deccan chronicles holdings ltd v. uoi

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IN THE HIGH COURT OF JUDICATURE AT MADRAS

Dated : 08.05.2014

Coram

The Honourable Mr.JUSTICE N.PAUL VASANTHAKUMARand

The Honourable Mr.Justice M.M.SUNDRESH

Writ Petition Nos.5897, 5898, 7296 to 7299, 7390, 7653, 7654, 7806, 8090, 8091 , 8457, 8458, 8593 to 8596 , 8746, 8747, 8766, 8942,

8970, 9019, 9073 , 9123, 9124, 9183, 9420, 9421, 9573 , 9611 , 9649 , 9671 , 9690, 9774, 9825 , 10007 , 10304, 10656, 10665 , 10766 , 11042, 11078 ,

11317, 11471 to 11474, 12318, 12462, 12506 and 12508 of 2014

W.P.Nos.5897 and 5898 of 2014:

M/s Deccan Chronicles Holdings Limited,A company incorporated under theCompanies Act, 1956, having Office atP-3, Developed Plot, Industrial Estate,Guindy, Chennai – 600 032rep.by its Assistant General Manager,R.Guruprasad. .. Petitioner

Vs.1. The Union of India, represented by its Joint Secretary, Ministry of Finance, Department of Economic Affairs, Room No.34-C, New Delhi – 110 001 (India)

2. Reserve Bank of India, represented by its Chairman and Managing Director, 6, Parliament Street, New Delhi – 110 001

3. Canara Bank,

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through its Authorised Officer, Prime Corporate Bank, T.S.R.Complex, S.P.Road, Secunderabad – 500 003. .. Respondents

W.P.Nos.7296 and 7297 of 2014:

Summer India Textile Mills P.Ltd.,rep.by its General Manager – FinanceShri S.S.PrabhaakaranNo.176.2-A, Kozhikkalantham Road,Tiruchengode – 637 211. ... Petitioner

Vs.

1. Union of India, rep. by its Joint Secretary Ministry of Finance – Department of Economic Affairs, Room No.34-c New Delhi – 110 001


3. State Bank of India, rep.by its Authorized Officer, Commercial Branch, C.D.Building, 78/79, Park Road, Erode – 638 003

4. State Bank of Patiala, MID Corporate Branch, Whbites Road, Thousand Lights, Chennai – 600 014 ... Respondents

W.P.Nos.7298 and 7299 of 2014:

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K.S.Rangaswamy ... Petitioner Vs.

1. Union of India, rep. by its Joint Secretary Ministry of Finance – Department of Economic Affairs, Room No.34-c New Delhi – 110 001


3. State Bank of India, rep.by its Authorized Officer, Commercial Branch, C.D.Building, 78/79, Park Road, Erode – 638 003

4. State Bank of Patiala, MID Corporate Branch, Whbites Road, Thousand Lights, Chennai – 600 014

5. Summer India Textiles Mills P.Ltd., No.176/2-A, Kozhikkalanatham Road, Tiruchengode 637 211. ... Respondents

W.P.No.7390 of 2014:

Ravi Shankar Mangipudy .... Petitioner Vs.

1. Union of India, rep. by the Secretary to Government, Ministry of Finance – Department of Economic Affairs,( Banking Division) North Block Room No.34-c New Delhi.2. Central Bank of India, rep.by its Manager, Mid Corporate Branch, 48/49, Monteith Road, Egmore, Chennai – 600 008

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3. The Authorised Officer, Central Bank of India, Mid Corporate Branch, 48/49, Monteith Road, Egmore, Chennai – 600 008

4. M/s.General Nice Mineral Trading Pvt.Ltd., rep.by its Manager, General Nice Tower, 4th Floor, NO.90, Old NO.87, Chamiers Road, Chennai – 600 018

5. M/s.General Nice Resources (Hong Kong) Ltd., 7th and 20th Floor, Lippo Leighton Tower, 103, Leighton Road, Causeway Bay, Hong Kong.

6. The Governor The Reserve Bank of India, Central Office, Mumbai. .... Respondents

W.P.Nos.7653 and 7654 of 2014:

M/s.Gangotri Textiles Ltd.,rep.by Mr.Manoj Kumar Tibrewal,No.35, Robertson Road,R.S.Puram, Coimbatore. ... Petitioner

Vs.1. Union of India, rep. by its Joint Secretary Ministry of Finance – Department of Economic Affairs, Room No.34-c New Delhi – 110 001


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3. State Bank of India, rep.by its Authorized Officer, Sam Branch, Cross Building, 32, Monteith Road, Egmore, Chennai – 600 008. ... Respondents

W.P.No.7806 of 2014:

Mr.A.Azariah ... Petitioner

Vs.

1. Union of India, rep.by the Secretary to Government Ministry of Finance – Department of Economic Affairs (Banking Division), North Block, New Delhi

2. The Governor, The Reserve Bank of India, Central Office, Mumbai

3. The Authorised Officer, M/s.Corporation Bank, Velandipalayam Branch Saibaba Colony, Coimbatore – 641 105

4. Royal Educational Trust, No.16/177, Marappalam Madukkarai, Coimbatore – 641 105

5. A.Jebasingh Prasad

6. A.Gunasingh

7. G.Flowrence Jasmine Bharathy .... Respondents

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W.P.Nos.8090 and 8091 of 2014:

M/s.Sekar Stores Home Mart,represented by its PartnerMr.S.V.Manivannan,S/o.S.V.S.Pandian,all having Office at No.37, Arcot Road, Kodambakkam,Chennai – 24. .... Petitioner

Vs.1. The Union of India, rep.by Secretary to Government, Ministry of Finance – Department of Economic Affairs (Banking Division), North Block, New Delhi.

2. The Authorised Officer, M/s.Pridhiv Asset Reconstruction and Securitisations Company Limited, Rajaprasadmu, 4th Floor, Wing No.1, Plot No.6, 6A, 6B, Masjid Bandar Road, Kondapur, Hyderabad – 500 084

3. Reserve Bank of India, No.16, Rajaji Salai, Chennai – 600 001

4. The Authorised Officer, M/s.Axis Bank Limited, Karumuthu Nilayam, 2nd Floor, No.192, Anna Salai, Chennai – 600 002. ... Respondents

W.P.Nos.8457 and 8458 of 2014:

M/s.Sri Devi Oil Pvt.Ltd.,A Company Registered under the Companies Act, having its place of business at No.279/6, Villipalayam village,Namakkal – 637 206

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rep.by its Director, Mr.V.Janarthana Guptha .... Petitioner

Vs.

1. Union of India, rep. by its Joint Secretary, Ministry of Finance, Department of Economic Affairs, Room No.34c, New Delhi – 110 001

2. The Reserve Bank of India, rep.by its Chairman and Managing Director, 6, Parliament Street, New Delhi – 110 001

3. State Bank of India, rep. by its Authorised Officer Commercial Branch # 232, NSC Bose Road, Chennai. .... Respondents

W.P.Nos.8593 and 8596 of 2014:

M/s.Sri Devi Extractions Pvt.Ltd.,No.50A, Salem Road,Namakkal – 637 001rep.by its Director, Mr.V.Janarthana Guptha .... Petitioner

Vs.

1. Union of India, rep. by its Joint Secretary, Ministry of Finance, Department of Economic Affairs, Room No.34c, New Delhi – 110 001

2. The Reserve Bank of India, rep.by its Chairman and Managing Director,

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6, Parliament Street, New Delhi – 110 001

3. State Bank of India, rep.by its Authorised Officer - Asst.General Manager, Commercial Branch # 232, NSC Bose Road, Chennai. .... Respondents

W.P.Nos.8594 and 8595 of 2014:

M/s.Global Trading Impex P.Ltd.,NO.5, 1st Floor, No.50A, Salem Road,Namakkal- 637 001rep.by its Director Mr.V.Janarthana Guptha .... Petitioner

Vs.1. Union of India, rep. by its Joint Secretary, Ministry of Finance, Department of Economic Affairs, Room No.34c, New Delhi – 110 001

2. The Reserve Bank of India, rep. by its Chairman and Managing Director, 6, Parliament Street, New Delhi – 110 001

3. State Bank of India, rep. by its authorised Officer - Asst.General Manager, Commercial Branch # 232, NSC Bose Road, Chennai. .... Respondents

W.P.Nos.8746 and 8747 of 2014:

S.Vijayalakshmi .... Petitioner

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Vs.1. The Union of India, rep. by its Joint Secretary Ministry of Finance – Department of Economic Affairs, Room No.34-c New Delhi – 110 001

2. Reserve Bank of India, represented by its Board of Directors, 6, Parliament Street, New Delhi – 110 001

3. The Authorised Officer, Uco Bank, Pondicherry Main Branch, Rue Mahe De Labourdonais, Pondicherry – 605 001. ... Respondents

W.P.No.8766 of 2014:

M/s.Sri Sivaram Spinning mIllrepresented by Parter K>R.Guruswami,No.674/1C, Kulathur Road,Venkatapuram PostCoimbatore- 641 014. .... Petitioner

Vs.

1. Union of India, rep. by its Joint Secretary Ministry of Finance – Department of Economic Affairs, New Delhi.

2. Reserve Bank of India, represented by its Chairman/Managing Director, 6, Parliament Street,

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New Delhi

3. State Bank of India, rep.by its Chief Manager, Commercial Branch, Veerappan Complex, 24, Stanes Road, Thirupur – 641 602. ... Respondents

W.P.No.8942 of 2014:

M/s.Alpride Medicsrepresented by PartnerMr.Ragunath, L-5, Industrial Estate,Ambattur, Chennai. .... Petitioner

Vs.1. Union of India, rep. by the Secretary to Government, Ministry of Finance, Department of Economic Affairs, (Banking Division), North Block, New Delhi

2. The Authorised Officer, The South Indian Bank Limited, Regional Office, Niagra Apartments, No.1, Sterling Road, Nungambakkam, Chennai – 34.

3. The Governor, Reserve Bank of India, Central Office Mumbai. ... Respondents

W.P.No.8970 of 2014:

M/s.Riverside Infrastructure (India) Pvt.Ltd.,(RIPL), having Regd.Office at 4/318, MARG Axis, Rajiv Gandhi Salai,

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Kottivakkam, Chennairep.by its Managing DirectorMr.G.R.K.Reddy .... Petitioner

Vs.

1. Union of India, rep. by the Secretary to Government, Ministry of Finance, Department of Economic Affairs, (Banking Division), North Block, New Delhi

2. The Authorised Officer, State Bank of Patiala, Commercial Branch, Atlanta, 1st Floor, Nariman Point, Mumbai – 400 021

3. M/s. LIC Housing Finance Ltd., Harrington Chambers, No.30/1A, Block C, II Floor, Abdul Razack, 1st Street, Saidapet, Chennai – 600 015

4. Syndicate Bank, Corporate Finance Branch, No.170, Eldams Road, Chennai – 600 018

5. The Governor, Reserve Bank of India, Central Office, Mumbai. .... Respondents

W.P.No.9019 of 2014:

Mr.G.Golpalakrishnan ... Petitioner

Vs.

1. Union of India,

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rep. by the Secretary to Government, Ministry of Finance, Department of Economic Affairs, (Banking Division), North Block, New Delhi

2. The Authorised Officer, Dena Bank, Retail Asset Branch, NO.83, TTK Road, Alwarpet, Chennai – 18.

3. The Governor, Reserve Bank of India, Central Office Mumbai. .... Respondents

W.P.No.9073 of 2014:

Mrs.K.Amsavalli .... Petitioner Vs.


2. The Authorised Officer, Indian Bank, CMDA Branch, CMDA Towers, 1, Gandhi Irwin Road, Egmore, Chennai – 600 008.

3. The Governor, Reserve Bank of India, Central Office, Mumbai. .... Respondents

W.P.No.9123 of 2014:

M/s MARG Ltd.,Registered office at MARG Axis,4/318, Rajive Gandhi Salai,

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Kottivakkam, Chennai-600 041having its Corporate Office atMARG Pancham,Block-B, NO.334,Futura Tech Park,Rajive Gandhi Salai, (OMR),Sholinganallur, Chennai-600 119.rep. By its Senior Manager (Legal) .... Petitioner

Vs.1. Union of India, rep. by the Secretary to Government Ministry of Finance, Department of Economic Affairs, (Banking Division) North Block, New Delhi

2.The Authorised Officer, The South Indian Bank Ltd., Regional Office, Niakara Apartments, 1, Sterling Road, Nungambakkam, Chennai-600 034.

3. The Governor, Reserve Bank of India, Central Office, Mumbai .... Respondents.

W.P.No.9124 of 2014:

Mrs.R.Vimala .... Petitioner


2.The Authorised Officer, Punjab National Bank, Circle Office, Trichy, PNB House, Kailasapuram P.O.,

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Trichy-620 014.


W.P.No.9183 of 2014:

B.N.Sridhar .... Petitioner


2.The Authorised Officer, Canara Bank, Asset Recovery Management Branch, Spencers Towers II, III Floor, 770-A, Anna Salai, Chennai-600 002.


W.P.Nos.9420 and 9421 of 2014:

M/s.V.M.E.Precast Pvt.Ltd.,rep.by its ChairmanNo.364, Pillaiayar Koil StreetPancer Nagar, Mugappair West,Chennai – 600 037 ... Petitioner

Vs.

