M/S. Anil Constructions, vs The Union Of India
2022 Latest Caselaw 3554 Tel

           THE HON'BLE Dr. JUSTICE G. RADHA RANI

                   WRIT PETITION No.6244 OF 2021

ORDER:

This writ petition was filed by the petitioner to issue Writ of

Mandamus, declaring the action of the respondent Bank vide letter dated

06.10.2020 in declaring that under the RINN SAMADHAN SCHEME

2017-18 the petitioner was not eligible for any refund of the amount which

were recovered and credited to the loan account prior to 31.05.2017, as

arbitrary, illegal, violative of principles of natural justice and to set aside

the same and to refund the excess amount received from the petitioner

towards the principal, interest and legal expenses.

2. Heard the learned counsel for the petitioner and the learned panel

counsel for the respondent Bank.

3. The learned counsel for the petitioner submitted that the

petitioner was a proprietary concern engaged in the activities of

construction and selling of residential apartments. In order to complete his

residential project, he availed overdraft facility of Rs.6.35 crores from

State Bank of Hyderabad (presently State Bank of India), Disukhnagar

Branch, Hyderabad, vide Loan Account No.62460716347 and the first

disbursement of loan was on 10.03.2010 and the same had to be repaid Dr.GRR,J

within 36 months with a stipulation to pay Rs.13.00 lakhs on sale of each

flat. By September 2011, the petitioner completed 70% of construction

work. However, due to agitation for separate State of Telangana, the

housing market was in slump and the petitioner could not receive any

advances from the prospective buyers as anticipated. Under those

circumstances, the repayment of loan amount was irregular and due to the

irregular repayment, the petitioner's loan account had been declared as Non

Performing Asset (NPA) w.e.f. 28.08.2011. Subsequent to declaring the

loan account of the petitioner as NPA, the petitioner paid an amount of

Rs.2.80 crores. Thus the petitioner actually utilized only an amount of

Rs.3.55 crores. For recovery of the balance amount of Rs 3.55 crores, the

respondent Bank put the securities for auction of 21 flats of various sizes

totalling to about 60,500 sft., at lowest rate of Rs.1250/- sft., (i.e., less than

50% of rate as fixed by the respondent Bank itself), causing huge loss to

the petitioner and the Bank recovered huge amount of more than Rs.7.50

crores exceeding the loan amount of Rs.3.55 crores. The respondent Bank

itself fixed the rate of the flats while granting loan @ Rs.2500/- per sft,

thus total would come to Rs.15.12 crores for 60,500 sft., but market price

was more than Rs.3000/- per sft. Due to the arbitrary action of the Dr.GRR,J

respondent Bank in fixing the upset price or reserve price at half of the

rate, the petitioner was put to a minimum loss of Rs.7.50 crores.

4. The learned counsel for the petitioner further submitted that

during the pendency of recovery through auction proceeds, the respondent

Bank introduced One Time Settlement Scheme (OTS) of 2017-18 (RINN

SAMADHAN). In terms of the said RINN SAMADHAN Scheme, the

petitioner was entitled for a total waiver of the interest from the date of

declaring its loan account as NPA i.e., from 28.08.2011 to the date of OTS

i.e, 24.10.2017 and further entitled for concession of 30% on the secured

portion of the assets. The respondent bank was not entitled to recover any

amount towards interest from the date of declaring the loan account as

NPA i.e., from 28-8-2011 to 24-10-2017 and also not entitled to recover

legal expenses. However huge amount received from the auction of

securities was credited to the loan account of the Bank towards the

principal outstanding amount and towards the outstanding interest and

Rs.7,61,454/- towards legal expenses, contrary to the scheme to waive the

interest from the date of NPA to the date of OTS settlement and concession

of 30% on securities portion of assets causing prejudice and huge financial

loss to the petitioner.

