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Judgment
S. Ravi Kumar, J
This Appeal is preferred against order dated 03.12.2018 in Securitization Application (S.A.) No. 251 of 2018 on the file of Debts Recovery Tribunal No. II, Ahmedabad (D.R.T.). Brief facts leading to this Appeal are as follows.
Respondents herein filed above referred S.A. questioning the measures of Appellant Bank initiated under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as the SARFAESI Act). Respondents contended that action of Respondent Bank in declaring Account of Respondents as Non Performing Asset (N.P.A.) on 28.06.2017 is illegal, unjust, improper and contrary to the guidelines of Reserve Bank of India (R.B.I.). They also contended that notice issued u/s. 13(2) of the SARFAESI Act is not fulfilling mandatory requirements of the provisions of the Act. Since description of Loan Facilities and Secured asset is shown wrongly. It is contended that no mortgage was created in favour of Plot No. 44 and the Bank violated provision of Section 13(3A) of the SARFAESI Act. They also contended that Bank failed to comply provision of Rule 8(1) and 8(2) of the Security Interest (Enforcement) Rules, 2002.
On the other hand, Advocate for Bank contended that the S.A. is not filed within 45 days from the date of symbolic possession thereby it is barred by limitation, appellant Bank classified the Account of Respondents as N.P.A. on 28.06.2017 and there are no such guidelines as claimed by Respondents herein.
On consideration of contentions and rival contentions of both parties, the Tribunal below held that the Appellant Bank has not followed the guidelines of R.B.I., dated 21.07.2016. Though in the beginning it was submitted that these guidelines are not applicable to Appellant Bank, but later on Advocate for Appellant conceded that these guidelines are binding on Appellant Bank also. It is not in dispute that first Respondent herein is a Micro, Small & Medium Enterprise as certified by District Industries Centre, Kachahh. As per guidelines of R.B.I., it is mandatory for Appellant Bank to forward the Account relating to Micro, Small & Medium Enterprises to a Committee for a Correction Action Plan before classification of the Account as N.P.A. Referring to above guidelines, Advocate for Appellant Bank submitted that Consultancy Cell has prepared Viability Study Report of the Respondent Unit and in view of that Report guidelines of R.B.I., is complied with.
On the other hand, Advocate for Respondents submitted that as per Guideline 3.3 there is a prescribed Committee to examine the framework for revival and rehabilitation of Micro, Small & Medium Enterprises. He submitted that as per the said guideline, composition of the Committee shall be as under :
(a) The regional or zonal head of the convener bank, shall be the Chairperson of the Committee;
(b) Officer-in-Charge of Micro, Small & Medium Enterprises Credit Department of the convener bank at the regional or zonal office level shall be the member and convener of the Committee;
(c) One independent external expert with expertise in Micro, Small and Medium Enterprises related matters to be nominated by bank;
(d) One representative from the concerned State Government. Endeavour should be made to bring representatives from the respective State Government in the Committee. In case State Government does not nominate any member, then the convening bank should proceed to include an independent expert in the Committee, namely a retired executive of another bank of the rank of A.G.M. and above;
(e) When handling accounts under consortium or MBA, senior representatives of all banks/lenders having exposure to the borrower.
He submitted in view of this mandatory requirement of Committee, Report referred to above by Appellant Bank which is issued by Manager of Consultancy Services of the Appellant Bank cannot be relied on. As rightly pointed by Advocate for Respondents, as guidelines of R.B.I. mandate constitution of a committee consisting of Chairperson and Members, report of a single person and that too from the Consultancy Service Cell of the very same Bank cannot be taken into consideration as an answer to compliance of R.B.I., guidelines. The Tribunal below mainly focused on these guidelines and quashed the measures of the Bank for not following the guidelines. As rightly pointed by Advocate for Respondents when it is held by higher Courts that the guidelines and circulars of R.B.I., will have statutory flavor, the Appellant Bank is bound to follow those guidelines and non-observance of those mandatory provisions shall result in quashing the measures taken by Appellant Bank, therefore, Tribunal below rightly quashed the measures for not following guidelines of the R.B.I.
As seen from the impugned order, the Tribunal below while setting aside the measures directed Appellant Bank to constitute a committee as per the guidelines of R.B.I. Referring to those directions, Advocate for Appellant submitted that the power u/s. 17 of the SARFAESI Act is only to set aside those measures which are contrary to the provisions and the Tribunal below cannot give such direction. I find some force in the argument of the Advocate for Appellant because as per Section 17 of the SARFAESI Act, if the Tribunal below is satisfied that the measures taken are not in accordance with the provisions of the Act, such measures have to be set aside and while setting aside the same, possession has to be restored. So far as restoration of possession, the Tribunal below rightly directed the Bank to restore back possession by granting reasonable time, but directing the Bank to constitute a Committee, in my view, is beyond the powers of Section 17 of the SARFAESI Act. In fact, even the Respondents have not prayed for such a relief in their S.A. Therefore, that direction is liable to be set aside.
On a overall scrutiny of the entire material, I am of the considered that the Tribunal below rightly quashed the measures taken by the Appellant Bank, but committed error in directing the Bank to constitute a Committee. For these reasons, direction of the Tribunal below in para 36 of the impugned order is to be set aside and the remaining findings and directions are to be confirmed.
In view of above observations and findings, appeal is partly allowed by setting aside the direction of the Tribunal below in para 36 of the impugned order dated 03.12.2018. Appeal, in respect of other findings and directions of Tribunal below, is dismissed confirming the order of the Tribunal below. Appeal is ordered accordingly. Both the parties shall bear their own costs.
All Miscellaneous Applications, if any, are dismissed as infructuous.