1. The Union of India, rep. by its Joint Secretary Ministry of Finance – Department of

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Economic Affairs, Room No.34-c New Delhi – 110 001


3. Uco Bank, rep. by its Authorized Officer, Midcorporate Branch, NO.67, Burkit Road, T.Nagar, Chennai – 600 017 Fax: 044-24357478 ... Respondents

W.P.No.9573 of 2014:

SKAT INDIA Cloth Apparels (P) Ltd.,rep.by Mr.K.V.Naidu Managing Director,Regd.Office and Unit-I, No.536 (No.1057),Poonamallee High Road, Arumbakkam,Chennai – 600 106. ... Petitioner

VS.1. Union of India, rep. by the Secretary to Government, Ministry of Finance, Department of Economic Affairs, (Banking Division), North Block, New Delhi

2. The Governor, Reserve Bank of India, Central Office, Mumbai.

3. Allahabad Bank, Asset Recovery Management Branch, “Vaairams”, 112, Sir Thyagaraja Road, T.Nagar, Chennai – 600 017

4. The Authorised Officer, Allahabad Bank, Industrial Finance Branch, Änna Theatre Building”,

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No.41, Mount Road, Chennai – 600 002. ... Respondents

W.P.No.9611 of 2014:

M/s LGP Enterprises,Rep. By its Proprietor L.Gajendran,No.35, Second Main Road,Lakshmi Nagar, Velacherry,Chennai-600 042. .... Petitioner

Vs.1. Union of India, rep. by the Secretary to Government Ministry of Fiannce Department of Economic Affairs, (Banking Division) North Block, New Delhi,

2. The Authorised Officer, M/s. Indian Bank – Porur Branch, No.225, Trunk Road, Porur, Chennai – 600 116

3. The Governor The Reserve Bank of India, Central Office, Mumbai. ..... Respondents

W.P.No.9649 of 2014:

M/s Uthrakaliamman Infrastructures (P) Ltd.,Rep. by its Director Mr.V.Manikanda RajuAlozz Abdul Kalam Azad Street,Pollachi-642 001. .... Petitioner

Vs.1. Union of India, rep. by the Secretary to Government, Ministry of Finance, Department of Economic Affairs, (Banking Division), North Block, New Delhi.

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2. The Governor, The Reserve Bank of India, Central Office, Mumbai

3. The Authorised Officer, M/s State Bank of India, Stressed Assets Management Branch, Now at 1112, Raja Plaza, First Floor, Lakshmi Mills Bus Stop, Avanashi Road, Coimbatore. .. Respondents

W.P.No.9671 of 2014:

M/s Karpaga Vinayagar Cosntructions,Represented by its Proprietor Mrs.M.Aruvi,No.2/32, Arunagirinathar Street,New perungalathur, Chennai-600 063. .. Petitioner

Vs.

1. Union of India, rep. by the Secretary to Government, Ministry of Finance, Department of Economic Affairs, (Banking Division), North Block, New Delhi.

2. The Authorised Officer, M/s Punjab National Bank, Teynampet Branch, No.152, Eldams Road, Teynampet, Chennai-600 018.

3. Reserve Bank of India, Department of Banking Operations and Development, Central Office, Mumbai-400 001. .. Respondents

W.P.No.9690 of 2014:

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M/s Mangai Interiors,Represented by its ProprietorMr.L.Alagappan, Plot No.107,Kambar Cross Street, Gandhi Nagar, Virugambakkam,Chennai-600 092. .. Petitioner

Vs.1. Union of India, represented by the Secretary to Government, Ministry of Finance, Department of Economic Affairs, (Banking Division), North Block, New Delhi.

2. The Authorised Officer, M/s Punjab National Bank, Teynampet Branch, No.152, Eldams Road, Teynampet, Chennai-600 018.3. Reserve Bank of India, rep. By its Chief General Manager, Department of Banking Operations and Development, Central Office, Mumbai-400 001. .. Respondents

W.P.No.9774 of 2014:

M/s.Current Trends,No.28/15, M.K.Building,Indira Nagar, 1st Street,Behind CSI Church, Avinashi Road,Gandhi Nagar Post, Tiruppur – 641 603.rep. by its Managing PartnerS.Krishnakumar ..,, Petitioner

Vs.1. Union of India, rep.by the Secretary to Government, Ministry of Finance, Department of Economic Affairs, (Banking Division), North Block,

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New Delhi

2. The Governor, The Reserve Bank of India, Central Office, Mumbai, Maharashtra

3. The Authorised Officer & Assistant General Manager, State Bank of India, Stressed Assets Management Branch, “Red Cross Building”, 32, Montieth Road, Egmore, Chennai – 600 008

4. The Authorised Officer & Assistant General Manager, State Bank of India, Stressed Assets Management Branch, 1112, Raja Plaza Avinashi Road, Colimbatore – 641 037

5. The Manager, State Bank of India, Specialized Commercial Branch, Tiruppur, Tiruppur District. .... Respondents

W.P.No.9825 of 2014:

M/s Everwin Textile Mill (P) Ltd.,Rep. by its Managing Director,K.Periasamy, No.4/12, Chittappa Avenue,Royapuram Main Road, Tiruppur-641 601. .. Petitioner

Vs.1. Union of India, rep. by the Secretary to Government, Ministry of Finance, Department of Economic Affairs, (Banking Division), North Block,

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New Delhi

2. The Governor, The Reserve Bank of India, Central Office, Mumbai.

3. The Assistant General Manager, M/s Punjab National Bank, No.54, Sabari Street, Tiruppur-641 601.

4. The Chief Manager, The State Bank of Mysore, Tiruppur Branch, No.72, Appachi Nagar Main Road, Kongur Nagar, Tiruppur-641 607. ... Respondents

W.P.No.10007 of 2014:

M/s Eurostyle Tex,Rep. by Mr.S.Gughan,Managing Partner,No.9, Poonthottam,Murugampalayam,Gandhi Nagar Post,Tiruppur-641 603. .. Petitioner

Vs.1. Union of India, rep. by the Secretary to Government, Ministry of Finance, Department of Economic Affairs, (Banking Division), North Block, New Delhi


3. The Authorised Officer, M/s Uco Bank, Nos.55 & 56,

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Sakthi Towers, Ground Floor, Vallipalayam 3rd Street, Tiruppur-641 603 .. Respondents

W.P.No.10304 of 2014:

M/s Tribune Textiles (India) Pvt. Ltd.,Rep. by its Director Mr.G.Surendra Gupta,No.284/2, Sanapudur, Manellore Post-601 202.Gummidipoondi Taluk,Thiruvallur District(T.N.) .. Petitioner

Vs.



3. City Union Bank Limited, by its Branch Manager, Achari Street, Nellore.

4.India SME Asset Reconstruction Company Ltd.(ISARC), M.S.M.E. Development Centre, C-11, G. Block, Bandra-Kurla Complex, Bandra East, Mumbai-400 051. .... Respondents

W.P.No.10656 of 2014:

M/s. Satyam Educational Trust,

22

Rep. By its Chairman A.Thinagar,II Floor, S.D.S. Building,Court Road, Nagercoil-629 001. .... Petitioner

VS.1. The Union of India, rep.by its Joint Secretary, Ministry of Finance, Department of Economic Affairs, Room No.34-C, New Delhi-110 001.

2. The Reserve Bank of India, rep. By Governor, No.6, Parliament Street, New Delhiu-110 001.

3. The Authorised Officer/ The Chief Manager, Bank of Maharastra, Chennai Zonal Office, No.4, Sivagnanam Road, T.Nagar, Chennai-600 017. .... Respondents

W.P.No.10665 of 2014:

B.Gnanasambandan @ Rajakumar,No.10, Sundaravinayagar Koil Street,Saint Simonpet, Muthialpet,Pondicherry-605 003. .. Petitioner

Vs.


2.The Authorised Officer, Uco Bank, Pondicherry Main Branch,

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No.7, Rue Mahe De Labourdonnais, Pondicherry-605 001.

3. The Governor, The Reserve Bank of India, Central Office, Mumbai. .. Respondents

W.P.No.10766 of 2014:

M.Shanthikumar .. Petitioner

Vs.


2.The Authorised Officer, Indian Bank, Chengalpattu Branch, No.7, G.S.T. Road, Chengalpattu, Kancheepuram District.

3. The Governor, The Reserve Bank of India, Central Office, Mumbai. .. Respondents

W.P.No.11042 of 2014:

M/s Deepa Panels Private Limited,Represented by its Managing DirectorMr.Pradeep Chirakal,No.184/3C, Mettupalayam-Parivakkam Road,Mettupalayam, Thiruverkadu Road Post,Chennai-600 007. .... Petitioner

Vs.

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1. Union of India, rep. by the Secretary to Government Ministry of Finance, Department of Economic Affairs, (Banking Division) North Block, New Delhi


3. The Authorised Officer, Assistant General Manager, State Bank of India, Stressed Assets Management Branch, No.32, Montieth Road, Indian Red Cross Society Buildings, Egmore, Chennai-600 008.

4. The Divisional Manager, New India Assurance Company Ltd., Bancassurance Divisional Officer 712300 Mac Millan House, IInd Floor, B Wing, No.21, Pattullos Road, Chennai-600 002. .. Respondents

W.P.No.11078 of 2014:

M/s Fine Furniture (P) Ltd.,Rep. By its Managing DirectorMr.Pradeep Chirakal,No.48, Varadarayapuram Trunk Road,Poonamallee, Chennai-600 056. .... Petitioner


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3.The Authorised Officer/Chief Manager & Relationship Manager, Overseas Branch, No.86, Rajaji Salai, Chennai-600 001. .. Respondents

W.P.No.11317 of 2014:

Mr.S.B.Sanyasi Rao .... Petitioner

Vs.1. Union of India, rep. by the Secretary to Government Ministry of Finance, Department of Economic Affairs, (Banking Division) North Block, New Delhi.

2.The Authorised Officer, Indian Bank, Yanam Branch, Jaladangi Street, Yanam-533 464.

3. The Governor, Reserve Bank of India, Central Office, Mumbai. .. Respondents

W.P.Nos.11471 to 11474 of 2014:

M/s Karpaga Vinayagar Electricals,Represented by its Proprietor Mr.T.R.Mahadevan,No.2/32, Arunagirinathar Street,New Perungalathur, Chennai-600 063. .... Petitioner in

WP.11471/2014

M/s Sri Venkateswara Enterprises,

26

Represented by its Proprietor Mr.T.R.Pandian,No.2/32, Arunagirinathar Street,New Perungalathur, Chennai-600 063. .... Petitioner in

WP.11472/2014

M/s Sapthagiri Enterprises,Represented by its Proprietor Mr.T.R.Ellappan,No.2/32, Arunagirinathar Street,New Perungalathur, Chennai-600 063. .... Petitioner in

WP.11473/2014

M/s Shri Lanco Enterprises,Represented by its Proprietor Mr.S.Deenadayalan,No.C17, K.P.Towers, 159, Arcot Road,Vadapalani, Chennai-600 026. .... Petitioner in

WP.11474/2014Vs.

1. Union of India, rep. by the Secretary to Government Ministry of Finance, Department of Economic Affairs, (Banking Division) North Block, New Delhi.

2.The Authorised Officer, M/s Punjab National Bank, Teynampet Branch, No.152, Eldams Road, Teynampet, Chennai-600 018.

3. Reserve Bank of India, Represented by its Chief General Manager, Department of Banking Operations and Development, Central Office, Mumbai-400 001. .. Respondents in

all WPs. W.P.No.12318 of 2014:

M/s.Nyle Garmentsrep.by its Managing PartnerM.Duraisamy, Son of Subramaniam1/223, Amman ThottamKalampalayam, Pongupalayam PostTiruppur District. .... Petitioner

27

Vs.

1. Union of India, rep.by the Secretary to Government, Ministry of Finance, Department of Economic Affairs, (Banking Division) North Block, New Delhi

2. The Governor The Reserve Bank of India, Central Office, Mumbai, Maharashtra

3. The Authorised Officer, Punjab National Bank No.54, Sabari Salai, Binny Compound, Tiruppur, Tiruppur District. .... Respondents

W.P.No.12462 of 2014:

M/s.Gowtham Industries,a partnership firmrepresented by its Partners Vijaykumar and V.Ponnuthai .... Petitioner

Vs.1. Union of India represented by the Secretary to Government, Ministry of Finance, Department of Economic Affairs (Banking Division) North Block New Delhi

2. The Governor, Reserve Bank of India, Central Office, Mumbai

3. Lakshmi Vilas Bank Limited, represented by its Authorised Officer,

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LVB Platinum Jubilee Building, No.68, Oppanakara Street, IInd Floor, Coimbatore – 641 001

4. Chairman and Managing Director, Lakshmi Vilas Bank Limited, Administrative Office, Chennai. .... Respondents

W.P.No.12506 of 2014:

M/s.Trinity Textilesrep.by G.SunithaCypress, B/103, Prince Green WoodsNO.66, Vanagaram Road,Chennai – 600 058 .... Petitioner



3. Indian Overseas Bank, No.2, Kirupashankar Street, West Mambalam, Chennai – 600 033. .... Respondents.

W.P.No.12508 of 2014:

D.John .... Petitioner Vs.

1. Union of India, rep.by its Joint Secretary,

29

Ministry of Finance, Department of Economic Affairs, Room No.34-C New Delhi – 110 001

2. Reserve Bank of India, rep.by its Board of Directors, 6, Parliament Street, New Delhi – 110 001

3. The Authorised Officer, Bank of India, 120/174, Luz Church Road, Mylapore, Chennai – 600 004. ... respondents

Prayer: Writ Petition in W.P.Nos.5897 and 7654 of 2014 are filed under Article 226 of the Constitution of India seeking for the relief of issuance of a Writ of Declaration to declare that the provisions of Section 2(1)(o) of the Securitization and Reconstruction of Financial Assets and Enforcement of Securities Act, 2002 as arbitrary, unconstitutional and opposed to public policy, null and void and the same being ultra vires the Constitution of India.

Writ Petition in W.P.No.5898 of 2014 is filed under Article 226 of the Constitution of India seeking for the relief of issuance of a Writ of Declaration declaring the guidelines No.DBOD.No.BP.BC.9/ 21.04.048/2012-13 dt. 2.7.2012 qua classification of account as Non-performing asset as arbitrary, unconstitutional and opposed to public policy, null and void and the same being ultra vires the Constitution of India.

