MP HIGH COURT, in M/S Samarth Infrabuild vs Bank Of India, relying on judgment of Delhi High Court in Dr.Yashwant Singh & Anr. V/s. Indian Bank & Anr., interpreting Section 2(o) SARFAESI Act and RBI circular, held:
(1) It is not as if it is not within the jurisdiction of the Bank to determine whether the account of the Bank is a NPA or not. The mistake if any by the Bank in holding the account to be an NPA would thus be a mistake in exercise of jurisdiction and not a mistake in assuming jurisdiction.
(2) Section 2(o) of the SARFAESI Act which vests the secured creditor with the power to classify an account as an NPA. The authority of the secured creditor in this regard cannot be questioned. Such authority of the secured creditor to classify the account of a borrower as an NPA has been recognized in Mardia Chemicals Ltd. and in Transcore Vs. Union of India (2008) 1 SCC 125. All that was observed in Mardia Chemicals Ltd. was that there must exist a specified internal channel which should settle the doubts in asset classification. The introduction of Section 13(3A) has fulfilled the said requirement also.
(3) If a Bank or financial institution forms an opinion that an account of a borrower has become an NPA, such opinion is not justiciable in a Court exercising jurisdiction under Article 226 of the Constitution because Section 13(2) does not use the expression "and his account in respect of such debt has become a Non Performing Asset" but uses the expression "and his account in respect of such debt is classified by the secured creditor as Non Performing Asset.