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2012 Supreme(Cal) 141
IN THE HIGH COURT OF CALCUTTA
Harish Tandon, J.
Amritraj Investments Pvt. Ltd.
Vs
The Dhanalakshmi Bank Ltd
C.O. No. 1543 of 2011
Decided on : 20.02.2012
For the petitioners: Mr. P.K. Dutt Mr. C.K. Dutta Mr. Pravat Sil
For the Opposite Parties: Mr. V. Raja Rao : Mr. A. Rao
The classification of an account as a non-performing asset under the Securitisation Act is based on the guidelines issued by the Reserve Bank of India, and not solely on the market value of the pledged asset.
Headnote:
SECURITISATION ACT - NON-PERFORMING ASSETS - SECTION 2(O), 13(2), 13(3A) - The term 'asset' in the context of the Securitisation Act refers to an account and not a fixed asset. An account is classified as a non-performing asset when it becomes substandard, doubtful, or a loss asset, as per the guidelines issued by the Reserve Bank of India (RBI).
Fact of the Case:
The petitioner challenged the declaration of his account as a non-performing asset (NPA) by the bank under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, arguing that the flat pledged as collateral security had a market value exceeding the bank's claim and hence could not be termed as an NPA.
Finding of the Court:
The court held that the term 'asset' in the Securitisation Act refers to an account and not a fixed asset. The classification of an account as an NPA is based on the guidelines issued by the RBI, and in this case, the bank had followed the prescribed procedure.
Issues: Whether the declaration of the petitioner's account as an NPA was valid, considering the market value of the pledged flat exceeded the bank's claim.
Ratio Decidendi: The court relied on the definition of 'non-performing asset' under Section 2(o) of the Securitisation Act and the RBI's prudential norms for classifying accounts as sub-standard, doubtful, or loss assets. It held that the bank's action in declaring the account as an NPA was in accordance with the prescribed guidelines and was not influenced by the market value of the pledged flat.
Final Decision: The court dismissed the petitioner's revisional application, upholding the declaration of his account as an NPA by the bank.
HARISH TANDON, J.:
1. This revisional application is directed against judgment and order dated 3rd February, 2011, passed by the Debt Recovery Appellate Tribunal, Kolkata in Appeal No. 79 of 2009.
2. A short but interesting question is raised in this revisional application by the petitioner as to whether it is an account which is declared as non-performing assets for non-payment of the term deposit or the property which is hypothecated and/or pledged for securing such term loan when depletes its value is termed as non-performing assets.
3. According to the petitioner which is not disputed by the Financial Institutions/Bank that the flat which stood as collateral security for such term loan would fetch much value than the claim of the bank and as such the action of the bank under the Securitisation & Reconstruction of Financial Assets and Enforcement of Security Interest Act after declaring the said asset as NPA is illegal and contrary to the aims and object for which such act was introduced.
4. Before dealing with such point, certain facts is required to be narrated.
5. On 30th September, 2003, the opposite party bank sanctioned a term loan of Rs.32 lakhs against an equitable mortgage of the entire 5th floor of the premises No.45, Jhowtalla Road, Kolkata- 700 019. An irrevocable Power of Attorney was executed to enable the opposite party bank to collect the rent directly from the tenant which would be adjusted against the said term loan. Subsequently, the tenant defaulted in making the payment on and from the month of June, 2005. On August 5, 2006, The opposite bank intimated to the petitioner that as on July 31, 2006, there is a total outstanding of Rs. 34,49,239/- where in turn the petitioner proposed for settlement of the aforesaid dues at Rs.22 lakhs as the Bank has collected more than Rs.10 lakhs as rent from the said tenant. Such proposal was not accepted by the bank as according to it, the petitioner is obliged to make the payment of a sum of Rs.30,79,895/-.
6. The petitioner opposite party, thereafter, issued a notice under section 13(2) of Securitisation & Reconstruction of Financial Assets and Enforcement of Security Interest Act on April 29, 2007 and thereafter issued further notice under Section 13(4) of the said Act on February 22, 2008.
7. Challenging the aforesaid Act of the opposite party bank, the petitioner moved before the Debt Recovery Tribunal under Section 17 of the Securitisation & Reconstruction of Financial Assets and Enforcement of Security Interest Act which was registered as SA No.68 of 2008. The Debt Recovery Tribunal Dismissed the said application and an appeal preferred against the said order before the Debt Recovery Appellate Tribunal being Appeal No.79 of 2009 is also dismissed. Against refusal of the said application under Section 17 of the Securitisation & Reconstruction of Financial Assets and Enforcement of Security Interest Act by the Debt Recovery Tribunal which is stood affirmed before the Appellate Tribunal, the present revisional application is filed.
8. As indicated above, the point which is urged by the respective parties in this revisional application is the core issue which is to be decided herein.
9. By contending the ‘asset’ means of fixed asset which is capable of fetching a value ascertainable in the form of money, the action of the bank in declaring such asset as non-performing assets (NPA) is illegal and contrary to the guidelines issued by the Reserve Bank of India from time to time.
10. A bone of contention of the petitioner is that the flat comprised in the entire 5th Floor of the Premises No.45, Jhowtalla Road, Kolkata- 700 019 has a present market value of above 123 lakhs whereas the claim of the opposite party bank is to the tune of 30 lakhs and odd and as such declaration of non-performing asset is illegal and bad. It is strenuously submitted that if the liability is more than the value of the asset then only such asset could be declared as non-performing asset
