Tapabrata Chakraborty JUDGMENT
Tapabrata Chakraborty, J.
1. The present writ petition has been preferred primarily praying for following relief:
"A writ of or in the nature of Mandamus do issue directing the respondents to forthwith recall, rescind, withdraw and/or cancel the order dated 20th November, 2018 passed by the Review Committee of the respondent No. 2 bank declaring the petitioner to be a willful defaulter under the Master Circular published by the Reserve Bank of India on 1st July, 2015;"
2. Records reveal that the petitioner is one of the promoters of Pro Mineral Pvt. Ltd. (in short, PMPL) and he claims that his association with PMPL was in the capacity of an investor. For implementation of a project, PMPL availed financial assistance from a consortium of banks. Thereafter a decision was taken towards installation of a captive power plant (in short, CPP) and further credit facilities were obtained. Alleging non-repayment of the loan, a notice was issued on 5th July, 2016 on behalf of the respondent No. 2 for recalling the credit facilities sanctioned in favour of PMPL. Thereafter a notice under Section 13(2) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short, the SARFAESI Act) was also issued on 3rd August, 2016. The petitioner replied to the same. Subsequent thereto, a show cause notice was issued on 23rd August, 2016 and alleging non consideration of the reply and violation of the principles of natural justice, PMPL preferred a writ petition, being W.P. No. 1035 of 2016, which was disposed of by an order dated 30th November, 2016 directing inter alia that the committee of the respondent No. 2 shall decide the matter impartially after taking into consideration the relevant circulars and upon giving a reasonable opportunity of hearing to the writ petitioners. The order passed by the concerned committee was challenged subsequently by preferring two writ petitions, being W.P. No. 173 of 2017 and W.P. No. 174 of 2017, which were disposed of by a common order dated 16th April, 2017. However, aggrieved by certain observations made in the said order, two appeals were preferred and the same were disposed of by an order dated 12th June, 2017 leaving the appellants free to approach the review committee. Subsequent thereto, the review committee passed an order on 20th November, 2018, which has been impugned in the present writ petition.
3. Mr. Saha, learned senior counsel appearing for the petitioner submits that the impugned decision of the review committee is not in consonance with the guidelines contained in the "Master Circular on Willful Defaulters" issued by the Reserve Bank of India (in short, RBI). Placing reliance upon 2.1.3 of the said guidelines he contends that a "willful default" would be deemed to have occurred when the unit has defaulted in making its payment/repayment to the lender even when it has the capacity to honour the said obligations. It is not a case that the finance from the lender was not utilized for the specific purposes for which the finance was availed of. The petitioners have been identified as willful defaulters on the basis of isolated transactions/incidents. It was by reason of cost escalation, PMPL was left with no choice but to opt for alternative supply of power and the amount saved on the CPP was naturally used to fund the cost escalation towards mechanised raw material handling system in line with discussion with consortium members from time to time and in view thereof the allegation of diversion of fund is not sustainable.
4. He further argues that it would be evident from the order dated 20th November, 2018 passed by the review committee that there was no decision taken qua the petitioners nor the order is supported with requisite evidence. The consequences of a person being levelled as willful defaulter are very serious inasmuch as the same leads to denial of credit facilities to the petitioners as a permanent measure. A perusal of the impugned order would reveal that the contents of the reply, filed by the petitioner, had not been taken into consideration instead the said committee abruptly arrived at a finding that "the funds were diverted intentionally and deliberately and in a calculated manner". The impugned order does not reflect any independent application of mind. In the decision of the willful defaulter identification committee of the respondent No. 2 on 9th January, 2017 there is no finding that the alleged act of diversion of fund was intentional, deliberate or calculated. There was also no finding with regard to the petitioner's track record. However, the review committee found that the formation of opinion of willful default by the petitioner was correct and attempted to justify the same, acting as a recovery officer of the respondent No. 2.
5. Per contra, Mr. Mitra, learned senior counsel appearing for the respondent Nos. 2-5 submits that the contents of the decision need to be considered in its entirety. A single clause cannot be taken out and highlighted. The finding of the review committee that there had been an intentional and deliberate diversion of fund by the petitioners is supported with requisite evidence.
6. Drawing the attention of this Court to the petitioner's replies, appearing at pages 117 and 123 of the writ petition, Mr. Mitra submits that the contents of the same are contradictory. In the letter dated 2nd September, 2016 it has been categorically stated that PMPL had agreed to refund a sum of Rs. 38 crores subject to generation of sufficient cash inflow whereas in the letter dated 14th December, 2016 it has been stated that 'at no point of time the company ever stated that we are not going ahead with the captive power plant or that the funds have been used to cost escalation. It is also denied that any commitment or agreement was ever made to refund Rs. 38.50 crores to the lenders'.
7. He further submits that the said amount of Rs. 38 crores has not yet been returned and there had been a continuing default on the part of the petitioner and such action clearly comes within the purview of clause of 2.1.3 of the Master Circular of RBI.
8. Indisputably, on the basis of a sanction letter loan was disbursed on 21st May, 2012 and such facility was required to be utilized for setting up of CPP. The said fund had not been utilized for such purpose. The charge quoted in the notice prior to declaration as willful defaulter runs as follows:
'A part of the sanctioned limit was sanctioned for setting up a Captive Power Plant, you availed the disbursement of the said loan, however, subsequently decided not to go ahead with the Captive Power Plant. After insistence by the Consortium members to refund the amount of such availed loan, you stated that the loan was used to fund the cost escalation in other areas of the pellet project, however you have agreed to refund around Rs. 38.50 Crs to the lenders, which has not been paid till date. Hence this is a case of Fund Diversion'
9. In reply to the said notice it has been stated that the amount saved on CPP was used to fund the cost escalation towards mechanised raw material handling system and there was a commitment on the part of PMPL towards refund of an amount of Rs. 38 crores. The said amount has not been refunded. A letter dated 20th July, 2015, as referred to in the review committee order, has been produced by Mr. Mitra which clearly shows that the total outstanding was of an amount of Rs. 38.49 crores. Let a copy of the said letter be kept on record.
10. The argument of Mr. Saha that the terms 'intentional and deliberate diversion of fund', as incorporated in the impugned decision are not based on proper evidence is not acceptable to this Court. The contents of the decision need to be considered together and not in isolation. A particular clause cannot be taken up and highlighted. For the purpose of setting up CPP, loan was sanctioned in the year 2012. In the replies submitted by the petitioners there had been a commitment towards refund of the amount of Rs. 38 crores but the same has been withheld.
11. It is well settled that the writ court cannot sit as an appellate authority over the decision taken by the competent authority. The order impugned does not suffer from any violation of the principles of natural justice. The replies submitted by the petitioners, were duly considered and a reasoned order has been passed by the Review Committee and it is also not a case that the impugned order has been passed on extraneous consideration. In view thereof, this Court is reluctant to exercise any discretion in favour of the petitioner and the writ petition is, accordingly, dismissed.
12. There shall, however, be no order as to costs.
13. Urgent photostat certified copy of this order, if applied for, be supplied to the parties, upon compliance of all requisite formalities.
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