HONOURABLE SRI JUSTICE A. GOPAL REDDY AND HONOURABLE SRI JUSTICE K.C. BHANU. WRIT PETITION No. 21425 OF 2010. DATED 30TH AUGUST, 2010. Between M/s. Novakar Collections A partnership firm, rep. By its Partner Smt. vimalasurana …..Petitioner And The Authorized Officer, Indian Bank, Secunderabad Branch, Secunderabad and anr. …..Respondents. HONOURABLE SRI JUSTICE A. GOPAL REDDY AND HONOURABLE SRI JUSTICE K.C. BHANU. WRIT PETITION No. 21425 OF 2010. ORDER: ( Per Hon’ble Sri Justice A. Gopal Reddy) This Writ Petition under Article 226 of the Constitution of India is ﬁled questioning the notice dated 03.05.2010 issued under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002( for short ‘SARFAESI Act’) by the ﬁrst respondent-bank. The petitioner is a partnership ﬁrm engaged in the business of selling household articles. To meet the business needs, the petitioner-ﬁrm obtained loan of Rs.25,00,000/- from the ﬁrst respondent-bank as against the primary security of hypothecation of stock and receivables and by mortgaging immovable properties belonging to another partner of the petitioner ﬁrm. However, as one of the partners was not in a position to monitor the business properly, there was slack in the business and in that situation it failed to repay the amount as agreed upon. Consequently, the ﬁrst respondent-bank got issued notice demanding the outstanding due amount as on 31.3.2010. The petitioner approached the ﬁrst respondent-bank requesting to reduce the rate of interest and settle the account under One Time Settlement scheme. However, the ﬁrst respondent-bank issued notice dated 3.5.2010 under Section 13(2) of the SARFAESI Act, treating the account as Non Performing Asset (NPA) and demanding an amount of Rs.25,63,337.89 alleging to be the outstanding due amount as on 31.3.2010. The learned Counsel for the petitioner submitted that the notice impugned issued by the ﬁrst respondent-bank does not reveal any reason to treat the petitioner’s account as NPA and mere classiﬁcation of the petitioner’s account as NPA by the ﬁrst respondent-bank on account of doubtful, substandard or loss assets itself is not suﬃcient, and, that the notice impugned under Section 13(2) of the SARFAESI Act issued by the ﬁrst respondent- bank does not reveal the date when the account of the petitioner ﬁrm had been classiﬁed as NPA, and that merely because the petitioner’s account is classiﬁed as NPA, it is not amenable to the ﬁrst respondent to initiate action under Section 13(2) of the SARFAESI Act. She submitted that the ﬁrst respondent-Bank is found to follow the prudential norms governing the asset classiﬁcation. Further, the learned Counsel for the petitioner emphatically submitted that the guidelines issued by the Reserve Bank of India provides total period of two years and 90 days to classify a loan account as NPA for the issuance of notice under Section 13(2) of the SARFAESI Act. She further submitted that even if the account is classiﬁed as NPA as on 31.3.2010, immediately thereafter notice impugned dated 3.5.2010 was issued without expiry of the period of two years, as such the said account would not become substandard and doubtful so as to get the jurisdiction to issue notice under Section 13(2) of the SARFAESI Act. She further submitted that this Court considered the said issue in Writ Petition No.18089 of 2006, dated 11.09.2009, and observed that the Writ Petition as such is maintainable against the issuance of notice under Section 13(2) of the SARFAESI Act and therefore, the respondent- bank may be directed to keep the notice impugned in abeyance and grant time for settlement of the account. On the other hand, the learned Standing Counsel for the ﬁrst respondent-bank contended that the judgment on which the petitioner placed reliance has no application to the facts of the case. He submitted that inasmuch as the petitioner failed to repay the amount in due pursuant to the demand notice, the petitioner’s account is classiﬁed as NPA and thereafter followed the steps laid down under Section 13(2) of the SARFAESI Act. As no objection was raised for issuance of the notice impugned under Section 13(2), ﬁnal orders under Section 13(4) of the SARFAESI Act have already been passed taking over the possession of the property on 05.08.2010. He further contended that inasmuch as ﬁnal order under Section 13(4) of the SARFAESI Act has already been passed, the proper remedy available to the petitioner is under Section 17(1) of the SARFAESI Act. He placed reliance on the judgment of the Apex Court in the case of United Bank of India Vs. Salyawathi Tondon and others, arising out of SLP (C) No.10145 of 2010. Undisputedly this Court in the above judgment in Writ Petition No. 18089 of 2006, following the decision of the Apex Court in the case of Mardia Chemicals Limited Vs. Union of India {(2004) 4 SCC 311} held that mere rejection of objections of the borrower to the notice of the creditor under Section 13(2) of the SARFAESI Act would not give rise to cause of action to invoke jurisdiction of the Debts Recovery Tribunal under Section 17 of the SARFAESI Act, unless measures as envisaged under Section 13(4) of the SARFAESI Act are taken by the creditor. When measures are not taken by the creditor under Section 13(4) of the SARFAESI act, the borrower would be disabled from invoking the jurisdiction of DRT under Section 17 of the SARFAESI Act. Therefore, the grievance of the borrower regarding asset classiﬁcation and consequential invocation of the SARFAESI Act by issuing notice under Section 13(2) of the SARFAESI Act cannot be redressed under Section 17 of the SARFAESI Act in the absence of invocation of Section 13(4) of the SARFAESI Act and judicial review under Article 226 is the only remedy. But, at the same time, it is not the case on hand. After issuance of notice under Section 13(2) of the SARFAESI Act, the petitioner has not ﬁled any objections as contemplated under Section 13 (3-A) of the SARFAESI Act, and thereafter, ﬁnal orders under Section 13(4) of the SARFAESI Act are passed on 5.8.2010 taking possession of the property. In view of the same, the Supreme Court in the case of Satyawathi Tondon (referred supra) has categorically held that if any person had any tangible grievance against the notice issued under Section 13(4) or action taken under Section 14 of the SARFAESI Act, then the aggrieved person has to avail remedy by ﬁling an application under Section 17(1) of the SARFAESI Act. It was further observed that the expression ‘any person’ used in Section 17(1) is of wide import and it takes within its fold, not only the borrower but also guarantor or any other person who may be aﬀected by the action taken under Section 13(4) or Section 14 of the SARFAESI Act’. Where such an appeal is ﬁled, both the Tribunal and the Appellate Tribunal are empowered to pass interim orders under Sections 17 and 18 of the SARFAESI Act and are required to decide the matters within a ﬁxed time schedule,. The Supreme Court further observed that despite repeated pronouncements of the Apex Court, the High Courts continue to ignore the availability of statutory remedies under the DRT Act and SARFAESI Act and exercise jurisdiction under Article 226 for passing orders which have serious adverse impact on the right of banks and other ﬁnancial institutions to recover their dues and that therefore, in future, the High Courts should exercise their discretion in such matters with greater caution, care and circumspection. In view of the above, when ﬁnal orders are already passed under Section 13(4) of the SARFAESI Act, this Writ Petition cannot be entertained unless and until the petitioner exhausted eﬃcacious alternative remedy available under law. The Writ Petition is therefore dismissed giving liberty to the petitioner to avail appropriate alternative remedy under law. No order as to costs. ------------------------------------------ JUSTICE A. GOPAL REDDY --------------------------------- JUSTICE K.C. BHANU 30T H AUGUST, 2010. Msnr.