2024 (7) TMI 1306 - HC - Indian Laws

Maintainability of petition - availability of efficacious remedies under the SAEFAESI Act, 2002 - issuance of notices issued under Section 13(2) and 13(4) of the SARFAESI Act, 2002 - HELD THAT - The writ petition was filed on 20th July, 2022 i.e. after issuance of the notice under Section 13(4) of the said Act. It appears from the writ petition that the respondent no. 1 filed the writ petition challenging the issuance of notices issued under Section 13(2) and 13(4) of the SARFAESI Act, 2002, including the illegal and arbitrary action on the part of the appellant bank for alleged non-compliance of the letter of arrangement dated June 28, 2021. The Hon ble Supreme Court in Phoenix ARC Private Limited 2022 (1) TMI 503 - SUPREME COURT , after taking note of the various decisions, held that writ petitions at the instance of borrowers against the proposed action to be taken under Section 13(4) of the SARFAESI Act, 2002 is an abuse of process of the Court in view of the statutory, efficacious remedy available by way of appeal under Section 17 of the SARFAESI Act. It was further held that under such situation the High Court ought not to have entertained the writ petitions - The Hon ble Supreme Court in Phoenix ARC (supra) held that the remedies available to an aggrieved person against the action taken under Section 13(4) of the SARFAESI Act by way of appeal under Section 17 of the Act is both expeditious and effective and the High Court while exercising its jurisdiction under Article 226 is dutybound to consider whether the petitioner has any alternative or effective remedy for resolution of dispute. The Hon ble Supreme Court in Baghora Polylab (P) Ltd. 2008 (9) TMI 864 - SUPREME COURT held that a contract may be discharged by the parties to the original contract either by entering into a new contract or by acceptance of performance of modified obligations in lieu of the obligations stipulated in the contract. In the case on hand it is evident from the records that the respondent no.1 having executed documents in terms of the letter of arrangement dated 11.10.2021 have entered into a new contract in substitution of the original contract i.e. the restructuring of accounts vide letter dated 28.06.2021. Therefore, the original contract vide restructuring letter dated 28.06.2021 gets discharged by the subsequent act of the parties - The issue of non service of letter of arrangement dated 28.06.2021 which weighed with the learned Single Judge pales into insignificance in view of the aforesaid observations of this Court. This Court is of the considered view that after the respondent no. 1 accepted the letter of arrangement dated 11.11.2021, the cause of action for seeking specific performance of the letter of restructuring dated 28.06.2021 no longer survives. This Court, therefore, holds that the direction passed by the learned Single Judge upon the Bank to give effect to the letter of arrangement dated 28.06.2021 and to give the benefit of the same to the writ petitioner/respondent no. 1 herein calls for interference. The impugned judgment and order dated November 3, 2021 stands set aside and quashed.

Summary

Issues Involved:
1. Maintainability of the writ petition.
2. Non-communication of the restructuring letter dated June 28, 2021.
3. Classification of accounts as Non-Performing Asset (NPA).
4. Specific performance of the restructuring letter.
5. Delay in filing the writ petition.
6. Refund of Rs. 92.56 lakhs appropriated by the Bank.

Issue-wise Detailed Analysis:

1. Maintainability of the writ petition:
The appellant argued that the writ petition was not maintainable due to the availability of efficacious remedies under the SARFAESI Act, 2002. The accounts of respondent no. 1 were classified as NPA, and actions under Sections 13(2) and 13(4) of the SARFAESI Act were initiated. The appellant cited several Supreme Court decisions to support this contention. The court noted that the respondent no. 1 had also filed an application under Section 17 of the SARFAESI Act, 2002, seeking similar reliefs, thus pursuing parallel remedies. The court referenced the Supreme Court's stance that writ petitions against actions under Section 13(4) of the SARFAESI Act are an abuse of process when statutory remedies are available.

2. Non-communication of the restructuring letter dated June 28, 2021:
The respondent no. 1 claimed unawareness of the restructuring letter until November 27, 2021, which led to further defaults. The court found this claim difficult to accept, given that amounts were credited to the respondent's account in accordance with the restructuring letter. The court concluded that the respondent was aware of the restructuring at the relevant time.

3. Classification of accounts as Non-Performing Asset (NPA):
The appellant contended that the respondent's accounts were rightly classified as NPA due to non-compliance with the restructuring terms. The court refrained from making observations on this issue, as it was already pending before the Debts Recovery Tribunal.

4. Specific performance of the restructuring letter:
The court observed that the respondent had accepted a subsequent letter of arrangement dated November 11, 2021, which created a new contract, thereby discharging the original restructuring letter dated June 28, 2021. The respondent could not seek specific performance of the original letter after accepting the terms of the new arrangement.

5. Delay in filing the writ petition:
The court noted that the respondent approached the writ court in July 2022, after the issuance of notices under Section 13(4) of the SARFAESI Act, despite claiming knowledge of the restructuring letter on November 27, 2021. Citing the principle that courts should be slow in granting relief to parties who do not act in time, the court held that the respondent was not entitled to relief due to the delay.

6. Refund of Rs. 92.56 lakhs appropriated by the Bank:
The court found that the respondent had sought identical relief in the application before the Debts Recovery Tribunal. The learned Single Judge's direction to return the amount appropriated by the bank was deemed inappropriate, as it interfered with the classification of the respondent's account as NPA. The court held that the learned Single Judge should not have entertained the prayer for refund, given the pending statutory remedies.

Conclusion:
The court set aside and quashed the impugned judgment and order dated November 3, 2021, allowing the appeal. The observations made were solely for the purpose of this appeal and would not prejudice the proceedings pending before the Debts Recovery Tribunal-1, Kolkata. No order as to costs was made.