M/S Srivajra Energies PVT LTD vs. Indian Overseas Bank

Held

The Court held that the petitioner's claim that its account was never declared an NPA was belied by the demand notice dated October 4, 2017, which explicitly stated the account was declared NPA on September 30, 2017. The Court found the petitioner's contention that partial repayment ousted the DRT's jurisdiction under Section 17 of the SARFAESI Act to be unacceptable, as Section 17(1) does not provide for such an exception. Even if the possession notice violated RBI guidelines or circulars, these were arguments that could be raised before the DRT. The Court reiterated the settled principle that writ jurisdiction should not ordinarily be invoked when an efficacious alternative remedy is available. Since the petitioner had ample time to approach the DRT under Section 17 of the SARFAESI Act (within 45 days of the possession notice dated February 27, 2018), and such a remedy was established by law, the Court declined to invoke its writ jurisdiction. The Court relied on its previous decision in M/S. REMO SOFTWARE PVT. LTD. AND OTHERS v. HBD FINANCIAL SERVICES LTD. AND OTHERS.

Facts

M/s. Srivajra Energies Pvt. Ltd. (the petitioner), a GST-registered MSME, obtained a term loan and working capital limit from Indian Overseas Bank (the respondent). The petitioner defaulted on loan repayments due to the impact of demonetization and GST implementation. Consequently, the respondent declared the petitioner's account as a Non-Performing Asset (NPA) on September 30, 2017, and issued a demand notice under Section 13(2) of the SARFAESI Act on October 4, 2017. Despite making a payment of ₹6,00,000 on December 29, 2017, and informing the bank about its MSME status and reliance on RBI circulars dated August 31, 2017, and February 7, 2018, the respondent issued a possession notice on February 27, 2018. The petitioner filed objections on February 28, 2018, which remained unconsidered, leading to the present writ petition challenging the possession notice and the Section 13(2) notice.

Key Issues

1. Whether the petitioner's writ petition is maintainable before this Court, considering the existence of an efficacious alternative remedy under the SARFAESI Act, 2002? 2. Whether the petitioner's account was declared as a Non-Performing Asset (NPA), thereby making the possession notice violative of RBI Guidelines? 3. Whether the repayment of a part of the loan amount on December 29, 2017, and the petitioner's status as an MSME, covered by RBI circulars dated August 31, 2017, and February 7, 2018, oust the jurisdiction of the Debts Recovery Tribunal (DRT) under Section 17 of the SARFAESI Act? Petitioner's arguments: The petitioner contended that its account was not declared an NPA, making the possession notice violative of RBI guidelines. They also argued that partial repayment and their MSME status, covered by RBI circulars, meant the DRT's jurisdiction was ousted. Therefore, writ jurisdiction was justified. Revenue/State's arguments: The judgment does not record specific arguments from the revenue or state. However, the Court's questioning and findings indicate an implicit argument regarding the availability of an alternative remedy under the SARFAESI Act.