M/s. RKI Builders Private Limited vs Union of India

* WEDNESDAY, THE TWELFTH DAY OF OCTOBER TWO THOUSAND AND TWENTY TWO PRESENT THE HONOURABLE SRI JUSTICE P NAVEEN RAO AND THE HONOURABLE SRI JUSTICE J SREENIVAS RAO WRIT PETITION NO: 35063 OF 2022 i I I I I T I I I rI II t E:; i ; Between: M/s.

RKI Builders Private Limited, Plot No.

3/fu1 and Plot3lN2 TSllC, IALA, Chedapally, Now Medhcal Malkajgiri District, T.S.

Represented by its Managing Director A.

Rajendra Prasad. lDA, Cherlapatly, ...PETITIONER AND 1 3 Union of lndia, Ministry of Finance, North Block, Central Secretariat New Delhi, Rep by its Secretary.

Reserve Bank of lndia, Saifabad, Hyderabad-SO0 004.

Canara Bank (Erstwhile Syndicate Bank), Mid Corporate Brarrch D.

No.

6-2- 983, 1" floor, Diamond Towers, Main Road, Khairatabad, Hyderabad - 500 004. ...RESPONDENTS Petition under Article 226 of lhe C,onstitution of lndia praying that in the circumstances stated in the affidavit filed therewith, the High Court may be pleased to grant an order, direction or writ, more so in the nature of mandamus: a.

Declaring the action of the Respondent Bank in not restructuring the Petitioners toan by giving the Petitioner the benefit of GECL/ECGL schernes for covid-19 related stressed asset as per the RBI and MSME guidelines or process the settl€ment of the Petitioners loan account as per a Non-Discriminatory Non Discretionary OTS Scheme as illegal, arbitrary, highhanded in violation of Article 14 of the Constitution of lndia. b.

Declare the proceeding dt.02l08l2022 (emailed on OBIOS/2O22) whereby the OTS proposal dt.O410612O22.131O612022/510612O22 and 3O|O612O22 has been rejected and asked to be rmproved without asstgning any reasons, without due consideration of the Banks own internal guidelines, the RBI guidelines to lmplement a non discriminatory and non{iscretionary OTS scheme, as illegal arbitrary. highhanded in violataon of Article 14 and 21 of the Constitution of India. ilzil : . ilzil : . [ 3306 ] HIGHCOURT FOR THE STATE OF TELANGANA AT HYDERABAD (Special Original Jurisdiction) -7 c.

Declare th account as NPA on SARFAESI Act, inc 0910912022 as illeg provisions of SAR violation of and Guidelines for MS Corrective Action I resolution of MSME lndia. d. with a cor letter dt.02-08-202i No.3 bank to apply Petitioner through Respondent Bank Guidelines and Ban lA NO: 1 OF 2022 Petition unde in the affidavit filed stay all fur-ther rec including p roceed rn auction on 09/09/20 lA NO: 3 OF 2022 Petition unde Section 151 CPC praying that in the o r,tuntstances stated in the affidavit filed in support of the petition, the High Cou 1 ,na,l be pleased to ciirect ihe Responot nt Bank to permit the Petitioner to operat3 a Ourrent Account on the file of the Re ;pondent bank or any other Bank for its rlr,ly operations. lA NO: 2 OF 2022 ) action of the Respondent Bank in decl ing the Petitioners 0110312021 and taking coercive steps urr,l'rr tre provisions of .rding Sale Notice dt.06/0812022 fixing tlre date of auction on rl, violative of the intention of the Legisl;rture in enacting the AESI, in violation of the provisions of SAIIFAESI Act, in iecurity lnterest Enforcement Rules ir violation of RBI ME for restructure, rehabilitation anrr imf,lementation of lans, in violation of the RBI guideline ; for settlement and Loans, in violation of Article 14 and 21 : f the Constitution of sequential prayer to set aside the Res:ondent No.3 bank's and Sale Notice dt.06-08-2022 and dir:ct the Respondenl he guidelines of RBI in the matter of set lemelt of loan of the One Time Settlement, or in the alt3"native direct the r restructure the Petitioner's loan acc()unt irs per the RBI :s internal policies.

Section 151 CPC praying that in the r;rrr:unrstances stated n support of the petition, the High Cou 1 rnarr be pleased to rvery proceedings under the provision; of SARFAES| Act ls pursuant to Sale Notice dt.

Notice dt.06/08/20,12 fixing the date of ,2 Between: Canara Bank (Erstwl ile Syndicate Bank), Mid Corporate Brancir [).

No.6-2-983, 1'r floor, Dramond Towe s. trilain Road, Khairatabad, Hyderabad 1)rl() 004. ...Petition erlRespondent No.3 lt3il ,.)' AND 1 M/s.

3lN1 and Plot 3 /A/2 , lDA, Cherlapally, TSllC, IALA, Cherlapally, Now Medhcal Malkajgiri Districl, T.S.

Represented by its Managing Director A.Ralendra Prasad. ...Respondent No.1/Petitioner 2.

Union of India, Ministry of Finance, North Bhrck, Central Secretariat New Delhi, Rep by its Secretary.

3.

Reserve Bank of lndia, Saifabad, Hyderabad-SOO 004. ...Respondents/Respondent Nos.1 & 2 Petition under Section 151 CPC praying that in the circumstances stated in the affidavit filed in support of the petition, the H(7h Court may be pleased to vacate order dated 071O912022 in |.A.No.0212022 in W.P.No.3506312O22 lor reasons aforementioned.

Counsel for the Petitioner: SRI RAJA SRIPATHI RAO FOR SRI.

V.

MURALI MANOHAR Counsel for the Respondent No.1: M/S.

B KAVITHA YADAV {SC FOR CENTRAL GOVERNMENT) Counsel for the Respondent No.2: NONE APPEARED Counsel for the Respondent No.3: SRI MANAV GECIL THOMAS The Court made the following: ORDER PNR,J & JSR.J tt P tio 35061 of2022 2 H. )N'BLE SRI JUSTICE P.

NAVEEN RA:I & HO \I'BLE SRI JUSTICE J.SREENTVAS R4.o !(RtT PETITION NO.35O63 of tzoi;i| ORDER: U'er Hoti' Ie sn Justtce P.NdL,een Rc.o) Heard Sr Raja Sripathi Rao, learned couns(: appearing for Sri V.Murali M Lnohar learned counsel for petitione r anri Sri Many Gecil Thomas le trned counsel for third respondent barrk 2.

Petitioner is a Micro, Small and Mediurn Enterp -:,se (MSME) unit.

It has availecl :redit facility from Syndicate Bank, ,,r'hich was later merged with C rnara Bank and defaulted in repayrnent. epayrnent.

The third respondent bar Lk declared the loan account of petiti<lner as a non- performing ass, t (NPA) and has taken recourse to mea surc:s prescribed by the Se curi ization and Rcconstruction of Fina r,c ial Assets and Enforccmt:nt o Security [nterest Act, 2OO2 (for shcrl , 'Act, 2OO2J to recover thr: loa r.

It has issued demand notices on 3.5 .2O2 |, 16.7.2021, 18.10.2021 an I 15.2.2022 under Scction l3(2) of tht Act, 2002.

It has issued pcsse.-sr ion noticc on 4.5.2022.

On 6.8.2021'. third rcspondent bank issrrcd s rlt: notice prrrposing to conduct ()-auction cf the secured asscts or) 9.9 2022 llxirrs the rcservc pricc as { 2{).O4 cror(:s.

After issuanct: ol s lr' rroticc. tlrere rv:rs corresponrlence to s:ttle thc loan CCoLrnl [or 3ne 'l'inlc S('tticrncnt (OTS).

It a tJrears, aftcr duc cle libr:r:rtions, [)r]trlioncr srrtrrtritted fresh OTS prr,l;,rsarl ior I 23.55 crrrres vrrlc l, tt(:r (l;lt('(l lit n -t022 and vidc lctlcr diir('d '22.a.2022 r(:qLr('slc(l 1lr,: rt'slrrrrclr.nl l)irnk ro rccall the salc rror ir,.' rl tlcd tr.l3.-2022.

PNR.J & JSR,J wP No J5063 of 202) Alleging that no further action in the rnatter is taken by the bank but proceeding to conduct e-auction, this writ petition is ftled.

Petitioner sought omnibus prayer touching upon account being declared as NPA, rejection of OTS, not extending the benefit of GECL/ECGL, violation of Reserve Bank of lndia (RBI) guidelines and conducting e-auction to sell secured assets.

