Ind Energy Ltd. and Another vs The Authorised Officer and Others

Satish K. Agnihotri, J.

1 By this petition, the petitioners seek following reliefs:

Relief (s) sought : The petitioner most humbly and respectfully prays for following reliefs;

(i) That this Hon''ble Court be pleased to issue writ in the nature of mandamus or such other appropriate writ, order or direction thereby striking down and quashing and setting aside the "Income Recognition & Asset Classification Guidelines" framed by the Respondent No. 3/Reserve Bank of India in purported exercise of powers conferred upon it by virtue of Section 12 of the Securitisation & Reconstruction of Financial Assets & Enforcement Security Interest Act, 2002 in so far as they relate to classification of account as non-performing asset, being contrary to the provisions of Sec. 2(o) of the SARFESI Act, and be further pleased to direct the Respondent No. 3/Reserve Bank of India to re-frame and lay down the Guidelines in conformity with the provisions of the said Act.

(ii) This Hon''ble Court be pleased to hold and declare that the classification of the account of the petitioner No. 1 as non-performing asset, based on illegal and contrary guidelines issued by the Respondent No. 3. and applied by the Respondent No. 1 Bank, is illegal, void-ab-initio resultantly all action taken by the Respondent No. 1 Bank, in pursuance thereto are illegal, viod-ab-initio be struck down to meet the ends of justice.

In the alternative

(iii) Hold that declaration of the account of the petitioner No. 1 as non-performing asset by the Respondent No. 2 is illegal and contrary to even the present existing Income Recognition and Asset Classification Guidelines as framed by the Respondent No. 3.

(iv) Hold that no decision having been taken upon the objection as raised by the petitioner No. 1 to the notice of the Respondents 1 & 2, u/s 13 (2) of the Act, and thus there being violation of the provisions of Section 13 (3-A) of the Act, all consequent actions thereto are illegal null and void.

(iv) On the prayer clause (iii) being granted, direct the Respondent No. 1, to decide the objections raised by the Petitioner No. 1, by giving reasons.

(v) During the pendency of the present petition, grant stay to the effect and operation of the notice u/s 13 (2) of the Act, and all consequent actions thereto.

(vi) Cost of the proceedings.

(vii) Any other relief as this Hon''ble Court deems fit and proper in the facts and circumstances of the case.

Learned counsel appearing for the petitioner submits that the petitioner No. 1 decided to set up Integrated Steel Plant comprising of Sponge Iron Plant, Steel Melt Shop, Coal Washery, Captive Power Plant, Railway Siding etc. and for the said purpose availed the credit facility from the Banks. The respondent No. 2 had funding prior to 2004-05 to the petitioner Soya/Agro Division. According to the petitioners, due to adamant approach of the respondent No. 2 Bank the proposal submitted by the Indian Overseas Bank came to be withdrawn on 09-02-2011. Thereafter, on 14-03-2011 (Annexure-P/4) the respondent Bank issued notice u/s 13 (2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short "the Act, 2002"). In response to the said notice, the petitioner submitted objection on 16-05-2011 (Annexure-P/5). The said objection has been rejected by the respondent Bank and communicated the same to the petitioner through the Bank''s counsel on 18-05-2011 (Annexure-P/6). Thus, this petition filed by the petitioner before this Court on 06-06-2011 to challenge the adjudication of the objection as well as the guidelines issued by the respondent No. 3/Reserve Bank of India.

The respondent-Bank submits that under the provisions of Section 13 (4) of the Act, 2002 read with the rules framed thereunder, the respondent Bank issued the possession notice on 20-05-2011 and copy of the same has already been supplied to the petitioners. Thus, the only remedy available to the petitioners is to take recourse to the provisions of Section 17 of the Act, 2002.

I have heard learned counsel appearing for the parties, perused the pleadings and the documents appended thereto.

The remedy under Articles 226 and 227 of the Constitution of India is not available to the petitioners when statutory efficacious alternative remedy under the provisions of the Act, 2002 is available.

The substantial relief sought for in this petition was not questioning the validity of the circular, but what was sought in the alternative is after passing of the order u/s 13 (4) of the Act, 2002. The petitioners, in order to delay the recovery of amount, have sought for a declaration to the effect that the guidelines issued by the Reserve Bank of India are not in conformity with the provisions of the Act, 2002.

In view of the fact that order u/s 13 (4) of the Act, 2002 has been passed, the issue asto illegality in the guidelines cannot be considered in the instant petition, leaving the question of law to be decided in an appropriate case.

The Supreme Court in Kanaiyalal Lalchand Sachdev and Others Vs. State of Maharashtra and Others, observed as under:

In Indian Overseas Bank v. Ashok Saw Mill the main question which fell for determination Was whether the DRT would have jurisdiction to consider and adjudicate post section 13 (4) events or whether its scope in terms of Section 17 of the Act will be confined to the stage contemplated u/s 13 (4) of the Act? On an examination of the provisions contained in Chapter III of the Act, in particular Sections 13 and 17, this Court held as under: (SCC pp. 375-76, paras 335-36 & 39).

In order to prevent misuse of such wide powers and to prevent prejudice being caused to a borrower on account of an error on the part of the banks or financial institutions, certain checks and balances have been introduced in Section 17 which allow any person, including the borrower, aggrieved by any of the measures referred to in sub-section (4) of Section 13 taken by the secured creditor, to make an application to the DRT having jurisdiction in the matter within 45 days from the date of such measures having taken for the relief indicated in sub-section (3) thereof.

The intention of the legislature is, therefore, clear that while the banks and financial institutions have been vested with stringent powers for recovery of their dues, safeguards have also been provided for rectifying any error or wrongful use of such powers by vesting the DRT with authority after conducting an adjudication into the matter to declare any such action invalid and also to restore possession even though possession may have been made over to the transferee.

We are unable to agree with or accept the submissions made on behalf of the appellants that the DRT had no jurisdiction to interfere with the action taken by the secured creditor after the stage contemplated u/s 13 (4) of the Act. On the other hand, the law is otherwise and it contemplates that the action taken by a secured creditor in terms of section 13 (4) is open to scrutiny and cannot only be set aside but even the status quo ante can be restored by the DRT

(Emphasis supplied by us)

We are in respectful agreement with the above enunciation of law on the point. It is manifest that an action u/s 14 of the Act constitutes an action taken after the stage of Section 13 (4), and therefore, the same would fall within the ambit of Section 17 (1) of the Act. Thus, the Act itself contemplates an efficacious remedy for the borrower or any person affected by an action u/s 13 (4) of the Act, by providing for an appeal before the DRT.

In view of the well settled principle of law that he efficacious statutory remedy of appeal under the provisions of Section 17 of the Act, 2002 is available to the petitioners and, as such, no interference in warranted by this court in exercise of its power under Article 226/227 of the Constitution of India. For the reasons mentioned hereinabove and applying the well settled principles of law to the facts of the present case, it is not necessary to go into the merits of the cases and the petition is dismissed, as not maintainable. However, liberty is reserved to the petitioners to take recourse to statutory forum under the provisions of the Act, 2002, if so advised.