The validity of non-performing asset (NPA) classification should be decided by the Debt Recovery Tribunal, and statutory remedies under the SARFAESI Act should be availed before seeking relief through writ petitions.

JUDGMENT :

Senthilkumar Ramamoorthy, J.

(Prayer in W.A.No.424 of 2020: Writ Appeal is filed under Clause 15 of Letters Patent, to set aside the order passed in W.P.No.17136 of 2019 dated 28.02.2020 and allow the writ petition.

W.A.No.425 of 2020: Writ Appeal is filed under Clause 15 of Letters Patent, to set aside the order passed in W.P.No.17134 of 2019 dated 28.02.2020 and allow the writ petition.

W.A.No.426 of 2020: Writ Appeal is filed under Clause 15 of Letters Patent, to set aside the order passed in W.P.No.17128 of 2019 dated 28.02.2020 and allow the writ petition.)

1. These three appeals are filed in respect of the declaration of the loan accounts of the respective Appellant as a non-performing asset (NPA) by the fourth Respondent bank (the Bank). In each of the cases, writ petitions were filed by the respective Appellant for a Writ of Mandamus to direct the RBI to enquire into the complaints dated 27.05.2019 and 28.05.2019 with regard to the classification of the respective loan account as a NPA. The RBI Master Circular No.DBR.No.BP.BC.2/21.04.048/2015-16 dated 01.07.2015 deals with, inter alia, asset classification. As per Clause 2.1.2 thereof, an account would be declared as a NPA if interest and/ or an installment of principal remain overdue for a period of more than 90 days in respect of the term loan. As per clause 4.2.4 of this Master Circular, an account may also be classified as a NPA, if material terms of the loan facility are violated.

2. Each of the Appellants herein were sanctioned loans between December 2016 and December 2017. By a communication dated 05.05.2018, the respective loan accounts were classified as NPA. Subsequent thereto, notices under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (the SARFAESI Act) were issued and measures were taken under Section 13(4) thereof. Challenging such measures, proceedings were initiated by the respective Appellant under Section 17 of the SARFAESI Act before the Debts Recovery Tribunal (DRT) and such proceedings are said to be pending. Upon receipt of the communication dated 05.05.2018 classifying the account as NPA, each Appellant made objections to such classification by letter dated 08.05.2018. Thereafter, complaints were filed with the RBI on 27.05.2019 and 28.05.2019. On account of the failure of the RBI to respond to the complaints, W.P. Nos.17128, 17134 and 17136 of 2019 were filed for Writs of Mandamus to direct the RBI to enquire the complaints dated 27.05.2019 and 28.05.2019. All the writ petitions were dismissed by a common order dated 28.02.2020. The said order is challenged in these proceedings.

3. We heard Mr.R.Thiagarajan, the learned senior counsel for the Appellant in all the writ appeals; Mr.C.Mohan, the learned counsel for the RBI; and Mr. E. Om Prakash, the learned senior counsel for the Bank.

4. Mr.R.Thiagarajan, the learned senior counsel for the Appellants, invited the attention of this Court to the Master Circular dated 01.07.2015 of the RBI and pointed out that a loan account can be classified as a NPA only if there is default in paying interest or an installment of the principal for a period of more than 90 days. In the case at hand, he submitted that the loan accounts were classified as NPA although neither principal nor interest was overdue for a period of more than 90 days. He further submitted that the Appellants immediately objected to the said classification of their accounts as NPA by communication dated 08.05.2018. They also complained to the RBI on 27.05.2019 and 28.05.2019. Consequently, he contended that the Appellants were entitled to the relief requested whereas the learned single Judge erroneously rejected the writ petitions on the ground that an alternative remedy is available. In support of his contentions, Mr.Thiagarajan relied upon the judgment of the Hon’ble Supreme Court in Sudhir Shantilal Mehta vs. Central Bureau of Investigation [(2009) 8 SCC 1], pa