Bank wins appeal as borrower's writ petition challenging SARFAESI Section 13(4) notice deemed abuse of process

The HC set aside a Single Judge's order directing a bank to implement a restructuring arrangement dated 28.06.2021. The court held that writ petitions challenging SARFAESI Act Section 13(4) notices constitute abuse of process when statutory appeal remedies under Section 17 are available. Following Phoenix ARC precedent, the court found that borrowers must exhaust efficacious statutory remedies before approaching HC under Article 226. Additionally, the court determined that the borrower's subsequent acceptance of a modified arrangement dated 11.11.2021 discharged the original restructuring contract, eliminating any surviving cause of action for specific performance of the earlier arrangement.

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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.

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