Writ Petition in W.P.Nos.7296, 7298, 8746 and 12508 of 2014 are filed under Article 226 of the Constitution of India seeking for the relief of issuance of writ of declaration to declare that the provisions of Section 2(1)(o) of the Securitization and Reconstruction of Financial Assets and Enforcement of Securities Act, 2002 as being ultra vires the provisions of the Constitution of India and thus null and void.

Writ Petition in W.P.Nos.7297 and 8747 of 2014 are filed under Article 226 of the Constitution of India seeking for the relief of issuance of a Writ of Declaration to declare the circular/guideline

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No.DBOD.No.BP.BC.9/ 21.04.048/2012-13 issued by the Reserve Bank of India dt. 2.7.2012 qua classification of accounts as a Non-performing asset as being arbitrary, unconstitutional and null and void.

Writ Petition in W.P.No.7390 of 2014 is filed under Article 226 of the Constitution of India seeking for the relief of issuance of writ of declaration declaring that Section 2(o) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and Clause 2.1 of prudential norms on income Recognition, Asset Classification and provisioning pertaining to Advances issued by the 6th respondent as ultra vires the Constitution of India, void ab initio, illegal and unconstitutional and consequently forbear the 2nd and 3rd respondents from continuing the proceedings initiated under the provisions of Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 as against the petitioner herein with reference to the subject property more specifically set out in the petition schedule.

Writ Petition in W.P.Nos.7653 and 8595 of 2014 are filed under Article 226 of the Constitution of India seeking for the relief of issuance of a Writ of Declaration declaring the guidelines bearing No.DBOD.No.BP.BC.9/ 21.04.048/2012-13 dt. 2.7.2012 issued by the Reserve Bank of India relating to the classification of accounts as Non-performing assets as arbitrary, unconstitutional, opposed to public policy, null and void and ultra vires the Constitution of India.

Writ Petition in W.P.No.7806 of 2014 is filed under Article 226 of the Constitution of India seeking for the relief of issuance of writ of declaration declaring that Section 2(o) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and Clause 2.1 of prudential norms on income Recognition, Asset Classification and provisioning pertaining to Advances issued by the 2nd respondent as ultra vires the Constitution of India, void ab initio, illegal and unconstitutional and consequently forbear the 3rd respondent from continuing the proceedings initiated under the provisions of Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 as against the petitioner herein with reference to the subject property more specifically set out in the petition schedule.

Writ Petitions in W.P.Nos.8090 and 8091 of 2014 are filed under Article 226 of the Constitution of India seeking for the relief of issuance of writ of declaration declaring that Section 2(o) of the Securitization and

31

Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and Clause 2.1 of prudential norms on income Recognition, Asset Classification and provisioning pertaining to Advances issued by the 3rd respondent – Reserve Bank of India as ultra vires the Constitution of India, void ab initio and consequently forbear the 2nd respondent from continuing the proceedings initiated under the provisions of Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 as against the petitioner herein with reference to the property at No.37, Arcot Road, Kodambakkam, Chennai – 24.

Writ Petition in W.P.No.8457 of 2014 is filed under Article 226 of the Constitution of India seeking for the relief of issuance of a Writ of Declaration to declare that Section 2(1)(o) of the Securitization and Reconstruction of Financial Assets and Enforcement of Securities Act is ultra vires and null and void.

Writ Petition in W.P.No.8458 and 8593 of 2014 are filed under Article 226 of the Constitution of India seeking for the relief of issuance of a Writ of Declaration declaring the guidelines bearing DBOD.No.BP.BC.9/ 21.04.048/2012-13 dt. 2.7.2012 issued by the Reserve Bank of India relating to the classification of accounts as Non-performing assets as arbitrary, unconstitutional, opposed to public policy, null and void and ultra vires the provisions of the Constitution of India.

Writ Petition in W.P.Nos.8594 and 8596 of 2014 are filed under Article 226 of the Constitution of India seeking for the relief of issuance of a Writ of Declaration to declare that the Section 2(1)(o) of the Securitization and Reconstruction of Financial Assets and Enforcement of Securities Act, 2002 as arbitrary, unconstitutional, opposed to public policy, null and void and ultra vires the provisions of the Constitution of India.

Writ Petition in W.P.No.8766 of 2014 is filed under Article 226 of the Constitution of India seeking for the relief of issuance of a Writ of Declaration declaring the guidelines issued by the Reserve Bank of India vide DBOD.No.BP.BC.9/ 21.04.048/2012-13 dt. 2.7.2012 relating to the classification of accounts as Non-performing assets (NPA) as arbitrary, unconstitutional and null and void and opposed to public policy.

Writ Petition in W.P.No.8942 of 2014 is filed under Article 226 of the Constitution of India seeking for the relief of issuance of writ of declaration declaring that Section 2(o) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest

32

Act, 2002 and Clause 2.1 of prudential norms on income Recognition, Asset Classification and provisioning pertaining to Advances issued by the 3rd respondent as ultra vires the Constitution of India, void ab initio, illegal and unconstitutional and consequently forbear the 2nd respondent Bank from continuing the proceedings initiated under the provisions of Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 as against the petitioner herein with reference to the subject property.

Writ Petition in W.P.No.8970 of 2014 is filed under Article 226 of the Constitution of India seeking for the relief of issuance of writ of declaration declaring that Section 2(o) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and Clause 2.1 of prudential norms on income Recognition, Asset Classification and provisioning pertaining to Advances issued by the 5th respondent as ultra vires the Constitution of India, void ab initio, illegal and unconstitutional and consequently forbear the 2nd respondent Bank from continuing the proceedings initiated under the provisions of Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 as against the petitioner herein with reference to the subject property more specifically set out in the petition schedule.

Writ Petition in W.P.No.9019 of 2014 is filed under Article 226 of the Constitution of India seeking for the relief of issuance of writ of declaration declaring that Section 2(o) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and Clause 2.1 of prudential norms on income Recognition, Asset Classification and provisioning pertaining to Advances issued by the 2nd respondent as ultra vires the Constitution of India, void ab initio, illegal and unconstitutional and consequently forbear the 2nd respondent Bank from continuing the proceedings initiated under the provisions of Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 as against the petitioner herein with reference to the subject property more specifically set out in the petition schedule.

Writ Petition in W.P.No.9073 of 2014 is filed under Article 226 of the Constitution of India seeking for the relief of issuance of writ of declaration declaring that Section 2(o) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and Clause 2.1 of prudential norms on income Recognition, Asset Classification and provisioning pertaining to Advances issued by the 3rd respondent – Reserve Bank of India as ultra vires the Constitution of India, void ab initio

33

and consequently forbear the 2nd respondent Bank from continuing the proceedings initiated under the provisions of Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 as against the petitioner herein with reference to the subject property.

Writ Petitions in W.P.Nos.9123, 9124 and 9183 of 2014 are filed under Article 226 of the Constitution of India seeking for the relief of issuance of writ of declaration declaring that Section 2(o) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and Clause 2.1 of prudential norms on income Recognition, Asset Classification and provisioning pertaining to Advances issued by the 3rd respondent as ultra vires the Constitution of India, void ab initio and consequently forbear the 2nd respondent from continuing the proceedings initiated under the provisions of Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 as against the petitioner herein with reference to the subject properties.

Writ Petition in W.P.No.9420 of 2014 is filed under Article 226 of the Constitution of India seeking for the relief of issuance of Writ of Certiorarified Mandamus to call for the records pertaining to the Master Circular-Prudential norms on Income Recognition, Asset Classification and provisioning pertaining to advances as issued by Reserve Bank of India in RBI/2012-2013/39;DBOD.No.BP.BC.9/21.04.048/2012-13 dt. 2.7.2012 on the file of the respondent and quash the same and consequently forbear the respondents from taking any further action pursuant to the notice issued by UCO Bank, Midcorproate Branch, T.Nagar, Chennai – 17/3rd

respondent dated 28.1.2014.

Writ Petition in W.P.No.9421 of 2014 is filed under Article 226 of the Constitution of India seeking for the relief of issuance of writ of declaration declaring that Sec.2(1)(o); Sec.2(ha) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 as arbitrary, unconstitutional, discriminatory and opposed to public policy.

Writ Petition in W.P.No.9573 of 2014 is filed under Article 226 of the Constitution of India seeking for the relief of issuance of writ of declaration declaring that Section 2(o) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and Clause 2.1 of prudential norms on income Recognition, Asset Classification

34

and provisioning pertaining to Advances issued by the 2nd respondent as ultra vires the Constitution of India, void ab initio, illegal and unconstitutional and consequently forbear the 3rd and 4th respondent Banks from continuing the proceedings initiated under the provisions of Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 as against the petitioner herein with reference to the subject properties.

Writ Petitions in W.P.Nos.9611, 10766 and 11317 of 2014 are filed under Article 226 of the Constitution of India seeking for the relief of issuance of writ of declaration declaring that Section 2(o) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and Clause 2.1 of prudential norms on income Recognition, Asset Classification and provisioning pertaining to Advances issued by the 3rd respondent as ultra vires the Constitution of India, void ab initio, illegal and unconstitutional and consequently forbear the 2nd

respondent Bank from continuing the proceedings initiated under the provisions of Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 as against the petitioner herein with reference to the subject properties.

Writ Petition in W.P.No.9649 of 2014 is filed under Article 226 of the Constitution of India seeking for the relief of issuance of writ of declaration declaring that Section 2(o) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and Clause 2.1 of prudential norms on income Recognition, Asset Classification and provisioning pertaining to Advances issued by the 2nd and 3rd respondents as ultra vires the Constitution of India, void ab initio, illegal and unconstitutional and consequently forbear the 2nd

respondent Bank from continuing the proceedings initiated under the provisions of Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 as against the petitioner herein with reference to the subject properties.

Writ Petitions in W.P.No.9671 and 9690 of 2014 are filed under Article 226 of the Constitution of India seeking for the relief of issuance of writ of declaration declaring that Section 2(o) of SARFAESI Act and Enforcement of Security Interest Act, 2002 and Clause 2.1 of prudential norms on income Recognition, Asset Classification and provisioning pertaining to Advances issued by the 3rd respondent-RBI as ultra vires the Constitution of India, void ab initio, illegal and unconstitutional and consequently forbear the 2nd respondent Bank from continuing the

35

proceedings initiated under the provisions of Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 as against the petitioner herein with reference to the properties bearing Door No.2/32, Arunagirinathar Street, New Perungalathur, Chennai-600 063 measuring an extent of 1706 sq.ft., comprised in S.No.145-B, Perungalathur Village, Tambaram Taluk, Kancheepuram District and plot No.104, measuring an extent of 1657 sq.ft., and bearing plot No.107, measuring an extent of 1840 sq.ft., Gandhi Nagar, Kambar Street, Virugambakkam, Chennai-600 092, comprised in R.S.No.163, Part of Virugambakkam Village, Mambalam-Guindy Taluk, Chennai District respectively.

Writ Petition in W.P.No.9774 of 2014 is filed under Article 226 of the Constitution of India seeking for the relief of issuance of Writ of Declaration declaring Section 2(o) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and Clause 2.1 of Prudential norms on Income Recognition, Assets Classification and Provisioning pertaining to Advocates issued by the 2nd

respondent as ultra vires and Constitution of India, void ab initio, illegal and unconstitutional and consequently forbear the 3rd to 5th respondents from continuing the proceedings initiated under the provisions of Securitization and Reconstruction of Financial Assets and Enforcement of Security Enforcement Act 2002 as against the petitioner with regard to the subject property.

Writ Petition in W.P.No.9825 of 2014 is filed under Article 226 of the Constitution of India seeking for the relief of issuance of Writ of Declaration by declaring that Section 2(o) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and Clause 2.1 of prudential norms on income Recognition, Asset Classification and Provision and Provision pertaining to Advances issued by the 3rd respondent as ultra vires the Constitution of India, void ab initio, illegal and unconstitutional and consequently, forbear the 3rd and 4th

respondent Banks from continuing the proceedings initiated under the provisions of Section 13(2) dated 18.05.2013 and 22.05.2013 and 13(4) notices of Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 as against the Petitioner herein with reference to the subject properties.

Writ Petition in W.P.No.10007 of 2014 is filed under Article 226 of

36

the Constitution of India seeking for the relief of issuance of writ of declaration declaring that Section 2(o) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and Clause 2.1 of prudential norms on income Recognition, Asset Classification and provisioning pertaining to Advances issued by the 2nd respondent as ultra vires the Constitution of India, void ab initio and consequently forbear the 3rd respondent-Bank from continuing the proceedings initiated under the provisions of Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 as against the petitioner herein with reference to the subject properties.

Writ Petition in W.P.No.10304 of 2014 is filed under Article 226 of the Constitution of India seeking for the relief of issuance of writ of declaration declaring that Section 2(o) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and Clause 2.1 of prudential norms on income Recognition, Asset Classification and provisioning pertaining to Advances issued by the 2nd respondent as ultra vires the Constitution of India, void ab initio and consequently forbear the 3rd and 4th respondent-Banks from continuing the proceedings initiated under the provisions of Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 as against the petitioner herein with reference to the subject properties.

Writ Petition in W.P.No.10656 of 2014 is filed under Article 226 of the Constitution of India seeking for the relief of issuance of Writ of Declaration to declare Section 2(1)(o) and 2(1)(ha) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002(54 of 2002) and the Master Circular-Prudential Norms on Income Recognition, Asset Classification and Provisioning pertaining to Advances as issued by the 2nd respondent in RBI/2012-13/39; DBOD No.BP.BC.9/21.04.048/2012-13 dated 02.07.2012 as ultra vires the Constitution of India, void ab initio, illegal and unconstitutional and consequently forbear the respondents from taking any further action pursuant to the notice issued by the third respondent in AX48/Legal/Sec/Satyam/2013 dated 18.12.2013.

Writ Petition in W.P.No.10665 of 2014 is filed under Article 226 of the Constitution of India seeking for the relief of issuance of writ of

37

declaration declaring that Section 2(o) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and Clause 2.1 of prudential norms on income Recognition, Asset Classification and provisioning pertaining to Advances issued by the 3rd respondent as ultra vires the Constitution of India, void ab initio and consequently forbear the 2nd respondent-Bank from continuing the proceedings initiated under the provisions of Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and consequent auction notice dated 04.03.2014 as against the petitioner herein with reference to the subject property.

