Anil Kumar G vs State Bank Of India
2024 Latest Caselaw 28697 Ker

Kerala High Court

Anil Kumar G vs State Bank Of India on 3 October, 2024

Author: Dinesh Kumar Singh

Bench: Dinesh Kumar Singh

                                        2024:KER:73462

     IN THE HIGH COURT OF KERALA AT ERNAKULAM

                      PRESENT

  THE HONOURABLE MR. JUSTICE DINESH KUMAR SINGH

   THURSDAY, THE 3RD DAY OF OCTOBER 2024 / 11TH

                   ASWINA, 1946

              WP(C) NO. 29742 OF 2024



PETITIONER:

        ANIL KUMAR G.,
        AGED 44 YEARS
        S/O. GOPINATHAN PILLAI,
        SOLE PROPRIETOR OF SANTHAS BEVERAGES,
        ANITHA BHAVAN KOTTARAKKARA, KOLLAM,
        KERALA, PIN - 695108

        BY ADVS.
        B.J.JOHN PRAKASH
        P.PRAMEL
        SOORAJ M.S.
        VARSHA VIJAYAKUMAR NAIR
        ANAGHA MADATH THEKKEPATTE



RESPONDENT:

        STATE BANK OF INDIA,
        REPRESENTED BY AUTHORISED OFFICER, RSARB,
        LMS COMPOUND, OPP. MUSEUM WEST GATE,
        VIKAS BHAVAN P.O., THIRUVANANTHAPURAM,
        KERALA, PIN - 695033
 WP(C) No.29742 of 2024    2

                                      2024:KER:73462


            BY ADV TOM K.THOMAS

    THIS WRIT PETITION (CIVIL) HAVING COME UP FOR
ADMISSION ON 03.10.2024, THE COURT ON THE SAME DAY
DELIVERED THE FOLLOWING:
   WP(C) No.29742 of 2024          3

                                                       2024:KER:73462

                            JUDGMENT

Dated this the 3rd day of October, 2024

The petitioner claims to be an MSME unit carrying out the

manufacturing and sale of packaged drinking water in the name and

style of M/s.Santhas Beverages. The petitioner has been issued with

registration certificate for MSME unit under UDYAM portal.

2. The petitioner had obtained various credit facilities

from the respondent Bank for an amount of Rs.75,00,000/-. The said

credit facilities were periodically renewed/enhanced and vide letter

dated 23.06.2021, the credit facility was enhanced to

Rs.1,14,00,000/-.

3. As the petitioner could not pay the loan advanced by

the bank, the bank classified the loan account of the petitioner as NPA

and issued notice under Section 13(2). The petitioner has not filed

any objection to Section 13(2) notice. Therefore, the bank issued

Section 13(4) notice. Section 13(4) notice has also remained

unchallenged and therefore, Section 14 proceedings have been

undertaken by the bank for taking the physical possession of the

secured assets. At this stage, the petitioner has approached this

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Court seeking the following prayers:

a) Issue a writ n the nature of mandamus or any other appropriate Writ, Order or Direction thereby directing the Respondent Bank to recall the classification of the Petitioner's MSME account as NPA and forward the accounts to the committee constituted under Exhibit-P3 for devising a Corrective Action Plan.

b) Issue a writ in the nature of mandamus or any other appropriate Writ, Order or Direction thereby directing the Respondent Bank to forthwith carry out a techno viability study as mandated in Exhibit-P3 and involved the Petitioner in the formation of the Corrective Action Plan, so that the possibility of rectification and restructuring of the Petitioner's account could effectively be carried out.

c) Issue a writ in the nature of mandamus or any other appropriate Writ, Order or Direction thereby directing the Respondent Bank to forthwith recall all recovery measures including as threatened in Exhibit-P4.

d) Pass such other orders or directions as this Hon'ble Court may be pleased to direct in the facts and circumstances of the case.

4. The learned counsel for the petitioner submits that,

before classifying the loan account of the petitioner as NPA, the Bank

has not followed the Master Circular issued by the Reserve Bank of

India dated 17.03.2016 and thereafter, the classification of the

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petitioner's loan account as NPA is illegal and the bank should be

directed to take decision as per the Master Circular issued by the

Reserve Bank of India dated 17.03.2016.

5. The learned counsel for the petitioner also relied

upon the judgment of the Hon'ble Supreme Court, in the case of M/s.