Extensive submissions are made by learned counscl for petitioner and learned counsel for third respondent bank touching upon various aspects of reliefs sought in the writ petition.

However, against measures initiated by the third respondent bank under Act, 2OO2, leadtng to conducting e-auction to sell sccured assets, Section 17 of the Act, 2OO2 provides remedy before the Debts Recovery Tribunal.

Tribunal.

As Court noticed that this writ petition is filed directly under Article 226 of the Constitution of India without availing the remedy under Section 17 of the Act,2OO2, the submissions of learned counsel are considered on the aspect of maintainability of the writ petition only.

4. [rarned counsel for petitioner vehemently contended that the third rcspondcnt bank erroneously classificd the petitioner's account as NPA. [t is an MSME unit.

Having regard to spread ol Covid- 19 virus impercting ovcr all business and dcvelopmcnt activity, petitioncr's activitv :rlso affected.

Adding to this problcm, several bills were pcnding rvith the Government causing harclship in meeting the loan commitmcnLs.

He would submit that RBI guiclelines required the third rcspon<lt'nl Ir:rnk to apply moratorium orl int( rcst on cash crcdit lirnits l :l : i I I I PNR.J & JSR,J u/P No 35063 of2022 particularly to l,[SME units but the same was not ext,]nde(l.

It has not extended addit cnal loan facilities as required by Cc,vid- 19 protocols and its own nc i-ms- He would submit that as per FlI3l guidelines, he has a right t( seek enforcement of these measu res zrnd if these measures were properly applied the petitioner accoult could not have been declared s NPA.

He would submit that prayer i A and B cannot be adjudicated ry the Debts Recovery Tribunal and th,:refc,re he has no other efficacic us remedy except to invoke thr exl.ra ordinary jurisdiction of his Court.

He would submit that ur.rier liection 17 of tlre Act, 2OO2, the Tribunal can only go into the a:;pect whether the bank/ financial institution has complied with the mandatory requirements c l'the Act, 2OO2 and therefore cannot gl int() the decision to declarc the pet itioner's account as NPA.

He worrld submit that Detitioner's a( ror !nt was standard account as o..

3l .3. o..

3l .3.2O21 and thcrefore it car not lrc classified as NPA, l 4-l- l,earnccl Eank of Himmatlal Ha: Daruka Vs Ht Works Vs Rese :ounsel relied on following decisions: Earoda and others Vs Gopal Shriram l'anda. and othersr; ilal Mehta Vs State of M.P and othr rs2; Anup Kumar FC Limited and others3; and Guru l,lanal: Engineering vc B:rnk of India and othersr.

5.

Prt cort. o. rrccorclitrg to lcat ttcd aounsel lcrt rcsP0ndcnL bank pctitioncr is c r;:lk'nging vrrrious stcps taken by thr: rhird respondr:nt ' tvtANU/MH()981,:')t I t t,l j.t sctt t I ll 'lrta.Nt; I,H {)759,2 ll ' IUANI] PU r.i.r:,1 t-' I II I I I I I { Jlt I I I l II ; ii , T t I E I E $ I I i PNR.J & JSR.J wr tio-35063 oI2022 5 bank such as declaring t-tre loan account as NPA, demand notices and sale noticc, but these measures are taken as per the provisions of the Act, 2OO2.

On any grievance arising out of measures taken by the bank to recover the amounts due to the bank aggrieved person has to avail the remedy provided by Section l7 of the Act,2OO2 and therefore writ remedy is not available.

He would submit that against demand noticc under Section 13 (2) petitioner has not submitted explanation as required by Section 13 (3-A) and therefore cannot question the subsequent measures taken by the bank.

5.1.

He would submit that petitioner has suppressed ttre fact that already S.A.Nos.2O9 and 2lO of 2022 are filed by guarantors where petitioner is a respondent.

He is very well aware that the remedy under Section 17 is an effective and efficacious remedy.

This writ petition is filed behind the back of the bank to stall proposed sale.

The petitioncr is not prosccuting the litigation before this CourL born frdely.

5.2. l,earned counsel relied on following decisions: S.V.Developers Vs State Bank of Indias; Devi Ispat Limited Vs 5816, Phoenix ARC (Pl Ltd., Vs Vishwa Bharati Vidya MandirT; Dr.Yashwart Singh Vs Indian Banks; zind M/s.

Garg and Company Vs UCO Bank Ltde.

6. k Ltde.

6.

Issur: for r--onsidcration is whether pctitioncr shoulcl bc relegatcd to avrril rcmr:dy rrnclcr Scction l7 of the Act,2OO2?

5 wP Nos llof,7 ('f l{)19 dt 7 6.1(,ll " 1zot,r; s st'c' tr.: '(:-o:2) : sct: i.ti 8 2015 sc( onl.inc t)rl q6li o CWP :7 j.i l(,lldarcd li J l(|ll I'unjab & t{aryana HC I!

I, I PNR.J & JSR,J ttP No.l506.l ol202) 6 7.

In the fo lowing decisions, the scope and object of the Act, 2OO2 and remedies p -ovided under the Act,2OO2 were considered.

7 .1. [n Mardi r Chernicals Ltd and Others Vs Union of Iadia and Othersro, valid ty of the SARFAESI Act, 2OO2 was chzLltenged.

Hon'ble Supreme Court held as under: "45. tn the lackground u'c have indicated above, we ma.' consider as to what forum or remedies are available to the bormwer to ventilate his grievance.

T 'c lr,,'qro* o! servtng d ^ottce upo^ t tc bo.'tottrE ur.ter sr.tb-sectld,- (2) o, sect{oa 13 ,f th-e Act 1.s, thdt d repE ndy be srbrattted bg the boffourer e-xlrldlai/tg t E ,€asons o : to tlhg ,ncd.sures ndg or ,ttog ,tot fu ta.ke/tr uade. sab-slxaiott (4) ot Section ,3 1r ca* of ^on<ol,,!Jtta,n.:e urith ',.otl.,e utthla 6O aays.

The creditor must apply ts mind to thc objections raised in reply to ;:r;h notice and an internal mechanism must be particularly evolved tr consider such objections aised in thc reply to the notice.

Therc may be some meaningfui :onsideration of the objections raised rather than to ritually reject them nd proceed to take drastic measures undcr sJb-section (4) of, Section 13 , f the Act- Once such a duty is envisaged on tlre part of the creditor it r ould only be conducive to the principles of larrness on the part of th( banks and hnancial institutions in dealing \vith their borrowers u apprisc thcm of thc rcason for not acceptin-p the cbjections or points ra ;ed in reply to the notice served upon them b:[ore proceeding to take me. sures under sub-section (41 of Section 13 Sucl- reasons, overruling t re objections of the borror. he borror.uer, must also be c )rnmunicated to the borrow( - by the secured creditor.

It will onll' b(r ir fulfilnent of a requi;-cment irf rcasonable ne ss and fairness in tl rr: de alings o[ institutiona financing which is so important from the porrt of view of the economy of :[re country and rvould scrve the purf()se in the growth of a healthv ecc rolnJ.

It woultl certainly provide guidance -c the secured debtors in , eneral in conducting the affairs in a manne. that they may not bc four I defautting and being rnadc liablc for thc rnsavoury steps contained t -rder sub-section (4) of Sectron 13.

Ar the sanre time, more importantly rl1: rnust make it clear unequivocally that c( rnmu!rication of the reason lbr not accepting ttle objections lakcn c, th: secured borrower rn y qot be taken to givc.'ccasion to rcs('!-t to s-ch pr-oceedings q,hich are not permissible und(:r thc provrsir>ns o t he Act.

But communica ion of reasons n(rt to acccpt thc obje,--tions tf the borrorr,,er, r,!,ould certz nly I)e for tl)(' [)rrrpos( of his kno\r'lc(lge rv]rr:h uould be a step fonvar torvards his right to kr)ow as to \\'lll his olllciioni have not been lcccp ed by thc scctrrr:d c|r'<lrtor rrtro intends lo rcsorl to harsh stcps of ta .ing ovcr thc nranalacrr('ttt/'busir'lcss of \,tz s,tcu'cd assets without intr i-\,enr ion of tht: court SLtch a pe rson rlj i-('r;l)c, r i)f \\.hom stel]s under Secti ,n l3(4) ofth.

Act arc lrliclv to lxr takcn c:rrrr(,1 be lcnied thc right (o kn $ thc rcason ()[ rron ,l( ccptatrr:<' anci ,:l lrrs r)l,jccrions.

