The court emphasized the power of the High Court to aid a borrower in case of violation of the Reserve Bank of India's guidelines and the legal right created in a borrower by the guidelines.

F.M. Ibrahim Kalifulla, J

1. By consent of all parties, the Writ Petitions itself are taken up together for hearing and disposed of by a common order.

2. The petitioners seek to challenge the impugned notices, dated 210. 2009, on the file of the first respondent and quash the same as illegal and arbitrary and direct the first respondent-Bank to consider the grievances of the petitioner in the background of equity and Principles of Natural Justice.

3. It is well settled that at the stage of issuance of Section 13(2) notice, there is no right for the petitioners to seek for a challenge. In fact, after 13(2) notice, the petitioners get an opportunity to file their objections within 60 days and responsibility on the first respondent-Bank to deal with such objections in an appropriate manner by invoking Section 13(3-A) of the SARFAESI Act. Thereafter, if further action is initiated under Section 13(4) of the Act, then alone, there would be any scope for the petitioners to seek for a challenge and that too, before the Debts Recovery Tribunal (in short ‘DRT’) under Section 17 of the SARFAESI Act. In such circumstances, we are not inclined to entertain the Petitions challenging the Section 13(2) notices impugned in these Writ Petitions.

4. As far as the direction to the first respondent to consider their grievances are concerned, we take note of the submissions made by Mr. Santharam Natarajan counsel for the petitioners as well as Mr. AV. Arun, learned counsel appeared for the Second respondent.

5. The learned for the second respondent placed before us the circulation of the Reserve Bank of India, dated 5. 2009, communicated to all Scheduled Commercial Banks. Paragraphs 7 to 9 of the said communication reads as under:

“7. The Reserve Bank has carefully considered the Group’s recommendations regarding rehabilitations of potentially viable sick MSE units/enterprises, which essentially aim at timely detection of sickness and adoption of remedial measures to rehabilitate the potentially viable ones. While fully appreciating the sense of the Group’s recommendations, attention of Banks is invited to the guidelines issued by the Reserve Bank on MSE debt restructuring in respect of borrowal accounts that show symptoms of stickiness, vide its circulars:

i. DBOD.BP.BC. No.34/24. 132/2005-06 dated September 8, 2005

ii. DBOD.BP.BC. No.37/21.04.132/2008-09 dated August 27, 2008

These guidelines, in fact, subsume the incipient sickness stage and, if implemented as intended, could significantly prevent or arrest sickness at the initial stages. Such MSE units/enterprises, which turn sick in spite of debt re-structuring are expected to be few and would fall within the ambit of the extent guidelines on rehabilitation of potentially viable sick units/enterprises (vide circular RPCD. No.PLNFS.BC.57/06.04.01/2001-2002 dated January 16, 2002). Banks are, therefore, advised to apply the Reserve Bank’s guidelines on debt restructuring optimally and in letter and spite. This would be to their advantage as well as their MSE clients.

8. The group has also recommended that Reserve Bank of India may announce a One Time Settlement Scheme (OTS) for the MSME Sector. However, any policy on settlement of non-performing loans essentially a management function to be exercised by individual Banks, based in their commercial judgment. It is necessary that the Banks have their own non-discretionary OTS policy which enables their officials to make quick and judicious decisions on OTS. As such, Banks are advised to put in place a suitable OTS for this sector.

9. Accordingly, in the light of the recommendations of the group and the Banking Codes, Standards Board of India’s code commitment for the MSE borrowers, your Bank may undertake a review and put in place the following policies for the MSE Sector, duly approved by the Board of Directors:

i. Loan policy governing extension of credit facilities

ii. Restructuring/Rehabilitation policy for revival of potentia