IN THE HIGH COURT OF KERALA AT ERNAKULAM

PRESENT

THE HONOURABLE MR. JUSTICE GOPINATH P.

FRIDAY, THE 10TH DAY OF MARCH 2023 / 19TH PHALGUNA, 1944

WP(C) NO. 18513 OF 2021

PETITIONER/S:

1 KRIZTLE BATH AND WELLNESS PRIVATE LIMITED,

DOOR NO. 40/1118 ANNA MARIA COMPLEX, P.T. USHA ROAD, ERNAKULAM
HEAD P.O, KOCHI-682 011, REPRESENTED BY ITS MANAGING DIRECTOR.

2 M.K. ANSARI,
AGED 58 YEARS
S/O. KOCHUMUHAMMED, MANAGING DIRECTOR, KRIZTLE BATH AND
WELLNESS PRIVATE LIMITED, RESIDING AT VILLA 50, KRISTAL GARNET
VILLAS, THRIKKAKKARA P.O, KOCHI, PIN-682 021

BY ADVS.
C.S.AJITH PRAKASH
T.K.DEVARAJAN
PAUL C THOMAS
FRANKLIN ARACKAL
M.B.SOORI
BABU M.
NIDHIN RAJ VETTIKKADAN
ADESH JOSHI
HAARIS MOOSA

RESPONDENT/S:

1 UNION OF INDIA,
MINISTRY OF FINANCE, (DEPARTMENT OF FINANCIAL SERVICES),
REPRESENTED BY ITS SECRETARY, JEEVAN DEEP BUILDING, PARLIAMENT
STREET, NEW DELHI-110 001

2 RESERVE BANK OF INDIA,

REPRESENTED BY ITS CHIEF GENERAL MANAGER, DEPARTMENT OF
BANKING SUPERVISION 21ST FLOOR, CENTRAL OFFICE BUILDING,
SHAHID BHAGAT SINGH MARG, FORT MUMBAI, MAHARASHTRA-400 001

3 BANKING OMBUDSMAN KERALA,

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W.P.(C)No.18513/2021

C/O. RESERVE BANK OF INDIA, BAKERY JUNCTION,

THIRUVANANTHAPURAM-695 033

4 STANDARD CHARTERED BANK,

REPRESENTED BY ITS EXECUTIVE DIRECTOR AND HEAD, BUSINESS
BANKING PRODUCT, RAJAJI SALAI, CHENNAI-600 001

5 HEAD CUSTOMER SERVICE,

REPRESENTED BY AUTHORISED OFFICER, STANDARD CHARTERED BANK,
19-RAJAJI SALAI, CHENNAI-600 001

6 THE BRANCH MANAGER,

STANDARD CHARTERED BANK, M.G. ROAD, ERNAKULAM-682 015

7 THE AUTHORISED OFFICER,

STANDARD CHARTERED BANK, 23-25 MAHATMA GANDHI ROAD, FORT
MUMBAI-400 001, MAHARASHTRA.

8 ADDL.R8.THE COMMITTEE FOR STRESSED MSME (MICRO, SMALL AND

MEDIUM ENTERPRISES)
STANDARD CHARTERED BANK, MUMBAI, REPRESENTED BY AUTHORISED
OFFICER IS IMPLEADED AS PER THE ORDER DATED 08.08.2022 IN
I.A. 3/2022 IN WPC 18513/2021.

BY ADVS.
MATHEW A KUZHALANADAN
KURIAKOSE VARGHESE
V.SHYAMOHAN
GEORGE J.NALAPPAT
JOSEPH KODIANTHARA (SR.)

THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 10.03.2023,

THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:
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W.P.(C)No.18513/2021

JUDGMENT

The Writ Petition has been filed challenging Ext.P24 order of the

Banking Ombudsman dismissing Ext.P23 complaint of the petitioners

against the respondent Bank alleging non-compliance with

circulars/notifications issued by the Reserve Bank of India (in short, the

RBI). The petitioners state that the non-compliance of Ext.P5 and Ext.P7

circulars/notifications of the RBI and consequent classification of the

account of the 1st petitioner Company as a ‘Non-Performing Asset’ (NPA)

and the issuance of Ext.P18 notice under S.13(2) of the Securitisation and

Reconstruction of Financial Assets and Enforcement of Security Interest

Act, 2002 (in short, the SARFAESI Act), by the respondent Bank are illegal

and unsustainable.

2. The 1st petitioner is a Private Limited Company and the 2 nd

petitioner is its Managing Director. The 1 st petitioner Company availed a

loan (Loan Against Property) of Rs.5,85,00,000/- from the respondent

Bank by mortgaging its immovable properties. The loan was availed in

September 2019 with a monthly EMI of Rs. 6,25,070/- for 180 months. It is

the case of the petitioners that monthly EMIs were paid until March 2020.

