IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 16TH DAY OF AUGUST, 2019 BEFORE THE HON' BLE MR. JUSTICE B. VEERAPPA WRIT PETITION Nos.42018/2015 AND 42020/2015 C/W WRIT PETITION Nos.41153-41154/2015(GM-RES) WP Nos. 42018/15 & 42020/2015 BETWEEN:
1. FLAVOURS & ESSENCES PVT. LTD., A COMPANY REGISTERED UNDER, THE COMPANIES ACT, 1956 HAVING ITS REGISTERED OFFICE AT 10TH KM, HUNSUR ROAD, BELAVADI, MYSORE-570018.
REPRESENTED BY ITS MANAGING DIRECTOR MR. E. J. COELHO, 2. MR. E. J. COELHO, SON OF LATE G. J. COELHO, AGED ABOUT 73 YEARS, NO.1/22A, SILVER ESTATES GUDALUR-643211.
3. MR. A.J. COELHO, SON OF LATE G.J. COELHO, AGED ABOUT 77 YEARS, NO.1/22A, SILVER ESTATES, GUDALUR 643211.
... PETITIONERS (BY SRI M. A. RAJENDRA, ADVOCATE FOR P1 & P2;
VIDE ORDER DATED 7.1.2019 WP AGAINST P3 IS ABATED) AND:
1. THE SECRETARY, WILFUL DEFAULTER IDENTIFICATION COMMITTEE, STATE BANK OF INDIA, I FLOOR, MADAM CAMA RAOD, NARIMAN POINT, MUMBAI-400021.
2. STATE BANK OF INDIA COMMERCIAL BRANCH NO.7/3, MRN SIGNATURE, VISHWAMANAVA DOUBLE ROAD, SARASWATHIPURAM, MYSORE-570009. REPRESENTED BY ITS ASSITANT GENERAL MANAGER.
... RESPONDENTS (BY SRI H. R. KATTI, ADVOCATE FOR R1; SRI VENKAT NARAYAN, ADVOCATE FOR SRI MADHUKAR DESHPANDE, ADVOCATE FOR R2) …… THESE WRIT PETITIONS ARE FILED UNDER ARTICLES 226 & 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE THREE SHOW CAUSE NOTICES BEARING NO.WXIC/RM/1099, NO.WDIC/RM/1100 & NO.WDIC/RM/ 1101 ALL DATED 27.8.2015 ISSUED BY R-1 HEREIN (ANNEXURE-U, V & W).
WP Nos. 41153-41154/15 BETWEEN:
1. SILVER CLOUD ESTATES PVT.LTD A COMPANY REGISTERED UNDER THE COMPANIES ACT, 1956 HAVING ITS REGISTERED OFFICE NO.1/22A, SILVER ESTATES, GUDALUR 643211.
REPRESENTED BY ITS MANAGING DIRECTOR, MR. E.J. COELHO 2. MR.E.J. COELHO SON OF LATE G.J. COELHO, AGED ABOUT 73 YEARS, NO.1/22, SILVER ESTATES, GUDALUR 643211.
3. MR. A.J. COELHO, SON OF LATE G.J. COELHO, AGED ABOUT 77 YEARS, NO.1/22A, SILVER ESTATES, GUDALUR 643211 ... PETITIONERS (BY SRI M. A. RAJENDRA, ADVOCATE FOR P1 & P2;
VIDE ORDER DATED 7.1.2019 WP AGAINST P3 IS ABATED) AND;
1. THE SECRETARY WILFUL DEFAULTER IDENTIFICATION COMMITTEE, STATE BANK OF INDIA, STATE BANK BHAWAN, SAMG DEPT, I FLOOR, MADAM CAMA ROAD, NARIMAN POINT, MUMBAI 400021.
2. STATE BANK OF INDIA COMMERCIAL BRANCH NO.7/3, MRN SIGNATURE VISHWAMANAVA DOUBLE ROAD, SARASWATHIPURAM, MYSORE 570009.
REPRESENTED BY ITS ASSISTANT GENERAL MANAGER ... RESPONDENTS (BY SRI H.R. KATTI, ADVOCATE FOR R1; SRI VENKAT NARAYAN, ADVOCATE FOR SRI MADHUKAR DESHPANDE, ADVOCATE FOR R2) **** THESE WRIT PETITIONS ARE FILED UNDER ARTICLES 226 & 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE THREE SHOW CAUSE NOTICES DATED 27.8.2015 ISSUED BY RESPONDENT-1 HEREIN (ANNEXURES - U,V & W).
