Dismissed

Ms Golden Leaf Agrotech India Pvt. Ltd. through Its Directors Mr. Altaf Rauf Shaikh and Mrs Samreen Altaf Shaikh v. Karnataka Bank Limited

DRT9 May 2024SA/31/2023

Case brief

AI extract

What is this about?

Applicants challenged a Demand Notice and NPA classification of their agricultural loans, alleging violation of RBI guidelines by the Bank. The court examined claims of improper restructuring and asset classification, finding the Bank's actions compliant with RBI norms.

What the court decided

AI extract

Ms Golden Leaf Agrotech India Pvt. Ltd. through Its… — Insolvency and Bankruptcy | DRT (2024)

¶1

SA No.31 of 2023

¶2

IN THE DEBT RECOVERY TRIBUNAL-I AT MUMBAI SECURITIZATION APPLICATION NO. 31 of 2023

¶3

1. M/S GOLDEN LEAF AGROTECH INDIA PVT. LTD., Having its office at Survey No.68/1, Ward No.1, Gundel Waddo, Veluz Valpoi-Thana Road, Sattari, North Goa, Valpol-403506. Through its Directors: a, Mr. Altaf Rauf Shaikh and b. Mrs. Samreen Altaf Shaikh.

¶4

2. MR. ALTAF RAUF SHAIKH. Age 44 years, Occu. Business. Having address at F-303, Devashree Garden, Behind Corporation Bank, Wadakade, Porvorim, Bardez Goa-403501

¶5

3. MRS. SAMREEN ALTAF SHAIKH. AGE 39 years, Occu: Business. Having address at F-303, Devashree Garden, Behind Corporation Bank, Wadakade, Porvorim, Bardez Goa-403501

¶6

5. MRS. CATUN BI SAYED. Age 69 years, Occu: Housewife. Having address at H. No.2/2155/161, Mubarak Manzil, Opposite Pai Hospital, Vaddem, Vasco da Gama, Goa-403802

¶7

…Applicants

¶8

Versus

¶9

KARNATAKA BANK LTD. Having its registered and head office at P.B. No.599, Mahaveera Circle, Kankanady, Mangluru-575002

¶10

Valpoi-Thana Road, Sattari, North Goa, Valpol-403506. Through its Directors: a, Mr. Altaf Rauf Shaikh and b. Mrs. Samreen Altaf Shaikh. 2. MR. ALTAF RAUF SHAIKH. Age 44 years, Occu. Business. Having address at F-303, Devashree Garden, Behind Corporation Bank, Wadakade, Porvorim, Bardez Goa-403501 3. MRS. SAMREEN ALTAF SHAIKH. AGE 39 years, Occu: Business. Having address at F-303, Devashree Garden, Behind Corporation Bank, Wadakade, Porvorim, Bardez Goa-403501 4. MR. NAZIR KASIM SAYED, Age 74 years, Occu: Retired. Having address at H. No.2/2155/161, Mubarak Manzil, Opposite Pai Hospital, Vaddem, Vasco da Gama, Goa-403802 5. MRS. CATUN BI SAYED. Age 69 years, Occu: Housewife. Having address at H. No.2/2155/161, Mubarak Manzil, Opposite Pai Hospital, Vaddem, Vasco da Gama,

¶11

¶12

SA No.31 of 2023

¶13

Having its branch office at Alto-Betim, Branch, Porvorim, Goa-403501 Through its Chief Manager and Authorized Officer

¶14

…Respondent

¶15

Counsel for the Applicant: Adv. Rahul Motkari i/b Mohit Shamdasani

¶16

Counsel for Respondent:

¶17

Dated: 09.05.2024

¶18

By way of the present SA, the Applicants prayed to quash and set aside the action of the Respondents in respect of the suit property i.e. (i) All that part and parcel of plot Chalta No.7 of P T Sheet No.96, admeasuring 540 sq. mtrs. forming part of larger property known as “CALGIR” situated at Vaddem ward, Mormugao Taluk and bungalow admeasuring 335.40 sq. mtrs. built up area constructed thereon and (ii) Hypothecation of Plant and Machinery; quash and set aside the Demand Notice dated 02.07.2022 (hereinafter referred to as “the secured assets”); and other reliefs.

