Bank of India vs State of Haryana and Others

Sanjay Kishan Kaul, C.J.—The tractor loan was granted by the petitioner-Bank to respondents No. 3 and 4 of Rs. 1.30 lacs on

23.11.1994 at the then prevailing rate of interest of 15.5% with half yearly rests. There were defaults in repayments and consequently the petitioner

filed a claim u/s 8A, 8(i), 3(5) of the Haryana Agricultural Credit Operations and Miscellaneous Provisions (Banks) Act, 1973 (hereinafter referred

to as ''the said Act'') seeking recovery of the then principal amount outstanding alongwith interest. On account of the defaults in repayment of the

loan, the account was declared as a Non Performing Asset (N.P.A.) on 25.9.1995 and thus, thereafter interest was payable but not debited in the

account. The petitioner filed a certificate dated 30.1.2001 certifying that a sum of Rs. 1,25,317-99 was payable as uncharged accrued interest

against the loan account from 25.9.1995 to 30.9.2000 in addition to the amount showed in the certified copy of the statement of account under the

Bankers Book Evidence Act of Rs. 1,12,439-01.

The claim of the petitioner was decided by the impugned order dated 28.2.2001, in terms whereof only the amount in the statement of account

has been allowed without allowing past, pendente lite or future interest.

The grievance made in the present petition is that the Sub Divisional Officer (Civil), Jagadhri failed to take into account the concept of N.P.A.

for grant of the past interest from the date the account was declared as N.P.A. till institution of the claim. It has been explained that an asset is

treated as a non performing asset so long as it generates income expected from it, but when it fails to generate income, it becomes an N.P.A. The

Reserve Bank of India (RBI) issued certain guidelines for treating credit facility as N.P.A. from the Accounting Year 1992-93 on the basis of

recommendation of the Narsimham Committee. The interest in such a case is not debited to the account, but is payable and it is not as if

declaration of the account as a N.P.A. waives interest.

The endeavour of the petitioner through an application u/s 152 of the Code of Civil Procedure, 1908 seeking correction of the order claiming

the amount of past, pendente lite and future interest was, however, not successful when application was rejected on 29.5.2001 by observing that

decision had been rendered on the basis of application filed and there was no reference to interest in the statement of account.

We may note that the RBI has circulated Prudential Norms on Income Recognition, Asset Classification and Provisioning pertaining to

Advances wherein an N.P.A. has been defined as an asset including a leased asset which becomes a non performing when it ceases to generate

income for the bank. Qua credit facility in respect of which the interest and/or installment of principal has remained past due for a specified period,

would be an N.P.A.. Agricultural advances are to be treated as N.P.A. after it has become past due for two harvest seasons for a period not

exceeding 2-1/2 years. We may clarify that past due was on amount which was not being paid within thirty days, but this concept was dispensed

with from 31.3.2001 onwards by laying down different parameters. However, with effect from 31.3.2004, a 90 days overdue norm for

identification of N.P.A. has been adopted as per international best practices.

We are thus, unable to accept the conclusion as per the impugned order that merely because the account has become N.P.A. and the interest is

not debited to the statement of account as due and payable, the recovery proceedings under the said Act cannot take place qua the amount of

interest due till the filing of the claim.

The issue of pendente lite and future interest has also remained unaddressed in the impugned orders. Suffice to say, as per Section 8, the order

passed by the prescribed authority is deemed to be a decree of Civil Court and would be executable in the same manner as a decree of such

court.

We are thus, of the view that in the light of what we have observed aforesaid, the impugned orders dated 28.2.2001 and 29.5.2001 are set

aside and the S.D.O. would have to apply mind afresh in view of our aforesaid observations. We are informed that the principal amount already

stands paid. The dispute is quite old. Thus, in case the respondents pay the interest amount as claimed upto the date of the application within one

month from today, the controversy would rest without any further adjudication and the claim would be treated as satisfied, failing which the S.D.O.

would have to take steps to pass a fresh order in accordance with law in terms of what we have observed aforesaid.

The writ petition is allowed in the aforesaid terms, leaving the parties to bear their own costs.