IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 08TH DAY OF JANUARY, 2019 BEFORE THE HON' BLE MR. JUSTICE B. VEERAPPA WRIT PETITION No.8991/2018(GM-RES) BETWEEN:
M/s RAJESH EXPORT LIMITED, A COMPANY REGISTERED UNDER COMAPNIES ACT 1956, HAVING REGISTERED OFFICE AT NO.4, BATAVIA CHAMBERS KUMARA KRUPA ROAD, KUMAR PARK EAST, BANGALORE-560001.
REPRESENTED BY ITS CHAIRMAN / AUTHORIZED SIGNAOTRY Mr. RAJESH J. MEHTA, ... PETITIONER (BY SRI UDAY HOLLA, SENIOR COUNSEL FOR SRI KIRAN S JAVALI, ADVOCATE) AND:
M/s IDBI BANK LIMITED, A COMPANY REGISTERED UNDER COMPANIES ACT 1956, HAVING ITS REGISTERED OFFICE AT IDBI TOWER, WTC COMPLEX, CUFF PARADE, COLABA, MUMBAI-400005.
BRANCH AT SPECIALIZED CORPORATE BRANCH IDBI HOUSE, 58, 2ND FLOOR, MISSION ROAD, BANGALORE-560 002 REPREENTED BY ITS AUTHORIZED SIGNATORY ... RESPONDENT (BY SRI K.G. RAGHAVAN, SENIOR COUNSEL FOR SRI GANAPATHI HEGDE, ADVOCATE ) …… THIS WRIT PETITION IS FILED UNDER ARTICLES 226 & 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE IMPUGNED LETTER DATED 01.02.2018 BEARING NO.IDBI (BL) / MCG / 743 / REL (ANNEXURE-A), AS ILLEGAL AND VOID AND ETC.
THIS WRIT PETITION HAVING BEEN HEARD AND RESERVED FOR ORDERS, COMING ON FOR PRONOUNCEMENT OF ORDERS THIS DAY, THE COURT MADE THE FOLLOWING:
O R D E R The petitioner filed the present writ petition for a writ of certiorari to quash the impugned letter dated 01.02.2018 bearing No.IDBI(BL)/MCG/743/REL, vide Annexure-A, as illegal and void and for a writ of mandamus to direct the respondent to appoint an independent auditor to audit the accounts and arrive at a correct and genuine balance payable by the petitioner to the respondent.
I. FACTS OF THE CASE:
2. It is the case of the petitioner that it is one of the most respected corporate of India and a listed company comprising of several thousand share holders. It has an immaculate track record in its dealings with various banks for more than thirty years and is a winner of several awards from various institutions and Governments for its sterling business performance. The petitioner company has placed huge fixed deposits with various banks in the country. The annual financial report of the petitioner company which is a statutorily audited publicly available document clearly establishes more than satisfactory and sound financial position. The petitioner had a substantial business dealings with the respondent bank for a period of about ten years. During the month of October 2017, the respondent bank, due to its internal situation, was not in a position to provide the required financial service to the petitioner company and hence both the parties mutually decided to terminate the business relationship. Accordingly petitioner company decided to clear off the entire balance due to the respondent bank.
3. It is further case of the petitioner that the Company’s books are statutorily audited and arrived at balance payable to the respondent bank at Rs.79,84,95,986/- as on 17.02.2018. After verifying all the accounts, a qualified Chartered Accountant of the petitioner company, also confirmed the said amount. The petitioner company was immediately ready and willing to make payment of the correct balance of Rs.79,84,95,986/- to the respondent bank to clear all the outstanding balances and close the account. The respondent bank demanded various different balances at different times which are much higher than the actual outstanding balance of Rs.79,84,95,986/-. The respondent bank, by letter dated 11.01.2018 informed the petitioner that the total outstanding balance was Rs.125,60,18,296/-. On 15.02.2018, the respondent bank directed the petitioner to make payment of Rs.178,61,32,115/- failing which severe action would be initiated. On 17.02.2018, the respondent bank informed the petitioner that as per the latest calculation, the total balance payable was Rs.137,22,25,086/-. It clearly indicates that the respondent bank does not have control over it’s accounting system due to which it is demanding different balances at different times even though there has been no transactions between the parties from 01.01.2018 onwards.
