IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE ANTONY DOMINIC TUESDAY, THE 19TH FEBRUARY 2008 / 30TH MAGHA 1929 WP(C).No. 4061 of 2008(H) ------------------------- PETITIONER: --------------- MR. PUNNASSERI RAMDAS, RESIDING AT 17/681, "RISHIKESH", INDIRA GANDHI LINK ROAD, CALICUT-4, KERALA. BY ADV. SRI.MATHEWS J.NEDUMPARA SRI.VADAKARA V.V.N.MENON RESPONDENTS: ----------------- 1. CENTRAL BANK OF INDIA, REPRESENTED BY ITS CHAIRMAN AND MANAGING DIRECTOR, CENTRAL BANK HEADQUARTERS, "CHANDRAMUKHI", NARIMAN POINT, MUMBAI-400 021. 2. R.SOMANATHAN NAIR, REGIONAL MANAGER, REGIONAL OFFICE, AUTHORISED OFFICER, CENTRAL BANK OF INDIA, FIRST FLOOR, METRO PALACE, OPP: ERNAKULAM TOWN RAILWAY STATION, KOCHI-18. 3. THE BRANCH MANAGER, CENTRAL BANK OF INDIA, CHERUTHI ROAD, CALICUT, KERALA. 4. UNION OF INDIA, REPRESENTED BY THE SECRETARY, DEPARTMENT OF BANKING, MINISTRY OF FINANCE, JEEVANDEEP BUILDINGS, PARLIAMENT STREET, NEW DELHI. BY ADV. SRI.P.PARAMESWARAN NAIR,ASST.SOLICITOR SRI.DEVAN RAMACHANDRAN, SC FOR BANK THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 04/02/2008, THE COURT ON 19/02/2008 DELIVERED THE FOLLOWING: ANTONY DOMINIC, J. ================= W.P.(C) NO. 4061 OF 2008 H ===================== Dated this the 19th day of February, 2008 J U D G M E N T Petitioner had availed of a loan from the 3rd respondent Bank. Default was committed in repayment and finally the account was classified as a Non Performing Account(NPA), in accordance with the Regulations issued by the Reserve Bank of India. The Bank invoked the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (herein after referred to as the 'Act' for short and issued Ext.P1 notice under Section 13(2) of the said Act. On receipt of Ext.P1, petitioner submitted Ext.P2 reply in which it was, interalia, contended that the classification of his account as NPA was in violation of the principles of natural justice. The Bank received Ext.P2 reply submitted by the petitioner and thereafter rejected the contentions and issued a reply which has been WPC 4061/08 :2 : produced by the petitioner as Ext.P3. Along with the reply, Bank has also provided him Ext.P4, a statement of accounts. In this writ petition, the relief sought for by the petitioner include one for declaring Section 13(2) 13(3)A and 13(4) of the Act to be unconstitutional and void. The petitioner also seeks other consequential reliefs. 2. Irrespective of the substantial reliefs that are sought, when the writ petition was taken up for admission, the learned counsel for the petitioner confined his submissions to one of violation of principles of natural justice and no other contentions were urged. He contended that while classifying his account as NPA, the Bank violated the principles of natural justice and fairness, since the petitioner was not put on notice nor was the petitioner heard in the matter. 3. In view of the limited submissions made by the learned counsel, the only point that I am called upon to examine is whether the Bank while exercising its powers under the Act and classifying an account as NPA, should comply with the principles of natural justice. 4. Once an account is classified as NPA, the Bank is WPC 4061/08 :3 : entitled to initiate steps for the enforcement of security interest. Section 13(1) provides that notwithstanding anything contained in the Transfer of Property Act, 1882, any security which was created in favour of any secured creditor can be enforced without the intervention of the Court or Tribunal in accordance with the provisions of the Act. Thus in exercise of this power, the Bank is required to issue notice under Section 13(2) requiring the borrower to discharge his liabilities in full within 60 days from the date of notice failing which secured creditor shall be entitled to exercise his rights under Section 13(4) of the Act. In this case, Ext.P1 is the notice so issued. As already mentioned, on receipt of the notice, petitioner submitted Ext.P2, his reply and that has been considered by the Bank, which rejected the representation. It is at that stage this writ petition has been filed complaining of violation of the principles of natural justice. 5. It is the settled law that normally when any power is vested by any statute upon any authority or persons and if such power is coupled with a public duty, even if it is not expressly provided for in the statute, the principles of natural justice should be read into such statutes. Therefore, to comply with the WPC 4061/08 :4 : aforesaid legal position, there should be a conferment of power, such power should have been vested in an authority and the character of power should be coupled with public duty. 6. A reading of the provisions of this Act would show that whenever there is a default in payment of instalments as per the agreement between the Bank and the borrower, right to recover the borrowed money accrues to the secured creditor. Thus the Act provides for an additional mode of recovery by enforcement of security and for such enforcement there should be default of payment by the borrower and the debt of such borrower who is in default,must have been classified as non performing asset. 