Ranjan Kumar Praharaj vs Branch Manager
2024 Latest Caselaw 16786 Ori

Orissa High Court

Ranjan Kumar Praharaj vs Branch Manager on 19 November, 2024

Author: S.K. Panigrahi

Bench: S.K. Panigrahi

                                                                     Signature Not Verified
                                                                     Digitally Signed
                                                                     Signed by: BHABAGRAHI JHANKAR
                                                                     Designation: AR-CUM-SR. SECRETARY
                                                                     Reason: Authentication
                                                                     Location: ORISSA HIGH COURT, CUTTACK
                                                                     Date: 19-Nov-2024 17:30:14



                   IN THE HIGH COURT OF ORISSA AT CUTTACK

                                W.P.(C) No.9607 of 2024

       (In the matter of an application under Articles 226 and 227 of the
       Constitution of India, 1950).

       Ranjan Kumar Praharaj                            ....                 Petitioner(s)

                                             -versus-

       Branch Manager, State Bank of                    ....          Opposite Party (s)
       India, Mayurbhanj & Ors.
     Advocates appeared in the case through Hybrid Mode:

       For Petitioner(s)               :                     Mr. Chakradhar Singh, Adv.



       For Opposite Party (s)          :                            Mr. G. D. Kar, Adv.


                   CORAM:
                   DR. JUSTICE S.K. PANIGRAHI

                       DATE OF HEARING:-03.09.2024
                      DATE OF JUDGMENT:-19.11.2024
     Dr. S.K. Panigrahi, J.

1. In the present Writ Petition, the Petitioner seeks to challenge the legality

and validity of Letter No.SARB/CTC/CM-1/SKM/14/657, dated

01.12.2023, and Letter No. SARB/CTC/CM-1/SKM/14/905, dated

22.03.2024, issued by the State Bank of India ("SBI"), whereby the bank

unilaterally cancelled the previously approved compromise settlement

under the One-Time Settlement (OTS) scheme concerning the

Designation: AR-CUM-SR. SECRETARY

Location: ORISSA HIGH COURT, CUTTACK Date: 19-Nov-2024 17:30:14

petitioner's Cash Credit Loan Account No. 30234997899/ Car Loan

Account No. 38879420128, and Education Loan Account No.

35962024188.

I.     FACTUAL MATRIX OF THE CASE:

 2.    The brief facts of the case are as follows:

(i)    The petitioner availed two loans from the SBI, Udala Branch. The first

loan was a Cash Credit (C.C.) account bearing No. 30234997899,

sanctioned on 29.06.2013, with a limit of ₹24,00,000 (Twenty-four lakhs).

The second loan was a car loan bearing No. 38879420128, sanctioned on

07.04.2019, with a limit of ₹10,75,000 (Ten lakhs seventy-five thousand).

Both loans were operational with installment payments; however, they

later became Non-Performing Assets ("NPA") due to delayed

installment payments attributed to business losses and the financial

impact of the COVID-19 pandemic. In addition, the petitioner's son

availed an education loan amounting to ₹13,50,000 on 30.07.2016, for

which the petitioner stood as guarantor. That account was later declared

as an NPA.

(ii) Subsequently, the bank proposed to recover all three loan accounts

under its OTS scheme. The petitioner submitted a compromise proposal

letter, in the prescribed SBI format, offering to settle all three accounts

by paying ₹60,00,000 against the total outstanding amount of ₹49,00,000

as of 25.04.2023. The payment schedule included an upfront deposit of

₹20,00,000 followed by installments of ₹20,00,000 each, to be paid by

25.06.2023, and 24.07.2023. The bank accepted and approved the

Designation: AR-CUM-SR. SECRETARY

Location: ORISSA HIGH COURT, CUTTACK Date: 19-Nov-2024 17:30:14

proposal through its letter No.SARB/CTC/CM-1/SKM/14/48, dated

27.04.2023.

