HC rejects firm's plea against recovery proceedings

The Allahabad High Court has dismissed a petition by a firm which challenged recovery proceedings against it on the ground that it suffered loss due to demonetisation and GST, and could not pay the loan installments to a bank.
A bench comprising justices Bharati Sapru and Siddharth passed the order on a petition filed by LED bulb manufacturing firm M/S Kanika Swami of Meerut.
The firm took a loan of Rs 93 lakhs on September 30, 2016, but later could not pay the installments and the bank concerned initiated recovery proceedings against it in July 2017.
The firm's account was declared as non-performing asset (NPA) by the bank.

The plea submitted was that due to demonetisation and implementation of the Goods and Services Tax (GST), the economy suffered a lot, resulting in mass unemployment and loss of business due to which the firm could not pay the installments in time and the bank wrongly classified its account as NPA.
However, after hearing the parties concerned, the bench observed, "Inquiry into the correctness and manner of classification of the account of borrower as NPA by the bank cannot be done in a writ petition before the high court".

The court said, "It requires scrutiny of the operation of the account by the borrower and compliance of prudential norms of the RBI by the bank while classifying an account as NPA.

"Since such issues involve the question of facts, hence proper remedy for aggrieved person is to file a petition before the Debt Recovery Tribunal," it said.
"If at all, the borrower is not satisfied, after exhaustion of remedies under the the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002, it can approach the high court while challenging the order passed by tribunal," the court said.
The Act allows banks and other financial institutions to auction residential or commercial properties of borrowers and guarantors to recover loans.