A.V.Prasanth vs Syndicate Bank Represented By
2021 Latest Caselaw 12262 Ker

         IN THE HIGH COURT OF KERALA AT ERNAKULAM

                            PRESENT

              THE HONOURABLE MR.JUSTICE N.NAGARESH

  MONDAY, THE 26TH DAY OF APRIL 2021/6TH VAISAKHA, 1943

                   WP(C).No.12538 OF 2020(N)


PETITIONER:

              A.V.PRASANTH, AGED 47 YEARS,
              S/O.K.APPUKUTTAN NAIR MANGALASSERY,
              KALATHARA VEEDU, OHM NAGAR,
              MANIKANDESWARAM P.O.,
              THIRUVANANTHAPURAM.

              BY ADV. SRI.T.M.ABDUL LATHEEF

RESPONDENTS:

    1         SYNDICATE BANK REPRESENTED BY
              SENIOR MANAGER, HEAD OFFICE MANIPAL,
              KARNATAKA, PIN-576 104.

    2         MANAGER, SYNDICATE BANK,
              SASTHAMANGALAM, ARMB,
              THIRUVANANTHAPURAM, PIN-695 010.

    3         BRANCH MANAGER, SYNDICATE BANK,
              ASSET RECOVERY MANAGEMENT BRANCH,
              ERNAKULAM, PIN-682 018.

    ADDL.4    B.S.VASANTHI, AGED 72 YEARS,
              W/O. K. APPUKUTTAN NAIR, MANGALASSERY,
              KALATHARA VEEDU, OHM NAGAR,
              MANIKANTESWARAM P.O.,
              THIRUVANANTHAPURAM.

              (ADDITIONAL R4 IS IMPLEADED AS PER ORDER DATED
              16/10/2020 IN IA 01/2020)

              R1-R3 BY ADV. SRI.R.S.KALKURA
              R4 BY ADV. K.RAMAKUMAR (SR.)
              R4 BY ADV. SRI.T.RAMPRASAD UNNI
 WP(C) No.12538/2020
                                   :2 :


              R4   BY   ADV.   SRI.S.M.PRASANTH
              R4   BY   ADV.   SRI.G.RENJITH
              R4   BY   ADV.   SMT.R.S.ASWINI SANKAR
              R4   BY   ADV.   SRI.T.H.ARAVIND

     THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD
ON 26-04-2021, THE COURT ON THE SAME DAY DELIVERED THE
FOLLOWING:
 WP(C) No.12538/2020
                                 :3 :




