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SABYASACHI BHATTACHARYYA
Bhanu Properties Ltd. – Appellant
Versus
Reserve Bank of India – Respondent
JUDGMENT :
Sabyasachi Bhattacharyya, J.
1. The petitioners have preferred a two-pronged challenge in the present writ petition – the classification of the petitioners’ account as Non Performing Asset (NPA) on June 30, 2023 and the Notice under Section 13(2) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002 dated September 11, 2023.
2. Learned senior counsel appearing for the petitioners contends that the interim order dated December 6, 2023 passed in the writ petition has not been challenged by the respondent-Bank. Hence, the findings in the same have attained finality. In the absence of any change of circumstances thereafter, it is argued that there is no reason why the said order should not be maintained.
3. Secondly, learned senior counsel assails the classification of the petitioners’ account as NPA. It is argued that the Statement of Accounts shows that the limit of the Cash Credit Facility was Rs. 7.5Cr. The credits availed of by the petitioners never exceeded the said limit. Hence, there was no occasion for the account to be classified as NPA.
4. Moreover, the credit facility was recalled vide Communication date
Classification of an account as NPA under SARFAESI Act is not subject to judicial review and requires the borrower to seek recourse through statutory appeal under Section 17.
The court held that classification of an account as NPA without meeting specific RBI criteria is arbitrary and violates statutory obligations.
The legislative intent to prevent judicial or quasi-judicial intervention at the stage of issuance of demand notice under Section 13(2) of the SARFAESI Act.
The court's discretionary jurisdiction under Article 226 is not absolute and should be exercised judiciously.
The High Court should not adjudicate on the classification of NPA, and recovery proceedings should not be halted by exercising power under Article 226 of the Constitution of India.
Borrowers have remedies under Section 13(3A) and Section 17 of the SARFAESI Act, 2002 to challenge NPA classification and appeal actions taken by the bank.
The statutory scheme of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (Act, 2002) does not provide for a legal remedy until the Section 13(4....
The classification of loan accounts as NPAs and the subsequent actions taken by the bank are not justiciable at the writ stage, and the petitioners should avail the remedy under Section 17 of the SAR....
The court established that non-response to NPA classification notices implies acceptance, validating subsequent asset transfer actions by lenders under the SARFAESI Act.
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