2024 (7) TMI 1247 - HC - Indian Laws

Renewal of cash credit facility for MSME Unit - Section 13(4) of the SARFAESI Act - loan account classified as NPA - HELD THAT - The petitioner submitted Ext.P12 representation before the respondents for immediate arrangement for regularization of credit facility. While Ext.P12 representation was pending before the respondents, the 2nd respondent issued Ext.P13 possession notice. The action of the respondents is high handed and against fundamental rights guaranteed to the petitioner under Article 14 of the Constitution India, contends the petitioner. The writ petition has been filed under Article 226 of the Constitution of India for issuance of proper directions for regularization of the loan account maintained with the 1st respondent and to stay further proceeding to Exts.P4 and P13 in the interest of justice. When the writ petition came up for admission, this Court passed an interim order dated 09.11.2023, staying all further proceedings against the petitioner for a period of one month on condition that the petitioner remits an amount of ₹20 lakhs within a period of one month. The petitioner submits that though the petitioner could not remit the amount within the stipulated period of one month. The amount has been remitted by 01.01.2024. The writ petition is therefore disposed of permitting the petitioner to prosecute his application before the Debts Recovery Tribunal-II, Ernakulam.

Issues:
1. Renewal of cash credit facility for MSME Unit.
2. Penal interest levied for delay in remitting full amount.
3. Reduction in cash credit limit due to fall in turnover.
4. Classification of loan account as NPA.
5. Request for renewal/regularization of loan account.
6. Threat of possession notice under SARFAESI Act.
7. Non-renewal of cash credit loan account despite submission of documents.
8. Recovery action during pendency of renewal agreement.
9. Violation of government notification for revival of MSMEs.
10. Writ petition under Article 226 for regularization of loan account and stay of proceedings.

Analysis:
1. The petitioner, an MSME unit owner, availed a cash credit facility from the 1st respondent bank. The renewal of the facility was pending, and the cash credit limit was reduced due to a fall in turnover reported based on GST returns. The petitioner's loan account was classified as NPA, leading to a request for renewal and regularization, which was not promptly addressed by the bank.

2. The petitioner submitted all required documents for renewal, including financial projections and purchase orders. However, the renewal agreement was not finalized, causing uncertainty for the petitioner. The petitioner faced the threat of possession under the SARFAESI Act, highlighting the urgency of the situation.

3. Despite the petitioner's efforts to regularize the loan account and requests for suspension of recovery action, the 2nd respondent issued possession notices, disregarding government notifications for MSME revival and rehabilitation. The petitioner contended that the actions of the respondents violated fundamental rights under Article 14 of the Indian Constitution.

4. The High Court, in response to a writ petition under Article 226, issued an interim order staying further proceedings against the petitioner, subject to a monetary condition. The petitioner failed to meet the deadline but eventually remitted the required amount. The Court directed the petitioner to pursue the matter before the Debts Recovery Tribunal-II, Ernakulam, emphasizing the importance of legal recourse in such disputes.

5. The Court disposed of the writ petition, allowing the petitioner to prosecute the claim before the Tribunal, with the interim order remaining in effect until the specified date. This judgment underscores the significance of legal procedures and avenues for resolving financial disputes, particularly concerning MSME units and banking facilities.

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