K.J. Raju v. State Bank of India and Others

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** **THE HONOURABLE MR. JUSTICE T.R.RAVI** **THURSDAY, THE 4th DAY OF MAY, 2023/14TH VAISAKHA, 1945** ## **WP(C) NO. 4517 OF 2023** ## **PETITIONER:** K.J.RAJU, AGED 59 YEARS, S/O. K.J.JOSEPH, PROPRIETOR BARNET ASSOCIATES, BARNET BUILDING, THAVALAKUZHY, ETTUMANNOOR, KOTTAYAM, PIN - 686631 BY ADVS. SRI RENJITH B.MARAR MS.LAKSHMI.N.KAIMAL SRI ARUN POOMULLI MS.PREETHA S CHANDRAN SRI ABHIJITH SREEKUMAR ## **RESPONDENTS:** 1 STATE BANK OF INDIA, CORPORATE CENTRE, MADAME CAMA ROAD, NARIMAN POINT, MUMBAI, PIN - 400001 REPRESENTED BY ITS MANAGING DIRECTOR. 2 AUTHORIZED OFFICER, STATE BANK OF INDIA, STRESSED ASSETS RECOVERY BRANCH, VANKARATH TOWERS, 7TH FLOOR, PALARIVATTOM, BYE PASS JUNCTION, ERNAKULAM, PIN - 682024 3 CHIEF MANAGER, SME BRANCH, STATE BANK OF INDIA, 2ND FLOOR, PARAYKKAL BUILDING, LAL BAHADUR SASTHRI ROAD, KOTTAYAM, PIN - 686001 BY ADV SRI S.EASWARAN THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 04.05.2023, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: W.P.(C)No.4517/2023 2 ## **T.R. RAVI, J.** **-------------------------------------------W.P.(C)No.4517 of 2023 -------------------------------------------Dated this the 4th day of May, 2023** ## **JUDGMENT** The prayer in the writ petition is for a direction to the respondent to permit the petitioner to pay the total overdue amounts in 20 equal monthly instalments along with regular intalments and thereby regularise the loan account. There is a prayer for renewal of cash credit facilities by accepting the pending due payment, restructuring of the petitioner's loan accounts based on Exts.P2 and P3 circulars and also for a direction to the bank to withdraw all SARFAESI proceedings initiated against the petitioner pursuant to Ext.P7 notice issued by the Advocate Commissioner. 2. Heard Sri Renjith B. Marar on behalf of the petitioner and Sri S.Easwaran on behalf of the respondent bank. 3. The case of the petitioner is that the respondent bank had classified the loan account of the petitioner as NPA on 30.3.2021 as evident from Ext.P11 and it is on that basis that proceedings were initiated. Ext.P2 also confirms that the account became NPA on 30.3.2021. On 28.10.2021, the petitioner W.P.(C)No.4517/2023 3 submitted a representation for restructuring the loan account which was rejected by the Bank on 15.11.2021. When notice under Section 13(4) of the SARFAESI Act was issued, the petitioner approached this Court by filing W.P.(C)No.2301 of 2021. The reason for approaching this Court was that the Debt Recovery Tribunal was not functioning at that time. On 9.6.2022, this Court by Ext.P5 judgment disposed of the writ petition without granting any relief to the petitioner. This Court however, gave liberty to the petitioner to raise all the contentions before the DRT. The petitioner filed S.A.No.300 of 2022 before the DRT. Pending the application, the respondent issued sale notice on 23.12.2022. The petitioner filed OP(DRT)No.521 of 2022, which was disposed of deferring the sale proceedings till 7.1.2023 on condition that the petitioner remits a sum of Rs.10 lakhs. On 26.12.2022, the petitioner deposited the amount of Rs.10 lakhs and on 9.1.2023, the petitioner submitted Ext.P6 representation before the bank seeking restructuring of the loan accounts. On 1.2.2023, the respondent moved the Chief Judicial Magistrate Court, Kottayam by filing M.C.No.666 of 2022 for taking physical possession of the property. The application was allowed and an Advocate Commissioner was deputed, who issued notice stating that possession will be taken on 13.2.2023. It is thereupon that the W.P.(C)No.4517/2023 4 petitioner preferred this writ petition. 