BEFORE THE HONOURABLE HIGH COURT OF KERALA AT ERNAKULAM
W.A. No. of 2024
(Against the order dated 23-10-2024 of this Honourable Court in IA No.1/2024 in WP(Civil) No. 30885/2024)
M/s. SARK Spice Produce Pvt. Ltd. & Anr.
: Appellants/Applicants/Petitioners
V/s
Reserve Bank of India & Ors.
: Respondents/Respondents/Respondents
S Y N O P S I S
The 1st petitioner is an MSME enterprise, which had availed credit facilities from the respondent-bank by mortgaging properties to the latter. Being an MSME-borrower, registered under the MSMED Act, 2006, the 1st petitioner/Micro enterprise was entitled to the benefits under the various statutory notifications and circulars issued by the MSME Ministry and the Reserve Bank of India, to ensure that a viable unit is given a full opportunity to revive and continue, instead of being a victim of hasty coercive recovery proceedings and closure of the enterprise. Respondents 2 to 4, without complying with the mandatory Exts. P2 and P3, and other statutory notifications/circulars issued by the central government and the Reserve Bank of India, has hastily initiated recovery proceedings against the petitioner’s enterprise, under the SARFAESI Act. The illegal actions of respondents 2 to 4, are in gross violation of the fundamental rights of the petitioner under Articles 14, 19, 21, and 300 A of the Constitution. Hence, the above Writ Petition (Civil) filed by the petitioners. The Respondent Bank filed a counter affidavit, contending that the Petitioner had approached this Hon’ble Court, so too, the DRT, DRAT, so too, the Madras High Court, on a number of occasions as when a new cause of action arose/whenever he faced the threat of dispossession, and that the same constitutes a bar. The Petitioner filed a reply affidavit pointing out that the earlier petitions which the Petitioner had instituted mostly when a fresh cause of action
arose, namely, when the property was sought to be taken forceful possession of or put to sale etc. do not constitute a bar. The Petitioner, therefore, was advised that it is absolutely necessary for him to seek an express declaration at the hands of this Court that the earlier proceedings do not constitute a cause of action estoppel or res judicata, much less merger. Accordingly, the Petitioner filed an application for amendment of the writ petition to incorporate the additional statement of facts and additional prayers. This Hon’ble Court rejected the I.A for amendment observing that the facts which are sought to be incorporated are facts which were known to the Petitioner and therefore, the plea for amendment is not justified. Hence, this Writ Appeal.
Chronology of Events:
24-03-2021 –Classification of the 1st petitioner’s account as a Non-Performing Assets (NPA).
09-06-2021 – Issuance of demand-notice u/s. 13(2), SARFAESI Act
01-09-2022 – Issuance of possession notice u/s. 13(4)
06-09-2022 – Issuance of sale-notice
2023 – Filing of SA No. 77/2023 before DRT-II, Ernakulam, and
Acts & Rules to be Cited:
SARFAESI Act, 2002
Micro Small and Medium Enterprises Development Act, 2006
Dated this the 28th day of October, 2024.
MARIA NEDUMPARA
K / 1527/2019
Counsel for the Appellant
BEFORE THE HON’BLE HIGH COURT OF KERALA AT ERNAKULAM W.A. No. of 2024 (Against the order dated 23 10-2024 of this Honourable Court in IA No.1/2024 in WP(Civil) No. 30885 /2024)
Appellants/Applicants/Petitioners
- Vs M/s. SARK SPICE PRODUCTS Pvt. Ltd. Represented by its Managing Director, Having its registered
address at TAK Industrial Complex, Eara North, Neelamperoor, Alappuzha, Kerala – 686 534. - ABRAHAM T. KURUVILA @ T.A. KURUVILA, S/o. late T.C. Abraham, Chairman & Managing Director, SARK Spice Products Pvt. Ltd., Thuruthithara House, Eara North P.O., Neelamperoor, Alappuzha, Kerala – 686 534.
Respondents/ Respondents/ Respondents
- RESERVE BANK OF INDIA Represented by its Governor Shahid Bhagat Singh Road, Fort, Mumbai – 400 001.
