A borrower under the SARFAESI Act must raise objections or representations to the secured creditor before seeking judicial intervention, reinforcing statutory remedies provided under the Act.

JUDGMENT

Dated this the 28th day of May, 2021 S. Manikumar, CJ Instant writ appeal is filed against the judgment in W.P.(C) No.26045 of 2020 dated 25.11.2020, by which, a learned single Judge of this Court dismissed the writ petition, holding thus:

“The petitioners have approached this Court aggrieved by Ext.P12 notice issued to them under Section 13 (2) of the Securitisation and Reconstructions of Financial Assets and Enforcement of Security Interest Act, 2002, hereinafter referred to as the 'SARFAESI Act'. Although various contentions are raised in the writ petition in its challenge against the said notice, I am of the view that inasmuch as the statutory scheme under the SARFAESI Act does not permit a borrower, who is served with a notice under (2) of the Act, to approach any forum against the said notice, but instead requires him to first file a representation in terms of (3A) before the secured creditor pointing out his objections to the notice served on him, the present Writ Petition is premature and hence not maintainable. This court has to keep in mind the statutory scheme under the SARFAESI Act while deciding on whether or not a writ petition ought to be entertained under Article 226 of the Constitution of India. In the instant case, I do not find this to be a stage at which an interference by this Court is warranted. The writ petition, therefore, fails and is accordingly dismissed.”

2. Facts leading to the filing of instant appeal are as follows:

Aggrieved by the conduct of Standard Chartered Bank, respondent No.2, declaring the account of the appellants as Non Performing Asset (NPA), ignoring the notifications/circulars issued by the Reserve Bank of India, including Exhibits-P15 and P17, in aftermath of COVID-19 pandemic, with respect to classification of a regular term loan account as on 29.02.2020 under moratorium, the writ petition has been filed seeking the following reliefs:

a) To issue a writ in the nature of certiorari calling for the records by virtue of which the respondent bank has proceedings to declare the account of the petitioner as NPA and proceeded to issue Exhibit-P12 notice to quash all the above proceedings being illegal.

b) To issue a writ in the nature of mandamus or any other appropriate writ, order or directing the respondent bank to forward the account of the petitioner to be considered by the committee constituted under paragraph 3.3 of Exhibit-

P18 notification dated 17.03.2016.

3. According to the appellants, the respondents are bound to strictly abide by the notifications/circulars and other directions issued by the Reserve Bank of India, and in violation of the same, they have declared the account as NPA. The illegality committed by the bank would disable them from proceeding under the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 (for short, the 'SARFAESI Act'). Therefore, the very process adopted by the bank itself was challenged through the writ petition.

4. Appellants have further contended that instead of appreciating the illegality committed by the respondent bank in declaring the account as NPA, which is a prerequisite to proceed under the SARFAESI Act, 2002, the learned single Judge has erroneously proceeded to decide the matter as if the challenge is merely against the demand notice issued under the SARFAESI Act.

5. Appellants have further stated that their account was declared as NPA on 1.4.2020, as evident from the disclosure made in Exhibit-P12 demand notice dated 13.04.2020. Earlier, moratorium was declared for three months between 01.03.2020 to 31.05.2020 by Reserve Bank of India through Exhibit-P15 notification/circular, repayment schedule for the loans was shifted across three months after the moratorium period, and asset classification was to be determined based on the revised due date and revised repayment schedule. Thereafter, Exhibit-P16 circular was issued by the RBI, wherein it is clarified that all the accounts cl