M/S. Gm Infinite Dwelling (India) ... vs The State Bank Of India on 1 September, 2023

[Cites 32, Cited by 0]

Karnataka High Court

M/S. Gm Infinite Dwelling (India) ... vs The State Bank Of India on 1 September, 2023

Bench: M. Nagaprasanna

                           1



      IN THE HIGH COURT OF KARNATAKA AT BENGALURU

        DATED THIS THE 1st DAY OF SEPTEMBER 2023

                          BEFORE

        THE HON'BLE MR. JUSTICE M. NAGAPRASANNA

           WRIT PETITION No.05 OF 2023 (GM - RES)


BETWEEN:

M/S. GM INFINITE DWELLING
(INDIA) PRIVATE LIMITED
A COMPANY INCORPORATED
UNDER THE PROVISIONS OF
COMPANIES ACT
HAVING ITS REGISTERED OFFICE AT
NO.6, G.M.PEARL, 1ST STAGE
1ST PHASE, BTM LAYOUT
BENGALURU - 560 068

REPRESENTED BY ITS
DIRECTOR / AUTHORIZED SIGNATORY
SRI JAWID HUSSAIN
S/O LATE GULAM RASOOL
AGED ABOUT 42 YEARS
DOING BUSINESS AT NO.6
GM PEARL, 1ST STAGE 1ST PHASE
BTM LAYOUT
BENGALURU - 560 068.
                                              ... PETITIONER

(BY SRI V.LAKSHMINARAYANA, SR.ADVOCATE FOR
    SRI CHANDPASHA, ADVOCATE)
                                 2



AND:

THE STATE BANK OF INDIA
MYSORE BANK CIRCLE BRANCH
NO.644/645, AVENUE ROAD
BENGALURU - 560 049
REPRESENTED BY ITS
AUTHORIZED OFFICER.
                                                      ... RESPONDENT

(BY SRI B.S.MURALIDHARA, ADVOCATE FOR C/RESPONDESNT)


     THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND
227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE
DEMAND NOTICE DATED 05.12.2022 ISSUED BY THE RESPONDENT
BANK BY EXERCISING THE POWERS CONFERRED UNDER SECTION
13 (2) OF SECURITIZATION AND RECONSTRUCTION OF FINANCIAL
ASSETS AND ENFORCEMENT OF SECURITY INTEREST ACT 2002
HEREWITH PRODUCED AS ANNEXURE - A AND ETC.,

     THIS WRIT PETITION HAVING BEEN HEARD AND RESERVED
FOR ORDERS, COMING ON FOR PRONOUNCEMENT THIS DAY, THE
COURT MADE THE FOLLOWING:-


                               ORDER

The petitioner - G.M. Infinite Dwelling (India) Private Limited (hereinafter referred to as 'the Company' for short) is before this Court calling in question a demand notice dated 05-12-2022 issued by the respondent - State Bank of India (hereinafter referred to as 'the Bank' for short) in exercise of its powers under Section 13(2) of the Securitization and Reconstruction of Final Assets and 3 Enforcement of Security Interest Act, 2002 (hereinafter referred to as 'the SARFAESI Act' for short).

2. Facts adumbrated are as follows:

The Company claims to be a reputed brand in the business of real estate engaged in construction of residential apartments on works contracts. In the month of June'2018 the Company initiates a project of housing in the name and style of "Towns Ville" which was a construction project relating to building of villas. In furtherance of the said project, the Company approaches the Bank and the Bank sanctions an amount of Rs.49 crores on 14-06-2018.

