Sunitha Roy and others v. Canara Bank, State of Kerala, State Level Bankers Committee (SLBC) and others

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** ## **THE HONOURABLE MR. JUSTICE A.M.BADAR** ## **FRIDAY, THE 13TH DAY OF NOVEMBER 2020 / 22ND KARTHIKA, 1942** ## **WP(C).No.5232 OF 2020(D)** **PETITIONERS: 1 SUNITHA ROY, AGED 38 YEARS PROPRIETRIX, MARIYAM CASHEW INDUSTRIES, W/O.ROY GEORGE, RESIDING AT ELANGALLOOR THEKKU, PANDINJATTEKIZHAKKU, PALLICHANDA, SOORANAD P.O. KOLLAM DISTRICT, PIN-690 522. 2 SHAMEER HABEEBULLA, PROPRIETOR, M/S.SINAN CASHEWS, VP/X11/369A, PUNTHALATHAZHAM, KILIKOLLOOR (PO), KOLLAM DISTRICT, PIN-691 004, RESIDING AT MANCHERY HOUSE, IQBAL NAGAR 42: VADAKKEVILA P.O.PALLIMUKKU, KOLLAM DISTRICT-691 010. 3 S. ASHKAR KHAN MUSALIAR, PROPRIETOR, M/S.ASHKAR CASHEW INDUSTRIES, KARICODE, KOLLAM-691 005, S/O A.M.SAINULABDEEN MUSALIAR, AGED 46 YEARS, RESIDING AT SHAFI MANZIL, KARICODE, TKMC (PO) KOLLAM-691 005. 4 G.P SIVAKUMAR, PROPRIETOR, SREEHARI CASHEWS, 9/571, ULIYANAD, KARAMCODE P.O., CHIRAKKARA VILLAGE, KOLLAM-691 579. BY ADVS. SRI.K.P.DANDAPANI (SENIOR.) SRI.MILLU DANDAPANI SRI.PREMCHAND R.NAIR** ## **RESPONDENTS:** **1 CANARA BANK, KOLLAM MAIN BRANCH, THAMARAKKULAM, KOLLAM-691 001, REPRESENTED BY ITS MANAGER.** W.P.(C) No.5232/2020 2 **2 STATE OF KERALA, REPRESENTED BY THE PRINCIPAL SECRETARY TO GOVERNMENT, SECRETARIAT, FISHERIES, PORTS, ENVIRONMENT AND INDUSTRIES (COIR AND CASHEW), MAIN BLOCK, GOVERNMENT SECRETARIAT, THIRUVANANTHAPURAM-695 001. 3 STATE LEVEL BANKERS COMMITTEE (SLBC) REPRESENTED BY ITS CONVENER/GENERAL MANAGER, CANARA BANK, SLBC CELL, CORPORATE OFFICE, CANARA BANK BUILDING, PB No.159, M.G. ROAD, TRIVANDRUM – 695 001. R1 BY ADV. SRI.M.GOPIKRISHNAN NAMBIAR R1 BY ADV. SRI.K.JOHN MATHAI R1 BY ADV. SRI.JOSON MANAVALAN R1 BY ADV. SRI.KURYAN THOMAS R1 BY ADV. SRI.PAULOSE C. ABRAHAM** ## **OTHER PRESENT:** ## **SRI.RON BASTIN, GOVT. PLEADER** **THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 02-11-2020, THE COURT ON 13-11-2020 DELIVERED THE FOLLOWING:** W.P.(C) No.5232/2020 3 ## **A.M. BADAR, J.** ------------------------------------ ## W.P. (C) No.5232 of 2020 ------------------------------------ ## Dated this the 13[th] day of November, 2020 ## **J U D G M E N T** This is a joint writ petition by four Cashew Processing Units praying for following reliefs: - (i) Call for the documents relating to Exhibits P1 to P8 peruse the same. - (ii) Issue a writ of mandamus or any other writ, order or direction directing the 1[st] respondent to reconsider the case of petitioners for revival based on the recommendations made by the State Government and issue orders accordingly. - (iii) Issue a writ of mandamus or any other appropriate writ, order or direction directing the Bank to keep in abeyance all further proceedings pursuant to Ext.P6, P6(b), P6(c) and P6(d) notices, till fresh applications as per the cashew revival proposals are considered. - (iv) Issue a writ of mandamus or any other appropriate writ, order or direction directing the 1[st] respondent to restructure/regularize the loan accounts of the petitioner as directed by the 2[nd] and the 3[rd] respondents. W.P.(C) No.5232/2020 4 - (v) Issue a writ in the nature of declaration that the petitioners are entitled to get the benefit of Ext.P2 Government Order. 2. It is thus clear that petitioners are in fact impugning demand notices issued under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as 'SARFAESI Act', for short) to petitioner Nos.1 to 3 directing them to repay to the secured creditor the outstanding amount of loan within the prescribed statutory period. 3. Heard learned counsel for petitioners. By taking me through exhibits annexed to the writ petition, learned counsel for petitioners argued that as Cashew Processing Units in the State were in crisis and at the verge of closure, 2[nd] respondent-State of Kerala constituted a Cashew Revival Committee. On the basis of its recommendation, a Revival Scheme for Cashew Processing Industries came to be formulated as per the decision taken by the Government of Kerala as well as the State Level Bankers Committee. Cashew Processing Units prima facie found liable for revival were referred to concerned Banks for taking up restructuring process. W.P.