Location: ORISSA HIGH COURT, CUTTACK Date: 14-May-2025 18:57:31 IN THE HIGH COURT OF ORISSA AT CUTTACK W.P.(C) No.5653 of 2025 along with W.P.(C) No.31627 of 2024 (In the matters of Petitions under Articles 226 and 227 of the Constitution of India, 1950).

M/s. Pratistha Engineering …. Petitioner(s)

Limited, Bhubaneswar (in both the Writ Petitions)

-versus-

State Bank of India & Ors. …. Opposite Party (s)

Advocates appeared in the case through Hybrid Mode:

For Petitioner(s) : Mr. Ramachandra Panigrahy, Adv. For Opposite Party (s) : Mr. Jagabandhu Sahoo, Sr. Adv.

Along with Mr. Dillip Kumar Mohapatra, Adv.

CORAM:

DR. JUSTICE S.K. PANIGRAHI DATE OF HEARING:-13.03.2025 DATE OF JUDGMENT:-09.05.2025 Dr. S.K. Panigrahi, J.

1. Since common questions of fact and law are involved in the above-

mentioned Writ Petitions, the same were heard together and are being disposed of by this common judgment. However, this Court finds it Location: ORISSA HIGH COURT, CUTTACK Date: 14-May-2025 18:57:31 appropriate to treat W.P.(C) No.3167 of 2024 as the leading case for proper adjudication of these matters.

2. The Petitioner in W.P.(C) No.3167 of 2024 is challenging the letter dated

13th November, 2024 issued by the Opposite Party Bank, whereby the sanctioned Fund-Based Working Capital (Cash Credit) limit in the Petitioner’s account was reduced from ₹14 Crore to ₹6 Crore.

3. The Petitioner is further challenging the action of the Opposite Party Bank in levying penal interest and compounding the same on a monthly basis, as well as the classification of his account as a Non-Performing Asset.

I. FACTUAL MATRIX OF THE CASE

4. The brief facts of the case are as follows:

(i) The Petitioner is engaged in the business of construction, including the undertaking of contracts and sub-contracts for government and public sector undertakings, such as the National Highways Authority of India.

(ii) The Petitioner had been availing various credit facilities from the Respondent Bank, including a Cash Credit facility through the primary account, and was concurrently operating Bank Guarantee and Guaranteed Emergency Credit Line accounts as secondary accounts.

(iii) These facilities were fully secured by a mortgage over several immovable properties, having a collective market value approximately three times the sanctioned Cash Credit limit of ₹14 Crore.

(iv) In 2017, the Petitioner was awarded a sub-contract by the National Project Implementation Agency of India. In order to comply with Location: ORISSA HIGH COURT, CUTTACK Date: 14-May-2025 18:57:31 contractual obligations, the Petitioner requested the Bank to issue the requisite performance Bank Guarantee.

(v) The Respondent Bank issued multiple assurances through letters dated

23.06.2017, 10.07.2017, 21.07.2017, and 16.08.2017, confirming the proposed issuance of the Bank Guarantee. However, the Bank did not proceed with the issuance of the guarantee, which led to the forfeiture of the earnest money deposit amounting to ₹3.23 Crore.

(vi) Subsequently, the Petitioner secured another substantial contract valued at ₹90 Crore from PSK Infrastructure & Projects Pvt. Ltd. The Petitioner once again requested an enhancement of the Cash Credit limit and issuance of the requisite Bank Guarantee. The Respondent Bank, however, failed to act on the request, leading to the loss of the contract and the corresponding opportunity to generate significant business revenue.

(vii) Despite repeated representations and formal requests made by the Petitioner for enhancement of the credit limit and issuance of Bank Guarantees, there was no substantive response from the Respondent Bank.

(viii) As on 08.11.2024, the sanctioned Cash Credit limit continued to be ₹14 Crore, as reflected in the Bank’s official records.

(ix) However, on 13.11.2024, the Respondent Bank reduced the sanctioned Cash Credit limit from ₹14 Crore to ₹6 Crore, citing irregularity in the account and non-receipt of repayments.

(x) In addition to the said reduction, the Bank levied penal interest amounti