TaxTMI 
TaxTMI 
2020 (7) TMI 27
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.... WDIC. The documents sought were permitted to be inspected by the agents of the petitioner no.1-borrower on June 18, 2019. The time for filing reply to the show cause notice was also extended for 15 days. Again on June 19, 2019 the petitioner no. 1 allegedly sent a letter for a further extension of time to file reply, seeking two weeks' time. Allegedly, vide letter dated June 20, 2019, the WDIC granted a further extension of time for ten days for the petitioners to file their reply, clarifying that no further extension would be allowed. An opportunity of personal hearing was given as well to the petitioners, fixing 12:30 p.m. on July 3, 2019 for such hearing. On June 29, 2019, the petitioner no. 1 wrote a letter to the concerned branch of the respondent no. 1-bank offering to pay certain amounts, which was rejected by the bank by a letter issued on the same day. A reply to the show cause notice dated April 6, 2019 was also served with a covering letter (bearing no. GJM/KMPL/19-20/008) of even date, that is, June 29, 2019. Vide letter dated July 2, 2019, bearing GJM/KMPL/419-20/10, the petitioner no. 1 requested a postponement of the hearing for another three weeks on the ground ....
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....eply to the Show Cause Notice, dated June 29, 2019, was not considered by the WDIC while declaring the petitioners to be wilful defaulters, on the ground that the said reply was filed later than the last (extended) date stipulated by the WDIC. However, the reply was received by the Respondent No. 1-Bank on July 1, 2019 itself as, according to the petitioners, was evident from the receipt stamp on the service copy of the reply, but the WDIC alleged to have received it on July 3, 2019 after commencement of the meeting convened to decide whether the petitioners were wilful defaulters. Thirdly, the petitioners submit, the writ petition was maintainable as there was no equally efficacious alternative remedy available to the petitioners. As per Clause 3 (c) of the RBI Master Circular dated July 1, 2015, the order of the WDIC should be 'reviewed' by another Committee and the order shall become final only after it is 'confirmed' by the Review Committee. However, since there was no consideration by the WDIC of the petitioners' representation dated June 29, 2019, the question of 'reviewing' its decision does not arise. Consequentially such a purported decision could not be confirmed by the ....
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....r. v. Union Bank of India & Ors.]. A learned Single Bench of this court held therein, inter alia, that the reply of the Bank in that case was not in compliance with Section 13 (3) (A) of The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI ACT, 2002), since the reply was short and cryptic and did not disclose adequate reasons for overruling the objections raised by the writ petitioners therein, which reasons should be indicated with sufficient clarity, according to the learned Single Judge, so that if the writ petitioners were unhappy with such reasons, they might challenge the same at the appropriate stage before the appropriate forum. The learned senior advocate for the petitioners goes on to argue that the petitioners had been approaching the bank for settlement since May, 2013 and, in order to facilitate such settlement, made payment from time to time, of a total amount of Rs. 3,47,08,785.09 p. It is claimed that the petitioner no. 1, on November 8, 2019, accepted to abide by an One-Time Settlement offer of March 16, 2015. Accordingly, it is argued, the petitioners attempted to repay the bank's claim repeatedly and ....
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....ed assets worth Rs. 5,15,68,541 during 2015-2016. To demonstrate particulars thereof, the petitioners rely on a purported schedule indicating such assets and invoices and/or receipts regarding such purchase, allegedly annexed to the written notes of arguments of the petitioners, but not found in the court's file. (In any event, such documents, even if filed, would have been produced for the first time with the written notes and were not a part of the pleadings in the writ petition. As such, those documents, even if filed, could not have been looked into at this belated stage.) It is further alleged that on November 1, 2018 the officers of the respondent no.1bank had visited the registered office of the petitioner no. 1 at 12A, N.S. Road, Kolkata - 700 001 and not its unit/factory premises/mining site inter alia situated at Rungta Mines Ltd., Jajang Iron & Mines PO Jajang, Keonjhar, Orissa - 758 052. Moreover, the petitioners submit that neither the unit nor the registered office was closed on November 1, 2018; certain tax invoices, of November 8, 2018 for the period from October 16, 2018 to October 31, 2018 and of November 22, 2018, for the period between November 1, 2018 and Nove....