(C) No.5232/2020 5 4. Learned counsel for petitioners drew my attention to Circulars issued by the Reserve Bank of India (Exts.P3 and P4) with a view to facilitate restructuring of Micro, Small and Medium Enterprises (MSME) and contended that vide Ext.P5 report of the Committee, cases of viable Cashew Processing Units were recommended for restructuring/additional finance. Learned counsel for petitioners contended that names of Cashew Processing Units of petitioners are figuring as viable units entitled for restructuring/additional finance. However, 1[st] respondent-Bank failed to check stock statements, balance sheets etc. and started taking steps under SARFAESI Act by issuing notices (Exts.P6, P6(a) to P6(c)) under Section 13(2) of the said Act. Learned counsel further drew my attention to documents at Exts.P7 and P8 by which 'in-principle' sanction was accorded for additional finance to the tune of Rs.150 lakhs to 1[st] petitioner-Cashew Processing Unit namely, Mariyam Cashew Industries. 5. With this, learned counsel for petitioners contended that petitioners are entitled for the benefit of recommendations of the Committee for revival of their Cashew Processing Units by way of additional finance with a direction to the W.P.(C) No.5232/2020 6 1[st] respondent Bank to keep all proceedings under the SARFAESI Act in abeyance. 6. Learned counsel for the 1[st] respondent Bank opposed the writ petition by contending that petitioners themselves have failed to take advantage of the Revival Scheme. They have not co-operated with the 1[st] respondent Bank despite intimation vide Ext.P8 as well as Annexures R1(a) and R1(b). It is also argued that huge loan is outstanding and therefore, secured creditor is entitled to take action under the SARFAESI Act. It is further argued that the writ petition, as framed and filed, is not maintainable as action under the SARFAESI Act has already been started for recovery of outstanding dues of the secured creditor. It is also argued that the 4[th] petitioner is not holding any account with the 1[st] respondent Bank and therefore, this writ petition is bad due to misjoinder of parties. 7. I have considered the submissions advanced and perused the materials placed before me. 8. Undoubtedly, a Committee was constituted by the State for assessing the viability of Cashew Processing Unit facing crisis. The Committee vide its recommendation at Ext.P5 had examined the proposal and segregated viable units. W.P.(C) No.5232/2020 7 The Annexure to the report of the Committee (Ext.P5) shows that name of Cashew Processing Units of petitioner Nos.2 and 3 are figuring at Sl.Nos.165 and 123 with recommendation for additional finance. It is thus seen that at least cases of two petitioners were recommended for additional finance with maintenance of financial discipline. 9. It is seen that, though cases of two of the petitioners were recommended for additional finance, the duly sworn statement of the 1[st] respondent-Bank makes it clear that petitioner Nos.1 to 3 have failed to produce documents necessary for viability study. Relevant portion of paragraph No.4 of the statement filed by the Bank reads thus: “It is pertinent to note that the revival scheme or the restructuring of loans granted to the petitioners 1 to 3 is upon submission of applications along with supporting documents. Upon submission of the necessary documents, the Bank shall conduct a viability study and it is only on the basis of this viability study (financial viability and technical feasibility) that the loan is considered for restructuring. Mere submission of application for revival or restructuring of the loan is not sufficient. The petitioners 1 to 3 till date, have not produced the documents necessary for the viability study. It is clear from Ext.P8 letter W.P.