PANAT SUDHAKARAN LAVIN v. THE SOUTH INDIAN BANK LTD

BY ADV.SRI.C.AJITH KUMAR THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 05.01.2024, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: W.P.(C) No.36690 of 2023 :2: J U D G M E N T Dated this the 5th day of January, 2024 The petitioner is a B.Tech Engineering graduate, running an MSME Unit under self employment. The Unit is registered under the Ministry of Micro, Small and Medium Enterprises of Government of India. The business is in refined coconut and palm oil under the name and style 'Venkiteswara Trading Company' at Alathur in Thrissur District, under the brand 'Ruchi Drops' and is as a proprietary concern.

2. The petitioner had all the licences including Ext.P1 and VAT registration. Towards working capital of the business, the petitioner availed a cash credit facility on 04.07.2020 with the 1st respondent-Bank. The MSME licence is issued by the Government of India with effect from 24.03.2021. The cash credit W.P.(C) No.36690 of 2023 :3: facility of 1,45,00,000/- was renewed on 09.02.2022, in ₹ hypothecation of entire current assets of the business of the petitioner, as well as properties of the petitioner's father and mother, as guarantors.

3. Interest in the cash credit account was remitted from time to time and for delay in remitting full amount of interest, penal interest was also levied by the Bank, as is evident from Ext.P2 statement of account. Due to fall in turnover reported from time to time on the basis of GST return, the 1st respondent issued Ext.P3 on 01.11.2022, intimating reduction in limit every month by ₹ 2 lakhs, as part of renewal terms of the cash credit limit.

4. While the renewal of cash credit limit was pending before the 1st respondent, the 2nd respondent issued Ext.P4 notice dated 24.03.2023 under Section13(2) of the SARFAESI Act. In Ext.P4, the 1st respondent for the first time informed the petitioner that from 22.01.2023, the loan account of the petitioner W.P.(C) No.36690 of 2023 :4: with the 1st respondent, is classified as NPA.

5. When the petitioner approached the 1st respondent for renewal / regularization of the loan account in response to Ext.P4, the 1st respondent issued Ext.P5 communication by WhatsApp, requiring the petitioner to produce certain documents. Accordingly, the petitioner produced Ext.P6 e-mails to the 1st respondent, attaching entire documents called for. In Ext P6, the petitioner provided the 1st respondent with provisional, projected financials, prevailing sundry debtors, GSTR-1, GSTR-3B, confirmation of purchase orders, etc.

6. While providing necessary forms or application for entering into the renewal agreement between the petitioner and the 1st respondent, on 21.08.2023 the 2nd respondent issued Ext.P7. In Ext.P7, the 2nd respondent required the petitioner to regularize the loan account. At the same time, the 1st respondent is not providing the petitioner with the facility for regularisation, W.P.(C) No.36690 of 2023 :5: even after repeated requests. Hence, the petitioner submitted Ext.P8 before the 3rd respondent for necessary directions to the 1st respondent. It is at this stage that the 1st respondent provided copy of Ext.P9 agreement dated 09.02.2022 to the petitioner.

7. Now, to the surprise of the petitioner, on 07.09.2024 the 2nd respondent came to the petitioner and threatened with affixing notice under Section 13(4) of the SARFAESI Act, before entire properties pledged by the petitioner and the guarantors and taking possession thereof, if the loan account is not closed, when the matter of regularization / renewal of the cash credit loan account is pending before the 1st respondent.

8. It is at that time only the petitioner came to know that as per Ext.P9, the renewal of cash credit loan account was expired on 08.08.2022. Ext.P9 cash credit loan was sanctioned the petitioner being a MSME business. Even after providing every document for renewal of cash credit loan account, the renewal W.P.(C) No.36690 of 2023 :6: agreement is kept pending.

9. While so, the 2nd respondent issued Ext.P10 intimating the petitioner that recovery action cannot be suspended during the pendency of renewal agreement. The action of the 2nd respondent is against Ext.P11 notification dated 29.05.2015 issued by the Government of India, for the frame work for revival and rehabilitation of Micro, Small and Medium Enterprise of the petitioner.

10. Hence, the petitioner submitted Ext.P12 representation before the respondents for immediate arrangement for regularization of credit facility. While Ext.P12 representation was pending before the respondents, the 2nd respondent issued Ext.P13 possession notice. The action of the respondents is high handed and against fundamental rights guaranteed to the petitioner under Article 14 of the Constitution India, contends the petitioner. The writ petition has been filed under Article 226 of the W.P.(C) No.36690 of 2023 :7: Constitution of India for issuance of proper directions for regularization of the loan account maintained with the 1st respondent and to stay further proceeding to Exts.P4 and P13 in the interest of justice.

11. When the writ petition came up for admission, this Court passed an interim order dated 09.11.2023, staying all further proceedings against the petitioner for a period of one month on condition that the petitioner remits an amount of 20₹ lakhs within a period of one month. The petitioner submits that though the petitioner could not remit the amount within the stipulated period of one month. The amount has been remitted by

01.01.2024.