- BOARD OF DIRECTORS OF SOUTH INDIAN BANK Represented by its CEO &Managing Director Registered Office, SIB House, T.B. Road Mission Quarters, Thrissur, Kerala – 680 001.
- SOUTH INDIAN BANK Represented by its CEO &Managing Director, SIB House, T.B. Road Mission Quarters, Thrissur, Kerala – 680 001.
- AUTHORISED OFFICER & CHIEF MANAGER, SOUTH INDIAN BANK, Regional Office, Kottayam, 1st
Floor, Regency Square, K.K Road, Collectorate P.O., Kottayam Kerala – 686 002.
MINISTRY OF MICRO SMALL AND MEDIUM ENTERPRISES
Represented by its Secretary. Udyog Bhawan, Rafi Marg, New Delhi- 110001
UNION OF INDIA,
Represented by its Secretary, Department of Financial Services, Ministry of Finance, 3rd Floor, Jeevan Deep Building, Sansad Marg, New Delhi – 110 001.
STATE OF KERALA
Represented by its Chief Secretary, Government Secretariat Thiruvananthapuram – 695 001. The address for service of notices and processes on the appellant is that of his counsel Maria Nedumpara, Nedumpara and Nedumpara, Advocates, Room No. 806, 8th Floor, KHCAA Chambers, High Court Campus, Kochi – 682 031.
The addresses of service of notices and processes on the respondents are that as shown above.
MEMORANDUM OF WRIT APPEAL FILED UNDER SECTION 5 OF THE HIGH COURT ACT
Statement of Facts
1.The appellant is the applicant in IA No.1/2024 in WP(Civil) No. 30885 /2024, and the respondents are the respondents therein. t is a fundamental principle of law that a court can bind the parties by its decision, even an eIrroneous one, for jurisdiction means the freedom to err on facts. However, no court has the freedom or the jurisdiction to err on law. The doctrine of res judicata has application on only disputed questions of fact or evidence, not on law. It is a universal, undeniable principle of law that there is no estoppel against law.
2. It is well settled in law that where a court has erred on law or acted contrary to the fundamental principles of judicial procedure, failed to observe natural justice, etc. such an order or judgement is a nullity. It can be sought to be corrected by all means, namely, indirect and collateral proceedings, review, appeal, even a suit.
3. The instant Appellant invoked the jurisdiction of this Court under Article 226 seeking a writ in the nature of certiorari, prohibition, as also, many a declaration. The core of the plea of the Petitioner was that the he being an
MSME, is entitled to the protection in terms of the notification dated 29.5.2015, that the rights and obligations inter se arising out of the MSMED Act could only be adjudicated by a civil court, to the exclusion of all other
courts, and the recovery action under the SARFAESI Act is rendered void ab initio. The Petitioner therefore, is entitled to a writ in the nature of prohibition restraining the prohibiting the Respondents from continuing the illegal recovery action, so too, a mandamus to put the clock back and extend him the benefit of the notification. It is profitable to extract the prayers sought in the writ petition as infra.
a. To declare that the failure on the part of the Central Government/RBI to implement the MSMED notification dated 29.5.2015, in particular, to ensure that the Board of Directors of the Banks/financial institutions in this country, including the Respondent Bank, constitutes a committee for ‘stressed micro, small and medium enterprise’ and further to prevent the Banks and NBFCs from classifying the account of an MSME as NPA and resorting to recovery under the SARFAESI, RDB Act, IBC, NI Act, etc. in violation of the prohibition to do so as contained in Paragraph 1 and 5(4)(iii) of the said notification, amounts to gross failure on their part to comply with the statutory duty cast upon them under Sections 35, 35A, 35AA, 36, 36AA of the Banking
Regulation Act and Sections 45-IE of the Reserve Bank of India Act, and Sections 9 and 10 of the MSMED Act;
b. To grant a perpetual mandatory and/or prohibitory injunction, mandating and the directing Central Government and the RBI to enforce the notification dated 29.5.2015 in its true letter and spirit and further to direct the Central Government and the RBI to ensure that recovery action initiated against the Petitioners in violation of the mandate of the notification is recalled, the clock is put back, the injustice which the Petitioners is made to suffer is redressed and that the Petitioners is compensated in full measure;
c. To declare that the Section 13 of the SARFAESI Act, and Section 19 of the RDB Act, Sections 7, 9, 10 and 95 of the IBC are unconstitutional, ultra vires and void and are liable to be so declared, inasmuch as the said enactments are wholly one-sided, drafted on the grossly erroneous premise that the right to relief, nay, remedies, arise only at the hands of a banker as against the borrower and that the enquiry to be conducted is wholly one-sided, or in the alternative to declare that the borrower’s right to be an actor/petitioner for the enforcement of his remedies has to be read into the said Acts;
