Delhi High Court
Prayag Polytech Private Limited & ... vs State Bank Of India on 22 July, 2022
$~1
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Date of Decision: 22nd July, 2022
+ W.P.(C) 1591/2022
PRAYAG POLYTECH PRIVATE LIMITED & ANR.
..... Petitioners
Through: Mr. Vipul Ganda with Mr. Chaitanya
Gaurang Tripathi, Advocates.
versus
STATE BANK OF INDIA ..... Respondent
Through: Ms. Jaya Tomar, Advocate.
CORAM:
HON'BLE MR. JUSTICE SANJEEV NARULA
JUDGMENT
SANJEEV NARULA, J. (Oral):
CM APPL.32079/2022 (seeking condonation of delay in filing counter
affidavit)
1. For the grounds and reasons stated in the application, the same is
allowed and disposed of. The counter affidavit filed on 19 th July, 2022 is
taken on record.
W.P.(C) 1591/2022
2. Briefly stated, Petitioner No. 1 - Prayag Polytech Private Limited
had availed credit facilities from Respondent - State Bank of India ("SBI").
Subsequently, somewhere in 2018, after deterioration of Petitioner-
company's financial condition and non-availability of funds, SBI declared
Signature Not Verified
Digitally Signed
By:SAPNA SETHI
Signing Date:23.07.2022
16:04:04
Petitioner-company's account to be a Non-Performing Asset ("NPA") and
initiated proceedings before the Debt Recovery Tribunal ("DRT").1
3. In the meantime, on 28th October, 2020, SBI sent a communication to
Petitioner-company informing it of a One Time Settlement ("OTS") scheme
of NPAs and offered to settle the total outstanding amount i.e., Rs.
7,15,72,836/- for Rs. 2,29,51,380.10/-. The said proposal was discussed by
the board of Petitioner-company in its meeting held on 10th November, 2020
and the acceptance was conveyed to SBI on 11th November, 2020.
4. Thereafter, SBI issued a letter dated 24th November, 2020
[hereinafter, "sanction letter"], setting-out the terms of the OTS. Since the
controversy revolves around the construction of the said terms, for quick
reference, the same are reproduced hereinbelow:
"Scheme for One Time Settlement of NPAs & AUCAs (Sill OTS 2020)
We refer to your letter no. NIL dated 11.11.2020 for settlement of your
dues to the Bank under the captioned scheme. We are pleased to advise
that your application under the captioned scheme has been accepted by
the appropriate authority.
1 OTS amount payable under the OTS Scheme will be Rs.2,29,51,380,10
Only.
2. Application money of Rs. 11,47,570.00 paid by you will be appropriated
towards your OTS amount.
3. Another 10% of the OTS Amount will have to be deposited by you as
first instalment within thirty days from the date of sanction of OTS failing
which the OTS sanction will be rendered infructuous and OTS treated as
failed.
4. Another 10% of the OTS Amount will have to be deposited by you as
State Bank of India v. Prayag Polytech Private Limited & Anr. in (OA/ 490/2020).
Signature Not Verified
Digitally Signed
By:SAPNA SETHI
Signing Date:23.07.2022
16:04:04
second instalment of money within sixty days from the date of sanction of
OTS failing which the OTS sanction will be rendered infructuous and OTS
treated as failed.
5. The balance amount can he paid within 8 months from the date of this
letter, i.e. 24/11/2020 (the validity period) together with interest @ 6
Months MCLR on reducing balance basis effective from the date of this
letter, i.e. 24.11.2020 failing which the OTS sanction will be rendered
infructuous.
6. However, no interest will be charged if the entire OTS amount is paid
within 6 months from the date of this letter, i.e. 24 /11/2020.
7. You will be eligible for an additional incentive on the OTS amount, on
making payment of the entire OTS amount as given below:
A:
Full payment of OTS amount Incentive on full
by payment of OTS Amount
Within one month from the date 15%
of sanction.
Within two months from the 10%
date of sanction.
By 31.03.2021 5%
B. Incentive on 50% payment of OTS Amount:
50% payment of OTS amount Incentive on full
by payment of OTS Amount
Within one month from the date 7.5%
of sanction.
