Rishika Cottons Private Limited vs Union Of India And 2 Others
2021 Latest Caselaw 1327 Tel

                   THE HON'BLE JUSTICE A.RAJASHEKER REDDY
                                     AND
                   THE HON'BLE DR. JUSTICE SHAMEEM AKTHER

                                W.P.NO.21893 OF 2020

                  O R D E R (Per the Hon'ble Sri Justice A.Rajasheker Reddy)

The writ petitioner - Company is the borrower. 2nd respondent -

Bank vide letter in SAMB-II/HYD/ESN/815-B dated 19.10.2020 extended the

One Time Settlement scheme to the account No./CIF No.72185231022 of

the petitioner. As per the case of the 2nd respondent - Bank, as the

petitioner failed to pay the upfront amount within time, the OTS scheme

stood closed, and the benefit under the scheme, cannot be extended to

the petitioner. The petitioner disputes the same, and seeks for a direction

in this writ petition to implement the OTS scheme.

2. The material on record would disclose that the

petitioner/borrower, which is a company, represented by its Managing

Director, availed credit facility from the 2nd respondent - Bank, after

executing necessary security documents, and the guarantors secured the

loan by creating equitable mortgage of their properties. As the petitioner

failed in making repayment of the loan amount, its account was declared

as NPA on 27.02.2017, and the Bank initiated proceedings under the

provisions of Securitisation and Reconstruction of Financial Assets and

Enforcement of Security Interest Act, 2002 (for short 'the SARFAESI Act') for

recovery of the loan amount, and eventually the property was auctioned

on 23.12.2019, and the 3rd respondent herein was the highest bidder. The

said auction purchaser paid 25% of the sale consideration, and in respect

of balance amount of 75%, he filed W.P.No.6400/2020, and this court vide

order dated 8.10.2020 disposed of the said writ petition granting eight

weeks time for payment of the balance amount, but however, the 3rd

respondent/auction purchaser, failed to pay the amount within the time

allowed by this court.

3. Though the petitioner in this writ petition is aggrieved by the

action of the 2nd respondent - Bank in not implementing OTS scheme,

inter alia, sought to dispute the procedure adopted by the Bank in

auctioning the properties. It is also sought to be contended that in

W.P.No.6400/2020, it was not made a party, and by playing fraud, and

contrary to Rule 9 (4) and (5) of Security Interest (Enforcement) Rules, 2002,

the auction purchaser could gain time for payment of the balance

amount, and the same is not sustainable.

4. It is to be seen that as per the averments made in the counter

affidavit, which are not denied by the petitioner by filing any reply, the

subject properties involved in W.P.No.6400/2020 are in the name of the

guarantors and not that of the petitioner - Company. Therefore, the

petitioner has no locus standi to question the said proceedings. A Division

Bench of this court in the decision reported in M/S PRINCE CORRUGATED

PACKING vs. ANDHRA BANK1, held that "When the actual owner of the

property brought to sale is not aggrieved and does not come forward, it is

2019 SCC Online TS 1657

not open to a third party, even if he be the principal borrower at whose

behest the owner of such property offered a guarantee, to maintain a

challenge under Section 17 of the SARFAESI Act." Therefore, the petitioner

is not justified in making any references of the said writ petition, and the

averments made in this regard with much verbosity, requires no reference

at all, and moreover, the learned Standing Counsel for the 2nd respondent

submitted that though the 3rd respondent has filed W.P.No.6400 of 2020,

and time was granted for payment, as payment was not made within the

stipulated time, the amount deposited by the 3rd respondent was

forfeited, and that the present writ petition has been filed to extend the

OTS for depositing the amount, as such, the 3rd respondent has no say in

the matter.

5. As noted above, the grievance of the petitioner in this writ

petition ultimately boils down to implementation of OTS scheme.

6. The 2nd respondent - Bank vide letter in SAMB-II/HYD/ESN/815-B

dated 19.10.2020 extended the One Time Settlement scheme to the

account No./CIF No.72185231022 to the petitioner. As per the said

communication, for processing the application for OTS, the wilful defaulter

is required to pay 5% of upfront amount by 23.11.2020.

