Petitioners are before this Court being aggrieved of steps taken by the respondent Bank, invoking the machinery under the SARFAESI Act for causing the property concerned, over which security interest is created, to be taken possession and sold in auction, to realize the amount stated as due under a loan transaction. The route cause is with reference to non-satisfaction of timely installments.
2. The facts and events as narrated in the writ petition shows that the petitioners are engaged in the business of ceramic and sanitary wares for more than 1 ½ decade. A loan was sought for and obtained from the respondent Bank to the tune of Rs.1.32 crores in the year 2011 and repayment was being effected @ Rs. 1.72 lakhs per month. The tenure of the loan is to come to an end by the end of the year 2022. In the course of business, there occurred some failure on the part of the petitioners in remitting some installments, when the Bank proceeded with further steps under the SARFAESI Act issuing Ext. P1 notice.
3. The petitioners took all earnest efforts to clear out the overdue amount, but because of coercive steps, the petitioners approached this Court by filing W.P.(C) No. 5702 of 2012, wherein Ext. P2 interim order dt. 08.03.2012 was passed on condition. Based on satisfaction of the condition, entire overdue amount was cleared and the account was regularized. The writ petition also came to be disposed of in the said circumstances, as borne by Ext. P3 judgment dated 16.03.2012.
4. The learned counsel for the petitioners points out that timely repayment was being effected without fail. But by virtue of some unforeseen circumstances and adverse market conditions, the petitioners came to be defaulters again and the Bank proceeded with steps under the SARFAESI Act, issuing Ext. P4 notice dated 18.08.2014. The request made by the petitioners to enable them to satisfy the entire overdue amount and to take the loan account outside the purview of 'NPA' status did not turn to be fruitful and hence the present writ petition.
5. A detailed counter affidavit has been filed by the respondent Bank on 27.10.2014, which has been supplemented by an additional counter affidavit dated 20.11.2014. The learned counsel appearing for the Bank vehemently opposes the relief sought for, pointing out that the writ petition is not maintainable, as the remedy of the petitioners, if aggrieved is before the concerned Debt Recovery Tribunal and not by way of Article 226 of the Constitution of India. The question to be considered is whether the petitioners are disputing the liability or the rights of the Bank in proceeding with steps under the SARFAESI Act.
6. When the matter came up for consideration on 15.10.2014, an interim order was passed directing the petitioners to satisfy Rs.20 lakhs forthwith, which is stated as complied with. Subject to satisfaction of the said amount, further proceedings were intercepted by this Court. The learned counsel for the respondent Bank submits that said amount is kept in a no lien account, however adding that total defaulted installments will come around Rs. 14.76 lakhs and if the amount already deposited before the Bank, pursuant to the interim order, is credited to the loan account, the entire overdue amount will be wiped off.
7. The prayer of the petitioners is only to credit the said amount to the loan account and to have the overdue amount satisfied, enabling the petitioners to effect further monthly installments as specified and agreed. As it stands so, there is no 'dispute' as to the facts and figures and the petitioners need not be relegated to the Tribunal, as no fact adjudication is to be pursued. For the same reason, the decision rendered by the Apex Court in Mardia Chemicals & Ors Vs. Union of India [2004 (2) KLT 273] and United Bank of India Vs. Sathyawati Tondon and Ors. [2010 (8) SCC 110] do not come to the field at all. The contention raised by the respondent in this regard is turned down in the said circumstances.
7. Another contention raised by the learned counsel for the Bank is that the writ petition is not maintainable by virtue of the law declared by the Apex Court in Federal Bank Ltd. Vs. Sagar Thomas [2003 (3) KLT 876 (SC)] holding that respondent is not an entity who satisfies the requirement of 'State' or 'other authority' as defined under Article 12 of the Constitution of India.