Hypothecation agreement was executed mortgaging 61 villas in the said project in favour of the Bank. It is the claim of the petitioner that till the onset of the pandemic, loan was regularly repaid according to the equal monthly instalments agreed upon. In the month of March 2020 due to the spread of COVID-19 virus, nationwide lockdown was clamped. It is then the construction of the Villas stopped. The Company approaches the Bank seeking restructuring of the loan seeking to declare a moratorium for a 4 period of 24 months from May'2020 to May'2022. Communications between the Bank and the Company galore with regard to the said restructuring package. Between the period of grant of loan and the claim of restructuring being declined several correspondences between the two were made with regard to sale of the villas, seeking no objection to sell the villas and deposit the entire sale consideration into the loan account. One fine day the Bank declines to grant no objection certificate for the 4 villas on the score that the Company did not deposit the loan portion availed from the Bank insofar as the deposit of buyers margin. It is because of this act, the loan of the Company was declared to be a Non Performing Asset ('NPA' for short) on 04-12-2022. On declaration of the loan of the Company as NPA, a demand notice is issued under Section 13(2) of the SARFAESI Act demanding a sum of Rs.54,64,50,739/-.

Immediately on receipt of a demand notice, the Company is before this Court, in the subject petition, calling in question the said demand notice.

3. Heard Sri.V.Lakshminarayana, learned senior counsel appearing for petitioner and Sri.B.S.Muralidhara, learned counsel appearing for respondent-Bank.

4. The learned senior counsel Sri.V.Lakshminarayana would seek to contend that the account of the Company could not have been declared as NPA at all, as the Company had, at intermittent intervals, deposited huge amounts upon which, no account can be declared to be a NPA. It is therefore contended that the demand notice is arbitrary and illegal. It is his submission that the Bank has failed to consider the EMI payments made by the Company between April'2022 and November'2022 and therefore, the declaration of NPA itself was erroneous.

5. On the other hand, the learned counsel representing the respondent-Bank would refute the submissions to contend that the Bank did provide a restructuring package to the Company and despite restructuring package, the Company failed to pay interest as was necessary to be paid between September to November'2022. It is the case of the Bank that several reminders 6 were sent, notwithstanding those reminders the default travelled beyond 90 days. Therefore, the Bank had to take steps under the SARFAESI Act. It is his emphatic submission that the remedy to the Company is only to approach the Debt Recovery Tribunal under Section 17 of the Act and the writ petition is not maintainable. He would seek to rely upon a slew of judgments rendered both by the Apex Court and this Court to buttress his submission with regard to the maintainability of the petition.

6. I have given my anxious consideration to the submissions made by the respective learned counsel for the parties and have perused the material on record.

7. The afore-narrated facts are not in dispute. The dates, link in the chain of events and the reason for the account of the Company getting slipped into becoming a NPA is a matter of record.

What is called in question is a demand notice issued by the Bank upon the Company under Section 13(2) of the SARFAESI Act. The demand is after classification of the account of the Company as a NPA and the classification of the account to be a NPA is on account 7 of the Company defaulting in payment even after restructuring of the loan. The claim of the Company is that they have made payments between April'2022 to November'2022 and therefore, the account could not have been declared to be a NPA. These are facts which are within the domain of the Bank. Section 13(2) notice is issued under the SARFAESI Act to which the Company has to reply within 60 days and the proceedings would be taken under Section 13(4) of the SARFAESI Act by the Bank. All those stages are yet to come about. The Company, on the garb of raising a challenge, contending that the account could not have been declared a NPA is wanting to create a jurisdiction at the hands of this Court, which the Apex Court and the co-ordinate Benches of this Court have clearly held that unless the facts project gross violation of the statute or jurisdictional issue, the writ petition would not be entertainable.

8. The Apex Court right from the case of UNITED BANK OF INDIA V. SATYAWATI TONDON1 clearly holds that the High Court must not exercise its jurisdiction in a case where an efficacious and statutory alternative remedy under Section 17 or 1 (2010)8 SCC 110 8 under Section 18 of the SARFAESI Act is available. The Apex Court has held as follows:

".... .... ....

44. While expressing the aforesaid view, we are conscious that the powers conferred upon the High Court under Article 226 of the Constitution to issue to any person or authority, including in appropriate cases, any Government, directions, orders or writs including the five prerogative writs for the enforcement of any of the rights conferred by Part III or for any other purpose are very wide and there is no express limitation on exercise of that power but, at the same time, we cannot be oblivious of the rules of self-imposed restraint evolved by this Court, which every High Court is bound to keep in view while exercising power under Article 226 of the Constitution.