4. Therefore, by the letter dated 17.02.2018, the petitioner company communicated to the respondent bank explaining that there was a difference in the balance worked by the respondent bank and the petitioner company and informed the respondent bank that as per the bank, the final balance payable by the petitioner company as on 17.02.2018 was Rs.137,22,25,086/- was incorrect, the genuine and the correct balance payable by the petitioner company was only Rs.79,84,95,986/- and explained in detail the difference in the balance and pointed out the causes for such difference and also indicated that if the differences were set-right then the balances would tally perfectly. The petitioner company further stated that, if the balance was not acceptable by the bank, then the petitioner company was ready and willing to make the entire payment of Rs.137,22,25,086/- (which was the balance as per the calculations of the respondent bank) into the escrow account with Canara Bank and requested the respondent bank to appoint a competent and independent auditor to scrutinize the entries of difference and arrive at the correct and genuine balance which would be paid to the respondent bank from the escrow account.
5. In the alternative, the petitioner company also proposed to make an immediate payment of Rs.79,84,95,986/- to the respondent bank and make the payment of difference amount of Rs.57,37,29,100/- into the escrow account of Canara bank. After the report of the independent auditor the differential amount if any could be transferred to the respondent bank from the escrow account. The Canara bank accepted to open an escrow account. The petitioner further informed the respondent bank that the action taken by the respondent bank in categorizing the account of the petitioner company as SMAI, SMAII and NPA was incorrect and illegal because this was not a case of default and petitioner company had never refused to make the payment of the balance amount to the respondent bank. It was the bank which was illegally demanding more payment than what was due to it.
6. Inspite of the said request, the respondent bank did not agree to appoint an independent auditor and insisted upon the petitioner company to make payment as per the bank demand and started to categorize the petitioner company as SMAI, SMAII and NPA, while demanding payment as per its workings and ultimately, the respondent bank, by the impugned letter dated 01.02.2018, held that the petitioner account had been slipped into NPA category and further advised the petitioner to clear the dues payable to the respondent bank forthwith, failing which the bank will be constrained to initiate suitable recovery measures against the petitioner company and also against the security providers. Therefore, the petitioner is before this Court for the relief sought for.
II. OBJECTIONS FILED BY THE RESPONDENT 7. The respondent filed objections to the main writ petition and sought to justify the impugned letter dated 01.12.2018 and contended that the very writ petition filed by the petitioner is pre-mature and petitioner is not entitled to any relief sought for. The dispute is contractual relationship between the parties and there is no public element or right involved in the writ petition. Therefore, the writ petition filed under Articles 226 and 227 of the Constitution of India to enforce the contractual right is not maintainable and is liable to be dismissed. It is further contended that the petitioner and the respondent entered into a Facility Agreement dated 25.03.2009 whereunder the respondent inter-alia sanctioned Working Capital Facilities to a tune of Rs.1900 crores in favour of the petitioner with break-up of each facility as described in the sanction letter. On the same day, the petitioner executed a Omnibus Counter Guarantee Agreement in favour of the respondent inter alia irrevocably and unconditionally agreeing and undertaking to indemnify and cause harmless to respondent against any cost/ claim/claims or loss/ damage etc. Again on 09.07.2016, a sanction letter was issued by the respondent to the petitioner for a facility of Rs.300 crores and same was valid till 01.06.2017. The said working capital facilities have not been renewed thereafter by the respondent.
8. It is further contended that on 01.02.2017, the respondent issued letter to the petitioner inter alia mentioning the details of facilities availed by the petitioner from the respondent, continuing defaults in respect of discounted export bill and TCBG, the extent of liability thereunder and advised the petitioner to make arrangements for repayment of all the outstanding dues along with interest charges and other monies etc. On 05.12.2017, Canara bank issued a letter to the petitioner inter alia advising the latter to regularize the accounts with the respondent bank. Despite issuance of the said letter, the petitioner did not regularize the accounts. Therefore, respondent bank issued another letter dated 19.12.2017 inter alia requesting the petitioner to clear the dues under the credit facilities to IDBI bank along with interest, charges and other monies as applicable, immediately. In response to the said letter, petitioner issued a letter dated 20.12.2017 suiting its convenience, furnished false and incorrect calculations of the amounts due and claimed that the petitioner is liable in a sum of INR 56,73,76,202/-. The respondent sent a reply dated 30.12.2017 denying the contentions which were raised in the petitioner’s letter and explained the correct position.
9. Thereafter, petitioner issued another letter dated 30.01.2018 to the respondent without referring the respondent’s response dated 30.12.2017. Therefore, respondent sent e-mail dated 05.01.2018 informing the petitioner that the petitioner’s account has been classified as SMA-2 (Special Mention Account) and that the petitioner’s instructions to liquidate its fixed deposits without any penal clause or reduction of interest and credit OD account with the proceeds could not be agreed to, because the same was conditional in nature and advised the petitioner to submit unconditional FD closure letters to enable the respondent to process the premature closure/ liquidation of the FDs. By the said e-mail, the petitioner was also informed that no liquidation/closure of FDs would be possible retrospectively and that the closure shall be done effective the date of receipt of such unconditional FD closure letter. After several correspondences, finally, the respondent issued the impugned letter dated 01.12.2018 informing the petitioner that its account slipped into NPA. The same is in accordance with law. The petitioner is not entitled to any relief before this Court. Therefore, sought for dismissal of the writ petition.