The circumstances, which led to the said decision are entirely different, which involve a service matter, and the dictum laid down therein is not applicable to the case in hand. Admittedly, the respondent Bank is discharging the duties to the public, engaged in banking operations, entertaining deposits effected by the general public and doing other related activities. As such, there is a duty to the public as well. The course and proceedings, particularly by invoking the remedy under Article 226 and maintainability of the writ petition have to be considered also with reference to the law laid down by the Apex Court in Anadi Mukta Sadgam S.M.V.S.J.M.S. Trust Vs. V.R. Rudani [AIR 1989 SC 1607], wherein it has been held that, if there is a 'public duty', writ petition is of course maintainable. This is more so, by virtue of the vide expression used under Article 226 to the effect that, writ petition is maintainable even against an 'individual', if there is infringement of public duty. In the said circumstances the contention raised by the respondent Bank in this regard fails.
9. The third contention of the respondent Bank is that, even if the entire overdue amount is satisfied, it is for the Bank to decide whether the loan account should be regularized or not. The additional counter affidavit dated 20.11.2014 reveals the impact of declaration of accounts as NPA, with reference to various factors including profitability, liquidity, involvement of management, credit loss etc. At the same time, reference is also made to the 'Master Circular' issued by the Reserve Bank of India, a copy of which has been produced as Ext. R1(a). Reliance is sought to be placed on 'Clause 4.2.5', which reads as follows :
“Clause 4.2.5 : Upgradation of loan accounts classified as NPAs. : If arrears of interest and principal are paid by the borrower in the case of loan accounts classified as NPAs, the account should no longer be treated as non-performing and may be classified as 'standard' accounts. With regard to upgradation of a restructured/rescheduled account which is classified as NPA contents of paragraphs 12.2 and 15.2 in the Part B of this circular will be applicable.
With reference to the said clause, the contention is that, the expression used is 'may' and not 'shall' and hence, it does not mean that the Bank has no power to exercise its discretion under Clause 4.2.5, as to whether the loan should be regularized or not. This Court finds it difficult to accept the said proposition.
10. The contention raised by the respondent Bank with reference to various aspects as to the impact of 'NPA' is as if it is not known to the authorities of the RBI. As a matter of fact, the RBI is controlling the entire affairs in the field of Banking, by virtue of its pivotal role and the relevant provisions of the RBI Act and the Banking Regulation Act, with power even to impose penalty upon the Banks (including in national sector) on violation of the fiscal mandate. Accordingly various circulars have been issued from time to time, which are having binding force upon all the Banks. Binding effect of the Circulars issued by the RBI has been asserted and upheld on different occasions by the Apex Court, including in M/s Sardar Associates and Ors. Vs. Punjab and Sindh Bank and Ors. [AIR 2010 SC 218]. Now, coming to Ext. R1 (a) circular, 'clause 4.2.5' clearly says that, if arrears of interest and principal are paid by the borrower in the case of loan account classified as NPA “account should no longer be treated as non- performing and may be classified as 'standard' account”. The emphasis given by the respondent Bank upon word 'may' is subject to the first limb, wherein a positive declaration has given to the effect that the account should no longer be treated as 'non performing'. This being the position, the word 'may' occurring in the second limb, has to be considered as subserving to the first limb, where it is mandatory. As such, the idea and understanding of the respondent in this regard is throughly wrong and misconceived. The said contention also fails.
11. Coming to the factual position, it is admitted that petitioners have deposited a sum of Rs. 20 lakhs, pursuant to the interim order dated 15.10.2014. The Bank is set at liberty to appropriate the said amount against the loan account with effect from the date on which the petitioners effected the deposit. Once this is done, the entire overdue amount as on date, which is stated as nearly Rs.14.76 lakhs will stand wiped off. Net result is that there cannot be any 'overdue' amount in the loan account and the loan account of the petitioner has to be declared as 'regularized', taking it outside the purview of 'NPA' status. It is ordered accordingly, making it clear that, it will be for the petitioners to effect the regular EMIs without fail. If any two consecutive defaults are made with regard to the regular EMIs, it will be open for the respondent Bank to proceed with further steps for realization of the entire amount in lump.
In the above circumstances, the writ petition stands allowed. Though the course and conduct of the respondents cannot, but be deprecated; this Court reluctantly refrains from awarding cost.
kmd Sd/-
P. R. RAMACHANDRA MENON, (JUDGE)