THESE WRIT PETITIONS COMING ON FOR PRELIMINARY HEARING IN ‘B’ GROUP THIS DAY, THE COURT MADE THE FOLLOWING:
ORDER All these writ petitions are filed seeking to quash the show cause notices bearing Nos.WDIC/RM/1099, WDIC/RM/1100 and WDIC/RM/1101 all dated 27.08.2015 issued by the first respondent as per Annexures-U, V and W and for a writ of mandamus directing the respondent to consider as to the eligibility of the petitioners in terms of SBI OTS scheme 2012 as per the directions issued by this Court in W.P. No.6707/ 2013 dated 09.04.2015.
2. It is the case of the petitioners that the first petitioner is a Company engaged in the business of manufacturing, processing, extract, distil oleoresins, essential oils, flavours, essences and aromatics either natural or derives and other products. The other petitioners are the Directors of the first petitioner – Firm. The petitioners approached the second respondent to avail loan. Accordingly, loan was sanctioned on 16.03.2016. Later in view of the financial constraints, a revised credit facility was also sanctioned by the bank on 29.09.2007. Similar term loan was also extended by the bank to the sister concern of the petitioner viz., M/s Silver Cloud Estates Private Limited. Having regard to the fact that the entire business of the petitioners is a totally export oriented one and agro based and on account of difficulty in obtaining the raw materials and due to global recession and other factors which were beyond the control of the petitioners, it was unable for the petitioners to clear its dues within the time stipulated and therefore, account of the petitioners was treated as a Non Performing Asset (NPA) as on 30.09.2010. As on the date of declaring the account of the petitioners as NPA, the total outstanding due was `13.22 crores. Thereafter, the respondent bank issued notice dated 14.12.2010 under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, demanding a sum of `14.32 crores. The same was challenged by the petitioners before the Debts Recovery Tribunal in S.A. No.171/2011.
3. The Tribunal, by the Order dated 20.12.2011, directed the petitioners to pay a sum of `35 lakhs on or before 20.12.2011. The petitioners, with an intention to comply with the directions issued by the DRT, brought to sale two of the properties belonging to the petitioners which were situated at Mysuru. Since the petitioners were unable to find prospective buyers within the time stipulated by the DRT and the bank was initiating steps to take possession of the properties, the petitioners were constrained to approach this Court in W.P.No.782/2012. This Court, by the Order dated 06.01.2012, stayed all further proceedings pursuant to the Order passed by the DRT. Subsequently, the bank issued one more notice on 30.07.2012 denying the benefit of SBI OTS scheme 2012 to the petitioners, which was subject matter of W.P.No.6707/2013. This Court, after hearing both the parties, by the Order dated 09.04.2015, disposed off the writ petition by setting aside the communication dated 30.07.2012 issued by the bank and directed the bank to reconsider the entitlement of the petitioners to the One Time Settlement as per OTS Scheme 2012, after providing an opportunity of hearing to the petitioners, within a period of three months from the date of the Order. When things stood thus, respondent No.1-The Secretary, Willful Defaulter Identification Committee, issued three show cause notices vide Annexures-U, V and W. Against the said show cause notices, the present writ petitions are filed.
4. This Court, while issuing notice to the respondent on 30.09.2015, granted stay as prayed for. Till today, respondent bank has not filed an application for vacating the stay.
5. I have heard the learned counsel for the parties to the lis.
6. Sri M.A.Rajendra, learned counsel for the petitioners contended that the impugned show cause notices issued by the second respondent is in utter violation of the Order passed by this Court in W.P.No. 6707/2013 dated 09.04.2015 and the same cannot be sustained. He further contended that when this Court directed the respondents to reconsider the application of the petitioners under the OTS Scheme 2012 after providing an opportunity of hearing to the petitioners, without considering the claim of the petitioners under the said scheme, the impugned notices issued by the respondents cannot be sustained. He further contended that it is the duty of the second respondent to follow the directions and reconsider the case of the petitioners within three months. The same has not been done by the respondents. Therefore, he sought to allow the writ petitions.
