Hon. Anil Kumar Sharma,J.
(Delivered by Hon.Tarun Agarwala,J.) The petitioners have prayed for the quashing of the order dated 11.12.2013 passed by the Assistant General Manager, State Bank of India rejecting the petitioners' application for restructuring the Cash Credit Limit. The petitioners have also prayed for a writ of mandamus commanding the State Bank of India to restructure the Cash Credit Limit and grant concessionary rate of interest, as per the guidelines issued by the Reserve Bank of India and circulars issued by the State Bank of India from time to time.
The facts leading to the writ petition is, that the petitioners' Company is a Private Limited Company incorporated under the Indian Companies Act and is engaged in the business of distribution of Mico Bosch automobile parts, Reliance Handset and recharge vouchers. It transpires that the Bank sanctioned a Cash Credit Limit to the tune of Rs. 156.00 lacs in August, 2006 for the purpose of meeting the working capital requirements of the company under the "Trader Easy Loan Scheme" floated by the Bank. It is alleged that on account of recession in the automobile and telecommunication industry, the Cash Credit Limit granted by the respondent Bank could not be paid on time and it became irregular in the year 2009. The petitioners made a proposal dated 20.12.2009 for repayment of the Cash Credit Limit in a phased manner. It transpires that the respondent-Bank considered the proposal and issued an order dated 26.04.2010 renewing the Cash Credit Limit by reducing the limit from Rs. 156.00 lacs to Rs.100.00 lacs subject to certain terms and conditions, namely, that the petitioner was required to give an equitable mortgage of a portion of the house and that the release of the title deeds would only be done upon deposit of Rs.56.00 lacs towards the reduction of the Cash Credit Limit. The respondent-Bank also granted permission for letting out the mortgaged premises and assignment of rentals only on deposit of an amount of Rs. 56.00 lacs after taking previous permission from the Bank. The respondents further directed that during the currency of the Bank's credit facilities, the petitioners would not deal with another Bank without taking prior permission from the respondent-Bank and that the petitioners would confine all its banking business with the respondent Bank. The sanction was also subject to a first charge on the profits of the Company towards repayment of the loan and interest accrued thereon. Instead of complying with the terms and conditions mentioned in the sanction letter, the petitioners by means of letter dated 05.05.2010 requested the respondent-Bank to permit them to pay Rs. 56.00 lacs in two years.
It transpires that since the petitioners committed various defaults, the respondent-Bank declared the petitioners' Account as "NPA" on 30.06.2010. The position remained the same for the next two years and it is alleged that in spite of the declaration of petitioners' account as "NPA", the petitioners paid Rs. 1.13 crores to the respondent-Bank between the period from 16.08.2010 to 22.03.2012. The petitioners approached the respondent-Bank again on 26.12.2012 for a loan under "assigned rent". The respondent-Bank by a letter dated 26.02.2013 accepted the proposal of the petitioners indicating that they have no objection to the closure of the Cash Credit Limit with them so long as the entire disbursement given by the subsequent Banks was remitted and credited in the Account of the petitioners operating with the respondent-Bank. It transpires that even this proposal was not accepted and the petitioners filed a fresh proposal for renewal of the existing Cash Credit Limit and for an additional loan of Rs. 35.00 lacs under the "Rent Plus Scheme". The petitioners submitted a representation dated 14.10.2013 for renewal of the Cash Credit Limit and conversion of the interest overdues payable in 36 months at 5% per annum under Debt Restructuring Mechanism. The petitioners contended that their demand is in the light of the circular of the State Bank of India dated 26.04.2012 and RBI guidelines dated 01.07.2011 framed by the Reserve Bank of India. It further transpires that while all these proposals were being sent by the petitioners, the respondent-Bank issued a notice in September, 2013 demanding Rs. 1.07 crores under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. The petitioners, accordingly, filed Writ Petition No. 68288 of 2013, which was disposed of by an order dated 20.11.2013 directing the petitioners to file a fresh application for restructuring of the loan, which would be decided by the Bank. Accordingly, the petitioners filed a fresh application on 27.11.2013 