High Court

filed a complaint on 10.07.2024, purporting under Section 30-A of the SARFAESI Act, 2002 claiming compensation as detailed in the said application. The said application is on record as Annexure No.2 to the writ petition. On the said application, the order impugned has come to be passed.

4. The submission of learned counsel for the petitioner is that the Reserve Bank of India in terms of its supervisory powers had issued a Circular on 6th August, 2020 providing for resolution for Covid-19 related stressed assets. It is argued that the said Circular was also considered by the Hon'ble Supreme Court in Writ Petition (C) No.476 of 2020, wherein it was observed that the Circular dated 06.08.2020 is binding on all the Banks and the Banks were at liberty and fully empowered to resolve the Covid-19 related stress and customize the relief to the individual borrowers by alteration of interest, extension of the residual tenor, waiving off penal interest, rescheduling the payment, converting accumulated interest into a fresh loan and for sanction of additional loan.

5. It is proposed to be argued that despite the said Circular, no action was taken by the Bank in respect of the loan granted to the petitioner and, as such, the petitioner was entitled to penalty as prescribed under Section 30-A of the said Act.

6. Learned counsel for the respondents-Bank, on the other hand, argues that the mandate of Section 30-A of the SARFAESI Act is not applicable for availing of the penalty amount by the borrowers and is related to violations, if any, in terms of prescriptions contained in Chapter IV and IV-A of the SARFAESI Act, but he argues that no application could have been filed by the petitioner under Section 30-A of the Act,

2002. He thus, argues that the petition is liable to be dismissed.

7. Learned counsel for the petitioner, in rejoinder, argues that the present petition is confined to adjudication of the dispute by the adjudicating authority and the petitioner had never invoked the jurisdiction of the Ombudsman, as is clear from the application itself. He further argues that the directions issues by the Reserve Bank of India are binding on all the Banks as was admitted and recorded in the judgement of the Hon'ble Supreme Court and thus, having failed to comply with the directions, the petitioner was well and duly entitled to claim the penalty as prescribed under Section 30-A of the said Act.

8. Considering the submissions made at the Bar, it is essential to notice that Chapter IV of the SARFAESI Act provides for setting up a Central Registry for registration of transactions of securitisation and reconstruction of financial assets. The purpose of setting up of the said Central Registry was for entering to the particulars of the transactions relating to securitisation of financial assets, reconstructions of financial assets and creation of security interest. Section 23 of the Act, 2002 prescribes that all the security interest shall be filed with the Central Registry in the manner as prescribed. Similarly, Section 25 of the Act, 2002 provides that the assets reconstruction company shall report the satisfaction of the security interest to the Central Registry. Chapter IV-A further prescribes for registration of secured creditors and other creditors. Chapter V of the said Act prescribes for penalties under Section 27, in the event of a default in filing under Section 23, sending a report under Section 24 or giving intimation under Section 25 of the said Act. In addition to the penalties prescribes, power has been conferred upon the adjudicating authority to impose penalty under Section 30-A of the SARFAESI Act, which is quoted herein-below:- "30A. Power of adjudicating authority to impose penalty- (1) Where any asset reconstruction company or any person fails to comply with any direction issued by the Reserve Bank under this Act the adjudicating authority may, by an order, impose on such company or person in default, a penalty not exceeding one crore rupees or twice the amount involved in such failure where such amount is quantifiable, whichever is more, and where such failure is a continuing one, a further penalty which may extend to one lakh rupees for every day, after the first, during which such failure continues. (2) For the purpose of imposing penalty under sub-section (1), the adjudicating authority shall serve a notice on the asset reconstruction company or the person in default requiring such company or person to show cause why the amount specified in the notice should not be imposed as a penalty and a reasonable opportunity of being heard shall be given to such person. (3) Any penalty imposed under this section shall be payable within a period of thirty days from the date of issue of notice under sub-section (2). (4) Where the asset reconstruction company fails to pay the penalty within the specified period under sub-section (3), the adjudicating authority shall, by an order, cancel its registration: Provided that an opportunity of being heard shall be given to such asset reconstruction company before cancellation of registration. (5) No complaint shall be filed against any person in default in any court pertaining to any failure under sub-section (1) in respect of which any penalty has been imposed and recovered by the Reserve Bank under this section. (6) Where any complaint has been filed against a person in default in the court having jurisdiction no proceeding for imposition of penalty against that person shall be taken under this section. Explanation.—For the purposes of this section and sections 30B, 30C and 30D- (i) "adjudicating authority" means such officer or a committee of officers of the Reserve Bank, designated as such from time to time, by notification, by the Central Board of Reserve Bank; ( ii) "person in default" means the asset reconstruction company or any person which has committed any failure, contravention or default under this Act and any person incharge of such company or such other person, as the case may be, shall be liable to be proceeded against and punished under section 33 for such failure or contravention or default committed by such company or person."

