Calcutta High Court
Bhanu Properties And Anr vs Reserve Bank Of India And Ors on 6 December, 2023
Author: Sabyasachi Bhattacharyya
Bench: Sabyasachi Bhattacharyya
OD 2
WPO/1805/2023
IN THE HIGH COURT AT CALCUTTA
Constitutional Writ Jurisdiction
ORIGINAL SIDE
BHANU PROPERTIES AND ANR.
VS
RESERVE BANK OF INDIA AND ORS.
BEFORE:
The Hon'ble JUSTICE SABYASACHI BHATTACHARYYA
Date: 6th December, 2023.
Appearance:
Mr. Joy Saha, Sr. Adv.
Mr. Meghajit Mukherjee, Adv.
Mr. Tanish Ghaneriwala, Adv.
Mr. Ramendu Agarwal, Adv.
...for the petitioners
Ms. Soni Ojha, Adv.
Ms. Sambrita B. Chatterjee, Adv.
...for the respondent no.2
The Court: Learned senior counsel for the petitioners argues that the writ
petition was filed challenging a notice under Section 13(2) of the SARFAESI Act,
2002 issued by the respondent no.2-Bank and the classification of the
petitioners' account as Non-Performing Asset (NPA). By a supplementary
affidavit, it is alleged that when the petitioners sought to serve notice of the writ
petition on the respondent no.2, the agent of the petitioners was made to run
from pillar to post within the same building. Ultimately, notice was sought to be
served by e-mail on December 1, 2023 which bounced back, having been blocked
from the end of the concerned official of the respondent no.2-Bank. On the same
day, a Notice under Section 13(4) was issued in a bid to render the writ petition
infructuous.
Learned senior counsel places reliance to the relevant annexures to the
writ petition to argue that even immediately prior to June 30, 2023, on which
date the petitioners' account was allegedly declared NPA, the petitioners were well
within the cash credit limit of Rs. 750 lakh sanctioned to the petitioners. Even in
a communication dated September 11, 2023 from the end of the Bank to the
petitioners, the Bank admitted that the outstanding amount out of the total cash
credit facility limit of Rs. 750 lakh was only Rs. 3,72,68,229.80p. as on that date.
Thus, the very premise of the NPA classification which was in turn the genesis of
the Notice dated September 11, 2023 under Section 13(2) of the SARFAESI Act
and the subsequent Notice under Section 13(4) of the said Act, was bad in law.
It is contended that as per the petitioners, the present dues are Rs.
1,92,00,000/- which the petitioner is ready to pay immediately to the Bank.
Despite repeated offers made in that regard, the Bank has refused to accept the
same. By a communication dated July 5, 2023, the petitioners pointed out in
detail the errors committed by the Bank. Even by a communication dated
August 30, 2023, the petitioners pointed out that it had approached the
respondent no.2-Bank to reverse the sum and accept payment of the due amount
in full and final settlement. Subsequently, the petitioners have brought down
and reduced the dues to a substantial extent.
Thus, the very premise of the Bank's action, it is contended, is bad in law.
Learned senior counsel places reliance on Maharashtra Chess Association
Vs. Union of India, reported at (2020) 13 SCC 285 in support of the proposition
that the writ jurisdiction of the High Court is in aid of justice and has wide scope
and the entertainability thereof is discretionary, depending upon the nature of
threat to the rule of law.
Learned counsel for the Bank cites South Indian Bank Limited and others
Vs. Naveen Mathew Philip and another, reported at 2023 SCC OnLine SC 435 for
the submission that writ petitions in anticipation of SARFAESI action under
Section 13(4) of the SARFAESI Act ought not to be entertained by the High
Courts.
Learned counsel for the Bank submits that the moment the Bank issued a
notice under Section 13(2) of the Act, the petitioners were aware that an action
under Section 13(4) would definitely follow the same. To preempt such action,
the petitioners have preferred the instant writ petition, which ought not to be
entertained and the petitioners should be relegated to the concerned Debt
Recovery Tribunal (DRT) which is fully functional at present.
Learned counsel for the respondent no.2-Bank next argues that the factual
dispute raised by the petitioners is not amenable to the writ jurisdiction, since
the same involves disputed questions of facts and requires appreciation of
evidence.
It is next argued that the petitioners have already approached the Banking
Ombudsman only on November 24, 2023 and without waiting for the outcome of
the same have preferred the instant writ petition. Thus, the same is premature.
It is also argued that the RBI has only been impleaded to attract the jurisdiction
of the writ court which is otherwise not maintainable.
Heard learned counsel on the issue of grant of ad interim prayers. It is an
undisputed position that when the writ petition was filed, no measure under
Section 13(4) of the SARFAESI Act had been taken by the Bank. Hence, at the
said juncture, there was no scope for the petitioners to move an application
under Section 17 before the concerned DRT. The manner in which apparently
the Bank refused service and issued notice under Section 13(4) of the SARFAESI
Act on the same day that is on December 1, 2023 betrays the intention of the
Bank to deliberately render the writ petition non-entertainable.
