Sneha Jyothi v. Canara Bank Ltd. & The Credit Guarantee Fund Trust for Minor and Small Enterprises

``` IN THE HIGH COURT OF KERALA AT ERNAKULAM ``` ``` PRESENT ``` ``` THE HONOURABLE MR. JUSTICE GOPINATH P. ``` ``` THURSDAY, THE 24[TH] DAY OF NOVEMBER 2022 / 3RD AGRAHAYANA, 1944 ``` ## `WP(C) NO. 31466 OF 2022` ``` AGAINST THE ORDER/JUDGMENTOA 435/2022 OF DEBT RECOVERY TRIBUNAL, ERNAKULAM PETITIONER: ``` ``` SNEHA JYOTHI AGED 56 YEARS S/O RAJALAKSHMI , PROPRIETOR, M/S AIRSUN SOLAR AND WIND ENERGY , DOOR NO 1 , AYSH MAGHAL ,T.KV NAGAR , KALMANDAPAM, PALAKKAD THALUK & DISTRICT, PIN - 678001 BY ADV K.A.SREEJITH ``` ## `RESPONDENTS:` ``` 1CANARA BANK LTD S.M. E BRANCH , KANJIKODE , PUDUSSERY , PALAKKAD. REPRESENTED BY ITS BRANCH MANAGER, PIN - 678123 2THE CREDIT GUARANTEE FUND TRUST FOR MINOR AND SMALL ENTERPRISES SWAVALAMBAN BHAVAN , 7TH FLOOR , PLOT NO C -11 , G BLOCK, BANDRA , KURLA COMPLEX ,BANDRA EAST MUMBAI IN. REPRESENTED BY ITS CHIEF EXECUTIVE OFFICER, PIN - 400051 BY ADVS. SHRI.PAULY MATHEW MURICKEN,SC,CANARA BANK ANIRUDH KADAVIL M.J.RAJASREE(K/330/1994) K.V.ANIL(K/000230/1980) ``` ``` THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 24.11.2022, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: ``` ``` W.P.(C)No.31466/2022 ``` ``` 2 ``` ## **JUDGMENT** ## **Dated this the 24[th] day of November, 2022** The petitioner has approached this Court being aggrieved by the fact that the proceedings have been taken by the respondent bank to recover the amounts due from the petitioner without considering the fact that the petitioner's business enterprise is covered under the Credit Guarantee Fund Trust for Micro and Small Enterprises (hereinafter referred to as 'CGTMSE' or 'the scheme'). The petitioner has therefore approached this Court seeking the following reliefs:- - A) “This Honourable Court may be pleased to invoke its jurisdiction vested under Article 226 by way of writ of mandamus or any other appropriate writ, direction or order directing the 1st Respondent to take necessary steps to make available the benefits of the CGTMSE Scheme for which petitioner is legally entitled. - B) This Honurable Court may be pleased to declare that petitioner is legally entitled to enjoy the benefits of CGTMSE Scheme. - C) This Honurable Court may be pleased to declare that all legal proceedings initiated by 1st Respondent against the petitioner without giving ``` W.P.(C)No.31466/2022 ``` ``` 3 ``` him the legal benefits which he is entitled under the CGTMSE Scheme are void and illegal ; - D) Dispense petitioner from producing true translation of documents in vernacular language. - E) Grant any other prayers which are prayed during the pendency of this writ petition which are deemed apt and fit to be allowed.” 2. The learned counsel for the petitioner submits that 75% of the amount due from the petitioner has already been released to the bank by the CGTMSE. Therefore, the bank cannot proceed to recover the entire amount from the petitioner. The learned counsel places reliance on the judgment of the Division Bench of the Andhra Pradesh High Court in **M/S Sai Sree Ganesh Industries v. Union of India** (judgment dated 19.01.2018 in W.P. (C) No. 32288/2017 reported as 2018 SCC OnLine Hyd 126) which, according to the petitioner is the authority for the proposition that the action now taken by the bank is illegal and contrary to the provisions of the guarantee scheme referred to above. It is also pointed out that the petitioner's account has been debited with the amounts payable for making the petitioner eligible for the credit guarantee under ``` W.P.(C)No.31466/2022 ``` ``` 4 ``` the provisions of the scheme. 3. The learned counsel appearing for the respondent bank refers to the provisions of the scheme, which has been produced along with the counter affidavit dated 07.11.2022 filed in this Court. Specific reference is made to the terms of Ext.R1(a) (the terms of the credit guarantee scheme) to point out that while the bank is entitled to claim the payment of 75% of the guaranteed amount, on default being committed by the borrower, it is the duty of the bank to take steps to recover the entire amount from the borrower. It is pointed out that, under the terms of the scheme, the bank will be covered only to the extent of the loss suffered by the bank during the course of recovery. It is submitted that it is the responsibility of the bank to recover the entire amount from the borrower and therefore, the claim of the petitioner as made in this writ petition is clearly untenable. 4. Having heard the learned counsel appearing for the petitioner and the learned counsel appearing for the ``` W.P.