M/S Satluj Spintex Ltd And Others vs Reserve Bank Of India And Another
2024 Latest Caselaw 10888 P&H

Punjab-Haryana High Court

M/S Satluj Spintex Ltd And Others vs Reserve Bank Of India And Another on 5 July, 2024

Author: Lisa Gill

Bench: Lisa Gill

CWP No.18383 of 2023 (O&M) -1-

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH

CWP No.18383 of 2023 (O&M)
Date of Decision: 05.07.2024

M/S SATLUJ SPINTEX LTD AND OTHERS

sesees Petitioner(s)
Versus
RESERVE BANK OF INDIA AND ANOTHER
.... Respondent(s)
CORAM:- HON'BLE MRS. JUSTICE LISA GILL
HON'BLE MS. JUSTICE AMARJOT BHATTI
Present: Mr. Aalok Jagga, Advocate and
Mr. H.S. Jagdev, Advocate
for petitioners.
Mr. C.S. Pasricha, Advocate
for respondent-Bank.
2 3 2
LISA GILL, J.

1. Prayer in this writ petition is for setting aside communication

dated 06.02.2023 (Annexure P-33), vide which proposal dated 03.06.2021 statedly submitted by petitioners for restructuring of its loan account in terms of circular dated 07.06.2019 issued by Reserve Bank of India (Prudential Framework for Resolution of Stressed Assets) has been rejected. There is a further prayer for setting aside sale notice(s) dated 04.07.2023 and 04.08.2023 alleged to have been issued in violation of Rule 9(1) of Security Interest (Enforcement) Rules, 2002 (hereinafter referred to as 2002 Rules). Petitioners also seek a direction to the respondent-Bank to reconsider proposal dated 03.06.2021 and restructure the loan account in question in terms of guidelines

dated 07.06.2019 issued by Reserve Bank of India.

2. It is pleaded that petitioner no.1 namely M/s. Satluj Spintex Limited is involved in the business of agro based activity of spinning cotton since the year 2010 and is registered as a medium enterprise under the Micro, Small and Medium Enterprises Development Act, 2006. It is stated that petitioner no.1 is a working unit and had availed of credit facilities from respondent no.2 in June 2019. Credit facilities consisting of fund based and non-fund based limits were enhanced from Rs.162.15 crores to 187.15 crores. However, due to outbreak of pandemic COVID-19, there was financial indiscipline on the part of petitioner and a request for restructuring of its loan account was submitted on 31.12.2020. It is further stated that the Bank renewed credit facilities on 22.02.2021. Due to the second wave of COVID- 19 in the month of April, 2021, efforts on the part of petitioners met with little success and as it was becoming difficult to service the interest and EMIs of term loan, an application for restructuring was again submitted on 30.03.2021 alongwith communication dated 31.03.2021 in continuation thereof seeking waiver of penal interest charged by the Bank.

3. Recall notice dated 20.05.2021 was, however issued by the respondent-Bank seeking deposit of sum of Rs.311,46,71,216.81/- calculated to be due upto 30.04.2021. Petitioners, it is stated replied to the said recall notice while stating that their request for restructuring was still pending. Another detailed proposal for restructuring was submitted by petitioner on 03.06.2021 specifically seeking reduction of rate of interest and rescheduling of repayment terms. Documents as sought by respondent-Bank, it is stated

were submitted by petitioner and in the meanwhile a TEV Study Report was

also prepared which found the project of petitioners to be technically and economically viable. It is stated that the Bank proposed to allow petitioners to run the account with 10% tagging. However, petitioners finding the same to be difficult requested the Bank to consider 3% tagging instead of 10% on 10.11.2021. Respondent-Bank on 13.10.2021, however, allowed petitioners to operate the unit as holding on operations with 5% tagging instead of 3%. It is averred in the writ petition that all the documents as sought by respondent- Bank were supplied by petitioners on various occasions but in an absolutely illegal manner vide communication dated 06.02.2023 proposal submitted by petitioner for restructuring was declined by the Bank on the ground that requisite information and documents were not supplied by petitioner. Tagging facility allowed to petitioners earlier was also withdrawn/cancelled and proceedings under Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short SARFAESI Act) were initiated with demand notice dated 22.02.2023 under Section 13(2) of SARFAESI Act being issued, demanding the deposit of Rs.370,14,74,168.52/- due as on 31.01.2023. Date of declaration of account Non-Performing Asset (NPA) was reflected to be 02.05.2021.

