IN THE HIGH COURT OF JUDICATURE, ANDHRA PRADESH AT HYDERABAD (Special Original Jurisdiction) MONDAY, THE FOURTEENTH DAY OF DECEMBER TWO THOUSAND AND NINE PRESENT HON’BLE SRI JUSTICE A.GOPAL REDDY AND HON’BLE SRI JUSTICE SAMUDRALA GOVINDARAJULU WRIT PETITION Nos.26038 and 26041 of 2009 W.P.No.26038 of 2009 Between: M/s.Good Health Rice Mill (P) Ltd., represented by its Managing Director. … Petitioner And State Bank of Patiala, represented by its Authorised officer. … Respondent W.P.No.26041 of 2009 Between: M/s.Sai Venkata Traders, represented by its Partner. … Petitioner And State Bank of Patiala, represented by its Authorised officer. … Respondent This Court made the following: HON’BLE SRI JUSTICE A.GOPAL REDDY AND HON’BLE SRI JUSTICE SAMUDRALA GOVINDARAJULU WRIT PETITION Nos.26038 and 26041 of 2009 COMMON ORDER: - (Per Hon’ble Sri Justice A.GOPAL REDDY) These two writ petitions are filed challenging the notices issued under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short, “the Act”) dated 02.07.2009 and 12.09.2009 by the respondent- bank, contending that mere classification of the account as Non- Performing Asset will not authorize the bank to issue demand notice under Section 13(2) of the Act. As per Section 2(o) of the Act, Non- Performing Asset means an asset which has become not only NPS but has further become substandard and doubtful or loss asset as per the guidelines issued by the Reserve Bank of India. A substandard asset would be one which has remained NPS for a period of less than or equal to 12 months from the date of the default in the loan account and thereafter it becomes doubtful asset if it remained a substandard asset for 12 months and thereafter the said doubtful asset becomes a loss account where it has been so identified by the bank or internal or external auditors or Reserve Bank of India on inspection and found to be uncollectable and of such little value that its continuance as a bankable asset is not any more warranted. Therefore, the said notices issued under Section 13(2) of the Act are arbitrary and illegal. On issuing the notices under Section 13(2) of the Act, the petitioner through its Advocate informed the bank that due to the adverse position in the market, the company committed defaults in payment of the amount due and the company is making its effort to meet the demand made by the bank and the security offered by the company for repayment of the loan has not lost its viability, which warrants the bank to initiate steps for recovery of the amounts. The notices under Section 13(2) of the Act do not disclose the details of the last payment made by the company, bifurcation of the outstanding amounts in interest account/principal account so as to enable the company to regularize the account. While such reply is given by the petitioner it admitted about non payment of the amounts due to the bank, but has not stated the amounts paid by the petitioner towards the outstanding loan account. To which the respondent-Bank sent reply through their advocate stating that the account was classified as Non Performing Asset as per the Reserve Bank of India guidelines and inspite of all Bank’s followup action, the borrower and the petitioner has not cleared the outstanding in the loan account with the bank. In fact, in the notice issued under Section 13(2) of the Act, it is specifically stated that the petitioner acknowledged the subsistence of the liability in respect of the credit facilities by executing the confirmation of balances, revival letters and other documents and along with the notice the outstanding inclusive of interest as on 11.09.2009 under cash credit facility, has also been given. In view of the same, the contention advanced by Sri P.Venu Gopal, learned counsel for the petitioner that the account cannot be treated as Non Performing Asset, do not merit consideration for want of details furnished by the petitioner. In fact, no valid objections have been put up to the notices issued under Section 13(2) of the Act, but stated due to abrupt increase in the levy on the products by the Government, the company could not meet its commitments and all the receivables are blocked in the market and company is making its efforts to meet the demand made by the bank and the security offered by the company for the repayment of the loan has not lost its viability. As the outstanding amounts are totally secured by sufficient mortgage, the petitioner requested the bank to furnish the documents executed by him and the statement of account (interest/principal), reserving his right to give appropriate reply on receipt of the same. In view of the same, the respondent Bank is directed to furnish all the necessary information sought by the petitioner within two weeks from the date of receipt of a copy of this order. On receipt of such information, the petitioner is at liberty to submit his detailed objections under Section 13-3A of the Act. If the respondent bank still proceeds with the possession notice under Section 13(4) of the Act, petitioner will have a remedy of filing appeal and can raise all the objections which are raised or to be raised under Section 13-3A of the Act, before the appellate tribunal. Hence, we do not see any ground to entertain these writ petitions. Accordingly, the writ petitions are dismissed. No order as to costs. __________________ A.GOPAL REDDY, J _______________________________ SAMUDRALA GOVINDARAJULU, J 14th December 2009 LMV