(C) No.5232/2020 8 from the 1[st] respondent to the 1[st] petitioner. A true copy of the letter dated 18.03.2019 issued by the 1[st] respondent to the 2[nd] petitioner is produced herewith and marked as **Annexure R1(a)** . A true copy of the letter dated 18.03.2019 issued by the 1[st] respondent to the 3[rd] petitioner is produced herewith and marked as **Annexure R1(b)** . Till date, the petitioners 1 to 3 have not produced any of the documents to enable the bank to take up their application for viability study. Therefore, the question of reconsidering the revival scheme, as prayed by the petitioners 1 to 3, does not arise”. 10. In addition to this, the letter at Ext.P8 filed by petitioners themselves makes it clear that 1[st] petitioner's unit was directed to produce as many as 11 documents for taking up the viability study. Documents at Annexures R1(a) and R1(b) make it clear that 2[nd] and 3[rd] petitioners' Cashew Processing Units were also directed to produce similar 11 documents for taking up viability study. Perusal of these letters makes it clear that petitioner Nos.1 to 3 failed to submit financial statements and supporting documents relating to restructuring of debt for establishing viability of the units. They were informed that the process is a time bound process and therefore, financial and other documents should be submitted in time. Despite these letters, petitioner Nos.1 to 3 W.P.(C) No.5232/2020 9 failed to produce documents sought for by the secured creditor for restructuring of debt. 11. The statement filed by the 1[st] respondent-Bank makes it clear that outstanding liability of 1[st] petitioner is Rs.3,02,40,000/- and that of 2[nd] petitioner is Rs.6,63,50,000/and of 3[rd] petitioner is Rs.5,07,65,000/-. The secured creditor has categorically stated that in this view of the matter, it is not willing to grant any further time or instalments to petitioners to clear the outstanding amount. These facts make it clear that petitioners No.1 to 3 themselves have failed to avail the opportunity for restructuring their debt despite willingness on the part of the 1[st] respondent to do so as reflected from documents at Ext.P8, Annexures R1(a) and R1(b). 12. Perusal of the writ petition and more particularly the prayer clause thereof, makes it clear that the writ petition has been filed to stop SARFAESI proceedings by virtually challenging demand notices issued under Section 13(2) thereof. Following are the observations of the Hon'ble Apex Court in the matter of _**Authorized Officer, State Bank of Travancore and another** vs._ _**Mathew K.C**_ (2018 (1) KLT 784). W.P.(C) No.5232/2020 10 “5. ….... The discretionary jurisdiction under Article 226 is not absolute but has to be exercised judiciously in the given facts of a case and in accordance with law. The normal rule is that a writ petition under Article 226 of the Constitution ought not to be entertained if alternate statutory remedies are available, except in cases falling within the well defined exceptions as observed in Commissioner of Income Tax and Others vs. Chhabil Dass Agarwal, 2014 (1) SCC 603, as follows: “15. Thus, while it can be said that this Court has recognised some exceptions to the rule of alternative remedy i.e. where the statutory authority has not acted in accordance with the provisions of the enactment in question, or in defiance of the fundamental principles of judicial procedure, or has resorted to invoke the provisions which are repealed, or when an order has been passed in total violation of the principles of natural justice, the proposition laid down in Thansingh Nathmal case, Titaghur Paper Mills case and other similar judgments that the High Court will not entertain a petition under Article 226 of the Constitution if an effective alternative remedy is available to the aggrieved person or the statute under which the action complained of has been taken itself contains a mechanism for redressal of grievance still holds the field. Therefore, when a statutory forum is created by law for redressal of grievances, a writ petition should not be entertained ignoring the statutory dispensation.” 