Telangana High Court
M/S. Dhanya And Co vs Andhra Bank on 24 December, 2020
Author: T. Vinod Kumar
Bench: A.Rajasheker Reddy, T.Vinod Kumar
THE HON'BLE SRI JUSTICE A. RAJASHEKER REDDY
AND
THE HON'BLE SRI JUSTICE T. VINOD KUMAR
WRIT PETITION NO. 3469 OF 2020
ORDER :(per Hon'ble Sri Justice T. Vinod Kumar) This writ petition is filed seeking Writ of Mandamus by setting aside the measures initiated under Section 13 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short "SARFAESI Act" or Act), vide Demand Notice dated 01.2109 and consequential Possession Notice dated 14.01.2020 without following any procedure laid down in the Act and declaring the account as Non Performing Asset (NPA) against RBI guidelines as highly illegal, arbitrary, contrary to the rules and against the procedure laid down in that regard by the respondent bank in respect of (1) residential flat number 112, door number 12 - 459/2, E Block with a carpet area of 1536.00 Sq.Ft, ground floor, Vajra residency with the Nandivada share of 32 Sq.yd situated at survey number 117/1, 117/2, 117 and 117/A, Tadepalli Grampanchayat, Mangalagiri, Guntur District.
2. Heard Sri T. Vijay Kumar, learned Counsel appearing on behalf of the petitioner and Smt. V. Dyumani, learned Standing Counsel appearing on behalf of the respondent bank, through videoconferencing and with the consent of both the learned counsel, the matter is taken up for hearing and disposal through virtual mode.
3. The brief facts of the case as pleaded by the petitioner are that, the petitioner is a partnership firm engaged in the business of executive contracts, architects and constructions. In order to meet its financial requirement for expansion of the business, the petitioner 1 firm approached the respondent bank and availed cash credit facilities to a tune of Rs. 2 crores under MSME scheme in the year 2013. That upon availing such loan facility from the respondent bank, the petitioner has been paying the instalments regularly without fail and had thus repaid substantial amount against the said loan availed. That despite the petitioner paying substantial amounts, the respondent bank declared the petitioner account as NPA and issued a demand notice dated 01.11.2018. Upon the petitioner raising objections with the bank about nondisclosure of petitioner account being declared as NPA in spite of the petitioner being regular in payment of instalments, the respondent bank sought time for clarification and thereafter also the petitioner was paying interest regularly which is being received by the respondent bank. Thus, the petitioner was given an impression that the respondent bank has regularised the petitioner account.
4. All of a sudden after a lapse of more than a year from 01.11.2018, the respondent bank has published the possession notice dated 14.01.2020 without serving the same on the petitioner and also without serving any Demand Notice prior thereto much less the notice dated 01.10.2019 whereby the petitioner account was declared as NPA as on 30.09.2019. That due to non-service of the demand notice dated 01.10.2019, the petitioner lost the opportunity of giving a reply raising its objections to the demand notice under Section 13(3) of SARFAESI Act and to request the respondent bank to withdraw the notice and also by requesting for restructuring/renewing of the account as per RBI guidelines.
5. Since, the petitioner was regular in payment of instalments, the petitioner's account could not have been declared as NPA more so 2 when the petitioner had made payments during the months of June to September, 2019 and thus, the action of the respondent bank in declaring the account of the petitioner firm as NPA is contrary to the RBI guidelines dated 01.01.2019.
6. Counter affidavit on behalf of respondent bank has been filed denying the writ averments. It is stated that the petitioner approached the respondent bank in February, 2018 for availing loan of Secured Over Draft facility (for short 'SOD') (against real estate to contractors) with a limit of 215 lakhs to meet the working capital requirements. That the petitioner through the loan application made in February 2018 gave projections of the gross sales of 2254.10 lakhs as on 31.03.2019 and 2479 .51 lakhs as on 31.03.2020 respectively and also projected net profit of 54.91 lakhs as on 31.03.2019 and 66.33 lakhs as on 31.03.2020 respectively. Based on the statistical data submitted by the petitioner, the respondent bank sanctioned the SOD limit of 215.00 lakhs by its letter dated 27.03.2018, subject to the terms and conditions mentioned therein. The said sanction was valid for a period of one year that is up to 26th March 2019. That contrary to the statistical data given in the loan application submitted by the petitioner in February 2018, the total credits in the account of the petitioner during the financial year 2018-19 was in a sum of 129.25 lakhs and the total credits for the period from 01.04.2019 to 27.03.2020 is only a sum of 22.62 lakhs, which receipts were far below the receipts projected by the petitioner while making an application for sanction of a SOD limit. There was no explanation forthcoming from the petitioner for the huge variation between the projections and the actual receipts and that the petitioner failed to submit/furnish details of receivables from the Government or from its principal contractor. Further, petitioner did not take effective steps to 3 have the SOD facility renewed or restructured upon expiry of the tenor of one year.