45. It is true that the rule of exhaustion of alternative remedy is a rule of discretion and not one of compulsion, but it is difficult to fathom any reason why the High Court should entertain a petition filed under Article 226 of the Constitution and pass interim order ignoring the fact that the petitioner can avail effective alternative remedy by filing application, appeal, revision, etc. and the particular legislation contains a detailed mechanism for redressal of his grievance.

46. It must be remembered that stay of an action initiated by the State and/or its agencies/instrumentalities for recovery of taxes, cess, fees, etc. seriously impedes execution of projects of public importance and disables them from discharging their constitutional and legal obligations towards the citizens. In cases relating to recovery of the dues of banks, financial institutions and secured creditors, stay granted by the High Court would have serious adverse impact on the financial health of such bodies/institutions, which (sic will) ultimately prove detrimental to the economy of the nation. Therefore, the High Court should be extremely careful and circumspect in exercising its discretion to grant stay in such matters. Of course, if the petitioner is able to show that its case falls within any of the exceptions carved out in Baburam Prakash Chandra 9 Maheshwari v. Antarim Zila Parishad [AIR 1969 SC 556] , Whirlpool Corpn. v. Registrar of Trade Marks [(1998) 8 SCC 1] and Harbanslal Sahnia v. Indian Oil Corpn. Ltd. [(2003) 2 SCC 107] and some other judgments, then the High Court may, after considering all the relevant parameters and public interest, pass an appropriate interim order.

.... .... ....

55. It is a matter of serious concern that despite repeated pronouncement of this Court, the High Courts continue to ignore the availability of statutory remedies under the DRT Act and the Sarfaesi Act and exercise jurisdiction under Article 226 for passing orders which have serious adverse impact on the right of banks and other financial institutions to recover their dues. We hope and trust that in future the High Courts will exercise their discretion in such matters with greater caution, care and circumspection."

The Apex Court, a little earlier to the judgment in the case of SATYAWATI (supra) in the case of TRANSCORE V. UNION OF INDIA2 holds that the problem with finance and the EMI or otherwise even to classify the assets as standard, sub-standard, doubtful or loss accounts is within the domain of the Bank. The High Court, in exercise of its jurisdiction under Article 226 of the Constitution of India, would not assess the standards of the accounts which the Bank only is empowered to do, unless 2 (2008)1 SCC 125 10 arbitrariness is writ large in any transaction. The Apex Court holds as follows:

".... .... ....

23. On reading Section 13(2), which is the heart of the controversy in the present case, one finds that if a borrower, who is under a liability to a secured creditor, makes any default in repayment of secured debt and his account in respect of such debt is classified as non-performing asset then the secured creditor may require the borrower by notice in writing to discharge his liabilities within sixty days from the date of the notice failing which the secured creditor shall be entitled to exercise all or any of the rights given in Section 13(4). On reading Section 13(2) it is clear that the said sub-section proceeds on the basis that the borrower is already under a liability and further that, his account in the books of the bank or FI is classified as substandard, doubtful or a loss. The NPA Act comes into force only when both these conditions are satisfied. Section 13(2) proceeds on the basis that the debt has become due. It proceeds on the basis that the account of the borrower in the books of bank/FI, which is an asset of the bank/FI, has become non-performing. Therefore, there is no scope of any dispute regarding the liability. There is a difference between accrual of liability, determination of liability and liquidation of liability. Section 13(2) deals with liquidation of liability. Section 13 deals with enforcement of security interest, therefore, the remedies of enforcement of security interest under the NPA Act and the DRT Act are complementary to each other. There is no inherent or implied inconsistency between these two remedies under the two different Acts. Therefore, the doctrine of election has no application in this case.

