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Morbet Health Care (P) Ltd. Versus Punjab National Bank

Accounts of the writ petitioner not NPAs - SARFAESI Act - Held that:- It is the settled law that the secured creditor has obligation to communicate the reasons for non-acceptance of the representation or the objection of the borrower. In the instant case, in reply dated 07.01.2016 (Annexure 6 to the petition), the secured creditor has given sufficient reasons for not accepting the objections of the borrower. There is no violation of statutory provisions so as to quash the notice of the responden .....

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against the petitioner contrary to the guidelines issue by RBI.

This Court, accordingly, concludes the matter and refuses to entertain the writ petition on the ground that there is nothing on record wherefrom one can come to a definite conclusion that the accounts of the writ petitioner were not NPAs as on the date of issuance of the notice under Section 13(2) of the Act. - Writ Petition No. 578 of 2016 (M/S) - Dated:- 21-3-2016 - U. C. Dhyani, J. For the Petitioner : Atul Kumar Bans .....

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issue a writ, order or direction in the nature of mandamus commanding the respondent Bank not to proceed under the SARFAESI Act of 2002 against the petitioner. 2. The petitioner is a private limited company and is engaged in the business of marketing of Allopathic and Ayurvedic Medicines (Ayurvedic Syrup in the name of crack stone and clear stone for removal of the kidney stone, medicated soap and cream in the name of Light and White cream and sopa and a capsule in the name of Devifit for Diabet .....

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ecame Non-Performing Asset (NPA for short). The borrower served a notice dated 20.12.2015 upon the respondent-bank, which was replied to by the respondent-bank on 07.01.2016. The borrower company was stopped by the respondent bank from operating its account with the respondent-bank. 4. On 02.01.2016, the respondent-bank issued a notice under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as the SA .....

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n 13(2) of the Act, whereby the outstanding dues as on 31.12.2015 was to be paid within 16 days. The notices dated 02.01.2016 and 06.01.2016 have, therefore, been waived by the respondent-bank. 6. On 06.01.2016, the respondent issued another notice under Section 13 of the Act, in which, the date of NPA was mentioned as 06.01.2016. The borrower company made an objection/ representation under Section 13(3)(a) of the Act to the respondent-bank, but the respondent-bank decided the representation/obj .....

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and directives of the Reserve Bank of India (hereinafter referred to as the RBI), the respondent-bank has violated the guidelines and directives of the RBI and has wrongly classified the accounts of the company as NPA. The account of the borrower company was under limit and did not exceed the sanctioned amount of ₹ 80 lakhs. It is further contended that the respondent-bank has wrongly classified the petitioner company as Non-Performing Asset (NPA) in violation of clause 2.1.3 of the RBI gu .....

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inst the petitioner is to the tune of ₹ 2,46,552/-. Learned counsel for the respondent-bank, at this juncture, submitted that the material worth ₹ 3.50 lakhs was kept in the godown of the petitioner company; the hypothetical goods have been disposed of by the petitioner company and the requested amount was not deposited by the petitioner. 9. In Mardia Chemicals Ltd. & others vs. Union of India & others, 2004 (4) SCC 311, it was observed by Hon ble Supreme Court that the purpo .....

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re may be some meaningful consideration of the objections raised rather than to ritually reject them and proceed to take drastic measures under sub-section (4) of Section 13 of the Act. Once such a duty is envisaged on the part of the creditor it would only be conducive to the principles of fairness on the part of the banks and financial institutions in dealing with their borrowers to apprise them of the reason for not accepting the objections or points raised in reply to the notice served upon .....

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supplied) 10. It will be appropriate to quote the observations made by Hon ble Allahabad High Court in Rita Bagga & others vs. Union of India & others, 2015 (111) ALR 190, which reads as under: 34. At this stage, we must observe that the finance is required so that the petitioners could run their business. If the loan or the cash credit limit is withdrawn abruptly it becomes difficult for the borrower to repay the amount since the amount sanctioned by the Bank is invested in the business .....