In the meantime, the RBI issued a moratorium from March 2020 to August

2020 (six months) vide Ext.P3 and Ext.P4 circulars/notifications to cope

with the financial difficulties caused due to Covid-19 pandemic. The

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W.P.(C)No.18513/2021

petitioner Company availed the facility of the moratorium for five months

from April 2020 to August 2020. The petitioners also availed additional

loan facilities under Guaranteed Emergency Credit Line (in short, GECL) of

Rs.1,15,71,147/. According to the petitioners, the RBI further issued Ext.P5

circular/notification that required a restructuring of loans that were

standard assets as on 01-03-2020 (one among other conditions laid down

in the notification) and that the restructuring of loans had to be

implemented by 31.3.2021. It is the case of petitioners that the account of

the petitioner Company was a standard asset on the said date, and

therefore, the petitioner Company is entitled to the restructuring of its loan

account. It is the case of petitioners that the respondent Bank should

extend the residual period of the loan for a period of two years with or

without moratorium as suggested by the Expert Committee through Ext.P6

report, as the said report is accepted by the RBI through Ext.P7

circular/notification. It is the case of the petitioners that the 1 st petitioner

Company requested the bank to restructure the loan account and to grant a

two-year moratorium on principal as well as interest through Exts.P8

(dated 30-08-2020) and P9 (dated 28-10-2020) and the respondent Bank

requested for various documents for restructuring the loan. The same was

provided to the Bank through Ext.P10 (dated 10-02-2021). On 30-03-2021,

the petitioner Company, through Ext.P11, sought the status of requests and
 5
W.P.(C)No.18513/2021

requested an additional loan of Rupees Fifty lakhs. The respondent Bank

through Ext.P12 reply (dated 31-03-2021), informed that the account of the

petitioner Company was inactive. Further requests were made by the

petitioners to restructure the loan, but the respondent Bank through Ext.

P17 communication requested the petitioners to remit five months' EMI of

Rs.31,25,350. Thereafter, the respondent Bank issued notice dated

05.05.2021 under Section S.13(2) of the SARFAESI Act. It is the case of

petitioners that, on o5-05-2021, RBI, through Ext.P21 circular/notification,

provided for restructuring of loans advanced to MSMEs. Relying on the

circular, the petitioner Company approached the respondent Bank again to

consider restructuring. Still, the same was denied as the petitioners failed

to remit the five months' EMI as requested by the respondent Bank.

Aggrieved by the non-compliance of the RBI circulars/notifications by the

respondent Bank, petitioners filed a complaint vide Ext. P23 before the 3 rd

Respondent/Banking Ombudsman on 02-08-2021 to direct the respondent

Bank to comply with RBI circulars/notifications. The Banking Ombudsman

vide Ext. P24 order rejected the complaint on the ground that the

complaint is beyond the purview of the Banking Ombudsman Scheme,

2006 (in short, ‘BOS, 2006' or ‘the scheme’) and, therefore, the complaint

cannot be admitted under the said scheme. It is the case of the petitioners

that non-admission of the complaint is against the provisions of the

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W.P.(C)No.18513/2021

Banking Regulation Act, 1949 and the BOS, 2006. Aggrieved by the order of

the Ombudsman and alleging the blatant violation of RBI

circulars/notifications by the respondent Bank, the petitioners are before

this Court under Article 226 of the Constitution of India.

3. Sri C.S. Ajith Prakash, the learned counsel appearing for the

petitioners, would submit that the petitioner Company is entitled to get

benefits under the circulars/notifications issued by the RBI. It is submitted

that the petitioner Company availed a loan on September 2019 and had

regularly paid EMI’s till March 2020 and thereafter availed moratorium for

five months till August 2020. It is also submitted that the respondent Bank

has cleared the EMI for September 2020 through NEFT transfer. The

learned counsel for the petitioners further submitted that the petitioner

Company is entitled to the restructuring of its loan account as provided in

Ext.P5 circular/notification of the RBI. Relying on the said

circular/notification, it is contended for the petitioners that, for

restructuring of loans, the account of the petitioner Company should be a

standard asset as on 01-03-2020 and that restructuring had to be

implemented by 31-03-2021. It is submitted that the petitioner Company

had paid EMI till March 2020 and its account was a standard asset as on

01-03-2020; therefore, it was entitled to the benefits of restructuring of the

loan account as provided by the said circular/notification. It is submitted

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W.P.(C)No.18513/2021

that the said circular/notification further provides that the asset

classification of borrowers classified as standard may be retained as such

and that the account which may have slipped into NPA category between

March 2, 2020 and the date of implementation may be upgraded as a

standard asset. It is contended that even if the account slipped into NPA,

the respondent Bank should have upgraded the petitioners’ account as a

standard asset and allowed restructuring. It is submitted that the

respondent bank arbitrarily declared the account of the petitioner Company

as NPA on 01-01-2021, before the last date for restructuring of loans (i.e.

31-03-2021) as provided by the said circular/notification. It is submitted

that the act of the respondent bank in declaring the account of the

petitioner Company as NPA, resulted in the denial of 10% additional GECL,

a fully secured credit facility where the Government of India, through the

National Credit Guarantee Trustee Company, provides a guarantee for the

said loan. It is also submitted that the petitioner could not avail of any

further loan from any other Bank as the account was in NPA status. The

learned counsel for the petitioners submits that, in the light of Exts.P6 and

P7 notifications/circular/notifications of the RBI, the residual tenure of

loan should be extended by two years with or without payment

moratorium. It is contended that the respondent Bank without complying

the said circulars/notifications of RBI, failed to consider Exts.P8 and P9

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W.P.(C)No.18513/2021

representations of the petitioners for restructuring of loan account and for

granting a two-year moratorium on principal as well as interest payment.

