**UNION BANK OF INDIA, KALADY BRANCH, KALADY P.O.,**| ||**ERNAKULAM DISTRICT, PIN - 683574**| |**2**|**UNION OF INDIA REPRESENTED BY THE SECRETARY,**| ||**DEPARTMENT OF ECONOMIC AFFAIRS, MINISTRY OF FINANCE, NORTH**| ||**BLOCK, NEW DELHI, PIN - 110001**| |**3**|**THE CHAIRMAN,**| ||**PRADHAN MANTRI MUDRA YOJANA (PMMY), SWAVALAMBAN BHAVAN, C-**| ||**11, G-BLOCK, BANDRA KURLA COMPLEX, BANDRA EAST, MUMBAI.,**| ||**PIN - 400051**| |**4**|**THE DISTRICT COLLECTOR,**| ||**COLLECTORATE, CIVIL STATION, KAKKANAD, ERNAKULAM,**| ||**PIN - 682030**| |**5**|**THE DEPUTY COLLECTOR, (RR)**| ||**COLLECTORATE, CIVIL STATION, KAKKANAD, ERNAKULAM,**| ||**PIN - 682030**| |**6**|**THE DEPUTY TAHSILDAR (RR)**| ||**ALUVA TALUK, ALUVA, ERNAKULAM DISTRICT, PIN - 683101**| ||**BY ADVS.**| ||**SRI.ASP.KURUP, STANDING COUNSEL**| ||**R2 & R3 BY SRI.MANU.S., DSGI**| ||**R4 & R6 BY SMT.DEEPA NARAYANAN**| **THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON** **04.04.2023, ALONG WITH WP(C).8291/2023, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** W.P.(C). Nos.8291 & 9291 of 2023 4 ## **JUDGMENT** ## **Dated this the 4[th] day of April, 2023** Captioned writ petitions are filed by one and the same person, the proprietor of a printing unit by name, “Gayathri Graphics”, Kalady, Ernakulam, challenging the revenue recovery action initiated by the Union Bank of India – respondents 1 and 2, as per the provisions of the Kerala Revenue Recovery Act, 1968. According to the petitioner, the unit is a Micro, Small and Medium Enterprises, which was sanctioned with two loans as per a scheme launched by the Union Bank of India, Kalady Branch. Admittedly, repayment was defaulted, consequent to which, the bank has filed O.S.Nos.175/2019 and 176 of 2019 before the Munisiffs court, to recover the amounts of Rs.6,34,516/- and Rs.1,49,511/- along with interest and cost. 2. The case projected by the petitioner is that while the suits are so pending revenue recovery action is initiated by the respondent bank as per the provisions of the Kerala Revenue Recovery Act, 1968 and consequently, the revenue authorities have issued notices under sections 7 and 34 of the Act, 1968. It is thus challenging the legality and correctness of the said actions of the bank, the writ petition is filed. It is also contended that since the loans are sanctioned to the petitioner under the Micro, Small and Medium Enterprises Scheme, there is a clear prohibition from initiating for recovery of the amounts. According to the petitioner, the Scheme has been launched with a laudable objective and the same is meant for upliftment of poor W.P.(C). Nos.8291 & 9291 of 2023 5 entrepreneurs like the petitioner. That apart, it is contended that the loans granted to the petitioner would come under the purview of the Prime Ministers Mudra Yojana Scheme and the same has been given without any security and is fully insured. 3. The sum and substance of the contention is that even if the petitioner has defaulted for payment of money, the bank can recover the amounts due from the Credit Guarantee Fund for Micro Units (CGFMU). It is the further contention of the petitioner that the filing of the suit as well as the recovery action are illegal, unjust and unconstitutional. That apart it is contended that the bank ought to have taken note of the fact that due to COVID-19 pandemic, the industry had to be closed down and therefore, the bank ought to have refrained itself from resorting to the legal actions against the petitioner. It is thus seeking to quash the suit proceedings as well as the revenue recovery action, the writ petition is filed. 4. The Branch Manager of the Union Bank of India – the 1[st] respondent, has filed a detailed counter affidavit disputing the claims and demands raised by the petitioner. Among other contentions, it is stated that the petitioner was granted loans under the Mudra Scheme, as a term loan under the Micro, Small and Medium Enterprises category with guarantee coverage. Fact remains, the petitioner had been a defaulter in the year 2016 itself, evident from Exhibit R1A notice issued by the bank to the petitioner dated 4.10.2016. After receipt of notice, the petitioner approached the bank and gave a reply dated 27.6.2017, admitting that he is a defaulter and assured the bank that the entire arrears with the bank will be cleared and the loan accounts will be closed, evident from Exhibit R1B dated 27.6.2017. 