M/S Noorul Islam Trust vs State Bank Of India
2025 Latest Caselaw 631 Ker

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