9. Even prior to the SARFAESI Act, considering the alternate remedy available under the DRT Act it was held in Punjab National Bank vs. O.C. Krishnan and others, W.P.(C) No.5232/2020 11 (2001) 6 SCC 569, that :- “6. The Act has been enacted with a view to provide a special procedure for recovery of debts due to the banks and the financial institutions. There is a hierarchy of appeal provided in the Act, namely, filing of an appeal under Section 20 and this fast-track procedure cannot be allowed to be derailed either by taking recourse to proceedings under Articles 226 and 227 of the Constitution or by filing a civil suit, which is expressly barred. Even though a provision under an Act cannot expressly oust the jurisdiction of the court under Articles 226 and 227 of the Constitution, nevertheless, when there is an alternative remedy available, judicial prudence demands that the Court refrains from exercising its jurisdiction under the said constitutional provisions. This was a case where the High Court should not have entertained the petition under Article 227 of the Constitution and should have directed the respondent to take recourse to the appeal mechanism provided by the Act.” 10. In Satyawati Tandon (supra), the High Court had restrained further proceedings under Section 13(4) of the Act. Upon a detailed consideration of the statutory scheme under the SARFAESI Act, the availability of remedy to the aggrieved under Section 17 before the Tribunal and the appellate remedy under Section 18 before the Appellate Tribunal, the object and purpose of the legislation, it was observed that a writ petition ought not to be entertained in view of the alternate statutory remedy available holding :- “43. Unfortunately, the High Court overlooked the settled law that the High Court will ordinarily not entertain a petition W.P.(C) No.5232/2020 12 under Article 226 of the Constitution if an effective remedy is available to the aggrieved person and that this rule applies with greater rigour in matters involving recovery of taxes, cess, fees, other types of public money and the dues of banks and other financial institutions. In our view, while dealing with the petitions involving challenge to the action taken for recovery of the public dues, etc. the High Court must keep in mind that the legislations enacted by Parliament and State Legislatures for recovery of such dues are a code unto themselves inasmuch as they not only contain comprehensive procedure for recovery of the dues but also envisage constitution of quasi-judicial bodies for redressal of the grievance of any aggrieved person. Therefore, in all such cases, the High Court must insist that before availing remedy under Article 226 of the Constitution, a person must exhaust the remedies available under the relevant statute. **==> picture [78 x 10] intentionally omitted <==** 55. It is a matter of serious concern that despite repeated pronouncement of this Court, the High Courts continue to ignore the availability of statutory remedies under the DRT Act and the SARFAESI Act and exercise jurisdiction under Article 226 for passing orders which have serious adverse impact on the right of banks and other financial institutions to recover their dues. We hope and trust that in future the High Courts will exercise their discretion in such matters with greater caution, care and circumspection.” 11. In Union Bank of India and another vs. Panchanan Subudhi, 2010 (15) SCC 552, further proceedings under Section 13(4) were stayed in the W.P.(C) No.5232/2020 13 writ jurisdiction subject to deposit of Rs.10,00,000/leading this Court to observe as follows : “7. In our view, the approach adopted by the High Court was clearly erroneous. When the respondent failed to abide by the terms of one-time settlement, there was no justification for the High Court to entertain the writ petition and that too by ignoring the fact that a statutory alternative remedy was available to the respondent under Section 17 of the Act.” 12. The same view was reiterated in Kanaiyalal Lalchand Sachdev and others vs. State of Maharashtra and others, 2011 (2) SCC 782 observing: “23. In our opinion, therefore, the High Court rightly dismissed the petition on the ground that an efficacious remedy was available to the appellants under Section 17 of the Act. It is well settled that ordinarily relief under Articles 226/227 of the Constitution of India is not available if an efficacious alternative remedy is available to any aggrieved person. (See Sadhana Lodh v. National Insurance Co. Ltd.; Surya Dev Rai v. Ram Chander Rai and SBI v. Allied Chemical Laboratories.)” 