12. I find that I.A.No.3841 of 2023 in S.A No.668 of 2023 filed by the petitioner stands posted before the Debts Recovery Tribunal-II, Ernakulam on 01.02.2024. In the facts of the case, it would be only just and proper that the petitioner prosecute his W.P.(C) No.36690 of 2023 :8: claims before the Tribunal. The writ petition is therefore disposed of permitting the petitioner to prosecute his I.A.No.3841 of 2023 in S.A.No.668 of 2023 before the Debts Recovery Tribunal-II, Ernakulam. The interim order passed in the writ petition will continue to enure to the benefit of the petitioner till 01.02.2024. JUDGE N. NAGARESH Sd/- W.P.(C) No.36690 of 2023 :9: APPENDIX OF WP(C) 36690/2023 PETITIONER EXHIBITS Exhibit P1 Exhibit P2 Exhibit P3 Exhibit P4 Exhibit P5 Exhibit P6 Exhibit P7 TRUE COPY OF RELEVANT PAGES OF THE MSME REGISTRATION CERTIFICATE NO.UDYAM-KL-13- 0007106 DATED 24.03.2021 ISSUED BY THE MSME MINISTRY, GOVERNMENT OF INDIA, TO VENKITESWARA TRADING COMPANY, CONDUCTED UNDER THE PETITIONER'S PROPRIETORSHIP. TRUE COPY OF STATEMENT OF ACCOUNT FOR THE PERIOD 28.04.2022 TO 31.08.2023 MAINTAINED WITH 1ST RESPONDENT BANK IN CASH CREDIT ACCOUNT NO.0178083000000242 TRUE COPY OF LETTER DATED 01.11.2022 ISSUED BY 1ST RESPONDENT INTIMATING REDUCTION IN LIMIT IN LOAN ACCOUNT EVERY MONTH BY 2 LAKHS FOR RENEWAL OF LOAN TRUE COPY OF NOTICE DATE 24.03.2023 ISSUED U/S.13(2) OF THE SARFAESI ACT BY 2ND RESPONDENT, INFORMING CLASSIFYING THE CREDIT SANCTIONED AS NPA ON 22.01.2023. TRUE COPY OF WHATSAPP MESSAGE DATED 29.04.2023 RECEIVED BY PETITIONER 1ST RESPONDENT, REQUIRING PETITIONER TO PRODUCE CERTAIN DOCUMENTS FOR RENEWAL OF LOAN ACCOUNT. TRUE COPY OF E-MAILS SENT BY PETITIONER TO 1ST RESPONDENT IN ATTACHING VARIOUS DOCUMENTS BEFORE 1ST RESPONDENT FOR RENEWAL OF LOAN ACCOUNT, PURSUANT TO EXT P5 MESSAGE. TRUE COPY OF LETTER DATED 21.08.2023 ISSUED TO PETITIONER BY 2ND RESPONDENT EITHER TO CLOSE OR REGULARIZE THE CASH CREDIT LOAN ACCOUNT W.P.(C) No.36690 of 2023 :10: Exhibit P8 Exhibit P9 Exhibit P10 Exhibit P11 Exhibit 12 Exhibit P13 TRUE COPY OF REQUEST DATED 25.08.2023 MADE BY PETITIONER BEFORE 3RD RESPONDENT FOR RENEWAL THE CASH CREDIT LOAN MAINTAINED BY PETITIONER WITH 1ST RESPONDENT TRUE COPY OF RENEWAL OF CREDIT FACILITY AGREEMENT ENTERED INTO BETWEEN PETITIONER AND 1ST RESPONDENT ON 09.02.2022, PROVIDED COPY UNDER WHATSAPP ON 02.09.2023. TRUE COPY OF LETTER DATED 30.09.2023 ISSUED TO PETITIONER BY 2ND RESPONDENT IN DIRECTING TO CLOSE OR REGULARIZE THE LOAN ACCOUNT. TRUE COPY OF THE NOTIFICATION NO.S O (E) 1432 (E) DATED 29.05.2015 PUBLISHED BY THE MINISTRY OF MICRO SMALL AND MEDIUM ENTERPRISES, GOVERNMENT OF INDIA. TRUE COPY OF REPRESENTATION DATED 27.10.2023 SUBMITTED BEFORE RESPONDENTS, SEEKING REGULARIZATION IN THE LIGHT OF EXT P11 NOTIFICATION, AGAINST EXT P10 TRUE COPY OF POSSESSION NOTICE DATED 01.11.2023 ISSUED U/S.13(8) OF THE SARFAESI ACT, ISSUED BY 2ND RESPONDENT. Exhibit P14 TRUE COPY OF DD NO.000918 DATED 08/12/2023 OF HDFC BANK RESPONDENT EXHIBITS Exhibit-R1(a) True copy of the reply dated 05/12/2023 issued by 1st respondent to the petitioner. PETITIONER EXHIBITS Exhibit P15 TRUE COPY OF THE STAY PETITION AS IA NO.3841/2023 IN SA NO.668/2023 DATED 21/11/2023 BEFORE THE HON'BLE DEBT RECOVERY TRIBUNAL-II, ERNAKULAM. W.P.(C) No.36690 of 2023 :11: Exhibit P16 Exhibit P17 TRUE COPY OF DD NO.987654321 DATED 01.01.2024 OF CSB BANK FOR RS.10 LAKHS TRUE COPY OF THE RECEIPT FROM THE SOUTH INDIAN BANK DATED 01/01/2024 FOR RS.10 LAKHS