Writ Petition in W.P.No.11042 of 2014 is filed under Article 226 of the Constitution of India seeking for the relief of issuance of Writ of Declaration by declaring that Section 2(1)(o) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and Clause 2.1 of prudential norms on income Recognition, Asset Classification and Provision and Provision pertaining to Advances issued by the 2nd respondent as ultra vires the Constitution of India, void ab initio, illegal and unconstitutional and consequently forbear the 3rd

respondent Bank from continuing the proceedings initiated under the provision of Section 13(2) dated 12.7.2013 and 28.12.2013 and 13(4) notices of Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 as against the Petitioner, herein with reference to the subject properties.

Writ Petition in W.P.No.11078 of 2014 is filed under Article 226 of the Constitution of India seeking for the relief of issuance of Writ of Declaration by declaring that Section 2(1)(o) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and Clause 2.1 of prudential norms on income Recognition, Asset Classification and Provision and Provision pertaining to Advances issued by the 2nd respondent as ultra vires the Constitution of India, void ab initio, illegal and unconstitutional and consequently forbear the 3rd

respondent Bank from continuing the proceedings initiated under the provisions of Section 13(2) notice dated 20.08.2013 of Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 as against the Petitioner, herein with reference to the subject properties.

Writ Petition in W.P.No.11471 of 2014 is filed under Article 226 of the Constitution of India seeking for the relief of issuance of writ of declaration declaring that Section 2(o) of SARFAESI Act and Enforcement

38

of Security Interest Act, 2002 and Clause 2.1 of prudential norms on income Recognition, Asset Classification and provisioning pertaining to Advances issued by the 3rd respondent-RBI as ultra vires the Constitution of India, void ab initio and consequently forbear the 2nd respondent Bank from continuing the proceedings initiated under the provisions of SARFAESI Act 2002 as against the petitioner herein with reference to the properties namely All that piece and parcel under S.No.145/B, building thereon at Plot No.135 AB, Door No.4/31, Arunagirinathar Street, New Perungalathur, Chennai-600 063, measuring an extent of 2165 sq.ft., and all that piece and parcel of vacant house site bearing Plot No.5, measuring an extent of 1040 sq.ft., bearing Plot No.6, measuring an extent of 1020 sq.ft., and bearing Plot No.7, measuring an extent of 1020, known as Dakshin Avenue-II, comprised in S.No.75/2 as per Patta No.146, Re S.No.75/2C, 76/1A, 85/5C2, 85/5C3 and 85/6, situated in No.12, Unaimancheri Village, Kanchipuram District, total measuring an extent of 3080 sq.ft. In respect of the cash credit Account No.253008700167876 and Term Loan-Vehicle Account No.25300NG02380677.

Writ Petition in W.P.No.11472 of 2014 is filed under Article 226 of the Constitution of India seeking for the relief of issuance of writ of declaration declaring that Section 2(o) of SARFAESI Act and Enforcement of Security Interest Act, 2002 and Clause 2.1 of prudential norms on income Recognition, Asset Classification and provisioning pertaining to Advances issued by the 3rd respondent-RBI as ultra vires the Constitution of India, void ab initio and consequently forbear the 2nd respondent Bank from continuing the proceedings initiated under the provisions of SARFAESI Act 2002 as against the petitioner herein with reference to the properties namely all that piece and parcel of vacant residential land measuring 2340 sq.feet bearing Plot Nos.390 and 2340 sq.feet bearing Plot No.391, in all admeasuring 4680 sq.feet, Sreeram Nagar, comprised in S.Nos.300/2 and 301/4 of Pazhanthandalam Village, Sriperumbudur Taluk, Kancheepuram District, in respect of the Cash Credit Account No.253008700168006 and Term Loan-Vehicle Account No.25300NG02380686.

Writ Petition in W.P.No.11473 of 2014 is filed under Article 226 of the Constitution of India seeking for the relief of issuance of writ of declaration declaring that Section 2(o) of SARFAESI Act and Enforcement of Security Interest Act, 2002 and Clause 2.1 of prudential norms on income Recognition, Asset Classification and provisioning pertaining to Advances issued by the 3rd respondent-RBI as ultra vires the Constitution of India, void ab initio and consequently forbear the 2nd respondent Bank

39

from continuing the proceedings initiated under the provisions of SARFAESI Act 2002 as against the petitioner herein with reference to the properties namely all that piece and parcel of vacant residential land measuring 2340 sq.feet bearing Plot Nos.387 and 2340 sq.feet bearing Plot No.388, in all admeasuring 4680 sq.feet, Sreeram Nagar, comprised in S.Nos.300/2 and 301/4 of Pazhanthandalam Village, Sriperumbudur Taluk, Kancheepuram District, in respect of the Cash Credit Account No.253008700167991 and Term Loan-Vehicle Account No.25300IB02295555.

Writ Petition in W.P.No.11474 of 2014 is filed under Article 226 of the Constitution of India seeking for the relief of issuance of writ of declaration declaring that Section 2(o) of SARFAESI Act and Enforcement of Security Interest Act, 2002 and Clause 2.1 of prudential norms on income Recognition, Asset Classification and provisioning pertaining to Advances issued by the 3rd respondent-RBI as ultra vires the Constitution of India, void ab initio and consequently forbear the 2nd respondent Bank from continuing the proceedings initiated under the provisions of SARFAESI Act 2002 as against the petitioner herein with reference to the properties namely All that piece and parcel of Southern portion of land measuring 1925 sq.feet out of 5835 sq.feet, bearing Plot No.31, Part in “Venkateswara Nagar”, New Perungalathur, Chennai-600 063, comprised in old S.No.211 and 213, Re S.Nos.211/1B and 213/1B of Perungalathur Village, Tambaram Taluk, Kancheepuram District, measuring 1860 sq.ft., bearing Plot No.22, “Venkateswara Nagar”, New Perungalathur, Chennai-600 063, comprised in S.No.213 of Perungalathur Village, Tambaram Taluk, Kanceepuram District.


the Constitution of India seeking for the relief of issuance of Writ of Declaration to declare Section 2(1)(o) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and clause 2.1 of Prudential norms on Income Recognition, Asset Classification and Provisioning pertaining to Advances issued by the 2nd respondent as ultra vires the Constitution of India, void ab initio, illegal and unconstitutional and consequently forbear the 3rd respondent from continuing the proceedings initiated under the provisions of Securitization and Reconstruction of Financial Assets and Enforcement of Security Enforcement Act, 2002 as against the petitioner with regard to the subject property.


40

the Constitution of India seeking for the relief of issuance of Writ of Declaration by declaring that Section 2(1)(o) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and Clause 2.1 of prudential norms on income Recognition, Asset Classification and Provision and Provision pertaining to Advances issued by the 2nd respondent as ultra vires the Constitution of India, void ab initio, illegal and unconstitutional and consequently forbear the 3rd and 4th

respondent Bank from continuing the proceedings initiated under the provision of Section 13(2) and 13(4) sale notice dated 10.4.2012, 26.12.2012, 24.10.2013 and 21.4.2014 of Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 as against the Petitioner, herein with reference to the subject properties.

Writ Petition in W.P.No.12506 of 2014 is filed under Article 226 of the Constitution of India seeking for the relief of issuance of writ of declaration to declare Section 2(1)(o) of the Secularization and Reconstruction of Financial Assets and Enforcement of Securities Act, 2002 and clause 2.1 of prudential norms on income Recognition, Asset Classification and provision pertaining to Advances issued by the 2nd

respondent as ultra vires the constitution of India, void ab initio, illegal and unconstitutional and consequently forbear the 3rd respondent bank from continuing the proceedings initiated under the provisions of Section 13(2) notice dated 10.08.2013 of Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 as against the petitioner herein with reference to the subject properties.

For Petitioner in W.P.Nos. : Mr.Anirudh Krishnan 5897 and 5898 of 2014

For Petitioner in W.P.Nos.7296: Mr.K.Gowtham Kumarand 7297 of 2014

For Petitioner in W.P.No.7298 : Mr.P.R.Renganath forand 7299 of 2014 Mr.N.Murali

For Petitioner in W.P.No.7390 : Mr.AR.L.Sundaresan,of 2014 Senior Counsel for

Mr.P.Satish

For Petitioner in W.P.No.7653,: Mr.S.V.Pravin Rathinam7654, 8593 to 8596, 8457 and

8458 of 2014

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For Petitioner in W.P.No.8746 : Mr.S.Seshadriand 8747 of 2014

For Petitioner in W.P.No.8766,: Mr.A.V.Raja9774 and 12318 of 2014

For Petitioner in W.P.Nos.8942,: Mr.E.Ramachandran9073,9124 and 10766 of 2014

For Petitioner in W.P.Nos.8970: Mr.A.Swaminathan9019, 9123, 9183 and 10665 of 2014

For Petitioner in W.P.Nos.9420: Mr.V.Ayyaduraiand 9421 of 2014

For Petitioner in W.P.No.9573, :Mr.S.N.Kirubanandam9649, 9825, 10007, 10304, 11042, 11078, 12462 and 12506 of 2014

For Petitioner in W.P.No.9611 : Mr.Venkatesh Mohanrajof 2014

For Petitioner in W.P.No.9671, : Mr.R.Kannan9690 and 11471 to 11474of 2014

For Petitioner in W.P.No.10656 : Mr.S.Reguof 2014For Petitioner in W.P.No.7806 : Mr.A.Selvendranof 2014

For Petitioner in W.P.No.8090 : Mr.V.Girish Kumarand 8091 of 2014

For Petitioner in W.P.No.11317 : Ms.Anuradha Balajiof 2014

For Petitioner in W.P.No.12508 : Mr.R.Sugumaran

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of 2014 and Mr.A.V.Arun

For 1st Respondent in W.P.Nos : Mr.G.Masilamani, 8746, 8747, 8942, 8970, 9019, Addl. Solicitor General for 9073, 9123, 9124, 9183, 9573, Mr.S.Udayakumar, ASGSC, 9611, 9649, 9671, 9690, 9825, 10007, 10304, 10656, 10665, 10766, 11042, 11078, 11317 & 11471 to 11474 of 2014

For 1st Respondent in W.P.Nos: Mr.G.Masilamani, 7296, 7297, 7653, 7654, 8090, Addl. Solicitor General for8091, 8457, 8458, 8593 to Mr.G.Arul Murugan,ACGSC.8596, 8766, 9420, 9421, 9774and 12318, 12462, 12506 & 12508 of 2014

For 1st respondent in W.P.Nos : Mr.G.Masilamani,5897, 5898, 7298, 7299 and Addl. Solicitor General for 7390 of 2014 Mr.N.Ramesh,CGSC

For 1st Respondent in W.P.No : Mr.G.Masilamani,7806 of 2014 Addl. Solicitor General for

Mr.S.Ravichandran,CGSC.,

For 2nd respondent in W.P.Nos : Mr.T.Poornam5897, 5898, 7296 to 7299, 7653,7654,7806, 8457, 8458, 8593, 8596, 8746, 8747,8766, 9420, 9421, 9573, 9649,

9774, 9825, 10007, 10304, 10656, 11042,11078, 12318,

12462, 12506 and 12508 of 2014, for 3rd respondent in WP.Nos.8090, 8091, 8942, 9019, 9073, 9123, 9124 9183, 9611, 9671, 9690, 10665, 10766, 11317 & 11471 to 11474 of 2014, for 5th respondent in WP.No.

8970 of 2014 and for 6th respondent in WP.No.7390 of 2014

For 3rd respondent in W.P.Nos: Mr.T.S.Golpalan & Co

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5897 and 5898 of 2014 and 2nd Respondent in WP.No.9183 of 2014

For respondents 2 & 3 in W.P.No.: Mr.F.B.Benjamin Goerge7390 of 2014, for 2nd respondent

in W.P.Nos.9611 & 11317 of 2014& for 3rd respondent in WP.Nos.12506 and 12508 of 2014

For 2nd respondent in W.P.Nos.: Mr.V.Girishkumar8942, 9073 and 9124 of 2014

For respondents 2 in W.P.Nos.: Mr.Om Prakash for 8970, 9019, 9123 and Ramalingam Associates10665 of 2014

For 2nd respondent in W.P.Nos.: Mr.M.LGanesh9671, 9690 and 11471 to 11474of 2014 and for 3rd respondent inW.P.Nos.7653, 7654, 8457, 8458, 8593 to 8596, 8766, 9573, 9649, 9825, 10007, 10304, 11042,11078& 12318 of 2014, for Respondents 3 & 4 in WP.No.12462 of 2014 and

for Respondents 3 to 5 in W.P.No.9774 of 2014

For 2nd respondent in W.P.No. : Mr.Srinath Sridevan8090 & 8091 of 2014

For 2nd respondent in W.P.No. : Mr.T.Sundar Rajan10766 of 2014

For respondents 3 & 4 in W.P.: Mr.Shivakumar &Nos.7296 to 7299 of 2014 Mr.Suresh

For respondents 3 & 4 : Mr.N.V.Srinivasan, S.C., for in W.P.No.9573 of 2014 M/s NVS & Associates

For 3rd respondent in : Mr.S.SethuramanWP.No.7806 of 2014

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For 3rd respondent in : Mr.K.S.ViswanathanW.P.Nos.9420 and 9421of 2014

COMMON ORDER

M.M.SUNDRESH,J.

The common thread that runs across all these cases is to the

constitutionality of Section 2(1)(o) of the Securitisation and Reconstruction

of Financial Assets and Enforcement of Security Interest Act, 2002, (Act

No.54 of 2002), (in short, “SARFAESI Act”) as well as the guidelines issued

by the Reserve Bank of India pertaining to the classification of assets as

“Non-Performing Assets”.

2. In all these cases, the petitioners have borrowed monies from the

respective respondent Banks. They did not repay the amounts borrowed.

