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IN THE HIGH COURT OF ORISSA AT CUTTACK
SANJEEB K. PANIGRAHI, J.
Proceka Techsol Pvt. Ltd. – Appellant
Versus
General Manager, Bank of India, Maharashtra and Others – Respondents
W.P. (C) No. 21112 of 2025
Decided On : 17-10-2025
| Table of Content |
|---|
| 1. seeking relief against arbitrary npa classification (Para 1 , 2) |
| 2. arguments regarding rbi norms and procedural impropriety (Para 3 , 4) |
| 3. maintainability of the writ petition despite alternative remedies (Para 5 , 6 , 7 , 8 , 9 , 10 , 11 , 12 , 13 , 14) |
| 4. criteria for npa classification under rbi norms (Para 15 , 16) |
| 5. court analysis of the npa classification rationale (Para 17 , 18 , 19 , 20 , 21 , 22) |
| 6. natural justice considerations in npa classification (Para 23 , 24 , 25) |
| 7. classification not in accordance with rbi norms (Para 26 , 27 , 28 , 29) |
| 8. quashing of npa classification and restoration of account status (Para 30 , 31) |
JUDGMENT :
SANJEEB K. PANIGRAHI, J.
1. In this Writ Petition, the petitioner seeks a direction from this Court to quash the arbitrary classification of its Cash Credit account as Non- Performing Asset (NPA) on 15.05.2025 and to direct the Opposite Party Bank to restore normal operation of the account with consequential reliefs.
I. FACTUAL MATRIX OF THE CASE
2. The brief facts of the case are as follows:
(i) The Petitioner company, incorporated on 21.02.2019 and recognized as a DPIIT Start-up, availed a Cash Credit (CC) facility of Rs. 10 lakh and a Term Loan sanctioned on 30.11.2019 under MSME/CGTMSE. All term loans, including COVID-period loans, were later cleared, while the CC account continued.
(ii) The CC limit was renewed annually in December. It was last renewed on 17.12.2024 with renewal charges of Rs. 5,900 debited. Subsequently, penal charges of Rs. 391 were levied on 21.01.2025 by the new Branch Manager, who stated that the account was due for review. The Petitioner exchanged emails with the Branch and submitted documents in January 2025.
(iii) On 06.02.2025 the Branch raised queries and sought a renewal application; the Petitioner replied with documents on 07.02.2025. The Branch referred to a CIBIL score of 532, while the Petitioner produced a score of 656 for the same date. The Branch also mentioned reducing the CC limit. On 21.02.2025 the Branch informed the Petitioner that the renewal/review could not be completed.
(iv) On 03.06.2025 the Petitioner was unable to transact in the CC account and was informed that it had been classified as NPA on 15.05.2025 for “low turnover.” A Recall Notice dated 31.05.2025 was issued though allegedly not received by the Petitioner. The Petitioner points to account activity including a Rs. 22,000 credit on 12.04.2025 and a Rs. 50,000 withdrawal on 28.04.2025.
(v) Insurance premiums were regularly debited from the CC account, including Rs. 5,118 on 18.01.2025. The Petitioner claims the Branch cancelled the policy unilaterally and credited back an amount on 07.04.2025. The Bank states the Petitioner itself had written that no mandate was given for insurance deduction.
(vi) The Petitioner filed a representation on 23.06.2025 seeking revocation of NPA status. A complaint is also pending before the RBI Ombudsman.
(vii) The Bank in its objection affidavit denies the allegations of illegality and states the classification was based on a Memorandum of Changes from RBI auditors and inspections.
(viii) The Bank cites clauses in the sanction letter: Clauses 2 and 21 requiring 60% utilization within six months (utilization was allegedly ~25.82% in 2024-25, ~23.12% in 2023-24, and ~20.19% in 2022-23), and Clause 30 requiring prior approval before opening accounts with other banks (the Petitioner opened and used a PNB account).
(ix) The Bank refers to its Credit Policy (Advances) 2025-26 requiring minimum sales and turnover of Rs. 40 lakh for a Rs. 10 lakh CC limit. It states the Petitioner’s sales/turnover were below this threshold. SMECC recommended reduction of the CC limit, but the Petitioner did not agree.
(x) The Bank asserts non-compliance at review, citing non-submission of renewal application, rental agreement, CBD and statutory licences. Inspections allegedly found no physical unit or stocks, which the Bank states is reflected in the Petitioner’s own ple
The court held that classification of an account as NPA without meeting specific RBI criteria is arbitrary and violates statutory obligations.
The court's discretionary jurisdiction under Article 226 is not absolute and should be exercised judiciously.
Debt Recovery and monetary Laws - Defaulted in payment of instalments in respect of the overdraft facility - Section 13(2) of SARFAESI Act and measures taken under Section 13(4) thereof were only nec....
Classification of an account as NPA under SARFAESI Act is not subject to judicial review and requires the borrower to seek recourse through statutory appeal under Section 17.
The statutory scheme of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (Act, 2002) does not provide for a legal remedy until the Section 13(4....
The classification of MSME loan accounts as NPAs without addressing the restructuring proposals violates RBI directives, mandating banks to consider such proposals before classification.
The Adjudicating Authority must provide detailed reasoning on debt and default issues to enable effective judicial review under the Insolvency and Bankruptcy Code, 2016.
important pointThe RBI guidelines in relation to NPAs are only in the nature of internal guidelines for the banks and financial institutions. They are purely executive instructions and have no statut....
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