The learned counsel contended that all the circulars/notifications issued by

the RBI are binding on the respondent Bank and placed reliance on the

judgments of Supreme Court in Canara Bank v. P.R.N Upadhyaya

and Others, (1998) 6 SCC 526 and Elavakkattu Ceramics and

Ors. v. Authorised Officer, Standard Chartered Bank and Ors.,

2015 (1) KHC 265, to buttress his contentions. Relying on the above

decisions, it is contended that the circulars issued by the RBI under Section

21 or 35 of the Banking Regulation Act, 1949 are statutory and must be

complied with by the Banks.

4. It is further submitted by the petitioners that the respondent

Bank without complying with the circulars/notifications issued by RBI,

arbitrarily classified the account of the petitioner Company as NPA and

issued Ext.P18 demand notice under S.13(2) of the SARFAESI Act. It is

submitted that, through the notice, the petitioners learnt that the account

was declared as NPA on 01-01-2021. It is further submitted that the RBI,

through Ext.P21 circular/notification suggested relief measures to MSMEs,

provided the borrower’s account was a standard asset on 31st March 2021

and that the account was not restructured in terms of the MSME

restructuring circulars. It is contended that Ext.P21 circular/notification

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W.P.(C)No.18513/2021

and Ext.P18 notice are both dated 05-05-2021, and it was with an intention

not to provide the benefits of Ext.P21 circular/notification that the

respondent Bank issued Ext.P18 demand notice on the same date.

5. The learned counsel for the petitioners submits that the

petitioners preferred Ext.P23 complaint before the Banking Ombudsman to

enforce the RBI guidelines. The complaint was rejected on the ground that

restructuring is beyond the purview of the BOS, 2006. He placed reliance

on the judgment of the Supreme Court in Durga Hotel Complex v.

Reserve Bank of India and Ors., AIR 2007 SC 1467, to contend that

the Banking ombudsman has the jurisdiction to entertain the complaint

and that there is a clear failure to exercise the jurisdiction conferred under

the Ombudsman Scheme. It is contended that the complaint clearly falls

within Clause 8(2)(d) of the BOS, 2006 and that Ext.P24 order of the

ombudsman is liable to be set aside and the matter is to be reconsidered.

6. The counsel for the petitioners also submits that the respondent

Bank has failed to comply with Ext.P27 circular/notification of the RBI. It is

submitted that, as per Ext.P27 circular/notification, every bank has to

maintain a committee for Corrective Action Plan and those accounts

coming under the category of SMA-2 (Principal or interest payment

overdue between 61-90 days) should be mandatorily forwarded to the said

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W.P.(C)No.18513/2021

committee. The respondent Bank without forwarding the account to the

said committee arbitrarily declared the account as NPA.

7. The counsel for the petitioners would submit that the

petitioners remitted an amount of Rs. 1.50 Crores in a no-lien account as

per the direction of this Court and thereafter, OTS proposals were made.

Still, the proposals were rejected as the same was not considered by any

senior-level officer. It is also submitted that the RBI has not filed any

counter affidavit even though the reliefs sought include a direction to the

RBI to take action against the respondent Bank.

8. The learned counsel also submits that the petitioner cannot

approach DRT for relief as the main issue concerns non-compliance with

RBI circulars/notifications by the respondent Bank. He placed reliance on

the judgment of the Supreme Court in Mardia Chemicals Ltd. and

Ors. v. Union of India and Ors., AIR 2004 SC 2371, to contend that

the petitioners cannot approach the DRT under the provisions of

SARFAESI Act at the stage of 13(2) notice. It is contended that the

challenge in DRT under Section 17 can be invoked only after some

measures have been taken under Section 13(4) of the SARFAESI Act.

9. Sri. Joseph Kodianthara, learned Senior Counsel appearing for

the answering respondents (R4 to R7) on the instructions of

Adv. V. Shyamohan contends that the writ petition challenging Ext.P18

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W.P.(C)No.18513/2021

notice issued under Section 13(2) of SARFAESI Act is not maintainable. It

is submitted that non-compliance of RBI Guidelines or MSME measures

cannot be raised in the proceedings initiated under the SARFAESI Act. It is

submitted that petitioners should have approached the Debts Recovery

Tribunal. In support of his contentions, the learned counsel placed reliance

on the judgments of the Supreme Court in United Bank of India v.

Satyawati Tondon and Ors.; (2010) 8 SCC 110 and Assistant

Commissioner (CT)LTU, Kakinada and Ors. v. Glaxo Smith

Kline Consumer Health Care Limited; AIR 2020 SC 2819, to

contend that when an effective alternative remedy is available, the

petitioners cannot approach this court under Article 226 of the Constitution

of India. It is contended that the account of the petitioner Company has

become NPA and that the respondent Bank can proceed against the

petitioner Company under the provisions of the SARFAESI Act. The

learned counsel for the respondent Bank placed reliance on the judgments

of the Supreme Court in State Bank of India v. Santosh Gupta and

another, (2017) 2 SCC 538 and Transcore v. Union of India and

another, (2008) 1 SCC 125, to contend that SARFAESI Act is an

enactment that entitles banks to enforce their security interest outside the

Court’s process and that the respondent Bank’s right cannot be defeated

through a Writ Petition under Article 226 of the Constitution of India.

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W.P.(C)No.18513/2021

10. The counsel for the answering respondents submits that

directing the Banking Ombudsman to consider the Ext.P23 complaint is

against Clause 14 of the BOS,2006. It is contended that if petitioners are

aggrieved by the rejection of a complaint under Clause 13 of the scheme, an

appeal could be preferred before the appellate authority within 30 days

from the date of receipt of said order. The learned counsel placed reliance

on the judgment of the Supreme Court in Radha Krishan Industries v.

