TaxTMI 
TaxTMI 
2024 (2) TMI 1504
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....HL/28, IC-18-18-00542/T/001.IC-17-18-00542/N/003 and IC-17-18-00542/N/002 of the petitioner with the respondent No.4 - 6 - Piramal Enterprises Limited and Piramal Capital & Housing Finance Limited was not declared as a Non-Performing Asset or a Stressed Account in accordance with the Law/Rules/Policy/ Guidelines/Norms promulgated by the respondent No.2 - Reserve Bank of India and therefore, the respondent No.4 - 6 - Piramal Enterprises Limited and Piramal Capital & Housing Finance Limited could not have assigned the Loan Account of the petitioner to the respondent No.7 - Omkara Assets Reconstruction Private Limited under Section 5 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interests Act, 2002 and consequently declare that all actions taken pursuance thereof, including the Recall Notice dated 15-02-2023 appended at Annexure-A (Ref:- Omkara/Mum/ RO957/2022-23) and the Notices dated 20-02-2023 appended at Annexure-B (Ref:- Omkara/Mum/ RO971/2022-23) and C (Ref:- Omkara/Mum/ RO973/ 2022-23) invoking the Personal and Corporate Guarantee to be null, void and non est insofar as the petitioner herein; (ii) Issue a suitable Writ, Order ....
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....t approximately Rs.115.25 crores towards the loan excluding a sum of Rs.7/- crores towards securing credit facilities was paid at regular intervals. The petitioner claims that its account was regular and standard at all times to come up to 2020. 4. Recourse is taken to projection of COVID-19 spreading across the globe and as a consequence thereof, volumes of cash flow of majority businesses started to be impacted. The petitioner being in the hospitality industry found it difficult to survive in the then market scenario due to the intermittent national lock down. It is then two schemes were launched - one Guaranteed Emergency Credit Line ('GECL') and Emergency Credit Line Guarantee Scheme ('ECLGS') through respondent No.5/Piramal Enterprises Limited. The Scheme provided for 100% guarantee coverage for additional working capital in the form of additional term loans. It is the claim of the petitioner that as on 29-02-2020 the account was standard and regular and, therefore, it was eligible for the scheme under ECLGS. Then the petitioner was also granted/sanctioned an amount of Rs.98/- crores under the Scheme by the 5th respondent/Piramal Enterprises Limited. Plethora of averments i....
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....mit that outstanding dues as on today to be paid to Piramal Enterprises Limited is only to the tune of Rs.54/- to Rs.60/- crores. The 7th respondent deliberately wants to recover Rs.696/- crores that is the entire amount of loan that is taken by the petitioner. He would seek intervention of this Court as the entire transaction is contrary to the Act and the circulars issued by Reserve Bank of India. 7. Per-contra, the learned senior counsel Sri Udaya Holla representing the 7th respondent would vehemently refute the submissions to contend that an account need not be declared as an NPA for reassignment of loan. If the account becomes stressed on account of default in payment, such account can always be transferred to the 7th respondent or the like even without notifying the borrower. He would submit that these are banking transactions which would not become amenable to judicial review under Article 226 of the Constitution of India. He would emphasise on the fact that what the petitioner in effect is seeking is a writ against a private party to enforce a private agreement. Such agreement is between the petitioner, a private entity and respondents 4 to 6, again a private entity and ....
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.... "2. Definitions.-(1) In this Act, unless the context otherwise requires,- ... ... ... (ba) "asset reconstruction company" means a company registered with Reserve Bank under Section 3 for the purposes of carrying on the business of asset reconstruction or securitisation, or both;" An asset reconstruction company would mean a company registered with the Reserve Bank under Section 3 for the purpose of business of asset reconstruction or securitization or both. Section 2(o) reads as follows: "(o) "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,- (a) in case such bank or financial institution is administered or regulated by any authority or body established, constituted or appointed by any law for the time being in force, in accordance with the directions or guidelines relating to assets classifications issued by such authority or body; (b) in any other case, in accordance with the directions or guidelines relating to assets classifications issued by the Reserve Bank;" Section 2(o) defines a non-performing asset t....