5. The sum and substance of the contentions advanced by the bank is that the bank is entitled as of right to institute suits, and simultaneously initiate recovery W.P.(C). Nos.8291 & 9291 of 2023 6 proceedings resorting to the provisions of the Act, 1968. That apart, it is submitted that the impression of the petitioner that since the loan is covered by the Credit Guarantee Fund Trust for Micro & Small Enterprises, the petitioner is not liable to make repayment, is not correct. According to the bank, the Credit Guarantee Fund Trust for Micro & Small Enterprises had been set up by the Government of India and the Small Industries Development Bank of India in August, 2000, to make the collateral free credit facilities available to the Micro & Small Enterprises. 6. It is also stated that the beneficiary of the Scheme is the bank and after receiving the amount from the borrower through recovery mechanism, the amount which is credited by the Trust to the loan account under the Credit Guarantee Scheme, is to be reimbursed to the Trust, as directed in Circular No.122/2016-17, issued by the General Manager of the Credit Guarantee Fund Trust for Micro & Small Enterprises, evident from Exhibit R1C dated 10.1.2017. Further contentions are also raised. Therefore, according to the bank, the petitioner is not entitled to get any reliefs as is claimed by the petitioner. 7. I have heard learned counsel for the petitioner - Sri.B.Krishna Mani, learned Senior Government Pleader – Smt.Deepa Narayanan for the State officials, learned DSGI - Sri.Manu.S. for the Union of India and its officials, learned Standing Counsel – Sri.A.S.P.Kurup for the Union Bank of India and perused the pleadings and material on record. 8. The deliberation made above would make it clear that two issues emerge for consideration; (1) Whether the bank is entitled to initiate legal action against the petitioner to recover the loan amount since the loans in question are covered by a Guarantee Scheme ? (2) When a suit is pending for recovery of the amounts at the W.P.(C). Nos.8291 & 9291 of 2023 7 instance of the bank, whether revenue recovery action can be initiated as per the provisions of the Act, 1968? 9. Insofar as the first issue is concerned, it is clear from Exhibit R1C circular issued by the General Manager of the Credit Guarantee Fund Trust for Micro & Small Enterprises that the payment of guarantee claim by the Trust to the lending institutions does not in anyway take away the responsibility of the lending institutions to recover the entire outstanding amount of the credit from the borrower; the lending institution shall exercise all the necessary precautions and maintain its recourse to the borrower for recovering entire amount of credit facility provided by it, and initiate such necessary actions for recovery of the entire outstanding amount. 10. Upon receipt of such recovery, the Guarantee Trust works out the net loss and shares the recovery so passed on by the member lending institutions with the respective member lending institution in the given proportion. Therefore, as per the circular, it is requested to strictly adhere to the guidelines issued by the Trust and pass on the entire recovery made, be it in installments, to the Guarantee Trust immediately upon recovering the amount after deducting the legal expenses; and the Guarantee Trust, on its part, would refund its share of amount to the member lending institutions in the ratio of net loss incurred only after receipt of entire recovery. It is also clarified in the circular that the beneficiary borrower under the Credit Guarantee Scheme presumes that once the credit facility is covered under the guarantee of the Trust, his liability towards his lender gets extinguished once the underlying claim is settled by the Trust and based on the claim application lodged by the respective member lending institutions and further stated that the presumption of the borrower is not correct in the light of the relevant provisions of the Scheme highlighted in the W.P.