¶19

Brief facts of the SA are that the Applicant No.1 herein was in the agricultural related business of plantation of Orchids and other ornamental flowers and foliages for sale at Goa. The said business was started in the year 2013 and since then for the last 7 years the Applicant No.1, 2, and 3 have been successfully and peacefully conducting this business. The Applicant No.2 and 3 are the husband and wife and are the only active directors of the Applicant No.1 and are involved in the day to day affairs of the company. The Applicant

¶20

Shamdasani Counsel for Respondent: Adv. Manoj Kumar F I N A L O R D E R Dated: 09.05.2024 By way of the present SA, the Applicants prayed to quash and set aside the action of the Respondents in respect of the suit property i.e. (i) All that part and parcel of plot Chalta No.7 of P T Sheet No.96, admeasuring 540 sq. mtrs. forming part of larger property known as “CALGIR” situated at Vaddem ward, Mormugao Taluk and bungalow admeasuring 335.40 sq. mtrs. built up area constructed thereon and (ii) Hypothecation of Plant and Machinery; quash and set aside the Demand Notice dated 02.07.2022 (hereinafter referred to as “the secured assets”); and other reliefs. 2. Brief facts of the SA are that the Applicant No.1 herein was in the agricultural related business of plantation of Orchids and other ornamental flowers and foliages for sale at Goa. The said

¶21

¶22

SA No.31 of 2023

¶23

No.4 & 5 are also husband and wife and are the partners of the Applicant No.3.

¶24

It is stated that vide sanction letter dated 31.08.2013, the Respondent sanctioned Loan Facility of Rs.3,40,00,000/- being Agriculture-Indirect Finance at the interest rate of 11.75% p.a. at annual rests to be repaid in 9 years within initial 2 years as holiday period and in 14 non equated half yearly installments. The Applicants executed the Memorandum of Deposit of Title Deeds in favour of the Respondent Bank on 06.09.2013.

¶25

It is further stated that vide sanction letter dated 15.05.2014, the Bank sanctioned Priority Sector Term Loan (Agriculture) of Rs.10 lakhs for the purpose of Floriculture-Cultivation of Orchids at the interest rate of 11.75% p.a. at annual rests to be repaid in 102 months with initial 18 months as holiday period and in 14 half yearly installments. Further, the Respondent sanctioned an amount of Rs.75 lakhs and Rs.25 lakhs respectively. In 2020, the Bank also sanctioned Rs.5.10 lakhs for the purpose of Interest Deferment for Working Capital Limit.

¶26

It is also stated that on 06.08.2019 in Goa especially Sattari there were extremely heavy rains and gusty winds resulted into Natural Calamity in the vicinity where the project of the Applicants is situated which severely destroyed the plantation and Applicants

¶27

It is also stated that on 06.08.2019 in Goa especially Sattari there were extremely heavy rains and gusty winds resulted into Natural Calamity in the vicinity where the project of the Applicants is situated which severely destroyed the plantation and Applicants incurred heavy losses. The Applicants received an amount of Rs.1.00 lakh as compensation from the Government of Goa under scheme of “Shetkari Adhar Nidhi”.

¶28

It is also stated that the concerned authorities and the competent officers like the Mamlatdar of Sattari Taluka, Goa, Zonal

¶29

¶30

SA No.31 of 2023

¶31

Agricultural Office, Directorate of Agriculture, Government of Goa had certified by letter dated 26.08.2019 after conducting necessary inspection and panchanama dated 16.08.2019 that the Applicants have suffered 80% loss to the said project due to heavy rains and gusty wind, 24,000 sq. mts. of Shade Net House was damaged and the prima facie damage to the Shade Net House was assessed and confirmed. 7. Further, it is stated that due to the continuous and heavy rains till November, 2019, the Government machinery was stressed and took some to prepare the requisite documents and hand over the same to the Applicant. This Natural Calamity totally disturbed the Applicants and infused more self-funds in the project to revive the project. They also approached the Bank for financial help as per the RBI guidelines. Ultimately, the documents after a continuous follow-up were readied by the authorities and application for certified copies was made on 31.01.2020 and were received on 03.02.2020. 8. It is further stated that thereafter the Applicants vide application dated 06.02.2020 alongwith necessary documents applied for restructuring the Reserve Bank of India with regards to natural calamities for agriculture projects being No.RBI/FIDD/2017-2018/55 Master Direction FIDD.CO.FSD.BC NO.8/0510/001-2017-18 dated 03.07.2017 and RBI Master

