In a writ petition challenging the retrospective NPA classification of a loan account, the Court dismissed the plea on maintainability grounds. Drawing on the Calcutta High Court in Birla Tyres, it held that the matter is sub judice before the NCLT under Section 7 of the Insolvency and Bankruptcy Code, 2016.
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HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR
S.B. Civil Writ Petition No. 5949/2022
----Petitioners
Versus
----Respondents
For Petitioner(s) : Mr. A.K. Sharma, Sr. Adv. with Mr. Vikas Jain For Respondent(s) : Mr. Abhishek Bhandari
HON'BLE MR. JUSTICE MAHENDAR KUMAR GOYAL
Order
18/10/2022
For the reasons stated in the application No.1/2022 for early hearing the writ petition, the same is allowed. On the request of the learned counsels for the respective parties, the writ petition is heard on its merit today.
This writ petition has been filed by the petitioners seeking a direction to declare the RBI circular issued for moratorium during the Covid-19 period as mandatory and to hold that their loan
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account could not have been classified as Non Performing Asset (for brevity, “the NPA”) on 21.03.2020.
Learned counsel for the respondent No.2 raised a preliminary objection as to maintainability of the writ petition inasmuch as it has already filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (for brevity, “Code-2016”) before the National Company Law Tribunal, Jaipur Bench, Jaipur (for brevity, “the NCLT”) wherein, the petitioners have raised specific objection against classification of their account as NPA on 21.03.2020. Relying upon a Division Bench judgement of Hon’ble Calcutta High Court dated 20.04.2022 in case of Birla Tyres Limited Vs. Reserve Bank of India & Ors.: 2022 SCC Online Cal 833, learned counsel would submit that this writ petition is not maintainable as the issue is already subjudice before the NCLT. He, therefore, prays for dismissal of the writ petition.
Per contra, learned Senior Counsel for the petitioners would submit that their account has erroneously been classified as NPA with effect from 20.03.2022 in violation of the RBI Guidelines that too in back date which requires consideration by this Court.
Heard. Considered.
Indisputably, the issue as to whether the petitioners’ account has erroneously been classified as NPA by the respondent No.2 is subjudice before the NCLT under Section 7 of the Code-2016 as the petitioners have raised an objection to this effect in their reply to the petition filed by the respondent No.2 under Section 7 of the Code-2016.. The Division Bench of Hon’ble High Court of Calcutta has, in case of Birla Tyres Limited (supra), held as under:-
“7. Having heard the learned Counsel for the parties and on perusal of the record, it is noticed
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that undisputedly, the respondent bank has initiated the proceedings under Section 7 of the Insolvency and Bankruptcy Code, 2016. Learned Single Judge has already held that the writ petition to be maintainable for the purpose of moratorium imposed by the Hon’ble Supreme Court and thereafter has examined the issue and taken the view that since the bank has already instituted proceedings under the Insolvency and Bankruptcy Code, 2016 and the authorities thereunder are better equipped to adjudicate the issue, therefore, in the light of the judgment of the Hon’ble Supreme Court in the matter of Small Scale Industrial Manufactures Association (Registered) v. Union of India reported in (2021) 8 SCC 511, has refused to interfere by observing that the authorities under the Code are competent to assess the correctness of the decision of the bank to treat the account of the appellant as NPA and to recall the advances. Nothings has been pointed out to show that there is any restriction upon the power of the authorities under the Code to go into these issues. Hence, we are of the opinion that the learned Single Judge has committed no error in dismissing the petition. We have refrained ourselves from going into the merits of the issue as the parties have the opportunity to raise these issues before the authorities under the Insolvency and Bankruptcy Code, 2016 and any observation by this Court at this stage may prejudice their right.”
Therefore, this Court is not inclined to entertain this writ petition. Even otherwise also, contention of learned Senior Counsel that their account has been declared NPA in back date necessarily entails examination of disputed question of facts which, this Court is not expected to enter into in its writ jurisdiction.
Resultantly, this writ petition is dismissed in view of pendency of the issue involved in the writ petition before the NCLT.
(MAHENDAR KUMAR GOYAL),J
PRAGATI/s-299
3 issues framed by the court
Whether the writ petition challenging the retrospective classification of a loan account as NPA is maintainable when an identical issue is sub judice before the NCLT under Section 7 of the Insolvency
Whether the High Court can adjudicate upon disputed questions of fact regarding NPA classification within its writ jurisdiction.
Whether the RBI circular regarding moratorium during the Covid-19 period can be declared mandatory in the writ petition.
Colour shows how this judgement treated each authority
Birla Tyres Limited Vs. Reserve Bank of India & Ors.Explained¶19
Birla Tyres Limited Vs. Reserve Bank of India & Ors.: 2022 SCC Online Cal 833 · Who else cites this
Small Scale Industrial Manufactures Association (Registered) v. Union of IndiaDistinguished¶23
(2021) 8 SCC 511 · Who else cites this
Swastik Cooper Pvt Ltd.
Sandeep Jain
Reserve Bank of India
Axis Bank Ltd.
Mahendar Kumar Goyal
As recorded by the court registry
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