7. In the affidavit filed in support of the writ petition it is stated that

though the OTS letter is dated 19.10.2020, it was despatched on 06.11.2020

and that after receipt of the said letter, petitioner addressed letters both

through email and by post on 21.11.2020 to the 2nd respondent - Bank

conveying its willingness to settle the dues and seeking for extension of

time for payment of the upfront amount till 15.12.2020, and balance by

15.01.2021, i.e., within one month from the date of approval of OTS, citing

Covid-19 pandemic, slump in business activity and ailments of the

director of the company and its promoters. Its further case is that on

23.11.2020, the Director of the company visited the 2nd respondent, and

the 2nd respondent - Bank handed over letter vide ref

No.SAMB/HYD/ESN/1050 dated 23.11.2020, indicating that OTS scheme

itself is non-discretionary and non-discriminatory, and hence it is not

possible to extend the time for payment of upfront amount beyond

23.11.2020.

8. That on the very same day, the petitioner could mobilize the

cash to a tune of Rs.46,40,000/- and requested the officials to accept the

cash, but the officials of the 2nd respondent - Bank rejected to accept on

the ground that cash hours were closed, then the petitioner, requested to

accept the cheques of Bank of Baroda and HDFC Bank for Rs.23,20,000/-

each, but the request was also rejected citing that only cheques of SBI

would be accepted, and that based on the telecommunication, the

Managing Director of the company again visited on 24.11.2020 with the

above stated two cheques, but the same were not accepted. In those

circumstances, petitioner sent a letter dated 26.11.2020 enclosing two

original cheques bearing No.000052 dated 23.11.2020, drawn on Bank of

Baroda, Punjagutta Hyderabad for Rs.23,20,000/- dated 23.11.2020, and

another cheque bearing No.000206 dated 23.11.2020, drawn on HDFC

Bank Limited, Hyderabad for Rs.23,20,000/-, totalling to Rs.46,40,000/-, to

the 2nd respondent - Bank, by way of speed post, and that the said letter

was received by the Bank.

9. The case of the petitioner is that with the letter dated 26.11.2020,

it sent two cheques dated 23.11.2020, it has to be taken that it paid the

upfront amount within time i.e., 23.11.2020, which is the last date for

payment of upfront amount under the OTS scheme. In support of this

version, petitioner, in the writ affidavit, sought to rely on the judgment of

the Supreme Court reported in K.SARASWATHY v. SOMASUNDARAM

CHETTIAR2, wherein it was held that payment by cheque realised

subsequently on the cheque being honoured and enchased relates back

to the date of the receipt of the cheque, and in law the date of payment

is the date of delivery of the cheques.

10. In the writ affidavit, petitioner also contended that the

2nd respondent - Bank contravened the guidelines of the Reserve Bank of

India, and relying on the decision of the Apex Court in SARDAR

ASSOCIATES v. PUNJAB & SIND BANK3 it sought to contend that if as per

the guidelines issued by the Reserve Bank of India, a right is created in a

borrower, writ of mandamus can be issued for its enforcement.

(1989) 4 SCC 527

(2009) 8 SCC 257

11. With these averments, the petitioners seeks for a direction to the

2nd respondent - Bank to receive the upfront amount and to implement

the OTS scheme extended to it vide letter of the Bank dated 19.10.2020.

Petitioner also filed an affidavit stating that it is ready and willing to settle

the dues under the OTS scheme.

12. Assistant General Manager/Authorised Officer, State Bank of

India, Stressed Assets Management Branch, Kachiguda, Hyerabad, filed

counter affidavit on behalf of the 2nd respondent.

13. In the counter affidavit, while stating facts relating to availing of

loan by the petitioner, committing default, declaration of its loan account

as NPA and initiation of proceedings under the SRFAESI Act, and bringing

the properties standing in the name of the guarantor for sale, the

3rd respondent emerging as highest bidder, and filing of W.P.No.9408 of

2020 by him, order passed by this court dated 08.10.2020; it is further

stated inter alia that one time settlement offer dated 19.10.2020 was

intimated to the petitioner and it was delivered to the petitioner on

07.11.2020, wherein it was clearly mentioned that offer letter of OTS will be

processed only on deposit of 5% of the OTS amount i.e., Rs.9,27,97,005.60/-

by 23.11.2020, but the petitioner failed to pay the amount on before the

stipulated date.