                        JUDGMENT

~~~~~~~~~

Dated this the 26th day of April, 2021

The petitioner, who is running a proprietary

business in construction, hardware and paint materials, has

filed this writ petition seeking to command respondents 1 to 3

to immediately release loan papers, security title deeds and

other documents obtained towards the loan covered by Ext.P3

settlement. Incidental reliefs are also sought for.

2. The petitioner states that the 2nd respondent-

Manager, Syndicate Bank, Sasthamangalam Branch provided

a term loan facility of ₹90 lakhs to the petitioner on

30.10.2006. SARFAESI proceedings were initiated by the

Bank against the petitioner. The petitioner filed WP(C)

No.28398/2011 when Section 14 was invoked. This Court

granted 10 EMIs to discharge the liability of about ₹100 lakhs. WP(C) No.12538/2020

Though the petitioner made substantial remittances, on

making a default, the Bank recalled the One Time Settlement

facility on 18.03.2017.

3. The Bank then filed O.A. No.440/2017 in the DRT,

Ernakulam for realisation of dues. The petitioner would

submit that during the interregnum, he had brought down the

outstanding to ₹25 lakhs even as per the bank statement.

But, the Bank brought up the amount to ₹55 lakhs soon. By

18.03.2017, when OTS offer was withdrawn by the Bank, the

petitioner had remitted more than ₹100 lakhs.

4. The Bank again permitted the petitioner to settle

the liability for a total amount of ₹35,50,000/- as per Ext.P3

dated 15.01.2020. Towards this settlement, the petitioner paid

₹5,50,000/- on 15.01.2020 itself as is evident from Ext.P4.

Thereafter, ₹18 lakhs was paid on 11.03.2020 and ₹7.5 lakhs

on 20.03.2020. Another ₹4,50,000/- was transferred to the

Bank on 20.03.2020.

5. Thus, the entire OTS amount of ₹35,50,000/- was

paid. Now, the Bank is not returning to the petitioner the title WP(C) No.12538/2020

documents in respect of the property offered by the petitioner

on a specious plea that in view of RBI directions, the Bank

cannot accept the OTS agreed upon. The respondents are

therefore compellable by appropriate orders of this Court to

return the title documents to the petitioner.

6. Respondents 1 to 3 filed counter affidavit and

opposed the writ petition. Respondents 1 to 3 stated that the

account of the petitioner became NPA on 31.12.2008. In

WP(C) No.30040/2009, this Court permitted the petitioner to

clear the outstanding amount in five equal monthly

instalments. The petitioner failed to pay. The petitioner then

filed WP(C) No.28398/2011. This Court granted time to the

petitioner to pay the balance amounts due, in 10 equal

monthly instalments. The petitioner still failed to clear the

loan.

7. Respondents 1 to 3 denied the statement of the

petitioner that ₹28,86,562/- was paid on 30.03.2015.

According to the respondents, the entry shown in their

statement of accounts is a mistake. The petitioner paid only WP(C) No.12538/2020

₹65,00,000/- by 27.12.2014. Thus, as against ₹100 lakhs, the

petitioner paid only ₹65 lakhs within the time limit prescribed

for OTS. The OTS therefore stood terminated.

8. Thereafter, the petitioner submitted Ext.R1(d) offer

dated 14.01.2020 to settle the account for ₹35,50,000/-. The

offer was addressed to the Regional Manager. At that time,

the loan outstanding was ₹1,06,22,805.19. Market value of

the secured property would come to ₹2,19,84,000/-.

Therefore, the Regional Manager could not have settled the

account of the petitioner under OTS for ₹35,50,000/-. It could

have been settled only by the next higher authority, as per RBI

stipulations. Ext.P3 settlement is without any authority,

contended respondents 1 to 3.

9. The counsel appearing for the additional 4 th

respondent, who is the mother of the petitioner, argued that

the Bank being 'State', cannot take a defence that the One

Time Settlement as per Ext.P3 is a mistake. The principles of

promissory estoppel would come into play, against the Bank. WP(C) No.12538/2020

10. Heard the learned counsel for the petitioner, the

learned Standing Counsel appearing for the Bank and the

learned Senior Counsel assisted by the counsel for the

additional 4th respondent.

11. The pleadings would disclose that the petitioner

availed a loan of ₹90 lakhs on 05.12.2006. When SARFAESI

proceedings were initiated, the petitioner approached this

Court and in WP(C) No.28398/2011, this Court permitted the

petitioner to pay back ₹100 lakhs in ten equal monthly