4. On 10.2.2023, when the case came up for admission, this Court stayed the coercive proceedings against the petitioner on condition that a sum of Rs.20 lakhs will be deposited on or before 17.2.2023. On 17.2.2023, the petitioner remitted a sum of Rs.10 lakhs and the further sum of Rs.10 lakhs was paid only on 24.2.2023. Subsequently, on 27.2.2023, this Court directed the parties to appear before the High Court Mediation Centre on 6.3.2023 with the hope that the parties will arrive at a mediated settlement. The mediation did not yield results. The petitioner, on the other hand, preferred Ext.P8 representation for renewal and restructuring of the loan accounts. According to the petitioner, on 6.3.2023, while the mediation was taking place, the officer of the Bank informed that the date on which the account became NPA was 24.9.2021. The petitioner had preferred a representation with a proposal for restructuring of the loan accounts which was rejected on 8.3.2023. 5. The contention of the counsel for the petitioner is that the Bank had proceeded with SARFAESI proceedings on the premise that the account became NPA on 30.3.2021, while as a matter of fact, the date of becoming NPA was much later, on 24.9.2021. It is hence submitted that the entire proceedings have W.P.(C)No.4517/2023 5 been initiated without complying with the requirements of the SARFAESI Act. The decision in **M.J.Betty & Ors. v. Union Bank of India & Ors.** reported in **[2007 (4) KHC 735]** was relied on to submit that where a minimum 90 days' period is required to classify an account as a non-performing asset and where the Statute requires the existence of certain facts for exercise of certain powers, this Court can entertain a writ petition if it is shown that the basic facts are not available for exercise of the jurisdiction. Reliance was also placed on the judgment of the High Court of Calcutta in **Fabworth Promoters Private Limited & Ors. v. Reserve Bank of India & Ors. (WPO No.841 of 2021)** , wherein the Court in exercise of jurisdiction under Article 226 of the Constitution quashed a notice issued under Section 13(2) of the SARFAESI Act. Reliance was also placed on the judgment of the Punjab & Haryana High Court in **Amar Alloys Pvt. Limited v State Bank of India** reported in **[2019 SCC OnLine P&H 571]** to emphasise on the importance of the circulars issued for governing the classification of an account as NPA. 6. Sri S.Eawaran, on the other hand submitted that the writ petition itself is not maintainable. Relying on Ext.P5 judgment it is submitted that this Court had clearly held that the appropriate forum for adjudicating issues as to violation of Reserve Bank of W.P.(C)No.4517/2023 6 India Guidelines in the matter of classification of accounts is the DRT and such disputed questions of facts cannot be determined in a writ petition under Article 226 of the Constitution of India. It is submitted that after having approached this Court and suffered Ext.P5 judgment, it is not open to the petitioner to raise the question relating to wrong classification as NPA in a subsequent writ petition. The counsel further points out that the petitioner has not raised such a challenge before the DRT and that having agreed to pay off the amounts in instalments, it is not open for the petitioner to challenge the very classification as NPA and the entire SARFAESI proceedings. The counsel for the respondent then points out that after the matter was sent for mediation, the petitioner had submitted a request on 1.3.2023, wherein the stand taken is different. It is submitted that in the request, the requirement was renewal of the credit facility and not for paying the amounts. In the request made, the petitioner has sought three months' holiday period before the initial instalment. Thirty six equal monthly instalments was also sought for. The said request was rejected by the Bank as per Ext.R2(e). 7. Having approached this Court earlier and agreed for paying off the amounts in instalments, it is not now open to the petitioner to challenge the proceedings initiated after Ext.P11. A W.P.(C)No.4517/2023 7 challenge to the proceedings on the ground that the date of classification as NPA was wrong was not a challenge earlier taken. In the communications which have been produced, the petitioner has proceeded as if the amounts are liable to be paid and states the reasons for non-payment of the amount already demanded. The counsel for the respondent has pointed out that the very prayer in W.P.