Veetee Fine Foods Limited v. Punjab National Bank & Ors.

1. By way of captioned application, defendant No.3-SBI[1] seeks rejection of the suit qua it as well as its consequent deletion from the array of parties.

2. Before delving into the respective merits of the contentions, brief facts, as narrated in the plaint, are that the plaintiff, to augment its business, State Bank of India approached defendant No.2-OBC[2] and SBI seeking credit facilities. Upon consideration of plaintiff’s request, the defendant banks, under a consortium arrangement, provided credit facilities, which were renewed from time to time, with a pari passu charge being created over plaintiff’s land, building and other securities. Defendant No.1-PNB[3] was appointed as the lead bank.

3. Plaintiff defaulted in repayment of loan and approached the defendant banks for loan restructuring. Though OBC and SBI approved the restructuring, PNB refused. Consequently, proceedings under SARFAESI Act, 2002[4] were initiated by the defendant banks, and a notice under section 13(2) of the SARFAESI Act was issued to the plaintiff. Resultantly, on 21.08.2013, symbolic possession of the plaintiff’s factory, including plant and machinery, was taken under Section 13(4) of the SARFAESI Act.

4. Plaintiff further claims that it had to closedown its factory in November 2012, and in spite of promoters inducting Rs. 48.51 crores, the factory remained closed. Subsequently, plaintiff approached the defendant banks for a composite OTS[5]. Both OBC and SBI approved the OTS on 13.01.2014 and 13.02.2014 respectively. Further, OBC, vide letters dated 11.03.2014, 19.05.2014 and 28.05.2014, while acknowledging the OTS, refused to undertake further proceedings under SARFAESI Act. A similar view was also put forth by SBI vide letters dated 14.05.2014 and 26.05.2014. However, PNB declined plaintiff’s request for OTS and went on to take physical possession of the plaintiff’s factory (spread over about 30 acres) on 30.04.2014/01.05.2014. By that time, plaintiff claims to have paid Oriental Bank of Commerce Punjab National Bank Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 One Time Settlement 90% of the amount under the OTS, to OBC and SBI.

5. Later, PNB also approved the OTS on 26.03.2015, subsequent to which, the plaintiff received back the possession of its factory on 06.04.2016, during the pendency of Writ Petition No. 9742/2015 filed by it, praying that the defendant banks be directed to issue no dues certificate.

6. In the aforenoted factual matrix, the plaintiff has instituted the present suit for recovery of damages and loss of Rs.3,38,52,494/-, by claiming that during the time its factory premises were in the possession of PNB, there was reported loss/theft of various valuable items and assets including parts of the machinery. The details of loss/theft were duly recorded in the Panchnama, which was prepared at the time of return of possession. The plaintiff has prayed that a decree be passed against defendants No.1 to 3 to jointly and/or severely pay a sum of Rs.3,38,52,494/- to the plaintiff, on account of loss and damage alongwith interest.

7. In this backdrop, SBI has preferred the present application by contending that neither in the plaint nor in the documents filed alongwith it, any averment has been made against it for the alleged loss/theft of valuable items and assets etc.

8. Learned counsel for SBI contended that as per the averments made in the plaint, physical possession of plaintiff’s factory and assets was taken over by PNB on 30.04.2014, and before that plaintiff had already entered into an OTS with SBI, which admittedly took place on 13.02.2014. In support of his submission, he has referred to plaintiff’s letters/notice dated 28.05.2015, 10.06.2015, 30.06.2016 and 30.08.2016 which were addressed only to PNB, as well as PNB’s reply dated 12.08.2016. Learned counsel further submitted that, though in pursuance of the OTS with SBI, the latter had received substantial payments from the plaintiff, the OTS was subsequently cancelled, apparently for the reason that plaintiff had entered into an OTS with PNB for a higher amount. However, by way of order dated 28.01.2016 passed by in W.P.(C) 9742/2015, the matter was put to rest.

9. Mr. Ganju, learned Senior Counsel for the plaintiff, while disputing the applicant’s submissions, referred to the pleadings in the written statement filed by the PNB, wherein it was stated that on 13.04.2015, PNB had received an e-mail from SBI asking it to release the securities in SBI’s favour, and also not to withdraw the OA which was jointly filed before DRT-I, Chandigarh. The said request was repeated vide letters dated 21.04.2015 and 24.04.2015. Reference was also made to SBI’s letter dated 08.03.2016, whereby SBI had requested PNB not to take any decision w.r.t releasing the factory, land and building as well as the title deed to the plaintiff. Learned counsel also referred to the order dated 11.08.2015 passed by DRT-I, Chandigarh in MA 33/2015, wherein a submission was recorded on behalf of PNB, to the effect that the plaintiff’s property was a secured assets for all the three banks and physical possession was taken on 30.04.2014, on behalf of all consortium members. Reliance was placed on decision in Liverpool and London S.P. and I Asson. Limited v. M.V. Sea Success I and Anr., reported as JT 2003 (9) SC

218. On the strength of this decision, it was contended that the letters and emails exchanged between PNB and SBI, being a fact within special knowledge, need not be pleaded in the plaint.

10. In rejoinder, learned counsel for the applicant submitted that though SBI had requested PNB not to release the plaintiff’s property, however, the same is irrelevant, as the present suit pertains to plaintiff’s claim of money for damages on account of loss and theft of plaintiff’s property while it was in the sole possession of PNB.

11. The settled position of law is that the power under Order VII Rule 11 Code of Civil Procedure can be exercised by the Court at any stage of the suit, provided the conditions enumerated are fulfilled. While considering such an application, only the averments in the plaint are to be seen, and the averments in the written statement as well as the contentions of the Defendant are wholly immaterial. If, on an entire and meaningful reading of the plaint, it is found that the suit is manifestly vexatious and meritless, in the sense that it does not disclose any right to sue, the court should exercise its power under the said provision. Since the power conferred on the Court to terminate civil action at the threshold is drastic, the conditions enumerated under Order VII Rule 11 have to be strictly adhered to. The averments of the plaint have to be read as a whole to find out whether they disclose a cause of action or whether the suit is barred by any law. Further, even when the allegations made in the plaint are taken to be correct as a whole on their face value, if they show that the suit is barred by any law, or that it does not disclose any cause of action, the application for rejection of plaint can be entertained and the power under Order VII Rule 11 can be exercised. If clever drafting of the plaint has created the illusion of a cause of action, the court will nip it in the bud at the earliest so that bogus litigation will end at the earlier stage.[6]

12. The Supreme Court in D. Ramachandran v. R.V. Janakiraman and Madanuri Sri Rama Chandra Murthy v. Syed Jalal, (2017) 13 SCC 174 Ors.7, outlined the scope of the test to applied for such a preliminary objection in the following manner: "It is well settled that in all cases of preliminary objection, the test is to see whether any of the reliefs prayed for could be granted to the appellant if the averments made in the petition are proved to be true. For the purpose of considering a preliminary objection, the averments in the petition should be assumed to be true and the court has to find out whether those averments disclose a cause of action or a triable issue as such. The court cannot probe into the facts on the basis of the controversy raised in the counter."

13. It is pertinent to note that during the pendency of present suit, OBC had merged with PNB, and was accordingly deleted from the array of parties.

14. A plain and meaningful reading of the plaint would show that the cause of action is stated to be based on the alleged loss caused to the plaintiff, when it was dispossessed of its factory premises. Indeed, the reason apparent for dispossession was the default committed by plaintiff in loan repayments to the consortium of banks.