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2023 (3) TMI 792 - HC - Indian LawsRestriction on having current account with other banks if that customer already had credit facilities in the form of Cash Credit/Export Packing Credit (CC/EPC) in the banking system. - RBI banking Policy - Seeking release of attachment of petitioner's accounts Petition tells us that with HDFC Bank, Jindal Cocoa has a current account. It also had availed certain Export Packing Credit facilities - Jindal Cocoa claims that HDFC Bank wrongfully reversed and withheld some amounts of interest subvention and wrongfully levied penal interest and other charges, debiting these to Jindal Cocoa’s current account and EPC facilities. HELD THAT:- As respondents point out, the entire purpose of the circular is to protect lending banks and to ensure smooth recovery. The RBI’s Affidavit notes the prevalence and upsurge of frauds by diversion of funds: those that ought to have come into the lending bank’s account were being moved into current accounts elsewhere. The circular attempts to curb and stop this. The circular’s purpose is not achieved by permitting an unregulated dispersal of inflows into diverse accounts at the option of the borrower. Correctly read, the circular demands what is best thought of as a funnelling or channelling mechanism: once there is a lending account with an exposure of over Rs 50 crores, all inflows must be routed into that lending account. Inflow and outflow transactions in other current accounts are not permitted. If there are other current accounts, then these are carefully calibrated to be only collection accounts. The provision for an escrow mechanism is predicated on there being multiple lending banks. One of these may be chosen as the escrow bank. But where there is only one lending bank and there are also several other non-lending banks where a borrower has a current account then there is no question of an ‘escrow’. The entire concept of an ‘escrow’ mechanism is to create a common pool from which disbursement is triggered only on the occurrence of defined events. Multiple lenders would be rival claimants to the funds in the escrow account. Which one should have priority, or how the funds should be shared (equally, pro rata to the size of the debt, according to priority of security, etc.) are all matters to be decided and which relate to distribution from this common escrow pool. In Ultratech Cement Ltd & Anr v State of Rajasthan & Ors. [2020 (7) TMI 513 - SUPREME COURT], in paragraphs 25, 25.3 and 25.5, the Supreme Court referred to the decision in Desh Bandhu Gupta [1979 (2) TMI 175 - SUPREME COURT] but did not depart from the principle. In fact, in paragraphs 25 and 25.1, we find that the attempt was to persuade the Supreme Court that the authority’s understanding deserved to be accepted. The doctrine was said to be embodied in a maxim which meant that the best way to construe a document would be to read it as it would have read when made. In paragraph 25.3, the Ultratech Cement court said that the principle is applied as a guide to interpretation by referring to the exposition that the document received from the competent authority at the relevant point in time. The Ultratech Cement Court said that when there is a contemporaneous construction placed by an executive or administrative authority charged with executing the statute — in this case the RBI — the Courts would lean in favour of attaching considerable weight to it, but it cannot be said that the understanding of a particular administrative or executive authority must be applied even if it is shown to be clearly erroneous. We are unable to see how in the facts and circumstances of the case this can be said the application of the circular can be said to be erroneous. On the contrary, it is our view that granting the Petitioner relief would in effect not only run directly contrary to the circular but would possibly permit the continuance or growth of the very mischief that is sought to be addressed. There is no merit in the petition - petition dismissed.
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