Case Law Details
R.K.L. Prasad Vs State Bank of India and Others (Andhra Pradesh High Court)
The writ petition was filed by a Chartered Engineer seeking removal of his name from the Indian Banks Association (IBA) Caution List and a direction to the State Bank of India (SBI) to re-empanel him as a property valuer after completion of the prescribed two-year cooling period. The petitioner contended that the continued inclusion of his name in the IBA Caution List despite expiry of the cooling period was arbitrary, unconstitutional and violative of Article 14 of the Constitution of India.
The petitioner had been empanelled as a valuer with several banks, including SBI. In 2015, SBI assigned him the valuation of properties belonging to M/s Naidu Beverages Pvt. Ltd. After examining the legal opinion, conversion certificate and documents furnished by the bank, and physically inspecting the properties, he submitted valuation reports on 27.01.2015. Nearly three years later, by letter dated 29.11.2018, SBI alleged that the valuation reports contained certain aberrations, that adequate care and due diligence had not been exercised, and that the borrower account had been classified as fraud, exposing the bank to enforcement risk. The petitioner was called upon to explain why his name should not be referred to the IBA Caution List and why a complaint should not be lodged before the Chartered Engineers Association. He submitted his explanation on 27.12.2018. Thereafter, SBI de-panelled him in 2019 and recommended inclusion of his name in the IBA Caution List.
The petitioner contended that SBI de-panelled him without affording an opportunity of personal hearing or passing any formal order and that the IBA circulated his name in the caution list without issuing notice. He argued that the action violated the principles of natural justice and the procedural guidelines governing reporting of third-party entities to the IBA Caution List, which require a fair opportunity of hearing, detailed examination by the appropriate authority and evaluation by an independent empowered body. He further submitted that, under the bank’s policy, re-empanelment is permissible after a minimum cooling period of two years from the date of de-panelment and that, having completed that period, he was entitled to be re-empanelled.
SBI opposed the petition, contending that the petitioner had submitted incorrect valuation reports, resulting in financial loss after the borrower account was declared fraudulent. It maintained that a show cause notice had been issued, the petitioner’s explanation had been considered, and the decision to de-panel him had been taken after due evaluation. The bank argued that it possessed absolute discretion to de-panel valuers who committed irregularities in order to safeguard public money. It further contended that re-empanelment after the two-year cooling period was discretionary rather than mandatory and that the bank was not obliged to re-empanel every valuer after expiry of that period.
The High Court first observed that the petitioner had not challenged the Circular Letter dated 02.02.2019 by which SBI directed that his services should not be engaged because of the alleged irregularities in his valuation reports. It held that the absence of a challenge to the foundational de-panelment proceedings was fatal to the relief sought.
The Court further found that SBI had issued a detailed notice dated 29.11.2018 specifying the alleged lapses, to which the petitioner had submitted a reply before the decision to de-panel him was taken. Accordingly, it rejected the contention that there had been any violation of the principles of natural justice. The Court also observed that, in the absence of a specific challenge to the de-panelment proceedings, it could examine only the decision-making process and found that the procedure had been followed. It therefore held that the de-panelment itself warranted no interference.
On the issue of re-empanelment, the Court examined the relevant guideline providing that valuers removed from the panel “may be re-empanelled” on a very selective basis after a minimum cooling period of two years. It held that the guideline conferred discretion upon the bank and did not create any mandatory or enforceable right to re-empanelment after completion of the cooling period. The Court further referred to the bank’s guidelines governing empanelment and de-panelment, which permit de-panelment for misconduct, including under-valuation or over-valuation of assets, and prescribe eligibility conditions for empanelment. In light of these provisions, the Court concluded that the bank’s discretion regarding re-empanelment could not be subjected to judicial review in the manner sought by the petitioner.
Holding that the petitioner had failed to establish any legal right to re-empanelment or removal of his name from the IBA Caution List, the High Court dismissed the writ petition. It also directed that the pending miscellaneous applications, if any, would stand dismissed.
FULL TEXT OF THE JUDGMENT/ORDER OF ANDHRA PRADESH HIGH COURT
This Writ Petition is filed seeking to declare the action of the respondents in not removing the petitioner‟s name from Indian Banks Association (for short “IBA”) caution list in spite of completion of two years cooling period, is highly illegal, arbitrary, unconstitutional, violation of Article 14 of the Constitution of India and for consequential direction to the respondents to re-empanel the petitioner as Property Valuer.