State of Himachal Pradesh and Ors. (2021) 6 SCC 771, to contend

that when a right is created by a statute, which itself prescribes the remedy

or procedure for enforcing the right or liability, resort must be had to that

particular statutory remedy before invoking the discretionary remedy

under Article 226.

11. It is submitted that the respondent bank had complied with

Exts.P3 and P4 circulars/notifications of RBI and granted a moratorium to

the petitioner Company. It is submitted that even assuming without

admitting that moratorium was not granted to the petitioner Company, the

Ext.R4(a) circular/notification states that in respect of accounts which were

not granted any moratorium in terms of Covid 19 Regulatory Package, asset

classification shall be as per the Master Circular [Prudential norms on

Income Recognition, Asset Classification and Provisioning pertaining to

Advances] dated 01.07.2015 or IRAC norms. It is submitted by the

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W.P.(C)No.18513/2021

answering respondents that Ext.P5 circular/notification is not applicable to

the petitioner Company. Reliance is placed on paragraph 2(v) of Ext.P5

circular/notification to contend that only those accounts which have been

classified as NPA between 02.03.2020 and the date of implementation of

restructuring plan are required to be upgraded as a standard asset. It is

further submitted that the account of the petitioner Company remained

standard during the said period and that the account of the petitioner

Company was classified as NPA only on 01.01.2021.

12. The learned senior counsel for the answering respondents

would submit that Ext.P7 circular/notification provides discretionary

power to the concerned banks while implementing the resolution plan. It

specifically does not grant any extension of moratorium or other benefits.

The learned counsel placed reliance on the judgment of Supreme Court in

Small Scale Industrial Manufactures Association v. Union of

India and Ors, (2021) 8 SCC 511, to contend that the bank had

complied with the circulars/notifications of RBI and had granted

moratorium till August 2020, in accordance with the circulars/notifications

issued by the RBI and that the petitioners are not eligible for any extension

of moratorium as its account was declared as NPA. It is also submitted that

Ext.P21 circular/notification does not apply to the petitioners as the

account of the petitioners was classified as NPA before 31-03-2021. It is

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W.P.(C)No.18513/2021

submitted that Ext.P21 is applicable only on borrowers' accounts, being a

standard asset as on 31-03-2021. Therefore, the respondent Bank cannot

provide a moratorium or restructure the petitioners' account as per the said

circular/notification. It is submitted that the RBI circulars/notifications

relied on by the petitioners do not provide for granting or extending a

moratorium for two years. It is further submitted that the petitioner

Company vide Ext.P25 has sought to upgrade the account and to increase

the tenure of the loan to 17 years and/ or to arrive at a One-time settlement

payable in 6 instalments starting from April 2022. It submitted that all

requests of the petitioners were duly considered by the respondent Bank

and it was found that the petitioner Company is not eligible for the benefits

claimed.

13. It is submitted that the total amount due as on 07.12.2022 is

Rs.7,63,94,474.50/- and no payment has been made from September,

2020. It is submitted that this Court on 09.09.2021 granted an ex-parte

interim order directing the respondents not to initiate any proceedings

against the petitioners and thereafter, the said interim order was extended

till 20.12.2022, thereby the petitioners enjoyed the interim order granted to

them for more than a year and have completely failed or willfully neglected

to service the loan. It is submitted that the stay enjoyed by the petitioners

has itself exceeded any benefit the petitioners would have been entitled to
 15
W.P.(C)No.18513/2021

under any of the RBI guidelines relied on in the Writ Petition. It is

submitted that by now, the value of the securities is below the total amount

due to the Bank. It is submitted by the answering respondents that under

the interim order of this court, an amount of Rs. 1.5 Crores has been

deposited by the petitioners in a no-lien account and the same is to be

appropriated only on further orders of this Court. It is submitted that the

petitioner has submitted a representation for One Time Settlement offering

the payment of Rs.4,20,58,562/- without claiming any benefit or

entitlement under the RBI Guidelines. It is submitted that the said amount

has been arrived at by the petitioners on an arbitrary estimate made by

reducing 30% towards damage suffered for non-compliance of RBI

Guidelines. It is submitted that the admitted amount of Rs.4.2 Crores may

be directed to be paid, including Rs.1.5 Crores deposited in a no-lien

account be allowed to be appropriated. It is submitted that said amount

could not be treated as One Time Settlement and that the petitioners may

submit their representation for any One Time

Settlement/waiver/consideration over the balance outstanding amount

after apportioning the amount of Rs.4.2 Crores.

14. I have considered the contentions raised. The petitioners

complain inter-alia of (i) Non-adherence with guidelines issued by the RBI;

(ii) Improper classification of the account as a Non-performing Asset; and

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W.P.(C)No.18513/2021

(iii) Illegal rejection of Ext.P.23 complaint by the Banking Ombudsman.