7. Since, the SOD limit sanctioned was valid till 26.03.2019, the petitioner was required to submit renewal documents seeking renewal of limit, if the petitioner so desired or could have sought for restructuring the credit facility by submitting detailed project report. Petitioner has not submitted any documents for renewal of limit nor sought for restructuring the credit facility by submitting full details of the works in hand to be executed and the dates and receivables. Since, the petitioner has not approached the respondent bank either seeking renewal of restructuring the credit facility, it is not open for the petitioner to allege that the respondent bank has violated the RBI circular dated 01.01.2019.
8. The respondent bank also denied the claim of the petitioner that no Demand Notice dated 01.10.2019 under section 13(2) of the SARFAESI Act was issued or served on the petitioner prior to issue of Possession Notice dated 14.01.2020, thereby petitioner was deprived of raising objections to the said demand notice issued. On behalf of respondent bank it is claimed, that the demand notice dated 01.10.2019 was sent by registered post on 04.10.2019 and the same was duly served on the petitioner on 07.10.2019. In support of the said claim, the respondent bank has filed the copy of the acknowledgement showing the service of the demand notice on the petitioner on 07.10.2019 along with the counter affidavit. The petitioner even after service of demand notice and before the expiry of the statutory period failed to pay the demanded amount, resulting in the respondent bank taking further steps by issuing possession notice dated 14.01.2020, which was sent to the petitioner by registered post 4 was duly acknowledged by the petitioner. Possession notice was published in both English and vernacular language newspapers on 15.01.2020. The copies of the publication caused in the newspaper are enclosed to the counter affidavit along with the bills received from the agency for causing such publication on behalf of the respondent bank. Possession notice was affixed at the secured asset and photos were also taken showing the presence of the authorised representative of the respondent bank thereat. Thus, it is claimed that the respondent bank had duly complied with the provisions of Section 13(2) by serving demand notice dated 01.10.2019, by serving possession notice under Section 13(4) of the Act read with Rule 8(1) &(2) of the Security Interest Enforcement Rules, 2002 (for short "Rules, 2002). On the basis of the above it is claimed by the respondent bank that the petitioner had approached this Court with unclean hands by resorting to suppression of material facts and by making deliberate false statements with malafide intention to cause prejudice against the respondent bank, alleging of resorting to issuing possession notice without even issuing and serving demand notice as mandated under the Act.
9. Learned counsel for the petitioner at the time of hearing while reiterating the writ averments would submit that the demand notice dated 01.10.2019 was not served on the petitioner. It is also the submission of the learned Counsel for the petitioner that the service of demand notice dated 01.10.2019, on 07.10.2020 at one of the office addresses mentioned in the loan application cannot be considered as a valid service since, the same was served on one of the employee of the petitioner firm and also that no proof of the said notice having been sent to the petitioner at the other addresses having been filed into this Court by the respondent bank. At this stage the learned 5 Counsel appearing for the respondent bank submitted that the demand notice was not only sent to the petitioner at the three addresses mentioned in the loan application, but was also sent to the three partners of the firm by sending the same through registered post on 04.10.2019. Learned Standing Counsel for the respondent bank would submit that the said demand notice was also sent to the deponent of the writ affidavit in her capacity as the partner of the firm. It is stated by the learned Standing Counsel for the respondent bank that while the demand notice sent to the petitioner firm at its one of the address of Kankipadu, Krishna District and the notice sent to one of the partners by name M Srinivas Reddy had been returned with postal endorsement, insofar as the notice sent to petitioner firm at its address in Hyderabad and to its two other partners have not been returned and are thus deemed to be served. Similarly, it is also submitted by the learned Standing Counsel that the possession notice dated 14.01.2020 was also sent by registered post at all the three addresses of the firm as well as to the partners who offered their immovable property as collateral security by creating an Equitable Mortgage for the above loan facility extended to the petitioner firm. The learned Standing counsel filed the proof of dispatch of the above notices by registered post, by way of additional documents on 22.09.2020. Upon service of the additional documents by the respondent Counsel, the learned Counsel for the petitioner took an objection stating that the registered post slip under which the demand notice as well as possession notice are stated to have been sent by the respondent bank are not legible and thus, the claim of the respondent bank of sending the said notices by registered post and the same being sufficient compliance of the rules cannot be accepted. The learned Counsel for the petitioner submitted that the petitioner 6 was not served with the demand notice prior to issue of possession notice dated 14.01.2020 thereby the entire procedure is vitiated for being in non-compliance with the mandatory requirement under the SARFAESI Act. It is submitted that as no prior notice under Section 13(2) of the Act was issued, the possession notice dated 14.01.2020 is bad in law. On the other hand, learned Standing Counsel would submit that the respondent bank has all the necessary evidence of dispatch of both demand notice and possession notice by registered post affixed in its records / register and undertook to place the record for perusal of this court. Upon this court hearing the matter and reserving the same for orders, the learned Counsel for the respondent has forwarded the original record for perusal of this court under the cover of letter dated 25.09.2020.
