The court's discretionary jurisdiction under Article 226 is not absolute and should be exercised judiciously.

JUDGMENT

Sabyasachi Bhattacharyya, J. - The petitioner no. 1 is a non-government company registered under the Companies Act, 2013. Petitioner nos. 2, 3 and 4 are its directors. The cash credit facility given to the petitioner no.1-company was classified as Non-Performing Asset (NPA) on February 28, 2020. Subsequently, the respondent-bank issued notice to the petitioners under Section 13(2) of the SARFAESI Act, 2002 on August 17, 2020, apparently followed up by proceedings under Section 13(4) of the 2002 Act, as claimed by the respondent-bank.

2. The petitioners had applied for an One-Time Settlement (OTS).

3. Learned counsel for the petitioners alleges that the bank sat tight over the OTS proposal on one hand and proceeded under the 2002 Act by rendering the company accounts NPA on the other.

4. Learned counsel submits that the OTS proposal of the petitioners comes within the purview of the RBI Master Circular, dated July 1, 2015, which grants relief to corporate entity in the pandemic situation. Placing reliance on Clause 2.1 of the Master Circular, laying down Prudential Norms on Income Recognition, Asset Classification and Provisioning pertaining to Advances, learned counsel for the petitioners submits that an asset, including a leased asset, becomes non-performing when it ceases to generate income for the bank. Clause 2.1.2 (i) stipulates that a loan or an advance where interest and/or instalment of principal remains overdue for a period of more than 90 days in respect of a term loan is treated as NPA.

5. Clause 2.1.3 provides that in case of interest payments, banks should classify an account as NPA only if the interest issued and charged during any quarter is not serviced fully within 90 days from the end of the quarter.

6. An account should be treated as 'out of order', Clause 2.2 provides, if the outstanding balance remains continuously in excess of the sanctioned limit/drawing power for 90 days.

7. Clause 2.3 defines 'overdue' to be any amount due to the bank under any credit facility if not paid on the due date fixed by the bank. By placing particular reliance on Clause 2.1.3, learned counsel for the petitioners argues that the classification of the petitioner's account as NPA was premature.

8. Even apart from the argument that the RBI Circular-in-question as well as the subsequent RBI Circular dated March 1, 2020, issued in view of the pandemic scenario, are applicable to the OTS proposal of the petitioners, learned counsel for the petitioners contends that the classification of the petitioners' accounts as NPA as on February 28, 2020 was an afterthought to suit the purpose of the respondents. Learned counsel submits that the relevant publication on the concerned website and the correspondence of the bank shows that it was admitted even on March 16, 2020 that the account was NPA 'as on date', implying such asset classification as NPA to operate from that date itself. As such, the account of the petitioners with the respondent-bank was a Standard Account even on March 1, 2020, attracting the financial relief given by the 2020 Circular to the petitioners. By placing reliance on the statement of accounts annexed at page-96, learned counsel argues that even the bank's own accounts reveal that interest was charged on the petitioner's loan as late as on February 29, 2020, belying the bank's contention that the account was already NPA on the previous date. The bank's e-mail communication at page-106, dated March 16, 2020 reflects that the petitioners were alleged not to have cleared the overdue in the loan accounts of the company rendering the loan account NPA as on that date.

9. However, the respondent-bank communicated to the petitioners on June 29, 2020 by speed post (annexed at page-119 of the writ petition) that the company accounts had been classified as NPA 'with effect from' February 28, 2020 in the bank's books in accordance with RBI Guidelines. This, it is argued by the petitioners, is an attempt to deprive the pe