Fortune Sarees Pvt. Ltd. and Others vs Union of India and Others

Bhaskar Bhattacharya, C.J.—At the time of hearing of these writ-applications where the writ-petitioners have challenged the legality of the provisions contained in Section 2(o) of the Securitization & Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 [hereinafter referred to as the Act], we find that we entertained first of such applications in the month of January 2013 and being satisfied with the prima facie case of the petitioners, granted an order of status quo for a limited period which has since been extended from time to time and is continuing. Now all these matters have attained the final stage of arguments and the single point that has now boiled down to is whether after the amendment of section 2(o) of the Act introduced by way of amending Act No. 30 of 2004, the two sets of guidelines provided in the amended provisions are violative of Article 14 of the Constitution of India. It appears that prior to coming into operation of the amendment, the only guidelines which were required to be followed for deciding the aspect of Non Performing Asset was the guideline relating to the asset classification issued by the Reserve Bank of India, but after such amendment, the Financial Institutions administered or regulated by any authority or body established, constituted or appointed by any law for the time being in force would provide the guidelines relating to asset classification and consequently, the borrower who had taken loan from any bank will be guided by the classification issued by the Reserve Bank of India, whereas in case of Financial Institutions covered by sub-section (a) may not be governed by such guidelines.

This classification, according to the petitioners, is violative of Article 14 of the Constitution of India.

We are, however, at this final stage, not impressed by the other points taken initially in the writ-applications.

In such changed scenario, in our opinion, no purpose would be served by continuing the interim relief which was earlier granted for a limited period and later on being continued.

The object of granting interim relief, it is well known, is to maintain status quo during the pendency of the proceedings so that the ultimate relief claimed in the proceedings may not become inappropriate or infructuous. In the cases before us, even if the petitioners succeed in the long run, we will have to read down the amended provisions by holding that it will be the Reserve Bank of India''s guidelines which will decide the fate of all the borrowers including the borrowers under the Financial Institutions but in all these petitions before us, the borrowers are the ones who have taken loan from the Bank.

Such being the case, the Reserve Bank of India''s guidelines, at any rate, will govern the cases of the petitioners and only the borrowers from Financial Institutions will be affected in the event of success of these writ-applications.

Therefore, if we vacate the interim order which was earlier granted, there will be no difficulty for this Court to give the ultimate relief in favour of the petitioners, even if the petitioners succeed.

The balance of convenience and inconvenience is also in favour of vacating the interim order inasmuch as for the continuation of the interim order, the recovery proceedings at the instance of the Banks are being unnecessarily delayed.

On consideration of the above factors, we vacate the interim order earlier granted in all these proceedings from time to time where the provisions contained in section 2(o) of the Act has been challenged as ultra vires the Constitution of India.

The matters will, however, continue in the list for further hearing which is at the final stage of arguments.

After this order is passed, Mr. Shah, appearing on behalf of some of the petitioners prays for stay of the operation of our order vacating interim relief.

After taking into consideration the fact that by virtue of the interim order granted by us the recovery proceedings is unnecessarily delayed, we find no reason to stay our order. We make it clear that we have not gone into the individual case of the petitioners and we have restricted our scrutiny only to the legality of section 2(o) of the Act and pendency of the petitions will not stand in the way of the petitioners in seeking appropriate remedy before the appropriate forum, if according to them, there is any other illegality in the action of the Bank in proceeding u/s 13(4) of the Act.

We further make it clear that we have also not gone into the merits of those aspects. Direct Service today is permitted.