(iii) In compliance with the payment schedule, the petitioner issued four

cheques, each for ₹10,00,000 (bearing Nos. 655571, 655572, 655573, and

655574), dated 24.07.2023, drawn on SBI Baripada Branch, in favor of

AGM, SBI SARB Cuttack. The cheques were handed over at the SARB

Branch on 27.07.2023. On the same day, the bank encashed two cheques

amounting to ₹20,00,000.

(iv) However, the bank later issued a letter (No. SARB/CTC/CM-

1/SKM/14/657, dated 01.12.2023) canceling the settlement, citing the

petitioner's failure to pay the entire ₹60,00,000 by 26.07.2023.

(v) The bank retained the encashed amount of ₹20,00,000 and returned the

remaining two cheques to the petitioner on 24.02.2023. At this time, the

bank demanded an additional ₹2,70,000 towards interest for the delayed

period, along with a request letter for an extension of time. Meanwhile,

the petitioner discovered that the bank had debited a total of ₹19,99,000

from his savings account at the Udala Branch on various dates, as

follows: ₹5,00,000 on 30.09.2023; ₹3,87,500 on 12.02.2024; ₹6,50,000 on

13.02.2024; ₹4,00,000 on 22.02.2024; and ₹61,500 on an unspecified date.

(vi) However, the opposite party, instead of closing the compromise

settlement, issued another letter bearing No. SARB/CTC/CM-

1/SKM/14/905 dated 22.03.2024. In this letter, the opposite party

informed the petitioner that his request for an extension of time was not

accepted by the competent authority. Furthermore, the opposite party

directed the petitioner to credit an additional amount of ₹22.70 lakhs

Designation: AR-CUM-SR. SECRETARY

Location: ORISSA HIGH COURT, CUTTACK Date: 19-Nov-2024 17:30:14

towards the loan dues within 15 days from 22.03.2024. Failure to

comply the same would result in the bank treating the amount as

recovery towards the total dues, an action the petitioner considered

arbitrary.

II. SUBMISSIONS ON BEHALF OF THE PETITIONER:

3. Learned counsel for the Petitioner earnestly made the following

submissions in support of his contentions:

(i) It is submitted that the bank calculated interest and other charges up to

31.03.2024, without waiting for a reply from the petitioner, despite

having requested one within the stipulated 15-day period. This

unilateral action by the bank appeared to disregard the petitioner's

genuine efforts to comply with the settlement terms.

(ii) The petitioner submitted that the OTS or compromise settlement for

bad loans is a scheme formulated by the RBI in consultation with the

Government of India. This scheme aims to facilitate early recovery of

loans while providing relief to borrowers unable to repay their loans in

full. All banks are obligated to implement this scheme in accordance

with RBI guidelines. Specifically, the RBI, through its Letter No.

RPCD.PLNFS.BC No.39/06.02.31/2005-06, dated 11.03.2005, outlines the

terms of payment under point No. 2A(iii). According to these

provisions, the settlement amount should preferably be paid in one

lump sum. However, if this is not possible, borrowers must pay at least

25% of the settlement amount upfront, with the remaining 75%

recoverable in installments within one year, subject to interest at the

prevailing prime lending rate.

Designation: AR-CUM-SR. SECRETARY

Location: ORISSA HIGH COURT, CUTTACK Date: 19-Nov-2024 17:30:14

(vii) The petitioner asserts that these payment terms are binding and cannot

be violated by the opposite party, SBI. In the petitioner's case/ the

compromise settlement was approved on 27.04.2023. The petitioner

paid ₹20 lakhs upfront on 25.04.2023, and subsequently issued cheques

totaling ₹40 lakhs in four installments of ₹10 lakhs each on 24.07.2023,

along with a request for an extension to realize the cheques. The

opposite party accepted and encashed two cheques amounting to ₹20

lakhs but later returned the remaining two cheques on 24.02.2024.

Additionally, the bank arbitrarily debited ₹19.99 lakhs from the

petitioner's savings account at the Udala Branch on different dates and

demanded ₹2.70 lakhs as interest for the delay, along with ₹1 lakh as

arrears.