Pro Knits v. The Board of Director of Canara Bank and Others

[2024 INSC 565]. The learned counsel for the petitioner also

submitted that the petitioner cannot challenge the classification of his

account as NPA before the Debts Recovery Tribunal under Section 17

of SARFAESI Act. Thereafter, the petitioner submitted that he has no

other remedy but to approach this Court in exercise of powers under

Article 226 of the Constitution of India, against the decision of the

respondent Bank for classifying the loan account of the petitioner as

NPA.

6. On the other hand, the learned counsel for the

respondent Bank submits that, the Bank has classified the loan

account of the petitioner after the petitioner failed to comply with the

terms of the loan. It is further submitted that the bank has constituted

the committee as per the Master Circular and after considering the

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recommendation of the committee, the loan account of the petitioner

has been classified as NPA. The learned counsel for the bank also

submitted that the bank has issued Section 13(4) notice, which remained

unchallenged and when the Section 14 proceedings were undertaken,

the petitioner has approached this Court. He further submits that,

there is no bar to the Debts Recovery Tribunal not to consider the plea

of classifying the loan account as NPA. The petitioner may take all

the objections before the Debts Recovery Tribunal, if he files an S.A

against the proceedings undertaken by the Bank for recovery under

SARFAESI Act and Rules made there under.

7. I have considered the submissions advanced.

8. The facts are not in dispute that the petitioner has

not discharged the liability in respect of the loan advanced by the bank

in terms of the loan agreement. It is also not in dispute that the

petitioner has not challenged Sections 13(2) and 13(4) notices in any

manner.

9. The question whether the Master Circular has been

followed by the Bank or not is the question of fact, which can be

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agitated before the Appropriate Tribunal/Appropriate authority. The

Hon'ble Supreme Court in its judgment cited by the learned counsel

for the petitioner has not held that, if the Master Circular has not been

followed, the proceedings under Sections 17 of the SARFAESI Act

could not be maintainable before the Debts Recovery Tribunal.

10. Section 17 of the SARFAESI Act on

reproduction would read as under:-

17. 2[Application against measures to recover secured debts].--(1) Any person (including borrower), aggrieved by any of the measures referred to in sub-section (4) of section 13 taken by the secured creditor or his authorised officer under this Chapter, 1 [may make an application along with such fee, as may be prescribed,] to the Debts Recovery Tribunal having jurisdiction in the matter within fortyfive days from the date on which such measure had been taken:

[Provided that different fees may be prescribed for making the application by the borrower and the person other than the borrower.]

[Explanation.--For the removal of doubts, it is hereby declared that the communication of the reasons to the borrower by the secured creditor for not having accepted his representation or objection or the likely action of the secured creditor at the stage of communication of reasons to the borrower shall not entitle the person (including borrower) to make an application to the Debts Recovery Tribunal under this sub-section.]

[(1A) An application under sub-section (1) shall be filed before the Debts Recovery Tribunal within the local limits of whose jurisdiction--

(a) the cause of action, wholly or in part, arises;

(b) where the secured asset is located; or

(c) the branch or any other office of a bank or financial institution is maintaining an account in which debt claimed is outstanding for the time being.]

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[(2) The Debts Recovery Tribunal shall consider whether any of the measures referred to in sub-section (4) of section 13 taken by the secured creditor for enforcement of security are in accordance with the provisions of this Act and the rules made thereunder.

[(3) If, the Debts Recovery Tribunal, after examining the facts and circumstances of the case and evidence produced by the parties, comes to the conclusion that any of the measures referred to in sub-section (4) of section 13, taken by the secured creditor are not in accordance with the provisions of this Act and the rules made thereunder, and require restoration of the management or restoration of possession, of the secured assets to the borrower or other aggrieved person, it may, by order,--

(a) declare the recourse to any one or more measures referred to in sub-section (4) of section 13 taken by the secured creditor as invalid; and

(b) restore the possession of secured assets or management of secured assets to the borrower or such other aggrieved person, who has made an application under sub- section (1), as the case may be; and

(c) pass such other direction as it may consider appropriate and necessary in relation to any of the recourse taken by the secured creditor under sub-section (4) of section 13.]

(4) If, the Debts Recovery Tribunal declares the recourse taken by a secured creditor under sub-section (4) of section 13, is in accordance with the provisions of this Act and the rules made thereunder, then, notwithstanding anything contained in any other law for the time being in force, the secured creditor shall be entitled to take recourse to one or more of the measures specified under sub-section (4) of section 13 to recover his secured debt.