10. Having regard to the submissions made by the learned Counsel appearing for the parties, the only issue that falls for consideration in the present writ petition is as to whether the respondent bank had complied with the mandatory requirement of issuing the demand notice under section 13(2) of the Act, to the petitioner firm before issuing possession notice under Section 13(4) of the Act.
11. The original record as placed before this court consist of two registers; The first register being titled as - i) registered post record starting from date 07.05.2019 to 07.01.2020 and the second register being tiled as - ii) dispatch register for the period starting from 09.01.2020. Apart from the two registers, one plastic folder containing, i) the two returned registered postal envelopes addressed to the petitioner and its partners / guarantors of the Notice issued under Section 13(2) of the Act, ii) one postal acknowledgment in respect of registered letter bearing RN150502745IN on the petitioner 7 on 07.10.2019 at its address in Tadepelli, Guntur District, iii) Postal acknowledgment of the notice sent on 14.01.2020 to petitioner at its address in Tadepelli, Guntur, on 16.01.2020, iv) two returned registered envelopes sent on 14.01.2020, addressed the petitioner at its address at Kankipadu, Krishna District and to one of its partner named M. Srinivasa Reddy, at his address in Hyderabad, v) the original letter dated 30.09.2019 submitted by the petitioner addressed to the Assistant General Manager, Andhra Bank, Ramachandrapuram Branch, Hyderabad, vi) the advertisement bill of Sri Vinayaka Ads dated 22.10.2019 for causing the publication of demand notice on behalf of respondent bank in News papers - Mana Telangana and Financial Express in Hyderabad and Hans India and Prajasakthi at Vijayawada along with copies of the News Paper containing the publication, vii) the advertisement bill of Sri Vinayaka Ads dated 22.01.2020 for causing the publication of Possession notice on behalf of respondent bank in News papers - Mana Telangana and Business Standard in Hyderabad and Hans India and Prajasakthi at Vijayawada along with copies of the News Paper containing the publication, and viii) 4 (four) photographs showing the affixation of possession notice on the main door of the property being taken possession in the presence of the authorized officer of the respondent bank. The first register is serially numbered from pages 1 to 162. At page no. 98 of the said register, the entries relating 04.10.2019 are noted. The total entries on the said date are numbering to 18. At serial No. 1 to 6 of the entries of the said date, the names of M Srinivas Reddy, Motinagar, Hyderabad, Chinnam Ratna Kiran Kishore, KPHB Colony, Kukatpally, Chinnam Swathi, Kukatpally, 4th phase, Dhanya & Co., Kukatpally, Hyderabad, Dhanya & Co, Tadepalli, Guntur, Dhanya & Co., Kankipadu, Krishna Dist., are 8 shown. Against the above said names as entered in the register on 04.10.2019, 13(2) is also mentioned. At the bottom of the said page, the total expenditure incurred for sending the registered post to all the 18 parties named, is mentioned with signature and stamp of the bank. On page 99 and 100 of the said register, the registered post slips relating to the 18 parties whose names are shown in page 98 have been affixed. A perusal of the registered post slips affixed at page 99 and 100 would show that registered envelope number RN150502759IN, RN150502745IN and RN150502731IN are addressed to the petitioner at its address in Kankipadu, Tadepalli and KPHB Colony, Kukatpally, respectively and dispatched on 04.10.2019 at 11:27 AM. Similarly, the registered post slips bearing number RN150502705IN, RN150502572IN and RN150502691IN of the same date are shown against the names of M S Reddy, Mothinagar, CH R Kishore, KPHB Colony, CH Swathi, KPHB Colony, Kukatpally, 500072. The above registered slips affixed in the register only go to show that the respondent bank having sent the Demand Notice dated 01.10.2019 to the petitioner and its partners. Further, the service of the said notice on the petitioner firm at one of its notified addresses on 07.10.2019 is also borne out from the acknowledgement card received. Similarly, the notice as issued to one of partner / guarantor has been returned with postal endorsement - "Door locked-1st intimation given" and attempt to deliver having failed despite intimation being given to the addressee, the said registered envelope was returned "Unclaimed". Similarly, the notice addressed to petitioner at its address in Kankipadu, Krishna District, has also been returned with postal endorsement "Not Known", returned to sender. The dispatch of the notices by registered post on 04.10.2020 and return of the two registered envelopes would go to show that the claim 9 of the petitioner to the contrary, that no Demand Notice was issued prior to issue of Possession Notice dated 14.01.2020, cannot be accepted. Further, the respondent bank has also caused publication of the Demand notice in News papers both at Hyderabad and Vijayawada as noted above.