(viii) Finding no alternative, the petitioner issued another cheque covering

₹2.70 lakhs for interest and ₹1 lakh for the shortfall, amounting to ₹2.71

lakhs as the third installment. Although there was a delay of seven

months, it remained within the one-year period stipulated in the RBI

guidelines. The petitioner emphasizes that the delay was not only

acknowledged by the opposite party but also regularized through their

acceptance of the delayed payments with interest.

(ix) The petitioner asserts that the opposite party, after obtaining the agreed

compromise settlement amount, is acting with malafide intent to

deceive and harass him in order to recover additional funds. The

OTS/compromise settlement was approved explicitly on the grounds of

business loss due to the COVID-19 pandemic, as documented in the

OTS proposal. The terms of payment for the settlement were dictated by

Designation: AR-CUM-SR. SECRETARY

Location: ORISSA HIGH COURT, CUTTACK Date: 19-Nov-2024 17:30:14

the opposite party and were strictly followed by the petitioner.

However, the actions of the opposite party have now become a source

of undue harassment.

(x) The petitioner highlights that the opposite party unreasonably included

an education loan, which is not directly the petitioner's liability/ as part

of the settlement. This education loan, for which the petitioner acted as

a guarantor, is governed by a separate recovery policy under the

Government of India's Education Loan Policy. The education loan was

under a moratorium period of five years after the completion of the

education period, extending up to 30.07.2022. Despite this, the bank

arbitrarily declared the loan as an NPA. Out of goodwill, the petitioner

agreed to settle this account as a guarantor, even though it should have

been treated independently.

(xi) The petitioner submits that the arbitrary and illegal actions of the

opposite party are driven by greed and an intent to exploit, akin to a

moneylender's approach. Such actions are in direct contravention of the

RBI guidelines, which mandate the proper implementation of

OTS/compromise settlements. Once the compromise settlement is

offered and payments are made in accordance with the terms, the bank

loses the discretion to unilaterally cancel the settlement. In this case, the

petitioner paid two installments of ₹20,00,000 each and issued cheques

for the third installment on time. Despite this, the opposite party

canceled the settlement, citing delays that were already addressed

through the petitioner's compliance with their demand for an additional

₹2.70 lakhs in interest.

Designation: AR-CUM-SR. SECRETARY

Location: ORISSA HIGH COURT, CUTTACK Date: 19-Nov-2024 17:30:14

(xii) The petitioner emphasizes that he has demonstrated a clear intention

and consistent effort to close the loans. The opposite party

acknowledged the delay and requested interest for the shortfall, which

the petitioner paid. As a matter of natural justice, the opposite party

cannot cancel the settlement after accepting these payments. The

cancellation appears to be a pretext to extract more money and

potentially seize the mortgaged property, reflecting an abuse of

discretion and malafide intent.

(iii) The petitioner argues that the opposite party's actions violate statutory

guidelines issued by the RBI and the Government of India. The bank is

obligated to honor the compromise settlement and cannot arbitrarily

rescind it after partial fulfillment of the agreed terms. Consequently, the

letter No. SARB/CTC/CM-1/SKM/14/657, dated 01.12.2023 issued by the

opposite party canceling the compromise settlement is liable to be

quashed. Failure to do so would result in severe hardship to the

petitioner, miscarriage of justice, and contravention of the law and

established guidelines.

III. SUBMISSIONS ON BEHALF OF THE OPPOSITE PARTIES:

4. The Learned Counsel for the Opposite Parties earnestly made the

following submissions in support of his contentions:

(i) The subject matter of the present writ petition is already sub-judice

before the Debt Recovery Tribunal, Orissa, Cuttack, in S.A. No. 22/2022.

The petitioner has willfully suppressed the material fact that he has

filed an application under Section 17(1) of the SARFAESI Act before the

DRT, Cuttack, wherein he has raised identical allegations and cause of

Designation: AR-CUM-SR. SECRETARY

Location: ORISSA HIGH COURT, CUTTACK Date: 19-Nov-2024 17:30:14

action against the Bank. In light of this deliberate non-disclosure and

the pendency of proceedings on the same issue before a competent

forum, the writ petition warrants dismissal.

