Kerala High Court
M/S Noorul Islam Trust vs State Bank Of India on 7 July, 2025
Author: Anil K. Narendran
Bench: Anil K. Narendran
W.A.No.1266 of 2025 1 2025:KER:48913
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR. JUSTICE ANIL K. NARENDRAN
&
THE HONOURABLE MR. JUSTICE MURALEE KRISHNA S.
MONDAY, THE 7TH DAY OF JULY 2025 / 16TH ASHADHA, 1947
WA NO. 1266 OF 2025
AGAINST THE JUDGMENT DATED 10.03.2025 IN
W.P.(C)NO.27856 OF 2024 OF HIGH COURT OF KERALA
APPELLANT/PETITIONER IN W.P.(C):
M/S NOORUL ISLAM TRUST
REPRESENTED BY ITS CHAIRMAN K.M. MOOSA, AL AZHAR
CAMPUS, PERUMPILLICHIRA P O, THODUPUZHA, IDUKKI.,
PIN - 682024
BY ADVS.
SRI.P.M.SANEER
SHRI.TONY GEORGE KANNANTHANAM
SHRI.GISON ALIYAS
SHRI.AJITH GEORGE KOOLA
RESPONDENTS/RESPONDENTS IN W.P.(C):
1 STATE BANK OF INDIA
REPRESENTED BY ITS ASSISTANT GENERAL MANAGER,
STRESSED ASSETS RECOVERY BRANCH, 7TH FLOOR,
VANKARATH TOWERS, PALARIVATTOM BY -PASS JUNCTION,
ERNAKULAM, PIN - 682024
2 THE AUTHORIZED OFFICER
STATE BANK OF INDIA, STRESSED ASSETS RECOVERY
BRANCH, 7TH FLOOR, VANKARATH TOWERS,
PALARIVATTOM BY -PASS JUNCTION,
W.A.No.1266 of 2025 2 2025:KER:48913
ERNAKULAM, PIN - 682024
3 THE RESERVE BANK OF INDIA
REPRESENTED BY ITS CHIEF GENERAL MANAGER,
DEPARTMENT OF SUPERVISION, RBI CENTRE-I,
WORLD TRADE CENTRE, MUMBAI., PIN - 400005
BY ADV SRI.AMAL GEORGE
ADV.JITHESH MENON, SC, SBI
THIS WRIT APPEAL WAS FINALLY HEARD ON 17.06.2025, THE
COURT ON .. PASSED THE FOLLOWING:
W.A.No.1266 of 2025 3 2025:KER:48913
JUDGMENT
Muralee Krishna, J.
The petitioner in W.P.(C)No.27856 of 2024 has filed this writ appeal under Section 5(i) of Kerala High Court Act, 1958, challenging the judgment dated 10.03.2025, passed by the learned Single Judge dismissing the writ petition filed by him under Article 226 of the Constitution of India, seeking a writ of mandamus commanding the 3rd respondent Reserve Bank of India to issue appropriate directions to the 1 st respondent State Bank of India and the 2nd respondent Authorized Officer, compelling them to formulate a board approved policy as envisaged in Ext.P14 Circular dated 08.06.2023 issued by the 3 rd respondent Reserve Bank of India and publish the same in the public domain forthwith. The appellant had also sought for a writ of certiorari to quash Ext.P8 letter dated 19.03.2022 issued by the 1 st respondent bank to the extent of appointing recovery agent to recoup the amount due from the appellant; a writ of mandamus commanding respondents 1 and 2 to permit the appellant to settle the loan accounts in question as per Ext.P2 notice dated 30.11.2020 issued by the 1st respondent for One Time Settlement Scheme, 2020, and in tune with the policy framed in pursuance to Ext.P14 W.A.No.1266 of 2025 4 2025:KER:48913 Circular/directions issued by the 3 rd respondent Reserve Bank of India or in the alternative direct the 3rd respondent to intervene in the matter and to issue necessary directions to respondents 1 and 2 to consider the request for settlement from the appellant in tune with Ext.P14 Circular/directions and also direct the 3 rd respondent to take up Exts.P15 and P16 representations dated 26.07.2024 and 01.08.2024 submitted by the appellant and to consider and take effective steps thereon to enable the appellant to close the loan accounts under settlement, within a time frame fixed by this Court.
