Disposed

Sri Padmavati Energy Solutions (India) (P) Limited, v. The Union of India

Telangana HC3 Dec 2021WP/31850/2021

Case brief

AI extract

What is this about?

The High Court, examining the SARFAESI Act, directed the bank to consider the petitioner's representation for loan restructuring and communicate a decision within fifteen days. The court stayed coercive steps during this period and remained neutral on the merits.

What did the court decide?

Stay on coercive steps directed respondents to consider petitioner's representation for restructuring within 15 days and communicate a speaking order.

Sri Padmavati Energy Solutions (India) (P) Limited… — Service and Employment | Telangana HC (2021)

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HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD (Special Original Jurisdiction)

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FRIDAY,THE THIRD DAY OF DECEMBER TWO THOUSAND AND TWENTY ONE

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PRESENT

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THE HONOURABLE SRI JUSTICE UJJAL BHUYAN AND THE HONOURABLE SMT JUSTICE P.MADHAVI DEVI

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WRIT PETITION NO: 31850 oF 2021

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Between:

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Sri Padmavati Energy Solutions (lndia) (P) Limited,, a private Limited Company duly incorporated, having its registered office at Sy No 515/E, Udityal Village, Balanager Mandal, Mahabubnager District, T.S. 509202 Rep by its Managing Director Sri. Umesh Thakral Son of Hirilal Thakral, 3-6-67168141, B N Reddy Complex, Opp Skyline theater, Basheer Bagh Hyderabad 500029 T.S.

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...PETITIONER

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AND

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The Union of lndia,, Represented by the Finance Secretary, Department of Financial Services, Government of lndia, Jeevan Deep Building, Parliament Street New Delhi - 110 001.

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The Reserve Bak of lndia, represented by its Deputy Governor, Main Building, Shahid Bhagat Singh Road, Mumbai-40O 001.

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The Managing Director and Chief Executive Officer, AXIS BANK, Limited,^'Axis House', C-2, Wadia lnternational Centre, Pandurang Budhkar Marg, Worli, Mumbai - 400 025.

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The Manager, AXIS BANK, Sme Center, 22-140 and 96, First Floor, Above Royal Enfield Showroom, M.G. Road, Secunderabad 500003 T.S.

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.,,RESPONDENTS

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Petition under Article 226 of the Constitution of lndia^praying that^{in the} circumstances stated in the affidavit filed therewith, the^{High Court may be pleased} to issue a Writ, order or direction^particularly in the nature^{of the Writ of Mandamus,} declaring the Notice No AXISB/SOUIHISAGI21-22154 daled,16110/2021^{issues by} the Respondents Nos 3 and 4 to the^{Petitioner Company, under Section13(2) of the} SARFAESI Act as bad in law and fact anti^{quashedthereto, and this court may be} pleased to pass

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lA NO: 1 OF 2021

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Petition under Section 15'l CPC^{prayingthat in the circumstancesstated in} the affidavit filed in support of the^{petition,the High Court may be pleased, in the} interregnum,^pending the disposal of^{the mainwritpetitionto stay the operationof} the impugned Notice AXISB/SOUTH/SAG/21-22154^{dated 1611012021andall}

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resultant^proceedings there^{under, issued by the Respondents Nos 3 and 4 to the} Petitioner company, and^{this court may be pleasedto pass}

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Counsel for the Petitioner:SRl.^{SAROSH SAMBASTAWALA}

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Counsel for the Respondent^{No 1: MR R KRISHNA SWAMY/} NAMAVARAPU RAJESHWAR^RAO(ASSGI)

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Counsel for the Respondents^{No 2lo 4t} -

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The Court made the following:^ORDER

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I{ONOURABLE SRI JUSTI CE U J J AL BIIUYAN AND IIONOURABLB SMT. JUSTICE^{P. MADHAVI DE,VI}

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W.P.No.3l850 OF 2021

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OIIDIR:^{rlt, lldl l']? \tt llt\tti'ctJti0l Bhu)at)i}

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Ileald Nlr',Salosh^{Bastau'ala. leamed counselfor the petitioner} ancl Mr'.It.Klishna^{$rvatl1. leanled counsclrepreserlting} Nlr.N.ILaieshu^{ar l(ao.icarnecl r\ssistarrtSolicitorGcneraio1' India lor} lespondent^{No.l rl-lnion ol Inclia'}

