(Petition under Article 226 of the constitution of India that in the circumstances stated in the Affidavit field herein the High Court will be pleased to issue an appropriate writ or order or direction more particularly one in the nature of writ of mandamus declare

(i) the action of the Respondents in classifying the 1st Petitioner’s account number a NPA and issue of notice dated: 01.09.2006 under Section 13 (2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security interest Act, 2002.

(ii) That action of the Respondents in seeking to sell the immovable property of the Petitioners under Section 13 (4) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security interest Act, 2002 vide its paper notification date: 27.11.2006.

as illegal, arbitrary, being contrary to the provisions of the Securitisation and Reconstruction of financial Assets and Enforcement of Security Interest Act, 2002 and consequently direct the Respondents not to take any coercive steps in pursuance thereof.)

Oral Order:

Heard Mr. Sriram, learned Advocate representing Sri D.V. Sitharam Murthy, the learned counsel for the petitioners and Sri Deepak Bhattacharjee, the learned counsel for the respondents. At the request of the learned counsel the writ petition is taken up for hearing and is disposed of by this judgment.

A notice dated 1.9.2006 was issued to the petitioners by the respondent-bank, being one u/Sec.13 (2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (‘the Act’), intimating the petitioners that the financial assets/credit facility (extended to them) had become irregular, the debt was classified as a non-performing asset (NPA); that the outstanding liability as on 28.8.2006 was Rs.68,62,272/- and that the petitioners should repay the same with further interest, incidental expenses and costs, failing which the bank would exercise its rights u/Sec.13(2) of the Act and other applicable provisions. By a notification dated 27.11.2006 u/Sec.13(4) of the Act r/w Rule 8(1) and (2) of the Security Interest (Enforcement) Rules 2002 (‘the Rules’), notice for taking possession on 24.11.2006 of the specified property was issued and published in the newspapers.

The writ petition challenges the notice u/Sec. 13 (2) of the Act, the paper notification dated 27.11.2006 and also seeks a declaration that the action of the respondents in classifying the first petitioner’s account as a NPA is illegal, arbitrary and contrary to the provisions of the Act. A consequent direction not to take coercive steps pursuant to the impugned notice and notification is also sought.

The first petitioner is a registered partnership firm, the 2nd petitioner is the first petitioner’s Managing Partner and the 3rd petitioner, the son of the 2nd petitioner.

During 1997-98 the first petitioner availed a term loan for its business purposes. According to the respondent-bank this account and other accounts of the first petitioner with the bank became irregular. The bank thereupon decided to recall the advances and transfer the account to ‘recalled debt account’. The bank also decided to approach the Debts Recovery Tribunal under the provisions of the Recovery of Debts Due to Banks and Financial Institutions Act 1993 (‘the Act’).

At the above stage of the matter the petitioner solicited a One Time Settlement (OTS). In view of this request the bank did not proceed under the provisions of the 1993 Act. On 5.3.2002 after the loan account was determined (in 2001) as NPA, in view of the petitioner’s request an OTS was approved on 5.3.2002. Under this scheme the petitioner was required to pay Rs.60.50 lakhs with further interest. The petitioners paid only Rs.30.06 lakhs in installments and after selling some of the mortgaged properties with the prior permission of the respondent-bank.

As the petitioners failed to conform to the terms of the OTS, the OTS was treated as inoperative