RITA BAGGA Vs. UNION OF INDIA

JUDGEMENT

(1.) The petitioners are carrying on the business of designed jewellery in the name and style of Umrrao Jewels which was subsequently changed to Aum Jewels. The petitioners were having business relationship with the respondent-Vijaya Bank since 2006.

(2.) The petitioners applied for cash credit facility. The Bank vide its letter dated 31.01.2011 sanctioned a sum of Rs. 550.00 lakhs as cash credit facility for a period of one year, which was to be renewed on a year to year basis. While sanctioning the cash credit limit, the stocks of gold and diamond jewellery were hypothecated. A collateral security in the nature of half western portion of freehold residential/commercial property measuring 934.315 sq. yards situate at plot no.G/4, Civil Station, Allahabad having a market value of Rs. 698.91 lakhs was also given. It is alleged that after previous permission from the Bank, a Memorandum of Understanding dated 20.09.2011 was arrived at with Millan Developers for building a commercial property on the land situate at Allahabad which was duly registered on 20.09.2011. On 19.03.2012, the petitioners sought renewal of the cash credit limit for the financial year 2012-13. Another application on 18.06.2012 followed by an application dated 17.11.2012 was moved for conversion of part of cash credit limit to a term loan. It is alleged that the Bank was not happy with the builders agreement and insisted that a tripartite agreement should be executed. Accordingly, a tripartite agreement dated 08.03.2013 was executed between the petitioners, respondent-Bank and the builder, in which it was clearly indicated that the Bank will have the first and paramount charge on the entire property even after its reconstruction. In spite of this agreement, the cash credit limit was not renewed in the financial year 2013-14 and, accordingly, the petitioners made another application for renewal of the cash credit limit for the financial year 2012-13. By a letter dated 09.03.2013, the Bank approved Rs.350.00 lakhs towards the cash credit facility and Rs.200.00 lakhs towards Working Capital Demand Loan (hereinafter referred to as WCDL). According to the petitioners, this WCDL loan was to be paid in five years. Security for the aforesaid cash credit limit and WCDL was the same, namely, hypothecation of stocks of gold, diamond, gold and diamond jewellery, assignment of book debts/receivables and collateral security of the land situate at Allahabad. In addition to the aforesaid, a guarantee was also given by the petitioners as guarantors. The aforesaid cash credit limit, etc., again expired on 28.01.2014. The respondent-Bank after reviewing the matter issued a letter dated 04.04.2014 extending the cash credit limit for a period of three months up to 28.04.2014. By the said letter, the respondent-Bank also requested the petitioners to reduce the WCDL loan at least by Rs. 10.00 lakhs per month by selling the stocks. The petitioners vide letter dated 16.04.2014 protested with regard to the unilateral action of the Bank in reducing the WCDL loan by Rs.10.00 lakhs every month. The Court finds that on account of negotiation and financial performance by the petitioners, the cash credit limit was extended by the respondent-Bank till 28.10.2014.

(3.) The petitioners contend that for the reasons best known to the respondent-Bank they became hostile and vindictive. The petitioners by way of example contended that petitioner no.1 took a term loan of Rs.4.5 lakhs by pledging LIC policies and, after clearing the loan the Bank did not return the LIC policies till date in spite of repeated requests. Similarly, the petitioners started a clothing business in the name of M/s Padmakriti in the same premises in which the partners were the same. This clothing business was objected to by the Bank and, on their request, the petitioners had to stop this business.