12. Similarly, the examination of the other dispatch / registered post register for the period starting from 09.01.2020 onwards show that the Possession Notice dated 14.01.2020 as issued, was sent by registered post to the petitioner at its three addresses situated in Krishna District, Guntur and Kukatpally, Hyderabad under the heading "borrower" and to Mr Ratna Kiran Kishore Chinnam, Mrs Chinnam Swathi and Mr. M Srinivas Reddy under the heading "partners/guarantors". The registered postal slips affixed in the next page of the said register would show that registered envelope number RN187614529IN, RN187614775IN and RN187614501IN are addressed to the petitioner firm at its three addresses, while the registered post slips bearing numbers RN187614736IN, RN187614515IN and RN187615039IN are relating to the registered post addressed to the three Partners / guarantors. Further, the delivery manifest of postman of the date 17.01.2020 pinned at page No.4 of the said register would show that the entry at serial number 25 which is the first entry of the manifest page is relating to delivery of registered envelope under RN187614501IN addressed to the petitioner firm at its Hyderabad address being delivered on 17.01.2020 and the person receiving the same having affixed signature as " Swathi" acknowledging the receipt of the said registered envelope, who is none other than the signatory to the present writ affidavit. Similarly, the notice as sent to petitioner address at Tadepalli has been delivered on 16.01.2020 as per the 10 acknowledgment card received. Thus, it is not open for the petitioner to contend that the petitioner did not receive Possession Notice as required to be delivered under Rule 8(1) of the Rules, 2002. It is also to be seen that while the petitioner claims to be in non-receipt of the possession notice, however, the copy of the notice filed as material paper along with the writ petition, clearly goes to show the service of the notice, as in the copy filed, while all the other addresses mentioned are struck off, against the address of the petitioner shown at Hyderabad, the same has not been struck off, which only goes to show that the copy as filed is the possession notice that was delivered to the petitioner on 17.01.2020, as detailed herein above. Thus, the claim of the petitioner with regard to non-delivery of the possession notice on the petitioner is only invented for the purpose of the present writ petition. Further, the claim of the petitioner that the possession notice not being published in newspaper both in English and in vernacular language is also equally without merit, as admittedly, the said notice has been published on 15.01.2020 in News paper Business Standard at Hyderabad, Hans India at Vijayawada in English and in Mana Telangana at Hyderabad and Praja Shakti newspaper in Vijayawada in Telugu.
13. Further, a plain reading of Rule 3 and Rule 8(1) of the Rules, 2002, mandates the delivery of notice to the borrower before further steps are taken by the secured creditor, be it demand notice under Section 13(2) or possession notice under Section 13(4) of the Act, respectively. While, Rule 3 of the Rules 2002, specifies one of the modes of the delivery of demand notice can be by way of sending the same by registered post with acknowledgment due, speed post or courier or by transmitting, apart from other modes of service, including hand delivery, when it comes to Rule 8(1) of the Rules, 11 2002, no such modes of delivery of possession notice is specifically mentioned, though the rule in addition to delivery of notice mentions the possession notice is to be affixed on the outer door or at such conspicuous place of the property. Rule 8(2) specifies the further requirement of the notice under Rule 8(1) to be published in News papers.
