Allowed

M/s Jasbir Singh and Brothers v. State Bank of India

DRT26 Sept 2022SA/119/2022

Case brief

AI extract

What is this about?

The applicant challenged a notice under Section 13(4) of the SARFAESI Act issued after a defect in NPA classification under Section 13(2). The Tribunal held the Section 13(2) notice invalid due to violation of RBI guidelines and quashed it, thereby quashing the Section 13(4) notice and allowing the application.

What did the court decide?

The Securitisation Application was allowed; the notice under Section 13(2) and the notice under Section 13(4) were quashed with costs.

M/s Jasbir Singh and Brothers versus State Bank of India — Banking and Recovery | DRT (2022)

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DEBTS RECOVERY TRIBUNAL-2, CHANDIGARH, PRESIDED OVER BY M.M. DHONCHAK

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DATED THE 26^th DAY OF SEPTEMBER , 2022

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SECURITISATION APPLICATION NO.119/2022

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M/s Jasbir Singh and Brothers through its Proprietor, Jasbir Singh and Another

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…..Applicants

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Versus

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State Bank of India, Stressed Assets Recovery Branch, SCO-70, Sector-5, Panchkula

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State Bank of India, Kurukshetra, SCO 88 and 89, Sector-2, Urban Estate Kurukshetra-136118

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…..Respondents

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Argued by: Sh. Sakal Sikri counsel for the applicants Sh. Sh. Arvind Rajotia counsel for the respondents bank

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ORDER

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This Securitisation Application is under Section 17 (1) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as ‘the Act’ for brevity). 2. In brief, it is the case of the applicants that applicants had entered into letter of arrangement against security of shop No.133 hereinafter referred to as ‘the property in question’; that the letter of arrangement was executed on 23.05.2013 which was followed by agreement of loan-cum-hypothecation between applicant No.1 and the respondent bank; that thereafter, guarantee agreement dated 23.05.2013 was executed between applicant No.2 and the respondent bank; that applicant No.1 was granted cash credit of Rs.24,00,000/- against his property in question; that an amount of Rs.21,59,188/- was paid by the applicants till the year 2021; that demand

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SA/119/2022 M/S JASBIR SINGH BROTHER AND ANOTHER VS STATE BANK OF INDIA

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notice dated 23.11.2021 was issued to applicant No.1 without mentioning the date of the guidelines of RBI in accordance with which the loan account was declared as NPA; that applicant No.1 had credited interest towards the cash credit and thus account of applicant No.1 was not out of order during the period of 90 days for facilitating the declaring of the same as NPA; that as per guideline dated 01.07.2015 issued by RBI, classification of NPA could be done in respect of the cash credit when the account remained out of order for a period of more than 90 days; that after classification of account as NPA, the respondent bank deducted an amount of Rs.3,20,484.58/- and that respondent bank had issued notice dated 26.04.2022 under Section 13(4) of the Act after passage of 180 days and not within 60 days.

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Notice of the SA was served upon the respondents which filed reply contending that the account was declared as NPA as per the RBI Guidelines and there was no violation of any guideline of the RBI; that as per RBI guidelines, after declaration of the account as NPA, the bank could deduct the amount from the other account of the borrower firm to adjust the due amount and the respondent bank had adjusted the due loan amount from the current account. Rest of the averments made in the SA were also denied in reply to the SA.

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Rejoinder was filed wherein the averments made in the SA was reiterated and that of the reply to the SA were controverted.

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I have heard learned counsel for the parties and also gone through the record carefully.

