IMPORTANT POINT
Alternative remedy must be availed of.

Badar Durrez Ahmed, C.J.—This writ petition is directed against the notice dated 25.1.2017, issued by the respondents (Jammu & Kashmir Bank) under Section 13(2) of the Secruritisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, (hereinafter referred to as the said Act). The main challenge to the notice dated 25.01.2017 is that it has been issued in violation of the guidelines of the Reserve Bank of India and is, therefore, liable to be quashed. The plea of the petitioner is that the respondent bank did not adhere to the guidelines as issued by the Reserve Bank of India with regard to classification of assets as non-performing assets. It was also contended that since the classification of an asset as a non-performing asset (NPA) is a pre-condition for the issuance of a notice under Section 13(2), when the said pre-condition is not satisfied in accordance with the law, the notice itself would be bad in law and would be liable to be challenged by way of a writ petition under Article 226 of the Constitution of India read with Section 103 of the Constitution of Jammu and Kashmir.

2. In the impugned notice dated 25.01.2017, it has been stated that the petitioner had defaulted in repayment of the secured debt in violation of the terms agreed upon and, therefore, the petitioner’s account had been classified by the bank as a non-performing asset with effect from 30.06.2016, as per the guidelines/ directions of the Reserve Bank of India. It is this statement in the impugned notice which has been challenged in the present writ petition.

3. The learned counsel for the petitioner drew our attention to a document known as the Master Circular ‘“Prudential Norms on Income Recognition, Asset Classification and Provisioning pertaining to advances issued by the Reserve Bank of India. Paragraph 2 of the said document deals with definitions and paragraph 2.1 pertains to non-performing assets. A non-performing asset has been defined as a loan or an advance where, inter alia, the account remains ‘out of order’ as indicated in paragraph 2.2 in respect of an Overdraft/Cash Credit (OD/CC). Paragraph 2.2 of the said Reserve Bank of India guidelines is set out herein below;

‘2.2’ Out of Order-status

An account should be treated as ‘out of order-if the outstanding balance remains continuously in excess of the sanctioned limit/ drawing power for 90 days. In cases where the outstanding balance in the principal operating account is less than the sanctioned limit/ drawing power, but there are no credits continuously for 90 days as on the date of Balance Sheet or credits are not enough to cover the interest debited during the same period, these accounts should be treated as’ out of order-.

4. On going through the above extracted paragraph 2.2, it is evident that an account is to be treated as ‘out of order-if the outstanding balance remains continuously in excess of the sanctioned limit/drawing power for 90 days. In the present case, we are concerned with an overdraft facility of Rs. 09 crores. It is the case of the bank that in respect of the said overdraft facility, the outstanding balance remained continuously in excess of the sanctioned limit/ drawing power for 90 days and that is why it was classified as a non-performing asset. It is also provided in paragraph 2.2, which has been set out here, that in case the outstanding balance in the principal operating account is less than the sanctioned limit/ drawing power, but there are no credits continuously for 90 days as on the date of balance sheet or credits are not enough to cover the interest debited during the same period, such accounts should also be treated as ‘out of order-.

5. We may point out that the outstanding balance in the overdraft facility which was extended by the respondent bank to the petitioner had crossed the Rs.09 crore sanctioned limit in November, 2015, itself and continued to be outstanding for a period of over 90 days.

6. The learned coun