2023 (4) TMI 878 - HC - Insolvency and Bankruptcy

Court dismisses writ petition for lack of eligibility under insolvency schemes, petitioner's actions seen as delaying tactic.

M/s. Asean Agencies Versus Union of India, The Chairman-cum-Managing Director, Bank of India, Mumbai, The Zonal Manager, The Chief Manager

The Court dismissed the writ petition, finding that the petitioner did not fulfill the eligibility criteria for the Pre-Packaged Insolvency Resolution ... Writ petition - Seeking a direction from this Court to the respondent Bank to initiate action as per the RBI Circular dated 05.05.2022 and the Pre-Packaged Insolvency Resolution Process under the Insolvency and Bankruptcy Code, 2016 instead of proceeding under the SARFAESI Act - proprietorship firm - HELD THAT:- There is no doubt that the entire country was affected because of the COVID-19 pandemic situation and the lockdowns were enforces to contain the pandemic. There is no doubt that several business entities including the entities like the petitioner may have suffered losses because of the COVID-19 pandemic situation. It is because of such financial distress faced by the entities like the petitioner that the Government had time and again brought out different schemes to ameliorate the grievances and the hardships faced by the business entities. It is seen that as per the RBI by circular No. DOR. STR. REC. 12/21.04.048/2021-22, the restructuring is to be invoked or shall be invoked when the lending institution and the borrower agree to proceed with the efforts towards finalizing or restructuring plan to be implemented in respect of such borrower. The petitioner submits that it had applied before the respondent bank for implementation of the said scheme by an application dated 21.07.2021. In response to the said application, the bank had replied by way of an e-mail, a copy of which is found at Annexure-A page 49 of the counter affidavit - As such by definition prescribed under the IBC, 2016 the applicant does not come within the definition of corporate applicant. Consequently, the insolvency and Bankruptcy (pre-packaged insolvency) Rules, 2021 are not applicable in so far as the petitioner is concerned. It appears that this writ petition is directed solely as a ploy to delay the further proceedings initiated under the SARFAESI Act which has already been initiated against the petitioner. The SARFAESI Act is a complete code in itself and it has statutory Authorities prescribed for redressal of grievances raised by the petitioner in the writ petition. This Court is of the considered view that there was sufficient laches on the part of the petitioner in pursuing the matter before the bank in right earnest in terms of the schemes which was floated by the RBI. The writ Court being a Court of equity cannot come to the aid of a litigant is not diligent or is guilty of laches. Where the SARFAESI Act provides for efficacious alternative remedy, ordinarily a writ Court will not exercise its jurisdiction under Article 226. In the facts and circumstances of the present case, the writ petitioner has not been able to demonstrate as to why the powers under Article 226 should be invoked by this Court without the writ petitioner exhausting the statutory alternative remedies as provided for under the SARFAESI Act - Time and again, the Apex Court has held that when a SARFAESI proceeding is initiated ordinary to the writ Courts would loathe to interfere save and except the exceptions curbed out by the Apex Court in Authorized Officer, State Bank of Travancore & Anr. [2018 (2) TMI 25 - SUPREME COURT], the apex court has precisely laid down the circumstances under which the writ court should interfere in SARFAESI matters. The writ petition fails and the same is therefore, dismissed. Issues Involved:1. Whether the respondent bank should have initiated action as per the RBI Circular dated 05.05.2022 and the Pre-Packaged Insolvency Resolution Process under the Insolvency and Bankruptcy Code, 2016 instead of proceeding under the SARFAESI Act.2. Whether the respondent bank's actions were contrary to the RBI Circular and the Government of India scheme for Pre-Packaged Insolvency Resolution Process.3. Whether the petitioner is eligible for benefits under the Emergency Credit Line Guarantee Scheme and the RBI Circular regarding Resolution Framework 2.0.Summary:Issue 1: Initiation of Action as per RBI Circular and Pre-Packaged Insolvency Resolution ProcessThe petitioner, a proprietorship firm, sought a direction from the Court for the respondent bank to initiate action as per the RBI Circular dated 05.05.2022 and the Pre-Packaged Insolvency Resolution Process under the Insolvency and Bankruptcy Code, 2016 instead of proceeding under the SARFAESI Act. The petitioner argued that the bank unilaterally reduced the cash credit limit and issued a notice under Section 13(2) of the SARFAESI Act without considering the petitioner's eligibility under the RBI Circular and the Government of India scheme.Issue 2: Actions Contrary to RBI Circular and Government SchemeThe petitioner contended that the bank's actions were contrary to the RBI Circular and the Government of India scheme for Pre-Packaged Insolvency Resolution Process. The petitioner argued that the bank did not extend the benefits under these schemes due to arbitrary reasons and ulterior motives, despite the petitioner being eligible. The respondent bank, however, argued that the petitioner, being a proprietorship firm, was not eligible for the Pre-Packaged Insolvency Resolution Process, which is applicable only to corporate applicants.Issue 3: Eligibility for Emergency Credit Line Guarantee Scheme and RBI CircularThe petitioner claimed that the bank did not consider the Emergency Credit Line Guarantee Scheme and reduced the credit limit instead of granting additional credit. The respondent bank countered that the petitioner did not respond to the bank's email requesting the necessary deposits for restructuring under the RBI Circular. The Court found that the petitioner had not demonstrated any further communication or steps taken in response to the bank's email.Court's Analysis and Conclusion:The Court noted that the entire country was affected by the COVID-19 pandemic, and various schemes were introduced to alleviate financial distress. The Court found that the petitioner did not take necessary steps under the RBI Circular for restructuring and was not eligible for the Pre-Packaged Insolvency Resolution Process as it is meant for corporate applicants. The Court also observed that the petitioner did not provide evidence of applying for the Emergency Credit Line Guarantee Scheme. The Court concluded that the writ petition appeared to be a ploy to delay SARFAESI proceedings and that the petitioner had not exhausted alternative remedies provided under the SARFAESI Act. The Court dismissed the writ petition as devoid of merit.Judgment:The writ petition is dismissed with no order as to cost.