Section 13(3A) of the SARFAESI Act – credit facility – declared as non- performing asset (NPA)- without availing sec.13(3)A filed writ – Writ was dismissed as not maintainable – application under sec.13(3)A filed and also filed inter appeal to D.B. – writ appeal was dismissed – Application was also rejected – Every process was completed – possession was also taken – Apex court held that confirm the orders of High court and directed to file any appropriate remedy if any available = Devi Ispat Limited & Anr. ….Petitioners versus State Bank of India & Ors. ..Respondents =2014 (April.Part ) http://judis.nic.in/supremecourt/filename=41426

  Section 13(3A) of the SARFAESI Act – credit facility – declared as non- performing asset  (NPA)- without availing sec.13(3)A filed writ – Writ was dismissed as not maintainable – application under sec.13(3)A filed and also filed inter appeal to D.B. – writ appeal was dismissed – Application was also rejected – Every process was completed – possession was also taken – Apex court held that confirm the orders of High court and directed to file any appropriate remedy if any available =

Devi Ispat had availed of credit facilities from  the  State  Bank  of

India with an overall limit of Rs. 29.5 crores.  This  credit  facility  was

enhanced from time to time to Rs.  68.5  crores  and  Devi  Ispat  sought  a

further enhancement to Rs. 93 crores but that was not sanctioned.

 

3.    While the Bank was processing the request of Devi Ispat, it  issued  a

letter to it on 10th January 2013 informing that its cash credit account  is

irregular inasmuch as the outstanding was about Rs.11.7 crores  against  the

permissible limit of Rs. 5.6 crores.  Devi Ispat was also informed  that  it

was not servicing  the  interest  of  cash  credit,  Foreign  Currency  Non-

Resident Bank Account etc.  It  was  also  informed  that  its  account  was

heading for becoming  a  non-performing  asset  (NPA)  and  Devi  Ispat  was

requested to regularize all its accounts by 14th January 2013 failing  which

there would be no alternative but to call up the advance.

 Instead of regularizing its accounts, Devi Ispat sent a reply on  22nd

January 2013 pointing out that the cash credit account had been operated  on

19th October 2012 and therefore its declaration as an NPA  on  16th  January

2013 (that is on the 90th day instead of on completion of 90  days)  was  in

violation of the guidelines issued by the Reserve Bank of India.

 

7.    The Bank then issued a notice to Devi Ispat  under  Section  13(2)  of

the Securitization and Reconstruction of Financial  Assets  and  Enforcement

of Security Interest Act, 2002 (the  SARFAESI  Act)  on  28th  January  2013

demanding payment of the outstanding liabilities due to the extent of  about

Rs. 17.9 crores,  $ 1.11 crores  (of the FCNB account ) and interest.=

 Section 13(3A) of the SARFAESI Act reads as follows:

 

           “13. Enforcement of security interest.

 

           1) , (2) and (3)  xxx

 

           (3A) If, on receipt of the notice  under  sub-section  (2),  the

           borrower makes any representation or raises any  objection,  the

           secured creditor shall consider such representation or objection

           and if the secured creditor comes to the  conclusion  that  such

           representation or objection is not  acceptable  or  tenable,  he

           shall  communicate  within  one  week   of   receipt   of   such

           representation or objection the reasons  for  non-acceptance  of

           the representation or objection to the borrower.

 

                 Provided that the reasons so communicated  or  the  likely

           action of the secured creditor at the stage of communication  of

           reasons shall not confer any right upon the borrower  to  prefer

           an application to the Debts Recovery Tribunal under  section  17

           or the Court of District Judge under section 17A.”

  After  the  dismissal  of  its  writ  petition,  Devi  Ispat  made  a

representation to the Bank under Section 13(3A) of the  Act  on  22nd  March

2013.  This was followed almost immediately thereafter  by  an  intra  court

appeal filed against the order of the learned Single  Judge.   Although  the

appeal was filed on 1st April 2013 (and we have gone  through  the  contents

of the appeal memo) there  is  no  mention  of  Devi  Ispat  having  made  a

representation to the Bank under Section 13(3A) of the Act.=

 

       While challenging the order  dated  26th  April  2013  passed  by  the

Division  Bench,  learned  counsel  submitted  that  Devi   Ispat   had   no

alternative but to file a writ petition challenging  the  notice  issued  by

the Bank on 18th January 2013. We find no merit in this contention.

 

16.   Firstly, Devi Ispat had an alternate remedy to make  a  representation

to the Bank under the provisions of Section 13(3A) of the Act and there  was

no reason to by-pass the statutory mechanism.