d. To declare that Section 34 of the RDB Act, and Section 34 of the SARFEASI Act and Section 63 of the IBC which bar the jurisdiction of the Civil Court to entertain and adjudicate the Petitioner’s/borrower’s plea against the Respondent Bank nay, bank/financial institution, is unconstitutional and void inasmuch as the Petitioners, victims of the gross breach of contract, culpable negligence, malicious and tortious action, so too, violation of the express statutory provisions at the hands of the Respondent Bank, are entitled to institute an action/suit as against the Respondent Bank for the enforcement of the Petitioners’ right as against them;
e. declare that the 1st Petitioner being an MSME within the meaning of Sections 7 and 8 of the MSMED Act of 2006, it is entitled to the benefits of the said Act and, in particular, the notification S.O. 1432(E) dated 29.5.2015 issued by the Central Government under Section 9 of the Act which provides for a mechanism of resolution of stress of MSMEs, as also, the circulars and guidelines issued by the Reserve Bank of India under Section 10 of the MSMED Act and further that no proceedings for recovery of the amounts due by the MSMEs to banks/financial institutions, nay, even operational creditors, shall lie against the Petitioner under the SARFAESI Act, RDB Act, IBC,
Negotiable Instruments Act or any other law, for recovery of the amounts allegedly due, in as much as the MSMED Act being a special law/later law in relation to the aforesaid enactments, the MSMED Act will prevail over them and recovery can be made only in accordance with article 5 (4) (iii) of the aforesaid notification dated 29.5.2015;
f. declare that the MSMED Act in so far as it has not created a special forum/tribunal to enforce the inter-se rights and obligations/remedies, which it has created in addition to those rights/obligations/remedies recognized by
the common law, the jurisdiction of the Civil Court is not ousted, for it is impossible to oust the jurisdiction of the Civil Court without providing for an alternative forum/tribunal to adjudicate the inter se disputes between parties
who are governed by the Act, and further as a corollary thereof, the DRTs, NCLTs created under the RDB Act 1993 and the Companies Act 2013 are invested of no jurisdiction to adjudicate a dispute arising out of/involving the
MSMED Act;
g. declare that the entire recovery steps initiated by Respondent Bank under the SARFAESI Act or any other law, is without jurisdiction, illegal and void in as much as the Respondent are not entitled to take recourse to any form of recovery of the amounts they claim to be due to them from the Petitioner except in the manner permitted by the ‘Committee for Corrective Action Plan’ contemplated in notification S.O. 1432(E) dated 29.5.2015, and quash and set aside the entire action taken by the Respondent Bank under Section 13(2), 13(4) and 14 of the SARFAESI Act/Section 19 of the RDB Act;
h. declare that the Petitioners are entitled to be compensated from the Respondents No. 2 Bank for the loss and injury, which it has suffered on account of the gross breach of contract and trust, culpable negligence, and malicious and tortious action at the hands of the Bank, financial institution and its officers, which loss and injury far exceeds the very claim of the Bank as against the Petitioners and therefore, no amount is due to the Respondents by the Petitioner and further that the Respondents have no enforceable rights as against the Petitioner;
i. declare that the guidelines and notifications issued by the Reserve Bank of India from time to time empowering the bank and financial institutions to declare a borrower as a willful defaulter is without authority of law, for such
a declaration amounts to a civil death and further that the Petitioners, nay, a borrower is not liable to the declared as a willful defaulter except by the authority of an Act of Parliament or statutory instrument having the force of law;
j. To declare that the failure on the part of the Central Government/RBI to implement the MSMED notification dated 29.5.2015, in particular, to ensure that the Board of Directors of the Banks/financial institutions in this country, including the Respondent Bank, constitutes a committee for ‘stressed micro, small and medium enterprise’ and further to prevent the Banks and NBFCs from classifying the account of an MSME as NPA and resorting to recovery under the SARFAESI, RDB Act, IBC, NI Act, etc. in violation of the prohibition to do so as contained in Paragraph 1 and 5(4)(iii) of the said notification, amounts to gross failure on their part to comply with the statutory duty cast upon them under Sections 35, 35A, 35AA, 36, 36AA of the Banking Regulation Act and Sections 45-IE of the Reserve Bank of India Act, and Sections 9 and 10 of the MSMED Act;
