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TMI Blog2023 (1) TMI 1423X X X X Extracts X X X X X X X X Extracts X X X X ..... titioner no. 2 and his wife. In any event, the petitioner no. 2's son attained majority on 8.8.2022 and the petitioners can therefore take appropriate steps in respect of the Delhi Flat to clear the loans. The stand of the respondent Bank is patently unreasonable. The conclusions of the Court are strengthened by a broader view of both the parties being benefited if the respondent Bank permits the petitioners to service their loans which the petitioners are admittedly in a position to do in the changed circumstances. This Court is unable to comprehend as to why the respondent Bank would invoke proceedings where the respondent Bank would not only have to engage in adversarial proceedings but also wait for a considerable time before the loan accounts of the petitioners are clear or settled or closed. The facts and the materials placed before the Court persuade the Court to hold that the respondent no. 1 Bank precipitated the events culminating in the issue of the impugned Notice under the SARFAESI Act without proper application of mind and due exercise of discretion. Appeal allowed by a declaration that the impugned Notice dated 27.4.2022 is liable to be quashed restraining the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2.2022 which were prior to the impugned Notice dated 27.4.2022 none of which were considered by the Bank in terms of R.F. 2.0. Counsel submits that the first petitioner satisfied all the conditions for obtaining effective restructuring through a one-time measure in accordance with the R.F. 2.0. It is submitted that the petitioners have submitted two plans, which if permitted by the Bank, would clear all the existing loans and the petitioners do not intend to continue with adversarial proceedings against the respondent Bank. 4. Learned Counsel appearing for the respondent no. 1/South Indian Bank urges that the writ petition is not maintainable since the petitioners have challenged a Notice issued under the provisions of the SARFAESI Act and that too against a private Bank. Counsel submits that the writ petition is in any event premature as the Bank has not invoked any measures under section 13(4) of the Act. It is submitted that even otherwise on merits, the first writ petitioner was not eligible to seek restructuring within the provisions of R.F. 1.0 as well as R.F. 2.0. Counsel submits that the petitioner no. 2 had also not perfected his security interest with regard to the immova ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he failure/inaction of the Bank to restructure the loans is prior to the declaration of the petitioners' loan accounts as NPA and also prior to issuance of the Notice under section 13(2) of the 2002 Act. 8. The cause of action pleaded in the writ petition persuades this Court to hold that the writ petition is not a SARFAESI action simpliciter and is premised on the statutory duty cast upon the respondent Bank to enforce the RBI Circular R.F. 2.0. which was to be enforced in accordance with its object and intendment and the respondent Bank was to exercise its discretion in the matter of restructuring the petitioners' loans as an MSME. The writ petition brings to the fore the failure of the respondent Bank to exercise its discretion in accordance with the Circular on acceptable and transparent standards. The decisions relied on by the Bank namely Sunitha Roy vs. Canara Bank; 2020 SCC OnLine Ker 5120, Katepalli Lavanya vs. Union of India, M/s. Digivision Electronics Ltd. vs. Indian Bank; 2005 SCC OnLine Mad 478 do not apply to the facts since all these decisions dealt with section 13(2) notices without any duty on the part of the respondents to enforce an RBI Circular. Federal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dent no. 2 before this Court) issued a statutory Circular under the Banking Regulation Act, 1949 namely Resolution Framework 1.0. on 6.8.2020 to help preserve long term viability of firms. The intended object was to alleviate Covid 19-related stress. A revised statutory Circular was issued namely Resolution Framework 2.0 dated 5.5.2021 for Resolution of Covid-19 related stress of MSMEs which is relevant to the present case since the petitioner no. 1 is an MSME. 12. R.F. 2.0 permitted Banks including the respondent no. 1 Bank to grant further restructuring as a one-time measure of already restructured loans of MSMEs. This would be evident from Clauses 2 and 4 of R.F. 2.0. The petitioner's case: 13. The first petitioner satisfied all the requirements under R.F. 2.0 for availing the benefit of a one-time restructuring of its three loans; the petitioner was an MSME as on 31.3.2021 and was GST-registered. The aggregate loan exposure of the petitioner no. 1 was below Rs. 25 crores. The petitioners' eligibility would appear from Clause 2 of R.F. 2.0. 14. Most important, all the three loan accounts of the petitioner no. 1 were standard assets as of 31.3.2021 (Clause 2(iv)). The res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned by the petitioner no. 2 and his wife, devolved upon the petitioner no. 2 and his minor son. The respondent Bank asked the petitioner no. 2 to obtain guardianship of his minor son from a competent Court in order to get the ECLGS Loan. The petitioner no. 2 complied with this requirement and filed appropriate proceedings before the Court in Delhi on 2.9.2021. The respondent Bank however rejected the petitioner's request for ECLGS Loan on 9.11.2021 on the ground of non-perfection of security interest involving minor interest... The primary grievance of the petitioners: 17. All the three loan accounts of the petitioner no. 1 were declared NPAs on 26.11.2021 and 30.11.2021 by the respondent Bank. (The 26.11.2021 declaration related to the Funded Interest Term Loan (FITL) and the 30.11.2021 related to the Cash Credit Open Loan (CCOL) and Working Capital Term Loan (WCTL)). The impugned declaration was despite the first petitioner not committing any default in respect of the CCOL which was also declared as NPA on 30.11.2021. The second petitioner also submitted a viability plan on 28.12.2021 as per the request of the respondent Bank. The viability plan was not considered by the resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and banks are under a statutory obligation to comply with the mandate of the Circulars. This was recognised in Central Bank of India vs. Ravindra; (2002) 1 SCC 367 where the Supreme Court held that the power conferred by sections 21 and 35-A of the Banking Regulation Act, 1949 is coupled with a duty to act and further that the Reserve Bank of India, as the prime banking institution in the country, is entrusted with a supervisory role and is conferred with the authority of issuing binding directions having statutory force in the interest of the public. 21. The allegations of the respondent Bank that the rejection of disbursement of further credit facilities to the petitioner no. 1 on 9.11.2021 was on the ground of non-perfection of security interest is sufficiently belied by the facts before the Court. The petitioner's wife passed away on 11.10.2020 during the Pandemic and the petitioner no. 1 applied for the loan in July 2021. The petitioner no. 2 thereafter filed appropriate proceedings before the Court in New Delhi under the Guardian and Wards Act, 1890 which was allowed on 11.7.2022. This was done at the direction of the respondent Bank and for the purpose of perfecting the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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