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i Ilaving regald^{to the gricvanceexpressed b'v the petitioneland} the order^{that we propose to pass' issuanceof formal notice to} respondent^{Nos.2 to 4 is considerednot necessaryand the case is} taken up^{for disposal at this stage itsell}

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Petitioner^{is a micro, small and mediumenterprise(MSMi)'} It had availed^{credit facilitiesfrom the Axis BankLimitedi'e''} respondent^{Nos.3 and 4However' becauseol variouscircumstances'} which rvere^{lurthcrageravatedby the pandernicand the resultanl} iocl<clorvn.^{thefc \lls dcl'ault irl reira) mcnt of thc IoanallroLlnt'} llterclolc.^{lr-sp()ll(l!'lll \os llrrtl J llnrc classillecltht' l'r'ttr'i!!.LllrL (rl} tlic pclitiilnct^{as tron-pct lilttlitlgasscr (NI)i)' uhclc:rllclpror l;l''rlrt} ol' the Secut'itization^{ancl Reconstructionol Firranclal Assetsantl} Enforcemenr^{of Securirylnterest Act,2002 (briefly 'the SAR|AESI} Act' hereinafter)^{have been invoked ln terms thereof' notice under} Section^{13(2)of the SARFAESIAct wasissuedto the petit'ipneron} I 16.lO.ZO2l^{calling upon the petitionerto pay the outstanding dues'}

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i r2'.'.

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According^{to learned counsellor the petitioner' betore issuing} the demand^{notice under Section l3(2) ol the SARFAESIAct'} respondent: Nos.3^{and 4/Axis Bank Limitedfailed to take into} consideration the^{decisionof the SupremeCourt in SMALL SCALE} INDUSTRIAL MANUFACTURERS^{ASSOCIATION (REGD') v'} UNION OF INDIA'^{W.P.(Civil) No.476 of 2020, decided on} 23.03.2021, as well^{as the guidelines of the ReserveBank of India} regarding restructuring^{of loan accounts of the MSME sector.}

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This Courr in a recent decision^{dated26.10.202 I renderedin} W.['].No.25503 o1202 I had examincd^{thc provisions ol'Section l3 o1'} the SAI{I AESI ,Act. tnore^{particularilthose contaitred in sLrb-sectiolls} (l)(3)arrd (l-r\ t thcre ol'and hcld as lbllows:

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'3. Respondents had issued notice to^the petltioners on 07.08,2021 under Section 13(2) of^the Securitisation and Reconstruction^{of FinancialAssets and} Enforcement of Security Interest^{Act, 2002 (briefly'the} SARFAESI Act' hereinafter). By^{the said notice} respondent - Bank called upon the^{petitionersto} discharge their outstanding liabilities to the^{tune of} Rs.6,04,46,394.20 (Rupees six crores^{fourlakhs fortysix} thousand, three hundred ninety^{four and twentypaise} only) as on 31.07.2021 inclusive of^{interest up to} 37.07 .2021, within sixty days.

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3.1. Petitioners submitted reply to the^said demand nollce on 06.09,2021, In the said^reply, petitioners pointed out about the difficulties faced on account of the^pandemic, which created^hurdlesin repayment of lhe loan, Therefore, request^{was made to} the respondents to withdraw the not ce issued^under Section 13(2) of the SARFAESI Act, and to restructure^the loan, so as to enable the petitioners to repay the same,

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3,2, Grievance of the^petitioners is that till date, there has been no response from the respondents.

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3.3. Apprehending that coercive steps may be taken following the notice issued under Section 13(2) of the SARFAESI Act, the present writ petition has been filed.

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Section 13 of the SARFAESI Act deals wlth enforcement of security interest. Sub-section⁽²⁾ provides for issuance of notice by the secured creditor to the borrower^for C scharge of^{labi it} es in the event^of default As^per- sub-sect;cn^(3-A), f on^recelpt of^notce under sub-sectron^t2), tne sorrower^makesany representa!ion, or ralses any objection, lhe secured creditor shall consider said^{representation} or^objection, and if the secured creditor comes^{to the conclusionthat} such representation or ob]ection^{is not acceptable,or} tenable, he shall^{communica[e withinfifteen days of} receipt of such representation,^{or objection,the reasons} for non-acceptance of^{the representation,or objection of} the borrower.