 

17.   Secondly, Devi Ispat did in fact make a  representation  to  the  Bank

under Section 13(3A)  of  the  SARFAESI  Act  and  that  representation  was

rejected on 2nd April 2013 during the pendency of the  intra  court  appeal.

The statutory remedy having been availed of by Devi  Ispat,  nothing  really

survived in the dispute raised.

 

18.   Thirdly, we now find from the written  submissions  submitted  by  the

Bank that it has taken possession of the secured assets  of  Devi  Ispat  on

25th May 2013 and 27th May 2013 under the provisions  of  Section  13(4)  of

the  SARFAESI Act  and  a  possession  notice  has  also  published  in  the

newspapers on 31st May 2013.

 

19.   On the facts on record and the statutory remedy  having  been  availed

of, we see no reason to interfere with the  impugned  order  passed  by  the

Calcutta High Court. However, it is left open to Devi  Ispat  to  take  such

appropriate steps as  may  be  considered  necessary  for  safeguarding  its

interests.

 

20.   There is no merit in this petition and it is accordingly dismissed.

          2014 (April.Part ) http://judis.nic.in/supremecourt/filename=41426

GYAN SUDHA MISRA, MADAN B. LOKUR

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

SPECIAL LEAVE PETITION (CIVIL) NO. 19466 OF 2013

 

Devi Ispat Limited & Anr. ….Petitioners

versus

State Bank of India & Ors. ..Respondents

J U D G M E N T

Madan B. Lokur, J.

1. Petitioner No.1 (Devi Ispat) is engaged in the manufacture and trade
of iron and steel products while petitioner no.2 is one of its Directors.

2. Devi Ispat had availed of credit facilities from the State Bank of
India with an overall limit of Rs. 29.5 crores. This credit facility was
enhanced from time to time to Rs. 68.5 crores and Devi Ispat sought a
further enhancement to Rs. 93 crores but that was not sanctioned.

3. While the Bank was processing the request of Devi Ispat, it issued a
letter to it on 10th January 2013 informing that its cash credit account is
irregular inasmuch as the outstanding was about Rs.11.7 crores against the
permissible limit of Rs. 5.6 crores. Devi Ispat was also informed that it
was not servicing the interest of cash credit, Foreign Currency Non-
Resident Bank Account etc. It was also informed that its account was
heading for becoming a non-performing asset (NPA) and Devi Ispat was
requested to regularize all its accounts by 14th January 2013 failing which
there would be no alternative but to call up the advance.

4. Devi Ispat replied to the above letter but since the response was not
satisfactory another letter was issued by the Bank on 14th January 2013
calling upon Devi Ispat to regularize its accounts position failing which
the Bank would be constrained to take appropriate action.

5. Since there was again no positive response from Devi Ispat, the Bank
issued a letter on 18th January 2013 intimating Devi Ispat that its account
had been classified as an NPA on 16th January 2013 and it was requested to
regularize the accounts position within seven days.

6. Instead of regularizing its accounts, Devi Ispat sent a reply on 22nd
January 2013 pointing out that the cash credit account had been operated on
19th October 2012 and therefore its declaration as an NPA on 16th January
2013 (that is on the 90th day instead of on completion of 90 days) was in
violation of the guidelines issued by the Reserve Bank of India.

7. The Bank then issued a notice to Devi Ispat under Section 13(2) of
the Securitization and Reconstruction of Financial Assets and Enforcement
of Security Interest Act, 2002 (the SARFAESI Act) on 28th January 2013
demanding payment of the outstanding liabilities due to the extent of about
Rs. 17.9 crores, $ 1.11 crores (of the FCNB account ) and interest.

8. Devi Ispat reacted by filing a writ petition in the Calcutta High
Court challenging, inter alia, the declaration of its being an NPA and for
setting aside the previous letters issued by the Bank.

9. The learned Single Judge hearing the writ petition dismissed it by an
order dated 19th March 2013 on the sole ground that Devi Ispat had an
alternate statutory remedy under Section 13(3A) of the SARFAESI Act to
make a representation against the letter issued under Section 13(2)
thereof.

10. Section 13(3A) of the SARFAESI Act reads as follows:

“13. Enforcement of security interest.

1) , (2) and (3) xxx

(3A) If, on receipt of the notice under sub-section (2), the
borrower makes any representation or raises any objection, the
secured creditor shall consider such representation or objection
and if the secured creditor comes to the conclusion that such
representation or objection is not acceptable or tenable, he
shall communicate within one week of receipt of such
representation or objection the reasons for non-acceptance of
the representation or objection to the borrower.