(C). Nos.8291 & 9291 of 2023 8 said circular. The member lending institutions are directed to educate the borrowers on this issue at the time of covering him under the Guarantee Scheme. Therefore it is explicit that even if the loans are covered under the Guarantee Scheme, there is a clear cut procedure prescribed by the Guarantee Trust for payment of the money to the member lending institutions and recovery of the same from the borrower. When there is an explicit procedure prescribed for payment of the guarantee amount to the member lending institutions and recovery of the same from the borrower, the petitioner cannot be heard to say that the petitioner is not liable to pay the amount to the bank in view of the credit guarantee availed by the bank from the Guarantee Trust. 11. Insofar as the 2[nd] question is concerned, there is no prohibition contained anywhere under law to proceed for recovery of the amount by filing a suit and initiating a proceeding to recover the amount as per the provisions of the Act, 1968, if the bank is entitled to proceed under the provisions of the Act, 1968. There is no case for the petitioner that the bank is not entitled to proceed under the Act, 1968 to recover the loans in question. As per the notification issued under the Act, 1968, the priority scheme loans are notified to enable the bank to make requisition for recovery of the amount due to it under the provisions of the Act, 1968. Moreover, the question with respect to filing of a suit and a simultaneous proceeding initiated under the provisions of the Act, 1968 was considered by a Division Bench of this Court in **Syndicate Bank v. Sheriff** [2007(1)KLT SN 63], and held that the proceedings in execution of a decree and the proceedings initiated under the Kerala Revenue Recovery Act, 1968, are independent of each other in scope and purport, and contextually, issue of prejudice is irrelevant, as the obvious attempt is to keep off the W.P.(C). Nos.8291 & 9291 of 2023 9 evil days to the maximum extent and therefore, the discretion of the court cannot be exercised in favour of the petitioner therein and that, the court should not be oblivious of the plight of a decree holder/financier. In **State Bank of India v. Kuttappan** [1998(2)KLT 130], a learned Single Judge of this Court held that the bank can resort to the proceedings under the Kerala Revenue Recovery Act, 1968 for recovery of amount in spite of a decree passed in favour of the bank by a competent civil court. 12. Moreover, the said question was considered by the Apex Court in the judgment in **Transcore v. Union of India** [(2008) 1 SCC 125], wherein it was held that the doctrine of election of remedies is applicable only when there are two or more co-existent remedies available to the litigants at the time of election, which are repugnant and inconsistent; and after considering the provisions of the Debt Recovery Tribunal Act, 1993 and the SARFAESI Act, 2002, it was held that there is no repugnancy nor inconsistency between the two remedies contained under the aforesaid Acts and therefore, the doctrine of election has no application. 13. In that view of the matter, I am of the definite opinion that the contentions advanced by the petitioner attributing illegality to the filing of the suit, and the recovery action under the Act, 1968, have no foundation or basis and therefore, the relief sought for by the petitioner to quash the suit proceedings and recovery action are declined. At that point of time, learned counsel for the petitioner submitted that petitioner may be permitted to pay the outstanding amounts in 20 Equated Monthly Instalments, which is stoutly opposed by the learned Standing Counsel appearing for the bank. In W.P.© No.8291/2023, as on today, an amount of Rs.7,98,500/- is remaining due from the petitioner and in W.P.© No.9291 of 2023, an amount of W.P.(C). Nos.8291 & 9291 of 2023 10 Rs.2,04,680/-. 