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TMI Blog2022 (8) TMI 1560X X X X Extracts X X X X X X X X Extracts X X X X ..... aggregating to Rs. 358,39,49,064/- (Rupees Three Hundred and Fifty Eight Crore Thirty Nine Lakh Forty Nine Thousand & Sixty Four) only, computed as on 16.07.2021 with interest as agreed, accruing thereon. 2. After service of notice, the Union of India is represented by the Asst. Solicitor General; the 2nd respondent RBI has chosen to remain unrepresented; the 3rd respondent - lender 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as defrauded the lender-Bank and therefore, the prudent decision to recall the credit facilities cannot be faltered; petitioner having remained in outstanding debts disregarding demand notices, it's Loan Account has been classified as NPA and therefore, the impugned SARFAESI Notice cannot be voided. It is also contended that the petitioner has not approached the Court with clean hands 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he creditor. But neither of these relations has any fiduciary character, nor does either bear an analogy to the relation between principal and agent..." It is so even if the lender bank were to be an instrumentality of 'State' under Article 12 of Constitution of India, subject to all just exceptions into which argued case of the petitioner does not fit. (iii) 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. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the customer to act with diligence which must be implied into the contract and alternatively that such a duty arises in tort from the relationship between banker and customer. 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" 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 Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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. '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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /unreasonably; Courts exercising constitutional jurisdiction u/A 226 do not sit as Appellate Authorities over the acts & deeds of the Bank and seek to correct them; even the doctrine of fairness/reasonableness does not convert the Writ Courts into appellate authorities over administrative decisions concerning the Banking business; unless the action of the Bank 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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