2014 (4) TMI 1183 - SC - Indian Laws

Division Bench upholds dismissal of writ petition challenging NPA classification by Bank under SARFAESI Act

The Division Bench upheld the Single Judge's decision to dismiss the writ petition challenging the Non-Performing Asset (NPA) classification by the Bank. ... Enforcement of security interest - enhancement of credit limit - Held that:- Firstly, Devi Ispat had an alternate remedy to make a representation to the Bank under the provisions of Section 13(3A) of the Act and there was no reason to by-pass the statutory mechanism. Secondly, Devi Ispat did in fact make a representation to the Bank under Section 13(3A) of the SARFAESI Act and that representation was rejected on 2nd April 2013 during the pendency of the intra court appeal. The statutory remedy having been availed of by Devi Ispat, nothing really survived in the dispute raised. Thirdly, we now find from the written submissions submitted by the Bank that it has taken possession of the secured assets of Devi Ispat on 25th May 2013 and 27th May 2013 under the provisions of Section 13(4) of the SARFAESI Act and a possession notice has also published in the newspapers on 31st May 2013. On the facts on record and the statutory remedy having been availed of, we see no reason to interfere with the impugned order passed by the Calcutta High Court. However, it is left open to Devi Ispat to take such appropriate steps as may be considered necessary for safeguarding its interests. Issues:1. Classification of account as NPA and subsequent actions by the Bank2. Challenge to the declaration of NPA status and letters issued by the Bank3. Dismissal of writ petition by the learned Single Judge4. Appeal against the order of the Single Judge5. Consideration of representation under Section 13(3A) of the SARFAESI Act6. Rejection of representation and subsequent appeal7. Division Bench's decision and reasoning8. Possession of secured assets by the Bank under Section 13(4) of the SARFAESI ActAnalysis:1. The case involved the classification of the account as a Non-Performing Asset (NPA) by the Bank due to irregularities in servicing the credit facilities. The Bank issued multiple letters to the petitioner, informing them of the NPA status and requesting regularization of accounts.2. The petitioner challenged the NPA classification and letters issued by the Bank by filing a writ petition in the Calcutta High Court. The Single Judge dismissed the petition citing the availability of an alternate statutory remedy under Section 13(3A) of the SARFAESI Act.3. The dismissal of the writ petition by the Single Judge was based on the ground that the petitioner could make a representation against the Bank's actions under Section 13(3A) of the SARFAESI Act, which would be considered by the Bank.4. Following the dismissal of the writ petition, the petitioner made a representation to the Bank under Section 13(3A) of the Act. An intra court appeal was filed against the Single Judge's order, but the representation made to the Bank was not explicitly mentioned in the appeal.5. The Division Bench, considering the statutory mechanism and previous court observations, upheld the decision of the Single Judge. Despite the rejection of the representation by the Bank, the Division Bench heard the appeal but did not delve into the merits due to the availability of the statutory remedy.6. The Division Bench emphasized that the petitioner had availed of the statutory remedy under Section 13(3A) of the SARFAESI Act, and the matter was adequately addressed through the statutory mechanism. The appeal was ultimately dismissed.7. Subsequently, the Bank took possession of the secured assets of the petitioner under Section 13(4) of the SARFAESI Act. The Division Bench found no reason to interfere with the High Court's order, allowing the petitioner to take further steps to safeguard its interests if deemed necessary. The petition was dismissed for lack of merit.