Allowed

Ms Raj Kesari Rocks Private Ltd. v. State Bank of India

DRT7 Jul 2026SA/578/2026

Case brief

AI extract

What is this about?

The Debts Recovery Tribunal allowed an application filed by a borrower to question a notice issued under Section 13(2) of the Securitization Act. The notice relied on RBI Master Circulars that were subsequently withdrawn and not applicable to public sector banks. The Tribunal held the notice invalid and quashed all proceedings. No separate authorized officer costs were imposed.

What did the court decide?

Securitization application allowed; Notice under Section 13(2) quashed; Declaration of NPA quashed; Further proceedings quashed; Court fee of Rs 1 lac credited to applicant.

Ms Raj Kesari Rocks Private Ltd. versus State Bank of India — Company and Corporate | DRT (2026)

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Court of the Presiding Officer Debts Recovery Tribunal, Jaipur

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Item No. 32

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Case No.SA/578/2026

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MS RAJ KESARI ROCKS PRIVATE LTD Vs STATE BANK OF INDIA

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Date: 07.07.2026.

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Proceedings through hybrid mode Present:

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Senior Advocate Sh. Ashok Mehta along with Shri R N Vijay& Sh. Ayush Kumar Jain, Counsel for the Applicant

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Shri Bheem Sain Jain, Counsel for the Respondent Bank/FI no officer/liaison officer of Bank present despite calling

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In this matter, Ld. Senior Counsel of the applicant draws my attention to the notice under Section 13(2) issued by the bank and he referred Para no. 5 wherein it is mentioned that “in terms of RBI Master Circular on Prudential Norms on Income Recognition, Asset Classification and Provisioning pertaining to Advances dated 08.05.2023 (as amended from time to time), if the credit sum in a Cash Credit/Revolving Credit facility account is less than interest debited during the previous 90 days period, then the loan account is marked as NPA. The aforesaid previous 90 days period is inclusive of the day for which the day-end process is being run. The total credits in the Cash Credit Account No. 41628886284 during the period from 04.11.2025 to 01.02.2026 amount only Rs. 0.00 whereas the total interest debited during the same duration is Rs. 18,87,364.00. The Cash Credit Account No. 41628886284 has thus been classified as NPA on 01.02.2026. Moreover, in terms of the said RBI Master Circular, the NPA Classification is “borrower-wise” and not ‘loan account-wise”. i.e. one Customer one IRAC/Asset Classification. Accordingly, all the loan accounts of the Borrower have been stamped as NPA w.e.f. 01.02.2026 with IRAC Sub-standard.”

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The circular mentioned in the notice under Section 13(2) is not in existence today or also on the date of issuance of notice u/s 13(2).

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Court of the Presiding Officer

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Debts Recovery Tribunal, Jaipur

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As per Reserve Bank of India’s website, it is categorically written “ Withdrawn”. The said circular has been withdrawn and there is no reason for the bank to relay upon withdrawn guidelines of the Reserve Bank of India.

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As per the judgment of Hon’ble Supreme Court, the guidelines issued by the Reserve Bank of India is directory in nature held in the matter of Sardar Associates vs. Punjab and Sind Bank, but in the present case there is a serious fault on the part of the authorized officer in referring the circular and justification of declaration of the account as NPA on the basis of such withdrawn guidelines. Interestingly said circular was for UCB (Urban Cooperative Banks) and not for Public Sector Banks.

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The counsel for the respondent bank submits that he has filed reply and justify the classification of the account as NPA.The Bank is trying to justify illegal act of Authorised officer in the reply but when the base is faulty, building can not stand.

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Prima facie on the face of the record, the reasons given by the bank in notice under Section 13(2) have relied upon the RBI Master Circular on Prudential Norms on Income Recognition, Asset Classification and Provisioning pertaining to Advances dated 08.05.2023and cheery on the cake is that these guidelines are for Urban Co-operative Banks.

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The Authorized officers needs training and upgrade his knowledge. The counsel for the respondent bank was asked whether they would like to withdraw this notice or not. He submits that he has no instructions and after consulting the client he submits that they will proceed with this notice itself.

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In view of the above, this Tribunal is of the opinion that classification of the account as NPA on the basis of non-existence RBI guidelines shows

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Court of the Presiding Officer

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Debts Recovery Tribunal, Jaipur

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that classification of NPA is wrong and bank is not able to justify the wrong classification of NPA, therefore, on the basis of such withdrawn guidelines, the account could not have been declared as NPA, therefore, it is presumed that the account was not NPA.

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The main thing troubling this Tribunal is that this notice has been issued by a specialsed branch dealing with recovery and no other work like general banking branch. Their focus should be on to the correctness & compliance of statuary provisions of Act but seems that this notice was prepared by someone simply signed by Authorised Officer not wetted by any law officer and/or Advocate. The concept of specialized branches appears to be failing as such notices aid borrowers to delay the recovery of Bank.

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No authorized officer or liaison officer present on the VC despite directions of DFS that all the matters will be attended by the liaison officer. Copy of the order be sent to the DFS as there is a noncompliance of directions issued and the Liaison officer of state bank is not appearing despite being called from last three-four month which results in exparte orders as no one on behalf of bank is present to assist.

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Copy of the orders be sent to Managing Director of Bank & Chief General Manager of the bank to look into the fact as to how such notices are issued which help the borrowers directly. It appears the Authorised officer has no knowledge or is hand in glove with borrowers to delay the recovery.

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Accordingly, this Securitization Application stands allowed. Notice under section 13(2) stand quashed & all further proceedings stand quashed. Declaration of NPA on the basis of said non-existent Notification (which was for UCB) also stand quashed.

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This is fit case where Authorized Officer should be put to personal cost as his action has delayed the recovery of the Bank however a chance to improve the functioning has to be given so personal cost is not imposed

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Court of the Presiding Officer

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Debts Recovery Tribunal, Jaipur

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but the amount of Court fee of Rs 1 lac paid by SA applicant shall be credited in their account as cost of this litigation.

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File be consigned to record, as per rules. Copy of order be uploaded on website.

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(Vimal Gupta) Presiding Officer Debts Recovery Tribunal, Jaipur

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Ms Raj Kesari Rocks Private Ltd. v. State Bank of India

Case brief

What is this about?

What did the court decide?

Ms Raj Kesari Rocks Private Ltd. v. State Bank of India

Case brief

What is this about?

What did the court decide?

What the court decided

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Issues for consideration

Statutes considered

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