(ii) The respondent bank respectfully submits that the compromise

settlement in question was not under the general OTS scheme offered to

all defaulters but was a specific agreement negotiated between the

petitioner and the bank. The petitioner agreed to pay the settled amount

within a specified time frame. Upon the petitioner's failure to adhere to

the agreed terms, the bank cancelled the compromise proposal on

01.12.2023. All amounts deposited by the petitioner, totaling ₹40 lakhs

as of 27.07.2023, were adjusted against his total outstanding loan

account.

(iii) The Bank has encashed two cheques, bearing Nos. 655571 and 655572,

for ₹10 lakhs each. However, when it was discovered that the petitioner

did not have sufficient balance in his account to honour two additional

cheques, bearing Nos. 655573 and 655574, also for ₹10 lakhs each, the

Bank/ at the petitioner's request/ returned both cheques to him. It is

pertinent to note that the petitioner, as the borrower, failed to pay the

agreed compromise amount within the stipulated timeframe,

compelling the Bank to issue a cancellation of the compromise

agreement through its letter dated 01.12.2023.

(iv) The petitioner's request for an extension to pay the settled amount was

duly considered and rejected by the competent authority overseeing

such compromises. Allegations of malafide intention on the part of the

bank are baseless and appear to have been made with ulterior motives.

Designation: AR-CUM-SR. SECRETARY

Location: ORISSA HIGH COURT, CUTTACK Date: 19-Nov-2024 17:30:14

(v) Upon the failure of the compromise, the petitioner requested the bank

to furnish details of all outstanding dues, which were provided via

email on 31.03.2024. The bank also sought the petitioner's consent to

adjust an additional deposit of ₹22,08,500 made on various dates.

However, as the petitioner did not respond to this request, the bank

temporarily retained this amount in its parking account without

appropriating it. Despite the petitioner's inaction, he filed this writ

petition, seemingly with the intent of obtaining a sympathetic order

from this Court.

(vi) The Bank has not made any unauthorized deductions from the

petitioner's account; all such deductions were made strictly in

accordance with the petitioner's instructions. The education loan

availed by the petitioner's son required an EMI payment of ₹12,300 for

five months, totaling ₹61,500, which was automatically credited to the

loan account as per the agreement and instructions provided by the

petitioner. Additionally, the deposit of ₹5 lakhs was made voluntarily

by the petitioner into the branch recovery account, as evidenced by the

deposit/pay-in slip submitted by him. Furthermore, the amounts of

₹3,87,500, ₹6,50,000, and ₹4 lakhs were deducted from the petitioner's

Savings Bank Account No. 10795597368 in accordance with his explicit

instructions for the settlement of loan dues.

(vii) The respondent bank emphasizes that the settlement was reached under

a specific compromise agreement, not under the RBI-prescribed OTS

scheme. Therefore, the guidelines referenced by the petitioner are

inapplicable to the present matter.

Designation: AR-CUM-SR. SECRETARY

Location: ORISSA HIGH COURT, CUTTACK Date: 19-Nov-2024 17:30:14

(viii) The respondent bank operates in strict compliance with corporate

governance standards and its legal obligations. The petitioner's

allegations of malafide intention and ulterior motives are unfounded

and appear to be an attempt to delay recovery proceedings indefinitely.

(ix) The failure of the compromise, due to the petitioner's non-payment

within the agreed period, renders him liable to pay the entire

outstanding dues. The respondent respectfully prays that this Hon'ble

Court direct the petitioner to fulfill his obligations accordingly.

(x) The respondent cites established legal precedents, including the Apex

Court's judgment in State Bank of India v. Arvindra Electronics (Civil

Appeal No. 6954 of 2022) which discourages judicial interference in OTS

or compromise matters, particularly when one party fails to adhere to

agreed terms.

IV. COURT'S REASONING AND ANALYSIS:

5. Heard the Learned Counsels for both parties and examined the records

presented.

6. In the present case in the sanctioned letter dated 27.04.2023 it was

specifically provided that the entire payment to be made by 26.07.2023.