III. Arguments advanced by the learned counsel for the parties 10. I have heard the learned Senior Counsel for the parties to the lis.
11. Sri Udaya Holla, learned Senior Counsel appearing for the petitioner contended that the impugned letter/ communication issued by the respondent is without assigning any valid reasons and is in utter violation of the principles of the natural justice which deserves to be interfered with as the same is a non speaking communication. The respondent bank is demanding payment of hugely different balances in its communication establishing that the bank is not consistent with its amounting, hence, correct balance is required to be worked out by independent competent entity, which request being fair, ought to have been accepted by the respondent. He further contended that the respondent bank is misusing its dominant position and being bestowed with legislative powers and is arm twisting the petitioner company to accept incorrect balance as dictated by respondent bank by misusing and abusing the powers bestowed upon it.
12. He further contended that the respondent bank has totally ignored the detailed balance statement provided by the petitioner company and has not given any credence to the correct and genuine balance worked out by the petitioner company. No reasons were given to say that accounts of the petitioner company was incorrect. The silence on the part of the respondent clearly reveals acceptance of the petitioner’s stance. The action taken by the respondent bank against the petitioner based on wrong and incorrect balance worked out by the respondent bank and declaring the petitioner company as defaulter by classifying the petitioner company as SMAI, SMAII and NPA based on incorrect balance is totally illegal, hasty and without jurisdiction and requires to be set-aside.
13. The learned Senior Counsel further contended that the balance as per Annexure-B was Rs.79,84,95,986/-. According to the respondent, balance payable by the petitioner as on 01.01.2018 is Rs.125,60,18,294/-. It is fabricated document and the amount claimed by the bank under different letters on different dates clearly indicate that the respondent bank does not have control over its account system due to which it is demanding different balances at different times. Therefore, he sought to allow the writ petition by quashing the impugned communication/letter.
14. In support of his contentions, leanred Senior Counsel, relied upon the following judgments.
(i) ABL International Ltd. and others vs. Export Credit Guarantee Corporation of India Ltd. and others reported in (2005)10 SCC 495, paragraphs 19, 27, 29, 30-with regard to maintainability of the writ petition (ii) Sushila Chemicals Private Limited and another vs. Bharat Coking Coal Limited and others reported in (2010)10 SCC 388, paragraph 20.
15. Per contra, Sri K.G.Raghavan, learned Senior Counsel for the respondent sought to justify the impugned action of the respondent and contended that Annexure-C dated 11.01.2018 produced by the petitioner is fabricated in view of Annexure-R15. The writ petition filed against the impugned communication is pre-mature. Annexure-A is issued in pursuance of the contractual transaction between the parties. The writ petition filed to enforce the contractual obligation is not maintainable and liable to be rejected. He further contended that in terms of the memo filed by the respondent dated 09.04.2018 the dispute between the petitioner and respondent is as to the quantum of payment of Rs.57,34,03,550/- as on 17.02.2018. According to the respondent, as on 17.02.2018, the amount due by the petitioner was Rs.137.22,25,086.29 as per Annexure R-27 and further contended that in view of the memo filed with regard to disputes of the year 2013 and 2017, it is clear that the dispute between the parties is not at all accounting disputes but they are transactional disputes. Therefore, petitioner is not entitled to any relief as sought for and hence, sought to dismiss the writ petition.
16. In support of his contentions, learned Senior Counsel relied upon the following judgments:
(i) State of Kerala and others vs. M.K.Jose, reported in (2015)9 SCC 433- paragraphs 7, 8, 11, 12, 13, 20, 21, with regard to maintainability of writ petition in contractual matters and disputed question of fact.
(ii) Unreported judgment of the Hon’ble Supreme Court in the case of Roshina T vs. Abdul Azeez K.T. and others in Civil Appeal No.11759/2018 dated 03.12.2018.