2. By the impugned judgment, the learned Single Judge found that by Ext.P14 Circular dated 08.06.2023 issued by the 3rd respondent Reserve Bank of India, it is apparent that the policy is intended to lay down the procedure to be followed by the officers of the bank while giving effect to the compromise settlements and technical write-offs. Ext.P14 does not contain any stipulation that the compromise settlement policy should be published. A reading of Ext.R1(D), particularly the last sentence extracted in the judgment, leaves no room for doubt that it is meant as guidelines for the bank officials. The learned Single Judge dismissed the writ petition, rejecting the contention of the appellant that the W.A.No.1266 of 2025 5 2025:KER:48913 compromise settlement policy should have been published and failure to do so has prejudiced the appellant.
3. According to the appellant, it is a registered Charitable Trust running various educational institutions. The appellant availed a term loan of Rs.23 Crores from the 1 st respondent Bank on 21.03.2013. The loan fell in default and the bank proceeded with the recovery measures and initiated steps for taking over the possession of secured assets by issuing a demand notice under Section 13(2) of the SARFAESI Act on 30.11.2017, demanding an amount of Rs.28,78,76.208/-. At that stage, the appellant approached the Debt Recovery Tribunal by filing S.A.No.247of 2018. The bank also filed a suit before the tribunal as O.A.No.4 of 2018. During the pendency of the proceedings before the tribunal, the bank offered settlement of the loan account for Rs.20 Crores and agreed that the appellant to make such payments in various instalments. This was agreed by both parties, and accordingly, on the basis of the compromise entered into between them, the tribunal passed Ext.P1 order dated 22.10.2019 in O.A.No.4 of 2018. However, the repayment did not materialise as agreed. When the bank proceeded with recovery measures, the appellant approached this Court by filing W.P.(C)No.15186 of 2023, and as W.A.No.1266 of 2025 6 2025:KER:48913 per Ext.P10 interim order, the bank was restrained from taking steps pursuant to the possession notice issued. The subsequent One Time Settlement proposals offered by the bank by issuing Exts.P2 to P4 notices also did not materialise. The appellant then approached the Reserve Bank of India, alleging that the bank had not formulated the guidelines in accordance with Ext.P14 Circular of the Reserve Bank of India, which had made it mandatory for all regular entities to put in place the board approved policies for undertaking compromise settlements with the borrowers and to technical write-offs. The Reserve Bank of India having failed to respond to the representation, the appellant approached this Court with the writ petition, wherein the impugned judgment was passed by the learned Single Judge.
4. In the writ petition, respondents 1 and 2 had filed a counter affidavit dated 06.08.2024, producing therewith Exts.R1(A) to R1(C) documents. Thereafter, they again filed an additional counter affidavit dated 03.10.2024, producing therewith Ext.R1(D) document.
5. Heard the learned counsel appearing for the appellant, the learned Standing Counsel for the State Bank of India and the learned counsel for the Reserve Bank of India.