14. However, taking advantage of nonprescription of modes of service of possession notice in Rule 8(1), as like in Rule 3 of Rules, 2002, the learned Counsel for the petitioner would urge that unless the possession notice is actually delivered to the borrower, mere sending of the same by registered post with acknowledgment due would not be sufficient compliance. It is further submitted by the learned Counsel for the petitioner that only upon the triple requirement as specified in Rule 8(1) and 8(2) of Rules, 2002, is met viz., i) delivering the possession notice to the borrower, ii) affixing the possession notice on the outer door or at such conspicuous place of the property and iii) the possession notice being published in two leading news papers having sufficient circulation in the locality (one of which in vernacular language), not later than seven days from the date of taking possession, the action of the respondent bank cannot be said to be in compliance of Rule 8(1) and 8(2) of the Rules, 2002.
15. The fallacy of the above submission is multifold and in ignorance of the provision of the Evidence Act, 1872 and the General Clauses Act, 1897. Further, it is to be seen that what has been specified in Rule 3 being expansive in nature, cannot be read as restricting the scope and effect of Rule 8 of the Rules, 2002. The normal mode of delivery of notice as recognized in law to any person or entity is by sending the said notices by registered post at the place 12 where the person or the corporate entity usually resides or carries on its business. The requirement of Rule 8(1) of the Rules 2002 is that of delivering possession notice as prepared as nearer to the format prescribed in Appendix IV of the rules, to the borrower apart from the same being affixed on the main door or other conspicuous place of the property. Thus, it would be sufficient, if it is shown that such notices were, in fact, issued and sent to the borrower at the address given. Once, it is shown as a fact that such a notice having been sent by registered post, Section 27 of General Clauses Act, 1897 would get attracted and the same shall be deemed to have been delivered in the ordinary course of post. In this regard reference can be made to the judgement rendered by the Apex Court in the case of CC Alavi Haji v. Polapetty Muhammed and Another1, wherein the Court dealt with the issue of deemed service of notice by applying the principle of 'presumption' under Section 114 of Evidence Act and Section 27 of General Clauses Act, 1897. Further, the Hon'ble Apex Court in the judgement rendered in the case of N. Parameswaran Unni v. G. Kannan2 also explained the circumstances when due service of notice has to be presumed. In the facts of the present case, while the respondent bank has delivered the possession notice by dispatching the same by registered post on 14.01.2020 and the same being served on the petitioner at Hyderabad on 17.01.2020 and at Tadepalli on 16.01.2020 as noted above, it is not open for the petitioner to contend that the possession notice was not served. The said notice was also served by affixing the same on the main door of subject property belonging to the guarantor, as required under Rule 8(1) of Rules, 2002. Further, the publication in news papers was also caused on 1 (2007) 6 SCC 555 2 (2017) 5 SCC 737 13 the following day i.e, on 15.01.2020 itself, which is well within the period of seven days provided under Rule 8(2) of the Rules, 2002. Thus, the compliance with triple requirement as specified in Rule 8(1) and 8(2) of the Rules, 2002, has been duly met. Further, since, the petitioner is a partnership firm, applying the provisions of Section 24 of the Indian Partnership Act, 1932, service of notice on one of the partners would also have to be considered as service on the firm. The Apex Court in the case of Ashutosh v. State of Rajasthan3 was pleased to observe that -
" Section 24 is based on the principle that as a partner stands as an agent in relation to the firm, a notice to the agent is tantamount to the principal and vice versa. As a general rule, notice to a principal is notice to all his agents; and notice to an agent of matters connected with his agency is notice to his principal."
16. Thus, the claim of the petitioner that the possession notice dated 14.01.2020 was not served on the petitioner firm is a self serving statement as devoid of any merit. Considered from any angle, the petitioner has failed to establish infraction of any of the provisions of the Act or the Rules in either issuing Demand notice under Section 13(2) or Possession Notice under Section 13(4) of the Act, by respondent bank and no case whatsoever nature is made out calling for interference by this court. The submission to the contrary, that unless the notices sent by registered post are actually delivered to the persons to whom the said notices are addressed, cannot be 3 (2005) 7 SCC 308 14 considered as delivery, is moonshine, without any merit and is liable to be rejected.