k. To grant a perpetual mandatory and/or prohibitory injunction, mandating and the directing Central Government and the RBI to enforce the notification dated 29.5.2015 in its true letter and spirit and further to direct the Central Government and the RBI to ensure that recovery action initiated against the Petitioner in violation of the mandate of the notification is recalled, the clock is put back, the injustice which the Petitioner is made to suffer is redressed and that the Petitioner is compensated in full measure;
l. declare that the entire recovery proceedings, under the SARFAESI Act leading to the forceful taking of possession of the Petitioners properties and sale thereof is illegal and void ab initio, being in violation of express statutory provisions and vitiated by fraud and further to quash and set aside the same;
m. grant a perpetual mandatory and prohibitory injunction restraining and prohibiting Respondent Bank/Financial institution, their agents, servants, officers, representatives from taking any action for recovery under the SARFAESI Act, IBC, Arbitration and Conciliation Act, Recovery of Debts and Bankruptcy Act, Negotiable Instruments Acts or any other law in respect of the amounts they falsely claim to be due from the Petitioners, in particular restraining Respondent no. 4, from dispossessing the Petitioners of their properties;
n. grant a perpetual mandatory injunction directing the Respondent-bank to constitute a committee for the resolution of the stress in the unit of the Petitioners Company, an MSME, as contemplated in paragraph 2 of the
notification dated 29.5.2015 issued under the MSMED Act, and further to direct the Committee to resolve the stress in accordance with the said notification and such other relevant notifications/regulations framed by the RBI;
o. grant a perpetual mandatory injunction directing Respondents to put the clock back in respect of the entire action initiated under the SARFAESI Act, in particular, cancel the classification of the petitioners’ loan accounts as NPA and the demand notice dated 09.06.2021, putting the Petitioners’ properties to sale and further to make attempts to revive the Petitioners’ business as mandated by the notification dated 29.5.2015;
p. to declare that Section 80 of the CPC is so far as it mandates that no suit shall lie before the Civil Court against Centre/State Government without 60 days prior notice is unconstitutional and void inasmuch as it denies the very access to justice, particularly of the weaker sections of society to whom Article 226 and 32 remain a mirage;
q. declare that the proviso to Section 113 of the CPC which mandate that Civil Courts shall refer any question of law as to the constitutionality of a statutory instrument to the High Court is unconstitutional and void inasmuch as it deprives the Civil Court, a court of record of plenary original jurisdiction empowered and competent, nay, dutybound to embark upon any controversy of a civil nature under the sun, accessible to even the least privileged, of its pristine glory and efficacy;
r. pass such further and other orders as the nature and circumstances of the case may require.
4. The Respondent Bank filed a counter affidavit, contending that the Petitioner had approached this Hon’ble Court, so too, the DRT, DRAT, so too, the Madras High Court, on a number of occasions as when a new cause of action arose/whenever he faced the threat of dispossession, and that the same constitutes a bar. The Petitioner filed a reply affidavit pointing out that the earlier petitions which the Petitioner had instituted mostly when a fresh cause of action arose, namely, when the property was sought to be taken forceful possession of or put to sale etc. do not constitute a barThe doctrine of estoppel, res judicata, merger, the principles which constitute the very foundation on which our legal system is build, is a complex subject. Many of these technical concepts which have its roots in classical Roman law, are attributed to jurists like Ulpian, Gaius, Paulose, Papinian, Modestinus. Chief Justice Coke in his commentaries on Laws of England said ‘estoppels are odious’, so too, Lord Blackburn in Burkinshaw v. Nicolls (L.R. 2 App. Cas. at p. 1026) and Lord Justice Bramwell in Baxendale v Bennet (L.R. 3 Q.B.D at
p. 529). The Petitioner, therefore, was advised that it is absolutely necessary for him to seek an express declaration at the hands of this Court that the earlier proceedings do not constitute a cause of action estoppel or res judicata, much less merger.