The schedule to make the payment under the instalments was also

mentioned. It is an admitted position that the borrower did not make

the full payment due and payable under the sanctioned OTS Scheme on

or before the date mentioned in the sanctioned letter. The relevant

portion of the concerned letter is produced hereinbelow:

"We refer to your letter dated 25.04.2023 for settlement of your dues to the Bank and subsequent discussions on the

Designation: AR-CUM-SR. SECRETARY

Location: ORISSA HIGH COURT, CUTTACK Date: 19-Nov-2024 17:30:14

captioned subject. We are pleased to advise that your offer to pay Rs. 60.00 lacs towards your dues to the Bank for Compromise Settlement has been accepted by the appropriate authority.

a. Total amount payable under the settlement will be Rs.60.00 lacs (Rupees Sixty lakhs only) b. Upfront amount of Rs.20,00,000/- already paid by you . c. The balance amount of Rs 40,00,000/- has to be paid within THREE months from the date of issuance of this letter i.e. by 27.04.2023. Further in case of non-payment within three months i.e. 26.07.2023, the proposal will be automatically stand cancelled.

...."(Emphasis supplied)

7. As evident from the impugned letter, the compromise proposal

explicitly stipulated that the entire payment under the sanctioned OTS

was to be made by 21.05.2018, with a specific schedule for installment

payments clearly outlined. Furthermore, it was expressly provided that

failure to pay the agreed amount within three months, i.e., by

26.07.2023, would lead to the automatic cancellation of the compromise.

It is an undisputed fact that the borrower failed to make the payments

due and payable under the compromise within the stipulated period.

As the petitioner did not comply with the agreed payment timeline, the

Bank was left with no option but to cancel the compromise

arrangement, which was formally communicated through a cancellation

notice dated 01.12.2023.

8. The petitioner's request for an extension of the final settlement date was

rejected as early as 22.03.2024. The petitioner contends that the Bank

was obligated, under RBI Circular No. RPCD.PLNFS.BC.

Designation: AR-CUM-SR. SECRETARY

Location: ORISSA HIGH COURT, CUTTACK Date: 19-Nov-2024 17:30:14

No.39/06.02.31/2005-06, to grant a one-year period from the date of the

settlement letter for the clearance of the agreed amount. However, the

cited circular, dated 03.09.2005, is outdated and explicitly stipulates that

the last date for receiving applications from borrowers was the close of

business on 31.03.2006, with processing under the revised guidelines to

be completed by 30.06.2006. Thus, the circular relied upon by the

petitioner is clearly inapplicable to the present case. The relevant clause

is produced hereinunder:

"2.(A) [i] Coverage ...

e) The last date for receipt of applications from borrowers will be as at the close of business on March 31, 2006. The processing under the revised guidelines shall be completed by June 30, 2006." (Emphasis supplied)

9. Nevertheless, as correctly submitted on behalf of the Bank, directing the

Bank to reschedule the payment under the OTS would amount to a

modification of the contract, which can only be effected by mutual

consent. The Supreme Court in State Bank of India v. Arvindra

Electronics1 has held that the borrower cannot assert a right to demand

further extension of time for payment under the sanctioned OTS,

particularly when the payment has not been made in accordance with

the agreed terms. The relevant portion is produced hereinunder:

"22. Even otherwise as rightly submitted on behalf of the Bank directing the Bank to reschedule the payment under OTS would tantamount to modification of the contract which can be

(2023) 1 SCC 540

Designation: AR-CUM-SR. SECRETARY

Location: ORISSA HIGH COURT, CUTTACK Date: 19-Nov-2024 17:30:14

done by mutual consent under Section 62 of the Indian Contract Act. By the impugned judgment and order rescheduling the payment under the OTS Scheme and granting extension of time would tantamount to rewriting the contract which is not permissible while exercising the powers under Article 226 of the Constitution of India.