It is trlle, ils p( iirc pro!,isions undcr rhc Act, trc Lritv rrrt 9e ,:ntitlcd to chalk rrge t e reilsons contntunicat(d or tllc llkcl\ actto.r :,f tlrc secured credilor aL tllal l)oint of titnc Lrnlcss his n:allt ro irpp oach thc Debts Rccor'ctv T t,-rrt:rl as l)roIr(lc(l LI (lr'r S.('tr() l7 oi rhc,\r. oi rhc,\r.I n1n1ra"a,r,t '"(lr)r)r)l s< r ;rr I I I t I I I ?NKJ &JSRJ wP No 1506t o12022 7 any measure having been taken under sub-section (4) of Section 13 of the Act.

50. lt has also been submitted that an appeal is entertainable beforE the Debts Recovery Tribunal only after such measures as provided in sub, section (4) of Section 13 are taken and Section 34 bars to entertain any proceeding in respect of a matter which the Debts Recovery Tribunal or the Appellate Tribunal is empowered to determine.

Thus before any action or measure is taken under sub-section (4) of Section 13, it is submitted by Mr Salvc, one of the counsel for the respondents that ttrere would be no bar to approach the civil court, Therefore, [t cannot be said that no remedy is available to thc borrowers.

We, however, find that this contention as advanccd by Shri Satve is not correct.

A futt reading of Section 34 shows that the jurisdiction of th€ civil court is barred in respect of matters which a Debts Recovery Tribunal or an Appetlate Tribunal is empowered to determinc in respect of any action taken 'or to be taken in pursuance o[ any power conferred under this Act".

That is to say, the prohibition covers even matters which can be taken cognizance of by the Debts Recovery Tribunal though no measure in that direction has so far been taken under sub-section (4) of Section 13.

It is further to be noted that the bar of jurisdiction is in respect of a proceeding which matter may be taken to the Tribunal.

Therefore, any matter in respcct of which an action may be taken even later on, the civil court shall have no jurisdiction to ent€rtain any proceeding thereof.

The bqr ol ctull court th,ls dltpljes to .rrl such fia.tt?rs lJr,rlch .nzg be ta'keft cogftizarcz ol bg t E ,re&s R?-o&ry fifU^aL dwtt rrorn those natt .s 7^ uthlch 'n4as1ncs ,taw allzadg ben talen undcr s7rl}scctto/r (4) oJ secctorr 13.

68. rr 13.

68.

The main thrust of the pctitioners as indicated in the earlier part of this judgment to challenge the validity of the impugned enactment is that no adjudicatory mechanism is available to the borrower to ventilate his grievancc through an independcnt adjudicatory authority.

Access to justice, it is submitted, is the hallmark of our system..................

76. [n rcgard to the submission made by the parties as indicated in the prcceding paragraphs, we would tike to make it clear that issue ofa notice to the debtor by the creditor does not attract thc application of thc principles of natural justice. lt is always open to tell the debtor what he owcs to repay.

No hearing can be demanded from thc creditor at this stage.

So far as the provision of appeal is concerned, we have already discusscd in thc carlier part of thc judgment that proceedings undcr Scction i7 of thc Act have t>ccn $,rongly dcscribed as appeal before the Debts Rccovcr), 'I'ribunal.

It is in fact a forum whcre procecdings arc originally initiatcd in casc o[ any grievance against the crcditor in rcspcct o[ any mcasurc taken under sub section (4) of Section 13 of the Act.

Ilcnce, tlle decrsions on thc l)oint as to lvhether provision for an appeal is essentiarl or nol arc not o[ an\ assistitnce in the facts of ttrc prescnt cas(:.

77.It is .rlso true that till tr].c s.age oI ftaki,.g oJ the denand a^d ^otice u^dcr Sectio( t3(2) oJ thc Act, ^o he<lring can be ctained Ior bg .he bo,[email protected]...........

80- Under ttrc Act in <:onsi<lcratiorr, u,e frnd that bcfore taking actioit a notice of 6O davs is retquirc<l to bc given and after thc rncasurcs undcr Section l3(4) of thc Acr trave lrcen raken, a mechanism has trecrr provi(led i i --- PNRJ &JSR.J wP No J50fi of2022 8 under Sectio r 17 of the Act to approach the Debts Recovery 'lribunal.

The abovenoted >rovisions are for the purpose of giving s( rne n:asonable protection t( the borrower. borrower.

Viewing the matter in the abo'r< perspective, we find what emerges from different provisions of the Act, rs zrs fc,llows: 8l . tn vieu q the dlscussio^ held ln thc JudgtEttt d d the laftdi!

9's a^d dLpctj,o,.s cotttal'red tn he preccd.ing paragraphs, tlp hold that the bon'o Le''s uould get d rcdsonabE Jd ' .r?al dnd ortportllnltg to get thc rnattct d.d.fitdtcat a upon beiore ttr2 Debts Reco'x.r Tributtd.L TrE ellect of sotri,! of Ute pr-vlsTons ,ing Le d bit ,tdrsh tor sotue ol the lx 'rouErs b{t on that grou^d thc tnptgr@d p.oltlslo^s ,rl Ue Act cd rtot be sdld to be lnconstlttt'd.o'rd.t t^ tleu oJ tE ldct that the obJat of the Act ls to dchleve qteed zr recouery of the dues decla,'ed ds JvPAs and betr,r awttablllq of capttd.t Aqukl y did ,esollt es to help l^ gt'ototh of the eco^omg ( t the cou^d! d.^d uevdrc ol the ,eople 1^ ge^eral ,.nhlch umnld subse,'t]€ tl,c ptbllc tnL, est.' (Emphasis st pr rlie c ) 7.2.

In Tranr core Vs Union of Indialt.

Honbl< Supreme Court analyzed in-der,th the object behind bringing Debts iccovery Tribunal Act, 1993 (Act, 1993) and SARFAESI Act, 2OO2, sco[',) an,l application of the enactmc rts.

The Hon'ble Supreme Court held rs under: nReasor 12.

The NP reconstructi and for mat Fls to real liabilttg mis, to take po: performing , The NPA A companies \ the borrowe sale.

The sa to take borrower.-.. , for e,n.o.ctment ol the NPA Act, 2OO2 r Act, 2002 is enacted to regulate sccrntisation and ,n of financial ass€ts and enforcement of :e(:Lrrity interest :rs connected thercwith.

The NPA Act enable; Ihe [,anks and ie long-term assets, manage problerns of li{luidity, assef- rctch and to improve recovery of debts b1' c>rr:ising powers ;ession of securities, sell them and thr:re tr,, rcc uce non- sse!s trv adoD!inc maa<rrres f^r r'...lvprv :U1. l..rrrstrrrction. t further provides for setting up ol. assel r. . assel r.construction hich are empowered to take possessi<,n of s,":rLrcri assets of including the right to transfer by way of l<:as, ;rssirlnment or I Act also empowers ths said assct reconsu u'i rn .ompanies lver the managemcnt of thc l,us,r r:ss of the 14.

There is civil courts Parliamenl assignment colll.l not I trqu idate th 20O2.

The e DRT ,Act. 'l'l .ights of tlI S,(rtc ftnancr 31 thcreof- 7 oJ the DRT A< one more reason for enacting thc NPA Act, 20)2 When the iailed to expcditiously dccide suits filed t;i' -l e Ianks/FIs, nacted the DRT Act, [993.

Howevcr, t)RT ciirl r,ot Irrovide for )f debts to secrrritisation companies.

The stcrr,'cl irssets also r liquidated in tiruc ln ordcr to crnpo\\''l r,r rks or Fls to asscts and thc securcd interest, tlle llPA Ac rL:rs rinacted in rarctment of the NPA Act is, thcrcfore. rrot irr r r"ollirLion of thc -' NPA Act removcs thc fcttcrs s'hich 1\erc in r\ st( [('c on the sccure<l creditot's.

Thc ,{P'e z{ct is i^spired bq tl.e I rovisions of the tI Co"]ooratio,ts Act, 1951 ("the St.(: Act'l, ifl /Jaraicuiar Scctioas 29 and e NPA Act prcceeds o^ the 6asis that the liabtlity cl the bo.ro,,*r to ,tdtlised; t,[dt thc debt hds bccot tE due aad ah<.t o 1 .tccot!^t of delag the borrouer hds becone *bstaaddrd a^d non Fx'r 1t ntnt. the objcct as tuell as the I,IPA Act is rccoocry oI debt by no,r.<tdhtj icatory process. .ctli4.ents providc tor ct,'t.ulatioe remedies to tir. se r.rcd ..cd.|to.s.