5. Accordingly, the Petitioner filed an application for amendment of the writ petition to incorporate the following as additional statement of facts and additional prayers: In the Statement of Facts, the following amendments are to be made. After paragraph 44 the following paragraphs may kindly be allowed to be added: “44A. that the various proceedings, namely, more than half a dozen writ petition before this Hon’ble Court, applications under section 17, appeal before the DRAT and writ petition in the Madras High Court, came to be instituted only because the Respondent Bank, which in terms of the notification dated 29.5.2015 under the MSMED Act and the various circulars issued by the RBI Sections 21 and 35A of the Banking Regulation Act, was duty bound to constitute a committee for the resolution of stress, in fragrant violation thereof invoked Section 13 and 14 of the SAARFAESI Act, so too, Section 19 of the Recovery of Debts and Bankruptcy Act, nay, even Section 95 of the IBC. A true copy of the chart detailing the various proceedings initiated by the Petitioner is produced as Exhibit P12.
44B. The Petitioners, though a graduate in Chemistry, is financially illiterate. He was not fully aware of the various circulars issued by the Reserve bank of India and of the notification dated 29.5.2015 and was under the erroneous
impression that the Respondent Bank has every right to classify his account as NPA and initiate recovery proceedings. The Petitioners were constrained to file writ petition after writ petition before this Court because inspite of the Petitioner having paid a substantial amount, namely, Rs. 4,80,68,119,86/- as against a claim of Rs. 11,90,40,929,86/= the Bank went on proceeding under the SARFAESI. It took possession of a factory, working unit, titled “Kalpaka” engaged in the manufacture and export of dehydrated peppercorn, thereby bringing the Petitioner’s business to total ruin. Faced with the threat of forceful possession of the unit in question, so too, of the sale of the “Kalapaka unit which was taken possession of, in order to salvage his business, the Petitioner was left with no option that to give a proposal of one time settlement, so too, invoke the jurisdiction of this Court under Article 226, on every occasion when further coercive steps under the SARFAESI was taken. 44C. The 2nd Petitioner came to learn of the protection which the MSMED Act of 2006 and the notification dated 29.5.2015 only after the authoritative pronouncements of the Supreme Court in M/s. Pro knits v. Board of Directors of Canara Bank. He was advised that there is no estoppel against law and in so far as in the various litigations in the past instituted before this Hon’ble Court and other forums, the rights and remedies which inure in the 2nd Petitioner was not a subject matter at all, nay, it was never raised at all. The orders of this Court and the other forums constitute no estoppel or bar in the institution of the instant proceedings for the enforcement of the rights and remedies emanating from the notification dated 29.5.2015. He was advised that the doctrine of res judicata estoppel, though a fundamental principle of jurisprudence, is a technical rule which needs to be construed strictly. The doctrine of res judicata, nay, ‘res judicata pro veritate accipitur’, attributed to Ulpian of the 2nd century, is founded on the principle ‘interest reipublicae ut sit finis litium’, that it is in the interest of republic that there shall be finality of litigation. There is yet another reason for the doctrine, namely, ‘nemo debet bis vexari pro una et eadem causa’, no man shall be vexed on the same question more than once. To not allow a matter which has been adjudicated by a court/tribunal of competent jurisdiction is in the public interest as also
in the interest of the parties who had agitated the issue, and a decision, whether right or wrong, has been taken on the merits. 44D. Roman law, based on which the common law which we follow is founded, is that the courts exist to do justice to the parties before it, and to do justice is a divine duty. To repeat, courts exist only to do justice and injustice ought to be avoided at any cost. The Roman lawyers (Gaius, Ulpian, Augustinus, Paulose, Papinian) however, acknowledged the fact that because of the limitations of fallible humans, no court can assuredly do justice. Therefore, it is necessary to give effect even to unjust decisions in the interest of the republic/public interest. Ulpian put the need to give effect to even unjust decisions in the interest of the republic metaphorically as, ‘res facit es judicata facit ex albo nigrum, ex nigro album, ex curvo rectum, ex recto curvum, namely a judicial decision can make what was white, black; what was black, white; what was crooked straight; what was straight, crooked’. 