IV. CONSIDERATION 17. Having heard the learned counsel for the parties, it is undisputed fact that there is business dealings between the petitioner and respondent for the last ten years, as admitted by the petitioner. The dispute between the parties is with regard to calculation of differential amount payable by the petitioner to the respondent. According to the petitioner, the balance amount payable is Rs.79,84,95,986/-. But according to the respondent bank, as per the latest calculation dated 17.02.2018, the amount payable by the petitioner is Rs.137,22,25,086/-. It is not in dispute that the petitioner in para-8 of the writ petition, in categorical terms stated that as per Annexure-D, petitioner Company had pointed out the item wise difference and requested the respondent bank to accept Rs.79,84,95,986/- and close the account and further stated that, if balance was not acceptable to the bank, then the petitioner company was ready and willing to make entire payment of Rs.137,22,25,086/- (which was the balance payable as per the calculations of the respondent bank) into an escrow account with Canara bank and requested the respondent bank to appoint a competent and independent auditor to scrutinize the entries of difference and arrive at a correct and genuine balance which would be paid to the respondent bank from the escrow account. Altenratively, the petitioner also proposed to make an immediate payment of Rs.79,84,95,986/- to the respondent bank and make the payment of difference amount of Rs.57,37,29,100/- into the escrow account of Canara Bank. After the report of independent auditor the differential amount if any could be transferred to the respondent bank from the escrow account.
18. It is an admitted fact that in terms of the order passed by this Court on 29.05.2018, the respondent bank was permitted to encash Rs.79 crores which is in escrow account at Canara Bank, M.G.Road Branch, Bengaluru. Further, this Court, by the order dated 06.06.2018, recorded the submission made by Sri K.G. Raghavan, learned Senior Counsel for the respondent that pursuant to the order dated 29.05.2018, the Canara Bank, M.G.Road Branch, Bengaluru, has transferred a sum of Rs.79 crores to the account of the respondent bank. This Court, by the order dated 12.07.2018 recorded the submission made by Sri Udaya Holla, learned Senior Counsel for the petitioner that the petitioner had no objection if the respondent bank encash the amount of Rs.463 crores kept in fixed deposit with it. In the light of the said submission, this Court ordered that the sum of Rs.463 crores kept in fixed deposit by the petitioner with the respondent bank be appropriated by the respondent bank towards petitioner’s loan account including interest accrued on the said fixed deposit. Now, the issue is whether the petitioner is liable to pay to the respondent a sum of Rs.58 crores which is in escrow account of the Canara Bank and it clearly indicates that the dispute between the parties is in respect of Rs.58 crores with interest.
19. Though the learned Senior Counsel for the parties vehemently disputed the amount mentioned by the petitioner Company and the respondent bank, the fact remains that there is business transaction between the parties and differences between the parties with regard to amount payable by the petitioner to the respondent bank. The amount payable by the petitioner to the respondent is not in dispute. The dispute is only as to what is the amount payable by the petitioner to the respondent.
20. In view of the orders passed by this Court dated 29.05.2018, 06.06.2018 and 12.06.2018 and in the interest of justice to both the parties, it is suffice to direct the petitioner to open an escrow account in the respondent Bank for the differential amount of Rs.58 crores with interest within a period of one month from the date of receipt of certified copy of this order, subject to the condition that the respondent bank shall not treat the petitioner company as NPA and not draw any amount deposited in the escrow account including interest and appoint any competent/ independent auditor to scrutinize the entries and arrive at a correct conclusion with regard to the amount payable by the petitioner to the respondent. Further, the respondent bank shall not take coercive steps against the petitioner.
21. In view of the aforesaid reasons and the admitted facts between the parties, the judgments relied upon by the learned Senior Counsel for both the parties, are not applicable to the facts and circumstances of the present case.
V. CONCLUSION 22. The communication of the respondent as per Annexure-A dated 01.02.2018, placing the petitioner company’s account in NPA category and initiating suitable recovery measures against the petitioner and the security providers available as per contracts, shall be kept in abeyance till a decision is arrived in the proceedings to be initiated by the respondent bank either before the competent authority or after appointing any competent or independent arbitrator to scrutinize the entries of both the parties and arrive at a correct conclusion about the amount payable by the petitioner. The petitioner also accepts in categorical terms in the writ petition that after report of independent auditor or authority, the differential amount, if any, would be transferred to the respondent bank from the escrow account.
23. In view of the above, writ petition is disposed of. with the following directions:
(i) The impugned letter/communication dated 01.02.2018 bearing No.IDBI(BL)/MCG/743/REL, vide Annexure-A, issued by the respondent shall be kept in abeyance, subject to the condition that the petitioner shall open an escrow account in the respondent bank for the disputed amount of Rs.58 crores with interest, within a period of one month from the date of receipt of certified copy of this order.
(ii) The respondent bank shall not treat the petitioner account as NPA and not draw any amount including interest from the escrow account to be opened by the petitioner with the respondent bank till the respondent either appoint an independent auditor to audit the accounts and arrive at a conclusion or approach the competent Tribunal to determine the genuine balance payable by the petitioner to the respondent bank and a report/ order is obtained in that regard.
(iii) Till such determination to be made either by the independent auditor to be appointed by the respondent bank or determination to be made by the Tribunal, the respondent bank shall not take any coercive steps against the petitioner.
Ordered accordingly.
Sd/- JUDGE kcm