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nt-Bank has failed to adhere to the terms indicated in the guidelines. Consequently, the action of the respondent-Bank in declaring the petitioners account as NPA by its order dated 31.12.2014 as well as the notice dated 1.1.2015 issued under Section 13(2) of the Act and the notice dated 17.3.2015 issued under Section 13(4) of the Act are quashed. The writ petition is allowed. (emphasis supplied) 11. The Division Bench of this Court in M/s Amba Devi Paper Mills Ltd. vs. State Bank of Inida & .....

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d creditor, if not accepting representation or objection of the borrower, is obliged to communicate within one week of receipt of representation or objection, the reasons for non-acceptance of the representation or objection of the borrower. In the instant case, it is the contention of the appellant that within one week from the date of representation or objection of the appellant, respondent Bank did not communicate its decision not to accept such representation or objection with reasons in sup .....

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before the Court of District Judge. In the circumstances, we accept the contention of the appellant that the writ petition of the appellant could not be rejected at the threshold on the ground that the appellant has an efficacious alternative remedy. 2. ………………………… 3. We, accordingly, conclude the matter and refuse to entertain the appeal on the ground that there is nothing on record, wherefrom one can come to a definite conclu .....

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examine validity of the sale conducted under the SARFAESI Act. Respondents 1 & 2 had raised a contention that this writ petition is not maintainable since the petitioners have not exhausted the effective, expeditious and alternate remedy available under Section 17 of the SARFAESI Act. It is contended that the petitioners have not stated any reason for not availing such remedy and that having slept over the matter for quite long period, the petitioner could not be allowed to invoke the extra .....

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y is exercised in an illegal and arbitrary manner, in an improper way, which is not as conferred by the legislature, this court is perfectly justified in interference, is the contention. Counsel for the petitioner points out a decision of this court in Betty Vs. Union Bank of India ((2007 (4) KLT SN 53 (C.No.58) in support of his contention. It was held that this court is justified in interfering with steps initiated under Section 13(4) when there is arbitrary classification of the account as NP .....

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legs to stand, inasmuch as declaration by the bank that the petitioner has become NPA is material and not the date, even if there is slight discrepancy in the same. 14. The next argument of learned counsel for the petitioner is that guidelines of RBI have not been followed. Even if it be conceded for the sake of arguments that it is so, the fact remains that the said guidelines are only in the form of executive instructions and appears to have no statutory backing, although, learned Senior Couns .....

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5 lacs is available with the petitioner, whereas the respondent bank owes ₹ 73,50,060.28 from the borrower company and has considered the submissions of the borrower company. 16. It is next contended by learned counsel for the petitioner that the declaration by the respondent bank to the effect that the petitioner company has become NPA in terms of Clause 2.1.3 of the RBI guidelines is incorrect. In reply, it is submitted by learned Senior Counsel for the respondent bank that as per the cr .....

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has been held by Hon ble Apex court in Mardia Chemicals Ltd. (supra) that the borrower may not be entitled to challenge the reasons communicated or the likely action of the secured creditor at that point of time unless his right to approach the Debts Recovery Tribunal as provided under Section 17 of the Act matures on any measure having been taken under sub-section (4) of Section 13 of the Act. Relevant portion of para 45 of the aforesaid decision is being reproduced here-in-below for convenien .....

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objections have not been accepted by the secured creditor who intends to resort to harsh steps of taking over the management / business of viz. secured assets without intervention of the court. Such a person in respect of whom steps under Section 13(4) of the Act are likely to be taken cannot be denied the right to know the reason of non-acceptance and of his objections. It is true, as per the provisions under the Act, he may not be entitled to challenge the reasons communicated or the likely a .....

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itor has given sufficient reasons for not accepting the objections of the borrower. There is no violation of statutory provisions so as to quash the notice of the respondent bank in exercise of extra ordinary jurisdiction. It does not appear that the secured creditor has arbitrarily classified the accounts of the borrower company as NPA. 19. Learned Senior Counsel for the respondent bank specifically submitted that Annexure 4 to the writ petition is merely an affixation giving information to the .....

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