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2013 (8) TMI 687 - HC - Companies LawAlternative Statutory Remedy u/s 13 SARFAESI Act Appeal For making Representation against the order appellant contended that its Credit facilities were classified as non-performing asset in violation of the guidelines of the Reserve Bank of India Held that - The writ petition was filed even prior to making representation u/s 13 (3A) of the SARFAESI Act to the respondent bank - During pendency of the appeal such representation was made and dealt with elaborately by the respondent bank by passing a speaking order which was communicated vide its letter to the appellants - In Mardia Chemicals Ltd. v. Union of India 2004 (4) TMI 294 - SUPREME COURT OF INDIA - The internal adjudicatory mechanism to deal with objections raised by a borrower with regard to the demand notice including classification of its accounts as NPA appeared to have been effectively complied Writ Petition rejected Decided against appellant.
Issues Involved:
1. Dismissal of the writ petition by the learned Single Judge. 2. Classification of the appellant's credit facilities as non-performing assets (NPA). 3. Alleged violation of Reserve Bank of India (RBI) guidelines. 4. Availability of alternative statutory remedy under Section 13 (3A) of the SARFAESI Act, 2002. 5. Validity of the notices issued under Section 13 (2) of the SARFAESI Act. Issue-wise Detailed Analysis: 1. Dismissal of the Writ Petition by the Learned Single Judge: The appeal was preferred against the judgment and order dated 19th March 2013, where the learned Single Judge dismissed the writ petition on the grounds that the appellants had an alternative statutory remedy under Section 13 (3A) of the SARFAESI Act. This section allows appellants to make representations against the notice issued under Section 13 (2) of the SARFAESI Act. The appellants were granted liberty to urge all issues before the appropriate authority. 2. Classification of the Appellant's Credit Facilities as Non-Performing Assets (NPA): The appellant company had enjoyed credit facilities from the respondent bank, which were later classified as NPA due to irregularities in their Cash Credit account. The respondent bank informed the appellants about the irregularities and the need to regularize the accounts. Despite the appellant's responses, the bank classified the accounts as NPA on 16th January 2013, citing non-servicing of interest and overdrawal beyond permissible limits. 3. Alleged Violation of Reserve Bank of India (RBI) Guidelines: The appellants argued that the classification of their credit facilities as NPA violated the RBI guidelines, specifically Clause 2.1.3 of the Master Circular dated 2nd July 2012. This clause states that an account should be classified as NPA only if the interest due and charged during any quarter is not serviced fully within 90 days from the end of the quarter. The appellants contended that the classification was premature and not in compliance with the RBI guidelines. 4. Availability of Alternative Statutory Remedy under Section 13 (3A) of the SARFAESI Act, 2002: The learned Single Judge dismissed the writ petition on the grounds that the appellants had an alternative statutory remedy under Section 13 (3A) of the SARFAESI Act. This section allows borrowers to make representations or objections to the secured creditor regarding the classification of their accounts as NPA. The respondent bank is required to consider such representations and communicate their decision within one week. The appellants had already made such a representation, and the bank responded with a detailed letter addressing their objections. 5. Validity of the Notices Issued under Section 13 (2) of the SARFAESI Act: The appellants challenged the notices issued under Section 13 (2) of the SARFAESI Act, arguing that the initiation of the proceedings was invalid due to the alleged premature classification of their accounts as NPA. The court noted that the issues relating to the classification of accounts as NPA involve disputed questions of fact and accounting, which are best adjudicated by the respondent bank through the statutory mechanism provided under Section 13 (3A). The court found no merit in interfering with the impugned order, as the appellants had already availed the alternative statutory remedy, and the bank had duly considered and communicated their objections. Conclusion: The court dismissed the appeal and connected applications, upholding the learned Single Judge's decision to reject the writ petition based on the availability of an alternative statutory remedy under Section 13 (3A) of the SARFAESI Act. The court emphasized that the statutory mechanism provided an adequate and effective means to resolve the appellant's objections regarding the classification of their accounts as NPA.
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