Authority: Calcutta High Court (Constitutional Writ Jurisdiction)

Order Date: 12 August 2026 (Judgment Delivered)

Case Overview

  • Parties: Benimadhab Construction Private Limited (Petitioner) vs. Reserve Bank of India and two respondent banks (Respondent Nos. 2 & 3).
  • Petitioners sought a mandamus directing the RBI and the respondent banks to withdraw/cancel the SARFAESI notice dated 19 June 2025 that declared their loan account as a Non‑Performing Asset (NPA).
  • Loan Background: Original loan sanctioned for Rs 150 Lakhs in 2012, renewed periodically, last renewal extended to 31 December 2024.
  • Payment Timeline:
  • 29 January 2025: Bank emailed demanding Rs 7,00,000 to avoid NPA status.
  • 30 January 2025 – 27 February 2025: Petitioners deposited Rs 9,25,000.
  • Monthly interest payments of Rs 1,00,000 were made up to May 2025.
  • Additional deposits: Rs 3,19,000 in October 2024, Rs 45,000 in December 2024, Rs 50,000 on 9 January 2025, and Rs 1,00,000 on 28 January 2025 (total Rs 1,50,000 for Jan 2025).
  • Overall, from 30 October 2024 to 28 January 2025, petitioners deposited Rs 9,14,000.
  • NPA Declaration: Bank declared the account NPA on 28 January 2025, prior to the 29 January email demanding Rs 7 Lakhs.
  • SARFAESI Notice: Issued on 19 June 2025 under Section 13(2) of the SARFAESI Act, demanding full repayment.
  • Bank’s Contentions:
  • Cash credit limit of Rs 150 Lakhs was to be reduced by Rs 1 Lakh each month; by September 2024 the limit fell to Rs 1.37 Crore, then to Rs 1.35 Crore in November 2024.
  • Drawing power figures: Oct 2024 – Rs 1.36 Crore; overdrawn balance of Rs 1,37,26,522.02 as on 31 Oct 2024 with interest of Rs 1,26,585.00 for October.
  • Alleged failure to submit monthly stock and book‑debts statements, leading to reduction of drawing limit.
  • Emails from the bank indicated processing of stock statements and drawing powers of Rs 4,20,86,250 (29 Oct 2024), Rs 40,612,500 (5 Nov 2024), and Rs 47,137,500 (21 Mar 2025).
  • RBI Master Circular (2 April 2024) criteria:
  • Clause 2.1.2.(i): Overdue interest/principal >90 days for term loan makes account NPA.
  • Clause 2.2.1: Cash Credit/Overdraft account is ‘out of order’ if balance exceeds sanctioned limit for 90 days or no credits for 90 days, or credits insufficient to cover interest for 90 days.
  • Court Findings:
  • No amount was overdue for more than 90 days; deposits of Rs 9,14,000 between 30 Oct 2024 and 28 Jan 2025 kept the account regular.
  • The bank’s claim that non‑submission of stock statements affected credit limit was unsupported; the bank’s own emails showed processing of statements and increased drawing powers.
  • Accordingly, the account could not be classified as NPA or ‘out of order’ under the Master Circular.

Final Outcome

  • The SARFAESI notice dated 19 June 2025 is set aside and quashed.
  • The writ petition (W.P.A. No. 23190 of 2025) is allowed.
  • The respondent banks are directed to act in accordance with the RBI Master Circular dated 2 April 2024.
  • Parties may obtain certified copies of the judgment as per court procedure.

Topics: Banking Regulation, NPA Classification