(C)No.31466/2022 ``` ``` 5 ``` respondent bank, I am of the opinion that there is considerable merit in the contention taken by the learned counsel for the respondent bank. The provisions of Ext.R1(a) clearly indicate that while the bank is entitled to certain payments from the CGTMSE scheme, it is the responsibility of the bank to recover the entire amount due from the borrower while proceeding against the assets of the borrower and in such manner as it may be open to the bank. Thereafter, the scheme envisages that there will be an adjustment between the bank and the trust which manages the scheme in such a manner that the amount of recovery will be factored in determining the amount to be paid to the bank under the provisions of the scheme. The Division Bench of the Andhra Pradesh High Court in **Sai Sree Ganesh Industries (supra)** holds that the recovery proceedings initiated by the bank cannot be kept in abeyance simply on the ground that the business in question is one covered by the provisions of the scheme. It was held: - ``` W.P.(C)No.31466/2022 ``` ``` 6 ``` “28. The writ petition is accordingly disposed of directing the Syndicate Bank to immediately inform the CGTMSE of the factum of the petitioner firm's loan accounts having become NPAs, in terms of the CGTMSE scheme, and thereafter abide by the procedure prescribed under the said scheme for realizing its dues in relation thereto. It is made clear that the petitioner firm's understanding that it need not pay 75% of the guaranteed amount in default, which would be released by the CGTMSE under the first instalment, is incorrect, being contrary to the import and intendment of the scheme. The Syndicate Bank would necessarily have to endeavour to recover the entire outstanding dues from the petitioner firm so as to make good the amounts released by the CGTMSE and it is only if the recovery proceedings fall short that the CGTMSE would have to release the second instalment of 25% of the guaranteed amount. The Syndicate Bank shall take steps accordingly.” The Court also found that it is incumbent on the bank to state that the account in question is covered by the provisions of the scheme while bringing the assets to sale. I am of the view that there is no such requirement since it is the duty of the bank to recover the entire amount from the borrower. If the bank proceeds with recovery against the borrower and brings the property to sale, the auction purchaser is clearly not concerned with the terms of the scheme or the amount which the bank may receive from out ``` W.P.(C)No.31466/2022 ``` ``` 7 ``` of the scheme. Therefore, I am in respectful disagreement with the view taken by the Division Bench of the Andhra Pradesh High Court to the extent it holds that the notices issued under the SARFAESI Act must clearly mention that the account in question is covered under the provisions of the scheme. In all other respects, I am in respectful agreement with the view taken by the Division Bench of the Andhra Pradesh High Court. The question of directing the bank to inform the trust of the claim in respect of the petitioner does not arise as it is the case of the petitioner herself that the Bank has already received payment from the CGTMSE. The writ petition fails. It is accordingly dismissed. No costs. ## **Sd/-** **GOPINATH P.** **JUDGE** RMV ``` W.P. (C) No. 31466 of 2022 ``` ``` ..8.. ``` ## `APPENDIX OF WP(C) 31466/2022` ``` PETITIONER EXHIBITS Exhibit P1THE TRUE COPY OF STATEMENT OF ACCOUNT OF PETITIONER Exhibit P2THE TRUE COPY OF THE LEGAL NOTICE DATED 20/07/2019 ISSUED BY THE 1ST RESPONDENT BANK Exhibit P3THE TRUE COPY OF THE A REPLY NOTICE DATED 5/08/2019 SENT BY PETITIONER TO 1ST RESPONDENT Exhibit P4THE TRUE COPY OF THE APPLICATION DATED 28/09/19 THE PETITIONER UNDER RTI ACT TO THE INFORMATION OFFICER OF THE 2ND RESPONDENT Exhibit P5THE TRUE COPY OF THE REPLY NOTICE SENT BY 2ND RESPONDENT TO PETITIONER DATED 11/10/2019 TO THE PETITIONER Exhibit P6THE TRUE COPY OF THE RELEVANT PAGES OF OA NO 435/22 BEFORE DEBT RECOVERY TRIBUNAL KERALA BENCH Exhibit P7THE TRUE COPY OF THE PLAINT OF O.S NO 418/2022 BEFORE MUNSIFF COURT , PALAKKAD Exhibit P8THE TRUE COPY OF THE BOARD INSERTED BY THE 1ST RESPONDENT IN PETITIONER' S PROPERTY RESPONDENT EXHIBITS Exhibit R1(a)A true copy of the CGTMSE Scheme dated 01.08.2000 Exhibit R1(b)A true copy of the relevant portion of the ``` ``` A true copy of the CGTMSE Scheme dated 01.08.2000 A true copy of the relevant portion of the consolidated guidelines with the regard to preferment of claim under CGTMSE ``` ``` PETITIONER EXHIBITS Exhibit P9TRUE COPY NOTICE OF E AUCTION GIVEN TO PETITIONER BY 1ST RESPONDENT Exhibit P10TRUE COPY OF THE ADVERTISEMENT PUBLISHED IN MATHRUBHUMI DAILY , PALAKKAD EDITION DATED 29/10/2011 GIVEN BY 1ST RESPONDENT ``` ## `TRUE COPY` ## `P.A.TO JUDGE`