4. Objections were submitted by petitioners bringing to fore that some of properties as mentioned in the notice were agricultural in nature. The Bank, it is stated issued a corrigendum notice dated 29.04.2023 while removing the properties which were agricultural in nature. Objections were rejected vide communication dated 22.05.2023 and notice under Section 13(4)

of SARFAESI Act was allegedly issued in an illegal manner on 15.05.2023.

Sale notice(s) dated 04.07.2023 and 04.08.2023 were issued, which are claimed to be in absolute violation of mandatory provisions contained in Rules 8(6) and 9(1) of 2002 Rules. Stand of petitioners in the writ petitions is that rejection of their proposal for restructuring by respondent-Bank vide communication dated 06.02.2023 is arbitrary whereas petitioners are entitled to restructuring of their loan account as per guidelines dated 07.06.2019 issued by Reserve Bank of India, which are mandatory in nature having a statutory flavor.

5. Notice of motion was not issued in the writ petition though respondent no.2 was represented by counsel on advance notice. During pendency of this writ petition additional affidavit dated 23.08.2023 of petitioners was sought to be placed on record vide Miscellaneous Application No.14244 of 2023. It is stated in the said affidavit that after filing of petition it came to the light that the respondent-Bank had initiated insolvency proceedings before learned NCLT, Chandigarh by filing an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (for short, IBC'). It was Stated that in view of the Bank having chosen to proceed for initiation of Corporate Insolvency Resolution Process (CIRP) of petitioner company, simultaneous action against petitioners under SARFAESI Act could not be continued as provisions of IBC and SARFAESI Act are antithesis to each other as object of IBC is not recovery but resolution of the stress either by way of resolution plan by third party or company itself or through restructuring whereas object of SARFAESI Act and Recovery of Debts and

Bankruptcy Act, 1993 (for short, 'RDB Act'), is recovery of amount due

CWP No.18383 of 2023 (O&M) 5-

towards financial institutions. Therefore, proceedings under the two statutes cannot go hand in hand. Petitioners also filed Miscellaneous Application No.19347 of 2023 seeking stay of operation of order dated 26.09.2023, passed by District Magistrate, Mansa, under Section 14 of SARFAESI Act.

6. Learned counsel for petitioners had vehemently argued that concept of insolvency and recovery are antithesis to each other. While referring to Clause 9 of circular dated 07.06.2019 issued by Reserve Bank of India, it was submitted that the lender has to choose whether it would initiate legal proceedings for insolvency or recovery. It was strongly urged by learned counsel for petitioners that in the given facts and circumstances petitioners' proposal for restructuring submitted on 03.06.2021 should be accepted. It was reiterated by learned counsel for petitioners that respondent-Bank cannot simultaneously seek to pursue proceedings under SARFAESI Act as well as petition under Section 7 of IBC. Present petition, it was submitted, should be allowed and respondent-Bank should be restrained from taking possession of secured asset. It was thus prayed that this writ petition be allowed.

7. Learned counsel for respondent-Bank opposed the writ petition while firstly raising the objection of the entertainability of the same itself. Mr. Pasricha, learned counsel for respondent-Bank submitted that there is a huge overdue amount of over Rs.370 crores from petitioners as on 01.02.2023 with the amount necessarily having increased till date. The only endeavour of petitioners, it was stated is to keep running the unit by itself and delay the proceedings in one way or the other. It was further argued that there is no bar

whatsoever in any statute to undertake proceedings under SARFAESI Act and

IBC. It was submitted that as application under Section 7 of IBC was pending and moratorium had not yet kicked in, proceedings under SARFAESI Act and RDB Act can also be continued.

8. Learned counsel for respondent-Bank further submitted that one asset owned by a guarantor was sold on 06.07.2023 in proceedings under SARFAESI Act. Petitioner no.3 challenged the same by way of filing SA No.255/2023, titled 'Sham Lal Goel Vs. Punjab National Bank and others' on the same day on which the present writ petition was filed before this High Court. This fact has not been mentioned in the writ petition. Subsequent filing of CM-19348-2023 on 14.11.2023, after filing of affidavit dated 16.10.2023 on behalf of respondent-Bank, seeking withdrawal of writ petition qua petitioner no.3 cannot in any manner absolve the petitioners of having stated this material fact in the writ petition itself. Learned counsel for petitioners relied upon judgments of Hon'ble the Supreme Court in M/. Transcore Vs. Union of India, 2007 AIR (SC) 712 and decision of Hon'ble the Supreme Court Tottempudi Salalith vs State Bank Of India 2023 LawSuit(SC) 1033 besides order dated 18.08.2023, passed in SEP (Civil) No.15130 of 2023.

