M/s Singh Rice Mill vs Bank Of Baroda

JUSTICE R. D. KHARE, CHAIRPERSON

The present appeal has been filed under section 20 of the Recovery of Debts & Bankruptcy Act, 1993 (hereinafter referred to as the "RDB Act") against an interlocutory order dated 18.07.2023, whereby an application dated 05.09.2019 filed by the appellant to challenge the maintainability of the O.A. No. 545/2016 has been rejected.

Brief facts of the matter are that the appellants were granted certain credit facilities by the respondent-Bank. In order to secure the same, the factory land and building was mortgaged by the appellants with the respondent-Bank. Since the borrowers did not adhere to the terms of loan agreement, therefore, the accounts were classified as NPA on 30.09.2014 as per demand notice dated 08.03.2018, copy of which has been placed at page no. 50 of the memo of appeal. Prior to the said demand notice, the respondent-Bank filed an Original Application No. 545/2016 for recovery of its dues. In the said O.A., an amendment application bearing I.A. No. 1875/2017 was filed by the bank to alter the date of NPA, but the same was rejected by the Tribunal below.

It appears that a Writ Petition No. 26141/2019 was filed by the appellants before the Hon'ble High Court, Allahabad challenging the validity of the aforesaid O.A., which was disposed off by directing the Tribunal below to examine the maintainability of the case at the primary level. Pursuant to the said order, an application dated 05.09.2019 was filed by the appellants with regard to the maintainability of the said O.A. The Tribunal below vide impugned order dated 18.07.2023 rejected the said application holding that it is not mandatory that the account must be declared as NPA and further classification of account as NPA is mandatory vide invoking SARFAESI application but not while invoking the DRT Act. Being aggrieved by the said order, the present appeal have been filed by the appellants.

Learned counsel for the appellants submitted that the Tribunal below has not considered the facts that earlier the Bank had filed an amendment application being I.A. No. 1875/2017 to alter the date of classification of account as NPA, but the same was rejected by the Tribunal below. It was further contended that initially the date of NPA was shown to be 28.02.2014 by the Bank, but later on it was changed to 30.09.2014, which is contrary to the guidelines of the Reserve Bank of India. It was further contended that prior to the first date of NPA as 28.02.2014, the account was restructured by the Bank on 03.12.2013, thus the account was declared as NPA within 87 days. It was further contended that the respondent-Bank has not given the date of default and in absence of date of default, the O.A. is not maintainable. It was also contended that the Tribunal below has invented a new cause of action which is non-fulfillment of undertaking given by the appellant to pay the outstanding dues of the Bank in 12 months during the proceedings of the SARFAESI Act, which compelled the respondent-Bank to file the present O.A. It was thus contended that it is nothing but a peculiar logic given by the Tribunal below. It was however contended that the Tribunal below has no discretion beyond the provisions of the statute and it does not have inherent power. It was, therefore, prayed that the order impugned may be set aside and the O.A. filed by the Bank may be held to be not maintainable.

Learned counsel for the respondent-Bank submitted that the original application was filed on the basis of loan and mortgage documents executed and signed by the appellants. It was further contended that the said O.A. was filed on 28.09.2016 and recall notice was sent by the Bank to the borrowers through Registered Post on 21.03.2015. It was also contended that the classification of account as NPA is not a pre-condition for filing the original application under section 19 of the RDB Act, thus the date of NPA will not affect the merits of the case. It was further contended that the date of NPA as 28.02.2014 was subsequently rectified/changed automatically to 30.09.2014 due to technical error in the system/computers of the Bank. It was lastly contended that the appellants are trying to prolong the proceedings by filing one application after another. It was thus contended that the Tribunal below has considered all the facts and legal aspects of the case and evidence on record, therefore, the order impugned does not call for any interference by this Tribunal. It was, therefore, prayed that the appeal filed by the appellants may be dismissed with heavy costs.

Having heard the learned counsels for the parties and considering the material available on record, undisputedly, the present appeal is filed against an interlocutory order, by which the objection of the appellants with regard to the maintainability of the original application of the Bank has been rejected.

The main controversy involved in the present case is, as to whether the original application was filed by the Bank after classification of the account as NPA or not?

It is to be seen that after filing of the original application of 28.09.2016, an amendment application dated 03.11.2017 was filed by the Bank in its pending O.A. No. 545/2016 before the Tribunal below along with an affidavit of Mr. Tapan Kumar Das, Chief Manager, Bank of Baroda, Branch-Bahadurganj, Allahabad. In para 7 of the said affidavit, it is written "permit the applicant to amend the date of NPA appearing in paragraphs no. 5.19 and 5.26 of the O.A. from 28.02.2014 to 30.09.2014", but on the contrary in para 8 of the said affidavit, it is written "due to the change in the date of NPA, there is a reciprocal change in the calculation of amounts overdue in the six accounts of the borrower and the same may also be permitted to be corrected/amended accordingly to the following chart". However, the said application was rejected by the Tribunal below, but later on, when pursuant to the order dated 26.08.2019 passed by the Hon'ble High Court, Allahabad in Writ-C No. 26141/2019, the appellants filed an application dated 05.02.2019 before the Tribunal below to decide the maintainability of the O.A. on the ground that the said O.A. is not maintainable; then the Tribunal below has rejected the application vide order impugned holding that the classification of the account as NPA is not mandatory while invoking the jurisdiction of DRT Act. While going through the Act and rules made thereunder, it is found that there is no provision for classification of the account as NPA. However, as per the RBI guidelines, if there is no transaction in the loan account continuously for the period of 90 days, then the account comes under the definition of "irregular". In the present case, it has been contended on behalf of the appellants that the account was restructured on 03.12.2013, but there is nothing on record that any amount was deposited by the borrowers in the loan account after restructuring of the loan account, therefore, the contention of the appellant is that the account was declared as NPA on 87th day from the date of restructuring i.e. 03.12.2013, is not tenable. However, the Bank has recalled the loan account of the borrower vide recall notice dated 21.03.2015, which is not controverted by the appellants. Once the loan account has been recalled, then the Bank is free to file original application at any time against the borrowers for recovery of its dues at any time, but not beyond the period of limitation as prescribed under the Act and rules made thereunder. In the present case, the loan was recalled on 21.03.2015 and the O.A. was filed on 28.09.2016, which is well within the period of limitation. Thus the Tribunal below has rightly held that the original application filed by the respondent- Bank is maintainable.

In view of the aforesaid, the order impugned does not call for any interference by this Tribunal. Consequently, the appeal is dismissed with no order as to costs.

A copy of this order be forwarded to the parties as well as to the DRT concerned and be also uploaded on e-DRT Portal.