By rcttcrs on the rights of tltc scdrcd c.edito., he t L,iuct d nght to more o! the cumul@ti.'e rcmedies The obJe.t b.hin,'S.cri.,.

13 olr the :e.tio'r 17 r/u Section 19 oJ .hc rR?

Acr ls thc lan., t dmt lu, recoucry " (toos) r s(-c ll:, I PNR.J & JSR.J tY?

No.3506J o/ 2022 of debL Coaccprtallg, the.e ts ^o ilteretua or lmpliecl Inco^sistencg betuEea thc t@ rc@daes.

TLcrcfore,4s stated o6(,r€, the object bc,zi^d thc e^dccac^x o! thc NPA Act as to occelefate the p"ocess oJ recoe,s oJ dcbt an<1 . cbt an<1 .o funove deJacaencles/obsascles ln the wag of realisacioa ol debt unaer .he DRT Aca by ttc e^acttuclrt of the NPA Act, 2OO2. .....,....,.,........" 8.

According to Section 2 (o), Non Performing Asset {NPA} means an asset or account of borrower classified by bank/ l-rnancial institution as substandard, doubtful or loss asset.

Account of the borrower in the books of the bank/Financial lnstitution is classified as substandard, doubtful or a {oss and the debt has become due (Tromscore case).

9.

According to RBI Guidclines dated 30.8.2OO1 a credit facility becomes an NPA where interest and/or instalment of principal remain overdue for a period of more than l8O days in respect of term loan.

It mandates the banks to establish appropriate internal systems to eliminate the tendency to delay or postpone the identilication of NPA.

10.

In Mardia Chemicals, Hon'ble Supreme Court considered the issue of classi{ication of asset as NPA. [t was contended that on the whims and fancies of the hnancial institutions, the assets are classif-red as NPAs.

The Hon'ble Supreme Court ncgatived said contention.

It has looked into the grclicy notified by RBI known as "RBI's Prudential Norms On [ncome Recognition, A.s-sel Cktssificntion and Prouisioning Pertaiting Tct Aduances" and rcjectcd the contclltiort that there are no guidclines [or trcating thc debt as NPA.

I1.

On NPA, in Transcore (suPral, l{on'ble Supreme Court notcd as under: ",,:i,H,1i:f,1, t0 " 13.

Non-per brming assets (NPA) are a cost to the econorn ' Wht:n the Act was erracted in 2OO2, the NPA stood at Rs l.1O lakh cro'::,.

This was a drag on the )conomy- Basically, NPA is an account whicit t€comes non- viable and on-performing in terms of the guidelines 8i!e1 by RBI.

As stdted i^ the tdrzol€'flt of ObJects and Reasons, NPA o,dscs oa oc1-<'11'rt o-f .'llsr'Idt h Itetoeen dssel a d La.bl,j]tv,- The NPA o.ccol,( t ls ar asset tn tle ha aCs of t:hz tu^k or FI. u^k or FI.

It reptcset ts dn dnou t "ecetvsble aftd ,cdfisable W ahe fu,J,l.s or irls.

I^ thdt s€as€, it ls an ossea in thc hc.,.ds o! the s"..Lt ed cr?.dltor- 1'herefo -,:, th€ NPA ACt, 2002 was rimarily enacted to reduce the non' perfor rrirlg ,.ssets by adopting m asures not only for recovery but also for -econstruction.

Therelore, hc Act provides for setting up of assct r'lconstruction companies, ;pecial purpose vehicles, asset management (ompanies, etc. which are :mpowered to take possession o[ secureri ilssets of the borrowcr in luding the right to transfer by way of lease, ass4grment or salc.

It also provides for realisation of the secured assets it also provides for takeover of the management of the borrower companv. ' 24 ..

Aft r classification of an account as NPA, a lar;t opportunity is given to th borrowcr of si.xty days to repay the debt.

Se( lion I3(3-A) was inserted t). ;rrnending Act 30 of 2OO4 after t.l'e judRrnt nt of this Court in Murd"itt alierticdls ii2OO+i 4 SCC 31 1l .r.'herelli' lrt tu:r rower is permitted o nrake representation/objection to the :e(:ured creditor against cli r:rrllcation of his account as NPA.

He can al,;<' oLject to the amorrnt (lr r if so ad!'ised.

Under Section l3(3-A), if tlle l,:trrk/Fl comes to the con.l lston that such objection is not acce )tirble. it shall communic t(: rr ithin one u,eek the reasons for non a )c(:ptance of the representa i()n/obJection.

A proviso is added to Secti( n I3(3-Al which states that the rcasons so communicated shall not conf,:r- tny right upon thc borro$ rr to file an application to DRT under Sectior r l7- l'he schcme o[sulr"st.r: iorrs (2], {31 and (3 A) of Section 13 ofthe Nll' \ct shorvs that the notic(: .rirder Scctiorl l3(21 is not merely a sllow-ca rs,: nr,tice, it is a no(icc o[ ( :rnan(l 'l'hat notice of demand is baseri on th€ looting that the debtor is r nci,'r ;r lialrihtr an.i that his account in rc:;pc,:,.,ri srrch liabilit)' i':as lrcr:r,r r substarrd:rrd. doubtful or a loss. or a loss.

Tllc rdel,,iiicalion of debt ancl tlre ,: r:,\ifi( atir)n of tl)e account as NPA is (ionr: ir a-'co|dance r',ith tllc qui(i( urcs rsstrcd t)y RBL Such notice o[ tlcnirnd therefore, conslrtLrlc :rl il(-tt)n lirkcn undcr the provisions of tlt(' 'lt'\ A-'t and such nolicc o1 ertliut(l (_irnrr()t bc <'omlrareri to a shclv (au.;(: not( e. ln fact, bcr:arrsc r r:i.r tli)llcc ol rlcmand rvhich constirutcs arr actton.

Section l3(:l r\l ro! r(t( s li)r arr opportunitr to the bo rrrrvcr to make rcprrs(:or. firrn t(] rlrc st,r:Lrred crcditor.

Sc(:tion l3{: ) ls r corrdition precedcnt t() tllc rn\o(;11ron of Scction t3(41 )f rhc NI)A Acr l)] thc bank 'FI )i,('(. thc (\t-r L:orrditions undcr Sccti()lt l3l2 I rr: tirlfitlcd. the nc\l str'l) rrlrir lr tlrr. l)iLnk or Irl is entitlc(l t(, tak,_' rs cllir(.r 10 take poss(ssi{) ()[ ll]a sa(.lltc(l itssa-,ls of the borrorr'r:r )r t( takc over ill:1Il,l!',('rt r:' ()i lltl. lrrtstrrr.ss oI tlle lx)rrou'cr or r.o rIrJ ( i!)l .1n\ IIt.inager I I I I I I I I l i I t I 23. ...

Orr -rading Section l3(2) it is clear that the r:rj,f s -rb-section procedds or the basis that the borrower is alreadl' und(r ,l liability and furt]lt:r tha his account in the books of the bank or F ir; clirssihed as substandar ,, doubtfut or a loss, The NPA Act comes inlo jt,rce only when both thesc r)nditions are satisfred.

Section 13(2) proce< <ls on the basis that the dc 't has become due. [t proceeds on the basis lr:!t ttre account ofthe borrc ver in the books of bank/Fl, which is an asse: o[ th: bank/FI, has becom, non-performing.

Therefore, there is no scoFs r)f a1y dispute rcgarding t rc liability.

There is a difference between ac:rral ,tf liability, determinat rn oI liabitity and liquidation of liabitity.

Se,:,.ion .3(21 deals with liquidr tion of liabitity.

PNR,J & JS&J tt *P No. tt *P No.3506i of2022 to manage the secured assets or require any person, who has acquired any of the secured assets from the borrower, to pay the secured creditor towards liquidation of the sccurcd debt." (emphasis supplied) 12.

From the discussion on relevant statutory provisions and opinion expressed by Hon'ble Supreme Court in Mardia Chemicals and Transcore, it is clear as crystal that once a loan account becomes substandard, doubtful or loss assct, in the book of a bank/ hnancial institution it is classified as NPA.

The RBI Guidelines clearly specify when a Ioan account reaches that stage to be classiired as NPA.

The steps taken leading to classifying a loan account as NPA is an intemal matter within the bank/ financial institution.

The Bank/financial institution notif-res the same in Section 13 (2) of the Act, 20O2 notice and calls upon the borrowcr to clcar the loan within sixty days.

