TaxTMI 
TaxTMI 
TaxTMI 
2021 (1) TMI 1142
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.... (OTS). 3. Learned counsel for the petitioners alleges that the bank sat tight over the OTS proposal on one hand and proceeded under the 2002 Act by rendering the company accounts NPA on the other. 4. Learned counsel submits that the OTS proposal of the petitioners comes within the purview of the RBI Master Circular, dated July 1, 2015, which grants relief to corporate entity in the pandemic situation. Placing reliance on Clause 2.1 of the Master Circular, laying down Prudential Norms on Income Recognition, Asset Classification and Provisioning pertaining to Advances, learned counsel for the petitioners submits that an asset, including a leased asset, becomes non-performing when it ceases to generate income for the bank. Clause 2.1.2 (i) stipulates that a loan or an advance where interest and/or instalment of principal remains overdue for a period of more than 90 days in respect of a term loan is treated as NPA. 5. Clause 2.1.3 provides that in case of interest payments, banks should classify an account as NPA only if the interest issued and charged during any quarter is not serviced fully within 90 days from the end of the quarter. 6. An account should be treated as 'out of or....
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.... June 29, 2020 the apparently retrospective classification of the accounts of the petitioner no.1 as NPA with effect from February 28, 2020. 10. Learned counsel for the petitioners places further reliance on the RBI Circular dated February 11, 2020 (annexure P9 at page-190 of the writ petition) which permits an one-time restructuring of existing loans to MSMEs classified as 'standard' without a downgrade in the asset classification, subject to certain conditions. 11. Counsel next places the RBI Circular dated March 27, 2020 (at page- 192 of the writ petition) which, he contends, is a continuation of the February 11 Circular. Therein, it is provided that the banks and financial institutions are permitted to grant a moratorium of three months on payment of all instalments falling due between March 1, 2020 and May 31, 2020 in respect of term loans and working capital facilities. The repayment schedule for such loans as also the residual tenor, the Circular provides, would be shifted across the Board by three months after the moratorium period. Learned counsel argues that the petitioner's account was classified retrospectively as NPA to avoid application of the said Circular. ....
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....to any other court in an extreme case, the High Court must not forget the width of the authority available to it and its constitutional obligation to discharge its duties governed by the overarching established principles designed by what may be loosely said to be the rule of law. 17. Learned counsel for the respondents, on the other hand, argues that the account of the borrower was classified as NPA on February 28, 2020 itself since the balance outstanding therein stood continuously in excess of the sanctioned limit for more than 90 days since November 30, 2019. NPA Identification of the Axis bank, it is submitted, is carried out in a separate system known as the CRISMAC system, which is configured to extract information and classify the account as NPA in appropriate cases. Such stamping of NPA classification in core banking system is carried out on T+2-day basis. As such, the NPA identification process for February 28, 2020 (T) was completed and sent for updation in the core banking system within 2 days. The borrower was stamped as NPA on March 1, 2020, which was the 91st day from overdue. Thus, since the entire operation was completed on March 1, 2020, interest for the month of....
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....that the aggregate exposure, including non-fund based facilities of banks and NBFCs to the borrower, does not exceed Rs. 25 crore as on January 1, 2020. In the present case, the exposure exceeded Rs. 25 crore as on January 1, 2020, rendering the petitioner ineligible for the one-time restructuring as per such Notification. 21. That apart, in the present case, steps have been taken under Sections 13(2) and 13(4) of the SARFAESI Act, 2002. Thus, as per the proposition laid down in United Bank of India vs. Satyawati Tondon and others [(2010) 8 SCC 110], the writ court ought not to interfere in the matter since an equally efficacious remedy is available to the petitioners before the tribunal. 22. Relying on Authorized Officer, State Bank of Travancore and Another vs. Mathew K.C, reported at (2018) 3 SCC 85, the respondents submit that the discretionary jurisdiction under Article 226 is not absolute but has to be exercised judiciously in the given facts of a case and in accordance with law. Except in cases falling within well-defined exceptions, a writ petition under Article 226 of the Constitution ought not to be entertained if alternative remedies are available. 23. Hence, the resp....
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....of the account of the petitioner no. 1 remaining standard even after February 28, 2020. 27. In any event, the petitioners never applied for restructuring under the RBI Circular of 2020, which disentitles the petitioners' claim of being governed by the RBI Circular, even irrespective of the OTS. 28. Another pertinent question which arises for consideration here is, whether Clause 2.1.2 (i) or Clause 2.1.3 of the 2015 Circular governs the account of the petitioner no.1. 29. Clause 2.1.2 (i) stipulates that a Non-Performing Asset (NPA) is a loan or an advance where interest and/or instalment of principal remain overdue for a period of more than 90 days in respect of a term loan. On the face of it, contrary to the arguments of the respondents, the account-in-question was a cash credit facility, as opposed to a term loan. Thus, Clause 2.1.2 (i) does not apply in terms to the account of the petitioner no.1. 30. Clause 2.1.3, on the other hand, provides that 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. In the present case, the petitioners a....
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.... as on January 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 Rs. 25 crore limit on November 30, 2019 itself, thus, rendering the petitioners ineligible for getting the benefit of the scheme contemplated by the aforementioned Circular. 38. The general ratio laid down by the Division Bench in Vineet Ruia (supra), that a High Court must not forget the width of the authority available to it and its constitutional obligation to discharge its duties governed by the overarching established principles designed by the rule of law in breakdown scenarios, is beyond dispute. However, the scope of interference by this court is also circumscribed by certain self-imposed fetters. The court has to be vigilant as to whether there has been any gross act of arbitrariness or violation of any fundamental/statutory right to justify interference with administrative functioning. 39. As far as the ratio contained in Velankani Information (supra) is concerned, the said report lays down that the exercise of discretionary power by the bank or lending institution, vis-à-vis the RBI Circular of 2020, is pre....