The petitioners have, therefore, prayed for the following reliefs:-

(i) to quash Ext.P.24 and direct the Banking Ombudsman to re-consider

Ext.P.23 complaint;
(ii) a direction to the bank to comply with the guidelines issued by the
RBI and to grant the reliefs contemplated therein (including
moratorium etc.)
(iii) a direction to the RBI to direct the bank to grant the benefits of the
circulars to the petitioner;
(iv) declare that the Ext.P.18 notice is improper in law as it was issued
without considering the claim of the petitioners for restructuring
under RBI Guidelines;
(v) Direct the RBI to take action against the bank for violating the
Guidelines;
(vi) declare that the petitioners are entitled to waiver of interest under
RBI Guidelines; and
(vii) direct the payment of compensation to the petitioner on account of
the failure of the bank to comply with the RBI guidelines

The first point to be considered is whether the rejection of Ext.P.23

complaint by the Banking Ombudsman is bad in law. The BOS, 2006 was
introduced “with the object of enabling resolution of complaints relating
to certain services rendered by banks and to facilitate the satisfaction or
settlement of such complaints”. Clause 8 of the BOS, 2006 sets out the
matters in respect of which a complaint can be made to the Banking
Ombudsman. Clause 8(1) is not relevant to the facts of this case. Clauses
8(2) and 8(3) of the Scheme read as under:-
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W.P.(C)No.18513/2021

“(2) A complaint on any one of the following grounds alleging

deficiency in banking service in respect of loans and advances
may be filed with the Banking Ombudsman having
jurisdiction:
(a) non-observance of Reserve Bank Directives on
interest rates;
(b) delays in sanction, disbursement or non-
observance of prescribed time schedule for disposal
of loan applications;
(c) non-acceptance of application for loans without
furnishing valid reasons to the applicant;
(d) non-adherence to the provisions of the fair
practices code for lenders as adopted by the bank or
Code of Bank’s Commitment to Customers, as the
case may be;
(e) non-observance of Reserve Bank guidelines on
engagement of recovery agents by banks; and
(f) non-observance of any other direction or
instruction of the Reserve Bank as may be specified
by the Reserve Bank for this purpose from time to
time.
(3) The Banking Ombudsman may also deal with such other
matter as may be specified by the Reserve Bank from time to
time in this behalf.”

The complaint raised by the petitioner does not relate to any matter set out

in sub-Clauses (a) to (e) of Clause 8(2) of the scheme. A reading of Clause

8(2)(f) and Clause 8(3) indicates that unless specified in this regard by the

RBI, the non-adherence with any other guideline/direction or instruction of

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W.P.(C)No.18513/2021

the RBI cannot be considered by the Banking Ombudsman. Therefore, the

petitioners' prayer for quashing Ext P.24 can only be rejected.

The question as to whether the guidelines issued by the Reserve Bank of

India have a statutory flavour or not is no longer res integra. It is settled

that they do have statutory flavour. That brings us to the question as to

whether the question of violation of the RBI Guidelines can be considered

in a writ petition under Article 226 of the Constitution of India, in the facts

and circumstances of this case. There is no dispute that proceedings have

already been initiated by the respondent bank under the provisions of the

SARFAESI Act, by issuing a demand notice under Section 13(2) of that Act.

A Division Bench of this Court in Kuruvithadam Agencies (Pvt) Ltd.

and another, v. The Authorized Officer and another; 2021

/KER/20923 (Judgment dated 28.5.2021 in W.A 1584/2021) has

considered an identical issue. The contentions taken in that Writ Appeal, as

set out in paragraph 7 of the Judgment read as under :-

7. On the above pleadings, the appellants have filed this appeal

raising the following grounds:

A. The learned Single Judge seriously erred to

appreciate the facts and law involved in the present
case in a right prospective and failed to consider the
fact that in extraordinary circumstances High Court
can exercise Writ jurisdiction when procedure
required to be complied at the threshold has not been
done. In the instant case in spite of Exhibit P15 to P18
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W.P.(C)No.18513/2021

notifications issued by Reserve Bank of India,

including such ones in the aftermath of COVID 19
pandemic regarding classification of accounts, the
same was blatantly violated resulting serious
procedural laps infringing their fundamental rights
guaranteed under Articles 14 and 19 of the
Constitution of India.
B. Relying on the decisions of the Hon'ble Supreme
Court in Whirlpool Corporation v. Registrar of
Trade Marks & others [(1998) 8 SCC 1) and
Harbanslal Sahnia & another v. Indian Oil
Corporation & others [(2003) 2 SCC 107] as
regards the rule of exclusion, the appellants have
contended that in appropriate cases in spite of
availability of alternative remedy, the High Court may
still exercise its Writ jurisdiction, in at least three
contingencies, viz., (i) where the writ petition seeks
enforcement of any of the fundamental rights; (ii)
where there is failure of principles of natural justice;
and, (iii) where order or proceedings are wholly
without jurisdiction or the virus of the Act is
challenged. In the instant case, there is a clear
violation of fundamental rights of the appellants as
well as it is a clear instance wherein the respondent
Bank have declared their account as NPA, without
authority, in view of express bar placed by RBI
through its notifications, and in spite of compelling
cause, writ court proceeded to dismiss the writ
petition.
C. Section 2(o) of the SARFAESI Act defines a non
performing asset to be such an account being classified
so by the Bank or Financial Institutions as
substandard or loss asset in accordance with the
guidelines issued by regulatory bodies, including RBI.
It is a prerequisite under Section 13(2) that only after
an account is declared as W.A. 1584/2020 7 NPA to be
proceeded against by issuance of demand notice. In
the instant case, RBI, being the regulatory body, has
 20
W.P.(C)No.18513/2021