Thereafter, the Banks initiated proceedings under the SARFAESI Act, 2002

after declaring the assets as "Non Performing Assets" in view of the

guidelines issued by way of the Circular by the Reserve Bank of India.

3. Being a Court of record, we would like to record the earlier

proceedings. The cases were heard at length before the other Bench in

which one of us (M.M.Sundresh,J.) was a party. After conclusion of the

arguments, the judgment was reserved. Thereafter, on the next working

45

day, two memos have been filed by the counsels on behalf of two

petitioners stating that the challenge made to the Circular was decided by

the other learned judge sitting single and the matter requires a fresh

hearing before some other Bench in which he may not be a party.

Accordingly, the cases have been posted before us giving the pleasure of

hearing the counsels once over by one of us, who was the party to the

earlier Bench.

4. Heard Mr.AR.L.Sundaresan and Mr.N.V.Srinivasan, learned

Senior Counsels and Mr..Anirudh Krishnan, Mr.K.Gowtham Kumar,

Mr.N.Murali, Mr.S.V.Pravin Rathinam, Mr.S.Seshadri, Mr.A.V.Raja,

Mr.E.Ramachandran, Mr.A.Swaminathan, Mr.V.Ayyadurai,

Mr.S.N.Kirubanandam, Mr.Venkatesh Mohanraj, Mr.R.Kannan,

Mr.S.Regu, Mr.A.Selvendran, Mr.V.Girish Kumar, Ms.Anuradha Balaji,

Mr.R.Sugumaran, Mr.A.V.Arun, the learned counsels appearing for the

petitioners and Mr.G.Masilamani, learned Additional Solicitor General,

Mr.N.Ramesh and Mr.S.Ravichandran, learned Central Government

Standing Counsels, Mr.G.Arul Murugan and Mr.S.Udayakumar, learned

Additional Central Government Standing Counsels, Mr.T.Poornam,

Mr.V.Karthik, Mr.F.B.Benjamin Goerge, Mr.V.Girishkumar, Mr.Om Prakash,

Mr.G.R.Lakshmanan, Mr.S.R.Sumathy, Mr.M.LGanesh, Mr.Srinath

Sridevan, Mr.T.Sundar Rajan, Mr.Shivakumar, Mr.S.Sethuraman and

46

Mr.K.S.Viswanathan, learned counsel appearing for respondents. We have

also perused at length the various documents filed, judgments relied upon

as well as the provisions of enactments.

5. Since number of counsels made their submissions on behalf of

both petitioners and the respondents, for the sake of brevity, we summarise

the submissions as a whole instead of referring them individually.

6. Role of Reserve Bank of India:-

When a mission was sent by then British Government, which was

wobbling in its last leg, not satisfied with the offers made, the father of the

Nation has rejected the same by saying that the sleuth of measures offered

would constitute a “post-dated cheque on a falling Bank”. Averting such a

situation is precisely the role of the Reserve Bank of India in maintaining,

monitoring, improving and developing health of the Banking Companies

and Banking in India. A stable – vibrant Banking system is a sine qua non

of a country's economy. This important function has been bestowed upon

the Reserve Bank of India as a Central Bank for the country, being the

Bankers' Bank. The Reserve Bank of India is the monitoring regulator

empowered to form the Banking policy. Such is the policy being evolved in

the interest of Banking system, monetary stability and sound economic

growth. The role of the Reserve Bank of India has been recognised by the

47

Supreme Court in JOSEPH KARUVILLA VELLUKUNNEL VS. THE

RESERVE BANK OF INDIA AND OTHERS, (AIR 1962 SC 1371), wherein

it was held as under:

“13. The power conferred on the Reserve Bank, by the section is said to be had under Article 14, because it enables a discrimination between a banking company and any other company by prescribing different laws for their respective winding up, and is bad under Art.19(1)(f) and (g) as amounting to an unreasonable restriction on the holding of property and the right to carry on business as a banking company. To amplify the first it is argued that under S.433 of the Indian Companies Act, when an application is made to wind up a company, the High Court has to be satisfied after a fair trial that an order to wind up the company is called for, and the Judge, who is independent of executive control, is completely free to reach a decision after the Company has shown cause and there is a right of appeal against the decision, if adverse to the company. But under the procedure laid down in S.38 of the Banking Companies Act the banking company proceeded against has no opportunity to show cause either before or after the winding up order, the Reserve Bank records no reasons in writing or communicates them, there is no access to Court and no hearing before the Court to determine whether the proposed action is justified, and no redress if a mistake were made. Under the exercise of that power, it is said, any banking company can be suppressed by the Reserve Bank or by the Central Government and the

48

Courts are powerless, since the opinion of the Reserve Bank and/or the Central Government is not justiciable and there is no appeal against the decision of the Reserve Bank or of the Court acting on the application of the Reserve Bank.”

7. In PEERLESS GENERAL FINANCE AND INVESTMENT

CO.LTD. AND ANOTHER VS. RESERVE BANK OF INDIA, (AIR 1962 SC

1033), the following passage of the Supreme Court would be apposite.

“53. ....... Thus, the R.B.I. occupies place of pre-eminence” to ensure monetary discipline and to regulate the economy or the credit system of the country as an expert body. It also advices the Government in public finance and monetary regulations. The banks or non-banking institutions shall have to regulate their operations in accordance with, not only as per the provisions of the Act but also the rules and directions or instructions issued by the RBI in exercise of the power thereunder.....”

The Reserve Bank of India Act, 1934:-

8. The Reserve Bank of India came into existence by the introduction

of a pre-Independence enactment viz., “Reserve Bank of India Act, 1934”.

It was introduced with the avowed object of securing monetary stability and

to operate the relationship and credit system of the country to its

advantage. The objects and reasons enshrined in Amendment Act 54 of

49

1953 would show that it was meant to ensure more effective supervision

and management of monitoring and credit system to give any financial

institution or institutions directions. Thereafter, several amendments have

been made from time to time explaining the jurisdiction of the Reserve

Bank of India. These amendments have been made taking into

consideration of the then prevailing situation and the steady progress that

the country is making in the field of economy. It was also necessitated as

the Indian financial markets have now more products, participants and

better liquidity than before. The necessity to go with any unforeseen

eventualities in future has also been taken note of. Thus, the Reserve Bank

of India is a statutory corporation constituted as monitoring and the

Banking Authority under the Reserve Bank of India Act, 1934.

The Banking Regulation Act, 1949:-

9. The Banking Regulation Act, 1949 (Act No.10 of 1949) was

enacted to consolidate and amend the laws relating to India. The need for

enacting the Banking Regulation Act was felt owning partly to the abuse of

powers by persons controlling some banks and the absence of measures

for safeguarding the interest of depositors of banking companies in

particular and partly to the economic interest of the country in general. The

collapse of a bank can affect a vast multitude of depositors. In view of

these considerations, banking business has been a highly regulated area

50

all over the world. In view of the various provisions of Banking Regulation

Act and the Reserve Bank of India Act, the Reserve Bank is obliged to see

that the banking business is carried on sound principles. The Banking

Regulation Act is a special law regulating the banking activities of banking

companies in India. Section 2 of Banking Regulation Act provides that, “the

provisions of this Act shall be in addition to, and not, save as hereinafter

expressly provided, in derogation of the Companies Act, 1956, (1 of 1956),

and any other law for the time being in force.” The primary objective of the

Companies Act is to safeguard the interest of the shareholders, but the

protection of interest of depositors of banks is not dealt with by the

Companies Act. Hence, a separate legislation for regulation of banking

companies in India was enacted by the Parliament with an intention to

protect the interest of depositors, public and banking business. Section

5(ca) of Banking Regulation Act, 1949 defines “Banking policy”, which

means any policy which is specified from time to time by the Reserve Bank

in the interest of the banking system or in the interest of monetary stability

or sound economic growth, having due regard to the interests of the

depositors, the volume of deposits and other resources of the bank and the

need for equitable allocation and the efficient use of these deposits and

resources. Section 6 of Banking Regulation Act specifies the forms of

business in which banking companies may engage. Section 21 of Banking

Regulation Act states that if the Reserve Bank is satisfied that it is

51

necessary or expedient in public interest or in the interests of depositors or

banking policy so to do, it may determine the policy in relation to advances

to be followed by banking companies generally or by any banking company

in particular and the banking company concerned, as the case may be,

shall be bound to follow the policy as so determined. Section 22 of the

Banking Regulation Act states that no company can carry on banking

business in India, unless, it holds a license in this behalf issued by the

Reserve Bank. Section 22(4) of the Banking Regulation Act empowered

the Reserve Bank to cancel the license of the banking company granted to

carry on banking business, in the facts and circumstances stated therein.

Section 35 of the Banking Regulation Act conferred the powers on the

Reserve Bank to carry on statutory inspection of books of accounts of any

banking company or cause a scrutiny into the affairs of a banking

company. Section 35-A of the Banking Regulation Act confers the powers

on the Reserve Bank to issue directions to banking companies in general

or any banking company in particular in the public interest or in the interest

of the banking policy or to prevent the affairs of the banking company being

conducted in a manner detrimental to the interest of its depositors or in a

manner prejudicial to the banking company etc. The Banking Regulation

Act envisages action to be taken by the Reserve Bank when the Revenue

Bank is satisfied that circumstances warrant such action.

52

10. Thus, a conjoint reading of Section 5(ca), Section 21 and Section

35-A would lead us to the necessary conclusion that the Reserve Bank of

India has got ample powers to issue appropriate directions to the Banking

Companies. Considering the scope and ambit of Section 21 and Section

35-A of the Banking Regulation Act, 1949, it has been held by the Supreme

Court in CENTRAL BANK OF INDIA VS. RAVINDRA AND OTHERS,

((2002) 1 SCC 367) as under:

“55. ........ (5) The power conferred by Sections 21 and 35A of the Banking Regulation Act, 1935 is coupled with duty to act. Reserve Bank of India is prime banking institution of the country entrusted with a supervisory role over banking and conferred with the authority of issuing binding directions, having statutory force, in the interest of public in general and preventing banking affairs from deterioration and prejudice as also to secure the proper management of any banking company generally. Reserve Bank of India is one of the watchdogs of finance and economy of the nation. It is, and it ought to be, aware of all relevant factors, including credit conditions as prevailing, which would invite its policy decisions........”

Master Circular:

11. The prudential norms issued by the Reserve Bank of India were

introduced in the year 1992, vide Circular DBOD No.BC.129/21.04.043/92

53

dated April 27, 1992 on 'Income Recognition, Asset Classification,

Provisioning and Other Related Matters. In terms of the said circular, “For

the year ending 31 March 1993, a term loan will be treated as “NPA” if

interest remains past due for a period of four quarters as on that date. For

the year ending 31 March, 1994 and 31 March, 1995 and onwards, a loan

will be treated as "NPA" if interest remains past due for three quarters and

two quarters respectively” Similar norms were prescribed for other kinds of

credit facilities. However, in order to align the prudential norms with the

international benchmarks the Reserve Bank had stipulated, vide Circular

DBOD.No.BP.BC.116/21.04.048/2000-2001 dated May 2, 2001 that, with

effect from March 31, 2004, a non-performing asset (NPA) shall be a loan

or an advance interest and/or installment of principal remain overdue for a

period of more than 90 days in respect of a term loan. Further, similar

norms were issued for other types of credit facilities also. Reserve Bank's

norms for asset classification have evolved over a period and 90 days

delinquency norms were brought in through a calibrated manner in an

effort to benchmark the Reserve Bank's prudential regulations to the

international standards. These prudential norms are one of the building

blocks for financial soundness of Indian banks and any deviation would

render the banking system weaker. These guidelines are applicable to all

banks. Further, any delay in recognition of deterioration in asset quality

removes pressure on the banks to deal promptly with the problem.

54

12. These norms have been amended from time to time and

consolidated into a Master Circular once in a year. These Master Circulars

have been issued in exercise of the powers conferred and mandated

under Sections 21 and 35-A of the Banking Regulation Act, 1949. The

latest Master Circular was updated on July 1, 2013. There is no dispute

that these Master Circulars have got statutory flavour as held by the

Supreme Court in ICICI BANK LTD. VS. OFFICIAL LIQUIDATOR OF APS

STAR INDUSTRIES LIMITED AND OTHERS, ((2010) 10 SCC 1).

13. Paras 2 and 4.2.4 of the Circular defines “Non Performing Asset”

as under:-

“2. DEFINITIONS.

2.1 Non performing Assets2.1.1 An asset, including a leased asset, becomes non

performing when it ceases to generate income for the bank.2.1.2 A non performing asset (NPA) is a loan or an

advance where;i. interest and/or instalment of principal remain overdue

for a period of more than 90 days in respect of a term loan,

ii. the account remains 'out of order' as indicated at paragraph 2.2 below, in respect of an Overdraft/Cash Credit (OD/CC),

iii. the bill remains overdue for a period of more than 90 days in the case of bills purchased and discounted,

55

iv. the instalment of principal or interest thereon remains overdue for two crop seasons for short duration crops,

v. the instalment of principal or interest thereon remains overdue for one crop season for long duration crops.

vi. the amount of liquidity facility remains outstanding for more than 90 days, in respect of a securitisation transaction undertaken in terms of guidelines on securitisation dated February 1, 2006.

vii. in respective of derivative transactions, the overdue receivables representing positive mark-to market value of a derivative contract, if these remain unpaid for a period of 90 days from the specified due date for payment.

2.1.3 In case of interest payments, banks should, classify an account as NPA only if the interest due and charged during any quarter is not serviced fully within 90 days from the end of the quarter.

2.1.4 In addition, an amount may also be classified as NPA in terms of paragraph 4.2.4 of this Master Circular.

2.2 'Out of Order' status:

An account should be treated as 'out of order' if the

outstanding balance remains continuously in excess of the sanctioned limit/drawing power. In cases where the outstanding balance in the principal operating account is less than the sanctioned limit/drawing power, but there are no credits continuously for 90 days as on the date of Balance Sheet or credits are not enough to cover the interest debited during the same period, these accounts should be treated as

'out of order'.

