2006 (2) TMI 673 - HC - Indian Laws

Summary

Issues:
1. Declaration of petitioner's account as Non-Performing Account (NPA) by the respondent Bank.
2. Challenge to the action of the non-petitioner regarding the NPA declaration.
3. Alternative remedy available to the petitioner under Section 17 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.
4. Request for direction to pursue claim towards foreign bills from Export Credit Guarantee Corporation (ECGC) and to regularize/upgrade the petitioner's account.

Issue 1: Declaration of NPA
The petitioner firm applied for an Export Credit Limit, which was sanctioned by the non-petitioners. However, due to pending Export Bills not being credited on time by the Foreign Bank, the non-petitioner declared the petitioner's account as NPA. The petitioner challenged this declaration, citing violations of guidelines by the Reserve Bank of India and referring to the Maradia Chemicals case. The petitioner argued that the Bank should have pursued the amount from ECGC and adjusted it in the petitioner's account.

Issue 2: Challenge to NPA Declaration
The petitioner contended that the account was wrongly declared NPA without following norms, presenting evidence of regular transactions and credits in the account. The petitioner emphasized that more than the interest amount was credited, indicating active transactions. The petitioner sought relief through a writ petition to declare the Bank's action illegal in treating the account as NPA.

Issue 3: Alternative Remedy
The respondents argued that the petitioner should have availed the alternative remedy under Section 17 of the Act, which allows challenging measures taken by secured creditors. The petitioner, however, claimed that the account was wrongly declared NPA and thus preferred the writ petition seeking relief without exhausting the remedy under Section 17.

Issue 4: Request for Direction
The petitioner sought a direction to pursue the claim towards foreign bills from ECGC and to regularize the account. The respondents highlighted that the petitioner failed to deposit the required amount for a one-time settlement, indicating a lack of seriousness in repayment. The Court referred to the State Bank of Bikaner and Jaipur case, emphasizing the liability of the petitioner to repay amounts borrowed for exports.

In the final analysis, the Court dismissed the writ petition, stating that the petitioner had defaulted in payment and recovery proceedings were reasonable. The Court found that the petitioner had not seriously pursued repayment or settlement options, leading to the account being rightfully declared NPA. The request for direction to pursue the claim towards foreign bills from ECGC was deemed untenable, and the plea to regularize/upgrade the account was dismissed due to the petitioner's lack of seriousness in repayment and failure to take advantage of settlement options. The Court concluded that the disputed questions could not be decided under Article 226, leading to the dismissal of the writ petition.