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The petitioner, an educational institution, availed credit DALBIR SINGH 2014.08.14 17:07 I attest to the accuracy of this document High Court Chandigarh CWP No.15673 of 2014 (O&M) (2) facilities from the Punjab National Bank (for short 'the Bank') by way of term loan and overdraft facility. The same are as under:-

                                   Sr.   Date           Nature        of Sanctioned Amount
                                   No.                  Facility
                                   1.    26.03.2008     Term Loan         Rs.575.00 lacs
                                   2.    18.05.2009     Term Loan         Rs.175.00 lacs
                                   3.    03.12.2009     Term Loan         Rs.688.00 lacs
                                   4.    31.08.2010     Over Draft        Rs.280.00 lacs

It was on 11.02.2012, the Bank served a notice under Section 13(2) of the Act informing the petitioners that the account has been classified DALBIR SINGH 2014.08.14 17:07 I attest to the accuracy of this document High Court Chandigarh CWP No.15673 of 2014 (O&M) (3) as NPA as on 30.09.2011 and an amount of Rs.15,93,00,554/- including interest up to 30.09.2011 is due and payable. The petitioners were advised to make the payment within 60 days.

The challenge to the action of the Bank before the Tribunal, inter alia, was that the account of the petitioners is not a Non Performing Asset and that the possession notice has not been served upon the petitioners in terms of Rule 8 (1) of the Security Interest (Enforcement) Rules, 2002 (for short 'the Rules'). The learned Tribunal, inter alia, returned a finding that since the current market value of security charged being sufficient to ensure recovery of the dues of Bank in full, the assets could not have been declared as sub-standard (in other words Non Performing Asset) in terms of the Master Circulars issued by RBI. Reliance was placed upon the reserve price fixed for these assets in the sale notice DALBIR SINGH 2014.08.14 17:07 I attest to the accuracy of this document High Court Chandigarh CWP No.15673 of 2014 (O&M) (4) dated 14.09.2012 as Rs.18.62 crores as against outstanding dues of Rs.15.93 crores. The Tribunal also found that penal interest has been charged in contravention of the judgment reported as Central Bank of India v. Ravindra and others, AIR 2001 SC 3095, and that the possession notice has not been delivered to the petitioners in terms of mandate of Rule 8 (1) of the Rules. It was also found that though the process of affixation of possession notice has been placed on record but there is nothing on record that the possession notice was delivered to the petitioners. It was further found that the affixation of possession notice and the personal delivery of possession notice both are mandatory.

"The Tribunal, in my view, has completely ignored the relevant clauses of the circular noted above. Clause 4.2.3 clearly states that the availability of security or net-worth of the borrower / guarantor should not be taken into account for treating an advance as NPA or otherwise, DALBIR SINGH 2014.08.14 17:07 I attest to the accuracy of this document High Court Chandigarh CWP No.15673 of 2014 (O&M) (5) (except to the extent provided in clause 4.2.9,) as income recognition is based on the record of recovery. Perusal of clause 4.2.9 would show that where there is erosion in the value of the security and existence of other factors such as frauds committed by the borrowers, it will not be prudent that such account go through various stages of asset classification. In such cases of serious credit impairment, the assets should be straightway classified as doubtful or loss asset. That there are and can be instances where the assets in the loan account are so inter-locked and suffer from such infirmities, as may render the liquidity of the same extremely difficult and doubtful. In this back ground, the finding by the Tribunal that against the assets valued at Rs.13.62 crores the loan amount was only Rs.15.93 crores to say that the account could not have been declared as NPA is apparently misconceived and misplaced. If the value of the mortgaged assets are more, obviously a part of it could be utilized to recover the amount. It may need appreciation here that generally while granting the credit facilities the bank would look to secure such facilities with the property which has a value more than what is the loan amount. If we accept this interpretation, then no loan amount may remain safe."