issued guidelines through notifications by declaring

moratorium after 29.02.2020 and the respondent
bank, in violation, has proceeded to issue demand
notice after declaring the account of the appellants as
NPA on 01.04.2020. In spite of the above factual and
legal position, writ court has dismissed the writ
petition.
D. The proceedings initiated by the respondent bank to
declare the account of the Appellants as NPA was
without jurisdiction or authority which goes into the
route of the matter warranting interference by this
Court.
E. Writ court failed to appreciate the fact that in the
instant case it is without any authority under law that
the account of the appellants was declared as NPA.
The arbitrary conduct of the respondents in declaring
the account as NPA and thereafter proceedings under
the SARFAESI Act is against Article 14 of the
Constitution of India guaranteeing equal protection of
law and Article 21 of the Constitution of India
F. There is absolutely no logic, reason or justification
in subjecting the appellants to a lengthy proceedings
and unnecessary harassment by relegating them to the
alternative remedy after the respondent bank proceeds
to the next step of issuing possession notice under
Section 13(4), including publication of the same, at the
cost of the appellants, when the undisputedly,
impugned actions to declare the account as NPA itself
is per se illegal and goes into the root of the matter
warranting interference at the very moment.
G. The respondent Bank had earlier illegally carried
out paper publication, after issuance of Exhibit-P2
notice in spite of the fact that the said notice got served
on the appellants and other borrowers. Said paper
publication was done not only against the borrowers,
but also against two other sons of the 2nd appellant,
and the intention of the respondent bank in proceeding
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W.P.(C)No.18513/2021

with paper publication was merely to harass and

coarse the appellants. The respondents should not be
given an opportunity to proceed with any further
steps, including carrying out the paper publication of
the possession notice, when there is inherent lack of
jurisdiction or authority to do so, and the proceedings
itself are an abuse of process of law.
H. The learned single Judge proceeded to pass
impugned Judgment arbitrarily & unreasonable
manner without even considering the above
compelling factors. Relying on the decision in
Authorized Officer, State Bank of Travancore and
another v. Mathew K.C. [(2018) 3 SCC 85), the
appellants contended that the Hon'ble Supreme Court
have clearly observed and recognized well accepted
exceptions to the rule of alternative remedy, which
includes a case wherein the statutory authority has not
acted in accordance with provisions of the enactment
in question and when such authority have acted in
defiance of fundamental principles of judicial
procedure.
I. Section 2(o) of the SARFAESI Act clearly stipulates
that declaration of NPA by the banks or financial
institutions shall be based on the
circulars/notifications issued by the regulators,
including RBL. In the instant case, RBI is the regulator
and Exhibit P15 to P18 were issued by RBL. When
Exhibit P12 notice was served on the appellants, an
objection was issued clearly mentioning about the
above circulars/notifications of the RBI, but in spite of
the same, a reply was issued, without considering or
giving any worth to the above notifications. The very
process adopted by the respondent bank, in declaring
the account of the appellants as NPA, was put to
challenge. When evidently the pre-requisite of
proceedings under the SARFAESI Act was not
complied, the initiation by the Bank warrants
interference and in spite of the same, the writ petition
 22
W.P.(C)No.18513/2021

suffered dismissal upon patently wrong and erroneous

appreciation of the matter.”
The Court proceeded to consider the issues raised and held as follows:-

“17. The question which emerges for consideration is as to

whether the learned single Judge has committed any
jurisdictional error while dismissing the writ petition. It is true
that contention was raised by the appellants in regard to the
conduct on the part of the respondent bank in making the
account of the appellants as Non Performing Asset. The
grievance of the appellants is that the bank has not followed
the guidelines and directives issued by the Reserve Bank of
India in the matter of treating the account as Non Performing
Asset. But, the fact remains that, consequent to the default on
the part of the appellants to repay the loan amount to the bank,
the bank proceeded against the appellants as per the provisions
of the SARFAESI Act, 2002. Appellants were issued with notice
under Section 13(2) of the Act, but instead of the representation
to the notice being adjudicated, the appellants have
approached the writ court. In fact, the bank is at liberty to
entertain a representation as is prescribed under Section
13(3A) of the SARFAESI Act, 2002 and consider the case of the
appellants. When a statutory prescription is provided under
law, to tackle a particular situation, the aggrieved person
should have resorted to the remedy provided under the statute.
In our view, the contentions put forth in the writ petition that
the bank has not followed the circulars and guidelines issued
by the Reserve Bank of India was a subject matter that should
have been raised by the appellants in a suitable representation,
as provided under the statute. Section 13 of the SARFAESI Act,
2002 reads thus:
xxx xxx xxx xxx xxx
18. Reading of Section 13 of the Act, 2002 makes it
categorically clear that the Parliament have provided a scheme
thereunder, enabling an aggrieved person to ventilate his
grievances by resorting to the procedure prescribed
thereunder. Even assuming that a representation is submitted
 23
W.P.(C)No.18513/2021