¶32

It is further stated that thereafter the Applicants vide application dated 06.02.2020 alongwith necessary documents applied for restructuring the Reserve Bank of India with regards to natural calamities for agriculture projects being No.RBI/FIDD/2017-2018/55 Master Direction FIDD.CO.FSD.BC NO.8/0510/001-2017-18 dated 03.07.2017 and RBI Master Direction FIDD.CO.FSD.BC No.9/05.10.001/2018-19 dated 17.10.2018. The said application was refused to be accepted by the Branch Manager. However, due to the regular follow up from the Applicants, the said Branch Manager had reluctantly accepted the application dated 06.02.2020 only on 15.02.2020 but that too

¶33

¶34

SA No.31 of 2023

¶35

without any visit from any of the officer of the Respondent. He stated that in the meantime the Lockdown was announced by the Government of India due to Covid-19 pandemic, despite these adverse circumstances, the Applicants were trying their level best to revive their business and sustain and seek help from the Bank. 9. It is further stated that on 17.04.2020, the Applicants reminded the Bank of the application dated 06.02.2020 but the Head Office of the Bank is not willing to consider the restructuring of the project of the Applicants thus, the Applicants sent a letter dated 30.04.2020 and by email to the GM - Credit (HO) and explained the everything and rude behavior of the branch manager as well as the need to restructure the project. Upon constant follow ups of the Applicants, the Respondent No.2 vide emails dated 21.05.2020 prepared and sent a resolution plan to the Applicants for the restructuring seeking signatures on the said Resolution Plan. The Applicants then signed the Resolution Plan and sent it to the Bank via email dated 21.05.2020. The Applicants again followed up with the Respondent on 26.05.2020 and sought early redressal of their issues. The Applicants resubmitted the Email dated 17.04.2020 by way of hard copy on 03.06.2020 as demanded by the Bank. With a view revenue the Applicant No.2 had leased 7 acres additional and with the hope that the Applicants were being funded by the Bank as promised and assured by the Respondent BANK.

¶36

It is further stated that on 17.04.2020, the Applicants reminded the Bank of the application dated 06.02.2020 but the Head Office of the Bank is not willing to consider the restructuring of the project of the Applicants thus, the Applicants sent a letter dated 30.04.2020 and by email to the GM - Credit (HO) and explained the everything and rude behavior of the branch manager as well as the need to restructure the project. Upon constant follow ups of the Applicants, the Respondent No.2 vide emails dated 21.05.2020 prepared and sent a resolution plan to the Applicants for the restructuring seeking signatures on the said Resolution Plan. The Applicants then signed the Resolution Plan and sent it to the Bank via email dated 21.05.2020. The Applicants again followed up with the Respondent on 26.05.2020 and sought early redressal of their issues. The Applicants resubmitted the Email dated 17.04.2020 by way of hard copy on 03.06.2020 as demanded by the Bank. With a view revenue the Applicant No.2 had leased 7 acres additional and with the hope that the Applicants were being funded by the Bank as promised and assured by the Respondent BANK.

¶37

Once again the Respondent had verbally asked the Applicants to submit a project report. The Applicants had done the same somewhere around 15.09.2020 by submitting the same in the branch. The Applicants thereafter got a call on 22.09.2020 from the Respondent to provide a covering letter for the revised proposal by

¶38

¶39

SA No.31 of 2023

¶40

way of email. Thereafter, the Applicants provided the same vide email dated 22.09.2020 and had provided the Respondent various financial documents and other requirements of the Applicants.

¶41

It is further stated that the Respondent again sent an email dated 06.11.2020 and 07.11.2020 again seeking signatures on the fresh resolution plan prepared by the Bank. The Applicants replied the said email dated 06.11.2020 vide their reply email dated 07.11.2020 thereby once again provided all the necessary details. The Applicants once again wrote to the Respondent to consider their proposal and expedite the same vide their email dated 23.11.2020. Thereafter, when the Respondent had verbally informed the Applicants that the Head Office was not willing to consider the Applicant’s proposal for restructuring, the Applicants wrote an email to the Respondent on 16.12.2020 pointing out to the Respondent the difficulties being faced by the Applicants in view of the Covid 19 pandemic and so also the natural calamity especially being an agriculture project. In the same mail the Applicants also pointed out that it was sincerely trying to revive the project and had taken on lease another bigger land on lease for 15 years so as to increase production and revenue streams. Once again the Respondent demanded a hard copy of the said email and the same was provided by the Applicants on 22.12.2020 which was acknowledged on 23.12.2020.

