Punjab-Haryana High Court
M/S Garg And Co. Through Its … vs Uco Bank Ltd. And Ors on 22 April, 2021 IN THE HIGH COURT OF PUNJAB AND HARYANA
AT CHANDIGARH
CWP-5753-2021
Date of Decision:-22.4.2021
M/s Garg & Co. Partnership Firm and Another
… Petitioners
Versus
UCO Bank and others
… Respondents
*****
CORAM: HON’BLE MR. JUSTICE RAJAN GUPTA
HON’BLE MR. JUSTICE KARAMJIT SINGH
*****
Present:- Mr. Manuj Nagrath, Advocate
for the petitioners.
Mr. Nonish Kumar, Advocate
for the respondent-Bank.
*****
KARAMJIT SINGH, J.
Case has been heard through video conferencing on account of
COVID-19 Pandemic.
Petitioners have filed this writ petition challenging the action of
respondent No.1 declaring their bank account relating to cash credit limit as
Non-Perfoming Assets (in short ‘NPA’) on 3.6.2020, which was
communicated to the petitioners vide impugned notices dated 17.7.2020
(Annexure P-6 colly) under Section 13(2) of Securitisation and
Reconstruction of Financial Assets and Enforcement of Security Interest Act,
2002 (in short ‘SARFAESI Act’) and notices dated 1.10.2020 (Annexure P-
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10 colly) issued under Section 13(4) of the SARFAESI Act. The petitioners
also seek a direction to the respondents to implement Reserve Bank of
India’s circulars dated 27.3.2020 (Annexure P-2), 17.4.2020 (Annexure P-3)
and 23.5.2020 (Annexure P-4) and to restrain the respondents from taking
the physical possession of the secured assets.
The case of the petitioners as pleaded in the writ petition is that
petitioner No.1 is the firm and it availed cash credit limit of `14 crore from
respondent No.1-Bank vide sanction letter dated 10.1.2019. The petitioners
have been making repayments in time as per the schedule. The cash credit
account of the firm was standard as on 29.2.2020. During the period of
lock-down it was illegally declared NPA on 3.6.2020 by respondent No.1-
Bank in violation of the circulars (Annexures P-2 to P-4), issued by Reserve
Bank of India (in short ‘RBI’). The petitioners came to know about the
same, when they received impugned notices (Annexure P-6 colly.) issued
under Section 13(2) of SARFAESI Act. The respondent No.1-Bank further
issued notices under Section 13(4) of SARFAESI Act (Annexure P-10 colly.)
against the provisions of law.
Mr. Nonish Kumar, Advocate who was having advance copy of
the petition appeared on behalf of respondent No.1-Bank and he filed
written statement in which, it was pleaded that after availing cash credit
limit, the petitioners had not adhered to its terms & conditions and their loan
account became irregular and turned bad on 29.2.2020. Stock audit was
conducted between 29.2.2020 to 3.3.2020 and as per Stock audit report, it
was found that goods worth `39.70 lac were lying in the premises against
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the stock of `28 crore as submitted by the petitioners at the time of availing
of cash credit limit. Thereafter official audit was conducted and on the basis
of the audit report, the account was declared NPA on 3.6.2020.
Subsequently, action was initiated against the borrowers under SARFAESI
Act.
Petitioners filed replication refuting the pleas taken by the
contesting respondent in its written statement and reiterated the stand taken
by them in the petition.
We have heard counsel for both the parties.
The counsel for the petitioners submitted that due to
countrywide lock-down, the RBI granted a moratorium on payment of all
installments falling due between 1 st March, 2020 to 31 st May, 2020. The
period of moratorium was further extended from 1 st June, 2020 to 31st
August, 2020 and in this regard circulars Annexure P-2 to Annexure P-4
were issued. During the said period of moratorium, the banks were not
permitted to declare pending loan accounts as NPA. The counsel for the
petitioners further argued that in the case in hand the loan accounts of the
petitioners were declared NPA during the aforesaid period of moratorium on
3.6.2020, in violation of the aforesaid circulars of RBI. No notice or
opportunity of hearing was given to the borrowers by respondent No.1-Bank
before taking aforesaid illegal action. So the action of respondent No.1-
Bank whereby the loan accounts of the petitioners were declared NPA on
3.6.2020 is totally illegal and is liable to be set aside. It is further contended
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that the subsequent actions taken by respondent No.1 under SARFAESI Act
are also illegal.