instalments. According to the petitioner, pursuant to the

judgment, he remitted a substantial amount. The Bank would

admit that the petitioner paid ₹25 lakhs on 30.06.2014 and

₹40 lakhs on 27.12.2014. As the entire amount was not

cleared, the Bank recalled the settlement and filed O.A.

No.440/2017 in the DRT, Ernakulam, for recovering ₹90 lakhs.

12. The petitioner thereafter made a fresh offer for One

Time Settlement to the Regional Manager of the Bank

agreeing to settle the loan for ₹35,50,000/-. The offer was

accepted by the Bank on 15.01.2020 as per Ext.P3 WP(C) No.12538/2020

communication, which reads as follows:

"In continuation of our e-mail dated 14.01.2020, we would like to inform you that the competent authority has accepted your OTS proposal for Rs.35,50,000/- for your account M/s.Guruji Enterprises with the following conditions:

1. Initial OTS payment for Rs.5,50,000/- is to be paid tomorrow 15.01.2020 without fail.

2. Remaining Amount of Rs.30,00,000/- is to be paid before 20.03.2020.

3. DRT cases will be withdrawn and title deeds will be returned only after closure of the loan account through OTS on receipt of full payment.

4. If the remaining amount of Rs.30,00,000/- is not paid before 20.03.2020 this offer letter will stand cancelled and you shall be liable to pay the full amount of Rs.10,32,57,000/- plus interest in addition to the above conditions mentioned in our earlier mail dated 14.01.2020."

13. The petitioner paid ₹5,50,000/- on 15.01.2020,

₹18,00,000/- on 11.03.2020 and ₹7,50,000/- on 20.03.2020.

Another amount of ₹4,50,000/- was transferred to the Bank

through RTGS on 20.03.2020. Thus, the petitioner remitted

the entire OTS amount within the time stipulated in Ext.P3.

Still, respondents 1 to 3 are refusing to admit the settlement

and return to the petitioner the title documents deposited by

him by way of security.

WP(C) No.12538/2020

14. The contention of the Bank is that since the

secured property would fetch more than ₹2 Crores, as per

Exts.R1(d) and R1(e) guidelines, the account could not have

been settled by the Bank for ₹35,50,000/-. The further

argument is that the settlement on terms mentioned in Ext.P3

could have been made by the Bank only at the Corporate

Office level. In this case, the OTS was addressed to the

Regional Manager and Ext.P3 was issued by the Branch

Manager.

15. The learned Standing Counsel for the respondent-

Bank relied on the judgment of this Court in Prasad and

another V. Grave Chekkakkari Nadankari Padasekhara

Committee and others [2018 (4) KLJ 673] to contend that

since Ext.P3 agreement is by a mistake, as the parties were

under a mutual mistake with respect to their respective rights,

the agreement is liable to be set aside as having been

proceeded upon a common mistake.

16. The learned Standing Counsel placing reliance on

the judgment of the Hon'ble Karnataka High Court in WP(C) No.12538/2020

Rathnam M. and others v. Susheelamma [AIR 2009 Kar

79], argued that when both parties proceeded with the

transaction under a mistake as to fact that one of them had

the authority to enter into an agreement, the mistake of fact is

mutual and by virtue of Section 20 of the Contract Act, 1872,

the agreement is void and unenforceable in law.

17. The learned Standing Counsel relied on the

judgment of the Hon'ble Madras High Court in Sheeba

Engineering Industries v. The State Bank of India [(2009) 3

CTC 362] to urge that an OTS signed in ignorance of a

material fact is liable to be withdrawn. The learned Standing

Counsel also relied on the judgment of the Apex Court in

Badrilal v. Municipal Corporation of Indore [AIR 1973 SC

508] to urge the point.

18. In the petitioner's case, there is no dispute that the

petitioner had made an offer of one-time settlement for `35.5

lakhs. The offer was addressed to the Regional Manager of

the Bank. The acceptance of the offer was communicated to

the petitioner by the Branch Manager. The petitioner acted WP(C) No.12538/2020

upon Ext.P3 and paid the amount due under Ext.P3 within the

stipulated time. The Bank relied on Ext.R1(g) to contend that

the Branch Manager or Regional Manager was not competent

to enter into Ext.P3 settlement. Ext.R1(g) Circular provides

for policy guidelines. The title to Ext.R1(g) itself states that it

is a settlement/compromise 'policy'. Ext.R1(g) Circular

requires the respondent-Bank to transact their business in a