14. The allegations of the petitioner that on 23.11.2020 the

petitioner was willing to deposit/deliver the cash/cheque with the

2nd respondent- Bank, but the officials of the Bank refused to accept 5%

upfront amount relating to OTS on 23.11.2020, and that, though the

petitioner was willing to deliver the cheques to the Bank on 24.11.2020, the

same were not received by the Bank, are denied.

15. It is stated that the petitioner sent the cheques dated

23.11.2020 along with the letter dated 26.11.2020 to the 2nd respondent -

Bank, and the same was received on 02.12.2020 i.e., beyond the

stipulated time, and hence the said cheques were returned to the

petitioner vide letter dated 02.12.2020, as the OTS scheme is non-

discretionary and non-discriminatory.

16. That the petitioner earlier addressed letter dated 21.11.2020 to

the 2nd respondent - Bank requesting to extend the time for payment of

5% upfront amount till 15.12.2020, and the balance till 31.01.2020, and in

response to the said letter, 2nd respondent vide letter dated 23.11.2020

denied the said request, informing the petitioner that the OTS scheme

itself is non-discretionary and non-discriminatory. That no cheques/cash

were made available to the 2nd respondent - Bank, either on 21.11.2020,

23.11.2020 and 24.11.2020 by the petitioner.

17. The allegation that the Bank denied the request of the

petitioner stating that cash hours were closed and only SBI cheques could

be considered, is also denied.

18. With these averments, and stating that the amount cannot be

received after the stipulated date under OTS letter, the writ petition is

sought to be dismissed.

19. No reply affidavit is field by the petitioner.

20. From the above, the undisputed facts are that the

2nd respondent - Bank offered OTS scheme to the petitioner vide letter

dated 19.10.2020, where under the petitioner is required to pay 5% upfront

amount of Rs.9,27,97,005.60 ps. on or before 23.11.2020, for processing the

OTS proposal of the petitioner.

21. In the writ affidavit, the petitioner has not stated when the said

OTS letter dated 19.10.2020 was received by him, and it only stated that

the said letter was despatched on 06.11.2020. In the counter affidavit

filed by the 2nd respondent - Bank, it is categorically stated that the said

letter was received by the petitioner on 07.11.2020. This shows that the

petitioner had time till 23.11.2020. Further there cannot be any dispute

that the OTS scheme is non-discretionary and non-discriminatory.

22. It is also not in dispute that petitioner addressed letter dated

21.11.2020, requesting the Bank to extend the time for payment of 5% of

upfront amount till 15.12.2020 and the balance till 31.01.2021, and the said

request was rejected by the Bank vide letter dated 23.11.2020.

23. In the writ affidavit, it is stated that on 23.11.2020 immediately

after receipt of letter dated 23.11.2020 from the Bank, on the very same

day, petitioner mobilized cash to a tune of Rs.46,40,000/-, but the Bank

refused to receive the same on the ground that cash hours were closed,

then the petitioner requested the Bank to accept the cheques drawn on

Bank of Baroda and HDFC Bank for Rs.23,20,000/- each, but the Bank

refused to receive, on the ground that only SBI cheques would be

considered. These averments have been specifically denied by the

2nd respondent - Bank in the counter affidavit. Assuming for a moment,

that Bank has not received cheques on 23.11.2020, to show its bona fides,

petitioner ought to have sent the same immediately on the very same

day by way of registered post with acknowledgement due. It did not do

so. However, these being disputed questions of facts, cannot be gone

into under the writ jurisdiction.

24. The admitted fact which remains on record is that vide letter

dated 26.11.2020, petitioner sent two cheques dated 23.11.2020 to the

2nd respondent, and the said letter is stated to have been received by the

Bank on 02.12.2020, and that on the very same day, Bank addressed letter

SAMB/HYD/ESN/2020-21/1105 dated 02.12.2020, returning the cheques

sent by the petitioner and informing the petitioner that the scheme is non-

discretionary and non-discriminatory and that the time for OTS scheme is

closed. These circumstances show that the petitioner sent cheques

beyond the time stipulated in the OTS letter dated 19.10.2020.

25. In the present case, though the petitioner, contended that Bank

has violated the guidelines issued by RBI, no such guideline has been

brought to the notice of this court. Therefore, the only question that arises

for our consideration in this writ petition is, whether the petitioner, who

failed to comply with the stipulation of time, is entitled to seek for

implementation of OTS scheme?.