9. In terms of mandate of Section 30-A of the said Act, the claim of the petitioner is that he was entitled to compensation as the Bank had failed to comply with the mandatory Circular issued by the Reserved Bank of India.

10. The said submission merits rejection for the sole reason that Section 30-A of the said Act, on its plain reading, empowers the imposition of penalties against asset reconstruction company or any person', who fails to comply with the directions issued by the Reserve Bank of India under the SARFAESI Act. Consciously, the Legislature has not given the word 'Bank' in the said Section. In any event, the Circular issued by the Reserve Bank of India, is not under the SARFAESI Act and the Circular only enables the Banks to take steps for stressed assets on account of Covid-19 situation. The violation, even if it is presumed, for the sake of arguments, would not entitle the claim of penalty amount as prescribed under Section 30-A of the said Act by the borrower against the Bank. The application was misconceived and in any case no writ can be issued for adjudication of an application, which is not even maintainable as per this Court under Section 30-A of the SARFAESI Act.

11. The writ petition lacks merits and is, accordingly, dismissed. Order Date :- 17.1.2025 Ashutosh

filed a complaint on 10.07.2024, purporting under Section 30-A of the SARFAESI Act, 2002 claiming compensation as detailed in the said application. The said application is on record as Annexure No.2 to the writ petition. On the said application, the order impugned has come to be passed.

4. The submission of learned counsel for the petitioner is that the Reserve Bank of India in terms of its supervisory powers had issued a Circular on 6th August, 2020 providing for resolution for Covid-19 related stressed assets. It is argued that the said Circular was also considered by the Hon'ble Supreme Court in Writ Petition (C) No.476 of 2020, wherein it was observed that the Circular dated 06.08.2020 is binding on all the Banks and the Banks were at liberty and fully empowered to resolve the Covid-19 related stress and customize the relief to the individual borrowers by alteration of interest, extension of the residual tenor, waiving off penal interest, rescheduling the payment, converting accumulated interest into a fresh loan and for sanction of additional loan.

5. It is proposed to be argued that despite the said Circular, no action was taken by the Bank in respect of the loan granted to the petitioner and, as such, the petitioner was entitled to penalty as prescribed under Section 30-A of the said Act.

6. Learned counsel for the respondents-Bank, on the other hand, argues that the mandate of Section 30-A of the SARFAESI Act is not applicable for availing of the penalty amount by the borrowers and is related to violations, if any, in terms of prescriptions contained in Chapter IV and IV-A of the SARFAESI Act, but he argues that no application could have been filed by the petitioner under Section 30-A of the Act,

2002. He thus, argues that the petition is liable to be dismissed.

7. Learned counsel for the petitioner, in rejoinder, argues that the present petition is confined to adjudication of the dispute by the adjudicating authority and the petitioner had never invoked the jurisdiction of the Ombudsman, as is clear from the application itself. He further argues that the directions issues by the Reserve Bank of India are binding on all the Banks as was admitted and recorded in the judgement of the Hon'ble Supreme Court and thus, having failed to comply with the directions, the petitioner was well and duly entitled to claim the penalty as prescribed under Section 30-A of the said Act.