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....ch deals with accounts with temporary deficiencies reads as follows: "4.2.4 Accounts with temporary deficiencies The 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: a) Banks should ensure that drawings in the working capital accounts are covered by the adequacy of current assets, since current assets are 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 calcul....
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.... follows: SMA Subcategories Basis for classification - Outstanding balance remains continuously in excess of the sanctioned limit or drawing power, whichever is lower, for a period of: SMA-1 More than 30 days and up to 60 days SMA-2 More than 60 days and up to 90 days 8.3 The above-mentioned instructions on classification of borrower accounts into SMA categories are applicable for all loans (including retail loans), other than agricultural advances governed by crop season-based asset classification norms, irrespective of size of exposure of the bank. 8.4 Classification of borrower accounts as SMA as well as NPA shall be done as part of day-end process for the relevant date and the SMA or NPA classification date shall be the calendar date for which the day end process is run. In other words, the date of SMA/NPA shall reflect the asset classification status of an account at the day-end of that calendar date. Example: If due date of a loan account is March 31, 2022, and full dues are not received before the bank runs the day-end process for this date, the date of overdue shall be March 31, 2022. If it continues to remain overdue, then this ....
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....ing it to be a special mention account. If the petitioner's account was to be declared as category-3 of a special mention account, the right of the lender to transfer the amount to asset reconstruction company does get triggered. What is the effect of it is dealt with by the Apex Court in ICICI BANK LIMITED v. OFFICIAL LIQUIDATOR OF APS STAR INDUSTRIES LIMITED (2020) 10 SCC 1 wherein the Apex Court has held as follows: "46. As stated above, an outstanding in the account of a borrower(s) (customer) is a debt due and payable by the borrower(s) to the bank. Secondly, the bank is the owner of such debt. Such debt is an asset in the hands of the bank as a secured creditor or mortgagee or hypothecatee. The bank can always transfer its asset. Such transfer in no manner affects any right or interest of the borrower(s) (customer). Further, there is no prohibition in the BR Act, 1949 in the bank transferring its assets inter se. Even in the matter of assigning debts, it cannot be said that the banks are trading in debts, as held by the High Court(s). The assignor Bank has never purchased the debt(s). It has advanced loans against security as part of its banking business. The account....
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.... follows: "34. Thus, on sanction of the scheme of amalgamation, all loans, recoveries, security, interest, financial documents, etc. in favour of IBFSL got transferred to and stood vested in the appellant including the loans given by IBFSL to the respondent borrowers, debts recoverable by IBFSL from the respondent borrowers in favour of IBFSL, security documents executed by the respondent borrowers in favour of IBFSL, etc. On the sanctioning of the scheme, the respondent borrowers became the borrower of the appellant as if the financial assistance was granted by the appellant to the respondent borrowers. 35. There is a force in the contention raised by the appellant that the debt with underlying securities is the asset of IBFSL and that IBFSL had right to transfer/assign its assets to any person without seeking consent of the borrower. Such transfer/assignment is recognised and that this Court in APS Star Industries [ICICI Bank Ltd. v. APS Star Industries Ltd., (2010) 10 SCC 1: (2010) 4 SCC (Civ) 1] has recognised and upheld such an assignment." The Apex Court holds that the lender has a right to transfer/ assign its assets to another person without seeking con....
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....E SCHEME AND BANKER'S PREROGATIVE: (i) The ECLG scheme promulgated by the Central Government which the petitioner's counsel heavily banked upon in support of his case, at its guideline 18 (xiv) imposes an obligation on the lender bank to secure its interest by taking all reasonable measures. The same reads: "The payment of guarantee claim by the Trustee Company to the lending institution does not in any way take away the responsibility of the lending institution to recover the entire outstanding amount of the credit from the borrower. The lending institution shall exercise all the necessary precautions and maintain its recourse to the borrower for entire amount of credit facility owed by it and initiate all necessary actions for recovery of the outstanding amount, including such action as may be advised by the Trustee Company." When the lender Banks in given facts & circumstances of the case take a decision as dictated by the prudence, for abruptly recalling the credit facilities, it is not for the courts to sit in appeal over their wisdom. Writ Courts neither have means nor the expertise to re-evaluate the "prudential decisions" of the Banks that....