2) The petitioner is the Chartered Engineer, empanelled by virtue of his experience and professional qualifications with many Banks and continued to practice as empanelled valuer of State Bank of India and during the empanelment he had issued several valuation reports to various banks. While so, in the year 2015 the State Bank of India, Anakapalli Branch had given an assignment to him for valuing properties of M/s Naidu Beverages Pvt., Ltd., and after going through the legal opinion, conversion certificate and on the basis of documents furnished by the Bank, the petitioner physically visited the properties and identified the property by its survey sketch, measurements and definite boundaries and found them correct by comparing with the documents. Thereafter, he submitted the valuation reports on 27.01.2015 to the concerned Branch of the State Bank of India. Three years after submission of the said Valuation reports, the petitioner received a letter dated 29.11.2018 from the 4th respondent, wherein it is, inter alia, stated that the Valuation Report dated 27.01.2015, in respect of the properties of the loan account of M/s Naidu Beverages Pvt., Ltd., contains certain aberrations, which are mentioned in the said letter, that adequate care and due diligence as panel valuer was not observed by the petitioner while offering the report. By virtue of which, the said account has been classified as fraud and bank was put in high risk of enforcement of its security. The petitioner was granted 30 days time for offering his explanation / comments as to why his name could not be referred to the IBA for putting in caution list and why complaint cannot be lodged against him before the Chartered Engineers Association of A.P., for issuance of negligent opinion. The petitioner submitted his explanation on 27.12.2018. Thereafter, in the year 2019 the respondent bank had de-paneled the petitioner and recommended the IBA-the 2nd respondent to put the petitioner‟s name in the caution list.
3) Heard the learned counsel for the petitioner. Also heard the learned standing counsel appearing on behalf of the respondent-State Bank of India.
4) Learned counsel for the petitioner, inter alia, contended that the State Bank of India de-paneled the petitioner without providing an opportunity of hearing, much less by passing any order and in an arbitrary manner, recommended for putting the name of the petitioner in the IBA caution list. He submits that the 2nd respondent on the advice of State Bank of India and without any notice to the petitioner, circulated the name of the petitioner in the IBA caution list. He submits that such an action on the part of the State Bank of India as well as the IBA is violative of principles of natural justice and unsustainable. Stating that as per the Procedural Guidelines reporting of names of third parties to IBA for inclusion in the caution list (Ex.P5) shall be done only after giving such third party a fair opportunity of being heard and such decision should be taken after detailed examination at appropriate level and further as per guideline No.5 for the purpose of evaluation of role of third party entity in fraud / loss, an independent empowered firm should be set up for the said purpose, the learned counsel contends that in the present case the said guideline has not been adhered to. He also submits that as stated earlier, the State Bank of India before recommending the name of the petitioner to IBA for inclusion in the caution list has not afforded any opportunity and the matter was not examined as required under the guidelines.
5) The learned counsel further submits that only with a view to safeguard the interest of employees of the respondent bank, the petitioner was de-paneled in an arbitrary manner and in fact the petitioner was made a scapegoat. Be that as it may. Stating that as per the policy of respondent bank, re-empanelment is permissible after a minimum cooling period of two years from the date of depanelment, learned counsel submits that as the said cooling period of two years is completed, the petitioner is entitled for re-empanelment. He submits that despite the said undisputed position, for the reasons best known to the respondent-Bank, no action has been taken for re-empanelment of the petitioner, which is unjust and arbitrary. He submits that having left with no other efficacious remedy, the petitioner is constrained to invoke the jurisdiction of this Court under Article 226 of the Constitution of India. Making the said submissions, learned counsel seeks to allow the Writ Petition as prayed for.
6) Refuting the said contentions the learned standing counsel for the State Bank of India made his submissions with reference to the specific averments made in the counter affidavit to which, no reply affidavit is filed.
7) Raising an objection to the maintainability of the Writ Petition against the IBA-2nd respondent, the learned standing counsel sought to justify the action of the State Bank of India in de-paneling the petitioner as a valuer. He submits that the writ petitioner submitted an incorrect valuation report for two properties of M/s Naidu Beverages Pvt., Ltd., and the said company was declared as fraud and caused financial loss to the State Bank of India. He further submits that before the de-panelment of the writ petitioner, a notice was issued and an opportunity was afforded for submitting explanation and therefore the contention that the action of the respondent-bank in de-panelment of the petitioner is violative of principles of natural justice is not sustainable. While submitting that the respondent-bank after issuing notice and evaluating the response, took a decision to de-panel the writ petitioner, the learned counsel contends that the Bank has absolute discretion to take such a decision in respect of the valuers, who committed irregularities and such decision is taken to safeguard the public money and that the same cannot be found fault with.