Dismissal of the writ petition was sought.

9. We heard learned counsel for the parties at length and have perused the file carefully.

10. Prayer in the writ petition is admittedly for a direction to

respondent no.2-Bank to reconsider the proposal dated 03.06.2021 for restructuring of loan account of petitioner no.1. Petitioners also seek setting

aside of sale notice dated 04.07.2023 and 04.08.2023 issued under

SARFAESI Act allegedly issued in violation of the applicable provisions of law. It is undeniable that in so far as the challenge to the proceedings (sale notice) under SARFAESI Act is concerned, petitioners have efficacious remedy provided to them under the said Act itself. It has been held by the Hon'ble Supreme Court in a catena of cases that interference by the High Courts in exercise of jurisdiction under Article 226 of the Constitution of India should be minimal and actuated only in exceptional or extraordinary circumstances. Gainful reference in this regard can be made to judgments of Hon'ble the Supreme Court in Union Bank of India vs. Satyawati Tandon and others, 2010(8) SCC 110, M/s South Indian Bank Ltd. and others v. Naveen Mathew Philip and another, 2023(2) RCR (Civil) 771 and PHR Invent Educational Society Vs. UCO Bank and others 2024 AIR (SC) 1893.

11. Inasmuch as the prayer for restructuring of the loan account in terms of proposal dated 03.06.2021 submitted petitioners is concerned, the same has been rejected by the Bank in its commercial wisdom. Petitioners do not have a vested right to seek a One Time Settlement or restructuring of their loan account. Rejection of petitioners' proposal for restructuring is a decision of the respondent-Bank based purely on its commercial wisdom, which is not to be substituted by this Court. It is further to be noted that the question as to whether the information and the documents as sought for by the respondent- Bank were in fact provided or not by petitioners is a disputed question of fact and cannot be subject matter of adjudication in the present proceedings.

12. As noted in the foregoing paras, learned counsel for petitioners

had stressed upon the factum of filing of petition under Section 7 of IBC by

respondent-Bank thereby estopping it from undertaking the proceedings under SARFAESI Act and RDB Act in OA No.29 of 2023 which was filed by the respondent-Bank before learned Debt Recovery Tribunal-III, New Delhi. In this regard we find merit in the arguments advanced by learned counsel for the respondent-Bank to the effect that there is no bar imposed upon the Bank from taking recourse to provisions under IBC even if proceedings under SARFAESI Act and/or RDB had been initiated. Reliance is correctly placed on judgment of Hon'ble the Supreme Court in Tottempudi Salalith's case (supra) wherein reference has been made to its earlier judgment in MA. Transcore's case (supra) while holding that the doctrine of election cannot be applied to prevent financial creditors from approaching the NCLT for initiation of CIRP even though proceedings under SARFAESI Act and RDB Act had been initiated earlier. Hon'ble the Supreme Court vide order dated

18.08.2023 in SLP No.15130 of 2023, titled Omkara Asset Reconstruction

Pvt. Ltd. Vs. G.P. Realtor Pvt. Ltd. and others, while setting aside interim

order dated 06.04.2022, passed by this High Court in CWP No.6993 of 2022 held that proceedings under SARFAESI Act and IBC shall continue in accordance with law without being influenced by the order passed by the Hon'ble Supreme Court.

13. In our considered opinion the valiant effort made by learned counsel for petitioners to distinguish the said judgments is futile. Moreover, in case petitioners have any grievance qua proceedings under SARFAESI Act or under the IBC, they have been provided specific remedies under the said

statutes themselves. There is no occasion for interference by this Court in

order to scuttle the proceedings against petitioners who owe a whopping amount of over Rs.370/- crores to the respondent Bank.

14. Keeping in view the facts and circumstances as narrated above, we do not find any ground whatsoever to interfere in this writ petition which is accordingly dismissed with no order as to cost. Petitioners are at liberty to pursue the remedies available to them in accordance with law in respect to any grievance which they might have qua proceedings initiated against them under SARFAESI Act, RDB Act and IBC while raising all pleas as may be available to them. It is also open to the parties to arrive at any mutually

acceptable settlement.

15. Pending miscellaneous application(s), if any, stand(s) disposed of accordingly.

(LISA GILL) JUDGE (AMARJOT BHATTI) JUDGE 05.07.2024

Sunil

Whether speaking/reasoned: Yes/No Whether reportable: Yes/No