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In the considered opinion of this Tribunal mentioned of the date in itself cannot be a ground to challenge the proceedings under Section 13(2) of the Act. 7. It was argued by counsel for the applicants that applicant No.1 had credited interest towards cash credit and thus the account of applicant No.1 was not out of order during the period of 90 days and thus, there was

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SA/119/2022 M/S JASBIR SINGH BROTHER AND ANOTHER VS STATE BANK OF INDIA

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violation of guidelines of RBI dated 01.07.2015. It was further argued that loan account was classified as NPA on 28.08.2021 and in the month of February interest of Rs.26,000/- was paid whereas in the month of March, interest of Rs.29,000/- was paid and in the month of April, interest of Rs.38,003/- and thus, total amount of Rs.93,0003 was paid. It was argued by Sh. Arvind Rajotia, advocate that even the payment of Rs.93,000/- as stated above, was not enough to show that the amount of interest was paid and thus, there was no violation of RBI Guidelines dated 01.07.2015. It would be in the interest of justice to reproduce a part of para-No.5 D, paraNo.5 E, 5 F and reply to the above in quick succession:

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Part of 5 E

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“It is relevant to point out here that the applicant no. 1 had credited interest towards the cash credit and thus, the account of the applicant no. 1 was not out of order during the time period of 90 days. The guidelines of the Reserve Bank of India dated 01.07.2015 is annexed herewith as Annexure A-2.”

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5E and F

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“E. That it is respectfully submitted that as per the guidelines dated 01.07.2015 issued by the Reserve Bank of India, the classification of NPA can be done in respect of Cash Credit when the account remains 'Out of Order' for a period of more than 90 days. It would be relevant to point out here that the respondent Bank had wrongly classified NPA on 28.05.2021. It is further relevant to state that since, the account was classified as NPA on 28.05.2021, the Bank statements of the applicant no. 1 for the period of 90 days clearly shows that the interest amount was credited to the respondent Bank. For the convenience of this Hon'ble Tribunal, the calculation of the

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interest for the period of 90 days are state herein below in a tabular form:

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Month	Interest Amount Paid
February	Rs.26,000/-
March	Rs.29,000/-

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SA/119/2022 M/S JASBIR SINGH BROTHER AND ANOTHER VS STATE BANK OF INDIA

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April	Rs.38,003/-
Total	Rs.93,003/-

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Thus, it is clear that the action of the Bank is in the non-conformity of the guidelines dated 01.07.2015 issued by the Reserve Bank of India as the applicant no. 1 had credited amount during the 90 days. The copy of the bank statements for the month February, March and April are annexed herewith as Annexure-3

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F. That it is relevant to point out that subsequently after the account was declared NPA, the respondent Bank automatically started deducting the amount from the current account of the applicant no. 1. The respondent Bank had deducted Rs. 55000/- in the month of May 2021. Rs. 35763/ in the month of June, Rs. 80000/- in the month of August and Rs. 67628 95/- and Rs.90092.24/- in the month of January 2022. In totality after the account was declared NPA, the Bank had deducted an amount of Rs. 328484.58/which the Bank had no right to do. Thus, the applicant had paid of the interest of total Furthermore, after getting the NPA declared, the amount that the Bank is crediting automatically is the income/commission the applicant no. 1 is earning from the business.”

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From the above pleadings, it is clear that there is hardly any denial of the above quoted contents of the Application and even if it is taken as an evasive denial, that also amount to admission on the part of the bank to the effect that there was violation of the guidelines of RBI dated 01.07.2015 in declaring the account as NPA on account of the account not being out of order for the period of more than 90 days in respect of overdraft/cash credit. 9. In the circumstances of the case, everything cannot be said to be well and legal with the coming into being of the notice under Section 13(2) of the Act. When the notice under Section 13(2) is held to be invalid, with that goes the notice under Section 13(4) of the Act. Consequently, the SA succeeds. Same is allowed hereby with costs.

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SA/119/2022 M/S JASBIR SINGH BROTHER AND ANOTHER VS STATE BANK OF INDIA

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However, allowing of the SA would not preclude the respondent bank

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to initiate the security proceedings afresh.

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Announced in the open Tribunal (M.M.Dhonchak) Presiding Officer DRT-2, Chandigarh

M/s Jasbir Singh and Brothers v. State Bank of India

Case brief

What is this about?

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M/s Jasbir Singh and Brothers v. State Bank of India

Case brief

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