13. In Ikbal (supra), it was observed that the action of the Bank under Section 13(4) of the ‘SARFAESI Act’ available to challenge by the aggrieved under Section 17 was an efficacious remedy and the institution directly under Article 226 was not sustainable, relying upon Satyawati Tandon (Supra), observing : W.P.(C) No.5232/2020 14 “27. No doubt an alternative remedy is not an absolute bar to the exercise of extraordinary jurisdiction under Article 226 but by now it is well settled that where a statute provides efficacious and adequate remedy, the High Court will do well in not entertaining a petition under Article 226. On misplaced considerations, statutory procedures cannot be allowed to be circumvented. 28…….In our view, there was no justification whatsoever for the learned Single Judge to allow the borrower to bypass the efficacious remedy provided to him under Section 17 and invoke the extraordinary jurisdiction in his favour when he had disentitled himself for such relief by his conduct. The Single Judge was clearly in error in invoking his extraordinary jurisdiction under Article 226 in light of the peculiar facts indicated above. The Division Bench also erred in affirming the erroneous order of the Single Judge.” 14. A similar view was taken in Punjab National Bank and another vs. Imperial Gift House and others, (2013) 14 SCC 622, observing:- “3. Upon receipt of notice, the respondents filed representation under Section 13(3-A) of the Act, which was rejected. Thereafter, before any further action could be taken under Section 13(4) of the Act by the Bank, the writ petition was filed before the High Court. 4. In our view, the High Court was not justified in entertaining the writ petition against the notice issued under Section 13(2) of the Act and quashing the proceedings initiated by the Bank.” W.P.(C) No.5232/2020 15 15. It is the solemn duty of the Court to apply the correct law without waiting for an objection to be raised by a party, especially when the law stands well settled. Any departure, if permissible, has to be for reasons discussed, of the case falling under a defined exception, duly discussed after noticing the relevant law. In financial matters grant of ex-parte interim orders can have a deleterious effect and it is not sufficient to say that the aggrieved has the remedy to move for vacating the interim order. Loans by financial institutions are granted from public money generated at the tax payers expense. Such loan does not become the property of the person taking the loan, but retains its character of public money given in a fiduciary capacity as entrustment by the public. Timely repayment also ensures liquidity to facilitate loan to another in need, by circulation of the money and cannot be permitted to be blocked by frivolous litigation by those who can afford the luxury of the same. The caution required, as expressed in Satyawati Tandon (supra), has also not been kept in mind before passing the impugned interim order:- “46. It must be remembered that stay of an action initiated by the State and/or its agencies/instrumentalities for recovery of taxes, cess, fees, etc. seriously impedes execution of projects of public importance and disables them from discharging their constitutional and legal obligations towards the citizens. In cases relating to recovery of the dues of banks, financial institutions and secured creditors, stay granted by the High Court would have serious adverse impact on the financial health of such bodies/institutions, which (sic W.P.