In support of his aforesaid contentions, the counsel for the
petitioners has placed reliance on an interim order dated 13.4.2020 passed
by Learned Single Judge of Delhi High Court in WP(C)2959-2020
Shakuntla Educational and Welfare Society vs. Punjab and Sind Bank
wherein as an interim measure, respondent-bank was restrained from
declaring the petitioner’s account as NPA till the next date of hearing. He
also relied upon judgment dated 6.4.2020 passed in WP(C)-Urgent5 of 2020
Anant Raj Ltd. vs. Yes Bank Ltd. wherein the Learned Single Judge of Delhi
High Court held that the Court prima-facie is of the view that the
classification of the account of the petitioner as NPA on 31.3.2020 could not
have been done by the respondent. Accordingly, status quo ante was
restored qua the classification of the said account and the account’s
classification as it stood on 1.3.2020 was restored. Reference is also made
by the counsel for the petitioners to decision dated 11.4.2020 in Writ Petition
LD-VC No.28 & 30 of 2020 Transcon Skycity Pvt. Ltd. & Ors. vs. ICICI
Bank and Others wherein Learned Single Judge of Bombay High Court held
as under:-
“(a) Subject to the conditions set out below, the period of the
moratorium during which there is a lockdown will not be
reckoned by ICICI Bank for the purposes of computation of
the 90-day NPA declaration period. As currently advised,
therefore, the period of 1st March 202 until 31st May 2020
during which there is a lockdown will stand excluded from
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the 90-day NPA-declaration computation until-and this is
the condition-the lockdown is lifted. Thus, irrespective of
the continuance of the moratorium until 31st May 2020, if
the lockdown is lifted at an earlier date than 31st May 2020,
then this protection available to the petitioners will cease
on the date of lifting of the lockdown, and the computing
and reckoning of the remainder of the 90-day period will
start from that earlier lifting of the lockdown-ending date.
(b) In that scenario, should the lockdown be lifted before 31 st
May 2020, the petitioners will have 15 days after the
ending of the lockdown in which to regularize the payment
under the first installment due to 15 th January 2020 and a
further three weeks thereafter to regularize the payment
under the second installment due to 15th February 2020.
(c) If the lockdown extends beyond 31 st May 2020, then these
days will be deferred accordingly, irrespective of whether
the moratorium itself is extended beyond 31st May 2020.
(d) The whole of the moratorium period is, evidently, excluded
for all amounts that fall due during that moratorium
period.”
On the other hand the counsel for respondent No.1-Bank
contented that loan account of the petitioners turned bad on 29.2.2020,
before the imposition of moratorium. The counsel further submitted that for
declaring an account NPA, the interest has to reverse from the date on which
the account is classified as NPA. He further argued that in the present case
the interest was shown to have reversed from 29.2.2020, making it clear that
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the account was NPA on that date. So there was no illegality in the action
taken by respondent No.1 to declare the loan account of the petitioner as
NPA.
The counsel for respondent No.1-Bank further argued that
notices under Section 13(2) of SARFAESI Act were duly served on the
borrowers and subsequently possession notice under Section 13(4) of
SARFAESI Act were also issued in accordance with law. The learned
counsel further contended that the petitioners have got alternative
efficacious remedy to challenge the said actions of respondent No.1-Bank by
filing application before DRT. The present writ petition is not maintainable
as the petitioners have not exhausted the aforesaid effective alternative
remedy.
We have considered rival submissions addressed by both the
parties.
Before going into the facts of the present case, we deem it fit to
go through the settled law relating to jurisdiction of DRT with regard to
actions taken by the banks under Sections 13 and 14 of SARFAESI Act.
The Hon’ble Supreme Court in Authorized Officer, Indian
Overseas Bank vs. Ashok Saw Mill (2009)8 SCC 366, held that the
jurisdiction of DRT under Section 17 of SARFAESI Act is not confined only
to stage contemplated under Section 13(4) of SARFAESI Act but also
extends to post-section 13(4) of SARFAESI Act situation/events.
In United Bank of India vs. Satyawati Tandon and Others
(2010) 8 SCC 110, the Hon’ble Supreme Court of India deprecated the
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tendency of the High Courts in granting interim orders of stay of recovery
proceedings and observed as follows:-
“There is another reason why the impugned order should be set
aside. If respondent No.1 had any tangible grievance against the
notice issued under Section 13(4) or action taken under Section 14,
then she could have availed remedy by filing an application
under Section 17(1). The expression `any person’ used in Section
17(1) is of wide import. It takes within its fold, not only the
borrower but also guarantor or any other person who may be
affected by the action taken under Section 13(4) or Section 14.
Both, the Tribunal and the Appellate Tribunal are empowered to
pass interim orders under Sections 17 and 18 and are required to
decide the matters within a fixed time schedule. It is thus evident
that the remedies available to an aggrieved person under
the SARFAESI Act are both expeditious and effective.