At that Stage, it is open to borrorvr:r to rcspond and place before the bank/ financial institution his point ol vierv. [{e can also oppose declaring his account as NPA. [{c can r-t:11, 6,-, tlRI Cuidelines on various aspects.

The Bank/Financial instrttrtion is rcquired to consider tlre objections objectively and to take zr <let:ision. lt is arlso required to communicate the decision to Lhc borrou t'r.

13.

As analyzcd bt' l{orr'blc Srtprcnrt: Court in Mardia Chemicals and Transcore thcre is :r strrtr.ll()rilv prcscribed rcstraint in taking legal course by a borrorvt:r llclirrc Scctiott t3(4) of the Act, 2002 stagc.

Statute prcscribcrl this r:otrrst' haurrtg rcgard to zrccumulation of debts to Lranks stifling I hr: lxrnkinu/ llnrur<:iitl s('ctor- It is in public interest to fast track thc rccovcrv of clut.s lrr b:r r r k s / linancial institutions.

Thus, PNR.J & JSR.J B'P No.3506J oI2022 l2 in Mardia Cb emicals Honble Supreme Court he rl that scheme of SARFAESI Acl 2OO2 does not envisage any remed'r t,itl Section 13(4) stage is reachr,l. reachr,l.

It has gone to the extent of saying :lrat borrower has no right of he, ring at the stage of Section 13(2) a r ri he can only file objections unr er Section f 3(3-A) of the Act, 2002 Therefore, upto Section 13(4) r o remedy is provided to a borrorver/ g ra rantor.

It is the statutory sche ne that must be respected by all, r rore so when the scheme stood t re test of judicial scrutiny.

14.

After Set tion 13(4) notice, it is open to br>rr ;rver to approach Debts Recovery Tribunal under Section l7 of thc Act.

20orl.

The Debts Rccovery Tribu ral is competent to go into all aspect: L:ading to bank/ hnancial instit Ltion taking recourse under Scction I l(41 of the Act, 2OO2.

Perforce when the Debts Recovery Tribunz.rl c:..rrnirrcs the claim of borrower/gt arantor/person aggricvcd opposrng rrrc;rsures taken under Section 13(a) of thc Act, 2CO2 suclr :rs r;rki:-rg symbolic possession, not ce of sale of securcd assc't, taking pt r'-,ic:rl possession ctc, the borrov er/guarantor/ pcrson :rg{rievt:cl t':rir plr,-atl bclore the Debts Recoverl Tribunal his dcfent'c su,-'h r ,'tir,n including llt qrrll. r'1,Lssilying his alleged violatior of RBI Guidelirres lr'arlrrrg trr account as NPA ;llli llsl 1.;. lrurtlter, Iassifying loiln ir(( ()r.lr]l lrs N['A t;r bt:lbrc RBI :rlleg rg that its gr-riclclini : ,rrc r ioiirtr"l ,.1 lilt:d br:lbrc the ( rnlbudsm.ln.

Tltr.rr.i,)r(. r;rliir)q rr.('{)rlr , I-lt'lor-c r-ear'hing Sc<:tior.r l.|(.1) ,rt rirr' .\t i. -lUl).1 ; (, nr l)lir in t carl bc lrr 1'11;111L',,*a6 r, , t\ f il rc-nlcdy l ri, 1t.;tts thc PNR.J & JSR.J WP No.35063 o[2022 ll statutory scheme and ,scuttles the very object in creating special dispensation to recover the debts by banks/financial institutions.

The object and purpose of these two Acts have to be kept in mind while considering a writ petition hled against classifying an account as NPA.

It is not for no reason the legal remedy is differed till Section 13 (a) of the Act, 2OO2 stage is reached. s reached.

Till this stage, as consistently held by Hontlle Supreme Court, no cause o[ action arises to the borrower/ guarantor to seek legal remedy.

He has to wait till further steps are taken under Section 13(a) of the Act, 2OO2.

16.

Time and again, the Constitutional Courts are repelling the resort to writ remedy against classifying a loan account as NPA and various measures taken by Banks/ Financial Institutions under SARFAESI Act and relcgating parties to avail remedy under Section 17 of the Act, 20O2.

17.

Few of the decisions, on remedy under Section 17 of the Act, 2OO2 are notcd hcrcunder 17. i. ln Dr.Yashwant Singh the Division Bench of Delhi High Court rcviewcd thc dccisions ttf ottrcr High Courts on thc issue.

Thc learned Division Bench held as undcr: "(Yl We clrarv slrcogth for thc aforcsaid Proposition from Scction 2(o) of the SARI.'AESI Acl r|lrir:lr lcsts the sccured creditor with the powcr to classify an .lccou l .ls an Nl'A 'fhc authoritl, of tlre secured crcditor in this rcgard cann()t bc qur:strone<l Such authority of the sccured creditor to classifv tlrc ac(:ourrt ()l it borro\ver as an NPA has been rccognized in Mo.rdio.

Chemicals rtd. ar)d to Transcorev.

Union oJ In.dia (20081 I SCC 125.

All tlrat u as olrst'rr,c<l in Mardia Chenticols Ltd- q'as ttrat there must exist a spccilrc<l in(('.!ral chalrnel r,vhich should settlc thc doubts in asset classi{icalrorr TIrt' intlorluction o[ Scction I3(3Al has full]llcd thc said requirerur-rrt .rlso \!ir- lrrrcl a Single Judgc of the Calcutta t(igh Cotrrt il Core Cera taken a view NPA, the wri an issue in institutions i in Mqrdio.

A Madras Hig Indic has hr that an acco justiciabte ir Constitution account in rr uses the expl by the secur€ t'^" R .l & JSRJ b/P iro 15063 of)022 t4 ,nics Ltd. v.

Uniot of India AIR 2O08 Cal rl3 also to have hat once the bank authorities have classifie< a -r a(:count as Court would have littte or no role to plav ir decicing such iew of the complete autonomy of the Bank; i. e Bank; i.nd financial r asset classihcation under the SARFADSI r',)l anC upheld emica'ls I*d- and.

TYanscore- Similarly, a Djrision Bench of Court in Gsin-N-Nature Food Product:; v.

L.nion of d that if a Bank or financial institution forrnj arl opinion .nt of a borrower has become an NPA, such coinirn is not a Court exercising jurisdiction undcr Arti:lf 2i6 ot tt:.e )ecause Section I3(2) does not use the expr,:;-.rion "and his ;pect of such debt has become a Non Perforr ri:Lg Assct" but 3ssion "and his account in respect of :;uch d::r is :lassified I creditor as Non Performing Asset".

17 .2.

In Devi I: Devi Ispat thal and requested I Ispat.

But ban Act,2O02.

Dev bank classifyinJ bank.

Holding Sect ron l3 (3A Appeal preferre belore rhe l{on' slnce Devi [sP6 t lre bank under s ta t rrto rw mechz pat Linited (supra), on l8.l-2013 the bank informed the loan account was classified a:i N l)A on 16.

1.2013 ) regularize the account.

This rvas c(,ntcsited by Devi < proceeded to issue notice undcr Ser t i,rn I 3 (2) of the Ispat ftled writ petition challenging t rc clccision of the its account as NPA and also the lcttrrs is;suecl by the ihat petitioner has alternativc statut( 11 rcrncdv under learned single Judge dismissed t [,,: u'rit petition.

I thereon also dismissed.

Devi Ispirt th,:n filcd SLP rle Supreme Court.

Hontrle Suprcm,: (lolrrt hcld that t had an alterntive remed_v to ii'ialit rcfrrirscnl:rtion to Section 13 (3A) there s'as no rcas( n t() i)\, pirss thc nism.

17.3 In N.A.K G Cotfrbres Private Ltd Vs The Zon:rl Manager, UCO Bank and ano her, the petitioner r,vas agqritretl I r' cl;Lssif-t.irrg ]tis a('c()unt :rs NPA and filed writ petition ch:rlle rrgirrg Sc..rron l3(2) ol-Act -2(.)02 noticc da cd 9.5.2011.

Jt rvas c()nilrl(l(.(l 1lr,r t.lltssitic:rlion oI PNR.J & JSR.J trP No.35M3 of 2022 t5 their account as NPA was unreasonable in as much as { 90 lakhs was paid on 31.3.2011 and such classification was not in accordance with guidelines issued by RBI. ed by RBI.

It was also contended that even though explanation was Iiled in response to Section 13(2) notice no reply was given.

The learned Division Bench of madras High Court held: '14.

In the present case, admittcdly, no notice undcr Section l3(4) of the Act was issued by the respondents bank.