24. Section 13(3) inter alia states that the notice under Section 13(2) shall give details of the amount payable by the borrower as also the details of the secured assets intended to be enforced by the bank/FI. In the event of non-payment of secured debts by the borrower, notice under Section 13(2) is given as a notice of demand. It is very similar to notice of demand under Section 156 of the Income Tax Act, 1961. After 11 classification of an account as NPA, a last opportunity is given to the borrower of sixty days to repay the debt. Section 13(3-A) was inserted by amending Act 30 of 2004 after the judgment of this Court in Mardia Chemicals [(2004) 4 SCC 311] whereby the borrower is permitted to make representation/objection to the secured creditor against classification of his account as NPA. He can also object to the amount due if so advised. Under Section 13(3-A), if the bank/FI comes to the conclusion that such objection is not acceptable, it shall communicate within one week the reasons for non-acceptance of the representation/objection. A proviso is added to Section 13(3-A) which states that the reasons so communicated shall not confer any right upon the borrower to file an application to DRT under Section 17. The scheme of sub-sections (2), (3) and (3-A) of Section 13 of the NPA Act shows that the notice under Section 13(2) is not merely a show-cause notice, it is a notice of demand. That notice of demand is based on the footing that the debtor is under a liability and that his account in respect of such liability has become substandard, doubtful or a loss. The identification of debt and the classification of the account as NPA is done in accordance with the guidelines issued by RBI. Such notice of demand, therefore, constitutes an action taken under the provisions of the NPA Act and such notice of demand cannot be compared to a show-cause notice. In fact, because it is a notice of demand which constitutes an action, Section 13(3-A) provides for an opportunity to the borrower to make representation to the secured creditor. Section 13(2) is a condition precedent to the invocation of Section 13(4) of the NPA Act by the bank/FI. Once the two conditions under Section 13(2) are fulfilled, the next step which the bank or FI is entitled to take is either to take possession of the secured assets of the borrower or to take over management of the business of the borrower or to appoint any manager to manage the secured assets or require any person, who has acquired any of the secured assets from the borrower, to pay the secured creditor towards liquidation of the secured debt.

.... .... ....

33. Section 17 of the NPA Act confers right to appeal. It inter alia states that any person including borrower, aggrieved by exercise of rights by the secured creditor under Section 12 13(4), may make an application to DRT as an appellate authority within forty-five days from the date on which action under Section 13(4) is taken. That application should be accompanied by payment of fees prescribed by the 2002 Rules made under the NPA Act. A proviso is added to Section 17(1) by amending Act 30 of 2004. It states that different fees may be prescribed for making the application by the borrower and the person other than the borrower. By way of abundant caution, an explanation is added to Section 17(1) saying that the communication of the reasons to the borrower by the secured creditor rejecting his representation shall not constitute a ground for appeal to DRT. However, under Section 17(2), DRT is required to consider whether any of the measures referred to in Section 13(4) taken by the secured creditor for enforcement of security are in accordance with the provisions of the NPA Act and the rules made thereunder. If DRT, after examining the facts and circumstances of the case and the evidence produced by the parties, comes to the conclusion that any of the measures taken under Section 13(4) are not in accordance with the NPA Act, it shall direct the secured creditor to restore the possession/management to the borrower [vide Section 17(3) of the NPA Act]. On the other hand, after DRT declares that the recourse taken by the secured creditor under Section 13(4) is in accordance with the provisions of the NPA Act then, notwithstanding anything contained in any other law for the time being in force, the secured creditor shall be entitled to take recourse to any one or more of the measures specified under Section 13(4) to recover his secured debt.

.... .... ....