44E. This Court exercising jurisdiction under Article 226 is a court of law and a court of equity, of mercy. The common law courts before the Judicature Act of 1852 were duty bound to administer justice according to strict letter of law. ‘Ignorantia juris non excusat’, ignorance of the law is no excuse. But in the court of equity, the said principle did not apply. What prevailed in the Court of equity was lex securit ignoranti, namely, the court protects the ignorant and that the King protects the weak and the meek, ‘rex est procurator factorum’. Courts of equity were ordained to do justice, nullifying the law where it is in conflict with equity, justice and good conscience. If there is a conflict between law and equity, equity will prevail. The concept of ‘Ignorantia juris non excusat’ stricto sensu belongs to the province of criminal law. 44F. The Petitioners, therefore, cannot be penalized for not having taken up the plea based on the MSMED notification dated 29.5.2015. It is the duty of the Court to enforce the law. ‘Jura novit curia, the Court knows the law is a fundamental principle of law. The notification dated 29.5.2015 being a preventive, remedial, benevolent, welfare legislation mandating the banks and financial institutions to identify incipient stress and come to the rescue of MSMEs which are financially illiterate and weak, the Respondent bank in not complying with the said notification, has acted in violation of law. The RBI, the Regulator also failed to discharge its duty. The Respondent Bank which is invested of judicial powers under the SARFAESI Act, a legislation which falls within the ambit of public law, and is liable to be proceeded against under the Banking Regulation Act, which could include cancellation of license, has chosen to accuse the Petitioner of invoking the jurisdiction of this Court repeatedly, a case of the kettle calling the pot black. 44G. The Respondent Bank is manifestly at fault and is blaming the Petitioners for approaching the Court when repeatedly proceeded against with illegal action under the SARFAESI. It has therefore, become imperative for the Petitioner to expressly seek a declaration at the hands of this Court by seeking an amendment of the instant writ petition that the various proceedings instituted before this Hon’ble Court, the DRT, Ernakulam, DRAT Madras and the High Court of Madras, do not constitute an estoppel or bar in the institution or continuation of the instant proceedings. As averred in the writ petition, the Petitioner is advised to institute a suit before the City Civil Court, Mumbai, within whose territorial limits the RBI and the ECGC are situated for remedies against the RBI, because the Petitioner came to be denied the protection under the notification only because of the RBI’s failure to discharge its duty as a regulator, to enforce the notification. A copy of the Civil suit No. 18837/2024 so instituted in the City Civil Court, Mumbai, is produced as Exhibit P13. 44H. It is well settled that there is no estoppel against law and the rights conferred by a statute, if denied, could be raised at any stage, and that an action of an authority without jurisdiction or in violation of law, namely, such as the proceedings which the Respondent bank initiated against the Petitioner under the SARFAESI Act, could be challenged at any time, in direct or collateral proceedings (A.R. Antulay v. R.S. Nayak & Anr. (AIR 1988 SC 1531), Mafatlal Industries v. Union of India (1997 5 SCC 536). For the doctrine of res judicata or issue estoppel to apply, there must be a decision on merits, after a proper contest, at least constructive. In the earlier proceedings, no disputed question of fact or issues were raised, much less discussed. In particular, concerning the rights emanating from the notification dated 29.5.2015. In the earlier proceedings before this Hon’ble Court, the DRT and the DRAT, none of the rights, cause of action or issues raised in the instant petition were ever raised, nor were the remedies. In those proceedings the Petitioner only sought some time to make the payments, bona fide believing that the Bank’s action is legally tenable. The undertaking which the Petitioner gave in the affidavit dated 11.6.2024 for in I.A no. 1 of 2024 in W.P no. 19103 of 2024 is was on the premise that the Bank has a right to recover and in ignorance of the Petitioner’s