The onlv grievance of the petitioner is without giving a rcpl-y as required under Section l3(3XA) of the Act, the bank cannot procced furthcr by issuing notices either under Section l3(4) of the Act or under Section 14 of thc Act.

Thus, it is clear that the petitioner, by precmpting the action of the bank, had hted the present writ petition.

Such a course is not opca to the petitioner especially under thc writ JurisJiction.

Even assuming that there is a viol,ation in respect of the proceclurcs contemplatcd under Section 13(2), 13(3!(A) by the bank, the only remcd]' .rvailablc to the petitioner is to approach the Debt Recovery Tribunal as contcmplated under Section l7 'of the Act.

Therefore, we hold that this rvrit pctition is not maintainable and the petitioner ought to hiivc approached the Debt Recovery Tribunal for relef instead of filing the prcscnt u,rit petition.

As nlcntioned above, the petitioner has frled the prcscnt rvrit pctition prcrnaturc and therefore also the writ petition is not maintainable and it carrnot be entertained by us." 17.4.

In M/s Tandra Impax Pvt Ltd Vs Punjab National Bankr2, the petitioner prayed to declarc thc action of responclcnt bank declaring the petitioner account as NPA wrtliout follorving RBI guidelines and guidelines issued in Aatmanirbhar Bharat Schemc clated I3.5.2O20 as arbitrary, illegal and against SARFAI SI Act, 2002 and to set aside the classil-rcation of account as Nl)A on .l I 3.202O ancl thc Dcmand Notice dated 31.7.2O20.

The lcarnccl l)rvistott l]cnch rclicrl on earlicr decision in W.P.Nos.23643 of 2O2O :rrrrl -l(X)'l(r of 2o2 I <l^t<'tl L).2. <'tl L).2.2022 to hold that petitioner ought to itt'ail rt'rtlt:rlv rtlltle r St't:tiort I7 of the Act, 2002. ,, Wp No.

23269 o12020 dt I I .11)tl PNR,J & JSR,J wP No Jt063 oI )U2 l6 I7.5.

In comr ron judgment in M/s.NDCX Private Limited vs.

Union Bank of India a rd another (W.P.No.23643 of 2O2O ar-r,l W.t'.No.2OO46 ol 2021 , daLed Og O2.2O22l,leamed Division Bench hel,l irs ttnder: "30.

Thus, , in the provir with the Ex Act, it rs cr] Act or the r su pport thc action in la advanced b Thc statute stage.

On[1, sccurcd cre Act, the agf 17 of the S Ju risd ictioni 31.

This ar National Ba had interfer SARFAESI Sctting asid l{igh Court frl rt lrcr acti( SAIIF-AESI A n a careful consideration of the statutory lan ;u,rgc employcd r to Sub-Section (3A) of Section 13 of the SAI:Fr\ESI Act read )lanation to Sub-Section (1) of Section l7 o tlre :iARFAESI ital clear that a notice under Section l3 (2) cr t'rc :;ARF^ ESI Jcction of the objection raised to it in(:luclint tl)e reasons in cof would not give rise to a cause of ar-'tion f( r rnst luting an .,.

To that extent, we frnd sullicient firrcc in tirc contention the respondents that the writ petition filc,l is p-(-'maturc. does not contemplate any interventi()n i\l ri i ; prcliminary vhcn the process ripens into a definitivc acti )n takcn b, the itor under Sub Section (4) of Sectiorr l:i or tlre :;n RFAESI ieved person can avail t.l.e statutory remcd- r nd(:r Sectioir \RFAESI Act by ffing secUritization appli(:: ti.,n lnforc the t Debts Recovery Tribunal. pect was highlighted by the Supreme C,)r.t rn Punjab rk Vs.

Imperial Gift llouse!3.

In that cas(), le lrigh Court rcl with the notice issued under Section 13 (21 of thc ct and quashed the proceedings initiat('c i,y rhe Bank ttre order of the High Cotrt, Suprenre (lourt hcll that thc ;as not justified in entertaining t}Ie u'rit p,:l r i, )rr trcforc anY e could be taken by the Bank under Sccri,,n 13 {4) of thc :t.' l,- r, ln M/s. r, ln M/s.

Tandra Impex M Ltd, Division [tr rr h rl tlris CoLut lLrllrcr lrcld -lI \\'c hilv t lrc sr:r:ured rrntL'r Sectir (iIr i[](l not rrc litrl to rrr i)t,i)I lr, iSSU already noticed above that classification ()[ (), n ;r('courrt b\ :rt:ditor is at a stage prior to issuancc of tlrr rl('rrr.rrrri rroticc n t3(2) of the SARFAESI Act.

If at thc stirq: r,l rssrrirncc ol '(, interference by the Court and TribrrnaL rs l !i, 1r rr;rCc. l(:rstand as to how such intervention r:an tr,' r r.r(i( irt ,1 stag(, rnr:e of demand notice under Section I3(1)) r t lr, j,\{{li\l')Sl l lrr l\4rrr r;rs []igh Court in Gain N-Nature F'< od Products and others Vs Uni rn of Indiala and the Madhi'a })nt<k r;lr I irilt Ciotrrt in Sarnarath Infr tlluild (I) Pvt Ltd Vs Bank of In<lia ;. lr rrt lrt'lcl tlrirl ()n(c ;rr ir( ('()ur t rs olassilled as NPA by thc ltarrk/li rrrrrr r;rl rrrslitulion 'rlit t\( I rr.r I t 1 llr.

I' ()l) l.l rI/8.J d JSR.J t P tio )5063 o/ 2D) t1 such classilication is not justiciablc by the writ Court cxercising jurisdiction under Article 226 of tL.e Constitution ot India.

The Division Bench of Madras High Court in Gain-N-Nature Food Products held as under: "11.

But as seen from the definition of thc exprcssion "Non Performing Asset", extracted above, it includes within its fold, eilher an assct or an account of the borrower.

If a Bank or financial institution, forms an opinion that a particular assct or account of a trorrou,cr has become a "Non Performiug Assct", such opinion may not be justiciable, especially fur a Court exercising jurisdiction undei Article 226 of tbe Co[stitution.

It may llot be open to this Court to conduct a roving enquiry to frnd out if an account or asset of a borrowcr could be classified as a "Non Perforrining Asset', with rcference to the guidelines issued by the Reserve Bank of India._Scction l3(2) is carefully worded. ly worded.

It does not use the exprcssion "and hls account in respect of such debt has become a Non Pcrlorming Assct' lnstcad, the Section uses the expression "and his account in rcs[)ect o[ sur:h tlcbt is classilied by the secured creditor as "Non Perlorming Assct .

Scction l3(2) reads as follows: 'where any borrower, who is undcr a liability to a securcd crcdrtor under a securit5r agreement, makes any defaulr in repayrncnt of secured debt or any installment thcrcof, and his account in rcspcct o[ such debt is classified by the secured creditor as non pcrf<rrmrng asset, then, the secured credi'.or may rcquirc thc lrorrorvcr lrv nolrcc in writing to discharge in full his liabilitics to the secured credrt()r within sixty days from the datc of notrce fitiling rvhrch thc sccuretl creditor shall be entitled to cxcrcisc all ()r anv r)f th{r n(hts ul(icr Sub-section (4).' l2- Therefore, the stress under Sc(:tion l3{21 is basirallv otr thc classification of the account as a Non Pcrfilrntittq Assct" i)\ llrc sc(:tl.ed creditor and not on whether the accor.lrrt hirs ac(uililv lrct-otnc a Non Performing Asset" or not.

In other wo(ls, ttrc Scction (locs Ilot l(avc anl' scope for a court to adjudicate as to rvhcthcr an accounl has blcome a "Non Performing Asset" or not, with rcfcrcn(:c to the guidclines issttcd b\, the Reserve Bank of lndia- Thcrcforc, thc first ol)jcction 1.rk('r] 1r| thc petitioners is not sustainable in lau'.- (ctnplrasis sttl)plrc(ll 17 .8. [n Samarath Infrabuild (Il Pvt Ltd, thc M:rclltr;r t'r:r<lt'sh High Court following the decision of M:rdras [{igh Oourt rcll'rrcd to above .rnd held as under: " 14.

On due consideration of thr: :rfort:s,rr<1. rte arc rrf lhc vrerr tlrat l:trr on tlre subject is well scttled [t_v thc Apcs (]ottrt rn th(' (its(: of ]llrrrlr;r Chcmicals Ltd.

V/s.

