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IN THE HIGH COURT AT CALCUTTA
DEBANGSU BASAK, MD. SHABBAR RASHIDI, JJ.
State Bank of India & Anr. - Appellants
Versus
Atibir Industries Co. Ltd. & Anr. - Respondents
APO No. 180 of 2023 In IA No. GA 1 of 2023 With APOT No. 393 of 2023 In IA No. GA 1 of 2023
Decided On : 25-07-2024
| Table of Content |
|---|
| 1. appeals against a common judgment. (Para 1 , 2) |
| 2. sbi's contention on loan classification and restructuring. (Para 3 , 4 , 5 , 6 , 7 , 8 , 9 , 10) |
| 3. arc's arguments on valid assignment and borrower classification. (Para 12 , 13 , 14 , 15 , 16 , 17 , 18 , 19 , 20 , 21) |
| 4. borrower's defense against npa classification. (Para 22 , 23 , 24 , 25 , 26 , 27 , 28 , 29 , 30 , 31 , 32 , 33 , 34 , 35 , 36) |
| 5. legal framework on financial asset transfer. (Para 55 , 56 , 57 , 58 , 59 , 60 , 61 , 62 , 63) |
| 6. impact of covid-19 on loan classifications. (Para 64 , 65 , 66 , 67 , 68 , 69) |
| 7. clarification on sbi's options for asset recovery. (Para 70 , 71 , 72 , 73) |
| 8. assessment of sbi's actions against legal standards. (Para 74 , 75 , 76 , 77 , 78) |
| 9. clarification on validity of the npa classification. (Para 79 , 80) |
| 10. legal grounds for appeal procedures. (Para 81 , 82 , 83 , 84) |
| 11. judicial interpretation of non-response to notices. (Para 85 , 86 , 87 , 88 , 89) |
| 12. summary of court's justification of actions taken. (Para 90 , 91 , 92 , 93 , 94 , 95) |
| 13. final ruling on the appeals. (Para 97 , 98) |
JUDGMENT :
Debangsu Basak, J.
| Preface |
| Contentions of SBI |
| Contentions of ARC |
| Contentions of the borrower |
| Issues |
| Facts |
| Decision |
| Conclusion |
Preface
1. Two appeals directed against the judgement and order dated October 5, 2023, passed in WPO 722 of 2023 have been heard analogously as similar issues are involved, appeals are between the same parties and appeals are directed against the same judgement and order.
2. State Bank of India, (hereinafter referred to as the SBI for the sake of convenience) has preferred the appeal being APO 180 of 2023 while CFM Asset Reconstruction Company (hereinafter referred to as the ARC for the sake of convenience) has preferred the appeal being APO No. 393 of 2023.
Contentions of SBI
3. Learned advocate appearing for SBI has contended that Atibir Industries Company Limited (hereinafter referred to as the borrower for the sake of convenience) obtained both fund and non-fund-based credit facilities from SBI. Such credit facilities have been sanctioned by a letter dated January 27, 2020. Referring to the letter of sanction dated January 27, 2020, he has pointed out that, amongst the fund-based credit facilities, the borrower enjoyed cash credit as well as term loan facilities. By a letter dated June 11, 2020, the borrower had referred to its earlier letter and resolution plan dated May 26, 2020, the meeting between the borrower and SBI held through video conferencing on June 1, 2020, and the letter of SBI dated June 3, 2020, and submitted a revised restructuring plan for credit facilities. He has contended that SBI accepted the revised restructuring plan submitted by the borrower.
4. Referring to the letter dated June 11, 2020, being the revised plan of the borrower and relevant provisions of the Reserve Bank of India (RBI) circulars, learned advocate appearing for SBI has contended that, the account of the borrower became a non-performing asset (NPA) on the date when the borrower had applied for restructuring of the credit facilities.
5. Learned advocate appearing for SBI has contended that, in any event, the account of the borrower became an NPA as of October 16, 2020. The account became irregular on January 17, 2020 itself. Moreover, sickness in the account of a borrower has to be treated borrower-wise and not account-wise. In support of such contention, he has relied upon the Master Circular of RBI.
6. Learned advocate appearing for SBI has submitted that SBI issued a web notice dated February 10, 2023, for the sale of the subject financial assets. Borrower had filed a writ petition with regard thereto in which an interim order was passed. Borrower had withdrawn the writ petition on March 21, 2023. SBI had subsequently sold the subject accounts on March 24, 2023, when the subsequent writ petition was affirmed. He has contended that with the interim order in the
The court established that non-response to NPA classification notices implies acceptance, validating subsequent asset transfer actions by lenders under the SARFAESI Act.
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....
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.
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 court's discretionary jurisdiction under Article 226 is not absolute and should be exercised judiciously.
The classification of a borrower's account as NPA under the SARFAESI Act is not justiciable in writ jurisdiction until measures under section 13(4) are invoked, necessitating the exhaustion of statut....
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.
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