HC directs Yes Bank not to take coercive steps against pvt firm declared NPA

The Delhi High Court Friday directed Yes Bank not to take any coercive action against a private company which has been declared as a non performing asset due to automated process for failing to pay loan installments. The court was hearing a plea by Anant Raj Limited seeking direction to the bank not to take any coercive steps for its failure to pay loan installments since January this year.

"In the meantime, no further coercive action shall be taken against the petitioner (company) pursuant to declaration of the status of the petitioner as a non performing asset," a bench of Justices Sanjeev Sachdeva said. Justice Sachdeva, who conducted the hearing through video conferencing, listed the matter for further hearing on April 6.

The court was informed by the counsel for the bank that the declaration of the status of an account as a Non Performing Asset (NPA) is an automated process and the computer system automatically picks up any default which has not been serviced for a period of 90 days and declares the account as NPA. He further said that the company was in default with regard to the instalment which was payable on January 1, 2020, accordingly, the computer system automatically on March 31, changed the status of the account as a NPA.

The court asked the company's counsel to file rejoinder to the bank's counter by email latest by 2 PM on April 5. The court on April 1, had directed the bank to file its response to the company's plea in which it has sought direction to the bank not to take coercive or adverse steps as proposed by it in its emails of March 25 and 27.

The company said that in the emails, the bank has informed the company that since the instalments for the months of January and February, 2020 are due and in case the amount is not paid by March 31, the petitioner's account shall be declared as a non-performing asset.  The petitioner's counsel had contended that in view of the March 27 circular issued by the Reserve Bank of India (RBI), which gives mortarium on terms of loan, the bank cannot declare the company's account as a non-performing asset and have to defer any coercive action till June 1, this year. The counsel for the bank had argued that the moratorium is applicable only with regard to instalments which fell due after March 1, 2020 and are not applicable on instalments that had fallen due as on March 1, this year.

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