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....ion about repayment of loan to SREI International to the tune of Rs. 4.14 crore by the petitioners without routing it through the respondent no. 1-bank is ex facie baseless. In support of this contention, the petitioners place reliance on a sanction letter from the respondent no.1-bank dated November 12, 2019, annexed to the writ petition, which "expressly provides", as per the petitioners, the purpose of the sanction to be "Working Capital Finance and Term Loan to take over the term finance with SREI". Such direct payment by the petitioners to SREI, according to the petitioners, could neither be deemed to be unauthorized, nor constitute an event of wilful default. At the outset of their arguments, the respondents take an objection to the maintainability of the writ petition, thus controverting the argument of feasibility of the writ jurisdiction advanced by the petitioners. The respondents say that the impugned declaration of the WDIC dated July 3, 2019, which was communicated by the impugned correspondence dated January 18, 2020, was the declaration of the "First Committee", being the identification committee, but not reviewed by second committee, being the Review Committee. As ....
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....etitioner no. 1 and a writ petitioner bearing WP No. 13367(W) of 2019 was filed by the present petitioner nos. 2, 3 and 4 in July, 2019 in respect of a loan account maintained with the Rash Behari Branch of the respondent no. 1-bank, with regard to which the respondent no. 1 also proceeded with declaring the present petitioner nos. 2 to 4 as wilful defaulter. The respondents submit that, as per the order passed in the said writ petition and in State Bank of India v. Jah Developers (supra), it was required to formulate revised guidelines after seeking clarifications in this regard, due to which there was a delay in communicating the order of the WDIC, allegedly within the knowledge of the petitioners. An opportunity was given to the petitioners, as per such orders and revised guidelines issued by the bank, to move the WDRC before passing final order. In view of such developments, the order dated July 3, 2019 was communicated by the letter dated January 18, 2020, affording the petitioners an opportunity of presenting their submission, if any, within 15 days. Hence, the respondents argue, there has been no violation of the guidelines and that the principles of Natural Justice have bee....
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....ice, it is submitted, attracts Guideline 2.1.3(d) of the Master Circular and referred to a letter dated January 16, 2018, which had specifically mentioned that it had come to the knowledge of the bank that the office premises mortgaged with the respondent no.1-bank to secure the loan-in-question was already mortgaged by the petitioners to secure other credit facility, which allegation was not dealt with in the reply to the referred letter, dated February 12, 2018. Even the explanation given in the reply to the show cause notice was vague and lacked any viable reasoning and justification. The respondents also allege that the petitioner no.-1 company changed its name and Directors without obtaining any consent/ 'no objection' from the respondent no. 1-bank, as allegedly accepted in the reply of the petitioner no.1 dated February 12, 2018, and did not intimate the changes well in time which, according to the respondents, proves the mala fide action of the petitioners while dealing with respondent no. 1. As to the fourth reason/ground in the show cause notice, the respondents argue that the same is in consonance with Guideline 2.1.3(d) of the Master Circular and that no satisfactory ....
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....no. 1, with a covering letter dated June 29, 2019, served a reply to the show cause notice dated April 6, 2019, beyond the period of 10 days which was granted to the petitioners by the letter dated June 20, 2019. As per the respondents, the petitioner no. 1 wrote another letter dated July 2, 2019, which was received by the WDIC only after commencement of its meeting on the scheduled date, that is, July 3, 2019, seeking postponement of personal hearing for a further period of three weeks on the ground that the borrower committed to make payment of the amount sanctioned under the OTS proposal of March 16, 2015. The petitioner no. 1 apparently sent another letter on July 2, 2019 itself, praying for sanction of One Time Settlement proposal. The above conduct of the petitioners, it is argued, clearly shows the delaying tactics adopted by the petitioners. Next controverting the petitioners' allegation of violation of the principles of Natural Justice, the respondents submit that the minutes of the meeting dated July 3, 2019 by the WDIC recorded the entire series of events as alleged by the respondents and the time for submission of the petitioners' reply was extended twice. The letter....