7. Even if such right is treated as a power, by adopting a very lenient interpretation, in such a situation also, it cannot be said that the secured creditors while classifying the account as non performing asset are acting as quasi judicial authorities or as authorities where any rights, inter se, are to be decided between the parties. At the most, such exercise of right by a secured creditor can be termed as a business decision or an administrative decision while rendering banking business by financial institutions. WPC 4061/08 :5 : 8. In the context of exercising powers under Section 29 of the State Financial Corporations Act, it has been held that when the Corporation takes an administrative decision as to the course of action to be adopted and followed, it is not exercising any quasi judicial power. See in this connection Alka Ceramics v.Gujarat State Financial Corporation (1992(73) CC 209). It is also held that though the institution is required to act fairly while invoking its right under Section 29 of the State Financial Corporations Act, the right of hearing cannot be read into the provisions of the said Act and that if the Corporation is satisfied that in the circumstances of the case, the account has become a non performing asset, it is entitled to proceed with the action. 9. Therefore, the powers that are exercised by a Bank are essentially of administrative character and the decision for the purpose will be based on business skill as an institution rendering financial assistance to the public at large. If money is not recovered by the Bank by realisation of security interest, the Bank will not be able to return money to their depositors , who have invested their savings and lend to those who need financial assistance. But then that does not mean that the Bank should WPC 4061/08 :6 : behave like unscrupulous money lenders and at the same time the right given to the Banks for enforcement of the security as secured creditors cannot also be equated with any authority exercising power as quasi judicial authority. For these reasons, the argument raised by the learned counsel for the petitioner that the Bank is made as the judge of its own cause is also meritless and deserves to be rejected. 10. The fact that the Bank is exercising these powers and that the principles of natural justice are inapplicable to such a situation, does not lead to a situation where a borrower is without any remedy. The Supreme Court in Maradia Chemicals Limited and others v. Union of India (2004(4) SCC 311) considered the question regarding the remedies that are available to the borrower to ventilate his grievances and the rights that are canvassed by the petitioner herein, have not been recognised. That judgment recognised the obligation of the Banks to communicate reasons for not accepting objections taken by the secured borrower although such communication of reasons has not been taken as giving occasion to the borrower to resort to proceedings which are not permissible under the Act. It is stated WPC 4061/08 :7 : that a borrower against whom steps under Section 13(4) of the Act have been taken, has a right to approach the Debts Recovery Tribunal as provided under Section 17 and a further right of appeal to the Debts Recovery Appellate Tribunal under Section 18 of the Act. 11. The first step towards fairness provided by statute is in Section 13(2) of the Act by requiring the borrower by notice to discharge his liability to the secured creditor and further by providing 60 days time from the date of notice. Those who object to the notice are informed the reasons for the non acceptance of the objections. Even thereafter the borrower against whom proceedings have been taken under Section 13(4) has a right of appeal first to the Debts Recovery Tribunal and then to the Debts Recovery Appellate Tribunal. Therefore the position that emerges is that though principles of natural justice are alien to the scheme of the provisions contained in the Act, while assets are classified as NPA, the Banks are expected to act fairly and in accordance with the provisions of the Act, which contains inbuilt safeguards, to protect the interests of the secured borrowers. 12. Although the learned counsel for the petitioner argued WPC 4061/08 :8 : that if natural justice is not excluded, the said principle should be read into the Act and relied on the decision of the Apex Court in Maneka Gandhi v. Union of India & another (AIR 1978 SC 597), I do not think that the principles laid down in that judgment has relevancy in the context of the Act. That apart, unlike the Passport's Act, the Act itself provides for remedies before Judicial forums. For these reasons, I am unable to accept the contentions raised. Writ petition is only to be dismissed and I do so. ANTONY DOMINIC,JUDGE. Rp