M/S Sri Vijayalakshmi Raw And ... vs Union Of India,
2023 Latest Caselaw 4246 AP

Citation : 2023 Latest Caselaw 4246 AP
Judgement Date : 14 September, 2023

Andhra Pradesh High Court - Amravati

M/S Sri Vijayalakshmi Raw And ... vs Union Of India, on 14 September, 2023

Bench: D.V.S.S.Somayajulu, Duppala Venkata Ramana

                                  1


           HON'BLE SRI JUSTICE D.V.S.S.SOMAYAJULU
                                AND
       HON'BLE SRI JUSTICE DUPPALA VENKATA RAMANA


                  W.P.Nos.2231 and 2774 of 2022


COMMON ORDER: (per Hon'ble D.V.S.S.Somayajulu)


     Both these writ petitions were taken up for hearing with the

consent of the learned counsels Sri Y.N.Vivekananda, learned counsel

for the petitioners and Sri N.Harinath and Sri S.Satyanarayana

Murthy for the respondents.

2. Lead arguments were advanced in W.P.No.2231 of 2022. As per

Sri Y.N.Vivekananda, the crux of the issue involved in this case is

about the classification of the petitioners account as an NPA. He

contends that the Bank issued the notice initially under section 13(2)

of the Securitisation and Reconstruction of Financial Assets and

Enforcement of Security Interest Act, 2002 (for short 'the SARFAESI

Act'). The said notice was however withdrawn on the ground that the

Bank found some errors in the said notice. When further action was

to be taken under the SARFAESI Act, the writ petitioner filed

Securitization Application No.235 of 2021 and in that application, a

memo was filed stating that the Bank intends to withdraw the section

13(2) demand notice and issue fresh proceedings. Learned counsel

argues that the same was allowed by the Court and thereafter, the

Bank has taken steps to issue a fresh notice but did not take any

action with regard to the classification of the account as an NPA. He

contends that even as on date, the classification of the account as an

NPA is incorrect. He relies upon the Master Circular - Prudential

Norms issued by the RBI and in particular clause 2.1.3 to argue that

till the quarter ending no steps can be taken and that it is only in

June, 2021 that the classification could be made as an NPA. He

contends that with a reading of the notice issued on 01.12.2021

clearly shows that much prior to this date itself, the account was

classified as an NPA. He also argues that to the notice given under

section 13(2) of the SARFAESI Act, an objection was raised but the

same was not even answered by the Bank and therefore, he submits

that there is a violation of statutory conditions.

3. Similar arguments were advanced in W.P.No.2774 of 2022.

4. Therefore, the essential contention by the counsel is that till

31.06.2021, the account could not have been classified as an NPA. It

is his contention that as this fundamental foundational factor is

flawed, all further steps are also incorrect. Therefore, he submits that

both the writ petitions must be allowed.

5. Sri S.Satyanarayana Murthy, learned counsel for the Bank

argues the matter for the respondents. He contends that in

W.P.No.2231 of 2022, the submission that an objection was issued to

the section 13(2) notice is totally incorrect and that no objection at all

was issued. He further admits that in the second case, W.P.No.2774

of 2022 an objection was given by the petitioner to the reply so issued.

6. As far as the contention of classification of the account is

concerned, learned counsel also relies upon very same clause 2.1.3 of

the Master Circular to argue that the interest was not paid from

13.12.2020 and that the account is classified as NPA on 30.03.2021.

Therefore, he submits that the said order is correct. He relies upon a

Division Bench judgment of this high Court in W.P.Nos.9080 and

9081 of 2019 and states that the writ is not a proper remedy even with

regard to the classification of an NPA and that proper remedy for the

writ petitioner was to approach the DRT under section 17 of the

SARFAESI Act. Therefore, learned counsel submits that the writs

should be dismissed.

7. This Court notices that the essential dispute circles around

classification of the account as an NPA. As rightly pointed out by the

learned counsel for the respondent in W.P.Nos.9080 and 9081 of

2019, a Division Bench of this Court considered the entire law on the

subject and held that the High Court should have self-impose

restrictions on itself and not interdict action of the Bank taken under

the SARFAESI Act. Learned counsel points out that the Division

Bench relied upon the judgments of the Hon'ble Supreme Court in

United Bank of India v. Satyawati Tondon and others1 and

Authorized Officer, State Bank of Travancore and another v.

Mathew K.C.,2 etc. He also points out relying upon the judgment of

Mardia Chemicals Limited v. Union of India and others 3 that the

Division Bench held that even a dispute with regard to classification of

an account as an NPA can only be raised under section 17 of the

SARFAESI Act before the DRT. This Court agrees with the said

submission.

8. Even on the question of interpretation, clause 2.1.3 of Master

Circular is reproduced once again:

2.1.3 In case of interest payments, banks should classify an account as NPA only if the interest due and charged during any quarter is not serviced fully within 90 days from the end of the quarter.

9. If the interest due and charged during any quarter is not paid,

the account is classified as an NPA within 90 days.

10. In the opinion of this Court, the words 'interest charged during

any quarter' and 'within 90 days' from the end of the quarter would

justify the stand taken by the respondent-Bank. It refers to the

interest charged during 'any quarter' and 90 days from the end of 'the

2010 (8) SCC 110

2018 (3) SCC 85 3 2004 (4) SCC 311

quarter'. Both refer to the same quarter and not to a subsequent

quarter. In this case, the interest was not paid for the quarter ending

December, 2020 and 90 day period expired on 30.03.2021 and

therefore, the proceedings were issued on the said date. The