JUDGMENT :

Sabyasachi Bhattacharyya, J.

1. The petitioners have preferred a two-pronged challenge in the present writ petition – the classification of the petitioners’ account as Non Performing Asset (NPA) on June 30, 2023 and the Notice under Section 13(2) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002 dated September 11, 2023.

2. Learned senior counsel appearing for the petitioners contends that the interim order dated December 6, 2023 passed in the writ petition has not been challenged by the respondent-Bank. Hence, the findings in the same have attained finality. In the absence of any change of circumstances thereafter, it is argued that there is no reason why the said order should not be maintained.

3. Secondly, learned senior counsel assails the classification of the petitioners’ account as NPA. It is argued that the Statement of Accounts shows that the limit of the Cash Credit Facility was Rs. 7.5Cr. The credits availed of by the petitioners never exceeded the said limit. Hence, there was no occasion for the account to be classified as NPA.

4. Moreover, the credit facility was recalled vide Communication dated March 28, 2023. Thus, there was no occasion to classify the account as NPA on June 30, 2023.

5. It is argued that the ground of non-renewal of the credit facility was taken for the first time during arguments and in the affidavit-in-opposition to the writ petition and, as such, cannot be a valid ground of classification of NPA. The reliance placed by the Bank on the Master Circular relating to Prudential Norms on Income Recognition, Asset Classification and Provisioning Pertaining to Advances dated April 1, 2023 issued by the Reserve Bank of India (RBI) is not applicable to the present case, since it was issued subsequent to the classification of the account as NPA on June 30, 2023.

6. Learned senior counsel argues that the claim of the respondent no. 2-Bank is palpably erroneous and exaggerated and the Bank levied interests on penal interest which is illegal and unauthorized as per the case of Central Bank of India Vs. Ravindra and others, reported at (2002) 1 SCC 367.

7. It is argued that the entire loan was repaid to the Bank.

8. Learned senior counsel argues that as per the RBI Circular dated July 1, 2011, in terms of Clause 2.2.1 thereof, Banks should not treat an advance as NPA merely due to existence of some deficiencies which are of temporary nature such as non-availability of adequate drawing power, balance outstanding exceeding the limit, non-submission of stock statements and the non-renewal of the limits on the due date. The amendment to the said Master Circular vide Circular dated April 1, 2023 also provides a similar premise in Clause 4.2.4 which stipulates that the classification of an asset as NPA should be based on the record of recovery and cannot be on the ground of balance outstanding exceeding the limit temporarily and non-renewal of the limits on the due date.

9. It is argued that the Bank acted in a mala fide manner and sought to frustrate the writ petition by initiating steps under Section 13(4) of the SARFAESI Act during pendency of the writ petition, merely to render the writ petition infructuous.

10. Learned counsel for the Bank contends that the RBI Circular dated April 1, 2023 has specifically granted liberty to the Banks to classify an account as NPA on grounds additional to the amount being outstanding for a period of more than 90 days. Clause 4.2.4(c) specifically provides that a cash credit account can be treated as NPA in the event of non-renewal of the said account within a period of 180 days from the due date of ad hoc sanction. In the present case, the loan account was lastly renewed on September 29, 2022 and was valid up to December 31, 2022, which has not been denied by the petitioners.

11. After December 31, 2022, the account was not renewed any further and after expiry of 180 days on June 29, 2023, the account was