56

2.3 'Overdue'Any amount due to the bank under any credit facility is

'overdue' if it is not paid on the due date fixed by the bank.

3. ........4. ASSET CLASSIFICATION4.1 ......4.2. .....

4.2.4 Accounts with temporary deficienciesThe classification of an asset as NPA should be based on the record of recovery. Bank should not classify an advance account as NPA merely due to the existence of some deficiencies which are temporary in nature such as non-availability of adequate drawing power based on the latest available stock statement, balance outstanding exceeding the limit temporarily, non-submission of stock statements and non-renewal of the limits on the due date, etc., in the matter of classification of accounts with such deficiencies banks may follow the following guidelines:

i) Banks should ensure that drawings in the working capital accounts are covered by the adequacy of current assets, since current assets are the first appropriated in times of distress. Drawing power is required to be arrived at based on the stock statement which is current. However, considering the difficulties of large borrowers, stock statements relied upon by the banks for determining drawing power should not be older than three months. The outstanding in the account based on drawing power calculated from stock statements

57

older than three months, would be deemed as irregular.A working capital borrowal account will become NPA if

such irregular drawings are permitted in the account for a continuous period of 90 days even though the unit may be working or the borrower's financial positi9on is satisfactory.

ii) Regular and ad hoc credit limits need to be reviewed/regularised not later than three months from the due date/date of ad hoc sanction. In case of constrains such as non-availability of financial statements and other data from the borrowers, the branch should furnish evidence to show that renewal/review of credit limits is already on and would be completed soon in any case, delay beyond six months is not considered desirable as a general discipline. Hence, an account where the regular/ ad hoc credit limits have not been reviewed/renewed within 180 days from the due date/date of ad hoc sanction will be treated as NPA.”

14. Such accounts classified as "Non Performing Assets" would be

upgraded in terms of 4.2.5 of the Master Circular, provided the arrears of

interest and principle are paid by the borrower. In such a case, the

accounts should no longer be treated as “Non performing” and may be

classified as “Standard Accounts”.

15. Under the present Master Circular, the impugned Paragraphs

restrict the period to treat the asset or an account as a “Non Performing”

after the expiry of 90 days. This Circular has been issued by the Reserve

58

Bank of India by taking into consideration of the two reports of the Expert

Committee by name “M.Narasimham Committee” upon taking note of the

public interest of depositors, transparency, uniformity and stability of the

Banking system as well as the prevailing International practice. Thus, the

Reserve Bank of India has introduced Circular in exercise of powers

conferred under Banking Regulation Act, 1949.

16. The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002:-

The Securitisation and Reconstruction of Financial Assets and

Enforcement of Security Interest Act, 2002, (Act No.54 of 2002), (in short,

“SARFAESI Act”), as it is called in the abbreviated form, has been has

been introduced by taking note of the slow process of recovery of

defaulting loans and mounting levels of Non Performing Assets of Banks

and Financial Institutions. It has also taken into consideration of two reports

of the Narasimham Committee as well as that of Andhyarujina Committee

constituted by Central Bank of India for the purpose of examining Banking

Sector Reforms. The enactment is a novel mechanism addressing the

need of the ever in making timely recovery. Section 2(1)(ha), which is a

provision containing definition of “debt” borrows the meaning assigned to it

in Clause (g) of section 2 of the Recovery of Debts due to Banks and

Financial Institutions Act, 1993 (Act No.51 of 1933). Section 2(1)(o) defines

59

"Non Performing Asset" in the following manner:

“non-performing asset” means an asset or account of a borrower, which has been classified by a bank or financial institution as sub-standard. Doubtful or loss asset.”

17. Under Section 2(1)(o), which is once again a definition clause, a

classification of a "Non Performing Asset" will have to be done in

accordance with the directions or guidelines relating to Assets

Classification issued by the Reserve Bank of India from time to time. When

once asset is treated as a “Non-performing Asset”, in accordance with the

guidelines issued by the Supreme Court of India by the respective Banks

pertaining to borrowers, then the rigour of the recovery machinery in

Chapter III, which deals with “Enforcement of Security Interest” would be

put into action. It is this provision, which adopts the directions/guidelines

relating to assets Classification issued by the Reserve Bank of India, has

been put to challenge before us as unconstitutional.

Other Enactments:-

18. Much prior to Act No.54 of 2002, the Recovery of Debts due to

Banks and Financial Institutions Act, 1993 (Act No.51 of 1993) came into

being. Even though the object of this enactment is akin to the object as

enshrined in Act No.54 of 2002, the mode of recovery is different. Under

this Act, in order to recover a debt, a Bank or a Financial Institution will

60

have to have its recourse through a Tribunal constituted. Section 2(g) of

Act No.51 of 1993 defines “debt” and the definition of the word “debt”

therein is rather exhaustive. It encompasses any liability, inclusive of

interest and such a debt will have to be a liability on the part of the

borrower, which is required to be a legally recoverable one on the date of

the application. This definition of 'debt' as envisaged under Act 51 of 1993

has been borrowed and adopted by Act No.54 of 2002. There are other

enactments like Sick Industrial Companies (Special Provisions) Act, 1985,

The Competition Act, 2002, The Companies Act, 1956, etc., The objects

and reasoning of these enactments are totally different. The objects of

these enactments is not with respect of the recovery. Therefore, they have

their own internal mechanism to deal with the object sought to be achieved

such as helping a Company from being sick, regulate the competition and

proper administration of the companies.

Relevant Judicial Pronouncements:-

19. The Supreme Court in Mardia Chemicals Limited and others

Vs. Union of India and others, ((2004) 4 SCC 311) upheld the challenge

made to the validity of Act No.54 of 2002. One of the contentions raised

was as to whether on the whims and fancies of the financial institutions,

classification of assets as Non-Performing Assets” can be made. While

61

dealing with the said issue, the Supreme Court took note of the Reserve

Bank of India's prudential norms of Income Recognition, Asset

Classification and Provisioning – pertaining to advances to the Circular

dated 30.8.2001 and said that in view of the said guidelines it cannot be

said that there are no parameters for treating the 'debt' as a "Non

Performing Asset". Accordingly, we believe that the challenge made to

these enactments will have to be seen in the light of the ratio laid down by

the Supreme Court. Further, the very same provision, which is sought to

be declared as unconstitutional before us – Section 2(1)(o) of Act No.54 of

2002 has been challenged by the borrowers before the Delhi as well as the

Gujarat High Courts. Both these High Courts have upheld this provision in

HOLYSTAR NATURAL RESOURCES PVT.LTD. AND ANOTHER VS.

UNION OF INDIA AND ANOTHER, (MANU/DE/0130/2014 = AIR 2014

DELHI 60) (W.P (C) No.7505/2013) of Delhi High Court dated 17.01.2014

and IONIK METALLICS AND OTHERS VS. UNION OF INDIA in

SCA.No.14908 of 2012 etc., batch dated 24.4.2014 of High Court of

Gujarat at Ahmedabad.

20. Submissions of the petitioners:-

Learned counsels appearing for the petitioners submitted that

issuing directions or guidelines relating to Asset Classification is essential

62

legislative function and therefore it cannot be delegated. A delegate cannot

formulate a policy. A delegated legislation, if exercised, is liable to be

struck down as unconstitutional. The decisions rendered in Mardia

Chemicals Limited and others Vs. Union of India and others, ((2004) 4

SCC 311) does not cover the issues raised in these writ petitions. The said

decision cannot be termed as a binding precedent. The issues, which have

not been decided on conscious consideration, cannot be termed as binding

precedents. The observations made by the Supreme Court are obiter.

Therefore, the said decision cannot be termed as a ratio decidendi. The

guidelines issued by the Reserve Bank of India cannot be used for defining

a "Non Performing Asset" under the SARFAESI Act. There has to be a

separate legislation, as provided under Section 38 of the SARFAESI Act.

Considering the rigour of Act No.54 of 2002, the definition of "Non

Performing Asset" as mentioned in the guidelines of Reserve Bank of India

cannot be imported. The High Court of Delhi has misconstrued itself on the

scope and the decision rendered by the Supreme Court. The question of

excessive delegation has not been considered by the Gujarat High Court. If

there is no delegated legislation, then the doctrine of legislation by

reference or incorporation would apply. Even in such a case, the

subsequent decision made by way of Circular by the Reserve Bank of India

cannot be made applicable. The word “legally recoverable debt” has not

63

been defined in both Act No.54 of 2002 and Act No.51 of 1993. A mere

liability cannot be termed as a 'debt'. Interest component cannot be added

into a 'debt'.

21. It is further contended on behalf of the petitioners that the

Circular, which defines "Non Performing Asset" is very vague. There is

ambiguity between the different classifications of the circular. "Non

Performing Asset" has been defined first and thereafter the classifications

have been made. There is no necessity to challenge Sections 21 and

Section 35-A of the Banking Regulation Act, 1949. Even otherwise, they do

not empower the Reserve Bank of India to issue the impugned Circular.

Even assuming that an enactment was constitutional at an earlier point of

time there is no bar to challenge its constitutionality based upon

subsequent facts. There is no basis for the classification made. The

international market alone cannot be a criteria to fix "Non Performing

Asset" without considering the local conditions. In support of the said

contentions, learned counsels have made reliance upon the following

judgments:

(1) HAMDARD DAWAKHANA VS. UNION OF INDIA, (AIR 1960 SC 554),

(2) VASANTLAL MAGANBHAI VS. STATE OF BOMBAY, (AIR 1961 SC 4),

(3) B.SHARMA RAO VS. U.T. OF PONDICHERRY, (AIR 1967 SC

64

1480),(4) DEVI DASS GOPAL KRISHNAN VS. STATE OF PUNJAB, (AIR

1967 SC 1895),

(5) HARAK CHAND RATANCHAND VS. UNION OF INDIA, ((1969) 2 SCC 166 = AIR 1970 SC 1453),

(6) GULABCHAND BAPLAL VS. MUNICIPAL CORPORATION OF AHMEDABAD, ((1971) 1 SCC 823),

(7) GWALIOR RAYON VS. ASST.COMMISSIONER OF SALES TAX, ((1974) 4 SCC 98),

(8) M.K.PAPIAH VS. THE EXCISE COMMISSIONER, (1975) 1 SCC 492),

(9) MAHE BEACH TRADING CO. VS. U.T. OF PONDICHERRY, ((1996) 3 SCC 741),

(10) HOLYSTAR NATURAL RESOURCES VS. UNION OF INDIA, (AIR 2014 DELHI 60),

(11) AIR INDIA VS. NARGESH MEERZA ((1981) 4 SCC 335),(12) KRISHNA MOHAN VS. MUNICIPAL CORPORATION OF DELHI,

((2003) 7 SCC 151),

(13) UNION OF INDIA VS. BHANA MAL ((1960) 2 SCR 627), (14) MARDIA CHEMICALS VS. UNION OF INDIA, ((2004) 4 SCC

311), (15) SANJEEVANI DYEING MILLS VS. UNION OF INDIA (Spl.Leave

to Appeal (c) No.26889 of 2013), dated 8.7.2013 of Supreme Court, in S.C.A.No.10494 of 2013 of High Court of Gujarat at

Ahmedabad.),

(16) ZEE TELEFILMS LTD. AND ANOTHER VS. UNION OF INDIA AND OTHERS, ((2005) 4 SCC 649),

(17) PURBANCHAL CABLES AND CONDUCTORS PVT.LTD VS. ASSAM STATE ELECTRICITY BOARD AND ANOTHER, ((2012) 7 SCC 462),

65

(18) MUNICIPAL CORPORATION OF DELHI VS. GURNAM KAUR, ((1989) 1 SCC 101),

(19) ARNIT DAS VS. STATE OF BIHAR, ((2000) 5 SCC 488),(20) TIKA RAM VS. STATE OF U.P. AND OTHERS, ((2009) 10 SCC

689),(21) LANCASTER MOTOR COMPANY LIMITED VS. BREMITH

LIMITED, ((1941) 1 K.B. 675), (22) VISHNU TRADERS VS. STATE OF HARYANA AND OTHERS,

((1995) SUPP (1) SCC 461) and

(23) STATE OF U.P. VS. STATE OF HARYANA AND OTHERS, ((2011) 5 SCC 305).

Submissions of Respondents:

22. The Writ Petitions are not maintainable either on facts and law.

The issues raised are no longer res integra and they are already covered

by the decision rendered by the Supreme Court in Mardia Chemicals

Limited and others Vs. Union of India and others, ((2004) 4 SCC 311)

and therefore it is not open to the petitioners to re-agitate the same. The

constitutionality of an Act once upheld by the Supreme Court would bring

about finality and hence the same is not open to be challenged on new

grounds. Once an Act as a whole is upheld, its provisions cannot be

independently challenged. The Supreme Court has recognised rule making

powers of the Reserve Bank of India giving statutory flavour. There is no

delegated legislation, reference legislation or legislation by incorporation

66

involved. The enactment merely borrows a definition clause from the

Circular. Declaring a "Non Performing Asset" is an accounting concept. It

includes both secured and unsecured assets. There is a presumption

towards the constitutionality of the enactments. Therefore, both Act No.54

of 2002 and Act No.10 of 1949 are constitutionally valid. The petitioners

indirectly seek to challenge Sections 21 and 35A of Act 10 of 1949, which

is impermissible in law. If Section 2(1)(o) is a legislation by reference, even

then, there is no unconstitutionality. The legislation has got power to create

an authority with the legislating powers. It has not been demonstrated as to

how the constitutional provisions have been violated. A delegated

legislation cannot be set aside only on the ground of uncontrolled and

vague powers on the delegate. It cannot also be set aside as excessive

delegation without considering the attending factors. When it comes to

economic matters, a greater latitude is required and the Court of law shall

not venture into the specialised field by acting as superior authority. In

support of the said contentions, the following decisions have been relied

upon.