17. The other aspect of the matter that requires to be considered is that the petitioner in the present case is the borrower, who availed credit facilities from the respondent bank by creating equitable mortgage of the properties of its partners, who stood as guarantors to the facility extended to the petitioner firm. The bank upon issuance of demand notice dated 01.10.2019 to the petitioner firm upon classifying the account as NPA and recalling the term loan advanced, had also issued notices to the guarantors. Despite receipt of the demand notice issued by the bank under Section 13(2) of the Act, the petitioner did not regularize the account by seeking renewal of term loan or by repaying the amount advanced. It is after a lapse of three months therefrom, the respondent bank has issued possession notice under Section 13(4) of the Act, in respect of one of the property of the guarantor by following the procedure prescribed under Rule 8(1) and 8(2) of the Rules, 2002. Since, the property that is sought to be taken possession by the respondent bank is that of the guarantor, the notice was also issued to the guarantor. Despite, the delivery of the possession notice to the guarantor, it is the guarantor who is required to approach this court, being the actual owner of the property, if he / she is aggrieved by the said action of the secured creditor. On the other hand, the present writ petition has been filed by the borrower, who in order to avail loan facility had offered the property of the guarantor by creating equitable mortgage by deposit of title deeds as security and having failed to service such loan facility extended, resulting in default, with the consequential action being resorted to by the respondent bank, and is thus, a third party. While refuting the challenge made to the possession notice issued, by a third party to 15 the schedule property, a co-ordinate bench of this court in similar circumstances in the case of Prince Corrugated Packaging v. Andhra Bank4 by its order dated 26.09.2019 was pleased to observe as under :
"When the actual owner of the property brought to sale is not aggrieved and does not come forward, it is not open to a third party, even if he be the principal borrower at whose behest the owner of such property offered a guarantee, to main a challenge under Section 17 of the SARFAESI Act."
18. One another submission of the learned Counsel for the petitioner, is that the action of the respondent bank in classifying the petitioner account as Non Performing Asset (NPA) is in itself is wrong and is contrary to RBI circular dated 01.01.2019 applicable to MSMEs. As a consequence thereof, the subsequent actions of respondent bank issuing demand notice under Section 13(2) and possession notice under Section 13(4) stand vitiated. In view of the conclusions arrived at as above with regard to delivery of notice under Section 13(2) of Act, read with Rule 3 of Rules, 2002, to which the petitioner failed to offer any explanation and also the subsequent action under Section 13(4) of the Act read with Rule 8(1) & 8(2) of the Rules, 2002, being in compliance with the statutory provisions, the submission does warrant consideration by this Court. However, in order to dispel any impression that the Counsel for the petitioner may entertain, that, if only the contentions urged on the said issue had been considered, the conclusion of the Court could have been different, the said submission is also being considered. 4 W.P.No. 5685 of 2019 16
19. In order to buttress his submission on the above issue, the learned counsel for the petitioner would urge, that the petitioner firm availed financial facility in the year 2013 and has been servicing the same by paying interest/ installments regularly. It is also the case of the petitioner that there were payments made into the account as late as in September, 2019 and thereafter also and, as such, the account could not have been classified as NPA resulting in issuance of the demand notice dated 01.10.2019. On the other hand, as seen from the counter affidavit filed along with material papers and the submission made by the learned Counsel for the respondent bank, it is evident that the petitioner approached the respondent bank in February, 2018 and sought for extending Secured over draft facility in respect of contract projects. Based on the application made and the projections given as to the receipts, the respondent bank sanctioned SOD facility to the extent of Rs. 2.15 crores to the petitioner. The said SOD facility extended was valid for a period of one year i.e. up to 26.03.2019. As the petitioner failed to have the said facility renewed or restructured by submitting the required information and explanation, nor having repaid the amount availed under the SOD facility extended for a period of one year, the amount advanced was recalled by declaring the petitioner's a/c as NPA and demand notice was issued.