8) In so far as the contention with regard to the cooling period of two years is concerned, he contends that it is not mandatory or compulsory to re-empanel a valuer after minimum cooling period of two years from the date of depanelment. He submits that the bank has discretion to take a decision to re-panel the valuer. He also submits that the 2nd respondent-IBA will not come under the definition of „State‟ as per Article 12 of the Constitution and even though the State Bank of India falls under the said definition, he submits that the empanelment or depanelment of the valuer is in the interest of Bank to safeguard the public money and the decision of the Bank in this regard is not amenable to judicial scrutiny. In any event, the action taken by the 2nd respondent, in the facts and circumstances of this case, is justified and therefore no directions as sought for by the petitioner may be granted, he adds. Making the said submissions, the learned counsel urges for dismissal of the Writ Petition.
9) With regard to the maintainability of the Writ Petition against IBA-2nd respondent is concerned learned counsel placed reliance on the Division Bench decision of Bombay High Court in Kishore S. Bhat v Indian Banks Association1.
10) This Court has considered the submissions made and perused the material on record. At the outset, it is pertinent to note that vide Circular Letter No.CCO/ADV/15/2018-19, dated 02.02.2019, the 3rd respondent issued instructions not to engage the services of the writ petitioner, inter alia, stating that he had committed certain irregularities while furnishing valuation report of collateral properties in respect of the loan proposals and thus breached the trust reposed in him by the Bank. The said proceedings have not been challenged in the Writ Petition, which is fatal to the case of the petitioner. In the absence of challenge to the said proceedings, the relief as sought for by the petitioner cannot be granted. Be that as it may.
11) On a perusal of the material on record, it is evident that before de-paneling the petitioner, a notice dated 29.11.2018 was issued duly setting out the lapses on the part of the writ petitioner. In reply to the same, the petitioner submitted his explanation on 22.12.2018 and thereafter a decision was taken by the State Bank of India to de-panel the petitioner and in the said circumstances, as rightly contended by the learned counsel for the respondent-Bank there is no violation of principles of natural justice. As to whether such decision on the part of the State Bank of India is arbitrary and the same warrants interference cannot be gone into, in the absence of any specific challenge to the proceedings dated 02.02.2019. Even otherwise, this Court can only examine the decision making process, which appears to have been followed scrupulously. Therefore, even in the absence of challenge to the said decision, this Court is satisfied that the de-panelment of the petitioner warrants no interference.
12) Coming to the contention of the learned counsel for the petitioner with regard to the re-empanelment after two years cooling period of depanelment, it may be appropriate to reproduce the relevant guideline which reads as follows:
“5. Procedure for Re-empanelment:
Valuers once removed from the panel of the bank (i.e., Depanelled) may be reempanelled. The Re-empanelment is to be on very selective basis and after a minimum cooling period of two (2) years from the date of Depanelment. The same process as that of empanelment is to be followed for Re-empanelment of valuers with specific justification for such Re-empanelment. If approved by delegated authority for empanelment, names of such valuers removed from De-empaneled list (post re-empanelment) may be reported to the IBBI / IBA, requesting IBBI/IBA to arrange for the names to be deleted from its caution list.”
13) From a reading of the above mentioned guideline, irrespective of the statutory nature of the same, in the considered opinion of this Court, it gives discretion to the Bank to re-empanel a valuer on very selective basis. Such a discretion cannot be subject matter of judicial scrutiny. Further, as per the guidelines for empanelment of a valuer of State Bank of India, Stressed Assets Resolution Group, Corporate Centre, Mumbai, which came into effect on 01.10.2019, filed along with the counter affidavit, the competent authority may de-list / de-panel a valuer on account of misconduct for the instances, which inter alia includes „under / over valuation value of assets‟ [Guideline No.5(a)(i)]. It also contemplates certain conditions to be fulfilled for the valuers for empanelment including that “the valuer has not been removed / dismissed from Valuation related service (previous employment) earlier”. In the light of the above stated guidelines, which are in vogue and for the reasons / conclusions recorded supra, this Court is of the considered opinion that the relief as sought for by the petitioner deserves no consideration.
14) In the result, the Writ Petition is dismissed. No costs.
15) Consequently, the Miscellaneous Applications pending, if any, shall also stand dismissed.
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