Unfortunately, the High Court overlooked the settled law that the
High Court will ordinarily not entertain a petition under Article
226 of the Constitution if an effective remedy is available to the
aggrieved person and that this rule applies with greater rigour in
matters involving recovery of taxes, cess, fees, other types of
public money and the dues of banks and other financial
institutions. In our view, while dealing with the petitions involving
challenge to the action taken for recovery of the public dues, etc.,
the High Court must keep in mind that the legislations enacted by
Parliament and State Legislatures for recovery of such dues are
code unto themselves inasmuch as they not only contain
comprehensive procedure for recovery of the dues but also
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envisage constitution of quasi judicial bodies for redressal of the
grievance of any aggrieved person. Therefore, in all such cases,
High Court must insist that before availing remedy under Article
226 of the Constitution, a person must exhaust the remedies
available under the relevant statute.”
The Hon’ble Apex Court in Kaniyalal Lalchand Sachdev vs.
State of Maharashtra, (2011) 2 SCC 782, held that SARFAESI Act itself
contemplates an efficacious remedy for the borrower or any person affected
by an action under Section 13(4), by providing appeal before the DRT. Thus
High Court was fully justified in declining to exercise its jurisdiction under
Articles 226 and 227 of the Constitution.
In G.M., Sri Siddeshwara Cooperative Bank vs. Sri Ikbal
(2013) 10 SCC 83, the Hon’ble Apex Court allowed the appeals filed by the
Bank with the following observations:-
“No doubt an alternative remedy is not an absolute bar to the
exercise of extraordinary jurisdiction under Article 226 but by now
it is well settled that where a statute provides efficacious and
adequate remedy, the High Court will do well in not entertaining a
petition under Article 226 of the Constitution. On misplaced
considerations, statutory procedures cannot be allowed to be
circumvented.”
The Hon’ble Apex Court in Authorized Officer, State Bank of
Travancore and Another vs. Mathew K.C. (2018)3 SCC 85, has
categorically held that when the petitioner has got alternative remedy before
DRT, without exhausting the said efficacious alternative remedy, a writ
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petition should not be entertained. The Hon’ble Apex Court in Authorized
Officer, State Bank of Travancore and Another’s case (supra) while
allowing the appeal of the bank, observed as follows:
“It is a matter of serious concern that despite repeated
pronouncement of this Court, the High Courts continue to ignore
the availability of statutory remedies under the DRT Act and
the SARFAESI Act and exercise jurisdiction under Article 226 for
passing orders which have serious adverse impact on the right of
banks and other financial institutions to recover their dues. We
hope and trust that in future the High Courts will exercise their
discretion in such matters with greater caution, care and
circumspection.”
In the decisions as discussed above, the Hon’ble Supreme Court
has held that writ petition under Article 226 of the Constitution should not
be entertained when the alternate remedy is available under the SARFAESI
Act, unless exceptional circumstances are made out. The remedy of writ
jurisdiction cannot be permitted to be availed as a routine.
The SARFAESI Act is a complete code by itself, providing for
expeditious recovery of dues arising out of loans granted by financial
institutions, the remedy of appeal by the aggrieved person under Section 17
of the Act before DRT followed by right to appeal before Debt Recovery
Appellate Tribunal (in short ‘DRAT’) under Section 18 of the Act.
As per the petitioners, their loan account was declared NPA on
3.6.2020, in violation of the circulars Annexures P-2 to P-4 issued by RBI
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for grant of a moratorium due to countrywide lockdown. Per contra, the plea
of respondent No.1-Bank is that the said loan account had already shown
reverse interest w.e.f. 29.2.2020 and thus is to be deemed as NPA w.e.f. that
very date. So the instant case involves some disputed questions of fact.
The petitioners have also impugned notices issued under
Section 13(2) and Section 13(4) of SARFAESI Act. An efficacious statutory
remedy under Section 17 of the SARFAESI Act is available to the petitioners
to challenge the actions taken by respondent No.1-Bank under the
SARFAESI Act. However, they have directly approached this Court without
availing the aforesaid effective efficacious remedy.
In the light of the settled position of law as discussed above, we
are of the view that the case law cited by the petitioners is not of much help
to establish their case.
In the wake of the above, we are not inclined to entertain this
petition. Accordingly, this writ petition is hereby dismissed. However, the
petitioners are at liberty to avail the appropriate remedy available to them
under law.
(RAJAN GUPTA) (KARAMJIT SINGH)
JUDGE JUDGE
22.4.2021
Gaurav Sorot
Whether reasoned / speaking? Yes / No
Whether reportable? Yes / No
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