¶42

It is further stated that on 24.12.2020 the branch manager (who was not a qualified in agricultural field) had visited the project site of the Applicants which was almost 10 months after making the first application for restructuring. During the said visit it was informed to the Applicants that they should once again apply for restructuring

¶43

¶44

SA No.31 of 2023

¶45

and submit a detailed revival plan so that it can be sent to the Agriculture Support Division-Head Office for their consideration and accordingly on 31.12.2020 the Applicants had done the same. However, the Applicants were shocked to receive 2 letters dated 02.01.2021 issued by the branch manager stating that the proposal of the Applicants cannot be considered favourably and that the arrears should be cleared and to regularize the accounts. Thereafter, the Applicants wrote a letter dated 11.01.2021 by RPAD to the GM-Credit (HO) in reply to the letter of the Respondent dated 02.01.2021. After further follow up with the Respondent Bank and its Circle Office, the Bank Officers informed and visited Applicant’s farm and assured the Applicants that they were satisfied with the reality and the hardship of the Applicants and informed the Applicants to again submit the restructure proposal stating in detail the revival plans as explained to the visiting officer. The Applicants once again submitted the revival plan on 25.02.2021. Then on 30.03.2021 Bank Branch manager Mr. Ravindra Shanbhough called upon the Applicant No.2 and asked the Applicant No.2 to make unrealistic, false and fabricated financial projections to revive the project or else the project will not get restructured and that today 30.03.2021 is the last day for the same, thereby pressuring and coercing the Applicants to submit false and fabricated projections to cook up the books of the Bank and inducing the Applicants to commit falsity.

¶46

It is also stated that the Applicants on the same day wrote email to Bank stating that the proposal asked by the Respondent is not feasible nor visible nor in sync with ground reality of the project requirements however, since the branch is insisting on the soft copies of the projection the Applicants sent the same without any

¶47

¶48

SA No.31 of 2023

¶49

changes. Suddenly on 31.03.2021, the Bank sanctioned an amount of Rs.1,63,70,300/- without the knowledge of the Applicants and credited the same to the other loans due of the Applicants, behind the back and which was not a part of the proposal submitted by the Applicants as and by way of restructure of the loan accounts of the Applicants. The said restructure is just an eye wash and to avoid the last moment NPA classification as on 31.03.2021 and with the sole intent of keeping good the financial books of the Respondent at the cost of the Applicant's project. Then on 02.04.2021, the branch manager of the Bank called the Applicant No.2 & 3 to the branch and pressured them to sign the purported sanction order and other documents of the loan papers. The Applicants were not at all aware of the fresh disbursement nor was it aware of the terms and conditions of the revised sanctions. Bank handed over the copy of credit sanction intimation dated 31.03.2021 after the signatures on the documents were taken. The said facts and events can be verified by directing the Bank to produce from its compliance departments and other departments to get the details regarding the date and time of sanction and disbursal of amounts and also entries in the statement of accounts alongwith details as to intimation to the branch about the sanction and the time frame of the parties taken by the Alto-Betim branch. 14. On assurance of the then Branch Manager, the Applicants waited for

¶50

On assurance of the then Branch Manager, the Applicants waited for a few days and as there was no further response from the Bank as committed by the Branch Manager, the Applicants decided to write to the branch manager on 07.04.2021 seeking explanation on what basis was the restructure offered and also that it was a technically as well as commercially faulty restructure. No reply was received in this regard. Thereafter, on 24.04.2021, the Applicants sent an email

¶51

¶52

SA No.31 of 2023

¶53

to the branch requesting reply to the communication dated 07.04.2021, being “most urgent” but again there was no reply from the Bank.