Union of lrtrlia &()rs {Supr.tl. its u<'ll its trr llrc [)('lhl High Court in the case of Dr.

Yash\\1!rl Srng,lr &r\rrr V/s lnrli;rr IJ;rnk &'Anr. rnk &'Anr. (Supra) and Madras High Cour t rn tlr. ( itsc <lf Clirrrt N N.rtrrre ljorrl t'roduct V/s.

Union of India (Supr,,y The clessification of NPA is not hr: above mentioned reasons, we hold that orLce the bank vt: classilied an account as NPA, the writ cour: would have e to play in deciding such an issue in vicw )f the complete the llanks and financial institutions in ass, l .lassification \RITAESI Act and upheld in Mardia Chem (:als r-td.

V/s. r &Ors. reported as MANU/SC/032312OO4 2002. (4) SCC ', :r Division Bench of Delhi High Court an i Macras tligh rl(t that if a Bank or financiat institution f6rrns arr opinion nt of a borrower has become an NPA, such oDini3n is not ,r Court exercising jurisdiction under Artr:[( 2i'.6 of l!r.e I'urther the question whether the acco.r nt l,as bccn .ified as a NPA or not is a factua.l dispute an,l..,pp<nant has r--fficacious remedy of appeal available und( r :;ection l7 of il Act, we do not find ary merit in '.his appeal.

0 I 5, has no merit and is, accordingly, dismis:.cC" (emphasis sul,l)lied) !y under Article 226 of tlle Constit:rtion of India is d knows no bounds.

Wherever injustice is caused to a rt extends its long arm ofjustice and rcaches out to a Though, Article 226 is very wide, thre c()nstitutional nlposed self-imposed restraint or exr:rcising its nsdiction.

Statutes and Administrati /e or,lers dealing r aspect do provide mechanism to rtrlress grievatrc:cs statute or administrative order.

S,)nrc timcs, nrorc dr is provided, like Original Aut rorit1,, Appe llatc ilcvisional Authority.

They also c rczite slitt utor\' lrrtt'rs of redressal mechanism.

Sr.rr:h lirnrnrs irrt' ::rrcious to dress the grievance of a p,:n;orr.

Wlrt'rrcvt r s tllat thc gricvancc ventilated beforr: tlrc (lotrrl t'irrr lrt' r rlr-rly constituted administr:rtive irr tthoritr /clurrsi r( l( qirt('s tl-tc pcrson to avail the sa rl rtrrrctlr lr' lor,' 15.

For authorrties h httle or no r( autonomy of unrlcr the S Union of lnd 3l i. lnd 3l i.

Srmilarl Court havc L that an acco just icrable in Constitution, correctlv clas an alternativ, thC SARI'AE w A No 575 / 18.

Thc r eme extraordinrrry ar person r,, rrr C)or, person irr ncc<l Cot-r r t s irirvt' cxtraorilirt.rl;r rvilh ;r lrirr trc'ttl: arisrrtt1 ,,tr: of : tlt;ttt lrtr r'( ul, :lLtiirrririr .iir(l TrrirLtrr.rir,-iillr cllictri' .,ir(i ( 11 tltr' (', rr tr l rr)lt(( ariLlr,'ssr',1 irr jrrrli r r lr r, lr. r ?NRJ & JSR,J tt'l' No J506t ol )o22 t8 subject to jud cial revics.

Oace the Bank suthoritles have clrssified accouat as NPA. the .rit court sould have ao role to play itr de(idiug such alry issue/suit- Tl: propet coutse ofthe appellaDt is to challeot r: the &ction by filing a statu ory appe.l as directed under Sectioa 17 of !;ARF,IESI Act, 2002.

PNR,J 1I JSR.J ['?

No ]506J ol )021 t9 knocking its doors.

In the following decisions, Hon'ble Supremc Court succinctly stated the need to avail statutorily engrafted remedy before availing the remedy under Article 226 of tlrre Constitution of [ndia.

18.1.

In Union Bank of India Vs Satyawati Tandonr6, Hon'ble Supreme Court cautioned High Courts from entertaining writ pctitions when statute prescribes detailed mechanism. [t has also cautioned against passing interim orders.

Hon'ble Suprcme Court said as undcr: '43- U^for-tu^dtely, the High Court overlooked. the settled laUJ that the High Court uttl ordlaarlly ^ot e;tertaln d. petltlo^ under Artlcle 226 of the Constltutlon t da eJlecth)e remedy k .rvq.lld,ble to the aggrleved pcrso'r a^d that th{s ,-ule q)plles urith gt'eqtei rlgour ln ,ndtters l^oolul^g recovery of ta-res, cess, fees, other tgpes oJ publlc tnoneg d d tlre dues of borl-ks a^d other- Jl,,.a,nclq.l iastifatloas.

In our vleu, uhile deating 'a,ith the petitlons l'aooltrl,ng challen,ge to the d.ctlon take,r Jor recovery of the publlc dues, etc. dues, etc. the Hlgh Court mt st keep an, mln'd thdt the leglslattons e^acted by Pcrlla:rlneltt alad Strrte Lglslatlrres lor tecooery of such dues are a code unto the,mseloes l'i'csal''uch d.s they not only coitdi^ cotnprehe^siae ptocedrre for recotEry of the du€s but also entlsage co^stltutlo^ of quasi Jud.lclcl bodles Jor red.ressal of the grleoance of ang aggrleued persot Therefote, ia cll such ccses, the lflgh Cou.t '?r'ast instst that before avalliag rentedg under Artlcle 226 o.f the C,anstitutton, c7 person rnust erhaust the 45. lt is truc that the rule of exhaustion of altcrnativc rcrrt( dv rs a rulc ol' discretion and not one of compulsion, but it is tliillcult {o fallronr rrrtr rcason why the High Court should entertain a petitron filctl unclcr Artrtl<: 226 of lhe Constitution and pass interim order ignortng tlrc &rct tlliil tlr(' pctitioner can avail effective alternative remed\ l^. filrug :rlrJrlir':rtron. appcal, revision, etc. and the particular legtslat()n conllins ii dc1;irlt<i mechanrsm for redressal of his grievance.

I lll ll) ) ti SC(- I t0 .16- lt rnust be remembered that stay of an a(:lion ruitrat( (l l,-\ tirt.

Sl.rlc and/or its agencies/instrumentalities for rccovr:11- ol l.ui.s. < ess. fccs. r'1,: scriously impedes execution of projects of publi<: ilrl[)()rtan( c arrti rlis;rlrlt s thcm f.om discharging their constitutional an<l legll olrlrq:rtrons torr';rlrls tllc citizcns- [n cases relating to recovery of (]tt' tlut s ol lrrnks. tinarr.r.rl institutions and secured creditors, stay grantc(l ttr thc llrglh (lo(rrt u1)ul(i har.,e scrious adverse impact on the ftrtancr;rl lrc.rltlr o[ srrt lr tlo(lies/institutions, which (sic rvill) ultimat(:lY l)ro\'(' .lc( nr.nt.rl to thc econonry of thc nation.

Thercfore, thc High C()ltrt sll()ul(l tx: c-\tr(rrrcl\ carcful and circumspect in exercising its tliscr'< tron l() llr.tllt stil\ rn slr( ll mattcrs.

Of course, if the petitioner is able l() slr()\\' tlt. ()\\' tlt.tl its (:ase litlls r(itlrin any of thc exceptions carved out ilr /i(lrtl(rrt l'r.!A(r-sh ('turtrlrct 18.2. [n Phoe nix ARC (Pl Ltd, the Hon'ble Suprerne ()ourt held as under Maheshwan v.

P-egistror Indiqn Oil () the High C( public intert " 18- Even o the private Article 22e action/actio not maintit action / actio a secured c public funr;' Statc authc under the ct and thereJot perfonnlng t the Statc at andlor ang 1 aflg of the d remedg u^d ,'lal^t tlnobI Praga Tools and Rarrne:_l SCC 3]] I : learned cou assistancc I, *,,!!,y,Ifit;i, 20 t Antarim Zila Panstrcd [AIR 1969 SC 5561 , \Wirlp,ool Corpn. tf Trade Marks I(1998) 8 SCC 1l aIj,d Harb'tnslal Sahzra v. q)tl.

Lld. l(2OO3l 2 SCC lOTl and some other lrdgments, then rrt rnay, after considering all the relevant f,ararrLeters and jt, pass an appropriate interim order." (emp,rasis ,supplied). rrr.\r'ise, rt is rcquired to be noted that a wril )r:titi,)n against inirnciat institution - ARC - the appella:r: herein under ,rf thc Constitution o[ lndia against the proposed s under Scction t3(4) of the SARFAESI Act orr be said to be r;rirlt'. ln the present case, the ARC pr )p,)se([ to take s undcr thc SARFAESI Act to recover the borr rwed iunount as e(lrt()r.

