A bank can revise interest rates based on internal ratings without prior notice if contractually permitted, but parties may contest such revisions in appropriate proceedings.

JUDGMENT

Dated this the 10^th February, 2026 The Petitioner is a Private Limited Company having Ext.P1

1.

Registration as MSME. The Petitioner had availed one Cash Credit Loan and two Term Loans from Dhanlaxmi Bank. As per Ext.P2 dated 07.03.2024, the Respondent Bank sanctioned one Cash Credit Loan and four Term Loans for a total amount of Rs.24.75 Crores. The Cash Credit Loan and Term Loan Nos.I & II mentioned in Ext.P2 Sanction Letter were takeover loans which were availed from Dhanlaxmi Bank. The rate of interest for the Cash Credit Loan and Term Loan Nos.I & II was 9% per annum as against the applicable rate of 9.25% per annum. The rate of interest of the Term Loan Nos.III & IV was 9.55% per annum as against the applicable rate of 10.05% per annum. The credit facilities granted as per Ext.P2 are subject to annual review. Clause No.1 of the Post Disbursement Terms and Conditions provides that the credit facilities will remain in force for a period of one year and are subject to annual review, and the next annual review will fall due on or before 06.03.2025, and the comprehensive review should be completed within three months from the review due date. Clause No.8 provides that in case the company is not eligible under Welcome offer at the time of annual review, then normal charges and rate of interest as per internal rating to be charged for Cash Credit and Term Loan Nos.I & II.

2. The Petitioner has filed this Writ Petition challenging Ext.P4 Demand dated 22.10.2025 issued by the Respondent for Rs.30,38,081.39 on the reason that the account was reviewed on 17.07.2025 and since the current internal rating of the company is below the benchmark, the rate of interest of 12.16% will be charged from the due date of review, i.e., 14.03.2025. The Petitioner also sought a Writ of Mandamus commanding the Respondent to refund Rs.14,27,765/- withdrawn by the Respondent from the Cash Credit Account on 21.10.2025, even before Ext.P4 demand, without any intimation to the Petitioner, and Rs.20,47,664.60 debited from the Cash Credit Account of the Petitioner from 30.10.2025 to 06.11.2025. The Petitioner further prayed for a Writ of Mandamus directing the Respondent to forward the loan account of the Petitioner to the Stress Committee for deciding a corrective action plan in accordance with Ext.P7 Framework for Revival and Rehabilitation of MSMEs, formulated by the Reserve Bank of India.

3. The Writ Petition is filed contending mainly that the Respondent cannot unilaterally increase the rate of interest to 12.16% after the due date of review without giving an opportunity of being heard to the Petitioner and that it is in violation of the Fair Lending Practice provided in Ext.P8 RBI Master Directions.

4. The Respondent filed Counter Affidavit dated 12.01.2026, Additional Counter Affidavit dated 21.01.2026 and Additional Counter Affidavit dated 02.02.2026 opposing the prayers in the Writ Petition. The Petitioner filed a Reply Affidavit dated 17.01.2026 controverting the contentions in the Counter Affidavit.

5. I heard the learned Counsel for the Petitioner, Sri. C. Ajith Kumar and the learned Counsel for the Respondent, Sri.Jawahar Jose.

The learned Counsel for the Petitioner contended that the

6.

Petitioner was not in default in repayment of the loan. All of a sudden, without any notice to the Petitioner, an amount of Rs.14,27,765/- was withdrawn from the Cash Credit Account of the Petitioner and thereafter Ext.P4 Notice dated 22.10.2025 was issued demanding Rs.30,38,081.39, alleging that interest is due at the rate of 12.16% from the due date of review, namely, 14.03.2025. Even after the issuance of Ext.P4, the