particular manner. That does not mean that whenever a

direction given in the Circular is violated, the contract entered

into by the Bank would be invalidated.

19. Ext.P3 states that the OTS proposal made by the

petitioner for `35.5,00,00/- has been accepted by the

competent authority. The petitioner had no reason to

disbelieve the authority or competency of the Regional

Manager or Branch Manager of the Bank to enter into Ext.P3

settlement. The petitioner has acted upon Ext.P3 and has

discharged his obligations under the agreement.

Respondents 1 to 3 did not repudiate the OTS till the

petitioner paid the entire amount payable under Ext.P3. WP(C) No.12538/2020

Respondents 1 to 3 are therefore estopped from taking a

stand that the OTS is void.

20. The judgments relied on by the respondents would

not be of any assistance to them. In Prasad and another

(supra), this Court was dealing with an agreement entered

into under a mutual mistake. The mutual mistake must be as

to a matter of fact essential to the agreement to render the

agreement void. Violation of a policy advice by the Regional

Manager or Branch Manager of the Bank, cannot be treated

as a matter of fact essential to the Ext.P3 agreement.

21. The judgment of the Hon'ble Karnataka High Court

in Rathnam M. and others (supra) related to allotment of a

plot which the parties to the agreement erroneously treated as

one transferring title to the property. In the present case, the

authority of Branch Manager or Regional Manager of the Bank

to enter into OTS is not under dispute. The contention is that

as per policy guidelines prescribed, they ought to have left it

to be decided by their Corporate Office. The judgment of the

Apex Court in Badrilal (supra) was a case of statutory WP(C) No.12538/2020

incompetency of one of the parties to the agreement. The

said judgment is also of no avail to respondents 1 to 3.

For the reasons stated above, the writ petition is

allowed. Respondents 1 to 3 are directed to release all the

documents deposited by the petitioner by way of security to

the loan transaction covered by Ext.P3, within a period of one

month.

Sd/-

N. NAGARESH, JUDGE

aks/16.04.2021 WP(C) No.12538/2020

APPENDIX PETITIONER'S EXHIBITS:

EXHIBIT P1 TRUE COPY OF THE STATEMENT ISSUED BY THE BANK FOR THE PERIOD COMMENCING FROM 9.12.2006 TO 28.3.2017.

EXHIBIT P2 TRUE COPY OF THE LETTER DATED 18.3.2017 RECALLING THE OTS SANCTION ORDER.

EXHIBIT P3 TRUE COPY OF THE LETTER DATED 15.1.2020 SANCTIONING THE ONE TIME SETTLEMENT.

EXHIBIT P4            TRUE    COPY   OF    THE    RECEIPT           FOR
                      RS.5,50,000/- DATED 15.1.2020.

EXHIBIT P5            TRUE COPY OF THE RECEIPT FOR RS.18 LAKHS
                      DATED 11.3.2020.

EXHIBIT P6            TRUE COPY OF THE RECEIPT FOR RS.7.5 LAKHS
                      DATED 20.3.2020.

EXHIBIT P7            TRUE   COPY  OF  THE          RTGS   AMOUNT  OF
                      RS.4,50,000/- THROUGH         HDFC   BANK DATED
                      20.3.2020.

EXHIBIT P8            TRUE COPY OF THE REQUEST SUBMITTED BEFORE

THE 2ND RESPONDENT ON 21.3.2020 AND COPY OF THE RECEIPT ADDRESSED TO THE 2ND RESPONDENT.

EXHIBIT P9 TRUE COPY OF THE PROCEEDINGS OF THE DISTRICT LEGAL SERVICES AUTHORITY.

RESPONDENTS' EXHIBITS:

EXHIBIT R1 (a) TRUE COPY OF THE JUDGMENT DATED 25.11.2011 IN WPC 28398 OF 2011

EXHIBIT R1 (b) TRUE COPY OF THE APPLICATION DATED 14.01.2020

EXHIBIT R1 (c) TRUE COPY OF THE STATEMENT OF ACCOUNTS PERTAINING TO PETITIONERS LOAN ACCOUNT WP(C) No.12538/2020

EXHIBIT R1 (d) TRUE COPY OF THE VALUATION REPORT DATED 28.03.2016 IN RESPECT OF THE PROPERTY BELONGING TO THE PETITIONER

EXHIBIT R1 (e) TRUE COPY OF THE VALUATION REPORT DATED 28.03.2016 IN RESPECT OF THE PROPERTY BELONGING TO THE PETITIONERS MOTHER VASANTHI AMMA

EXHIBIT R1 (f) TRUE COPY OF THE VALUATION REPORT DATED 20.07.2019 IN RESPECT OF THE PROPERTY BELONGING TO THE PETITIONER

EXHIBIT R1 (g) TRUE COPY OF THE RELEVANT PORTIONS OF THE CIRCULAR BEARING NO.187-2013-BC- REC-10/08-08-2013

EXHIBIT R1(h) TRUE COPY OF THE RELEVANT PAGE OF CIRCULAT NO.030-2020 BC-RMD-05/17-01- 2020 DATED 17.01.2020

EXHIBIT R1 (i) TRUE COPY OF THE CALCULATION SHEET PERTAINING TO THE SACRIFICE TO BE MADE BY THE BANK MADE AT THE BRANCH LEVEL

EXHIBIT R1(j) TRUE COPY OF THE LETTER DATED 07.03.2020 ISSUED BY DEPUTY GENERAL MANAGER, RRBU, CORPORATE OFFICE OF THE 1ST RESPONDENT.

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