by the appellants to the respondent bank and the bank has not
considered the same, in accordance with law, a remedy is
provided under Section 17 of the act 2002 to the appellants to
proceed against the bank by filing a suitable application before
the Debt Recovery Tribunal.
19. Appellants did not care to resort to the remedy provided
under law. When an amount due under a loan is not paid by a
loanee, the bank is entitled to resort to the statutory remedy
available to it as per the provisions of the SARFAESI Act, 2002.
20. Grievance of the appellants is that the respondent bank is
not entitled to proceed against them, since the conduct on the
part of the bank in converting the account of the appellants as
Non Performing Asset, is not in accordance with the RBI
guidelines. According to us, as stated above, it was a subject
matter ought to have been pointed out by the appellants before
the bank itself, since the statute prescribes a modality enabling
a party to make suitable representation. Therefore, the
proceedings initiated by the bank squarely comes under the
procedure contemplated under Section 13 of the SARFAESI Act,
2002 and we have doubt in our mind to say that the appellants
have a clear remedy as is statutorily prescribed under the act
2002.
21. The question as regards the action initiated by the
respondent bank illegally can be raised by the appellants
before the Debt Recovery Tribunal at the appropriate time, as
is prescribed under law, and the Tribunal is vested with ample
powers to consider such aspects, regarding the loan account
maintained by an aggrieved person with a bank, the conduct
on the part of the bank in making the account a Non
Performing Asset and the failure on the part of the bank to
follow the Reserve Bank guidelines. That apart, there is a clear
remedy of appeal provided under the SARFAESI Act, 2002, if
aggrieved, on any order passed by the Debt Recovery Tribunal,
which thus means, the statute has provided a clear mechanism
to tackle all and any situations of an aggrieved person under
law, and therefore, a writ court would be slow in interfering
with the action initiated by the bank, especially due to the fact
 24
W.P.(C)No.18513/2021

that, the Act, 2002 was introduced with the avowed object of
speedy recovery of amounts, without unnecessary interference
of courts.
22. If that be so, we have no hesitation to hold that the
appellants have not made out a case for interference with the
impugned proceedings initiated by the bank against the
appellants in a writ proceeding. So also, the position
enumerated by us is well settled in law and bearing in mind the
proposition of law laid down by the Hon'ble Apex Court in its
various judgments, we do not think the facts and circumstances
put forth by the appellants impress us to entertain the writ
petition, as there is no legal infirmities persuading us to do so
exercising the power of discretion conferred on us under Article
226 of the Constitution of India.”

In the light of the above categoric findings of a Division Bench of this Court,

the other prayers sought for also cannot be granted.

15. The petitioners have deposited an amount of Rs. 1.5 Crores in a

no-lien account with the respondent Bank, pursuant to the interim order

dated 17.08.2022. The petitioners have filed I.A No 1 of 2023 seeking a

direction to the respondent Bank to return that amount forthwith. I am

afraid that such a direction cannot be issued in the facts and circumstances

of this case. This case was admitted on 09.09.2021. The proceedings

against the petitioners have been stayed by this Court through an order

dated 09.09.2021. That stay continues till date. The learned counsel for the

respondent bank has submitted that the present liabilities are in excess of

the value of the securities available with the Bank. This is stated to be on

account of the stay granted by this Court. It is fundamental that the act of
 25
W.P.(C)No.18513/2021

Court should prejudice none- “actus curiae neminem gravabit”. Therefore,

I am not inclined to direct the repayment of the amount presently. The

amount shall remain in the no-lien account. It shall be adjusted against the

loan liability (at the option of the petitioner) or against payment under any

condition that may be imposed in any interim order of the Debt Recovery

Tribunal. If the petitioner does not opt for adjustment of the amount

against the loan liability, the amount shall be adjusted only in terms of any

order that may be issued by the Tribunal, as and when proceedings are

initiated by the petitioner under Section 17 of the SARFAESI Act.

The writ petition fails and will stand dismissed.

Sd/-

GOPINATH P.
JUDGE
acd
 26
W.P.(C)No.18513/2021

APPENDIX OF WP(C) 18513/2021

PETITIONER EXHIBITS

Exhibit P1 A TRUE COPY OF THE GST REGISTRATION CERTIFICATE

NO. 32AADCP69110G1ZQ ISSUED TO 1ST PETITIONER
COMPANY.

Exhibit P2 A TRUE COPY OF THE LOAN AGREEMENT DATED

30.09.2019 BETWEEN THE PETITIONER COMPANY AND
THE 4TH RESPONDENT BANK.

Exhibit P3 A TRUE CPY OF THE RBI NOTIFICATION NO.

RBI/2019-20/186 DATED 27.03.2020.

Exhibit P4 A TRUE COPY OF THE NOTIFICATION NO. RBI/2019-

20/244 DATED 23.05.2020.

Exhibit P5 A TRUE COPY OF THE NOTIFICATION OF THE RBI NO.

RBI/2020-21/17 DATED 06.08.2020.

Exhibit P6 A TRUE COPY OF THE REPORT OF THE EXPERT

COMMITTEE ON RESOLUTION FRAMEWORK FOR COVID-19
RELATED STRESS DATED 04.09.2020.

Exhibit P7 A TRUE COPY OF THE NOTIFICATION NO. RBI/2020-

21/34 07.09.2020 ISSUED BY THE RESERVE BANK OF
INDIA ACCEPTING THE KAMATH COMMITTEE REPORT.

Exhibit P8 A TRUE COPY OF THE E-MAIL DATED 30.08.2020 SENT

TO 5TH RESPONDENT BANK.

Exhibit P9 A TRUE COPY OF THE APPLICATION DATED 28.10.2020

SUBMITTED BY THE PETITIONER COMPANY TO THE 6TH
RESPONDENT.

