M/S. Luhit Commercials And Anr. vs. The Punjab National Bank And 2 Ors.
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The petitioner, M/s. Luhit Commercials, represented by its proprietor Prayag Pulin Buragohain (petitioner No. 2), sought to update the proprietorship of the firm from his mother, Smti Dipika Rani Buragohain, to himself. This process had been ongoing since 2016. The firm's banker, initially United Bank of India, later merged with Punjab National Bank (respondent). The petitioner aimed to avail benefits under the Central Government's Guaranteed Emergency Credit Line (GECL) scheme, which required a separate loan account. However, the incomplete proprietorship transfer and an NPA account in petitioner No. 2's name posed obstacles. A meeting between the petitioner and the bank on October 19, 2020, outlined several requirements for the petitioner to submit, including the closure of the NPA account and specific registrations.
Held
The Court acknowledged the petitioner's inability to immediately liquidate the NPA account due to business recovery challenges post-pandemic, as stated in their affidavit filed on March 23, 2021. The Court also noted the extension of the GECL scheme by the Central Government until June 30, 2021. Considering the respondent Bank's contention that the petitioner's proposed liquidation period was excessively long and could lead to the scheme's withdrawal, and that the loan sanction was valid for twelve months from October 30, 2020, the writ petition was disposed of with specific directions. The respondent Bank was directed to sanction the loan in principle, as it had already done, and to consider the period stated by the petitioner for liquidating the NPA account for regularization. Furthermore, upon liquidation of the NPA account, the name of the proprietor of the firm would be changed to petitioner No. 2.
Key Issues
1. Whether the respondent Bank should effect the change in the name of the proprietor of the firm in favour of petitioner No. 2 and allow the petitioner firm to avail the benefit of the GECL scheme, considering the existing hurdles? Petitioner's arguments: The petitioner contended that the GST registration was already in the name of petitioner No. 2, reflecting the proposed transfer of proprietorship. They argued that the minutes of the meeting on October 19, 2020, did not impose conditions regarding GST registration and that the bank had accepted the DIC registration in the name of the earlier proprietress. The petitioner also highlighted that the GECL scheme was extended until June 30, 2021. Respondent's arguments: The respondent Bank argued that the time period stated by the petitioner for liquidating the NPA account (six to eight months) was too long, increasing the risk of the GECL scheme being withdrawn. They noted that the loan sanction was valid for twelve months from October 30, 2020, and the extended timeline might jeopardize its availability.
Sections Cited
Section 129
AI-generated summary — verify with the full judgment below
Cause title — parties, addresses and appearances
ORDER 05.04.2021. Heard Ms. D. Borgohain, the learned counsel for the petitioners. Also heard Mr. A. Ganguly, the learned Standing Counsel for the respondent Bank. This writ petition is filed by the petitioner No. 1, the proprietorial firm purportedly represented by its proprietor, the petitioner No.
Originally the proprietress of the firm concerned was the mother of the petitioner who due to her old age withdrew herself from various function of the proprietorial firm and authorized the petitioner No. 2 by way of General Power of Attorney to act on her behalf as the proprietor of the said firm. Initially United Bank of India was the banker under whom the petitioner firm had its account and subsequent to the amalgamation of the said Bank with the Punjab National Bank, the account of the said firm came under the said present respondent Bank. The process of changing the name of proprietor of the firm from Smti Dipika Rani Buragohain to the petitioner No. 2, the son started way back in the year 2016 and on the basis of various opinions obtained by the earlier bank from the panel advocate the said change in the proprietor could not be effected. The Central Government, after the Covid-19 pandemic situation issued a Scheme under the name and style “Guaranteed Emergency Credit Line” (GECL) thereby facilitating the borrowers categorized therein scheme for Working Capital Term Loan for which purpose a separate loan account is required to be opened for the borrower distinct from any existing loan account. In order to get the benefit under the said scheme, the petitioner No. 2 approached the present respondent Bank and as the process of transfer of the original proprietorial firm to the present petitioner No. 2 was incomplete as such the petitioner faced some problems in getting the benefit under the said GECL scheme. The petitioner accordingly approached this court by filing this writ petition seeking for the following reliefs:-
Page No.# 3/5 “1. Effect the change in name of proprietor of the firm in favour of the petitioner No. 2 and 2. Allow the petitioner firm to avail benefit of the GECL scheme and on cause/causes being shown, if any, and upon hearing the parties and on perusal of the records would be pleased to make the Rule absolute and/or pass such other order or orders as to Your Lordships may deem fit and proper in the facts and circumstances of the case”. Keeping in view the issue before this court, by an order dated 15.10.2020, a meeting was directed to be held between the petitioner No. 2 and the respondent Bank and in terms of the said direction on 19.10.2020 a meeting was held between the present petitioner No. 2 and the officials of the respondent Bank. In the said meeting, the petitioner No. 2 was asked to submit the following:- “After the wrap up of the discussion Mr Prayag Pulin Burgohain representing M/s Luhit Commercials was asked to submit the following.
