Sudharman R And Ors vs Union Of India And Ors

The petitioners in these three cases - which have been considered together on account of the analogous factual circumstances presented - are stated to be engaged in cashew processing and cashew product manufacturing.

According to the petitioners - as submitted by their learned counsel, Sri.John Prakash B.J. - they are entitled to the benefit of the Circular issued by the Reserve Bank of India, a copy of which has been produced as Ext.P4 along with W.P.(C) No.23758/20, as per which, they say that the Banks are obligated to consider their proposal for restructuring, they being classified as "Micro, Small and Medium Enterprises" (MSME).

The learned counsel for the petitioners contend that, in fact, in terms of the afore said Reserve Bank Circular, the State Level Bankers Committee (SLBC), of which the respondent - Bank was also a member, had given them an offer to make such a proposal but that the same had not been considered properly by the Bank and have been rejected, in the case of the petitioners in W.P.(C) No.23758/2020 and W.P. (C) No.24476/2020, without assigning any specific reason but saying that they are not financially viable. Sri.John Prakash, therefore, prays that the respondent - Bank be directed to consider his clients' revival proposals in terms of the Reserve Bank Circular aforementioned and to take a decision thereon, after affording them an opportunity of being heard.

In response, Sri.Gopikrishnan Nambiar, the learned standing counsel for the respondent - Canara Bank, began his submissions by saying that the Reserve Bank Circular in question is not applicable to the petitioners because, even though they are classified as "Micro Enterprises", the loans given to them fall under the agricultural category. He submitted that this is evident from the documents produced by his client along with the statement filed in these matters and therefore, that the Bank was justified in not considering the proposal of the petitioners for restructuring the loans. He then added to his submissions by saying that, in any event of the matter, the proposals have been considered by the Circle Office of the respondent - Bank and it was found that they were all unviable and therefore, that they have no other option but to reject them for such reason. The learned standing counsel, therefore, prayed that this writ petition be dismissed.

I have examined the materials available on record and have tested them on the touchstone of the submissions made by the learned counsel for the parties as afore.

It is without doubt that the stand of Sri.Gopikrishnan Nambiar before this Court is that the Reserve Bank Circular aforementioned is not applicable to the case of the petitioners. However, it is ineluctable that the SLBC of which the Bank was a member had directed the petitioners to submit their proposals for restructuring based on the said Circular. This aspect is not controverted but they contend that this was a benefit given to all the businesses in the cashew sector and not merely to the petitioners and therefore, that it is up to the Bank to decide whether the Reserve Bank Circular was applicable to the individual case or otherwise.

However, as I have already said above, since the Bank themselves have given an option to the petitioners to make a proposal for restructuring as per the Circular of Reserve Bank of India, I am of the certain view that the petitioners are entitled at least to have the same considered in terms of law.

That said, when I go through the documents placed on record by the Bank, along with their statement in two of the afore writ petitions as Exts.R4(b), it is clear that they have rejected the proposals merely saying either that it is not financially viable or that the Reserve Bank Circular are not applicable. I am afraid that this cannot obtain imprimatur of this Court since the Bank had a duty to consider the proposals they having invited it from the petitioners - after affording them an opportunity of being heard, so that they can convince the competent Authority of the Bank with the available materials and other applicable inputs.

In the afore circumstances, I am of the certain view that the steps now taken by the Bank under the provisions of SARFAESI Act cannot be allowed to proceed until such time as the proposals of the petitioners are considered by the competent Authority of the Bank in terms of the Reserve Bank of India Circular. I hasten to add that this does not mean that this Court has concluded that the Circular of the Reserve Bank is applicable to the petitioners but only that the petitioners must be given an opportunity of convincing the Authority so, based on the materials available with them and on the basis of other relevant aspects.

Discerning the mind of this Court as afore, Sri.Gopikrishnan Nambiar submitted that the Bank does not have any legal impediment in reconsidering the proposals of the petitioners, after affording them an opportunity of being heard; but prayed that this Court may not make any affirmative declarations as to their entitlement to any relief under the said Circular.

Of course, it is without need to expatiate that this Court has not entered into the merits of any of the contentions of the petitioners, but I am only concluding, for the purpose of this judgment, that the Bank must give them an opportunity of being heard before their proposals for restructuring are rejected or allowed, as the case may be.

In the afore circumstances, I order these writ petitions to the limited extent of directing the competent Authority of the respondent - Canara Bank to again consider the proposals of the petitioners for restructuring in these cases and dispose it of, after affording an opportunity of being heard to them.

Needless to say, until such time as the afore exercise is completed, all further proceedings pursuant to the steps taken by the Bank under the SARFAESI Act will stand deferred; however, clarifying that they will be entitled to pursue it, from the stage at which it is available today, depending upon the decision to be taken by them on the proposals for restructuring in terms of the afore directions.