Within two months from the 5%"
date of sanction
[Emphasis Supplied]
5. In terms of the above-extracted conditions no. 5 & 6, the OTS amount
of Rs. 2,29,51,380.10/- could have been paid either (i) within six months
without interest from the date of the sanction letter (condition no. 6); or (ii)
within eight months with interest @ six-months Marginal Cost of Funds
Based Lending Rate ("MCLR") on reducing balance basis, effective from
Signature Not Verified
Digitally Signed
By:SAPNA SETHI
Signing Date:23.07.2022
16:04:04
the date of the sanction letter (condition no. 5). It is further stipulated in
condition no. 5 that failure of payment would render the OTS sanction
infructuous.
6. Petitioner-company complied with the terms of sanction letter and
made payments to SBI in the following manner:
STATE BANK OF INDIA-OTS
Date Account Amount CHQ. No. / RTGS No.
13-11- BANK- 11,47,570.00 CHQ TRANSFER - 125805 -
2020 ALLAHABAD RTGS-SBIN-STATE BANK OF I-
BANK (ALC ALLA2O2O 11135014122517
NO.50501227919)
23- 12- BANK- 22,95,139.00 TO TRANSFER - -RTGS-SBIN-
2020 ALLAHABAD SBI-ALLA202012235014494720
BANK (A/C
NO.50501227919)
22-01- BANK- 22,95,138.00 CHQ TRANSFER - 125823
2021 ALLAHABAD RTGS-SBIN-STATE BANK OF I-
BANK (A/ C ALLA202101225014809430
NO.50501227919)
23-02- BANK- 22,95,138.00 CHQ TRANSFE-STATE BANK
2021 ALLAHABAD OF
BANK (A/ C INlDIBR52021022322346212
NO.50501227919)
20-03- BANK.- 22,95, CHQ TRANSFE-STATE BANK
2021 ALLAHABAD 138.00 OF INIDIBR5202
BANK (A/ C 1032022770607
NO.50501227919)
20-04- BANK- 21,95, CHQ TRANSFE-STATE BANK
2021 ALLAHABAD 138.00 OF INIDIBR5202
BANK (A/ C 1042023227515
NO.50501227919)
21-04- BANK- 1,00,000.00 CHQ TRANSFE-STATE BANK
2021 ALLAHABAD OFINIDIBH2 1111363589
BANK (A/ C
NO.50501227919)
13-05- BANK- 22,95,138.00 CHQ 00785794
2021 ALLAHABAD TRANSFESTATE BANK OF
BANK (A/C INDIA
NO.50501227919)
Signature Not Verified
Digitally Signed
By:SAPNA SETHI
Signing Date:23.07.2022
16:04:04
17-06- BANK- 22,95,138.00 TRANSFER STATE BANK OF
2021 ALLAHABAD IN/
BANK (A/C IDIBH21168377334/NEFT/SBIN
NO.50501227919) TRANSFER TO 89634064780
19-07- BANK- 22,95, CHQ TRANSFERTGS/ SBIN
2021 ALLAHABAD 138.00 STATE BANK OF IN/
BANK (A/ C IDIBR5202 1071924208554
NO.50501227919)
23-07- BANK- 40, CHQ NO. 785863
2021 ALLAHABAD 13,586.00
BANK LA/c
NO.50501227919)
Total
(Rupees) 11.00
7. Since the afore-noted payments were made in eight months, condition
no. 5 became applicable and in terms thereof, the validity was to expire on
or before 23rd July, 2021. The final payment of Rs. 40,13,586/- was made on
23rd July, 2021 by way of a cheque bearing no. 785863 drawn on Indian
Bank (formerly Allahabad Bank).
8. The afore-noted cheque was duly encashed by SBI, yet, the loan
account was not closed. Petitioner-company started following up with SBI
for issuance of a no-dues certificate and closure of proceedings before the
DRT, however, neither did SBI withdraw the DRT proceedings nor issued
the no-dues certificate.
9. Aggrieved with SBI's failure to accede to its request, Petitioner-
company has been constrained to approach this Court by way of the instant
petition.
10. SBI has filed a counter affidavit strongly opposing the present
Signature Not Verified
Digitally Signed
By:SAPNA SETHI
Signing Date:23.07.2022
16:04:04
petition. Ms. Jaya Tomar, Advocate, representing the Respondent-bank,
submits that the petition is not maintainable as condition no. 5 of the
sanction letter has not been complied with by Petitioner-company. She
emphasises that Petitioner-company was obligated to deposit/ transfer the
entire balance amount to SBI by 23rd July, 2021 - which they have failed to
do. She explains that the statement of account filed by Petitioner-company
reflects that the cheque for Rs. 40,13,586/- was cleared only on 27th July,
2021. Thus, the said amount stood transferred to SBI only on the that date,
and not on or before 23rd July, 2021, as per condition no. 5, which proves
that Petitioner-company did not deposit the entire amount under OTS
sanction terms within the stipulated timelines. Any deposit after the cut-off
date cannot revive the OTS which had become infructuous on account of
non-payment. The scheme is non-discretionary and not discriminatory; the
branch functionary has no discretion to extend the time or reconsider the
conditions under the sanction letter. As regards the Petitioner-company's
contentions that the payment was made to SBI on 23rd July, 2021, Ms.