¶54

Further, on 05.05.2021, the Applicants sent a letter dated 05.05.2021 via RPAD to the General Manager, Credit of the Bank, bringing to its notice that the restructure was not as per norms of RBI’s Master Circular and mishandling of account however, again there was no reply from the Respondent. Thereafter, on 11.05.2021 and 18.06.2021 the Applicants sent letters requesting replies to the earlier communications.

¶55

It is further stated that thereafter on 30.06.2021, as per directions and request of the Manager and email was written by the Applicant No.2 to the Bank requesting for 2 years Moratorium period in view of the covid-19 pandemic, since the Applicant's final products was used exclusively in social events in view of the strict Covid restrictions. Applicant No.2 and 3 were made to submit necessary documents and were even called by the bank in the branch to sign loan application documents for a sum of Rs.45 lakhs under the GECL scheme, which was done by the Applicants however, a copy of the said application was never handed over despite request.

¶56

It is further stated on 25.12.2021, 27.12.2021 and 19.01.2022, the Applicants submitted by emails and physical letter a fresh

¶57

It is further stated on 25.12.2021, 27.12.2021 and 19.01.2022, the Applicants submitted by emails and physical letter a fresh application after the Bank assured that fresh loan of Rs.50 lakhs and 2 years moratorium period would be considered. To the utter shock and disbelief, the Branch Manager replied to the email dated 04.03.2012 informing the Applicants that all its accounts have turned into NPA and refused restructuring and further finance to project and informed that they have initiated SARFAESI action.

¶58

¶59

SA No.31 of 2023

¶60

It is further stated that the Respondent issued recall notice on 01.03.2022 contents of which are false, wrong and illegal and the date of classification are also illegal and contrary to the Bank’s own documents. The Applicants' vide letters dated 20.03.2022 requested time to reply and comprehend the situation and thereafter, on 07.04.2022, the Applicants issued legal notices to Bank, but bank failed to reply.

¶61

It is further stated that the Respondent Bank through its Advocate addressed notice dated 25.04.2022 to the Applicants. The said notice also claims the classification of account as NPA from 28.02.2022 and threatens further Securitization Action.

¶62

It is further stated that thereafter the Respondent by notice dated 02.07.2022 issued under Section 13(2) of the SARFAESI Act, 2002 called upon the Applicants to make payment of the amount of Rs.7,10,23,555.05 and classifying 1 loan account as NPA on 31.03.2021 w.e.f. 30.05.2020 and another loan account on 31.03.2021 of the Applicant No.1. Date of NPA for 3 loan accounts of Applicant No.2 as 27.02.2022. The said notice was duly replied by the Applicants, however, the Bank failed to give the satisfactory rejoinder to the said reply.

¶63

It is also stated that on 28.12.2022 Bank took symbolic possession of the property. Being aggrieved by the said notice, the Applicants

¶64

It is also stated that on 28.12.2022 Bank took symbolic possession of the property. Being aggrieved by the said notice, the Applicants filed the present SA.

¶65

On the other hand, Ld. Counsel for the Respondent has submitted that on the request of Applicant No. 1 vide Sanction Letter dated 31.08.2013, the Respondent sanctioned term loan of Rs. 3,40,00,000/- (Rupees Three Crore Forty Lakh Only) under

¶66

¶67

SA No.31 of 2023

¶68

Agriculture-Indirect Finance category for a term period of 9 (Nine) Years which term loan was payable in 14 Non equated half yearly installments after an initial holiday period of two years and on the terms and conditions mentioned therein which terms and conditions were accepted and acknowledged by the Applicant No. 1. The said loan amount was disbursed by the Respondent in the loan account bearing No. 0177001800069501 of the Applicant No. 1. The Applicant No. 1 made the first payment on 18.08.2016 and last payment was made on 30.05.2019, but the Applicant No. 1 thereafter failed and neglected to make any payment towards the said loan account bearing No. 0177001800069501. 23. It is submitted that the Applicant No. 1 submitted the application for restructuring of loan account bearing No. 0177001800069501 on 29.03.2021 and thereupon, on perusal of application, vide Sanction Letter dated 31.03.2021, the Respondent restructured the principal outstanding loan amount of Rs. 3,88,27,100/- of said loan account no. 0177001800069501 into term loan which is to be payable in 7 (seven) non-equated yearly instalments and the Respondent has sanctioned fresh Fund Interest Term Loan (FITL) of Rs.1,63,70,300/- which was to be repaid in 36 EMIs after initial holiday period of 3 months which loan amount was disbursed in the loan account bearing No. 0177001800075601. 24. It is stated that Applicant No. 1 was to make the first payment on

