The court ruled that the borrower’s failure to timely assert its MSME status and follow regulatory guidelines allowed the bank to declare the loan account as NPA and pursue recovery without further obstruction.

ANIRUDDHA ROY, J.:

In Re: IA No. GA-COM/1/2024

Facts:

1. This is an interlocutory application filed by the plaintiffs/petitioners, inter alia, praying for the following reliefs:-

(a) Injunction restraining the Respondent, its men, agents, servants, representatives and assigns from giving any effect or further effect or acting in terms of or in furtherance of the demand notice dated December 6, 2023.

(b) Ad interim orders in terms of prayers above;

(c) Such further and/or other order or orders be passed, direction or directions be given as Your Lordships may deem fit and proper.

2. Petitioner no. 1 is engaged in the business of manufacturing, selling and distribution of jute yarn and hessian cloth. The petitioner has its manufacturing unit at Cooch Behar, West Bengal. The petitioner no. 2 and 3 are the promoters and directors of the petitioner no. 1. The petitioner no. 1 was recognized as a small unit within the meaning of Micro, Small, Medium and Enterprises Development Act, 2006 (for short MSME Act) with effect from February 20, 2019. In support of such contention the petitioners have disclosed several documents, annexure “A” to the said petition.

3. The petitioner no. 1 was incorporated on February 20, 2019. To meet the requirement of working capital, the petitioner no. 1 in August 2019 approached the respondent bank to avail of credit facilities and the respondent on February 12, 2020 sanctioned credit facilities aggregating to a sum of Rs.8,05,00,000/-. The said credit facility was enhanced on February 7, 2022 to the extent of Rs.9,05,00,000/- and further extended on September 14, 2022 to the extent of Rs.12,02, 00,000/-. The petitioner no. 1 had created equitable mortgage of immovable properties as collateral security and the petitioner nos. 2 and 3 stood as guarantors in respect of the said credit facilities and executed various guaranteed documents in usual course of business.

4. The petitioners have contended that the petitioner no. 1 could not generate sufficient revenue, for the reasons beyond its control, during the COVID-19 Pandemic. Because of the lock down having been declared by the State, the petitioners could not manufacture its products or sale the same and as a result the petitioner no. 1 had undergone a severe financial recession and suffered losses which led the respondent to declare the loan account of the petitioner no. 1 as Non-performing Asset (in short NPA) with effect from November 29, 2023.

5. On December 6, 2023 the respondent bank through its Advocate’s letter issued a demand notice annexure “M” at page 117 to the petition whereby and where under the respondent had called upon the petitioner no. 1 and other petitioners to pay a sum of Rs.11,94,46,227/-.

6. Since, the petitioners failed and neglected to pay the demanded amount, the respondent had issued a notice dated February 3, 2024 under Section 13 (2) of Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short SARFAESI Act), annexure “N” at page 120, 122 to the petition. The consequential possession notice dated May 3, 2024 was also issued in respect of the secured assets at page 128 to the petition.

7. Thereafter, the petitioners filed the instant suit with the following reliefs:-

a) Decree for Rs.30,00,00,000/- (Rupees Thirty Crore only as pleaded in paragraph 24