20. From a perusal of the Letter of Sanction dated 27.03.2018 under which the petitioner was extended with SOD facility would indicate that the facility is granted as "Ag.RE to Contractors"
"FRESH". Further, in cl.2, the tenor of credit facility is mentioned as one year and the due date of limits was also specified as 26.03.2019, which indicates that the said facility was extended initially for a period of one year i.e., up to 26.03.2019, thereby requiring renewal 17 thereafter. One of the sub-condition of Clause 34 of Special Terms specifies that the Borrower shall submit renewal proposal one month before the due date of the limits. Admittedly, the petitioner did not submit any application along with relevant document seeking renewal of the SOD facility for further period. Thus, the SOD facility granted to the petitioner stood lapsed on 26.03.2019. As a result of non renewal, the facility extended by the respondent bank to the petitioner firm stood recalled and is required to be repaid in full. Thus, the claim of the petitioner that the petitioner was regular in servicing the loan account since, 2013 is a self serving statement as firstly the SOD facility was extended under the caption "Fresh" on 27.03.2018, with a tenor of one year. Secondly, since, the said facility has not been renewed, the entire loan availed stood recalled and is required to be repaid. The reliance placed on the circular of RBI dealing with classification of MSME as NPA is of no help to the case of the petitioner, since the petitioner did not seek to renew the limit or approach the respondent bank for rescheduling/ restructuring the facility. No document is also filed into this Court to show as to the petitioner is an MSME registered unit or the credit facility sanctioned is under any of the MSME advances, which otherwise would entail the petitioner to avail benefits thereunder. Even other wise, the benefit of RBI circular would not be available to petitioner. It is for the reason that due to non renewal or restructuring of SOD facility beyond the period of 26.03.2019, the entire loan extended stood recalled and is required to be repaid. On the other hand when the respondent bank called upon the petitioner to submit information / explanation for the receipts being meagre as compared to the projections, the petitioner by his letter dated 30.09.2019 instead of providing information and seeking renewal / 18 restructuring of SOD facility, gave evasive reply. As a matter of fact, it is this reply of the petitioner, which triggered the issuance of Demand notice on 01.10.2019 by respondent bank, as by then the SOD facility extended to the petitioner is over due by more than six months. Thus, the claim of the petitioner that his account could not have been classified as NPA, is without substance.
21. In addition to the above, as per the RBI circular issued on 14th June, 2001 regarding Income recognition, asset classification and provisioning norms for advances, to the specific query as to whether an account will be an NPA if the review / renewal of regular/adhoc credit limit are not done when due ? what should be periodicity of review / renewal to decide the status of account ?, The RBI has answered to the above stating that - "regular and adhoc credit limit need to be renewed / regularized not later than three months from the due date / date of adhoc sanction. In case of constraints, such as non- availability of financial statement and other data from the borrowers, the branch should furnish evidence to show that renewal / review of credit limit is already on and would be completed soon. In any case, delay beyond six months is not considered desirable as a general discipline. Hence, an account where the regular / adhoc credit limits have not been reviewed / renewed within 180 days from the due date / date of adhoc sanction will be treated as NPA." In the facts of the present case, as the credit facility which has become due for renewal on 27.03.2019 and not having been renewed within 180 days, i.e. by 23.09.2019, the account would stand classified as NPA even though there have been intermittent payments after the due date of limits i.e. 26.03.2019. The classification of the petitioner account as NPA is not the ground of petitioner serving the interest and bringing the sanctioned limit within its drawing power which 19 stood lapsed after one year tenor granted, but it is on the ground of non renewal of the SOD facility even after 180 days have expired. As, the demand notice has been issued on 01.10.2019, which is beyond the period of 180 days specified for renewal of credit facility, no fault can be found with the action of the respondent bank nor the action of the respondent bank can be said to be contrary to the RBI circular as mentioned above.
22. In the light of the conclusions arrived at as above, considered from any angle, the challenge to the demand notice dated 01.10.2019 under Section 13(2) and the possession notice dated 14.01.2020 under Section 13(4) of the SARFAESI Act, 2002, as having not been served as required under the provisions of the Act and the Rules, 2002, and also on the ground of the respondent bank acting contrary to RBI circular, is devoid of merit. Thus, the present Writ Petition as filed is intended only for procrastinating the matter further.
23. Accordingly, the Writ Petition is dismissed. No order as to costs. Miscellaneous petitions pending if any, shall stand closed, in the light of the final order.
______________________________ A. RAJASHEKER REDDY, J _____________________ T. VINOD KUMAR, J Date : 24.12.2020 MRKR Note : Registrar (Judicial) is directed to return the Original record as placed before this court, under the cover of letter dated 25.09.2020, to the counsel for the respondent bank.
20