7. Per contra, Sri H.R.Katti, learned counsel for the first respondent and Sri Venkatnarayan, advocate for Sri Madhukar Deshpande, learned counsel for respondent No.2 sought to justify the impugned show cause notices.
8. Learned counsel for the second respondent contended that the very notices are issued by the respondents in pursuance of the directions issued by this Court to consider the claim of the petitioners. Therefore, the present writ petitions filed against the show cause notices are premature and not maintainable. The respondent bank has considered the matter in accordance with law and petitioners were also provided with an opportunity to give explanation in writing even before issuing the show cause notices. Therefore, writ petitions filed are nothing but abuse of process of Court. The petitioners availed working capital term loan from the second respondent and failed to repay the loan amount. Against the order passed by the DRT, petitioners filed W.P.No.782/2012 for extension of time to make payment by modifying the Order passed by the DRT. This Court, by the Orders dated 06.01.2012 stayed the proceedings pursuant to the order passed by the DRT. Thereafter, the bank came up with SBI OTS scheme 2012. Since the petitioners failed to repay the loan amount, the impugned notices were issued. Therefore, he sought to dismiss the writ petitions.
9. Having heard the learned counsel for the parties, it is undisputed fact that the first petitioner is a Company and other petitioners being the Directors, availed loan from the second respondent-Bank. Earlier, proceedings were initiated by the respondent-Bank against the petitioners and that was subject matter of S.A.No.171/2011 before the Debts Recovery Tribunal wherein the petitioners were directed to pay `35 lakhs on or before 20.12.2011. That was subject matter of writ petition in W.P.No.782/2012 and this Court stayed the proceedings pursuant to the order passed by the DRT. The memorandum of writ petitions as well as the statement of objections does not depict as to what happened to W.P. No.782/2012. With the assistance of the Court Officer, it is ascertained that the said writ petition is disposed of on 10.12.2012.
10. It is also not in dispute that the respondent-Bank, by the Order dated 30.07.2012 denied the benefit of SBI OTS 2012 to the petitioners which was subject matter of W.P.No.6707/2013. This Court, after hearing both the parties, by the Order dated 09.04.2015, set-aside the communication dated 30.07.2012 and the matter was remanded to the respondent-Bank for reconsideration, in accordance with SBI OTS Scheme 2012, after affording an opportunity of hearing to the petitioners, within a period of three months. Admittedly, no reconsideration is made. On the contrary, present impugned show cause notices came to be issued on 27.08.2015.
11. It is well settled that the writ petitions filed against show cause notices are not maintainable. It is for the petitioners to show cause by filing objections within the time stipulated. Admittedly, the show cause notices are already stayed by this Court on 30.09.2015 in the present writ petitions. Till today, respondents have not taken steps to get the stay vacated. The matter stands still.
12. It is for the petitioners to file objections to the show cause notices and if such objections are filed within fifteen days, it is for the respondent Nos.1 and 2 to consider the same and pass orders taking into consideration the directions issued by this Court dated 09.04.2015 in W.P.No.6707/2013, wherein this Court has recorded a finding as under:
“3. I find force in the submission made by the learned counsel for the petitioner. It is not stated by the respondent-Bank as to how the petitioner had willfully defaulted in paying the dues to the Bank. Hence, the impugned communication at Annexure-M is unsustainable in law and the matter requires to be reconsidered by the respondent, in accordance with law, after affording an opportunity of hearing to the petitioner. Accordingly, I make the following Order:
The communication dated 30.07.2012 (Annexure-M) insofar as it relates to the petitioner is set-aside. The matter is remitted to the respondent-State Bank of India for reconsideration in accordance with the SBI OTS Scheme-2012 after affording an opportunity of hearing to the petitioner. Having regard to the facts of the case, the respondent-Bank is directed to reconsider the matter expeditiously, and in any event, within three months from today.”
13. Therefore, without adverting to merits and demerits of the contentions urged by learned counsel for both the parties, it is suffice to direct the petitioners to file objections to the show cause notices within fifteen days from the date of receipt of certified copy of this Order. If such objections are filed, it is for the respondent Nos.1 and 2 to consider the same and pass appropriate Orders in the light of directions issued by this Court in W.P.No.6707/2013 dated 09.04.2015, within a period of six weeks therefrom, in accordance with law.
Accordingly, writ petitions are disposed off.
Sd/-
JUDGE kcm