8. Considering the submissions made at the Bar, it is essential to notice that Chapter IV of the SARFAESI Act provides for setting up a Central Registry for registration of transactions of securitisation and reconstruction of financial assets. The purpose of setting up of the said Central Registry was for entering to the particulars of the transactions relating to securitisation of financial assets, reconstructions of financial assets and creation of security interest. Section 23 of the Act, 2002 prescribes that all the security interest shall be filed with the Central Registry in the manner as prescribed. Similarly, Section 25 of the Act, 2002 provides that the assets reconstruction company shall report the satisfaction of the security interest to the Central Registry. Chapter IV-A further prescribes for registration of secured creditors and other creditors. Chapter V of the said Act prescribes for penalties under Section 27, in the event of a default in filing under Section 23, sending a report under Section 24 or giving intimation under Section 25 of the said Act. In addition to the penalties prescribes, power has been conferred upon the adjudicating authority to impose penalty under Section 30-A of the SARFAESI Act, which is quoted herein-below:- "30A. Power of adjudicating authority to impose penalty- (1) Where any asset reconstruction company or any person fails to comply with any direction issued by the Reserve Bank under this Act the adjudicating authority may, by an order, impose on such company or person in default, a penalty not exceeding one crore rupees or twice the amount involved in such failure where such amount is quantifiable, whichever is more, and where such failure is a continuing one, a further penalty which may extend to one lakh rupees for every day, after the first, during which such failure continues. (2) For the purpose of imposing penalty under sub-section (1), the adjudicating authority shall serve a notice on the asset reconstruction company or the person in default requiring such company or person to show cause why the amount specified in the notice should not be imposed as a penalty and a reasonable opportunity of being heard shall be given to such person. (3) Any penalty imposed under this section shall be payable within a period of thirty days from the date of issue of notice under sub-section (2). (4) Where the asset reconstruction company fails to pay the penalty within the specified period under sub-section (3), the adjudicating authority shall, by an order, cancel its registration: Provided that an opportunity of being heard shall be given to such asset reconstruction company before cancellation of registration. (5) No complaint shall be filed against any person in default in any court pertaining to any failure under sub-section (1) in respect of which any penalty has been imposed and recovered by the Reserve Bank under this section. (6) Where any complaint has been filed against a person in default in the court having jurisdiction no proceeding for imposition of penalty against that person shall be taken under this section. Explanation.—For the purposes of this section and sections 30B, 30C and 30D- (i) "adjudicating authority" means such officer or a committee of officers of the Reserve Bank, designated as such from time to time, by notification, by the Central Board of Reserve Bank; ( ii) "person in default" means the asset reconstruction company or any person which has committed any failure, contravention or default under this Act and any person incharge of such company or such other person, as the case may be, shall be liable to be proceeded against and punished under section 33 for such failure or contravention or default committed by such company or person."

9. In terms of mandate of Section 30-A of the said Act, the claim of the petitioner is that he was entitled to compensation as the Bank had failed to comply with the mandatory Circular issued by the Reserved Bank of India.

10. The said submission merits rejection for the sole reason that Section 30-A of the said Act, on its plain reading, empowers the imposition of penalties against asset reconstruction company or any person', who fails to comply with the directions issued by the Reserve Bank of India under the SARFAESI Act. Consciously, the Legislature has not given the word 'Bank' in the said Section. In any event, the Circular issued by the Reserve Bank of India, is not under the SARFAESI Act and the Circular only enables the Banks to take steps for stressed assets on account of Covid-19 situation. The violation, even if it is presumed, for the sake of arguments, would not entitle the claim of penalty amount as prescribed under Section 30-A of the said Act by the borrower against the Bank. The application was misconceived and in any case no writ can be issued for adjudication of an application, which is not even maintainable as per this Court under Section 30-A of the SARFAESI Act.

11. The writ petition lacks merits and is, accordingly, dismissed. Order Date :- 17.1.2025 Ashutosh