The SARFAESI Act prevails over the MSME Act, and the classification of accounts as NPA is not justiciable at the stage of objection rejection under Section 13(3A).

JUDGMENT

Mrs. Lisa Gill, J. (Oral)

Prayer in this writ petition is for setting aside rejection of objections filed by petitioners under Section 13(3A) of Securitization and Reconstruction of Financial Asset Assets and Enforcement of Security Interest Act, 2002 (for short SARFAESI Act), vide Communication dated 10.02.2024, Annexure P-II. There is a further prayer for directing respondents no.1 and 2 to pass a speaking order besides quashing notice dated 06.12.2023, Annexure P-9, under Section 13(2) of SARFAESI Act.

2. It is submitted that petitioner no.1 is a partnership firm with petitioner no.2 being its managing partner. Petitioner-firm is claimed to be registered as MSME unit under The Micro, Small and Medium Enterprises Development Act, 2006. Cash credit facility to the tune of Rs. 90,00,000/- was availed of by the petitioners, date of which is not specifically mentioned. It is stated that due to outbreak of Pandemic COVID-19, business of petitioners was affected. Emergency Credit Line Guarantee Scheme (ECGLS) was availed of and further credit of Rs. 67,00,000/- was availed of. However, petitioners account was declared Non Performing Asset (NPA) on 12.09.2023, allegedly in blatant violation of Reserve Bank of India (RSBI) guidelines namely Master Circular- Prudential norms on Income Recognition, Asset Classification and Provisioning pertaining to Advances. Moreover, respondent-Bank, it is stated was under a mandatory obligation to first put up petitioner's case for revival before the Designated Committee in terms of RBI Circular dated 17.03.2016 for Framework for Revival and Rehabilitation of Micro, Small and Medium Enterprises. Objections under Section 13(3A) of SARFAESI Act were filed by petitioners on 09.11.2023, upon which respondent-Bank withdrew notice dated 04.12.2023 on the basis of technical grounds. It is stated that petitioners thereafter again requested the respondent-Bank for referring the matter to the Designated Committee. However, in utter disregard of provisions of law, another notice under Section 13 (2) of SARFAESI Act was issued on 06.12.2023, which is verbatim the earlier notice dated 14.09.2023, demanding deposit of a sum of Rs. 2,76,86,308.20/-. Detailed objections were again filed by petitioners under Section 13(3A) of SARFAESI Act, however, respondent-Bank, it is stated rejected the objections in a mechanical and perfunctory manner vide a non speaking communication dated 10.02.2024, Annexure P-II. Aggrieved therefrom, present writ petition has been filed.

3. Learned counsel for petitioners vehemently argued that respondent-Bank is under a statutory obligation to decide the objections filed by petitioners by passing a reasoned order. Once this exercise has not been carried out, petitioners are entitled to approach this Court. Learned counsel for petitioners vehemently argued that respondent-Bank is under a mandate to furnish specific reasons for rejection of objections filed by petitioners. Compliance with Section 13(3A) of SARFAESI Act is mandatory in nature and not directory. Reference is made to judgment of Hon'ble the Supreme Court in ITC Limited v. Blue Coast Hotels Limited, (2018) 15 SCC 99, to submit that as per requirement of Section 13(3A) of SARFAESI Act, it is active consideration by the creditor which is required and a reasoned order to be passed indicating the reasons for non acceptance of the objections/representation by the debtor. It was further argued that Section 13(3A) of SARFAESI Act had been incorporated in the SARFAESI Act to protect the interest of the borrower. Once there is violation thereof, present writ petition should be entertained. It is submitted that this is an aspect which has not been considered by this Court in decision dated 18.12.2023, titled 'M/s Technico Strips and Tubes Private Limited and another v. Deutsche Bank AG and another'. Therefore, present writ petition should be entertained and allowed.

4. We have heard learned counsel for petitioners and have gone t