35. In the present matter, there is a controversy with regard to payment of court fee in the matter of appeal to the Appellate Tribunal against the action taken under Section 13(4) of the NPA Act. In this connection, certain facts are required to be stated. On 21-6-2002 the NPA Act came into force. As stated above, any person including borrower aggrieved by action taken under Section 13(4) of the NPA Act is entitled to move the Tribunal in appeal under Section 17(1) of the NPA Act. The Tribunal being established under Section 3(1) of the DRT Act. This aspect is important. The Tribunal under the DRT Act is also the Tribunal under the NPA Act. Under Section 19 of the DRT Act 13 read with Rule 7 of the Debts Recovery Tribunal (Procedure) Rules, 1993 ("the 1993 Rules"), the applicant bank or FI has to pay fees for filing such application to DRT under the DRT Act and, similarly, a borrower, aggrieved by an action under Section 13(4) of the NPA Act was entitled to prefer an application to DRT under Section 17 of the NPA Act. Similarly, the borrower was required to file an appeal to DRT under Section 18 of the NPA Act. For such appeals a borrower was required to pay fees as prescribed by Section 20 of the DRT Act read with Rule 8 of the Debts Recovery Appellate Tribunal (Procedure) Rules, 1994 ("the 1994 Rules"). The Central Government, however, found that a borrower who was entitled to carry the matter further against the action taken under Section 13(4) was also required to pay court fees which gave rise to difficulties and, therefore, it enacted the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (Removal of Difficulties) Order, 2004 ("the 2004 Order") under Section 40 of the NPA Act to make provisions for levying fees in the matter of filing of application/appeal under Sections 17 and 18 of the NPA Act respectively. We quote hereinbelow the contents of the said Order, 2004:

"NOW, THEREFORE, in exercise of the powers conferred by sub-section (1) of Section 40 of the said Act, the Central Government hereby makes the following Order to make the provisions of levying of the fee for filing of appeals under Sections 17 and 18 of the said Act, being not inconsistent with the provisions of the Act, to remove the difficulty, namely--

1. Short title and commencement.--(i) This Order may be called the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (Removal of Difficulties) Order, 2004.

(ii) It shall come into force at once.

2. Definition.--Debts Recovery Tribunal (Procedure) Rules, 1993 means the Debts Recovery Tribunal (Procedure) Rules, 1993 made under Section 9 read with Clause (e) of sub-section (2) of Section 36 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993.

3. Fee for filing of an appeal to Debts Recovery Tribunal.--The fee for filing of an appeal to the Debts Recovery Tribunal under sub-section (1) of Section 17 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 shall be mutatis mutandis as provided for filing of an application to the Debts Recovery Tribunal under Rule 7 of the Debts Recovery Tribunal (Procedure) Rules, 1993.

4. Fee for filing of an appeal to Debts Recovery Appellate Tribunal.--The fee for filing of an appeal to the Debts Recovery Appellate Tribunal under sub-section (1) of Section 18 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 shall be mutatis mutandis as provided for filing of an appeal to the Debts Recovery Appellate Tribunal under Rule 8 of the Debts Recovery Appellate Tribunal (Procedure) Rules, 1994."

Later, the Apex Court in the case of KESHAVLAL KHEMCHAND AND SONS PRIVATE LIMITED V.UNION OF INDIA3 holds that if the guidelines of the RBI are followed in classifying an asset as NPA, this Court would not interfere or this Court should not interfere. It is held as follows:

".... .... ....

38. To make any attempt to define the expression "non- performing asset" valid for the millions of cases of loan transactions of various categories of loans and advances, lent or made by different categories of creditors for all time to come would not only be an impracticable task but could also simply paralyse the entire banking system thereby producing results 3 (2015)4 SCC 770 15 which are counterproductive to the object and the purpose sought to be achieved by the Act.

39. Realising the same, Parliament left it to Reserve Bank of India and other Regulators to prescribe guidelines from time to time in this regard. Reserve Bank of India is the expert body to which the responsibility of monitoring the economic system of the country is entrusted under various enactments like the RBI Act, 1934, the Banking Regulation Act, 1949. Various banks like State Bank of India, National Housing Bank, which are though bodies created under different laws of Parliament enjoying a large amount of autonomy, are still subject to the overall control of Reserve Bank of India."

9. Following the afore-quoted judgments, a co-ordinate Bench of this Court in the case of M/S STEEL HYPERMART INDIA PVT.

LTD., V. INDIAN BANK4 considers an identical issue of a challenge to a demand notice under Section 13(2) of the SARFAESI Act and holds as follows:

".... .... ....