¶69

It is submitted that the Applicant No. 1 submitted the application for restructuring of loan account bearing No. 0177001800069501 on 29.03.2021 and thereupon, on perusal of application, vide Sanction Letter dated 31.03.2021, the Respondent restructured the principal outstanding loan amount of Rs. 3,88,27,100/- of said loan account no. 0177001800069501 into term loan which is to be payable in 7 (seven) non-equated yearly instalments and the Respondent has sanctioned fresh Fund Interest Term Loan (FITL) of Rs.1,63,70,300/- which was to be repaid in 36 EMIs after initial holiday period of 3 months which loan amount was disbursed in the loan account bearing No. 0177001800075601.

¶70

It is stated that Applicant No. 1 was to make the first payment on 31.03.2022 in respect of restructured Loan Account No. 0177001800069501 but the Applicant No. 1 has miserably failed to repay the first instalment as per the term of Sanction dated 31.03.2021 and the Applicant No. 1 was to make the first payment in July 2021 in respect of FITL loan account bearing No.

¶71

¶72

SA No.31 of 2023

¶73

0177001800075601 but the Applicant No. 1 has miserably failed to repay the first instalment as per the term of Sanction dated 31.03.2021.

¶74

It is further stated that on the request of Applicant No. 2 vide Sanction Letter dated 30.05.2019, the Respondent sanctioned term loan of Rs. 25,00,000/- (Rupees Twenty Five Lakh Only) for a term period of 55 months which term loan was payable in 5 yearly installments and Overdraft facility of Rs. 75,00,000/- (Rupees Seventy Five Lakh Only) for a period of 12 months which overdraft facility was to be repaid on demand and on the terms and conditions mentioned therein which terms and conditions were accepted and acknowledged by the Applicant No. 1. The said term loan amount was disbursed by the Respondent in the term loan account bearing No. 0177001800073401 and the said overdraft facility was disbursed by the Respondent in the loan account bearing No. 0177000600291101 of the Applicant No. 2.

¶75

It is further stated that the Applicant No. 2 has miserably failed to repay the term loan and overdraft facility as per the term of Sanction dated 30.05.2019.

¶76

It is also stated that on the request of Applicant No. 2 vide Sanction Letter dated 03.09.2020, the Respondent sanctioned Interest Deferment DPN 2020 of Rs. 5,10,000/- (Rupees Five Lakh Ten

¶77

It is also stated that on the request of Applicant No. 2 vide Sanction Letter dated 03.09.2020, the Respondent sanctioned Interest Deferment DPN 2020 of Rs. 5,10,000/- (Rupees Five Lakh Ten Thousand Only) for a term period of 6 months which term loan was payable in 6 monthly installments and on the terms and conditions mentioned therein which terms and conditions were accepted and acknowledged by the Applicant No. 1. The said term loan amount was disbursed by the Respondent in the term loan account bearing No. 0177001400123101 of the Applicant No. 2. However, the

¶78

¶79

SA No.31 of 2023

¶80

Applicant No. 2 has miserably failed to repay since 09.02.2021 as per the term of Sanction dated 03.09.2020.

¶81

It is also stated that Applicant Nos. 3 to 5 are the guarantors to the said credit facilities granted by the Respondent to Applicant Nos. 1 & 2 and to secure the said credit facilities are granted to Applicant Nos. 1 & 2 by the Respondent, the Applicant No. 4 has created equitable mortgage on the property being "all that part and parcel of Residential Property admeasuring 540 sq. mtr. which is part of the property known as "Calagir" along with residential house/bungalow constructed thereon admeasuring 335.40 sq. mtr. (Ground + One Floor) surveyed under Chalta No. 7 of P.T. Sheet No. 96 of City Survey of Vasco Da gama, situated within the limits of Vaddem Village, Margoa, Taluka and District South Goa Revenue District and within the limit of Mormugoa Municipal Area (hereinafter referred to Secured Asset)". However, the Applicant No. 1 failed and neglected to repay the loan under account bearing Account No. 0177001800069501 and 0177001800075601, thereafter the Respondent classified the said loan account of Applicant No. 1 as NPA on 31.03.2021 as originally classified as NPA in term of clause No. 12.2.4 of RBI Guidelines bearing No. DBOD.No.BP.BC.1/21.04.048/2013-14. The Applicant No. 2 failed and neglected to repay the loan under account bearing Account Nos. 0177001800073401, 0177000600291101 and 0177001400123101, thereafter the Respondent classified the said loan account of Applicant No. 2 as NPA on 27.02.2022.

