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2024 Supreme(Online)(DEL) 32315
HIGH COURT OF DELHI
Sanjeev Narula, J
DAWESCO LLP – Appellant
Versus
UGRO CAPITAL LIMITED & ANR. – Respondent
W.P.(C) 16951/2024
NEIL DAWES BHUTANI
The court ruled that a writ petition against a private NBFC was not maintainable under Article 226, emphasizing the availability of statutory remedies under the SARFAESI Act for borrowers.
Headnote:(A) Constitution of India, 1950 - Article 226 - SARFAESI Act, 2002 - Sections 13(2) and 13(4) - Writ petition filed against a private NBFC for actions violating MSME laws and RBI guidelines - Petitioner availed loan but alleged non-disclosure of terms and conditions, and inadequate loan disbursement - Court found that the petition was not maintainable as the primary reliefs sought were against a private entity not qualifying as 'State' under Article 12 - The court emphasized that the SARFAESI Act provides a comprehensive mechanism for borrowers to challenge creditor actions, and the petitioner has statutory remedies available under it. (Paras 10, 12, 14, 15)
(B) Judicial Review - The court clarified that while judicial review is available for public functions, the present dispute pertains to private commercial transactions and contractual obligations, which should be addressed under civil law. (Paras 10, 12)
(C) Misjoinder of Cause of Action - The attempt to introduce a public law element by impleading the Registrar of Trademarks was deemed unpersuasive as the relief sought was misconceived. (Paras 11, 12)
(D) Dismissal of Writ Petition - The court dismissed the writ petition, stating it was an attempt to circumvent statutory remedies available under the SARFAESI Act. (Paras 17)
O R D E R
1. The Petitioner, a Limited Liability Partnership has approached this Court under Article 226 of the Constitution of India, 1950 , aggrieved by the actions of Respondent No. 1 - URGO Capital Limited, a private Non- Banking Financial Corporation 1 . Briefly, the facts of the present case as presented by the Petitioner are as follows:
2. The Petitioner availed loan facilities of a sum of INR 76,07,917/- from Respondent No. 1, under a loan agreement dated 31 st July, 2023. It is 1 “NBFC” contended that the material terms and conditions, including those governing moratorium or debt relief, were not disclosed in the loan agreement. The Petitioner further alleges that no paper copy of the facility documents was provided to them. Despite these grievances, the Petitioner undertook to fulfil its obligations under the agreement, assuming that moratorium or restructuring options would be available in accordance with MSME legal framework and fair market practices. However, it is alleged that the actual disbursed loan amount was only INR 22,14,750/-.
3. A significant factor in the Petitioner’s financial distress was the prolonged delay in obtaining trademark registration for its brand. The Petitioner submitted an application in September, 2022 for registration of its trademark under Class 25, which was allowed only on 22 nd April, 2024. The delay in registration, according to the Petitioner, prevented it from onboarding its products on e-commerce platforms, compounding its financial difficulties.
4. In light of the financial constraints, the Petitioner approached Respondent No. 1 on 11 th March, 2024, seeking debt restructuring and/or a moratorium. However, Respondent No. 1 rejected this request on 12 th March, 2024, issuing a Loan Recall Notice. This was followed by further notices demanding repayment of the outstanding dues.
5. Even though the Petitioner attempted to clarify their stance as to their stressed assets and financial constraints due to non-registration of trademark, Respondent No. 1 threatened the Petitioner with legal consequences, leading them to clear an EMI amount of INR 1,01,317/- against the loan availed by them.
6. The Petitioner argues that in violation of MSME laws and RBI Fair Practice Code, Respondent No. 1 initiated proceedings under section 13(2) of the SARFESI Act, 2002 2 , against the Petitioner by issuing a demand notice dated 10 th June, 2024. Thereafter, on 14 th June, 2024, Respondent No. 1 also presented a depository check to the Petitioner’s bank to the tune of INR 77,64,289/-. By September, 2024, Respondent No. 1 had classified the Petitioner’s account as a Non-Performing Asset 3 and claimed token possession of the Petitioner’s secured asset under Section 13(4) of the SARFESI Act. Further, on 8 th October, 2024, Respondent No. 1 also issued an arbitration notice to the Petitioner in order to sell off the Petitioner’s secured asset, however, the same was withdrawn on 28 th October, 2024.
7. The Petitioner submits that while Respondent No. 1 was taking these actions for recovery of their dues, the Petitioner, in accordance with the facility documents and as per the MSME law and statutory guidelines, repeatedly escalated the matter with the grievance redressal mechanism of Respondent No. 1, however, to no avail.
8. In addition to the above, the Petitioner contends that they discovered breaches of personal financial data by Respondent No. 1, including bank balance and transaction details of the Petitioner(s) as well as harmful online content posted by Respondent No. 1 to defame the Petitioner’s reputation and business. Moreover, it is alleged that Respondent No. 1 has also initiated e-auction process for the secured asset of the Petitioner on 25 th October, 2024.
9. In light of the above facts, the Petitioner has filed the present writ petition aggrieved by the actions of Respondent No. 1 which are alleged to 2 “SARFESI Act” 3 “NPA” be in complete violation of the applicable RBI and MSME laws, guidelines,