(1) JOSEPH KURUVILLA VELLUKUNNEL VS. RESERVE BANK OF INDIA, (AIR 1962 SC 1371(1)),

(2) PEERLESS GENERAL FINANCE AND INVESTMENT CO.LTD. AND ANOTHER VS. RESERVE BANK OF INDIA, (AIR 1962 SC 1033),

67

(3) THE REGISTRAR OF COOPERATIVE SOCIETIES AND ANOTHER VS. K.KUNJAMBU AND OTHERS, (AIR 1980 SC 350),

(4) THE CONSUMER ACTION GROUP VS. STATE OF TAMIL NADU, ((2000) 7 SCC 425),

(5) KISHAN PRAKASH SHARMA AND OTHERS VS. UNION OF INDIA AND OTHERS, ((2001) 5 SCC 212),

(6) UNION OF INDIA VS. AZADI BACHOO ANDOLAN AND ANOTHER, ((2004) 10 SCC 1),

(7) GOVERNMENT OF A.P. AND OTHERS VS. P.LAXMI DEWVI (SMT), ((2008) 4 SCC 720),

(8) BANGALORE DEVELOPMENT AUTHORITY VS. AIRCRAFT EMPLOYEES COOPERATIVE SOCIETY LIMITED AND OTHERS, ((2012) 3 SCC 442),

(9) R.K.GARG VS. UNION OF INDIA, ((1981) 4 SCC 675), (10) MARDIA CHEMICALS LTD. AND OTHERS VS. UNION OF

INDIA AND OTHERS, ((2004) 4 SCC 311);(11)DELHI CLOTH AND GENERAL MILLS LTD. VS.

SHAMBUNATH MUKHERJI AND OTHERS ( 1977) 4 SCC 415);

(12) BANK OF BARODA VS. REDNAM NAGACHAYA DEVI, ((1989) 4 SCC 470),

(13) DIRECTOR OF SETTLEMENTS A.P. AND OTHERS VS. M.R.APPARAO AND ANOTHER, ((2002) 4 SCC 638),

(14) K.RAKKIANNA GOUNDER VS. THE STATE OF TAMIL NADU, SOCIAL WELFARE DEPARTMENT AND ANOTHER, (CDJ 2009 MHC 1919),

68

(15) K.R.CHANDRASEKARAN AND OTHERS VS. UNION OF INDIA, (CDJ 2012 MHC 2078),

(16) CENTRAL BANK OF INDIA VS. RAVINDRA AND OTHERS, ((2002) 1 SCC 367),

(17) ICICI BANK LTD. VS. OFFICIAL LIQUIDATOR OF APS STAR INDUSTRIES LIMITED AND OTHERS, ((2010) 10 SCC 1);

(18) SUDHIR SHANTILAL MEHTA VS. CENTRAL BUREAU OF INVESTIGATION ((2009) 8 SCC 1),

(19) RAKESH VIJ VS. RAMINDER PAL SINGH SETHI AND OTHERS, ((2005) 8 SCC 504),

(20) SNEH ENTERPRISES VS. COMMISSIONER OF CUSTOMS ((2006) 7 SCC 714),

(21) SINGHAI RAKESH KUMAR VS. UNION OF INDIA AND OTHERS, ((2001) 1 SCC 364),

(22) B.KRISHNA BHAT VS. STATE OF KARNATAKA, ((2001) 4 SCC 227),

(23) ST.JOHNS TEACHER TRAINING INSTITUTE VS. REGIONAL DIRECTOR, NATIONAL COUNCIL FOR TEACHER EDUCATION AND OTHERS, ((2003) 3 SCC 321),

(24) STATE OF M.P. AND ANOTHER VS. BHOLA ALIAS BHAIRON PRASAD (RAGHUVANSHI ((2003) 3 SCC 1),

(25) T.VELAYUDHAN ACHARI AND ANOTHER VS. UNION OF INDIA, ((1993) 2 SCC 582),

(26) K.T.PLANTATION PRIVATE LIMITD AND ANOTHER VS. STATE OF KARNATAKA, ((2011) 9 SCC 1),

69

(27) BANGALORE DEVELOPMENT AUTHORITY VS. AIRCRAFT EMPLOYEES CO-OPERATIVE SOCIETY AND OTHERS, ((2012) 3 SCC 442),

(28) CANARA BANK VS. P.R.N.UPADHYAYA AND OTHERS, ((1998) 6 SCC 526),

(29) SARDAR ASSOCIATES AND OTHERS VS. PUNJAB & SIND BANK AND OTHERS, ((2009) 8 SCC 257),

(30) SIGNAL APPARELS PVT.LTD. VS. CANARA BANK, ((2010) 5 SCC 337),

(31) COMMON CAUSE VS. UNION OF INDIA, ((2010) 11 SCC 528),

(32) HOLYSTAR NATURAL RESOURCES VS. UNION OF INDIA, (AIR 2014 DELHI 60),

(33) TIKA RAM VS. STATE OF U.P. AND OTHERS, ((2009) 10 SCC 689),

(34) JYOTI PERSHAD VS. THE ADMINISTRATOR FOR THE UNION TERRITORY OF DELHI, (AIR 1961 SC 1602),

(35) TATA IRON AND STEEL CO.LTD. VS. THE WORKMEN AND OTHERS, (AIR 1972 SC 1917),

(36) SRI SRINIVASA RICE AND FLOOR MILL VS. AUTHORIZED OFFICER, STATE BANK OF INDIA AND ANOTHER, (AIR 2007 AP 252),

(37) SHRI MULRAJ JAYANTILAL SHETH VS. THE GOVERNOR, RESERVE BANK OF INDIA AND ANOHTER, (AIR 2003 BOMBAY 318),

(38) TRANSCORE VS. UNION OF INDIA, (AIR 2007 Supreme Court 712),

(39) A.KASINATHAN VS. THE BRANCH MANAGER, CANARA

70

BANK, (2012 WRIT LR 640), (MADURAI BENCH OF MADRAS HIGH COURT),

(40) DEVI ISPAT LIMITED AND ANOTHER VS. STATE BANK OF INDIA AND OTHERS, (SLP (C) NO.19466 OF 2013) and,

(41) RAJAN AGARWAL AND ANOTHER VS. THE AUTHORISED OFFICER FOR ING VYSYA BANK LTD. AND OTHERS (W.P.NO.1066 OF 2012, DT.10.4.2012 OF KARNATAKA HIGH COURT AT BANGALORE.

Discussion:

(a) Ratio decidendi:-

23. The Supreme Court in Mardia Chemicals Limited and others

Vs. Union of India and others, ((2004) 4 SCC 311) dealt with the

submissions made on the lack of guidelines in declaring asset

classifications. Taking note of the Circular dated 30.8.2001 issued by he

Reserve Bank of India, the Supreme Court came to the conclusion that the

financial institutions are not fixing their own norms in view of the specific

directions issued by Reserve Bank of India. From the said observation, it is

therefore clear that the guidelines of Reserve Bank of India, which are also

sought to be impugned before us, have been taken into consideration.

Similarly, the scope and ambit of Act No.54 of 2002 has also been

discussed and approved by the Supreme Court. Therefore, on these two

issues, the decisions referred supra would govern the cases. However, we

71

note that there was no challenge to the constitutionality of Section 2(1)(o)

pertaining to the power of the external agency vis-a-vis the adoption by the

Legislature. We are also of the view that the High Courts of Delhi and

Gujarat after holding that the decision in Mardia Chemcials, ((2004) 4

SCC 311) would hold the field, none the less went into the merits. In the

same way, as we propose to go into the contentions raised on merits, we

do not venture into the submissions made on the binding nature of the

decision rendered by the Supreme Court referred supra. We only observe

that atleast to the extent of the availability of guidelines, the object of the

enactment and the rigour of recovery mechanism would be binding on us,

while deciding the issues raised. In such view of the matter, we are also not

willing to go into the submission made that the constitutionality of the Act

upheld earlier can be challenged subsequently based upon new facts.

(b) The SARFAESI Act, 2002 and The Banking Regulation Act, 1949:-

24. Admittedly, Reserve Bank of India is the only body, which can

formulate the Banking policies. Definition of “Banking Policy” under Section

5(ca) of the Banking Regulation Act is rather wide and extensive. Such a

policy is to be evolved by Reserve Bank of India in the interest of Banking

System or monetary stability or sound economic growth, having due regard

to the interests of the depositors, the volume of deposits, other resources

72

of the Bank, the need for equitable allocation and the efficient use of

deposits and resources. It only means that the control of the Reserve Bank

of India is all pervasive. Any other interpretation would defeat the very

object of Act No.10 of 1949. The Reserve Bank of India Act is made in

public interest and with a mandatory duty to formulate a statutory,

comprehensive and formal structure of banking regulations and

supervisions.

25. We have already discussed the scope and ambit of Section 21

read with Section 35A of the Act No.10 of 1949. Admittedly, the said

provisions have not been challenged as unconstitutional or ultra vires the

Constitution. The SARFAESI Act, 2002 as well as the Banking Regulation

Act, 1949 act on different fields. The objects and reasons, as discussed

above, enshrined in both the enactments, are totally different. When it

comes to issuing direction to the Banks as well as the Financial Institutions,

the power is vested only with the Reserve Bank of India alone. Such a

power has already been in existence much prior to the existence of

SARFAESI Act, 2002. The subsequent enactment has taken into

consideration of the earlier enactment. As seen from the preamble of the

enactment, two of the Narasimhan Committee reports have been taken into

consideration. Therefore, it is a conscious decision by the Legislature to

adopt the definition of "Non Performing Asset" as decided by the Reserve

73

Bank of India into the subsequent enactment. The subsequent enactment

does not deal with the definition of "Non Performing Asset", which is not its

object and intent. On the contrary, it merely provides for a mechanism to

recover the debt. The Legislature has taken into consideration of serious

prevailing situation of ever mounting debts. Admittedly, it has a chain

reaction on the economy of the country affecting millions of people. Unless

a recovery is made, a loan cannot be given for a needy project.

26. The SARFAESI Act, 2002 merely recognises the powers of

Reserve Bank of India. Therefore, once a validly exercised power is

recognised, which has been given to an expert body constituted for that

purpose, then the consequence would follow. The consequence would not

trickle upon the mechanism provided under the earlier Act, but the

subsequent one as well. There is no bar in law that the subsequent

enactment cannot borrow a classification, which is available in exercise of

the power conferred under the earlier Act. The Legislature has deliberately

thought fit to avoid repugnancy. The Legislature has also in its wisdom has

thought that having constituted a specialised body, it cannot take its role in

a different form for the implementation of a different purpose. After all,

there is little room for any arbitrariness on the policy of the Reserve Bank of

India, which is based upon empirical data and materials. When under law

both the enactments are presumed to be valid, then they have to be

74

allowed to operate in their own fields. The formulation of a policy regarding

classification of an asset does not do anything with the SARFAESI Act,

2002. The subsequent enactment merely borrows the definition. Therefore,

there is no necessity for the Legislature to classify an asset as "Non

Performing Asset" in view of the specific provision contained in the other

enactment.

27. Section 2(1)(o) of the SARFAESI Act, 2002 merely deals with the

definition of "Non Performing Asset". This definition will have to be

construed only for the purpose of recovery. Even though an attempt has

been made to compare Chapter II and Chapter III of Act No.54 of 2002, it is

apparently very clear that they operate in their own spheres. The

determination of asset “classification” is required only for the purpose of

recovery. There cannot be two definitions of “non-performing asset”

applicable to the same banks. Similarly, the argument made that there is a

discrepancy between the definition of "Non Performing Asset" under the

enactment as against the “Asset Classification” made under the Master

Circular with respect to sub-standard asset, doubtful asset or loss asset

cannot be countenanced, as the same cannot be the basis for declaring

the enactment as unconstitutional. It is no doubt that a sub-standard,

doubtful or loss asset would become a "Non Performing Asset". Therefore,

the definition of "Non Performing Asset" under the Master Circular and the

75

subsequent categorisation of a sub-standard, doubtful or loss asset would

not make the provision ultra vires nor it would make the norms as

unconstitutional.

(c) Delegated Legislation, Legislation by reference and Legislation by Incorporation:-

28. Much arguments have been made by the petitioners' counsels

that there cannot be any delegated legislation and if it is permissible, it

would be excessive, as the essential legislative functions cannot be

delegated. Law on this subject has been crystallised for quite some time.

We do not like to reiterate the said position of law by once again

undertaking the exercise already done through various pronouncements of

the Supreme Court as well as the High Courts of Delhi and Gujarat. We

just take note of the settled position of law that a delegated legislation is

constitutionally permissible. A delegated legislation permits utilisation of

experience and consultation of interest effected by the practical operation

of statutes. An excessive delegation will have to be decided having regard

to the subject matter, scheme, provisions of the statute including its

preamble and the facts and circumstances of the background of which the

statute is enacted. The authority to whom it is delegated is also an

important factor to be noted. It is not possible for the Legislature to enact

laws with minute details to deal with increasing complexity of governance in

76

a political democracy, that too, in economic matters. Useful reference can

be made to the following decisions:

1. B.KRISHNA BHAT VS. STATE OF KARNATAKA, ((2001) 4 SCC 227),

2. ST.JOHNS TEACHER TRAINING INSTITUTE VS. REGIONAL DIRECTOR, NATIONAL COUNCIL FOR TEACHER EDUCATION AND OTHERS, ((2003) 3 SCC 321),

3. K.T.PLANTATION PRIVATE LIMITD AND ANOTHER VS. STATE OF KARNATAKA, ((2011) 9 SCC 1) and

4. BANGALORE DEVELOPMENT AUTHORITY VS. AIRCRAFT EMPLOYEES CO-OPERATIVE SOCIETY AND OTHERS, ((2012) 3 SCC 442).

29. However, the question for consideration before us is, as to

whether there is indeed any delegated legislation or not. We are of the view

that there is no delegated legislation involved in the case on hand. As

discussed above, the power exercised by the Reserve Bank of India in a

separate enactment has been taken note of by the Legislature in the

subsequent one. It is only a definition clause, which has been adopted by

the Legislature. This has been done to put its machinery into use towards

its avowed object of activity – appropriate recovery. Therefore, we do not

find any delegated legislation involved and therefore contentions raised on

the power of delegation and thereafter it is excessive, has no force. We

only observe for the sake of completion, that even assuming that there is a

delegated legislation involved, the same is not excessive as there are

77

sufficient guidelines available in the earlier enactment and based upon

which the Circular has been issued by the Reserve Bank of India, being a

specialised body.