Tomar submits that the cheque is payable on presentation and encashment,
and not on demand. Cheque no. 785863 was given by Petitioner-company to
SBI on 23rd July, 2021 which was a Friday; and the same was sent for
clearance only on the next working day i.e,. 26th July, 2021 (Monday) as the
previous two days were bank holidays - being Saturday and Sunday. The
payment received thereunder was beyond the validity period as the actual
date of payment has to be construed to be 27th July, 2021, and thus, it is
evident that the terms of sanction letter have not been satisfied. In such
circumstances, Petitioner-company is not entitled to the reliefs sought for in
the present petition.
Signature Not Verified
Digitally Signed
By:SAPNA SETHI
Signing Date:23.07.2022
16:04:04
11. Having considered the afore-noted contentions, in the opinion of the
Court, the present petition deserves to be allowed for the reasons discussed
hereinafter.
12. The dispute between the parties surrounds the construction of the
terms of the sanction letter. It cannot be disputed that the amounts which fell
due under sanction letter, stand paid. Controversy has arisen because the last
payment made by Petitioner-company by way of a negotiable instrument (a
cheque) on 23rd July, 2021 i.e. the last date of the validity period, stood
credited into the account of SBI only on 27th July 2021. For the sake of
clarity, it would be apposite to extract condition no. 5, which reads as under:
"5. The balance amount can he paid within 8 months from the date of this
letter, i.e. 24/11/2020 (the validity period) together with interest @ 6
Months MCLR on reducing balance basis effective from the date of this
letter, i.e. 24.11.2020 failing which the OTS sanction will be rendered
infructuous."
13. Condition no. 5 clearly stipulates that the payment has to be made
within the 'validity period'. This entails application of interest @ six months
MCLR on reducing balance basis, from date of the sanction letter. Since
Petitioner-company did not avail the benefit of condition no. 6, and instead,
chose to pay the OTS amount in eight months, interest had to be calculated
and levied by SBI. Petitioner-company had made payment of Rs.
22,95,138/- by 19th July, 2021. The remaining amount under the sanction
letter, inclusive of interest, thus, had to be calculated for making the
payment. Accordingly, in terms of condition no. 5 of the sanction letter, the
total amount due as on 23rd July, 2021 (Rs. 40,13,586/-) was paid by cheque.
Signature Not Verified
Digitally Signed
By:SAPNA SETHI
Signing Date:23.07.2022
16:04:04
This calculation has not been disputed by SBI in its counter affidavit.
14. The only dispute raised by SBI is that the cheque tendered by
Petitioner-company was encashed on a later date past the 'validity period',
and hence, condition no. 5 has been violated. In the opinion of the Court,
this argument cannot be accepted for several reasons. When Petitioner-
company tendered the final amount by cheque, SBI accepted the same
without any condition. During the course of arguments, Ms. Tomar made an
oral submission, without any supporting specific averment in the counter
affidavit, that it could be a possibility that Petitioner-company simply
deposited the cheque in the dropbox/ dak and moved away. However, the
Court finds no mention of such contention in the counter affidavit. The
Court also finds it hard to believe that the exact calculation of payable
interest amount would have been done by Petitioner-company unilaterally.
Nonetheless, SBI did not dispute the cheque even on the subsequent date,
and instead, proceeded to encash the same. This is supported by the pleading
in the counter affidavit, which reads as:
"Therefore, cheque was presented by the bank without any delay, on very
first working day".