rights and the protection that the notification dated 29.5.2015 provides for. Since there cannot be an estoppel against statute, the said undertaking will not constitute a bar/estoppel/issue estoppel/res judicata in prosecuting the instant writ petition.” In the Prayers, the following amendments may be allowed to be made. After prayer No. (r), the following may be allowed to be added: “(s) To declare that the various writ petitions and other proceedings which the Petitioner has instituted as detailed in the Exhibit P12/Chart does not constitute a Cause of Action Estoppel, nay, estoppel per rem judicatam/res judicata, not even issue estoppel, inasmuch as there is no Estoppel against statute and the undertaking which the Petitioner had given before the Hon’ble High Court of Kerala in IA No. 1/2024 in WP(c) No. 19103/2024 that he will deposit an amount of Rs. 2 crores within the stipulated time, failing which he shall withdraw all cases and surrender possession of the purported secured asset, does not constitute cause of action estoppel, nay estoppel per rem judicatam/res judicata, or even Issue Estoppel inasmuch as the rights and remedies which the Petitioner seeks to enforce in the instant is based on the notification dated 29.5.215, and for the added reason that in the previous proceedings before the High Court of Kerala and other forums there was never an adjudication on merits;
6. When the above case was listed on 23.10.2024, since the arguing counsel, Shri Nedumpara, was on his legs before the Bombay High Court, a plea was made by his junior for a pass over. The Ld. Single judge was gracious enough to accede to the said request. The matter was called again after lunch. Shri Nedumpara could not appear online because of connectivity issues. This Court was pleased to decline the plea for further pass over / adjournment. This Hon’ble Court rejected the I.A for amendment observing that the facts which are sought to be incorporated are facts which were known to the Petitioner and therefore, the plea for amendment is not justified.
7. Accordingly, the application for amendment of the writ petition and also to receive on record additional documents, were dismissed. Since Shri Nedumpara could not join online due to connectivity issues, there was hardly any argument or deliberation. The order of this Court is one rendered without the Petitioner being afforded a due opportunity to be heard. Shri Nedumpara, the arguing counsel was more than willing to be physically present for hearing. Had the said plea been acceded to, he would have been able to advance arguments on the doctrine of estoppel, which jurists like Lord Coke had described as ‘odious, though an excellent and curious kind of learning’.
8. The Appellant is entitled to the protection of the notification dated 29.5.2015 which is mandatory and binding and creates rights, if not primary rights, at least secondary rights, falling in the realm of vested rights. There is no estoppel, waiver or res judicata against a statutory right.
9. The Petitioner did not raise it on earlier occasions because of his financial illiteracy, an undeniable truth when it comes to MSMEs which the Legislature and the RBI took notice of in enacting the notification and the various
circulars. That is precisely the reason why the notification mandates the banks and financial institutions to identify incipient stress and prohibits it from even classifying the account as NPA. There is no need for the MSMEs to
apply or bring its incipient stress to the notice of the bank concerned. The Petitioner came to know about the full scope and ambit of the protection only belatedly, and the moment he came to be aware of it, he invoked the jurisdiction of this Court.
10. It is not the Appellant MSME who is at fault, but the Board of directors of the IndusInd Bank, the RBI and the senior officials of the bank. By acting in of the notification, the bank and its officials have rendered
themselves liable to be removed under Section 36AA of the Banking Regulations Act. This Court was dutybound to make the Bank and its officials accountable for this failure, so too, even the RBI and the Ministries of MSME
and Banking. Instead of punishing the Bank and its officials who acted contrary to law, this Hon’ble Court in its judgment has chosen to penalize a hapless MSME. To repeat, the error which the Court made here is not an error in ascertaining the facts or in appreciating the evidence. It is not an error with which the court can bind the parties like holding 1+1=0. This is a pure failure to give effect to give effect to the notification.