51. In the case of Authorised Officer, State Bank of Travancore and Another -vs- Mathew K.C. reported in (2018) 3 SCC 85, the Hon'ble Supreme Court with regard to discretionary jurisdiction under Article 226 of the Constitution of India at paragraphs-10, 15, 16 and 17 has held as under:

"10. In Satyawati Tondon [United Bank of India v. Satyawati Tondon, (2010) 8 SCC 110 : (2010) 3 SCC (Civ) 260] the High Court had restrained [Satyawati Tondon v. State of U.P., 2009 SCC OnLine All 2608] further proceedings under Section 13(4) of the Act. Upon a detailed consideration of the statutory scheme under 4 W.P.No.32112 of 2019 disposed on 20-12-2019 16 the Sarfaesi Act, the availability of remedy to the aggrieved under Section 17 before the Tribunal and the appellate remedy under Section 18 before the Appellate Tribunal, the object and purpose of the legislation, it was observed that a writ petition ought not to be entertained in view of the alternate statutory remedy available holding: (SCC pp. 123 & 128, paras 43 & 55) "43. Unfortunately, the High Court overlooked the settled law that the High Court will ordinarily not entertain a petition under Article 226 of the Constitution if an effective remedy is available to the aggrieved person and that this Rule applies with greater rigour in matters involving recovery of taxes, cess, fees, other types of public money and the dues of banks and other financial institutions. In our view, while dealing with the petitions involving challenge to the action taken for recovery of the public dues, etc. the High Court must keep in mind that the legislations enacted by Parliament and State Legislatures for recovery of such dues are a code unto themselves inasmuch as they not only contain comprehensive procedure for recovery of the dues but also envisage constitution of quasi-judicial bodies for redressal of the grievance of any aggrieved person. Therefore, in all such cases, the High Court must insist that before availing remedy under Article 226 of the Constitution, a person must exhaust the remedies available under the relevant statute.

***

15. It is the solemn duty of the court to apply the correct law without waiting for an objection to be raised by a party, 17 especially when the law stands well settled. Any departure, if permissible, has to be for reasons discussed, of the case falling under a defined exception, duly discussed after noticing the relevant law. In financial matters grant of ex parte interim orders can have a deleterious effect and it is not sufficient to say that the aggrieved has the remedy to move for vacating the interim order. Loans by financial institutions are granted from public money generated at the taxpayer's expense. Such loan does not become the property of the person taking the loan, but retains its character of public money given in a fiduciary capacity as entrustment by the public. Timely repayment also ensures liquidity to facilitate loan to another in need, by circulation of the money and cannot be permitted to be blocked by frivolous litigation by those who can afford the luxury of the same. The caution required, as expressed in Satyawati Tondon [United Bank of India v. Satyawati Tondon, (2010) 8 SCC 110 :

(2010) 3 SCC (Civ) 260] , has also not been kept in mind before passing the impugned interim order: (SCC pp. 123-24, para 46) "46. It must be remembered that stay of an action initiated by the State and/or its agencies/instrumentalities for recovery of taxes, cess, fees, etc. seriously impedes execution of projects of public importance and disables them from discharging their constitutional and legal obligations towards the citizens. In cases relating to recovery of the dues of banks, financial institutions and secured creditors, stay granted by the High Court would have serious adverse impact on the financial health of such bodies/institutions, which (sic will) ultimately prove detrimental to the economy of the nation. Therefore, the High Court should be extremely careful and circumspect in exercising its discretion to grant stay in such matters.

Of course, if the petitioner is able to show that its case falls within any of the exceptions carved out in Baburam Prakash Chandra Maheshwari v. Antarim Zila Parishad [Baburam Prakash Chandra Maheshwari v. Antarim Zila Parishad, AIR 1969 SC 556] , Whirlpool Corpn. v. Registrar of Trade Marks [Whirlpool Corpn. v. Registrar of Trade Marks, (1998) 8 SCC 1] and Harbanslal Sahnia v. Indian Oil Corpn. Ltd. [Harbanslal Sahnia v. Indian Oil Corpn. Ltd., (2003) 2 SCC 107] and some other judgments, then the High Court may, after considering all 18 the relevant parameters and public interest, pass an appropriate interim order."