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4.1. However,^{as per the proviso, the reasons so} communicated^{or the likely action of the securedcreditor} at the stage^{of communicatlonof reasons, shall not confer} any right^{upon the borrowerto preferan applicationto} the Debts^{Recovery Tribunal under Section 17' or to the} Court of District^{ludgeunder Section17-A}

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5, A careful^{anaLyslsof sub-section(3-A) of} section^{13 of the SARFAESIAct wouldgo to show that} upon^{recelpt of notlcerssued by the secured creditor} under sub-section^{(2), the oorro!er has a rightto makea} representat on,^{or ra se anyobjeclion'as to the notlce so} issued, lf^{the Oorrower exercisesthat right'then ' its} incumbent^{upon lhe securedcreditor lo consider such} representation^{or ob.lec!lonTheuseof the word'shall'in} sub-seclion^{(3-A) is indicativeof lhe legislativeintent of} considering^{such representationor objection' by the} secured^{creditormandatory lf the securedcreditoris not}

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{

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satisfied with the representation or objection, and finds it to be unacceptable, or untenable, he shall communicate such decision within fifteen days along with the reasons to the borrower.

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While the statute is silent as to what happens in case of a positive decision by the secured creditor on consideration of such representation or objection, it is axiomatic that once the decision is taken either way, the same has to be communicated to the borrower, notwithstanding the fact that it would not give rise to a cause of aclion for moving an application either under Section 17 or under Section 17(A). But the fact remains that it would be obtigatory on the part of the secured creditor to consider the representatjon or objection of tne borrower, and then take a conscious decision one way or the other, which should be communicated to the borrower within fifteen days of receipt of such representation or objection.

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Adverting to the facts of the present case, we find that petitioners have made a request to the respondents that in view of the unprecedented situation created by the pandemic, which has affected life and business of one and all, Section 13(2) notice may be withdrawn and the loan account may be restructured. This has to be considered by the respondents by takjng a reasonable and a pragmatic view, and whatever decision is taken, has to be communicated to the petitioners.

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B. Let such decision be taken by the respondents within a period of fifteen days from the date of receipt of a copy of this order, and communicated to the pe titrone rs.

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Till such decis,on ls taken and commun/cated to the petiI oners, no coercive steps shail be taken by the respondents against the petittoners,,.

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On due consideration, we are ol the view that the present writ

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petition can also be disposed of in the above terms.

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:;.i; :

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In vievr., ol_ ab ()\ c. \. cJir.r,,..t tlt,. pt,lilt,r6.,1. f() \uirntil a fep|esen tatiorro bj ect.ion to the dentand notice dated I6.IO.2O2l to respondent Nos. j and 4 within a period o f j5 I I5 days from today. If such representation/o j b i ec t "" ,""""_". :" tion is filed by the petitioner within the specified period, the sarne shall be considered by the said respondents having regard to the above decision of the Supreme Couft and the extant guidelines of the Reserve Bank of India.

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7.1 . Following such considcration, respondent Nos.3 and 4 shall pass a speaking order and contrnunicate the sanre to the petitioner. 'fill receipt ol. suclr speaking order, lurther stcps pursuant to the irnpLrgned derland norice dared 16,10.202 I shall not be raken bv responclent Nos,.l and.1. Wc. ntalie tL clear.[hat i.r,e harc not expressed arrl,opinion on rntrit and all conrentiot.rs are kept open.

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I1', how,ever. pctitioner lails to subrrit the represen tation,/ objection as above. or within the specif.ied period, it will be open to respondent Nos.3 and 4 to proceed in accordance with law.

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Writ petition is disposed of.

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Miscellaneous applications, if any pending, shall stand closed. I l. No costs.

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SD/-K.VENKAIAH ASSISTANT REGTSTRAR //TRUE COPY// secn#orncen

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\ To, 1. The Union of India,, Finance Secretary, Department of Financial Services, Government of lndia, Jeevan Deep Building, Parliament Street New Delhi - 110 001.

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The Deputy Governor, Reserve Bak of lndia, Main^{Building, Shahid Bhagat Singh} Road, Mumbai-400 001.

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The Managing Director and Chief Executive Officer,^{AXIS BANK, Limited, 'Axis} House', C-2, Wadia lnternational Centre, Pandurang^{BudhkarMarg, Worli,} It/umbai - 400 025,

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