30. Coming to the question of legislation by reference, or

incorporation, we are of the view that there is no express reference of any

statute under section 2(1)(o). While the discussion made earlier would

apply to this issue as well, there is no difficulty in appreciating the fact that

the Legislature has taken note of the earlier enactment. A reference can

also be by way of adoption. When an adoption is made, the mechanism

available under the earlier enactment would ipso facto apply to subsequent

one with its future changes. A legislation by incorporation would involve

uplifting the words from one statute applying to the second and that is not

the situation before us. As we observed earlier, the power available under

the earlier enactments has been taken note of in the subsequent

enactment. We do not find how it becomes unconstitutional as a definition

is merely made by the Legislature when the job of doing the same is

already conferred to an authority in the other enactment. The question of

using or introducing a definition is one of convenience. In other words,

there is no law which mandates that an enactment should have the

definition on its own. An attempt will have to be made always by the Courts

to reconcile the enactments.

78

31. The determination, whether a Legislation is one of incorporation

or reference is more a matter of construction. A Court of law will have to

see whether a law made by the Legislature is meant for a public purpose.

In this connection, useful reference can be made to the decision rendered

by the Supreme Court in RAKESH VIJ VS. RAMINDER PAL SINGH

SETHI AND OTHERS, ((2005) 8 SCC 504), wherein it was held as under:

“28. Adopting or applying an earlier or existing Act by

competent Legislature to a later Act is an accepted device of Legislation. If the adopting Act refers to certain provisions of an earlier existing Act, it is known as legislation by reference. Whereas if the provisions of another Act are bodily lifted and incorporated in the Act, then it is known as legislation by incorporation. The determination whether a legislation was by way of incorporation or reference is more a matter of construction by the courts keeping in view the language employed by the Act, the purpose of referring or incorporating provisions of an existing Act and the effect of it on the day-to-day working. Reason for it is the courts’ prime duty to assume that any law made by the Legislature is enacted to serve public purpose.”

32. The question was considered by a Three Judge Bench of the

Supreme Court in Nagpur Improvement Trust etc. vs. Vasantrao & Ors.

[(2002) 7 SCC 657], and observed as under:-

79

"...... The law on the subject is well settled. When an earlier Act or certain of its provisions are incorporated by reference into a later Act, the provisions so incorporated become part and parcel of the later Act as if they had been bodily transposed into it. The incorporation of an earlier Act into a later Act is a legislative device adopted for the sake of convenience in order to avoid verbatim reproduction of the provisions of the earlier Act into the later. But this must be distinguished from a referential legislation which merely contains a reference or the citation of the provisions of an earlier statute. In a case where a statute is incorporated, by reference, into a second statute, the repeal of the first statute by a third does not affect the second. The later Act along with the incorporated provisions of the earlier Act constitutes an independent legislation which is not modified or repealed by a modification or repeal of the earlier Act. However, where in a later Act there is a mere reference to an earlier Act, the modification, repeal or amendment of the statute that is referred, will also have an effect on the statute in which it is referred. It is equally well settled that the question whether a former statute is merely referred to or cited in a later statute, or whether it is wholly or partially incorporated therein, is a question of construction."

The said decision was followed by the Supreme Court in Kanak

(SMT) & Anr. vs. U.P. Avas Evam Vikas Parishad & Ors. [(2003) 7 SCC

693] and Sneh Enterprises Vs. Commissioner of Customs, New Delhi,

[(2006) 7 SCC 714].

80

33. The Supreme Court in Bajaya v. Gopikabai, (1978) 2 SCC

542), held as follows:

"Broadly speaking, legislation by referential incorporation falls in two categories. First, where a statute by specific reference incorporates the provisions of another statute as of the time of adoption. Second, where a statute incorporates by general reference the law concerning a particular subject, as a genus. In the case of the former, the subsequent amendments made in the referred statute cannot automatically be read into the adopting statute. In the case of latter category, it may be presumed that the legislative intent was to include all the subsequent amendments also made from time to time in the generic law on the subject adopted by general reference. This principle of construction of a reference statute has been neatly summed up by Sutherland, thus : A statute which refers to the law of a subject generally adopts the law on the subject as of the time the law is invoked. This will include all the amendments and modifications of the law subsequent to the time the reference statute was enacted. Corpus Juris Secundum also enunciates the same principle in these terms : ....Where the reference in an adopting statute is to the law generally which governs the particular subject, and not to any specific statute or part thereof, ... the reference will be

81

held to include the law as it stands at the time it is sought to be applied, with all the changes made from time to time, at least as far as the changes are consistent with the purpose of the adopting statute."

The said decision was followed by the Supreme Court in Singhai

Rakesh Kumar Vs. Union of India and others, ((2001) 1 SCC 364).

34. What is required to be seen is the intention of the Legislature at

the time of enactment. In this case, the Legislature has left the job of

defining “non-performing asset' in the hands of Reserve Bank of India.

Therefore, when once the Legislature has approved the power of Reserve

Bank of India on the classification of assets, the resultant consequence

would be that a subsequent amendment pertaining to such a classification

would apply with its vigour and force to the new Act as well.

35. in the light of the discussions made above, we are of the view

that it is a case of an adoption involved in the present case. Therefore it

can only be termed as legislation by reference and hence the impugned

Circular is valid in law.

(d) SARFAESI Act, 2002 (Act N0.54 of 2002) and Recovery of Debts due to Banks and Financial Institutions Act, 1993 (Act No.51 of 1993):-

36. A submission has been made that both the enactments do not

82

refer to legally recoverable debt. We are afraid that neither the definition of

'debt' under the Act No.54 of 2002 nor under Act No.51 of 1993 is put into

challenge. Act No.54 of 20012 merely borrows definition from Act No.51 of

1993. Even in the said Act, under the definition of “debt” under Section 2(g)

is very exhaustive as discussed above. The provision treats a liability

inclusive of interest as a debt. We do not find any unconstitutionality in the

same. There is no necessity for defining a legally recoverable debt. If the

contention of the learned counsel for the petitioner is accepted, then it

amounts to a striking down Part III of Act No.54 of 2002, which has been

upheld already. A legally recoverable debt is a one, which is permissible

under law. Therefore, there is no necessity to define the same.

Furthermore, if a recovery is sought to be made de hors the definition of a

'debt' as mentioned in Act No.51 of 1993, then a forum is available to the

borrower in such a case. Therefore, the said submission is rejected.

(e) Validity of the Master Circular:-37. In the light of the discussion made above, we do not find any

merit in the challenge made to the impugned Master Circular. The Master

Circulation has been made by taking into consideration of the global

economy, the prevailing situation, the intention to create transparency and

uniformity with the Banking system, to provide stability and to protect the

interests of depositors. When such a decision has been made based upon

analysis of material factors, the same cannot be set aside as arbitrary. We

83

do not also find any force in the submissions that Section 21 read with

Section 35A of the Act No.10 of 1949 do not authorise the introduction of

the impugned Master Circular. The said policy has been in vogue for quote

some time. We do not wish to reiterate the scope and extent of power that

is available to the Reserve Bank of India under the provisions. As observed

by the Supreme Court, the said provisions impose a duty upon the Reserve

Bank of India, which is public in nature. Similarly, in the impugned Master

Circular, we do not find any vagueness contained in paragraph No.2.1.1,

which deals with an “asset”, when it ceases to generate income for the

Bank. 2.1.2 deals with a “loan or an advance”. 2.1.3 deals with “interest

payments”. Similarly, 4.2.4 only deals with “Accounts with temporary

deficiencies”. Therefore, they are all various classifications. Accordingly,

we do not find any vagueness or confusion involved.

38. We also find no force in the submission made that the objects of

two enactments being same, the definition made in the earlier Act cannot

be imported into the subsequent one, since the subsequent one merely

deals with recovery. Therefore, we do not find any reason to strike out the

impugned Master Circular. Accordingly, its validity is upheld.

(f) Judicial Review:39. While dealing with a legislation pertaining to a specialised field,

that too, a one like economy, the Court should adopt a “dignified

84

reluctance”. While exercising its power of judicial review, a good deal of

latitude is permissible in case of economic statutes. The Court should be

aware of the fact that the Legislature is dealing with complex problems.

The economic mechanism is highly sensitive and therefore we should

constantly remind ourselves of our own limit. We do not like to take the

role of a higher authority to review a decision made by an expert body on

the materials placed before it. The said attempt is to be avoided, as neither

the counsels nor the Court can claim a better expertise. Such an attempt

would be akin to a search by a visually impaired person to find a black cat

during night time in a dark room when the cat itself is not there. In this

connection, we only quote the settled position of law as held by the

Honourable Apex Court in T.VELAYUDHAN ACHARI AND ANOTHER VS.

UNION OF INDIA, ((1993) 2 SCC 582), which reads as under:

“28. In examining the various submissions addressed on behalf of the appellants and the petitioners we propose to examine the same in the following background since it is a law relating to regulation of economic activities. 29. In R.K. Garg case, (1981) 4 SCC 675), it is held: (SCC pp. 690-91, para 8) "Another rule of equal importance is that laws relating to economic activities should be viewed with greater latitude than laws touching civil rights such as freedom of speech, religion etc. It has been said by no less a person than Holmes, J. that the legislature should be allowed some play in the joints,

85

because it has to deal with complex problems which do not admit of solution through any doctrinaire or strait-jacket formula and this is particularly true in case of legislation dealing with economic matters, where, having regard to the nature of the problems required to be dealt with, greater play in the joints has to be allowed to the legislature. The court should feel more inclined to give judicial deference to legislative judgment in the field of economic regulation than in other areas where fundamental human rights are involved. Nowhere has this admonition been more felicitously expressed than in Morey v. Doud, (354 US 457= 1 L Ed 2d 1485 (1957),

where Frankfurter, J. said in his inimitable style: 'In the utilities, tax and economic regulation cases, there are good reasons for judicial self-restraint if not judicial deference to legislative judgment. The legislature after all has the affirmative responsibility. The courts have only the power to destroy, not to reconstruct. When these are added to the complexity of economic regulation, the uncertainty, the liability to error, the bewildering conflict of the experts, and the number of times the judges have been overruled by events self-limitation can be seen to be the path to judicial wisdom and institutional prestige and stability.' The court must always remember that legislation is directed to practical problems, that the economic mechanism is highly sensitive and complex, that many problems are singular and contingent, that laws are not abstract propositions and do not relate to abstract units and are not to be measured by abstract symmetry; that exact wisdom and nice adaptation of remedy are not always possible and that judgment is largely

86

a prophecy based on meagre and uninterpreted experience. Every legislation particularly in economic matters is essentially empiric and it is based on experimentation or what one may call trial and error method and therefore it cannot provide for all possible situations or anticipate all possible abuses. There may be crudities and inequities in complicated experimental economic legislation but on that account alone it cannot be struck down as invalid." At page 706, para 19 it is held: "...That would depend upon diverse fiscal and economic consideration based on practical necessity and administrative expediency and would also involve a certain amount of experimentation on which the court would be least fitted to pronounce. The court would not have the necessary competence and expertise to adjudicate upon such an economic issue. The court cannot possibly assess or evaluate what would be the impact of a particular immunity or exemption and whether it would serve the purpose in view or not. There are so many imponderables that would hazard an opinion where even economists may differ. The court must while examining the constitutional validity of a legislation of this kind , be resilient, not rigid forward looking not static, liberal, not verbal and the court must always bear in mind the constitutional proposition enunciated by the Supreme court of the United States in Munn v. Illinois, (94 US 113 = 24 L Ed 77

(1875) namely, that courts do not substitute their social and economic beliefs for the judgement of legislative bodies. The court must defer to legislative judgement in matters relating to social and economic policies and must not interfere, unless

87

the exercise of legislative judgement appears to be palpably arbitrary. The court should constantly remind itself of what the supreme court of the United State said in Metropolis theater Co. v. City of chicago, (228 US 61 = 57 L Ed 730 (1912)):

“The problems of government are practical ones and may justify, if they do not require, rough accommodations, illogical it may and unscientific. But even such criticism should not be hastily expressed. What is best is not always discernible, the wisdom of any choice may be disputed or condemned. Mere errors of government are not subject to our judicial review."

Conclusion:-

40. In the light of the discussion made, we do not find any merit in

these writ petitions. Accordingly, the writ petitions are dismissed. However,

there is no order as to costs. Consequently, the connected miscellaneous

petitions are also dismissed.

(N.P.V.,J.) (M.M.S.,J.) 08.05.2014

Index:Yes/NoInternet:Yes/NoNote to Office:Issue order copy today

usk

To

1. The Secretary to Government Ministry of Finance,

88

Department of Economic Affairs, (Banking Division), Union of India, North Block, New Delhi.

2. The Joint Secretary, Ministry of Finance, Department of Economic Affairs, Union of India, Room No.34-C, New Delhi – 110 001 (India)

3. The Governor, Reserve Bank of India, Central Office, Mumbai

4. The Chief General Manager, Reserve Bank of India, Department of Banking Operations and Development, Central Office, Mumbai – 400 001.

5. The Board of Directors, Reserve Bank of India, No.6, Parliament Street, New Delhi – 110 001.

89

N.PAUL VASANTHAKUMAR,J.ANDM.M.SUNDRESH,J.

usk

PRE-DELIVERY COMMON ORDER IN W.P.NO.5897 OF2014 ETC., BATCH

90

08.05.2014

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