Uttarakhand High Court
Unknown vs Union Of India And Others on 27 February, 2025
Author: Ravindra Maithani
Bench: Ravindra Maithani
HIGH COURT OF UTTARAKHAND AT NAINITAL
Writ Petition 633 of 2025 (M/S)
Haridwar Education and Research Development Society
........Petitioner
Versus
Union of India and others ........Respondents
Present:-
Mr. Siddhartha Sah, Advocate for the petitioner.
Mr. Saurav Adhikari, Standing Counsel for the Union of India.
Mr. Mohit Maulekhi, Brief Holder for the State.
Mr. Siddhartha Jain, Advocate for the respondent nos. 3, 4 & 5.
Hon'ble Ravindra Maithani, J. (Oral)
The challenge in this petition is made to a demand notice
dated 09.12.2024 under Section 13(2) of the Securitisation and
Reconstruction of Financial Assets and Enforcement of Security
Interest Act, 2002 (“the SARFAESI Act“), Annexure No. 9 to the writ
petition as well as the communication dated 18.02.2025 under Section
13(3A) of the SARFAESI Act, Annexure No. 14 to the writ petition, by
which the reply of the petitioner to the notice under Section 13(2) of
the SARFAESI Act has been rejected.
2. Heard learned counsel for the parties and perused the
record.
3. Learned counsel for the applicant would submit that the
petitioner Society runs a school, for which loan was taken from the
respondent bank; the students’ strength dipped alarmingly and it is a
breaking point now, therefore, the loan could not be repaid on time.
On 24.09.2024, the petitioner society filed an application to the
respondent bank for restructuring the loan, which was rejected by the
respondent bank by its communication dated 21.11.2024. It is
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submitted that thereafter a demand notice under Section 13(2) of the
SARFAESI Act was received, which was duly replied by the petitioner.
4. Learned counsel for the petitioner further submits that
according to RBI Guidelines laid down in MSME Revival and
Rehabilitation Framework Instructions and Directions, 2016 (“the
Guidelines”), the petitioner falls in the category of Micro, Small and
Medium Enterprises (“MSME”); the Ministry of MSME had issued
notification dated 29.02.2015 for restructuring of loan, etc. in the
cases of MSMEs; the petitioner requested for restructuring of loan, but
it has been rejected.
5. Learned counsel would also submit that without taking
recourse to the Guidelines, an account may not be declared as Non-
Performing Assets (“NPA”) and if it is so done, a writ petition is
maintainable. Reference has been made to the case law in the case of
PRO KNITS v. Board of Directors of Canara Bank and Ors., (2024) 10
SCC 292.
6. In the case of PRO KNITS (supra), the Hon’ble Supreme
Court observed as follows:-
“22. In that view of the matter, we are of the opinion
that the findings recorded by the High Court in the impugned
order [A. Navinchandra Steels (P) Ltd. v. Union of India, (2024)
1 HCC (Bom) 290 : (2024) 246 Comp Cas 402] that the banks
are not obliged to adopt the restructuring process on its own
or that the Framework contained in the Notification dated 29-
5-2015, as revised from time to time could not be said to be
mandatory in nature, are highly erroneous and cannot be
countenanced. The Instructions/Directions issued by the
Central Government under Section 9 of the MSMED Act and by
3the RBI under Section 21 and Section 35-A have statutory force
and are binding to all the banking companies.
23. The impugned order [A. Navinchandra Steels (P)
Ltd. v. Union of India, (2024) 1 HCC (Bom) 290 : (2024) 246
Comp Cas 402] therefore is set aside. Since, it has been
submitted by the learned counsel for the respondent Banks
that in all the cases, the proceedings under the SARFAESI Act
have already been concluded and the possession of the
respective premises of the petitioners has already been taken
over, we do not propose to remand the matters to the High
Court for deciding the writ petitions afresh. However, since
the High Court has not dealt with the other issues based on
the factual aspects of the writ petitions, we clarify that it
would be open for the appellants to take recourse to any
remedy as may be legally available to them for agitating the
issues not decided by the High Court in the impugned order
[A. Navinchandra Steels (P) Ltd. v. Union of India, (2024) 1
HCC (Bom) 290 : (2024) 246 Comp Cas 402] . All the appeals
stand allowed to the aforesaid extent.”
