The classification of loan accounts as NPAs and the subsequent actions taken by the bank are not justiciable at the writ stage, and the petitioners should avail the remedy under Section 17 of the SARFAESI Act, 2002 when further steps are taken by the bank.

ORDER :

[P. Naveen Rao, J.]

1. Heard learned senior counsel Sri S.Ravi for petitioners and learned senior counsel Sri G.Vidyasagar for respondents.

2. Petitioners are classified as small enterprises under the Micro, Small and Medium Enterprises (MSME) classification. They are engaged in the business of extraction of crude petroleum and natural gas. With an intention to set up units to be engaged in manufacture of reclamation of used and waste oil, petitioners obtained term loan of Rs.5.37 crores and Rs. 2.76 crores respectively for construction of factory buildings and term loan of Rs. 4.98 crores and Rs. 4.56 crores respectively towards purchase of plant and machinery and a cash credit amount of Rs. 4.63 crores and Rs. 7.35 crores respectively at the rate of interest of 11.75 % per annum from first respondent bank. There appears to be correspondence on restructuring the loan accounts and charge of higher interest rate. Holding that consequent to default committed in repayment of principal debt and interest thereon, the loan accounts of petitioners were classified as Non Performing Assets (NPA) as on 31.7.2019, the first respondent bank issued notice dated 7.9.2019 calling upon the petitioners to discharge the liabilities in full. Questioning the decisions to classify petitioners’ loan accounts as NPAs and issuing Section 13(2) notices, these writ petitions are filed. This Court by orders dated 5.11.2019 made in I.A.No.3 of 2019 in W.P.No.24018 of 2019 and in I.A.No.2 of 2019 in W.P.No.24052 of 2019 granted interim directions as prayed for.

3. Extensive submissions are made by learned senior counsel for petitioners and learned senior counsel for respondent bank touching upon various aspects of reliefs sought in the writ petitions. However, as reliefs sought in the writ petitions are against classifying petitioners’ accounts as NPA and notices under Section 13(2), the submissions of learned senior counsel are considered on the aspect of maintainability of the writ petitions.

4. Learned senior counsel for petitioners vehemently contended that the respondent bank erroneously classified the petitioners’ accounts as NPAs. They are small enterprises. Having regard to spread of Covid-19 virus impacting over all business and development activity, petitioners’ business also affected. He would submit that Reserve Bank of India (RBI ) guidelines required the respondent bank to restructure the accounts of small enterprises like petitioners but illegally the benefits of restructure was not extended to them. He would submit that as per RBI guidelines, he has a right to seek enforcement of these measures and if these measures were properly applied the petitioners’ accounts could not have been declared as NPAs. He would submit that issue of declaring petitioners’ accounts as NPA cannot be adjudicated by the Debts Recovery Tribunal and therefore petitioners have no other efficacious remedy except to invoke the extra ordinary jurisdiction of this Court. He would submit that under Section 17 of the Act, 2002, the Tribunal can only go into the aspect whether the bank/financial institution has complied with the mandatory requirements of the Act, 2002 and therefore cannot go into the decision to declare the petitioners’ accounts as NPAs.

4.2. According to learned senior counsel appearing for petitioners, a writ under Article 226 of the Constitution of India is maintainable against private entities when petitioners are seeking enforcement of RBI guidelines.

4.3. Learned senior counsel relied on Andi Mukta Sadguru Shree Muktajee Vandas Swami Suvarna Jayanti Mahotsav Smarak Trust and others Vs V.R.Rudani and others, (1982) 2 SCC 691; Pearson Drums & Barrels Pvt. Ltd., Vs The General Manager, Consumer Education & Protection Cell of Reserve Bank of India and others, MANU/WB/0194/2021; Velankani Information Systems Limited Vs Secretary, Ministry of Home Affairs, Government of India and others, MANU/KA/2455/2020; and Bharat Navnitlal Shah Vs Punjab Nation