praying that their Cash Credit Limit be restructured, as per RBI guidelines and as per the circulars of the State Bank of India. The request of the petitioners for restructuring of the loan was rejected by an order dated 11.12.2013 on the ground that the proposal was not within the purview of the RBI guidelines or the circulars of the State Bank of India. The respondents found that the petitioners' company was not declared a sick unit and was generating income regularly and that the petitioners' entire business proceeds was being routed through HDFC Bank or South Indian Bank Ltd. in violation of the sanction granted earlier by the respondent-Bank. The respondent-Bank further found that the petitioners were getting a rent of Rs. 1.42 lacs and were going to rent out another portion of the premises without taking permission from the respondent-Bank and that major alterations were taken on the property in which equitable mortgage was created in favour of the respondent-Bank. The respondent-Bank found that the compromise proposal, which was accepted in 2010 was not complied with by the petitioners and the overdues were not paid by the petitioners wilfully and, accordingly, the respondent-Bank did not find it fit to consider the petitioners' application for restructuring of the Cash Credit Limit.
Heard Sri Shashi Nandan, the learned Senior Counsel assisted by Sri Vikram D. Chauhan, the learned counsel appearing for the petitioners and Sri Avinash Chandra Tripathi, the learned counsel appearing for the respondents.
The learned Senior Counsel for the petitioners contended that the application for restructuring the Cash Credit Limit was done in accordance with the RBI guidelines and circular issued by the State Bank of India. The learned counsel further submitted that the RBI guidelines and the SBI circular has statutory force and are binding upon the Bank, which are required to be followed, which in the instant case has not been done, and that, the respondents, in an arbitrary manner rejected the petitioners' request on flimsy ground. The petitioners contended that as per clause 12.1.1 of the RBI guidelines, the petitioners' account was clubbed under the "doubtful" category, and although the respondents have labelled the petitioners as a "wilful defaulter", even then, for such "wilful defaulter", Cash Credit Limit could be restructured as per clause 12.1.5 of the RBI guidelines. The learned Senior Counsel further contended that the findings given in the impugned order that the accounts were opened without taking permission from the Bank or that the premises was let out on a rent without taking permission was wholly erroneous in as much as no such permission or sanction was required from the respondent-Bank nor any permission was required to be taken for major alteration of the premises in question.
On the other hand, Sri Avinash Chandra Tripathi, the learned counsel for the respondent-Bank contended that the request of the petitioners' application for restructuring the loan was considered, as per the RBI guidelines & the SBI circulars and the petitioners' application was not found fit for restructuring the Cash Credit Limit and, was accordingly, rejected. The learned counsel for the respondent-Bank further submitted that the Bank had been very considerate and lenient in the petitioners' case as it renewed the Cash Credit Limit and restructured its Cash Credit Limit with certain conditions, which was not adhered to, nor the amount towards the Cash Credit Limit was cleared within the stipulated period. The learned counsel further contended that instead of complying with the conditions laid down in the sanction letter dated 26.04.2010, the petitioners violated the sanction so granted, by letting out the premises to another Bank and did not route the rent proceeds to the petitioners' Account maintained with the respondent-Bank. Not only that, the petitioners without seeking prior permission, opened another Account with HDFC Bank and all business proceeds and transactions was being done from this Account, which resulted in the declaration of the respondent- Bank as "NPA" Account. The learned counsel further submitted that the petitioners action did not entitle them for any discretionary relief from the writ Court. The learned counsel for the respondent further submitted that the RBI guidelines issued by the Reserve Bank of India and circulars issued by the State Bank of India are only executive instructions and does not have any statutory flavour. In support of his submission, learned counsel has placed reliance upon a decision of the Supreme Court in Oriental Bank of Commerce Vs. Sunder Lal Jain and another, (2008) 2 SCC 280.
