NPA Classification Applies To Borrower, Not Individual Loan Facilities : NCLT Kolkata

The National Company Law Tribunal (NCLT) at Kolkata has, relying on RBI norms, held that NPA classification is borrower-wise and not facility-wise, and that once any credit facility of a borrower is declared NPA, all facilities extended by the bank must be treated as NPA for insolvency proceedings.

A coram of Judicial Member Labh Singh and Technical Member Rekha Kantilal Shah, in an order dated November 13, 2025, while deciding an insolvency application filed by Central Bank of India against SA Plywood Industry Pvt Ltd, observed,

“Treatment of accounts non performing asset is borrower wise and not facility wise. In respect of a borrower having more than one facility with a bank, upon classification of one account as non performing asset, all the facilities granted by the bank will have to be treated as NPA and not the particular facility or part thereof which has become irregular.”

The dispute arose from multiple credit facilities sanctioned by Central Bank of India to SA Plywood Industry Pvt Ltd beginning January 31, 2012, which were subsequently renewed on October 19, 2019. During the Covid period, the bank sanctioned additional facilities, including those under the Guaranteed Emergency Credit Line, on February 22, 2021 and December 18, 2021. Following financial stress faced by the company, the loan accounts were restructured on September 28, 2021.

Despite the restructuring, SA Plywood defaulted in repayment of its term loan account. The bank consequently classified the borrower's account as a non-performing asset on March 31, 2023 and issued a demand notice dated July 17, 2023, claiming outstanding dues of ₹16.38 crore.

SA Plywood argued that the default was limited to Rs 41 lakh in the term loan account, while its other credit facilities continued to remain “standard”. It contended that after restructuring, the default amount fell below the statutory threshold of ₹1 crore prescribed under the Insolvency and Bankruptcy Code to trigger insolvency proceedings.

Rejecting these submissions, the tribunal relied on RBI Master Circulars on Income Recognition and Asset Classification, which clarify that NPA classification is borrower-wise.

It held that once any account of a borrower becomes NPA, all facilities granted to that borrower automatically assume NPA status, and that the corporate debtor cannot segregate loan facilities to avoid insolvency.

Concluding that debt and default stood established, the tribunal admitted the application, declared a moratorium, appointed Subodh Kumar Agrawal as the Interim Resolution Professional, and directed the bank to deposit Rs 3 lakh towards initial costs of the CIRP.