26. The above issue is no longer res integra. A Division Bench of this

court in the decision reported in M.APPA RAO vs. DY. GENERAL MANAGER

- CUM -AUTHORIZED OFFICER4 held that if the borrower fails to comply with

time stipulation, he would no longer be entitled to the benefit of reduction

in his dues as per such OTS scheme. The relevant portion of the judgment

is as under:

18. . . .To begin with, the bank deals with public monies deposited by its customers and having extended loan facilities on the strength thereof to borrowers, such as the petitioner, the very fact that it is settling for a far lesser amount than is actually due from such borrower, in terms of repayment of the principal loan amount along with accrued interest thereon, is itself against commercial and public interest. However, as banks do resort to such settlements so as to cut their losses by at least making part-recovery of their lawful dues, such options exercised by banks cannot be held to be unlawful. However, when banks approve such reduced One Time Settlement offers to defaulting borrowers, it cannot be doubted that an indulgence is being shown to such borrowers and they cannot, as a matter of right, demand that they should be given sufficient time, as per their own convenience, to pay even such reduced dues. The very scheme and thrust of a One time Settlement is aimed at enabling the bank to make recovery of the reduced dues, at least, within the stipulated time. If the borrower fails to comply with this time stipulation, he would no longer be entitled to the benefit of reduction in his dues as per such One Time settlement."

27. In an other judgment, a Division Bench of this court in SWETHA

EXPORTS, KAKINADA v. BANK OF INDIA5, considering the facts and

circumstances held that the petitioner therein was not able to show any

2018(3) ALD 206 (DB)

2017(6) ALD 465 (DB)

transgression of RBI guidelines relating to OTS scheme by respondents,

and, therefore, not entitled to seek Mandamus from High Court directing

respondent bank to extend to petitioners therein OTS benefit offered to

them earlier, despite their having failed to adhere to conditions stipulated

therein, and that the manner in which OTS should be formulated is a

matter for RBI and concerned banks to decide and that the court would

not interfere therewith, as it lacks expertise.

28. In view of the above facts and circumstances of the case, as

the petitioner failed to adhere to the stipulation of time under the OTS

offer letter dated 19.10.2020, it is not entitled to seek for implementation of

the said scheme, and the writ petition is devoid of any merits and liable to

be dismissed.

29. The decision of the Apex Court in SARASWATHY v.

SOMASUNDARAM CHETTIAR (2 supra) relied on by the petitioner, to

contend that the payment by cheque realised subsequently on the

cheque being honoured and en-cashed, relates bank to the receipt of

the cheque and that in law the date of payment is the date of delivery of

the cheque; is concerned, is unexceptionable, but cannot be made

applicable to the facts of the present case, for the reason that Bank has

not realised the cheques sent by the petitioner, as they were sent beyond

the time stipulated in OTS letter dated 19.10.2020 and, as noted above,

the OTS scheme is non-discretionary and non-discriminatory and once the

petitioner failed to adhere to the time stipulated, as held by this court in

the above cited decisions (4 and 5), it is not entitled to the benefit under

the scheme.

30. Similarly the other judgment reported in Sardar Associates v.

Punjab and Sind Bank (3 supra), is also not applicable, since the petitioner

in the present case, has not pointed out any breach of RBI guideline by

the 2nd respondent - Bank.

31. The petitioner also relied on the judgment of a Division Bench of

this court in W.P.No.9408 of 2020 dated 02.07.2020, wherein this court

extended time for an additional period of 90 days for payment of OTS

amount. The facts of the said case disclose that petitioner therein initially

paid 20% of the OTS amount, and to pay the balance 80% he sought time,

and considering the facts and circumstances, this court extended the

time for payment of balance amount by the end of August, 2020.

32. In the present case, the petitioner has not even paid the 5%

upfront amount within the time stipulated, which is post Covind - 19

pandemic, and as the facts and circumstances in the present case are

different, the judgment of this court in W.P.No.9408 of 2020 dated

02.07.2020, cannot be made applicable in all fours.

33. For the foregoing reasons, the writ petition is dismissed.

34. Interlocutory applications pending, if any, shall stand closed.

No order as to costs.

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A.RAJASHEKER REDDY,J

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DR.SHAMEEM AKTHER,J DATE:23 --04--2021 avs