W.A.No.1266 of 2025 7 2025:KER:48913
6. The learned counsel for the appellant would submit that as per Section 21 of the Banking Regulation Act, 1949, the Reserve Bank of India has power to control advances made by the banking companies. The Reserve Bank if satisfied that it is necessary or expedient in the public interest or in the interests of depositors or banking policy so to do, may determine the policy in relation to advances, to be followed by banking companies generally or by any banking company in particular, and when the policy has been so determined, the bank is bound to follow the policy. Under Section 35A of the Banking Regulation Act, the Reserve Bank has power to give directions to the banking companies so as to prevent the affairs of the banking companies being conducted in a manner detrimental to the interests of the depositors or in a manner prejudicial to the interests of the banking companies, etc. Ext.P14 Circular is one of such directive issued by the Reserve Bank of India requiring all the Commercial Banks, Primary Co-operative Banks and Non-Banking Financial Companies to put in place, board approved policies for undertaking compromise settlements with the borrowers and provide for technical write-offs. Though Ext.R1(D) compromise settlement policy was formulated by the 1 st respondent bank, it W.A.No.1266 of 2025 8 2025:KER:48913 was not published and hence did not come to the knowledge of the borrowers. Only if the bank publishes the policy, the appellant can approach the bank for a settlement in terms of that policy. Hence, the dismissal of the writ petition by the learned Single Judge is incorrect.
7. On the other hand, the learned Standing Counsel for the State Bank of India submitted that Ext.P14 is only to regulate and guide the officers of the bank as to how the compromise settlements and technical write-offs have to be dealt with. The compromise settlement policy to be formulated pursuant to Ext.P14 Ciruclar is only an internal directive and hence need not be published. The learned counsel would further submit that several chances of One Time Settlement were given to the appellant by the bank, and even then it did not avail those opportunities, and as of now, more than 35 Crores is due from it. Since a writ under Article 226 of the Constitution of India is not maintainable against the recovery proceedings under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, ('SARFAESI Act' for short), the appellant has approached this Court with a prayer seeking publication of the policy formulated in pursuance to W.A.No.1266 of 2025 9 2025:KER:48913 Ext.P14 Circular of the Reserve Bank of India.
8. Section 21 of the Banking Regulation Act, 1949 reads thus;
"21. Power of Reserve Bank to control advances by banking companies.--
(1) Where the Reserve Bank is satisfied that it is necessary or expedient in the public interest or in the interests of depositors or banking policy so to do, it may determine the policy in relation to advances to be followed by banking companies generally or by any banking company in particular, and when the policy has been so determined, all banking companies or the banking company concerned, as the case may be, shall be bound to follow the policy as so determined.
(2) Without prejudice to the generality of the power vested in the Reserve Bank under sub-section (1), the Reserve Bank may give directions to banking companies, either generally or to any banking company or group of banking companies in particular, as to--
(a) the purposes for which advances may or may not be made;
(b) the margins to be maintained in respect of secured advances;
(c) the maximum amount of advances or other financial accommodation which, having regard to the paid-up capital, reserves and deposits of a banking company and other relevant considerations, may be made by that banking company to any one company, W.A.No.1266 of 2025 10 2025:KER:48913 firm, association of persons or individual;
(d) the maximum amount up to which, having regard to the considerations referred to in clause (c), guarantees may be given by a banking company on behalf of any one company, firm, association of persons or individual; and
(e) the rate of interest and other terms and conditions on which advances or other financial accommodation may be made or guarantees may be given.
(3) Every banking company shall be bound to comply with any directions given to it under this section."
9. Section 35A of the said act reads as under;
"35A. Power of the Reserve Bank to give directions.--
(1) Where the Reserve Bank is satisfied that--
(a) in the public interest; or (aa) in the interest of banking policy; or
(b) to prevent the affairs of any banking company being conducted in a manner detrimental to the interests of the depositor or in a manner prejudicial to the interests of the banking company; or
(c) to secure the proper management of any banking company generally, it is necessary to issue directions to banking companies generally or to any banking company in particular, it may, from time to time, issue such directions as it deems fit, and the banking companies or the banking company, as the case may be, shall be bound to comply with such directions.
(2) The Reserve Bank may, on representation made to it or on its own motion, modify or cancel any direction issued W.A.No.1266 of 2025 11 2025:KER:48913 under sub-section (1), and in so modifying or cancelling any direction may impose such conditions as it thinks fit, subject to which the modification or cancellation shall have effect."