Exhibit P10 A TRUE COPY OF THE E-MAIL LETTTER DATED

10.02.2021, SENT BY THE PETITIONER COMPANY TO
THE E-MAIL ID OF THE RELATIONSHIP MANAGER OF
THE 4TH RESPONDENT BANK.

Exhibit P11 A TRUE COPY OF E MAIL DATED 30.03.2021 FROM

PETITIONER COMPANY TO THE MANAGER STANDARD
CHARTERED BANK, THE 6TH RESPONDENT.

Exhibit P12 A TRUE COPY OF THE E-MAIL DATED 31.03.2021 FROM

5TH RESPONDENT TO THE PETITIONER.

Exhibit P13 A TRUE COPY OF THE E-MAIL LETTER DATED

05.04.2021 ADDRESSED TO THE 6TH RESPONDENT.

Exhibit P14 A TRUE COPY OF THE E-MAIL COMMUNICATION DATED

 27
W.P.(C)No.18513/2021

13.04.2021 ADDRESSED TO 6TH RESPONDENT AND E-

MAILED TO THE 5TH RESPONDENT, WHO IS THE
GRIEVANCES REDRESSAL CELL.

Exhibit P15 A TRUE COPY OF THE E-MAIL DATED 17.05.2021 FROM

5TH RESPONDENT OFFICE.

Exhibit P16 A TRUE COPY OF THE E-MAIL LETTER DATED

18.05.2021 FORWARDED BY THE PETITIONER COMPANY
TO THE 5TH RESPONDENT.

Exhibit P17 A TRUE COPY OF THE REPLY E-MAIL ISSUED FROM THE
5TH RESPONDENT OFFICER DATED 16.06.2021.

Exhibit P18 A TRUE COPY OF THE NOTICE ISSUED BY THE 4TH

RESPONDENT BANK DATED 05.05.2021 TO THE
PETITOINERS AND OTHER CO-OBLIGANTS.

Exhibit P19 A TRUE COPY OF THE REPLY DATED 05.07.2021

SUBMITTED BY THE PETITIONER TO THE AUTHORIZED
OFFICER TO THE 4TH RESPONDENT BANK.

Exhibit P20 A TRUE COPY OF THE REPLY FROM THE 7TH

RESPONDENT DATED 23.07.2021 ISSUED TO THE 2ND
PETITIONER.

Exhibit P21 A TRUE COPY OF THE NOTIFICATION OF THE RBI NO.

RBI/2021-22/32 DATED 05.05.2021.

Exhibit P22 A TRUE COPY OF THE E-MAIL COMMUNICATION ISSUED

BY THE PETITIONERS T THE 5TH RESPONDENT DATED
31.05.2021.

Exhibit P23 A TRUE COPY OF THE COMPLAINT DATED 02.08.2021

FILED BEFORE THE BANKING OMBUDSMAN BY THE
PETITIONER.

Exhibit P24 A TRUE COPY OF THE COMMUNICATION ISSUED BY THE

OFFICE OF THE BANKING OMBUDSMAN DATED
18.08.2021 AS PER ORDER OBO(T) CMS 3628/21-22
TO THE 2ND PETITIONER.

Exhibit P25 A TRUE COPY OF THE REPRESENTATION DATED

20.08.2021, SUBMITTED BY THE PETITIONER TO THE
BRANCH MANAGER/THE 6TH RESPONDENT.

RESPONDENT EXHIBITS

Exhibit R4(A) TRUE COPY OF CIRCULAR OF RBI BEARING NO.

DOR.STR.REC.4/21.04.048/2021-22 DATED 07-04-
2021 ISSUED BY RESERVE BANK OF INDIA,
RESPONDENT NO.2
 28
W.P.(C)No.18513/2021

Exhibit R4(B) TRUE COPY OF THE REPLY DATED 02-08-2021

SUBMITTED BY THE PETITIONER TO THE RESPONDENT
BANK.

Exhibit R4(C) TRUE COPY OF THE REPLY OF THE RESPONDENT BANK

DATED 24-08-2021 SENT TO THE PETITIONER.

PETITIONER EXHIBITS

Exhibit P26 A TRUE COPY OF THE LETTER

REF.NO.1243/NCGTC/ECLGS DATED 04/10/2021 ISSUED
BY THE CEO NCGTC TO THE FINANCIAL INSTITUTIONS
AND BANKING INSTITUTIONS.

Exhibit P27 A TRUE COPY OF THE CIRCULAR NO.RBI2015-16/338

DATED 17/03/2016 ALONG WITH ITS ANNEX ADDRESSED
TO ALL SCHEDULED COMMERCIAL BANKS ISSUED BY THE
RESERVE BANK OF INDIA.

Exhibit P28 A TRUE COPY OF THE OTS PROPOSAL REPRESENTATION

SUBMITTED BY THE 2ND PETITIONER DATED 25-08-
2022 BEFORE THE MANAGER STANDARD CHARTERED BANK

Exhibit P29 . A TRUE COPY OF THE LETTER ISSUED BY THE

AUTHORIZED SIGNATORY OF THE STANDARD CHARTERED
BANK

Exhibit P30 A TRUE COPY OF THE LETTER DATED 27-09-2022

SUBMITTED BY THE PETITIONER TO THE MANAGER
STANDARD CHARTERED BANK

Exhibit P31 A TRUE COPY OF THE LETTER DATED 17-10-2022

ISSUED BY THE AUTHORIZED OFFICER OF THE
STANDARD CHARTED BANK TO THE PETITIONER