Sombatla Sandeep Dixit vs Union Of India

Mr. A.P.Venu Gopal, learned counsel representing Ms. Ch.Vedavani, learned counsel for the petitioner.

In this writ petition, the petitioner who is a borrower has prayed for the following reliefs:

“For the reasons stated in the accompanying affidavit, it is therefore prayed that this Hon’ble Court be pleased to issue a writ, order or direction more particularly in the nature of a Mandamus:

(i) Declaring the action of the 3rd Respondent in issuing the proceeding dated 05-12-2023 in declaring the account of the petitioners bearing loan account number: 104201031765 as “Fraud” being contrary to the guidelines issued by the 2nd respondent called as (Frauds classification and Reporting by Commercial Banks and Select FIs) apart from being violative of the law laid by the Honorable Supreme Court in the case of State Bank of India & Ors Vs Rajesh Agarwal & Ors pertaining to fraud reported in 2023 Live Law (SC) page 243 and consequently set-aside the same.

(ii) Consequentially, declare the demand notice dated 5-12-2023 issued by the 3rd respondent, alleged to be a notice issued under Section 13 (2) of the SARFAESI Act; in so far as declaring the loan account of the petitioner bearing No. 104201031765 as a “Non Performing Asset” with effect from 29-11-2023 being contrary to “Master Circular on- Prudential Norms on Income Recognition” pertaining to asset classification framed by the 2nd respondent and Keshavlal Khemchand and Sons Pvt Ltd & Ors Vs Union of India and Ors reported in 2015 (4) SCC page770, pertaining to asset classification as per the master circular and having been issued without jurisdiction, violative of the principles of natural justice, without there being any cause of action and hence liable to be set-aside.”

(iii) Consequently, grant stay on all the proceeding being initiated by the Respondent in pursuance to the impugned notice dated 05-12-2023.

(iv) Grant cost of the writ petition.

(v) Pass further order/orders as this Honorable court deems fit and proper in the circumstance of the case.”

Facts giving rise to filing of this writ petition briefly stated are that respondent No.3 Bank sanctioned loan to the petitioner on 21.12.2022 for a sum of Rs.45 lakhs. The petitioner was required to pay a sum of Rs.42,683.00 per month for a period of 240 months. The petitioner purchased the property bearing House No.C4-46/1/A/1, on Plot No.43 (Middle Part), admeasuring 150 square yards with built up area of 900 square feet, ground floor RCC in Survey No.87 Part, situated at Nagaram Village and Municipality and Keesara Mandal, Medchal, Malkajgiri District and deposited the title deeds.

On 05.12.2023, a demand notice was issued to the petitioner under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (briefly referred to hereinafter as the ‘SARFAESI Act’) treating the account of the petitioner as ‘Fraud’ and Non-Performing Asset (NPA) since 29.11.2023 and demanded the petitioner to pay the entire loan amount immediately. In the aforesaid factual background, this petition has been filed.

Learned counsel for the petitioner submitted that petitioner has repaid the whole amount of loan and in fact has paid excess amount. It is further submitted that neither any notice nor any opportunity of hearing was afforded to the petitioner before declaring the account of the petitioner as ‘Fraud’. It is therefore submitted that the action is in violation of the Master Circular on ‘Frauds – Classification and Reporting’ dated 01.07.2016 (updated as on 03.07.2017) issued by Reserve Bank of India under the provisions of Reserve Bank of India (Frauds classification and reporting by commercial banks and select FIs) Directions, 2016 and therefore, the same is liable to be quashed.

In support of aforesaid submission, reliance has been placed on decision of Supreme Court in State Bank of India v. Rajesh Agarwal (2023) 6 SCC 1.

We have considered the submission made by learned counsel for the petitioner.

On receipt of a notice under Section 13(2) of the SARFAESI Act, it was open for the petitioner to file an objection under Section 13(3A) of the SARFAESI Act. However, for the reasons best known to the petitioner, he has not chosen to do so.

Supreme Court in United Bank of India v. Satyawati Tondon (2010) 8 SCC 110 has deprecated the practice of the High Courts in entertaining the writ petitions despite availability of an alternative remedy. The aforesaid view has also been reiterated by Supreme Court in Varimadugu Obi Reddy v. B.Sreenivasulu (2023) 2 SCC 168. The relevant extract of para 36 reads as under:

“36. In the instant case, although the respondent borrowers initially approached the Debts Recovery Tribunal by filing an application under Section 17 of the SARFAESI Act, 2002, but the order of the Tribunal indeed was appealable under Section 18 of the Act subject to the compliance of condition of pre-deposit and without exhausting the statutory remedy of appeal, the respondent borrowers approached the High Court by filing the writ application under Article 226 of the Constitution. We deprecate such practice of entertaining the writ application by the High Court in exercise of jurisdiction under Article 226 of the Constitution without exhausting the alternative statutory remedy available under the law. This circuitous route appears to have been adopted to avoid the condition of pre-deposit contemplated under 2nd proviso to Section 18 of the 2002 Act”

Sofar as the reliance placed by the petitioner on the decision of Supreme Court in State Bank of India v. Rajesh Agarwal (supra) is concerned, suffice it to say that the validity of the Reserve Bank of India (Frauds classification and reporting by commercial banks and select FIs) Directions, 2016 was under challenge in the said writ petition and the Supreme Court held that the principles of natural justice are required to be followed before an account is classified as ‘Fraud’.

Needless to state that in case any measure under Section 13(4) of the SARFAESI Act is taken, the petitioner has an alternative efficacious remedy of approaching the Debts Recovery Tribunal. It is open for the petitioner to contend therein that the action which has been taken against him is in violation of the Master Circular on ‘Frauds – Classification and Reporting’ dated 01.07.2016 (updated as on 03.07.2017) issued by Reserve Bank of India.

No provision of law has been brought to our notice which debars the petitioner from raising such a contention before the Debts Recovery Tribunal.

For the aforementioned reasons, the Writ Petition is disposed of with the liberty to the petitioner to take recourse to such remedy as may be available to him in law with regard to his grievance.

As a sequel, miscellaneous applications pending, if any, shall stand closed. There shall be no order as to costs.