23. It is required to be noted that under the OTS Scheme which was originally sanctioned in the year 2017 the borrower was required to pay Rs.10,53,75,069.74 against the outstanding of Rs.13,99,89,273.99. Therefore, under the original sanctioned OTS Scheme the borrower was getting the substantial relief of approximately 3 crores. The Bank agreed and accepted the OTS offer on the terms and conditions mentioned in the letter dated 21.11.2017. In the sanctioned letter dated 21.11.2017 it was specifically mentioned in Clause

(iv) that the entire payment under the OTS Scheme was to be made by 21.05.2018, otherwise OTS would be rendered infructuous. Therefore, borrowers were bound to make the payment as per the sanctioned OTS Scheme. Therefore, the High Court ought not to have granted further extension de hors the sanctioned OTS Scheme while exercising the powers under Article 226 of the Constitution of India."

24. The submissions on behalf of the borrower that in case of some other borrowers the time was extended is concerned, the same is neither here nor there. The Bank mutually can agree to extend the time which is permissible under Section 62 of the Indian Contract Act. The borrower as a matter of right cannot claim that though it has not made the payment as per the sanctioned OTS Scheme still it be granted further extension as a matter of right. There cannot be any negative discrimination claimed. The borrower has to establish any right in their favour to claim the extension as a matter of right."

10. Moreover, the Supreme Court has deprecated the interference of the

High Courts in commercial matters, more particularly pertaining to the

Designation: AR-CUM-SR. SECRETARY

Location: ORISSA HIGH COURT, CUTTACK Date: 19-Nov-2024 17:30:14

SARFAESI cases and non-payment of loans. In M/S. South Indian Bank

Ltd. & Ors. v. Naveen Mathew Philip & Anr.,2 the Supreme Court held

as following:

"15. The object and reasons behind the Act 54 of 2002 are very clear as observed by this Court in Mardia Chemicals Ltd. v. Union of India, (2004) 4 SCC 311. While it facilitates a faster and smoother mode of recovery sans any interference from the Court, it does provide a fair mechanism in the form of the Tribunal being manned by a legally trained mind. The Tribunal is clothed with a wide range of powers to set aside an illegal order, and thereafter, grant consequential reliefs, including re-possession and payment of compensation and costs. Section 17(1) of the SARFAESI Act gives an expansive meaning to the expression "any person"/ who could approach the Tribunal.

16. Approaching the High Court for the consideration of an offer by the borrower is also frowned upon by this Court. A writ of mandamus is a prerogative writ. In the absence of any legal right, the Court cannot exercise the said power..."

11. It is abundantly clear that the petitioner has no legal right to seek an

extension of the deadline for settlement under the already sanctioned

OTS, particularly when the Bank has already extended significant

concessions to settle the NPA account. The petitioner's reliance on an

outdated RBI circular, which ceased to be operative after March 2006, is

misplaced and does not advance the petitioner's case. In the absence of

any other legal provision or precedent supporting the petitioner's claim/

this Court finds no grounds to intervene in the matter. The sanctity of

contracts and the terms of settlement agreements cannot be undermined

2023 SCC OnLine SC 435

Designation: AR-CUM-SR. SECRETARY

Location: ORISSA HIGH COURT, CUTTACK Date: 19-Nov-2024 17:30:14

by entertaining requests for unilateral modifications or extensions

contrary to the agreed terms.

12. Moreover, courts should support the process of loan recovery by

avoiding unwarranted interference in matters where the lender has

acted within the bounds of law. Delays and disruptions in the recovery

of dues not only undermine the financial stability of lending institutions

but also adversely affect the overall credit ecosystem, ultimately

deterring the availability of credit to genuine borrowers. In the present

case, where the petitioner has failed to honor the terms of the OTS

Scheme, this Court is of the view that judicial intervention would set an

undesirable precedent, discourage fiscal discipline, and hinder effective

debt recovery mechanisms. Consequently, no interference is warranted

in this matter.

V. CONCLUSION:

13. In light of the facts and circumstances of the present case, this Court

finds no merit in the current Writ Petition. The petitioner has not

succeeded in establishing grounds for interference against the

impugned letter.

14. In light of the foregoing, the Writ Petition is dismissed and disposed of

in terms of the aforesaid observations.

15. Interim order, if any, passed earlier stands vacated.

(Dr.S.K. Panigrahi) Judge

Orissa High Court, Cuttack, Dated the 19th Nov., 2024/