The court emphasized the necessity for the Debt Recovery Appellate Tribunal to address critical issues regarding wrongful classification of a borrower's account as NPA and the invocation of bank guarantees without any default.

ORDER :

MANINDRA MOHAN SHRIVASTAVA, CJ.

The petitioner has filed this revision petition under Article 227 of the Constitution of India embittered by the order dated 8.2.2021 passed by the Debt Recovery Appellate Tribunal, Chennai [DRAT].

2. The nub of the revision petition runs thus:

2.1. The petitioner company, which is engaged in the execution of various Heating Ventilation and Air Conditioning (HVAC) Engineering, Procurement and Construction (EPC) contracts for private parties as well as many public projects, approached the respondent bank seeking financial assistance and the same was granted over a period of time from 2003 to 2016.

2.2. It is stated and alleged that, during the period from April2016 to July, 2016, as the cash credit facility exceeded the limit, the respondent stopped the facilities in contravention of the Reserve Bank of India Directions on Revitalisation of Distressed Financial Assets. It is added that the abrupt stoppage of non-fund based facilities had serious financial implications and resulted in devolvement of Bank Guarantees/Letters of Credit to the tune of approximately Rs.18.42 crore between September and October, 2016.

2.3. It is averred that the petitioner was in dire need of funds to execute various projects and, therefore, it approached the respondent to issue various bank guarantees. It is alleged that from February 2017, the bank paid wrongfully the bank guarantees without any default and without even the employer/beneficiary seeking for payment under the bank guarantees. This act of the respondent, it is averred, resulted in termination of several ongoing contracts, resulting in huge loss to the petitioner. It is further averred that the conduct of the respondent reeks of arbitrariness and is in contravention of the provisions of law of guarantee under the Indian Contract Act, 1872 as well as the Reserve Bank of India Directions and Guidelines.

2.4. It is further stated that, on 31.3.2017, the petitioner received a demand notice under Section 13 (2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 [for brevity “the Act”] for an alleged outstanding amount of Rs.82.16 crore, after classifying the petitioner's account as Non-Performing Asset [NPA] with retrospective effect from30.6.2016.

2.5. Apropos of the alleged wrongful payment of bank guarantees, without there being any default by the petitioner or demand from the employer, the petitioner filed a suit, being C.S.No.257 of 2017 before this court, wherein, it is stated that an interim mandatory injunction was granted on 28.4.2017. It is alleged that even thereafter the respondent proceeded to make further payments in respect of the bank guarantees, despite specific request for extension of bank guarantees by the petitioner.

2.6. It is submitted that, when things stood thus, out of the blue, the petitioner received an order dated 24.4.2018 passed under Section 14 of the SARFAESI Act directing delivery of possession. The petitioner as well as the respondent bank filed applications before the Debts Recovery Tribunal [DRT]. During the pendency of these proceedings, the respondent took possession of the ground and first floors of the registered office of the petitioner.

2.7. The DRT allowed the application filed by the petitioner by order dated 11.5.2020 and directed the respondent to restore the actual possession of the subject property to the petitioner. Assailing the said order, the respondent/bank approached this court by filing a revision petition, as the Debt Recovery Appellate Tribunal was not functioning owing to Covid pandemic, and this Court directed the parties to maintain status quo in respect of the possession. Subsequently, the matter was relegated to the DRAT, noting its functioning. The Debt Recovery Appellate Tribunal, by the order dated 8.2.2021, which is impugned in this revision, allow