TaxTMI 
TaxTMI 
2023 (1) TMI 1423
X X X X Extracts X X X X
X X X X Extracts X X X X
....e loans of the petitioners is arbitrary and contrary to the Resolution Framework (R.F) 2.0 dated 5.5.2021 issued by the Reserve Bank of India. 2. The petitioner no. 1 claims to be a small enterprise within the meaning of The Micro, Small and Medium Enterprises Development Act, 2006 (MSME Act) and the petitioner no. 2 is a shareholder and Managing Director of the petitioner no. 1. 3. The petitioners seek to enforce the RBI Circular R.F 2.0 and claim, through learned counsel appearing for the petitioners, that the said Circular casts a positive statutory duty on the Bank to grant restructuring to already restructured loans of MSMEs. Counsel submits that the relief claimed in respect of the impugned Notice dated 27.4.2022 is only consequential in nature and that the cause of action with regard to the failure of the respondent Bank arose prior to the 13(2) Notice. Counsel submits that the petitioners' loan accounts would have remained a standard asset as on 31.3.2021 if the loans would have been restructured in accordance with the R.F 2.0. Counsel refers to several contemporaneous representations made by the petitioners to the Bank on R.F 2.0 and the Emergency Credit Line Gua....
X X X X Extracts X X X X
X X X X Extracts X X X X
....27.4.2022 was issued under section 13(2) of the Act which would be evident from the impugned Notice itself. Hence, the stage for approaching the DRT, which is the statutory alternative remedy under the SARFAESI Act, had not arrived as on the date of the impugned Notice. Phoenix Arc Private Limited vs. Viswa Bharati Vidya Mandir.; (2022) 5 SCC 345 and United Bank of India vs. Satyawati Tondon; (2010) 8 SCC 110 both cited by the Bank, involved Notices under section 13(4) of the Act and hence are distinguishable from the facts of the present case. 7. Second, prayer (c) of the writ petition which is for a declaration that the Notice issued under section 13(2) namely of 27.4.2022 is liable to be set aside, is consequential to prayers (a), (b), (e) and (f) which are for declarations that the failure of the Bank in extending the benefit of restructuring of the three loans of the petitioners is contrary to the spirit of Resolution Framework 2.0 of the Reserve Bank of India. Prayers (e) and (f) are for a mandamus on the respondent Bank to disburse the ECLGS Loan to the petitioner no. 1 and to restructure the three loans of the petitioner Company in terms of R.F 2.0. There is no doubt tha....
X X X X Extracts X X X X
X X X X Extracts X X X X
....loan facilities from the respondent Bank for about Rs. 5.9 crores from 2013. There was no default between 2013 - 2021. The petitioner no. 1 was constrained to seek restructuring of loans from the Bank by reason of the downturn in retail business after demonetisation. The request for restructuring was made on the basis of future apprehension and without any actual default in the payment. The restructuring was granted with effect from January, 2020 and the loan was segregated into three separate loans; i) Cash Credit Open Loan (CCOL), ii) Working Capital Term Loan (WCTL) and iii) Funded Interest Term Loan (FITL). The petitioners gave a two-storied building at Bangur Avenue jointly owned by second petitioner and his mother and a flat in Delhi jointly owned by the second petitioner and his wife as security for restructuring. The petitioner complied with the obligations of restructuring from January, 2020 onwards. The Covid 19 Pandemic started from March, 2020 and the petitioner's physical stores shut down due to the ensuing lockdown. Although the petitioners incurred huge financial losses, the petitioners continued to service the CCOL loan. The WCTL and FITL loans were under a mora....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the son of the petitioner no. 2 not being perfected. The representations made by the petitioners on 17.9.2021, 27.11.2021 and 1.12.2021 were also not considered by the respondent Bank in accordance with the parameters of R.F. 2.0. Emergency Credit Line Guarantee Scheme (ECLGS) Loan: 16. The respondent Bank offered to grant ECLGS Loan to the first petitioner under the Scheme formulated by the Ministry of Finance, Government of India through the National Credit Guarantee Trustee Company Limited of 23.5.2020 which was formulated to help Banks for extending emergency credit facilities during Covid-19 crisis to MSMEs like the petitioner no. 1. The representatives of the Bank assured the petitioners that the ECLGS Loan would be provided to the petitioner no. 1 and the petitioner no. 1 hence wrote to the Bank on 30.8.2021 requesting sanction of loan on account of the financial stress suffered by the petitioner no. 1 due to the Pandemic. The petitioner no. 1 could not avail of the loan in 2020 since the petitioner no. 1 was servicing the CCOL Loan at that time. The respondent Bank however agreed to grant the ECLGS Loan to the petitioner no. 1 on 30.7.2021 and 11.8.2021. The petition....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 2.0. on 6.7.2021 and 15.7.2021 which was also well within the time frame. Fourth, none of the representations filed with regard to R.F. 2.0 or ECLGS Loan were considered by the respondent Bank prior to the declaration of the accounts as NPA. All these representations were sent before the impugned declaration on 29.11.2021. Further representations made by the petitioners between 1.12.2021 and 10.2.2022 were also not considered by the respondent Bank in accordance with the R.F. 2.0. All these representations were made before the impugned Notice under section 13(2) of the SARFAESI Act, which was issued on 27.4.2022. 19. It is also relevant that R.F. 2.0 has been described as a "Circular" at Clause 2(x) of R.F. 2.0. R.F. 2.0 describes itself as a stress-reliever for MSMEs in view of the uncertainties created in the resurgence of the Covid-19 Pandemic in India. Clause 2 of R.F. 2.0 states that keeping the above reality in mind, the RBI has decided to extend the facilities of restructuring of existing loans to MSME borrowers without a downgrade in the asset classification subject to the conditions in R.F. 2.0. There is little doubt that R.F. 2.0 was issued in public interest having r....