16. The writ petition ought not to have been entertained and the interim order granted for the mere asking without assigning special reasons, and that too without even granting opportunity to the appellant to contest the maintainability of the writ petition and failure to notice the subsequent developments in the interregnum. The opinion of the Division Bench that the counter-affidavit having subsequently been filed, stay/modification could be sought of the interim order cannot be considered sufficient justification to have declined interference.

17. We cannot help but disapprove the approach of the High Court for reasons already noticed in Dwarikesh Sugar Industries Ltd. v. Prem Heavy Engg. Works (P) Ltd. [Dwarikesh Sugar Industries Ltd. v. Prem Heavy Engg. Works (P) Ltd., (1997) 6 SCC 450] , observing: (SCC p. 463, para 32) "32. When a position, in law, is well settled as a result of judicial pronouncement of this Court, it would amount to judicial impropriety to say the least, for the subordinate courts including the High Courts to ignore the settled decisions and then to pass a judicial order which is clearly contrary to the settled legal position. Such judicial adventurism cannot be permitted and we strongly deprecate the tendency of the subordinate courts in not applying the settled principles and in passing whimsical orders which necessarily has the effect of granting wrongful and unwarranted relief to one of the parties. It is time that this tendency stops."

.... .... ....

54. In the case of Transcore -vs- Union of India and Another reported in (2008) 1 SCC 125, the Hon'ble Supreme Court has held that it is domain of the Bank or Financial Institutions which has to classify the assets as Standard, Substandard, doubtful or loss wherein at paragraph-23 and 24 it is held as under:

23. On reading Section 13(2), which is the heart of the controversy in the present case, one finds that if a borrower, who is under a liability to a secured creditor, makes any default in repayment of secured debt and his account in respect of such debt is classified as non-performing asset then the secured creditor may require the borrower by notice in writing to discharge his liabilities within sixty days from the date of the notice failing which the secured creditor shall be entitled to exercise all or any of the rights given in Section 13(4). On reading Section 13(2) it is clear that the said sub-section proceeds on the basis that the borrower is already under a liability and further that, his account in the books of the bank or FI is classified as substandard, doubtful or a loss. The NPA Act comes into force only when both these conditions are satisfied. Section 13(2) proceeds on the basis that the debt has become due. It proceeds on the basis that the account of the borrower in the books of bank/FI, which is an asset of the bank/FI, has become non-performing.

Therefore, there is no scope of any dispute regarding the liability. There is a difference between accrual of liability, determination of liability and liquidation of liability. Section 13(2) deals with liquidation of liability. Section 13 deals with enforcement of security interest, therefore, the remedies of enforcement of security interest under the NPA Act and the DRT Act are complementary to each other. There is no inherent or implied inconsistency between these two remedies under the two different Acts. Therefore, the doctrine of election has no application in this case.

24. Section 13(3) inter alia states that the notice under Section 13(2) shall give details of the amount payable by the borrower as also the details of the secured assets intended to be enforced by the bank/FI. In the event of non-payment of secured debts by the borrower, notice under Section 13(2) is given as a notice of demand. It is very similar to notice of demand under Section 156 of the Income Tax Act, 1961. After classification of an account as NPA, a last opportunity is given to the borrower of sixty days to repay the debt. Section 13(3-A) was inserted by amending Act 30 of 2004 after the judgment of this Court in Mardia Chemicals [(2004) 4 SCC 311] whereby the borrower is permitted to make representation/objection to the secured creditor against classification of his account as NPA. He can also object to the 20 amount due if so advised. Under Section 13(3-A), if the bank/FI comes to the conclusion that such objection is not acceptable, it shall communicate within one week the reasons for non-acceptance of the representation/ objection. A proviso is added to Section 13(3-A) which states that the reasons so communicated shall not confer any right upon the borrower to file an application to DRT under Section 17. The scheme of sub-sections (2), (3) and (3-A) of Section 13 of the NPA Act shows that the notice under Section 13(2) is not merely a show-cause notice, it is a notice of demand. That notice of demand is based on the footing that the debtor is under a liability and that his account in respect of such liability has become substandard, doubtful or a loss. The identification of debt and the classification of the account as NPA is done in accordance with the guidelines issued by RBI. Such notice of demand, therefore, constitutes an action taken under the provisions of the NPA Act and such notice of demand cannot be compared to a show-cause notice. In fact, because it is a notice of demand which constitutes an action, Section 13(3-A) provides for an opportunity to the borrower to make representation to the secured creditor. Section 13(2) is a condition precedent to the invocation of Section 13(4) of the NPA Act by the bank/FI. Once the two conditions under Section 13(2) are fulfilled, the next step which the bank or FI is entitled to take is either to take possession of the secured assets of the borrower or to take over management of the business of the borrower or to appoint any manager to manage the secured assets or require any person, who has acquired any of the secured assets from the borrower, to pay the secured creditor towards liquidation of the secured debt.