14. Taking into consideration the adverse economic and financial situations prevailing in the community, it is only fair and proper that the petitioner is granted with reasonable instalments to pay the outstanding amounts. This is more so since under the Credit Guarantee Scheme also, the recovery of the amount in instalments is well protected. Therefore, petitioner is directed to pay the amounts outstanding as above in 12 Equated Monthly Installments, starting from 25.4.2023 and balance on the corresponding date of the succeeding months. I make it clear that if the petitioner fails to pay the amounts as directed above, the respondent bank will be at liberty to proceed in accordance with law for recovery of the amount under the provisions of the Act, 1968. I also make it clear that the directions in this writ petition will not stand in the way of the bank proceeding with the suit. However, if any recovery is made, necessarily, adjustments shall be made by the bank in the suit proceedings if and when a decree is passed in the suit proceedings. Sd/- **SHAJI P.CHALY** smv **JUDGE** W.P.(C). Nos.8291 & 9291 of 2023 11 ## **APPENDIX OF WP(C) 8291/2023** ## **PETITIONER'S EXHIBITS** |**Exhibit-P1**|**A TRUE COPY OF THE PLAINT IN O.S. 175/2019**| |---|---| ||**BEFORE THE MUNSIFF'S COURT, ALUVA DATED**| ||**9/4/2019**| |**Exhibit-P2**|**A TRUE COPY OF THE WRITTEN STATEMENT SAME**| ||**DATED NIL IN O.S.NO.175/2019 BEFORE THE**| ||**MUNSIFF'S COURT ALUVA**| |**Exhibit-P3**|**A TRUE COPY OF THE CERTIFICATE FOR RECOVERY**| ||**DATED 24/12/2020**| |**Exhibit-P4**|**A TRUE COPY OF THE RECEIVED NOTICES DATED**| ||**19/1/2021 UNDER SECTION 7 AND 34 OF THE**| ||**REVENUE RECOVERY ACT**| |**Exhibit-P5**|**A TRUE COPY OF THE RECEIVED NOTICES DATED**| ||**19/1/2021 UNDER SECTION 7 AND 34 OF THE**| ||**REVENUE RECOVERY ACT**| |**Exhibit-P6**|**A TRUE COPY OF THE REPRESENTATION BEFORE THE**| ||**DISTRICT COLLECTOR, ERNAKULAM DATED NIL**| |**Exhibit-P7**|**A TRUE COPY OF THE RECEIPT DATED 4-11-2022**| |**RESPONDENTS' EXHIBITS**|| |**EXHIBIT R1 A**|**A true copy of the notice Dated 4/10/2016**| ||**issued by the bank to the petitioner**| |**EXHIBIT R 1 B**|**A true copy of this reply dated 27.6.2017**| ||**given by the petitioner**| |**EXHIBIT R1 C**|**A true copy of the circular No. 122/2016-17**| ||**dated 10/1/2017 issued by the General**| ||**Manager of the Credit Guarantee Fund Trust**| ||**for Micro and Small Enterprises**| |**EXHIBIT R 1 D**|**A true copy of screen shot of the posts made**| ||**by the petitioner through the social media**| ||**account**| |**EXHIBIT R1 E**|**A true copy of the complaint dated 20.3.2019**| |**EXHIBIT R1 F**|**A true copy of the receipt issued with**| ||**respect to Ext.R1E dated 20.3.2019**| |**EXHIBIT R1 G**|**a true copy of the complaint before the**| ||**Banking Ombudsman dated 13.3.2019**| W.P.(C). Nos.8291 & 9291 of 2023 12 ## **APPENDIX OF WP(C) 9291/2023** ## **PETITIONER'S EXHIBITS** **Exhibit-P1 A TRUE COPY OF THE SUIT, IN O.S. 176/2019 BEFORE THE MUNSIFF'S COURT, ALUVA DATED 9/4/2019 Exhibit2 A TRUE COPY OF THE WRITTEN STATEMENT IN O.S.NO.176/2019 BEFORE THE MUNSIFF'S COURT, ALUVA DATED NIL Exhibit-P3 A TRUE COPY OF THE CERTIFICATE FOR RECOVERY DATED 24/12/2020 Exhibit-P4 A TRUE COPY OF THE NOTICE DATED 19/1/2021 ISSUED BY THE 6TH RESPONDENT TO THE PETITIONER** |**Exhibit-P3**<br>**Exhibit-P4**|**A TRUE COPY OF THE CERTIFICATE FOR RECOVERY**<br>**DATED 24/12/2020**<br>**A TRUE COPY OF THE NOTICE DATED 19/1/2021**<br>**ISSUED BY THE 6TH RESPONDENT TO THE**<br>**PETITIONER**| |---|---| |**RESPONDENT EXHIBITS**|| |**EXHIBIT R 1 A**|**A true copy of the notice issued by the bank**| ||**to the petitioner on 4.10.2016**| |**PETITIONER EXHIBITS**|| |**Exhibit-P5**|**A TRUE COPY OF THE NOTICE DATED 19/1/2021**| ||**ISSUED BY THE 6TH RESPONDENT TO THE**| ||**PETITIONER**| |**RESPONDENT EXHIBITS**|| |**EXHIBIT R 1 B**|**A true copy of this reply dated 27.6.2017**| ||**given by the petitioner**| |**EXHIBIT R 1 C**|**A true copy of the circular No. 122/2016-17**| ||**issued by the General Manager of the Credit**| ||**Guarantee Fund Trust for Micro and Small**| ||**Enterprises**| |**EXHIBIT R 1 D**|**A true copy of screen shot of the posts made**| ||**by the petitioner through his social media**| ||**account**| |**EXHIBIT R 1 E**|**a true copy of the complaint dated 20.3.2019**| |**EXHIBIT R 1 F**|**A true copy of the receipt issued with**| ||**respect to Ext.R1E dated 20.3.2019**| |**EXHIBIT R 1 G**|**a true copy of the complaint before the**| ||**Banking Ombudsman dated 13.3.2019**|