[(4A) Where--

(i) any person, in an application under sub-section (1), claims any tenancy or leasehold rights upon the secured asset, the Debt Recovery Tribunal, after examining the facts of the case and evidence produced by the parties in relation to such claims shall, for the purposes of enforcement of security interest, have the jurisdiction to examine whether lease or tenancy,--

(a) has expired or stood determined; or

(b) is contrary to section 65A of the Transfer of Property Act, 1882 (4 of 1882); or

(c) is contrary to terms of mortgage; or

2024:KER:73462

(d) is created after the issuance of notice of default and demand by the Bank under subsection (2) of section 13 of the Act; and

(ii) the Debt Recovery Tribunal is satisfied that tenancy right or leasehold rights claimed in secured asset falls under the sub-clause (a) or sub-clause (b) or sub-clause (c) or sub-clause (d) of clause (i), then notwithstanding anything to the contrary contained in any other law for the time being in force, the Debt Recovery Tribunal may pass such order as it deems fit in accordance with the provisions of this Act.]

(5) Any application made under sub-section (1) shall be dealt with by the Debts Recovery Tribunal as expeditiously as possible and disposed of within sixty days from the date of such application:

Provided that the Debts Recovery Tribunal may, from time to time, extend the said period for reasons to be recorded in writing, so, however, that the total period of pendency of the application with the Debts Recovery Tribunal, shall not exceed four months from the date of making of such application made under sub-section (1).

(6) If the application is not disposed of by the Debts Recovery Tribunal within the period of four months as specified in sub-section (5), any part to the application may make an application, in such form as may be prescribed, to the Appellate Tribunal for directing the Debts Recovery Tribunal for expeditious disposal of the application pending before the Debts Recovery Tribunal and the Appellate Tribunal may, on such application, make an order for expeditious disposal of the pending application by the Debts Recovery Tribunal.

(7) Save as otherwise provided in this Act, the Debts Recovery Tribunal shall, as far as may be, dispose of the application in accordance with the provisions of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993) and the rules made thereunder.]

11. On a reading of the Section 17, I do not find that

there is Bar to challenge the decision of the Bank in classifying the

loan account of the borrower as NPA. When the further proceedings

under Sections 13(4) and 14 have been undertaken, the petitioner

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can challenge the proceedings before the Debts Recovery Tribunal

under Section 17 and I am of the considered view that the writ is not

an appropriate remedy. If the petitioner files the S.A challenging the

proceedings undertaken by the bank under the provisions of the

SARFAESI Act and Rules made thereunder, the Debts Recovery

Tribunal shall consider all the grounds, which may be taken by the

petitioner. However, the writ petition is not an appropriate remedy in

respect of the proceedings undertaken by the bank to recover its due

under the provisions of the SARFAESI Act and Rules made

thereunder.

Thus, the writ petition is dismissed, leaving it open to the

petitioner, to take recourse to any other remedy, as may be available

to him, under the law.

Sd/-

DINESH KUMAR SINGH JUDGE AJ

2024:KER:73462

APPENDIX OF WP(C) 29742/2024

PETITIONER EXHIBITS

EXHIBIT-P1 TRUE COPY OF THE UDYAM REGISTRATION CERTIFICATE

EXHIBIT-P2 TRUE COPY OF THE LETTER OF ARRANGEMENT DATED 23.06.2021 ISSUED BY THE RESPONDENT BANK

EXHIBIT-P3 TRUE COPY OF THE MASTER CIRCULAR DATED 17.03.2016

EXHIBIT-P4 TRUE COPY OF THE NOTICE DATED 01.08.2024 THREATENING TO TAKE PHYSICAL POSSESSION OF THE PROPERTY ON 24.08.2024 ISSUED BY THE ADVOCATE COMMISSIONER.

EXHIBIT-P5 TRUE COPY OF THE JUDGEMENT OF HON'BLE SUPREME COURT IN M/S. PRO KNITS V. THE BOARD OF DIRECTORS OF CANARA BANK & ORS.

REPORTED IN 2024 INSC 565.

EXHIBIT-P6 TRUE COPY OF THE RELEVANT PAGES OF THE STATEMENT OF ACCOUNT OF THE PETITIONER

RESPONDENT EXHIBITS

EXHIBIT R1(A) TRUE COPY OF THE PROCEEDINGS OF THE COMMITTEE DATED 29.04.2023