7. Learned counsel would further submit that the petitioner
had all the intention to repay the loan, but due to low strength of the
students, they found it difficult to pay on time; therefore, application
for restructuring of loan was given, which, it is argued, has been
rejected without examining the application in view of the Guidelines;
the petitioner is still ready to get his loan restructured and to
cooperate with the respondent bank so that the loan may be repaid.
8. Learned counsel for the respondent bank would submit
that the petitioner had given an application for restructuring of loan,
but he was required to place certain documents by the bank’s
communication dated 13.11.2024, Annexure No. 5 to the writ petition.
But, it is argued that the petitioner did not submit any of the details or
the documents; therefore, based on whatever material was available
with the bank, a decision was taken and request for restructuring of
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loan has been rejected as per the Guidelines. It is argued that after the
decision is taken under Section 13(3A) of the SARFAESI Act, no right
is accrued to the petitioner to challenge that decision; now the
petitioner may challenge any action that may be taken under under
Section 13(4) of the SARFAESI Act.
9. The SARFAESI Act is a self-contained Act to regulate
securitisation and reconstruction of financial assets and enforcement
of security interest, etc. It is true that in the case of PRO KNITS
(supra), the Hon’ble Supreme Court, inter alia, held that the
Framework for Revival and Rehabilitation of MSMEs is required to be
followed prior to the classification of the borrower’s account as NPA. In
para 17, the Hon’ble Supreme Court observed as follows:-
“17. What is contemplated in the “Framework for Revival
and Rehabilitation of MSMEs” contained in the
Instructions/Directions stated hereinabove, is required to be
followed prior to the classification of the borrower’s account, (in the
instant case MSMEs loan account), as non-performing assets. The
said Instructions contained in the Notification dated 29-5-2015 as
part of measures taken for facilitating the promotion and
development of MSMEs issued by the Central Government in
exercise of powers conferred under Section 9 of the MSMED Act,
followed by the Directions issued by the RBI in exercise of the
powers conferred under Sections 21 and 35-A of the Banking
Regulation Act, the banking companies though may be “secured
creditors” as per the definition contained in Section 2(zd) of
the SARFAESI Act, are bound to follow the same, before classifying the
loan account of MSME as NPA.”
10. In the instant case, when such an application was moved
by the petitioner; the respondent bank required certain documents
and details from the petitioner, which they did not supply. Therefore,
following the Guidelines, according to the respondent bank, they had
no option but to reject the request for restructuring of loan that had
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been placed by the petitioner. Thereafter, demand notice has been
issued under Section 13(2) of the SARFAESI Act, which was duly
replied by the petitioner, which was rejected by another
communication dated 18.02.2025.
11. In the communication dated 18.02.2025, in para 4, the
respondent bank has categorically stated that the request for
restructuring of loan was not viable to be considered as the bank has
fully complied with the due procedure envisaged by the Guidelines. It
is not a case that the respondent bank did not consider the request of
the petitioner for restructuring of loan. It is the positive case of the
respondent bank that when the petitioner submitted a request for
restructuring of loan, he was required to submit certain documents
and details, which he did not supply.
12. If the petitioner has any intention to repay the loan, he is
always free to approach the respondent bank. In so far as the
proceedings under the SARFAESI Act are concerned, this Court is of
the view that the only remedy that would be available to the petitioner
is under 17 of the SARFAESI Act. Therefore, this Court does not see
any reason to make any interference. Accordingly the writ petition
deserves to be dismissed at the stage of admission itself.
13. The writ petition is dismissed in limine.
(Ravindra Maithani, J.)
27.02.2025
Avneet/