(C) No.5232/2020 16 will) ultimately prove detrimental to the economy of the nation. Therefore, the High Court should be extremely careful and circumspect in exercising its discretion to grant stay in such matters. Of course, if the petitioner is able to show that its case falls within any of the exceptions carved out in Baburam Prakash Chandra Maheshwari v. Antarim Zila Parishad, Whirlpool Corpn. v. Registrar of Trade Marks and Harbanslal Sahnia v. Indian Oil Corpn. Ltd. and some other judgments, then the High Court may, after considering all the relevant parameters and public interest, pass an appropriate interim order.” 17. We cannot help but disapprove the approach of the High Court for reasons already noticed in Dwarikesh Sugar Industries Ltd. vs. Prem Heavy Engineering Works (P) Ltd. and Another, 1997 (6) SCC 450, observing :- “32. When a position, in law, is well settled as a result of judicial pronouncement of this Court, it would amount to judicial impropriety to say the least, for the subordinate courts including the High Courts to ignore the settled decisions and then to pass a judicial order which is clearly contrary to the settled legal position. Such judicial adventurism cannot be permitted and we strongly deprecate the tendency of the subordinate courts in not applying the settled principles and in passing whimsical orders which necessarily has the effect of granting wrongful and unwarranted relief to one of the parties. It is time that this tendency stops.” W.P.(C) No.5232/2020 17 Petitioners have most efficacious remedy of challenging demand notices under Section 13(2) of the SARFAESI Act before the Debt Recovery Tribunal. It is not case of petitioners that the Bank has not acted in accordance with the provisions of the SARFAESI Act or in defiance of the fundamental principles of judicial procedure. No case for breach of principles of natural justice is also made out. In this view of the matter, this writ petition is devoid of merit and the same is accordingly dismissed. **A.M. BADAR JUDGE** smp W.P.(C) No.5232/2020 18 ## **APPENDIX** ## **PETITIONER'S EXHIBITS:** **EXHIBIT P1 TRUE COPY OF MINUTES OF MEETING HELD ON 6.2.2019 IN CHAMBERS OF CHIEF MINISTER OF KERALA.** **EXHIBIT P2 TRUE COPY OF GO (MS) No.643 OF 2019 DTD.6.7.2019.** **EXHIBIT P3 TRUE COPY OF CIRCULAR OF RESERVE BANK OF INDIA DTD.1.1.2019.** **EXHIBIT P4 TRUE COPY OF CIRCULAR OF RESERVE BANK OF INDIA DTD.11.2.2020 EXHIBIT P5 TRUE COPY OF RELEVANT PAGES OF REPORT OF COMMITTEE DTD.31.01.2019.** - **EXHIBIT P6 TRUE COPY OF DEMAND NOTICE UNDER SECTION 13(2) DTD.5.2.2020 UNDER SARFAESI ACT ISSUED TO 1ST PETITIONER.** - **EXHIBIT P6(a) TRUE COPY OF DEMAND NOTICE UNDER SECTION 13(2) DTD.29.01.2020 UNDER SARFAESI ACT ISSUED TO 2ND PETITIONER.** - **EXHIBIT P6(b) TRUE COPY OF DEMAND NOTICE UNDER SECTION 13(2) DTD.10.01.2020 UNDER SARFAESI ACT ISSUED TO 3RD PETITIONER.** - **EXHIBIT P6(c) TRUE COPY OF DEMAND NOTICE UNDER SECTION 13(2) DTD.15.01.2020 UNDER SARFAESI ACT ISSUED TO 4TH PETITIONER.** - **EXHIBIT P7 TRUE COPY OF THE LETTER DTD.25.02.2019 SANCTIONING THE ADDITIONAL FINANCE OF RS.150 CRORES.** - **EXHIBIT P8 TRUE COPY OF THE LETTER DTD.18.03.2019 ISSUED TO 1ST PETITIONER BY THE 1ST RESPONDENT.** - **TRUE COPY OF UDYOG AADHAR REGISTRATION** - **EXHIBIT P9 CERTIFICATE NO.KL06A0008273 ISSUED ON 10.10.2012 TO THE 1ST PETITIONER.** - **EXHIBIT P10 TRUE COPY OF UDYOG AADHAR REGISTRATION CERTIFICATE NO.KL06B0001038 ISSUED ON 11.05.2011 TO THE 2ND PETITIONER** - **EXHIBIT P11 TRUE COPY OF UDYOG AADHAR REGISTRATION CERTIFICATE NO.KL06B0004517 ISSUED ON 1.04.2005 TO THE 3RD PETITIONER** W.P.(C) No.5232/2020 19 **EXHIBIT P12** **A TRUE COPY OF UDYOG AADHAR REGISTRATION CERTIFICATE NO.KL06A0001351 ISSUED ON 01.01.2016 TO THE 4TH PETITIONER** ## **RESPONDENT'S ANNEXURES:** Annexure R1(a) A true copy of the letter dtd.18.03.2019 issued by R1 to 2[nd] petitioner. Annexure R1(b) A true copy of the letter dtd.18.03.19 issued by R1 to 3[rd] petitioner. Annexure R1(c) A true copy of the Circular dtd.17.12.2015 issued by the Canara Bank, Head Office along with Annexure. True Copy P.S to Judge smp