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....hen the matter has been decided justiciably at the first instance by the first committee, being the WDIC, untainted by bias and/or patent miscarriage of justice. As such, a small window is still open for the borrower to approach this court under its writ jurisdiction, on the above limited grounds. Unless there is a legally tenable first decision, there cannot be any scope of 'review', because the second committee would then be effectively the first committee adjudicating the matter and the two rungs - initial identification as defaulter and subsequent review - as contemplated in the RBI Master Circular mentioned above, would lose all meaning. In the present case, however, there does not appear to be such patent mala fide, arbitrariness, bias or abuse of the process of law by the WDIC as may attract judicial intervention. The fast-track scheme of the relevant legislation and RBI guidelines operating in the field would be frustrated if the courts interfere at the drop of a hat in every case of probable mistake, even if the same requires a thread-bare scrutiny to establish. The declaration of the petitioners as wilful defaulters, in the present case dated July 3, 2019, was backed by ....
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....al hearing. The petitioners deliberately did not avail of those, but chose to rely on technical pivots, like the delay in communication of the decision and non-consideration of their delayed reply. However, enough justification for the purported delay in communication, between the date of the decision (July 3, 2019) and its communication to the petitioners (January 18, 2020), being provided by the pendency of the previous litigation. In any event, there is no statutory bar in late communication, provided sufficient opportunity is given to the borrower before and after the decision to redress any grievance. Such opportunities were afforded to the present petitioners in the instant case. Another question raised by the petitioners is the non-acceptance of the reply to the show cause notice due to delay as, according to the petitioners, there is no statutory time-limit to file such reply. However, the process of declaration of wilful defaulter is not a mechanical process where the WDIC has no power to restrict the time for giving such reply. In fact, in the present case, more than sufficient time was granted to the petitioners, acceding to their request for inspection of documents as....
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.... before the review committee, and consideration by the committee, on all legal and factual grievances of the borrower relating to the decision of the WDIC. Such remedy was open to the petitioners all along, but they chose to opt for another writ petition, being the present one, which would obviously procrastinate the possible declaration of wilful defaulter inordinately. In the Whirlpool Corporation case (supra), the Supreme Court reiterated the principle that the jurisdiction of the High Court in entertaining a writ petition under Article 226 of the Constitution, in spite of the alternative statutory remedies, is not affected, especially in a case where the authority against whom the writ is filed is shown to have had no jurisdiction or had purported to usurp jurisdiction without any legal foundation. It was found in the facts of the said case, which was primarily on the Trade and Merchandise Marks Act, 1958, that the concerned High Court was not justified in dismissing the writ petition at the initial stage without examining the contention that the show-cause notice issued to the appellant therein was wholly without jurisdiction and that the Registrar, in the circumstances of th....
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....ons of the two committees - identification and review - are not concurrent but distinct from each other. Hence the ratio of Whirlpool Corporation (supra) cannot be blindly applied in the present case. With regard to the question of jurisdiction of the writ court vis-à-vis Whirlpool (supra), in the present case the two committees-in-question had different functions and fields of operation and there was no jurisdictional error, at least of such gravity that the powers of this court under Article 226 of the Constitution can be liberally exercised. None of the tests laid down in Whirlpool Corporation (supra) , for the writ court to interfere, is satisfied in the case at hand. As regards the co-ordinate bench judgment of this court in East India Laminates (P) Ltd. & Anr. (supra), the learned Single Judge dealt with Section 13 (3A) of The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, (SARFAESI Act), 2002 and allied provisions. In the cited matter, the writ petitioners had given a detailed representation in response to the bank's notice under Section 13 (2) of the SARFAESI Act, to which a cryptic reply was sent by the bank, withou....
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....the petitioners, not only for personal hearing but for submitting their defence to the allegations made in the show cause notice in the present case, but the petitioners went on a dilatory spiral instead of addressing the issues and/or presenting the relevant documents before the identification committee at the first instance, and thereafter before the review committee, to meet the allegations against the petitioners. As far as the allegations are concerned, those were sufficiently justified in the context and as reflected in the impugned decision declaring the petitioners wilful defaulters. Although the representation of the petitioners was submitted much beyond even the extended time, the essence of the same was, in fact, dealt with in the order of the WDIC dated July 3, 2019. For the initial declaration of wilful defaulter, reasonable satisfaction of the identification committee is sufficient. In the present case, the direct re-routing of the petitioners' loan to SREI instead of channelizing the same through the respondent no.1bank was contrary to the terms of sanction. Even the terms of the sanction letter for the loan-in-question, dated November 20, 2009 borne out the purpos....