Summary: The Bombay High Court turned down Vardhan Agro Processing Ltd's request to change their loan terms under small business rules because their loan was too big to qualify.
Vardhan Agro Processing Ltd, a small business, went to the Bombay High Court to ask the Union Bank of India to change their loan terms. They claimed that their loan should be managed under rules meant to help small businesses recover, especially since they were struggling financially due to the COVID-19 pandemic.
The big question was whether Vardhan Agro could use the small business rules. The bank said Vardhan's loan of Rs.30 crores was too large since the rules only covered loans up to Rs.25 crores. The court agreed with the bank, stating that the size of the loan, not just how much was left to pay, was what mattered for qualifying.
The court, led by Judges Manish Pitale and Shreeram V. Shirsat, decided that Vardhan Agro's loan was too big for the small business benefits, making them not eligible. The court found that the bank acted correctly and allowed them to continue trying to get their money back through the National Company Law Tribunal (NCLT).
The court looked at a previous case, Pro Knits vs. Canara Bank, and pointed out that the small business rules only apply to those who are eligible. The court stressed that the Rs.25 crore limit is key for deciding who can use these rules, following the guidelines from the Reserve Bank of India.
The court rejected Vardhan Agro's request, allowing the Union Bank to continue its process with the NCLT. This case highlights the need to follow the rules for qualifying in financial matters, especially for small businesses.