¶82

Considered the submissions of the parties and perused the record.

¶83

The Applicants have mainly raised the two issues that:

¶84

¶85

SA No.31 of 2023

¶86

A. The Respondent failed to comply with RBI Master Circulars on restructuring of loan account; and

¶87

B. The loan accounts of the Applicant No.1 & 2 were wrongly classified as NPA.

¶88

Now hereinafter, I would like to decide the issue raised by the Applicants.

¶89

A. The Respondent failed to comply with RBI Master Circulars on restructuring of loan account;

¶90

(i) Ld. Counsel for the Applicants submitted that the Bank failed to comply with RBI Master Circulars i.e. RBI Master Direction Circular No. RBI/FIDD/2017-2018/55 Master Direction FIDD.CO.FSD.BC NO 8/0510/001-2017-18 dated 03.07.2017; and RBI Master Direction FIDD.CO.FSD.BC NO 9/05.10.001/2018-19 dated 17.10.2018.

¶91

(ii) He submitted that the restructure done by the Bank to revive the project post natural calamity is illegal and in complete violation of the guidelines set as per RBI for agriculture projects suffering under natural calamity and in total violation of RBI Master Direction. Thus the purported restructure done by the Bank to revive the project post natural calamity is illegal and in complete violation of the guidelines set as per RBI.

¶92

(iii) I have gone through the record.

¶93

(iv) At the outset, Clause 4.1.1 of RBI Circular No.FIDD.CO.FSD.BC NO 8/0510/001-2017-18, on restructuring of existing loans, provides that:

¶94

Applicants. A. The Respondent failed to comply with RBI Master Circulars on restructuring of loan account; (i) Ld. Counsel for the Applicants submitted that the Bank failed to comply with RBI Master Circulars i.e. RBI Master Direction Circular No. RBI/FIDD/2017-2018/55 Master Direction FIDD.CO.FSD.BC NO 8/0510/001-2017-18 dated 03.07.2017; and RBI Master Direction FIDD.CO.FSD.BC NO 9/05.10.001/2018-19 dated 17.10.2018. (ii) He submitted that the restructure done by the Bank to revive the project post natural calamity is illegal and in complete violation of the guidelines set as per RBI for agriculture projects suffering under natural calamity and in total violation of RBI Master Direction. Thus the purported restructure done by the Bank to revive the project post natural calamity is illegal and in complete violation of the guidelines set as per RBI.

¶95

¶96

SA No.31 of 2023

¶97

"All short-term loans, except those which are overdue at the time of occurrence of natural calamity, should be eligible for restructuring. The principal amount of the short-term loan as well as interest due for repayment in the year of occurrence of the natural calamity may be converted into term loan." (emphasis provided) (v) In the present case, though the loan account of Applicant No. 1 was turned to NPA originally on 30.05.2020 however, as per RBI Guideline and due to covid, the Respondent considered the request of the Applicants for restructuring of loan account No. 0177001800069501 and vide Sanction Letter dated 31.03.2021 restructured the loan which was to be repaid in 7 non-equated yearly instalments as per RBI Guideline and the Interest was converted in FITL (Account No. 0177001800075601) which was to be repaid in 33 EMIs after an initial holiday period of 3 months. (vi) Thus, the objection raised by the Applicants is not sustainable hence, rejected. B. The loan accounts of the Applicant No.1 & 2 were wrongly classified as NPA.