11. There is no estoppel against law. the fact that the Petitioner did not effectively plead the facts which are now sought to be brought on record cannot in law stand in the way of his seeking to amend the writ petition to seeking to enforce the rights based on the notification dated 29.5.2015. The current writ petition is primarily based on the protection which the Appellant MSME is entitled to under the MSMED Act, 2006. In the earlier proceedings, out of financial illiteracy, the Appellant did not raise it or seek thereof. In the current petition, out of bona fide human error, fallibility and ignorance of its import, the Petitioner failed to disclose to his lawyer the previous proceedings instituted through his earlier lawyer. The said failure cannot act as an estoppel against him from seeking correction/rectification of the pleadings to bring all relevant material on record. The rejection of his plea has resulted in grave legal injury and breach of his equitable rights. Aggrieved by the Against the order dated 23-10-2024 of this Honourable Court in IA No.1/2024 in WP(Civil) No. 30885 /2024, this Writ Appeal is filed on the following among other grounds:
GROUNDS
A. The order of this Court, is one, for all practical reasons, one which is rendered without affording the Appellant a fair opportunity to be heard. On 23.10.2024 when the above case called out, since the arguing counsel, Shri Nedumpara, was on his legs before the Bombay High Court, a plea was made by his junior for a pass over. The Ld. Single judge was gracious enough to accede to the said request. The matter was called again after lunch. Shri Nedumpara could not appear online because of connectivity issues. This Court was pleased to decline the plea for further pass over/adjournment. This Hon’ble Court rejected the I.A for amendment observing that the facts which are sought to be incorporated are facts which were known to the Petitioner and therefore, the plea for amendment is not justified. The order of this Court dated 23.10.2024 is therefore, vitiated by errors apparent on the face of record and is thus one rendered void ab initio. It is the duty of the court to recall an order which is a nullity, in violation of a statutory provision, ex debito justitiae. ‘Actus curiae neminem gravabit’, no man shall suffer because of the mistake of a court. The Supreme Court in Antulay’s case even set aside a judgment of the 5-judge constitution bench in its anxiety to undo the error of the court. A judgment of court which is a nullity constitute no res judicata and can be challenged by either direct or collateral proceedings (Kiran Singh, Antulay, Mafatlal).
B. By amendment, what the Appellant sought was a mere declaration that the earlier proceedings, the full disclosure of which he failed to make when he instituted the instant writ petition, out of bona fide human error and ignorance, does not constitute a bar to the instant writ petition, neither on the ground of estoppel/res judicata or suppression of material facts. ‘Nemo praesumitur malus’, nobody is presumed to be bad. The omission is not a malicious or wilful one. The Appellant could well seek all the declaratory and other remedies he has sought even after making a full disclosure of the previous proceedings. By not disclosing the institution of the previous proceedings, a fact which is well-known to the Respondent, the Petitioner does not achieve anything. The risk is that often in litigation, the opposite parties would like to take undue advantage of such bona fide omissions, however, innocuous.
C. The current petition is primary founded on the protection under the MSMED Act, a plea which is purely a legal plea. There is no estoppel against law. Even assuming he had filed ten proceedings on earlier occasions and all those were dismissed, still, a fresh proceedings under Article 226 or a suit would lie. The cause of action in the earlier proceedings and the current proceedings are not the same, the parties are not the same. The current proceedings is to bring to the notice of this Court that the Respondent Bank and the RBI which were under a
duty to extend protection to MSMEs by reaching out to them have completely failed in their statutory duty and to compel them to discharge their statutory duty and that a writ in the nature of mandamus will lie, so too, writs in the nature of certiorari and prohibition.
D. It is not only the banks and financial institutions which have failed in their duty, but the courts and tribunals as well, for whenever an MSME has sought protection under the MSMED Act and notification, the same is declined offering curious reasons. A classic example is the judgment of this Court in N.P Abdul Nazer vs. Union Bank of India & Others, & Jayaprakash.A vs Union Bank of India & Others, to name a few. The amendment was sought to prevent such injustice at the hands of this Court, yet again.
In light of the above grounds and other grounds to be submitted at the time of hearing, it is most humbly prayed that this Hon’ble Court may be pleased to consider granting the following prayers:
PRAYERS
Set aside the order dated 23-10-2024 of this Honourable Court in IA No.1/2024 in WP(Civil) No. 30885 /2024 Interim relief sought for For the reasons stated in the Writ Appeal, it is most humbly prayed that this Hon’ble Court may be pleased to Stay all further proceedings initiated by the Respondent Bank under the SARFAESI and/or any other law; pending final disposal of the above Original Petition (Crl.) in the interest of justice.
Dated this the 28th day of October, 2024.
MARIA NEDUMPARA
K / 1527/2019
Counsel for the Appellant