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TMI Blog2024 (7) TMI 451X X X X Extracts X X X X X X X X Extracts X X X X ..... onstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002 dated September 11, 2023. 2. Learned senior counsel appearing for the petitioners contends that the interim order dated December 6, 2023 passed in the writ petition has not been challenged by the respondent-Bank. Hence, the findings in the same have attained finality. In the absence of any change of circumstances thereafter, it is argued that there is no reason why the said order should not be maintained. 3. Secondly, learned senior counsel assails the classification of the petitioners' account as NPA. It is argued that the Statement of Accounts shows that the limit of the Cash Credit Facility was Rs. 7.5Cr. The credits availed of by the petitioners ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... power, balance outstanding exceeding the limit, non-submission of stock statements and the non-renewal of the limits on the due date. The amendment to the said Master Circular vide Circular dated April 1, 2023 also provides a similar premise in Clause 4.2.4 which stipulates that the classification of an asset as NPA should be based on the record of recovery and cannot be on the ground of balance outstanding exceeding the limit temporarily and non-renewal of the limits on the due date. 9. It is argued that the Bank acted in a mala fide manner and sought to frustrate the writ petition by initiating steps under Section 13(4) of the SARFAESI Act during pendency of the writ petition, merely to render the writ petition infructuous. 10. Learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . It is argued that the dispute raised in the writ petition is purely commercial in nature, arising out of a private contract between the petitioners and the respondent-Bank, and there is no violation of any fundamental right calling for interference under Article 226 of the Constitution of India. Thus, the Bank seeks dismissal of the writ petition. 15. Upon hearing learned counsel for the parties, certain dates acquire relevance. 16. Admittedly, the credit facility was last renewed on September 29, 2022 and was valid up to December 31, 2022, after which the same was not renewed. The period of 180 days expired on June 29, 2023. Thus, under Clause 4.2.4(c) of the RBI Circular dated April 1, 2023, the account was fit to be declared NPA sinc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urther that, in order to avoid ambiguity regarding determination of 'out of order' status of CC accounts on a continuous basis, it is clarified that under sub-Clause (i), an account shall be treated as 'out of order' if the outstanding balance in the CC/OD account remains continuously in excess of the sanctioned limit/drawing power for 90 days. 20. Under sub-Clause (ii), the account shall be treated as 'out of order' if the outstanding balance in the CC/OD account is less than the sanctioned limit/drawing power but there are no credits continuously for 90 days or the outstanding balance in the CC/OD account is less than the sanctioned limit/drawing power but credits are not enough to cover the interest debited during the previous 90 days p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tter, the challenge of the petitioners to the said classification fails. 26. The petitioners were given several opportunities to make good the deficit balance in the credit facility account but failed to do so. As such, it cannot be said that the deficits were of a temporary nature and/or that the antecedents and recovery record of the petitioners were favourable to them. 27. The petitioners have argued that in the absence of any change of circumstances, the findings in the interim order passed in connection with the writ petition hold good and should be made absolute. Such argument is inherently fallacious, since it is well-settled that findings rendered at the ad interim stage are merely tentative and not conclusive or binding at the st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ), of which the notice under Section 13(2) was a mere precursor. 31. Since the NPA classification has been upheld above, the subsequent steps taken under Section 13, sub-sections (2) and (4) of the SARFAESI Act were also justified. 32. In the above circumstances, the challenge to the NPA classification as well as the issuance of the notice under Section 13(2) of the SARFAESI Act and further consequential measures under Section 13 (4) fails. 33. Accordingly, WPO No. 1805 of 2023 is dismissed on contest, without any order as to costs. 34. Nothing in this order shall preclude the petitioners from approaching the concerned Debts Recovery Tribunal with a challenge under Section 17 of the SARFAESI Act, 2002, if the petitioners so choose, whic ..... X X X X Extracts X X X X X X X X Extracts X X X X
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