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2022 (8) TMI 1560

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..... e 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 .....

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..... nterest 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 desp .....

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..... r Bank is represented by its private counsel who has filed the Statement of Objections dated 27.05.2022 opposing the petition. Learned Senior Advocate appearing for the lender Bank, makes submission in justification of the impugned proceedings and the cumulative reasons on which they have been structured. He also seeks dismissal of the Writ Petition on the ground that petitioner has perpetrated sharp practices unbecoming of a scrupulous borrower and a culpable litigant. 3. BRIEF FACTS OF THE CASE: (a) Petitioner, a Private Limited Company is incorporated under the provisions of Companies Act, 1956, with the sole purpose of developing sa hotel namely, 'The Ritz-Carlton-Bangalore', for providing accommodation and worldly services. The Hotel was sought to be established on a property which petitioner had obtained by a registered lease deed dated 11.01.2007 with ARCHDIOCEASE of Bangalore. On the assurances & representations of the petitioner, the third respondent - Bank sanctioned the credit facilities which would include a Term Loan of Rs.291, 00, 00, 000/-, granted in March, 2016. The leasehold rights were furnished by way of security for the repayment coupled with certain personal .....

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..... ds and he has secured reprieve ex parte, without disclosing the true facts. 4. Having heard the learned Counsel for the parties and having perused the petition papers, this Court declines indulgence in the matter for the following reasons: A. AS TO RESPONDENT BANK NOT BEING 'STATE' UNDER ARTICLE 12 : (i) The respondent - Bank, being a private lending agency, apparently does not fit into the term 'other authorities' within the meaning of Article 12 of the Constitution in the light of Apex Court decision in R.D SHETTY vs. INTERNATIONAL AIRPORTS AUTHORITY OF INDIA AIR 1979 SC 1628, as rightly contended by its learned Senior Advocate, Mr. Dhyan Chinnappa. Its business is regulated by the RBI Norms does not ipso facto establish a pervasive control by the RBI or the Central Government, in every activity of business. The response of the Bank to arguably detrimental acts of its borrower, made in the course of its commercial dealings cannot be approximated to an order of a statutory authority, justifying the invocation of remedy at the hands of Writ Court. The principles on which a Bank's response to its customers have to be examined lie in the realm of private law as contradistinguished .....

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..... he 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. Conversely, even if the respondent does not answer the said description, its action may still be susceptible to judicial review should it be animated by sufficient public law elements vide LIC OF INDIA v. ESCORTS INDIA LTD AIR 1986 (1) SCC 264, which is not the case here. Heavy reliance placed by the petitioner on Central Government's Guidelines Emergency Credit Line Guarantee Scheme (hereinafter 'ECLGS') does not much come to its aid, regardless of its arguable statutory origin, to complain before the Writ Court about the impugned action of the Bank. Reasons are not far to s .....

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..... tomer 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" C. AS TO CULPABLE CONDUCT OF BORROWER QUA THE BANK: (i) Mr.Dhyan Chinnappa, learned Sr. Advocate appearing for the lender Bank is right in contending that the petitioner is not a scrupulous borrower entitled to protection at the hands of this Court exercising extraordinary jurisdiction constitutionally vested in it: petitioner had not disclosed to the Bank in March 2016 about the pendency of arbitration proceedings founded on the termination of lease vide notice dated 11.12.2014; in fact, he had furnished the very same lease deed by way of security for the repayment of this huge loan aggregating to .....

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..... ces 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. 'Thou art weighed in the balance and found wanting' aptly applies to the case of petitioner. That being the position, the lender Bank is more than justified in observing in its impugned letter dated 5.2.2021 as under: "Further, even as recently as December 03, 2020, you had approached the Bank for sanction of additional credit facilities under Guaranteed Emergency Credit Line (GECL) scheme. However, even at such time, you did not inform the Bank of any Arbitration Award, let alone the Arbitration Award, which we became aware of only after receipt of the letter from the Land owner. This reaffirms an intent to withhold materially critical information with a view to extract incremental facilities from Bank. Further, if the lease was indeed terminated on December 11, 2014, it is clear that the Borrower, from the very ince .....

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..... nk is apparently malafide, even a wrong decision taken by it cannot be interfered. (iv) It is not for the Court or a third party to substitute it's decision howsoever prudent or business like it may be, for the decision of the Bank; in commercial matters, the Courts do not risk their judgments for the judgments of the bodies to which that task is assigned; a Public Sector Bank or a Financial Institution cannot wait indefinitely to recover its dues; the fairness required of the Bank cannot be carried to the extent of disabling it from recovering what is due; in matters of loan transactions, fairness cannot be a one-way street; both the Bank & the borrower have to be equally fair to each other ..." F. AS TO CULPABLE CONDUCT OF PETITIONER QUA THE COURT: (i) Petitioner had secured an ex parte interim order without disclosing certain material and relevant facts. The said interim order reads as under: "Issue emergent notice. Stay as prayed for, subject to petitioner depositing 30% of the amount due with the 3rd respondent-Bank as under: (i) a sum of ₹10,00,000/- (Rupees Ten Lakh only) within two weeks; (ii) a sum of ₹10,00,000/- (Rupees Ten lakhs only) within .....

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