15. The above submission clearly suggests that SBI was in possession of
the cheque and conscious of the fact that it had to encash the same without
any delay. There is no explanation why the cheque was not sent for clearing
on 23rd July, 2021 itself. Although it is orally argued that the same was
perhaps for the reason that it was deposited by Petitioner-company after the
clearing hours; however, again, there is no such averment in the counter
affidavit. Further, a glaring fact that emerges in the instant case is that after
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Digitally Signed
By:SAPNA SETHI
Signing Date:23.07.2022
16:04:04
deposit of the cheque, Petitioner-company followed up by sending an e-mail
communication to the bank on 26th July, 2021, which reads as under:
"From: Milan Aggarwal
Sent: 26/07/2021 6:55 PM
To: SAR Retail North - New Delhi-I - SBI 5169 [email protected]
Cc: Manish Aggarwal [email protected]; SANJAY JHA
[email protected]
Subject: RE: OTS sanctioned letter dated 24.11.2020
Dear Sir
We would like to update you about the OTS sanction provided to us on
24/11/2020 after the proposal was accepted by us and upfront paid for in
November 2020.
We have paid the entire amount as per the OTS guidelines/ Sanction and
proposal letter exactly.
The last EMI amount has been paid on 23/07/2021 by way of cheque payment
after having received the pending principal plus interest amount.
We were informed the Principal amount 34,42,705/- and the interest amount
of 5,70,881.48/-
We have provided the cheque no. 785863 on 23/072021.
With this, we have honoured out OTS sanctioned to us in all aspects
You are requested to acknowledge this and provide the NOC accordingly.
We are providing the attachment of the total amount paid towards this.
Thanks
MILAN AGGARWAL"
16. The afore-noted communication has neither been replied to by SBI,
nor has the same been categorially denied in its counter affidavit. Rather,
there is only an evasive general denial of the corresponding paragraph of the
petition in the counter affidavit. Several regular e-mail correspondences
between the Petitioner-company and SBI after each payment have been
placed on record, and the same are not specifically denied by SBI.
Signature Not Verified
Digitally Signed
By:SAPNA SETHI
Signing Date:23.07.2022
16:04:04
17. After having received the afore-noted communication, there was radio
silence on SBI's end. The first communication relied upon by SBI to defend
its inaction is the letter dated 31st January, 2022 wherein for the first time,
referring to a meeting held in the first week of January and on 31st January,
2022, it is contended that no-dues certificate cannot be issued towards the
settlement of account. In view of the above, it emerges that SBI
unconditionally accepted the payment; made no protest and credited the
payment. Having accepted the payment and not offering any plausible
explanation for the delay in responding can only lead to one inference- the
stand now put forth by SBI is an after-thought.
18. That apart, the fact that the payment was made on 23rd July, 2021, is
not controverted. The conditions of sanction letter do not stipulate that the
payments have to be made only by way of electronic transaction, and not by
way of negotiable instruments - such as cheques. Payment by way of cheque
is thus presumed to be a valid mode of payment. The same, as observed
above, was indeed accepted on 23rd July, 2021. Pertinently, if SBI was to
consider the date of encashment of cheque as the date of payment,
Petitioner-company should have been intimated of this stipulation in the
sanction letter itself, or at least on the date when the cheque was accepted by
SBI. Even on 23rd July, 2021 i.e. the date of payment, had the Petitioner-
company been informed that the payment by way of cheque would be
accepted only on the date of encashment, Petitioner-company could have
resorted to other modes of making good the payment electronically. The
cheque was encashed as there was sufficient balance in the Petitioner-
Signature Not Verified
Digitally Signed
By:SAPNA SETHI
Signing Date:23.07.2022
16:04:04
company's bank account for encashment of the said amount. Mr. Vipul
Ganda, counsel for Petitioner-company, states that the funds were also
available on 23rd July, 2021. Be that as it may, the cheque has already been
encashed and sufficiency of funds is immaterial.
19. SBI has a duty to act fairly and reasonably. The OTS cannot be
rendered infructuous on fanciful reasons otherwise the intent of bringing an
OTS scheme, and the ensuing consequences, would stand defeated. The
reasons offered by SBI have trivialized the 'non-discretionary' aspect of the
scheme.
20. In light of the fore-going, the Court is satisfied that Petitioner-
company has complied with the terms of the sanction letter, and therefore,
the petition deserves to be allowed. SBI is directed to forthwith issue the no-
dues certificate in terms of the OTS sanction letter. The intimation of OTS
shall also be brought to the notice of DRT by filing an appropriate
application to bring closure to the ongoing proceedings against Petitioner-
company.
21. With the above directions, the present petition is allowed.
SANJEEV NARULA, J
JULY 22, 2022/as
Signature Not Verified
Digitally Signed
By:SAPNA SETHI
Signing Date:23.07.2022
16:04:04
