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2022 (8) TMI 1560 - HC - Indian Laws'State' under Article 12 of the Constitution - Challenge to Letters whereby all credit facilities extended to him have been recalled - challenge to the consequent SARFAESI Notice at Annexure-L - defaults committed by the petitioner eventually resulting into its debt being classified as non performing asset . 'State' under Article 12 of the Constitution - HELD THAT - When the preliminary issue as to maintainability of the Writ Petition is raised, what needs to be examined is not invariably the status of answering respondent as State or its instrumentality but the essential nature of its action called in question. Since the enactment of the Constitution, our system has moved from the formality of status of an entity to the substance of its function , while adjudging the claim for writ remedies. In other words, even if the respondent Bank answers the description of other authorities under article 12, that per se may not justify invocation of constitutional jurisdiction - The Scheme does not exclude the exercise of Bankers Prudence which as of necessity avails in a reasonable measure while making commercial decisions of the kind. Banks handle public money as trustees and therefore, consistent with public trust norms they should be allowed to take certain decisions as would prove prudent in the given circumstances - Though petitioner may be right in saying that the ECLGS Loan Scheme answers the generic definition of law given under Article 13(3) of the Constitution still that does not advance his case inasmuch as the same is not put in challenge as being repugnant to Part III Rights. On the contrary, petitioner wants to found right to relief on the basis of said scheme. Customer's duty to the bank - HELD THAT - The Apex Court in PRADEEP KUMAR vs. POST MASTER GENERAL 2022 (3) TMI 1 - SUPREME COURT observed that ' The Privy Council parted company with the observation by the Court of Appeal here and repelled the plea that it was necessary to imply into a contract between a banker and the customer a wider duty and that it was not a necessary incident of banker/customer relationship that the customer should owe his banker a wider duty of care. This duty is in the form of an undertaking by the customer to exercise reasonable care in executing his written orders so as not to mislead the bank or to facilitate forgery. The Privy Council accepted that an obligation should be read into the contract as the nature of this contract implicitly requires. In other words the term sought to be implied must be one without which the whole transaction would become futile and inefficacious.' Culpable conduct of borrower qua the bank - HELD THAT - Petitioner s challenge to the arbitral award at the hands of Commercial Court having been negatived, presently a further challenge is said to have been pending before a Division Bench of this court, is beside the point. There was a duty owed by the petitioner to the respondent-Bank to disclose about the notice of termination of lease when it had first applied for a huge loan furnishing the said lease deed as one of the securities for repayment; it also owed the duty to disclose this when it was availing the said additional credit facility when already there was an arbitral award. However clandestinely withheld that crucial information from the bank. Banker's prudence and husbanding its funds - HELD THAT - Petitioner is not a peasant or a petty farmer who has availed some frugal loans for mitigating the hardships of life. It is an incorporated company purporting to be worth crores of rupees. Its Managing Director other Directors have participated in contracting the loans in hundreds of crores of rupees. A customer owes to the Bank a duty to disclose all facts and circumstances that would in the ordinary course of business figure in the decision making process as to the intended loan transaction. This duty becomes more pronounced when such transactions involve huge loans liabilities. A perusal of the petition papers leaves no manner of doubt as to clandestine failure on the part of borrower in discharging this duty, to say the least - the impugned action of the lender Bank cannot be said to be vulnerable for challenge in writ jurisdiction. Emergency credit loan guarantee scheme and banker's prerogative - HELD THAT - The ECLG scheme promulgated by the Central Government which the petitioner s counsel heavily banked upon in support of his case, at its guideline 18 (xiv) imposes an obligation on the lender bank to secure its interest by taking all reasonable measures - When the lender Banks in given facts circumstances of the case take a decision as dictated by the prudence, for abruptly recalling the credit facilities, it is not for the courts to sit in appeal over their wisdom. Writ Courts neither have means nor the expertise to re-evaluate the prudential decisions of the Banks that are made in the ordinary course of their commercial transactions with accumulated wisdom in the trade. Culpable conduct of petitioner qua the bank - The Apex Court time and again has warned that the cases of unscrupulous litigants should be thrown out at the threshold vide S.P.CHENGALVARAYA NAIDU (DEAD) BY LRS vs. JAGANNATH (DEAD) BY LRS 1993 (10) TMI 315 - SUPREME COURT . Petitioner has suppressed about the availability of alternate remedy in law. The petitioner seeks to call in question the Notice issued u/s 13(2) of the SARFAESI Act, 2002. There is an alternate and more efficacious relief availing to the borrower/noticee for doing this, by invoking remedial provisions of the Act. Writ remedy is not the panacea for all such arguable legal injuries - No extraordinary circumstances are demonstrated from the records despite vociferous submissions of petitioners counsel warranting grant of relief in constitutional jurisdiction. Conclusion - i) Though petitioner may be right in saying that the ECLGS Loan Scheme answers the generic definition of law given under Article 13(3) of the Constitution still that does not advance his case inasmuch as the same is not put in challenge as being repugnant to Part III Rights. ii) The petitioner's non-disclosure constitutes a breach of the contractual relationship with the bank. iii) The petitioner's claims of innocence and lack of intent to deceive are dismissed. iv) The impugned action of the lender Bank cannot be said to be vulnerable for challenge in writ jurisdiction. v) Writ Courts neither have means nor the expertise to re-evaluate the prudential decisions of the Banks that are made in the ordinary course of their commercial transactions with accumulated wisdom in the trade. vi) No extraordinary circumstances are demonstrated from the records despite vociferous submissions of petitioners counsel warranting grant of relief in constitutional jurisdiction. 1. ISSUES PRESENTED and CONSIDERED The core legal questions considered in the judgment are:
2. ISSUE-WISE DETAILED ANALYSIS A. AS TO RESPONDENT BANK NOT BEING 'STATE' UNDER ARTICLE 12:
B. AS TO CUSTOMER'S DUTY TO THE BANK:
C. AS TO CULPABLE CONDUCT OF BORROWER QUA THE BANK:
D. AS TO BANKER'S PRUDENCE AND HUSBANDING ITS FUNDS:
E. AS TO EMERGENCY CREDIT LOAN GUARANTEE SCHEME AND BANKER'S PREROGATIVE:
F. AS TO CULPABLE CONDUCT OF PETITIONER QUA THE COURT:
3. SIGNIFICANT HOLDINGS
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