Having heard the learned counsel for the petitioners, the Court finds that various parameters have been given in the RBI guidelines, which includes restructuring of the loan of persons, who are categorised under "doubtful" category" or "wilful defaulter". Consequently, the petitioners' application was liable to be considered for restructuring of the loan even if the petitioners was labelled in the "doubtful category" or "wilful defaulter". The Court finds that in spite of an observation being made in the impugned order, the petitioners' application was considered and rejected on merits.
The contention of the respondent, that the RBI guidelines and the circulars issued by the SBI are executive instructions and have no statutory force nor any right is created in favour of the borrowers, is patently erroneous. The question whether the guidelines issued by the RBI is binding or not is concluded by a decision of the Constitution Bench of Supreme Court in Central Bank of India Vs. Ravindra, (2002) 1 SCC 367, wherein the Supreme Court held:
"(5) The power conferred by Sections 21 and 35-A of the Banking Regulation Act, 1949 is coupled with duty to act. Reserve Bank of India is the prime banking institution of the country entrusted with a supervisory role over banking and conferred with the authority of issuing binding directions, having statutory force, in the interest of the public in general and preventing banking affairs from deterioration and prejudice as also to secure the proper management of any banking company generally. Reserve Bank of India is one of the watchdogs of finance and economy of the nation. It is, and it ought to be, aware of all relevant factors, including credit conditions as prevailing, which would invite its policy decisions. RBI has been issuing directions/circulars from time to time which, inter alia, deal with the rate of interest which can be charged and the periods at the end of which rests can be struck doewn, interest calculated thereon and charged and capitalised. It should continue to issue such directives. Its circulars shall bind those who fall within the net of such directives. For such transaction which are not squarely governed by such circulars, the RBI directives may be treated as treated as standards for the purpose of deciding whether the interest charged is excessive, usurious or opposed to public policy."
In the light of the aforesaid decision, judicial discipline mandates this Court to follow the judgment of the Constitution Bench of the Supreme Court.
The Court finds that the proposal of the petitioners for repayment of the amount in a phased manner was accepted and the Cash Credit Limit was reduced in the year 2010, subject to certain terms and conditions. The Court finds that these conditions were not complied with by the petitioners and in fact was misused by them. A specific condition was given that the petitioners will not open any Account in any other Bank without taking previous permission from the respondent-Bank. A specific direction was also issued that the rentals would be assigned to the respondent-Bank. This specific condition was not adhered to by the petitioners and they went ahead with impunity and opened another Account with HDFC and routed their business transactions through this Account. The rentals, which were assigned to the respondent-Bank was also not being deposited in the respondent-Bank and the proceeds were also not been adjusted to clear the Cash Credit Limit. The Court finds strength in the finding given by the respondent-Bank that the volume of transactions conducted by the petitioners from the HDFC Bank was large and voluminous, which was sufficient to regularise the Cash Credit Limit with the respondent-Bank but was not regularised deliberately for vested reasons. Consequently, since the petitioners unit was not a sick unit, the question of restructuring the Cash Credit Limit did not arise. The Court finds that the petitioners have misused the earlier sanction given by the respondent-Bank. The petitioners have not come forward with clean hands. The Supreme Court in M.P.Mittal Vs. State of Haryana and others, AIR 1984 SC 1888 has held that the petitioners must show not only violation of law but must also show equity in his favour. The Supreme Court held that the Court always has the power to refuse to grant any relief especially where the petitioner seeks to invoke the writ jurisdiction in order to secure a dishonest advantage or perpetuate an unjust gain.
The Court in the instant case finds that there is no manifest error in the impugned order, which requires interference in a writ jurisdiction. The Court does not find that any equity exists in favour of the petitioners. Consequently, the Court is not inclined to exercise its discretionary jurisdiction under Article 226 of the Constitution of India. The writ petition fails and is dismissed.
Dated: 07th February, 2014 MAA/-