¶98

B. The loan accounts of the Applicant No.1 & 2 were wrongly classified as NPA.

¶99

(i) Ld. Counsel for the Applicants submitted that the Respondent has illegally classified the accounts of Applicant No.1 as NPA on the day of sanction i.e. 31.03.2021. He submitted that on 31.03.2021, the Bank sanctioned an amount of Rs.1,63,70.300/- without the knowledge of the Applicants and credited the same to the other loans which was not a part of the proposal submitted by the

¶100

¶101

SA No.31 of 2023

¶102

Applicants as and by way of restructure of the loan accounts of the Applicants. The said restructure is just an eye wash and to avoid the last moment NPA classification as on 31.03.2021 and with the sole intent of keeping good the financial books of the Respondent at the cost of the Applicant's project. He submitted that there are serious and glaring discrepancies in the dates of NPA. Further, there is no prior notice issued to the Applicants before classifying the accounts as NPA. The classification of accounts as NPA is without hearing the Applicants. In fact the respondent had taken up a fresh proposal for further finance and restructure just days before classifying the account as NPA. (ii) I have gone through the record. (iii) Record reveals that as per the terms of Sanction dated 30.08.2013, the Applicant No. 1 was to repay the loan in 14 Non equated half yearly installment in respect of Loan Account No. 0177001800069501 of Applicant No.1 but the Applicant No. 1 failed and neglected to repay the loan amount even after several requests and reminders hence the loan account was original turned into NPA on 30.05.2020. Thereafter, the Applicant No. 1 submitted the application for restructuring of loan account on 29.03.2021 and thereupon, on perusal of application, vide Sanction Letter dated 31.03.2021, the Respondent restructured the principal outstanding loan amount of Rs.3,88,27,100/of said loan account no.

¶103

(iii) Record reveals that as per the terms of Sanction dated 30.08.2013, the Applicant No. 1 was to repay the loan in 14 Non equated half yearly installment in respect of Loan Account No. 0177001800069501 of Applicant No.1 but the Applicant No. 1 failed and neglected to repay the loan amount even after several requests and reminders hence the loan account was original turned into NPA on 30.05.2020. Thereafter, the Applicant No. 1 submitted the application for restructuring of loan account on 29.03.2021 and thereupon, on perusal of application, vide Sanction Letter dated 31.03.2021, the Respondent restructured the principal outstanding loan amount of Rs.3,88,27,100/of said loan account no. 0177001800069501 into term loan which is to be payable in 7 (seven) non-equated yearly instalments and the Respondent has sanctioned fresh Fund Interest Term Loan (FITL) of Rs.1,63,70,300/- which was to be repaid in 36 EMIs after initial holiday period of 3 months which loan amount was disbursed in the

¶104

¶105

SA No.31 of 2023

¶106

loan account bearing No. 0177001800075601, but the Applicant No. 1 has miserably failed to repay the instalments as per the term of Sanction dated 31.03.2021 and hence these loan accounts were classified as NPA w.e.f. 31.03.2021 in terms of Clause No. 12.2.4 of RBI Guidelines which says that: "In case, however, satisfactory performance after the specified period is not evidenced, the asset classification of the restructured account would be governed as per the applicable prudential norms with reference to the pre- restructuring payment schedule". (emphasis supplied) (iv) Therefore, looking at the above clause and considering the facts of the present case, I find no illegality in classification of accounts of Applicant No.1 as NPA on 31.03.2021 by the Respondent. (v) Insofar as classification of loan accounts of Applicant No.2 as NPA is concerned, the Applicant No.2 availed the Overdraft and Term Loan Facilities from the Respondent however, they failed to adhere the financial discipline and neglected to make the payment of the dues, thus, the loan account Nos. 0177001800073401, 0177000600291101 and 0177001400123101 of Applicant No. 2,

¶107

(iv) Therefore, looking at the above clause and considering the facts of the present case, I find no illegality in classification of accounts of Applicant No.1 as NPA on 31.03.2021 by the Respondent.

¶108

(v) Insofar as classification of loan accounts of Applicant No.2 as NPA is concerned, the Applicant No.2 availed the Overdraft and Term Loan Facilities from the Respondent however, they failed to adhere the financial discipline and neglected to make the payment of the dues, thus, the loan account Nos. 0177001800073401, 0177000600291101 and 0177001400123101 of Applicant No. 2, were classified as NPA on 27.02.2022.

¶109

(vi) Therefore, I do not find any merit in the objection raised by the Applicants and the same is hereby rejected.

¶110

¶111

SA No.31 of 2023

¶112