- (1.) The legal issue that has arisen in this petition under Article 226 of the Constitution of India is whether the inclusion of the name of the petitioner company in a special list maintained by the first respondent corporation amounts to the petitioner company being blacklisted. If the placement of a person's name on the specific approval list (SAL) is deemed to be the blacklisting of such person, the writ of prohibition as sought has to be issued to quash the decision since it is the undeniable position that the petitioner company had not been afforded an opportunity to present its defence prior to its name being placed on the SAL. If the inclusion of a name in the SAL is not perceived to be the blacklisting of such person, it has then to be assessed whether the respondent corporation has been arbitrary in its decision to include the name of the petitioner company in the SAL.
(2.) The second petitioner, who is a director of the petitioner company, appears to be the principal person in control of several commercial entities and may be regarded as the controlling mind of the several group companies. Two other companies under the control of the second petitioner obtained credit facilities from banks. The respondent corporation, which is a government company, provided credit insurance covers to the relevant banks on export finance facilities extended by the banks to such other companies controlled by the second petitioner. Though the petition makes an attempt to feign ignorance of the transactions pertaining to the two other companies, Contessa Commercial Private Limited and SRM Private Limited, since the second petitioner appears to be the controlling mind of such companies, the petitioners ought to have avoided the hide-and-seek in the petition and made a clean breast of the second petitioner's association with the other transactions.
(3.) True to the Indian commercial ethos after obtaining bank loans, Contessa and SRM failed to repay the amounts owed to the respective banks. The banks or the assignees of the banks' debts instituted proceedings against the said companies controlled by the second petitioner before the appropriate Debts Recovery Tribunal or, at any rate, one of the banks approached such tribunal. In Contessa's case the relevant bank entered into a compromise and received Rs.1.40 crore against its claim of Rs.1.80 crore. The claim against SRM was settled at Rs.1.52 crore against a certificate sought for Rs.3 crore. In view of the settlements by the banks, the respondent corporation suffered a loss in either case as it had covered the exposure of either bank to the exporter. The corporation refers to its circular of August 6, 2007. Clause 14 of the circular is relevant in the present context. Clause 14.1 recognises the previous guidelines which provided that "if in respect of a claim paid account, the bank had concluded OTS and the Corporation had approved the same, if a part of the claim paid amount is to be sacrificed by the Corporation, the exporter shall continue in SAL for a period of 3 years." The new guidelines formulated by the circular is recorded at clause 14.2 thereof: "14.2 It has now been decided that no fresh exposure can be taken in respect of any exporter or group where the Corporation has sacrificed the claim paid amount either in part or full, unless the entire claim paid amount is received by the Corporation. It has also been decided that such an exporter or Group of the exporter or any connected person shall not be removed from SAL, if the Corporation has to sacrifice part of the claim amount on account of any unit of the group. However, where the sacrifice is on account of the legal charges incurred by the bank which could not be recovered from the exporter, the exporter can be delisted based on the recommendations of the branch office. As regards the legal charges, the Branches shall carefully examine the settlement proposals and satisfy themselves that these charges were borne by the bank and could not be recovered from the exporter. If the same is recovered from the exporter, the full claim paid amount shall become refundable and branches have to ensure the same before recommending delisting from SAL.";