.... .... ....

57. In the case of Keshavalal Khemchand and Sons Private Limited and Others -vs- Union of India and Others reported in (2015)4 SCC 770, relied upon by the learned Counsel for the petitioners, the Hon'ble Supreme Court while considering the provisions of Debt, Financial and Monetary Laws and provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 especially provisions of Section 2(1)(o) at paragraphs-32 held 21 that since such a system was also found to be inadequate for the speedy recovery of the monies due from the borrowers to the creditors, the Parliament made the Act under which the process of ascertainment of the amounts due from a borrower by an independent adjudicatory body is dispensed with. The secured creditor is made the sole judge of the amount due and outstanding from a borrower subject to an appeal under Section 17 of the Act. Be that as it may, such an ascertainment of amount due and outstanding is not the only criteria on the basis of which the secured creditor is entitled to initiate proceedings under Section 13(4) of the Act, but the secured creditor is also required to classify the account of the borrower (asset of the creditor) as an NPA.

58. Admittedly in the present case, the respondents have issued notice before declaring the petitioners' accounts as NPA after 90 days as contemplated under the provisions of Section 2(1)(o) and as per the RBI Guideline 2.1.2 after 90 days. Therefore, the said judgment is in no way assistance to the petitioners'. Infact paragraphs-38 and 39 of the very judgment read as under:

"38. To make any attempt to define the expression 'non-performing asset' valid for the millions of cases of loan transactions of various categories of loans and advances, lent or made by different categories of creditors for all time to come would not only be an impracticable task but could also simply paralyse the entire banking system thereby producing results which are counter productive to the object and the purpose sought to be achieved by the Act.

39. Realising the same, the Parliament left it to the Reserve Bank of India and other regulators to prescribe guidelines from time to time in this regard. The Reserve Bank of India is the expert body to which the responsibility of monitoring the economic system of the country is entrusted under various enactments like the RBI Act, 1934, the Banking Regulation Act, 1949. Various banks like the State Bank of India, National Housing Bank, which are though bodies created under different laws of Parliament enjoying a large amount of autonomy, 22 are still subject to the overall control of the Reserve Bank of India."

In so far as paragraph-54 of the said judgment, it is specifically contended by the respondents that they have followed the RBI Guidelines."

The co-ordinate Bench of this Court was following the judgments of the Apex Court which are quoted hereinabove and holds that writ petition would not be maintainable, on the score that remedy lies elsewhere particularly, before the Debt Recovery Tribunal.

10. The facts obtaining in the case of M/S STEEL HYPERMART (supra) are identical to the facts obtaining in the case at hand, inasmuch as, the challenge is to a demand notice under Section 13(2) of the SARFAESI Act. The contention therein was that the demand notice could not have been issued, as the very act of declaring the account of M/S STEEL HYPERMART as a NPA was illegal, arbitrary and contrary to the RBI guidelines. The Company, in the case at hand, sings the same swan song, that having been declined by the judgments of the co-ordinate Bench and by the Apex Court (supra), the petition in the form that it is presented and 23 for the reason that it is knocking at the doors of this Court is unentertainable.

Therefore, finding no statutory aberration, the petition deserves to be rejected and is accordingly rejected.

SD/-

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