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.

JUDGMENT

Satish Chandra Sharma, C.J. (Oral)

CM APPL. 16120/2023

1. Exemption allowed, subject to all just exceptions.

2. The application stands disposed of.

LPA 225/2023 & CM APPL. 16119/2023

3. The present Letters Patent Appeal (LPA) is arising out of judgment dated 22.02.2023 delivered by learned Single Judge of this Court in W.P.(C.) No. 13530/2022 titled Satpal Singh Kohli & Another Vs. Canara Bank.

4. The facts of the case reveal that the Appellants have availed various loans/cash credit facilities from Respondent/Canara Bank since 2013. In total, six loan accounts were being operated with the Respondent Bank. Out of the six loan accounts, four were in respect of cash credit facilities, working capital. The remaining two housing loans were in the joint name of the Appellants.

5. It has been stated by the Appellants that on account of financial crisis from 01.04.2022, the accounts in respect of M/s Pal Enterprises became irregular, and finally, they were classified as Non-Performing Asset (NPA). The Appellants before this Court, being aggrieved by declaration of accounts as NPA and against the action of the bank under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred as `the SARFAESI Act, 2002'), came up before this Court praying for the following reliefs:

"a) issue writ/order/direction quashing and setting aside the action of Respondent bank declaring and classifying all the six accounts of the Petitioners and M/s Pal enterprises as NPA along with quashing and setting aside of the impugned Notices issued under Section 13 (2) of the SARFAESI Act, 2002 dated 08.08.2022 and 17.08.2022 by the Respondent Bank; and

b) issue writ/order/direction to the Respondent Bank to regularize all the six accounts of the Petitioners and M/s Pal Enterprises; and/or

c) pass any other and further orders as this Hon'ble Court may deem fit and proper in the facts and circumstances of the present case."

6. An interim order dated 19.09.2022 was passed in the matter restraining the Respondent Bank from taking further action. Thereafter, an application was preferred by the respondent Canara Bank being C.M. No.1648/2022 for vacating the stay order dated 19.09.2022.

7. The learned Single Judge declined to interfere with the notices dated 08.08.2022 and 17.08.2022 issued under Section 13(2) of the SARFAESI Act, 2002 giving liberty to the Appellants to prefer an appeal under Section 17 of the SARFAESI Act, 2002. The learned Single Judge was of the view that the Appellants have a remedy to raise their grievances in terms of Section 13(3A) of the SARFAESI Act, 2002- which has, admittedly, not been availed of.

8. Liberty has been granted to the Appellants to raise their grievances under Section 13(3A) of the SARFAESI Act, 2002, and in case the Appellants have any further grievance in the matter, then they are given a liberty to avail appropriate remedy available is under Section 17 of the SARFAESI Act, 2002.

9. Learned Counsel for the Appellants has vehemently argued before this Court that the Appellants does not have any remedy against the order declaring the account of the Petitioners as NPA, and therefore, the petition could not have been disposed of with liberty to the Petitioners to raise their grievances under Section 13(3A) of the SARFAESI Act, 2002 and thereafter, under Section 17 of the SARFAESI Act, 2002.

10. Learned Counsel for the Appellants has submitted that the Respondent Bank has not granted any opportunity to the Appellants. There were various anomalies, and in case a notice was issued to the Appellants, the Appellants would have clarified the issue and there would have been no necessity to proceed under the statutory provisions of the SARFAESI Act, 2002.

11. It has been vehemently argued by the Appellants before this Court that in the case of Phoenix ARC (P) Ltd. v. Vishwa Bharati Vidya Mandir, (2022) 5 SCC 345, the Hon'ble Supreme Court has