Kuaan International vs Asset Reconstruction Company (India) And Ors.

S.N.H. Zaidi, J

Since the 1st respondent/caveator is present through its Counsel, the caveator is discharged. Heard parties Counsel on application I.A. No. 130/2013 filed by the appellant seeking waiver of the deposit required under Section 18 of the SARFAESI Act. Mr. Dutta points out that the Tribunal below has passed the order impugned in respect of this matter as well as in respect of three other matters, including Second Appeal No. 527/2012--M/s. Kumar Aluminum v. ARC. He further points out that M/s. Kumar Aluminium had also filed the appeal (No. 39/2013) against that order wherein this Tribunal, while disposing of a similar application filed under Section 18 of the SARFAESI Act, had taken into consideration that the total amount claimed in respect of ail the four companies was Rs. 5,56,60,345/- and had ordered for the payment of 25% of the said amount on 27.12.2012 and, accordingly, an amount of Rs. 1,39,25,000/- was deposited by way of FDR in the name of the Registrar of this Tribunal. According to Mr. Dutta, the amount deposited includes 25% of the amount claimed in respect of this matter and as such the appellant be exempted from depositing any further amount in compliance of the requirement of the second proviso to Section 18(1) of the SARFAESI Act for the entertainment of this appeal.

Ms. Rungta, however, submits that in Kumar Aluminum's case this Tribunal had granted the indulgence of reducing the requirement of deposit to 25% as it was of the view that the account in question was not properly classified as NPA.

Since 25% of the amount of Rs. 1,65,91,235/- as claimed under Section 13(2) of the SARFAESI Act in this matter has already been deposited, hence I agree with Mr. Dutta that the appellant is not required to deposit any further amount for the entertainment of this appeal application stands disposed of accordingly. Let the appeal be entertained and registered.

Also heard the parties Counsel on admission. Mr. Dutta points out that the appellant was sanctioned three credit facilities in July 2000 by the Oriental Bank of Commerce, namely, (1) Cash Credit (Hypothecation) up to the limit of Rs. 60 lacs, (2) Cash Credit (Book Debt) up to the limit of Rs. 30 lacs and (3) Term Loan of Rs. 56 lacs out of which only Rs. 41.99 lacs were availed. He further points out that the Bank had issued demand notice dated 31.1.2003 under Section 13(2) of the SARFAESI Act claiming an amount of Rs. 1,65,91,235/- in respect of all the aforesaid facilities, showing that the loan account was classified as NPA on 31.3.2002.

Mr. Dutta contends that as per the provisions of the SARFAESI Act the secured creditor can take measures for enforcing its security interest under Section 13(4) of the said Act, only after classifying the account as NPA and issuing demand notice under Section 13(2) thereof. He further contends that as per the statement of account relating to Cash Credit (Hypothecation), the account was within the sanctioned limit on 22.10.2001 as on that date the outstanding balance was Rs. 59,99,056.43 and subsequent thereto the account became out of order, but as per the RBI guidelines applicable at that time, a Cash Credit limit could be classified as NPA only if the account remained out of order for a period of more than 180 days and in this matter the period of 180 days was to expire sometime in April 2002, but the Bank had classified the account as NPA on 31.3.2002, i.e., before the expiry of the period of 180 days and thus the account in respect of that credit facility was wrongly classified as NPA and on the basis of such classification, the action taken was bad in law.

He also contends that as per the statement of account, the account of the Cash Credit (Book Debt) facility was also within the sanctioned limit of Rs. 30 lacs on 29.9.2001, as on that date an amount of Rs. 29,93,639.95 was in balance and when on 31.12.2001 the interest amount was debited by the Bank only then it became out of order and since from that date the period of 180 days was to expire at the end of June 2002, therefore, the classification of the account as NPA on 31.3.2002, was wrong and against the RBI guidelines and as such the respondent had acted in violation of the provisions of the SARFAESI Act in taking the action under Section 13(4) of the said Act.

Mr. Dutta also contends that so far as the Term Loan account is concerned, as there was a moratorium period of six months, the payment of installment and servicing of interest were to commence only after the said period. He further contends that the appellant had serviced the interest and also paid installments and as per the statement of account the last payment of Rs. 2 lacs was made on 4.6.2001 and as such the classification of the said account as NPA was also bad and contrary to the RBI guidelines, but the learned Tribunal below has failed to consider these aspects and erred in declining to grant interim relief to the appellant, observing that no prima facie case for the same is made out.

Ms. Pratiti Rungta, Counsel for the respondent, points out that the respondent No, 1 is the assignee of respondent No. 2 Bank. She also submits that since the appellant had failed to service the interest and to pay the installments of the term loan regularly and the account remained overdue for more than 180 days, therefore, it was rightly classified as NPA and the other two accounts had also be declared as such. She points out that the appellant had started to avail the term loan facility from 4.9.2000 and after the moratorium period of six months, he was to pay the first installment in March 2001, but as per the statement of account, the appellant had paid the interest on 5.10.2000 and 30.12.2000 and thereafter no interest was paid, except a payment of Rs. 4,581/- towards revised interest on 21.6.2001. She also submits that after 4.6.2001, no installment was paid and as the account remained overdue for more than 180 days, therefore, it was classified as NPA on 31.3.2002 and since on classification of one account of the borrower, its other accounts can also be classified as such, accordingly, the other loan accounts were also classified as NPA on the said date and in view of this, there is no illegality/infirmity in the order impugned in refusing to grant any interim relief.

I have considered the submissions of the parties Counsel and perused the record. A perusal of the order impugned would show that challenge to the classification of the account as NPA as made by the appellant before this Tribunal was not so raised before the Tribunal below, which has rightly observed that once one account is classified as NPA, the other accounts can also be classified as such. The contention of Ms. Rungta appears tenable that the appellant has failed to show any illegality in classification of the term loan account of the appellant as NPA. Since one account of the borrower/appellant has rightly been classified as NPA, the question whether or not the Cash Credit accounts remained out of order for more than 180 days loses its importance. No other ground qua the order impugned has been pressed by the appellant. I, therefore, see no infirmity in the order impugned that no prima facie case for interim relief is made out in favour of the applicant/appellant. This appeal being devoid of any force is liable to be dismissed and the same is dismissed as such at this stage. Before parting with the matter, it is clarified that the Tribunal below, while disposing of the S.A., shall not be influenced with any observation made by this Tribunal in this order, which has been made only for the purposes of this appeal.