The ARC as such cannot be said t,) l)e I)erforming ons rvhich arc normally expected to be p< riirrmed by the rlr(rs Durlng the course ol d cointnerclcl a"s.a'so.ctlon d.ftd. ^tract, the bank/ARC lent the moneg to tte lrr?iouers herein ? the sald dctlultg ol the bdnUARC co'n'not ,? sol,7 to be ds publlc J'l,Ictloa nrftlch ls nonnallg e4tected k be pe;fortn-ed. by tttotltles.

Il proceedl^gs are l,rttloted. under the S.A.Rr'r.Esr Act .oposed actlo^ ls to be tdkcft.dnd. the bo.-to.tE. ls aggd,eaed. bg tlons of the p.Tudte bankt'bc1k/ARq brroaq .\.a-s t,, dttdll the r the S?raF,(esr Act dad fto tDrlt petltlott utot.ld lle a d/or ls and/or enter-talnabte.

Therefore, decisions )f thir; Court in 'orprt. lPraqct l'ools Corpn- v- C.A. n- v- C.A.

Imanua\ (1 )69) I SCC 5851 t\itlutuqlrct IRornesh Ahluwalia v.

State of httlab, (20L2!.

12 lol.il 3 SC:C (1-&S) 456:4 SCEC 7I5l rehed upon by the r:.,r1 rpl:r';rr irrg on bchalf of. the borrowers iue rot of any !ll( lx )! r()\r'ar's tlrt l;rn lzrrcl dorvn by this Court in Matheu \.()- It,)tqte Baftk 'r rllat,rrcrl K (1., (2Ol8l 3SCC85:.(2Olal 2 f;OC (Civ) 411 to r. r r tr l- u.re are of the opt^ion that JTll^g oJ t te t'rt7t petltlons bg ; before ahe Hlgh Court und.er Attlcle 226 olthe rd'oflstltutloa oI xrse of process of the court.

The writ petitionr; have been filed r )l)rts(.(i ,r('lr()n to bc taken under Section 1!(41.

Ar; obscrved , \ r' .rssurrng tll:tt the communication czrl-ed 13-8-2015 ' r (j, r' 51 ( tr()n l.](-l), in that case also, in vi.:w of the i,,rr'r,rLrs rtructlt irvailiible by way of appe:rl tn(ier llcction l7 :r ,\, r, rlr(' llrqh Corlrt ought not to have cnto:-tain(:d the rvrrt 'u ilrc rrrrPLrg c{i or<lcrs passed by the HiBb (:ourt directing l:, \i.rtLrs rluo r\.itlr r('spcct to the possessiorr o[ ttre sccurcd i,.{\ rlll'|ll oi lls ] ('ror(' ont-y (in all Rs 3 cro, esl is absolutclv llr,. ,lLrr.s .rrr. l(, lltc ('\tent of approximatcl.. l]ls I l7 crores :rrr r,lrtl lr.rs lrc<:n continued since i2015 i n(i the securcd ,'i;ri .rl ol lrrocci r!inq furthcr rvith the arlion under the lrlr r!i ()t tllr. \\'nt pctilron by the borrowers ltr.fort: the I{igh r:,!l lrrrl irit ,rbusc of process of cou.t.

It eFrl:,car j ttral thc lr,r.. ll)trl.1ll\ r'r;rrrleri an e:i parte ad interim <trder , rrt ur;lrr,rr1 .rs\rrt.t r)!1 anv reasons.

Th<: H 11t C(,urt orrlii1t r.1r,.ri rlr,r, Irr 1r.r.:rr11 such an interim or(lcr tlt,: ri!lltts,rl 2l- Applrinr of 7'raL,oru'r,t thc falt s r,rr Iadia is an ( aq:rinsr I lr, !r r'rr'r r r., fr, ,' st;ttLrt,,11. . i ol l lr( :illri 1 p( titlors l.' to rltillIr1lllri J)rol). r lias ,) rrrrlLrs; rllillr i 'l ht rr, i irrr, lt r'rlit r,; r..

S{i..\ :i ,\, (lorr r t rs l,,r l lr-'lr ( rr,.; r !r 1. .; r !r 1.rr' ,11 r I I I I I I I I Pi\?.J & JSR.J wP No J5063 of 202) 2t thc secured creditor to recover the amount due and payable havc been scriously prejudiccd- The secured creditor and/or its assignor have a right to recover the amount due and payable to it from the borrowers.

The stay granted by the High C-ourt would have serious adverse impact on the hnancial health of the secured creditor/assignor.

Therefore, the l{igh Court should have been extremely careful and circumspect in exercisrng its discretion while granting stay in such matters.

In thesc circumstances, the proceedings before the High Court deserve to be dismissed." (emphasis supplied) 19.

As hetd by Hon'ble Supreme Court in L.Chandra Kumar Vs Union of IndiatT, the Debts Recovery Tribunal is a duly constitutcd Tribunal vesting jurisdiction on matters arising out of SARFAEST Act, 2OO2 and is the Court of lirst instance.

When a person has a st-atutorily engrafted remedy available to redress his grievance , thc writ Court does not entertain the writ petition and relegates him to:rvail the said remedy.

This case is no exception and must fall in [ine.

20.

Coming back to the case on hand, the bank has issued posscssion notice and also notified auction date to scll the sccurecl asscts.

Thcrefore, remedy under Section 17 of thc Act, 2O()2 is av:ril:rblc to pctitioner.

From the statutory schcmc and prccedcnl rlct:isions noted above it is clear that the Debts Recovery Tribunal <:an so irrto the aspect of classifoing the account as NPA :rnd also rr'l.tt'thcr Rtrtl gui(lclincs arc violated on any aspect leading t() dcclilt ins I h(' it( (:()r.lnI irs N['A arncl taking recourse under the Act. ()n ttx: ( ()r]l r.lr\', as t'onsistcntlv opinecl by constitutional courts the asJ>cct of classiivinq :ur ir('c()unt oI NPA is not justiable in exercisc of port't:t' ol iu<lit:ial rcvicrr, rrncler Articlc '226 o[ the Constitution of Indiir. of Indiir.

Wc rtrt t ltt:r'cltrrt' ol t lrt' opinion that the petitioner has an eflectivc :r r tcl t ll-i<::rcirtlts It(,1) r is(-( l(,1 I I I i PN&J & JSR-J WP No 35063 of2022 remedy before I )ebts Recovcry Tribunal under Sectio,r 17 of Act,2OO2 and ought to hz ve availed the said remedy. ,TRUE COPY// lSEC'nON OFFTCER One Fair )opy to the Hon'ble Sri Justice P NAVEI:N RAO and One Fair Copy to the Hon'ble Sri Justice J SRE[: f,llvr,S RAO (For His Lordships Kind Perusal) 1.

The Presiding )ffrcer.

Debts [iecovery Tribunal.

Hyderabad.

2.

11 L.R.

Copies 3.

The Under Set retary.

Unron of lndra lVlrnistry of Law, Juslice and Company Affairs, New D rlhi 4.

The Secretary Telangana Al,vocates Associatron t-ibrary, l-{igh Cou( for the State of Telanr ana at Hyderabad 4 One CC to Sri ,/ fVlura[ Irlanohar Advocale [OPUCI 5 One CC to lvl/: B Kavrtha Yadav SC for Central Goverrrnent [OPUC] 6 One CC to Srr [\,4anav Gecrl i lrorrras ndvocate IOPUC] 7 Two CD Copre ; B One Spare Co ry t i I 'r^ CH BB 21.

The Writ Petition is accordingly dismissed, leaving open to petitioner to av iil the remcdy undcr Section 17 of th.: Act, 2002.

It is made clear tha . therc is no expression of opinion on merits and all issues are left c oen to be urgcd bcfore the Debts Recc,very Tribunal.

No costs.

PendinS miscellancous applications, if arry, shall stand dismissed.

SD/-G.S]REESHA ASS|::TANT REGISTE|A( -"' \ HIGH COUR T DATED:1 2t1t)t2022 ORDER W.P.No.3S0Gi ot 2022 DISMISSING T IE WRIT PETITION WITHOUT COS TS -.a:: 5TA'r"(-- '\ I IJtt $[ ; I- + >L 6[, mrl- Srit I I I i il I i i I t^\