Closure of the NPA Account standing in his personal name as shown in CIBIL report.
Power of Attorney duly registered in his name from his mother Mrs. Dipika Rani Buragohain to operate the Cash Credit account on her behalf.
DIC registration of the firm in the name of Mrs. Dipika Rani Buragohain.
Compliance of the terms and conditions of the Last renewal dated 24.04.2019 specifically completion of documentation formalities of the guarantors and creation of valid mortgage by all the legal heirs of the mortgaged property.
Account statement of the current accounts maintained in SBI and HDFC bank in the name of M/s Luhit Commercials”. In the meantime, the respondent bank in principle had sanctioned the loan in favour of the petitioner No. 1 proprietorial firm under the said scheme GECL. The said loan was sanctioned as per the sanction letter dated 30.10.2020 in the name of Ms Dipika Rani Buragohain, the earlier proprietress of the petitioner No.
As per the terms of sanction, two of the terms namely closure/regularization of the NPA Account standing in the name of the petitioner No. 2 and DIC & GST registration of the firm in the name of earlier proprietress i.e.
Page No.# 4/5 Mrs. Dipika Rani Buragohain became the hurdle so far as the petitioner No. 2 is concerned. It is submitted by Ms. Borgohain, the learned counsel for the petitioner that the original registration under the District Industries Centre is in the name of Mrs. Dipika Rani Buragohain and on the other hand the GST registration stands in the name of the petitioner No. 2 which he registered after there was a proposal by the petitioner No. 2 to the erstwhile United Bank of India to transfer the proprietorial firm in his name. It is the contention of Ms. Borgohain that in the minutes of the meeting dated 19.10.2020 no such conditions were imposed inasmuch as the respondent bank accepted the DIC registration of the firm in the name of Mrs. Dipika Rani Buragohain and there was no issue in respect of GST. However, there was a specific reference for closure of NPA Account standing in the name of petitioner No.
From the submission of the learned counsel for the petitioners, it is found that the petitioner No. 2 is not in a position to change the GST registration to the name of the earlier proprietress. On the other hand, if the loan under the said scheme is to be granted in the name of the petitioner No.2 then the account standing in the name of the petitioner No. 2 with the status NPA has to be liquidated and only thereafter bank would consider the proposal of the petitioner No.
In view of the same, the petitioner No. 2 was directed to file affidavit thereby placing on record the time period required for liquidating the said loan account. As per the direction of this court, the petitioner No. 2 filed affidavit on 23.03.2021 wherein it is stated that the petitioner No. 2 is not in a position to liquidate the said account immediately as the business hardly recovered from the pandemic, however an endeavor shall be made by the petitioner No. 2 to close the account within a period of six to eight months subject to the prevailing near normal conditions. It is also submitted by Ms. Borgohain that the scheme under the GECL was extended till 30th June, 2021 by the Central Government. Mr. Ganguly submitted that the time period stated in the affidavit by the petitioner No. 2 as too long and there is every possibility of the scheme being withdrawn by the Central Government and under such circumstances, though the bank in principle sanctioned the loan, the same may not be available for the said period of six to eight months from today. It is further submitted by Mr. Ganguly that the sanction of the said loan was on 30.10.2020 which stands valid normally for a period of twelve months from the date of sanction.
Page No.# 5/5 In view of the said contention of Mr. Ganguly coupled with the stand taken by the petitioner No. 2 in the affidavit, this writ petition stands closed with a direction to the respondent Bank to sanction the said loan in principle which it had already done and consider the period of liquidation of the account standing in the name of the petitioner No. 2 as NPA for regularization of the same within the period as stated in the affidavit. Needless to say that once the account standing as NPA in the name of the petitioner No. 2 is liquidated, then the name of the proprietor of the said firm shall be changed to the name of the present petitioner No. 2 from the earlier proprietress. Accordingly this writ petition stands disposed of with the aforesaid direction.
JUDGE Comparing Assistant
Reproduced from the public record of the Gauhati High Court. Verify against the court's own copy before relying on it. Income tax judgments are on bharattax.net.