IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE ANTONY DOMINIC FRIDAY, THE 9TH DECEMBER 2011 / 18TH AGRAHAYANA 1933 WP(C).No.31004 of 2011(A) -------------------------- PETITIONER(S): -------------- RAVINATHAN PILLAI T.K., MANAGING PARTNER, NICE CASHEW COMPANY, VARUTHUNDIL VEEDU, CHERUMOODU, VELLIMON P.O., KOLLAM - 691 511. BY ADV. SRI.G.BHAGAVAT SINGH RESPONDENT(S): -------------- 1. THE CHIEF MANAGER, UNION BANK OF INDIA, KOLLAM BRANCH, FATHIMA BUILDING, BEACH ROAD, KOLLAM-691 001. 2. THE DEPUTY GENERAL MANAGER, UNION BANK OF INDIA, REGIONAL OFFICE, STATUE, M.G.ROAD, THIRUVANANTHAPURAM-695 001. 3. THE UNION BANK OF INDIA, REP.BY THE CHAIRMAN & MANAGING DIRECTOR, UNION BANK BHAVAN, 239, VIDHAN BHAVAN MARG, NARIMAN POINT, MUMBAI- 400 021. R1 TO R3 BY ADV.SRI.A.S.P.KURUP, SC, UBI THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 09/12/2011, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: BKA WP(C).No.31004 of 2011(A) APPENDIX PETITIONER'(S) EXHIBITS: EXT-P1 COPY OF THE LETTER DT.24.7.2007 ISSUED BY THE 1ST RESPONDENT. EXT-P2. COPY OF THE LETTER DT.24.7.2007 ISSUED BY THE 1ST RESPONDENT. EXT-P3. COPY OF THE PROFORMA INVOICE ISSUED BY COPAG. EXT-P4. COPY OF THE NOTICE DATED 31.01.2011 ISSUED BY THE 1ST RESPONDENT TO THE PETITIONER. EXT-P5. COPY OF THE COMPLAINT FILED BY THE PETITIONER BEFORE THE 3RD RESPONDENT DATED 3.2.2011. EXT-P6. COPY OF THE COMPLAINT FILED BY THE PETITIONER BEFORE THE BANKIND OMBUDSMAN DATED 3.2.2011. EXT-P7. COPY OF THE JUDGMENT IN W.P.(C)NO.4649/2011 OF THIS HON'BLE COURT DATED 28.03.2011. EXT-P8. COPY OF THE LETTER DT.16.9.2011 ISSUED TO THE 1ST RESPONDENT BY THE PETITIONER. EXT-P9. COPY OF THE SANCTION LETTER ISSUED BY THE 1ST RESPONDENT TO THE PETITIONER. EXT-P10. COPY OF CLOSURE CERTIFICATE DT.31.10.2011 ISSUED BY SBT. EXT-P11. COPY OF THE ACCOUNT CLOSURE CERTIFICATE ISSUED BY THE DENA BANK DATED 9.11.2001. EXT-P12. COPY OF THE LETTER ISSUED BY THE 1ST RESPONDENT INFORMING THE RECALLING OF THE CC(H) FACILITY. EXT-P13. COPY OF THE REPRESENTATION DT.14.11.2011 FILED BY THE PETITIONER BEFORE THE RESPONDENTS. RESPONDENT'(S) EXHIBITS: NIL //TRUE COPY// PA TO JUDGE BKA ANTONY DOMINIC, J. ------------------------------------------ WP(C) NO. 31004 OF 2011 ------------------------------------------ Dated this the 9th day of December, 2011 J U D G M E N T Petitioner is the managing partner of a partnership firm by name “Nice Cashew Company”. In this writ petition, the prayers sought are the following; “ a) Call the entire records leading up to Ext.P-12 from the 1st respondent and quash Ext.P12; b) direct the 1st respondent to regularize the account bearing No.361405010050137 of Nice Cashew Company and permit the petitioner to enjoy the CC(H) facilities granted as per Ext.P-9; c) declare that the respondents are jointly and severally liable to compensate the losses if any, incurred to the petitioner from and out of the various illegal acts of the 1st respondent by denying the CC(H) facilities granted as per Ext.P-9.” 2. Briefly stated facts are that the petitioner was enjoying a cash credit hypothecation facility to the limit of Rs.75 lakhs. This was subsequently reduced and fixed as Rs.36 lakhs. While so, in June 2011, petitioner applied for enhancing the facility limit to Rs. 1 crore. By Ext.P9, the WP(C) No: 31004 of 2011 ..2.. bank approved the proposal, subject to various conditions, the relevant of which read as under; “ 1) The firm to deal exclusively with us. A/c with SBT to be closed and certificate produced before release of enhanced portion above Rs.36.00 lacs. 2) EM extension to be obtained before release. 3) Enhancement to be released only after credit process audit. 4) Our advance will be subject to bank's credit policy/RBI guidelines from time to time.” 3. According to the petitioner in compliance of condition No. 1 of Ext.P9, they closed their account with State Bank of Travancore and Ext.P10 certificate from SBT was produced before the respondent bank. It is also their case that for securing the loan facility availed, they have furnished additional security. It is stated that even thereafter the bank issued Ext.P12, recalling not only the enhancement but the entire advance granted. This letter reads thus; “With reference to your request letter for enhancing the limit, we inform you as under: We had proposed to sanction/disburse the WP(C) No: 31004 of 2011 ..3.. enhanced limit. But, we came to know from Dena Bank, Kollam vide their letter dated 04.11.2011 that your credit facility with them is still outstanding and its status is NPA since 1st November, 2010 which you did not reveal to us in the latest credit information report filed with us. On the above ground, we are recalling all the advances granted to you. We request you to clear the entire dues with immediate effect.” 