Hence, it does not lie in the mouth of the Bank that the writ petition ought
not to be entertained. In South Indian Bank Limited (supra), cited by the
respondents, the court proceeded on the premise that the attempt of the writ
petitioners was to frustrate subsequent proceedings under Section 13(4), in view
of Section 13(2) steps having already been taken. Here, however, the NPA
declaration has also been challenged.
The Supreme Court highlighted in Maharashtra Chess Association (supra)
that the role of the High Court under the Constitution is crucial to ensure the
rule of law throughout its territorial jurisdiction, in order to achieve which the
powers of the High Court are necessarily broad and are conferred in aid of
justice. Two clear principles were enunciated by the Supreme Court in the said
judgment. First, the decision of the High Court to entertain or not a particular
action under its writ jurisdiction is fundamentally discretionary. Secondly,
limitations placed on the court's decision to exercise or refuse to exercise its writ
jurisdiction are self-imposed. It was reiterated that the writ jurisdiction of a High
Court cannot be completely excluded by statute. The High Court is tasked with
being the final recourse to upholding the rule of law and it must necessarily have
the power to examine any case before it and make a determination whether or
not its writ jurisdiction is engaged. Judicial review was reiterated to be an
intrinsic feature of the basic structure of the Constitution.
In the present case, a prima facie case of the Bank's action being arbitrary
and de hors the provisions of natural justice has been made out.
From the materials placed before the Court, there is nothing to indicate
that the concerned Circular of the RBI pertaining to classification of accounts as
NPA was satisfied in respect of the petitioners.
From the initial sanction letter onwards at various points of time, the Bank
itself, in its correspondence, retained the limit of the cash credit facility of the
petitioners at Rs.750 lakh. In fact, even after the impugned recall of credit
facilities sanctioned to the petitioners vide Communication dated March 28,
2023, it is seen that the outstanding in respect of the said account stood reduced
by servicing of the said facility by the petitioners.
Thus, the action of the Bank in recalling the credit facility and labelling the
account of the petitioners as NPA is prima facie perverse and de hors the law.
If the said NPA classification goes, there remains no basis of the Notice
under Section 13(2) of the SARFAESI Act issued by the Bank, the premise of
which was the NPA classification. Subsequent action under Section 13(4) is
merely consequential to the notice under Section 13(2) and, as such, ought to
suffer the same fate as the notice under Section 13(2).
In such view of the matter, also keeping in mind the conduct of the Bank
in refusing notice of the writ petition and issuing a notice under Section 13(4) on
the same date, there is sufficient ground to interdict the illegal action of the Bank
by restraining it from taking further steps in terms of the notice under Section
13(2).
Although the respondent no.2-Bank has sought to argue that the writ
petition is premature, the complaint before the Banking Ombudsman against the
respondent no.2-Bank dated November 24, 2023 is on a different footing and
scope than the present challenge. Whereas the legality of the Bank's action has
been challenged herein, the complaint before the Banking Ombudsman pertains
to alleged irregularities committed by the Bank, the scope of enquiry of which is
different from that in the present writ petition.
The intervention required by this Court is not on disputed questions of fact
as to the actual amount due from the petitioners but is more on principles, as to
whether the cash credit facility ever reached the stage of classification as NPA, in
view of the petitioners having never exceeded the limit thereof at any point of
time.
Since the petitioners themselves have admitted that an amount of Rs.
1,92,00,000/- is due and payable and the petitioners are ready to pay the same,
it would only be appropriate if, for the time being, such payment is imposed as a
condition of the interim order proposed by this Court.
Accordingly, the respondent no.2-Bank is restrained by an order of
injunction from taking further steps against the petitioners in terms of the notice
dated September 11, 2023 under Section 13(2) of the SARFAESI Act, 2002
(Annexure P-16 at page 112 of the writ petition). Any action taken
consequentially thereto shall also remain stayed. Such stay shall operate
unconditionally till December 20, 2023. Thereafter, the same would stand
extended till February 15, 2024 or until further order, whichever is earlier,
subject to the petitioners paying an amount of Rs. 1,92,00,000/- to the
respondent no.2-Bank within December 20, 2023. It is made clear that in
default of such payment, the interim order shall stand vacated on and from
December 21, 2023. Upon such payment, however, the interim order will stand
extended till February 15, 2024 or until further order, whichever is earlier.
Such payment shall be without prejudice to the rights and contentions of
the parties in the writ petition and in any other legal proceeding before any other
forum and shall be subject to the final result of the writ petition.
The parties shall act on a server copy of this order without insisting upon
prior production of certified copy for the purpose of compliance.
The respondents shall file their affidavits-in-opposition within December
22, 2023. Reply, if any, shall be filed by January 12, 2024. The matter shall be
listed for hearing on January 15, 2024.
(SABYASACHI BHATTACHARYYA, J.)
