TMI Blog2021 (1) TMI 1142X X X X Extracts X X X X X X X X Extracts X X X X ..... ary 1, 2020 for an MSME to be eligible for such restructuring. The petitioners, as per the annexures of the writ petition itself, had exceeded the ₹ 25 crore limit on November 30, 2019 itself, thus, rendering the petitioners ineligible for getting the benefit of the scheme contemplated by the Circular. The petitioners have failed to prove any mala fides or arbitrariness on the part the respondents. The RBI Circulars cited by the petitioners are not attracted, since the account of the petitioner no.1 lost its status as a standard account after February 28, 2020, when the same was classified as NPA. That apart, such classification on February 28, 2020 could not be said to be an arbitrary exercise beyond the pale of discretion of the bank and the respondent-authorities. Thus, there is no scope of finding fault with the legitimate exercise of discretion on the part of the respondents in the present case. The acts/omissions complained of in the writ petition do not merit interference by the writ court - Appeal dismissed. - W.P.A. No. 9226 of 2020 - - - Dated:- 7-1-2021 - THE HON BLE JUSTICE SABYASACHI BHATTACHARYYA For the Petitioner : Mr. Anirban Roy, Mr. Ranajit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1.3, learned counsel for the petitioners argues that the classification of the petitioner s account as NPA was premature. 8. Even apart from the argument that the RBI Circular-in-question as well as the subsequent RBI Circular dated March 1, 2020, issued in view of the pandemic scenario, are applicable to the OTS proposal of the petitioners, learned counsel for the petitioners contends that the classification of the petitioners accounts as NPA as on February 28, 2020 was an afterthought to suit the purpose of the respondents. Learned counsel submits that the relevant publication on the concerned website and the correspondence of the bank shows that it was admitted even on March 16, 2020 that the account was NPA as on date , implying such asset classification as NPA to operate from that date itself. As such, the account of the petitioners with the respondent-bank was a Standard Account even on March 1, 2020, attracting the financial relief given by the 2020 Circular to the petitioners. By placing reliance on the statement of accounts annexed at page-96, learned counsel argues that even the bank s own accounts reveal that interest was charged on the petitioner s loan as late as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the writ petition, learned counsel for the petitioners contends that the account of the petitioners was first shown to be overdue in February, 2020. Thus, it was not possible for the account of the petitioners to be classified as NPA on February 28, 2020. 13. It is argued that even if the OTS proposal of the petitioners is held to fall beyond the pale of the RBI Circulars, the petitioner no.1-company is, in any event, entitled to get the benefits of the Circulars even without any OTS scheme, which has been denied by the respondents. 14. Learned counsel cites paragraph no. 22 of Andi Mukta Sadguru Shree Muktajee Vandas Swami Suvarna Jayanti Mahotsav Smarak Trust and Others vs. V.R. Rudani and others reported at (1989) 2 SCC 691 in support of the proposition that even violation of fundamental rights on the part of a private body may be amenable to the writ jurisdiction. 15. Learned counsel also relies on the unreported judgment of the Karnataka High Court in Velankani Information Systems Limited vs. Secretary, Ministry of Home Affairs and others to argue that the RBI Circular was issued in public interest, attracting a public law element and permitted the grant of moratoriu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... est. However, banks may continue to record such accrued interest in a Memorandum account in their books. Thus, in the petitioners case, interest was charged on February 29, 2020 even after the account turned NPA the previous date, due to system level gaps. Such interest was reversed manually in the corresponding quarter. 18. Clause 2.6 of the RBI Circular dated September 14, 2020, on Automation of Income Recognition, Asset Classification and Provisioning Processes in Banks, advises the bank that the system based asset classification shall be an ongoing exercise for both downgradation and upgradation of accounts and that banks should ensure that the established classification status is updated as part of day end process. 19. The periodicity of updating report to CIBIL is monthly. The data for February, 2020 was thus reported in March, 2020. The regulatory guidelines contained in the Circular bearing DBR No.CID.BC.60/20.16.056/2015-15 dated January 15, 2015, it is submitted, mandate membership of Credit Information Companies (CICs). It provides that CICs and CIs shall keep the credit information, collected/maintained by them, updated regularly on a monthly basis or at such sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase, the materials on record clearly show that the proposed OTS stopped at the stage of a proposal being advanced by the petitioners to the respondent-bank, without there being any acceptance of such proposal on the part of the bank at any point of time. Thus, the petitioners proposal did not crystallise into an OTS scheme at any point of time, in the absence of any consensus ad idem having been arrived at by the concerned parties, eliminating the question of the petitioners being entitled to the benefits provided by the RBI Circulars on the score of an OTS. 25. As regards the petitioners allegation that the marking of the account of the petitioner no. 1 as NPA on February 28, 2020 was a deliberate post facto attempt on the part of the respondents to deprive the petitioners of the benefits envisaged by the RBI pandemic circulars, the petitioners have failed to show any mala fides or bias on the part of the bank or the other respondents in doing so. The bank has furnished sufficient justification for the technical delay in uploading the classification of account as NPA. The T+2 procedure of updation is a plausible explanation for the delay in updation. In any event, in view o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use 2.1.4 provides that an account may also be classified as NPA in terms of paragraph 4.2.4 of the Master Circular. 32. Sub-clause (i) of Clause 4.2.4 provides that, 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 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 position is satisfactory. 33. Clause 4.2.5 provides for upgradation of loan accounts classified as NPAs. As per the said Clause, if arrears of interest and principal are paid by the borrower in the case of loan accounts classified as NPAs, the account should no longer be treated as non-performing and may be classified as a standard account. 34. In the present case, the petitioners did not make any attempt at such repayment. 35. Clause 2.3 of the Master Circular of 2015 stipulates that any amount due to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petitioners in the present case, since the petitioners have failed to prove any mala fides or arbitrariness on the part the respondents. As discussed above, the RBI Circulars cited by the petitioners are not attracted, since the account of the petitioner no.1 lost its status as a standard account after February 28, 2020, when the same was classified as NPA. That apart, such classification on February 28, 2020 could not be said to be an arbitrary exercise beyond the pale of discretion of the bank and the respondent-authorities. Thus, there is no scope of finding fault with the legitimate exercise of discretion on the part of the respondents in the present case. Keeping an eye on United Bank of India vs. Satyawati Tondon (supra), it is evident that the rule of selfimposed restraint in the exercise of power under Article 226 of the Constitution is applicable to the present case. Since proceedings have already been initiated under Sections 13(2) and 13(4) of the SARFAESI Act, it would be interdicting with the jurisdiction of the tribunal to pass any order on merits as regards the claim of the respondents against the petitioners. In any event, upon a consideration of the conspectus o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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