2013 (8) TMI 547 - HC - Indian Laws

Benefit of Rehabilitation Scheme - Writ of Mandamus - granting assistance and lending to micro, small and medium enterprises - Held that - There was serious dispute with regard to fulfillment of the condition for seeking benefit of the circular in question it was not appropriate for the Court to issue any mandamus - For issuing the mandamus and commanding the respondents to give effect to the rehabilitation scheme - the Court had to be satisfied that the pre-conditions stipulated for applicability of the circular or scheme were fulfilled. Conditions for Sick unit - When can a unit be considered as sick unit - a unit was considered as sick when any of the borrowal account of the unit remains substandard for more than 6 months or there was erosion in the net worth due to accumulated cash losses to the extent of 50% of its net worth from the documents and material available on record it was clear that the condition was fulfilled - The unit had been in commercial production for at least two years Central Bank of India Vs. Ravindra and others 2001 (10) TMI 1065 - SUPREME COURT OF INDIA . Matter Sub-judice - Disputed question of facts The Debt Recovery Tribunal is a forum where a detailed enquiry and trial can be held and after recording of evidence and cross examination the tribunal would in a better position to decide the questions of fact which are in dispute by recording a finding with regard to the unit being in commercial production for two years or not - The matter was already sub-judice before the Debt Recovery Tribunal where the dispute in question can be more appropriately dealt with it was not appropriate for the Court to interfere in the matter the Debt Recovery Tribunal comes to the conclusion that the requirements of the Master Circular were fulfilled, the Debt Recovery Tribunal can issue direction for grating benefit to the petitioner as per the scheme or circular of the Reserve Bank of India Decided against petitioner.

Issues Involved:
1. Entitlement of the petitioner to the benefits of the rehabilitation scheme as per the Master Circular dated July 1, 2010.
2. Fulfillment of the conditions stipulated in the Master Circular for declaring the petitioner's unit as a sick industry.
3. Jurisdiction of the High Court to issue a mandamus for enforcing the Master Circular.
4. Appropriateness of the High Court's interference given the disputed facts and pending proceedings before the Debt Recovery Tribunal (DRT).

Detailed Analysis:

1. Entitlement to Rehabilitation Benefits:
The petitioner challenged the respondents' action in not granting the benefits of the rehabilitation scheme as per the Master Circular dated July 1, 2010, issued by the Reserve Bank of India (RBI). The petitioner sought relief for the extension of benefits under the said circular and other connected benefits flowing from the Act of 2006 and other regulations. The petitioner claimed that despite fulfilling the conditions for being declared a sick industry, the respondents failed to provide the necessary rehabilitation benefits.

2. Fulfillment of Conditions for Sick Industry:
The petitioner's establishment faced significant losses, leading to the erosion of capital by more than 50%, and defaulted on its financial commitments. The petitioner argued that it met the criteria under Clause 3.5.1 of the Industrial Policy 2010 and Clause 4.6 of the Master Circular, which defines a sick industry. The petitioner contended that it had been in commercial production for at least two years, a requirement for availing the rehabilitation benefits. However, the respondents refuted this claim, stating that the petitioner had not been in commercial production for the stipulated period, as evidenced by inspection reports and other documents showing production ceased since August 2009.

3. Jurisdiction to Issue Mandamus:
The court examined whether it had the jurisdiction to issue a mandamus for enforcing the Master Circular. The Constitution Bench of the Supreme Court in Central Bank of India Vs. Ravindra and others held that directives and circulars issued by the RBI have statutory flavor, and non-compliance is punishable under Section 46(4) of the Banking Regulation Act, 1949. The court acknowledged that a mandamus could be issued for enforcing the Master Circular, referencing the Supreme Court's judgment in Sardar Associates and others Vs. Punjab & Sind Bank and others, which upheld this principle.

4. Appropriateness of High Court's Interference:
The court noted that there was a serious dispute regarding the fulfillment of the condition that the unit had been in commercial production for two years. The inspection report and other documents submitted by the respondents contradicted the petitioner's claims. Given the disputed facts and the ongoing proceedings before the Debt Recovery Tribunal (DRT), the court deemed it inappropriate to issue a mandamus. The court suggested that the petitioner could raise a counterclaim before the DRT, where a detailed inquiry and trial could be conducted to resolve the factual disputes.

Conclusion:
The High Court concluded that due to the serious dispute over the fulfillment of the conditions for the rehabilitation scheme and the ongoing proceedings before the DRT, it was not appropriate to interfere. The court directed the petitioner to raise a counterclaim before the DRT, which could then conduct an inquiry and decide on the relief sought by the petitioner. The petition was disposed of with these directions.

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