10. By virtue of the power given under Sections 21 and 35A of the Act, the Reserve Bank of India issued Ext.P14 Circular requiring all Commercial Banks, Primary Co-operative Banks and Non-Banking Financial Companies to put in place, board-approved policies for undertaking compromise settlements with the borrowers and provide for technical write-offs. Though at the time of filing of the writ petition, the appellant contended that no such policy had been formulated by the 1st respondent bank, along with the additional counter affidavit, Ext.R1(D) compromise settlement policy formulated by the 1st respondent was produced before this Court. Then, the appellant contended that the said policy ought to have been published by the bank, since Section 21 of the Act says that the policy has to be formulated for the benefit of the public.
11. But, while going through Ext.P14 Circular, we notice that the direction in that Circular is mainly to formulate a step by step mechanism as to how the compromise settlements and technical write-offs have to be arrived at or dealt with by the banks. In pursuance to Ext.P14 Circular, the 1 st respondent bank W.A.No.1266 of 2025 12 2025:KER:48913 formulated Ext.R1(D) compromise settlement policy, which also contains the directives for the staff of the bank as to how the compromise has to be dealt with. As extracted by the learned Single Judge in the impugned judgment, the last sentence of the second paragraph of Ext.R1(D) policy says that "However, certain basic principles and guidelines which are to be kept in view by the branches and their Controllers, while processing compromise proposals, are detailed in the subsequent paragraphs." The appellant could not point out any statutory obligation or direction in the Banking Regulation Act regarding the necessity of publication of such a policy formulated by the bank. No such direction is there in Ext.P14 Circular also. Therefore, we agree with the finding of the learned Single Judge that there is no legal necessity to publish the compromise settlement policy formulated by the bank in pursuance to Ext.P14 Circular.
12. Moreover, as submitted by the learned Standing Counsel for the bank, Exts.P2 to P4 documents would show that the bank has offered One Time settlement by substantially reducing the amount on several occasions. According to the bank, those opportunities were not availed by the appellant. As of now, according to the bank, the total amount outstanding is more than W.A.No.1266 of 2025 13 2025:KER:48913 Rs.35 Crores from the appellant. The bank has initiated proceedings under the SARFAESI Act for recovery of the money by taking possession of the secured asset. From the judgments of the Apex Court, and that of this Court it is settled that the High Court under Article 226 of the Constitution of India can entertain a writ petition against the proceedings under the SARFAESI Act only on exceptional circumstances, such as where the statutory authority has not acted in accordance with the provisions of the enactment in question, or in defiance of the fundamental principles of judicial procedure, or has resorted to invoke the provisions which are repealed or when an order has been passed in total violation of the principles of natural justice alone. [See: Authorized Officer, State Bank of Travancore and another v. Mathew K.C [2018 (1) KHC 786], The Commissioner of Income Tax and others v. Chhabil Dass Agarwal [(2014) 1 SCC 603], South Indian Bank Ltd v. Naveen Mathew Philip [2023 (4) KLT 29], PHR Invent Educational Society v. UCO Bank [2024 (3) KHC SN 3] and Jasmin K. v. State Bank of India [2024 (3) KHC 266]. The argument of the learned Standing Counsel for the 1st respondent bank is that it is to circumvent or to overcome this restraint in approaching this Court W.A.No.1266 of 2025 14 2025:KER:48913 seeking a relief by invoking the writ jurisdiction under Article 226 of the Constitution of India, against the proceedings lawfully initiated by the bank under the provisions of SARFAESI Act, the appellant approached this Court with a prayer as that framed in the writ petition and we find force in that argument.
Having considered the pleadings and materials on record and the submissions made at the Bar, we find no sufficient ground to interfere with the impugned judgment of the learned Single Judge.
In the result, this writ appeal stands dismissed.
Sd/-
ANIL K. NARENDRAN, JUDGE Sd/-
MURALEE KRISHNA S., JUDGE MSA