Provided that the reasons so communicated or the likely
action of the secured creditor at the stage of communication of
reasons shall not confer any right upon the borrower to prefer
an application to the Debts Recovery Tribunal under section 17
or the Court of District Judge under section 17A.”

 

11. After the dismissal of its writ petition, Devi Ispat made a
representation to the Bank under Section 13(3A) of the Act on 22nd March
2013. This was followed almost immediately thereafter by an intra court
appeal filed against the order of the learned Single Judge. Although the
appeal was filed on 1st April 2013 (and we have gone through the contents
of the appeal memo) there is no mention of Devi Ispat having made a
representation to the Bank under Section 13(3A) of the Act.

12. Be that as it may, the representation was considered by the Bank and
rejected on 2nd April 2013. The Division Bench was informed of this during
the hearing of the intra court appeal on 26th April 2013.

13. The Division Bench was of the opinion that in view of the
observations by this Court in Mardia Chemicals v. Union of India[1] as well
as the provisions of Section 13(3A) of SARFAESI Act, the writ court was
right in not entertaining the writ petition and permitting the issues
raised by Devi Ispat to be considered by the Bank through the statutory
mechanism.

14. While upholding the view of the learned Single Judge and despite the
fact that the representation made by Devi Ispat had been rejected on 2nd
April 2013, the Division Bench heard the matter on merits. However, it did
not deal with the merits of the case since Devi Ispat had availed of the
statutory remedy available to it. Accordingly, the appeal filed by Devi
Ispat was dismissed on 26th April 2013.

15. While challenging the order dated 26th April 2013 passed by the
Division Bench, learned counsel submitted that Devi Ispat had no
alternative but to file a writ petition challenging the notice issued by
the Bank on 18th January 2013. We find no merit in this contention.

16. Firstly, Devi Ispat had an alternate remedy to make a representation
to the Bank under the provisions of Section 13(3A) of the Act and there was
no reason to by-pass the statutory mechanism.

17. Secondly, Devi Ispat did in fact make a representation to the Bank
under Section 13(3A) of the SARFAESI Act and that representation was
rejected on 2nd April 2013 during the pendency of the intra court appeal.
The statutory remedy having been availed of by Devi Ispat, nothing really
survived in the dispute raised.

18. Thirdly, we now find from the written submissions submitted by the
Bank that it has taken possession of the secured assets of Devi Ispat on
25th May 2013 and 27th May 2013 under the provisions of Section 13(4) of
the SARFAESI Act and a possession notice has also published in the
newspapers on 31st May 2013.

19. On the facts on record and the statutory remedy having been availed
of, we see no reason to interfere with the impugned order passed by the
Calcutta High Court. However, it is left open to Devi Ispat to take such
appropriate steps as may be considered necessary for safeguarding its
interests.

20. There is no merit in this petition and it is accordingly dismissed.

 

………………………………J
(Gyan Sudha Misra)

 

………………………………..J
(Madan B. Lokur)
New Delhi;
April 16, 2014
ITEM NO.1B COURT NO.14 SECTION XVI

S U P R E M E C O U R T O F I N D I A
RECORD OF PROCEEDINGS

Petition(s) for Special Leave to Appeal (Civil) No(s).19466/2013
(From the judgement and order dated 26/04/2013 in APOT No.172/2013 of The
HIGH COURT OF CALCUTTA)

DEVI ISPAT LTD. & ANR. Petitioner(s)

VERSUS

STATE BANK OF INDIA & ORS. Respondent(s)

[HEARD BY HON’BLE GYAN SUDHA MISRA AND HON’BLE MADAN B. LOKUR, JJ.]

Date:16/04/2014 This Petition was called on for judgment
today.
For Petitioner(s) Mr. Rameshwar Prasad Goyal,AOR
For Respondent(s) Mr. Anil Kumar Sangal,AOR
Hon’ble Mr. Justice Madan B. Lokur pronounced the judgment of
the Bench comprising Hon’ble Gyan Sudha Misra and His Lordship.
For the reasons recorded in the Non-Reportable judgment, which
is placed on the file, the special leave petition is dismissed.

 

 
|(Parveen Kr.Chawla) | |(Phoolan Wati Arora) |
|Court Master | |Assistant Registrar |
| | | |

———————–
[1] AIR 2004 SC 2371