(C)No.23019 of 2021 was for a direction to the Bank to regularise the petitioner's loan account by allowing him to remit the arrears outstanding. There is no challenge to the classification as NPA raised in the said writ petition. This Court also did not grant any relief in the said writ petition and only relegated the petitioner to the DRT. It is further submitted that the petitioner's remedy to challenge Ext.P7 notice issued by the Advocate Commissioner was to move the DRT and for that reason also the writ petition is not maintainable. 8. I have considered the contentions raised by the Counsel for the petitioner and the respondents. The limits of exercise of jurisdiction under Article 226 need not be stated extensively, since precedents in that regard are a plenty. Recently, the Hon’ble Supreme Court in the decision in **South Indian Bank & Ors. v. Naveen Mathew Philip & Anr. [2023 SCC OnLine SC 435]** , catalogued the earlier decisions rendered by the Apex Court and reiterated the concerns expressed by the Supreme Court regarding the interference by the High Court in W.P.(C)No.4517/2023 8 matters relating to action taken under the SARFAESI Act. Even approaching the High Court for consideration of an offer by the borrower has been frowned upon by the Hon’ble Supreme Court. While observing that the power under Article 226 is rather wide, the Hon’ble Supreme Court has categorically stated that the power should be used only in extraordinary circumstances, when it comes to matters pertaining to proceedings and adjudicatory schemes qua a Statute and more so in commercial matters relating to a lender and borrower, where the Statute prescribes a specific mechanism for redressal of grievances. In view of the categoric pronouncement of the law, I am of the opinion that the case on hand cannot be categorised as one within the confines of the term “extraordinary circumstances” warranting interference by this Court any further. The writ petition fails and is dismissed, however, without prejudice to the rights and remedies available to the petitioner under the Statute, before the appropriate forum. **==> picture [320 x 55] intentionally omitted <==** Sd/- **T.R. RAVI JUDGE** dsn W.P.(C)No.4517/2023 9 ## **APPENDIX OF WP(C) 4517/2023** - PETITIONER'S EXHIBITS Exhibit P1 A TRUE COPY OF THE NOTICE UNDER SECTION 13(2) OF THE SECURITISATION ACT DATED 21.10.2021 ISSUED BY THE 2ND RESPONDENT - Exhibit P2 TRUE COPY OF CIRCULAR NODOR.NO.BP.BC/3/21.04.048/2020-21 DATED 06.08.2020 ISSUED BY THE RESERVE BANK OF INDIA - Exhibit P3 TRUE COPY OF CIRCULAR NO-DOR.STR.REC 11/21.04.048/2021-22 DATED 05.05.2021 ISSUED BY THE RESERVE BANK OF INDIA - Exhibit P4 A TRUE COPY OF THE SECTION 13(4) POSSESSION NOTICE DATED 12.01.2022 ISSUED BY THE 2ND RESPONDENT - Exhibit P5 TRUE COPY OF JUDGMENT IN WPC NO23019/2021 DATED 09.06.2022 - Exhibit P6 TRUE COPY OF REPRESENTATION MADE BEFORE RESPONDENT NO-3 BY THE PETITIONER DATED 09.01.2023 - Exhibit P7 TRUE COPY OF THE ADVOCATE COMMISSION NOTICE IN MC NO-666/2022 OF HON'BLE CHIEF JUDICIAL MAGISTRATE COURT, KOTTAYAM 01.02.2023 - Exhibit P8 TRUE COPY OF THE REPRESENTATION MADE BEFORE THE RESPONDENT NO-2 DATED 01.03.2023 - Exhibit P9 TRUE COPY OF THE REPRESENTATION MADE BEFORE THE RESPONDENT NO-2 DATED 07.03.2023 - Exhibit P10 TRUE COPY OF THE COMMUNICATION NOSARB/VK/30/2022-23 DATED 08.03.2023 ISSUED BY THE RESPONDENT NO-2 - Exhibit P11 TRUE COPY OF DEMAND NOTICE ISSUED UNDER SECTION-13(2) OF SARFAESI ACT DATED 30.07.2021 BY THE RESPONDENT NO-3 - Exhibit P12 TRUE COPY OF THE COMMUNICATION DATED 22.09.2021 ISSUED BY THE RESPONDENT NO-3 - RESPONDENT EXHIBITS EXHIBIT R2(a) COPY OF THE WRIT PETITION NO 23019 OF W.P.(C)No.4517/2023 10 2021 ON THE FILES OF THIS HONOURABLE COURT EXHIBIT R2(b) COPY OF SA NO 300 OF 2022 (WITHOUT ANNEXURES) ON THE FILES OF DRT-II ERNAKULAM EXHIBIT R2(c) COPY OF THE REPRESENTATION DATED 1-3-2023 SUBMITTED BY THE PETITIONER EXHIBIT R2(d) COPY OF THE REPRESENTATION DATED 7-3-2023 SUBMITTED BY THE PETITIONER EXHIBITR2(e) COPY OF THE LETTER DATED 8-3-2023 ISSUED BY THE 2ND RESPONDENT EXHIBIT R2(f) COPY OF THE APPLICATION FOR AMENDEMENT FILED IN SA NO 300 OF 2022 ON THE FILES OF DRT-II ERNAKULAM EXHIBIT R2(g) COPY OF OP DRT NO 521 OF 2022 ON THE FILES OF THIS HONOURABLE COURT.