4. The petitioner says that immediately thereafter, the accounts mentioned in Ext.P12 were closed and Ext.P11 certificate to that effect obtained from Dena Bank, Kollam was produced before the 1st respondent. On that basis, they sought withdrawal of Ext.P12 by making Ext.P13 representation. No reply was received and in such circumstances, this writ petition is filed. A statement has been filed on behalf of the respondents. In the statement, after explaining the previous transactions between the parties, the Bank has stated thus; “Thereafter the petitioner approached the Bank for enhancement of the CCH facility to the limit of Rs. 1 Crore. At the time of approaching the Bank to have CCH facility of 1 Crore the petitioner had submitted a confidential credit information to the Bank on 11.10.2011. With respect to the specific question in the credit information format as to the nature and extent of WP(C) No: 31004 of 2011 ..4.. dealings with Banks branches and credit facilities enjoyed if any, the petitioner had answered nil. Similarly, to the specific question names of other Bankers/Financial Institutions and credit facilities allowed by them and securities charged to them the petitioner had given the answer nil. Believing the correctness of the information given by the petitioner the Bank had processed the request for the loan facility and issued Ext.P9 sanction letter to the petitioner. There were various conditions in the sanction letter which had to be fulfilled by the petitioner. The sanction letter was to enhance the existed CCH facility from the existed Rs.36 lakhs to Rs.1 Crore under the Union Trade Scheme. It is clearly stated in condition No:4 that 'our advance will be subject to Banks credit policy/RBI guidelines from time to time'. As seen from Ext.P9 the petitioner had accepted all the terms and conditions. While the Bank was in the process of documentation for the above proposal, it was noticed that there were several obligations under Ext.P9 which were to be fulfilled. It is clearly stated that the enhancement will be released only after credit process audit which is yet to be done. Credit process audit is a verification by a particular Authorized Officer of the Bank regarding the fulfillment of each of the conditions in the sanction letter as well as verification of documents and securities. In the meanwhile, on 04.11.2011 Bank received a letter from Dena Bank stating that the petitioner is availing credit facilities from Dena Bank, Kollam Branch which are still outstanding and loan accounts are NPA since 1st November 2010. This letter shows that the petitioner CCH account and housing loan accounts were NPA since 01.11.2010. A Xerox copy of this letter dated 04.11.2011 received from the Dena Bank Kollam Branch is produced herewith and marked as Annexure R1B.” WP(C) No: 31004 of 2011 ..5.. 5. It is stated that on receipt of the letter mentioned above from the Dena Bank, taking note of Ext.R1C circular issued by the Head Office of the Bank advising branches not to entertain defaulters, Ext.P12 was issued. 6. Petitioner has filed a reply affidavit disputing the averments in the statement filed on behalf of the respondents. 7. I have heard the counsel for the parties. 8. Ext.P12 is the order under challenge. The validity of this order has to be judged in the light of the reasons stated in this order. Reading of this order shows that the only reason stated is that the respondents came to know from Ext.R1B letter of Dena Bank that credit facility was outstanding and that it remains as NPA. It is further alleged that the petitioner did not reveal this fact in the WP(C) No: 31004 of 2011 ..6.. latest credit information report filed. 9. As far as the allegation that the petitioner did not disclose his credit facility with Dena Bank itself, it is to be noticed that the information sought by the Bank from the petitioner which is mentioned in paragraph 3 of the statement is regarding the nature and extent of dealings which the petitioner has with other banks. It was in answer to this query that the petitioner answered in the negative. The credit facility from Dena Bank, which is alleged to have been suppressed credit facilities, availed of by M/s. Nice Food Products, another partnership firm in which partners of the petitioner firm are also partners. Yet another liability which is mentioned in Ext.R1B is towards the housing loan availed of by the managing partner of the petitioner firm. Therefore, the allegation in Ext.P12 that the Nice Cashew Company did not disclose its credit facility from other bank, is incorrect as much as the aforesaid liabilities are that of WP(C) No: 31004 of 2011 ..7.. Nice Food Products and that of the managing partner of both these firms. Yet another aspect of the matter is that the bank also did not require the account holder to declare the liabilities of its partners or the associate firms. In such circumstances, the petitioner firm cannot be accused of having suppressed any information from the respondent bank. 10. That apart, it is also now disclosed that even those accounts that are mentioned in Ext.R1B and relied in Ext.P12 have been closed and Ext.P11 certificate to that effect has been produced by the petitioner before the respondent. In other words, not only that, there is no substance in the finding of suppression mentioned in Ext.P12, or even otherwise, the said allegation does not survive now. In such circumstances, I see absolutely no reason for the bank to have taken the harsh step of recalling the very facility itself. WP(C) No: 31004 of 2011 ..8.. 11. However, I record the submission of the learned counsel for the petitioner that the petitioner now only wants continuation of the original cash credit hypothecation facility of Rs.36 lakhs till 31.03.2012. 12. In the light of the above, I dispose of the writ petition quashing Ext.P12 and direct that subject to the petitioner satisfying the conditions laid down by the bank, the bank will extend the original cash credit hypothecation facility of Rs.36 lakhs to the petitioner till 31.03.2012. ANTONY DOMINIC, JUDGE bka/-