Dr.GRR,J

5. The learned counsel for the petitioner further submitted that

pursuant to introduction of RINN SAMADHAN Scheme 2017-18, the

respondent Bank issued a letter dated 01.09.2017 intimating that the bank

had announced a scheme for One Time Settlement - RINN SAMADHAN

to settle the dues and the scheme envisaged significant reliefs by way of

"Waiver of Notional Interest" from the date of declaring the loan account

as NPA to the date of introducing the scheme and further relief on the

outstanding ranging from 25% to 50% and early bird incentive of 5% and

further informed that the petitioner was eligible under the scheme and "No

Due Certificate" would be issued after receiving the settled amount.

Subsequently, the respondent Bank issued Checklist cum Settlement

Format dated 24.10.2017, wherein it was stated that the outstanding

amount as on 31.05.2017 was Rs.1.00 only and accrued interest from the

date of NPA i.e. 28.08.2011 to 24.10.2017 was Rs.7,60,73,001/- and legal

charges as Rs.7,61,454. The respondent Bank informed the petitioner that

on payment of Rs.7,23,382/-, the petitioner's loan account would be

considered and No Due Certificate would be issued and there after account

would be closed under the RINN SAMADHAN Scheme. All documents

would be released and balance due amount would be credited to the

petitioner's account. On the assurance given by the respondent Bank, the Dr.GRR,J

petitioner paid the said amount, however so far the respondent Bank had

not settled the account in terms of the RIN SAMADHAN Scheme 2017-18

in its proper perspective. The petitioner made several representations to the

respondent Bank for the settlement of the account. The respondent bank

inspite of giving assurance for settlement, not considered the request of the

petitioner and finally informed vide letter dated 24.09.2018, that the

auction proceeds received on 02.05.2017, beyond 31.03.2017, were

adjusted towards interest and it was further stated that the amount was

settled by waiving off the accrued interest for the period from 28.08.2011

to 24.10.2017 amounting to Rs.7,60,73,001/- which was exclusive of the

amounts received in the auction held on 20.03.2017. From the said

statement, it was clear that, the respondent Bank had adjusted the amounts

received from the auction of the secured properties of the petitioner

towards the interest accrued during the period from 28.08.2011 to

24.10.2017 and the same was contrary to the RINN SAMADHAN 2017-18

Scheme and the petitioner was entitled for the refund of the same to the

credit of his account. The respondent Bank was bound to refund the

amounts received towards the interest from the date of declaring the loan

account as NPA till the date of One Time Settlement i.e., 28-8-2011 to

24-10-2017, refund of 30% of concession amount on secured portion of Dr.GRR,J

assets (i.e., 30% on 6.35 croroes) and also refund of Rs. 7,61,464/-

received for legal expenses in terms of the Scheme to the petitioner with

interest. The petitioner gave a representation on 3-9-2019 and a notice

through advocate on 22-4-2020. Inspite of receipt of the said

representations, the respondent Bank had not finalized the petitioner's loan

account and not refunded the eligible amount to the petitioner and also not

furnished the details of receipts from the auction and all the particulars as

to how the said amount was adjusted towards interest and principal. Under

the said circumstances, the petitioner filed WP No. 15214 of 2020 seeking

a direction to the respondent Bank to dispose of the petitioner's

representation in terms of One Time Settlement Scheme 2017-18 (RINN

SAMADHAN). This Court disposed the WP vide order dated 23.09.2020

giving a direction to the respondent bank to intimate the petitioner whether

he was eligible to be considered under the Scheme, and if so, the terms,

under which, the petitioner's representation would be considered for One

Time Settlement and the said exercise should be completed within a period

of six (6) weeks." Pursuant to the said direction, the respondent bank

issued the letter dated 06.10.2020 stating that, the proceeds of the auction

dt.29.03.2017 were received on 02.05.2017 and were adjusted towards the

principal and part interest. The RINN SAMADHAN 2017-18 scheme was Dr.GRR,J

formulated vide e-circular dt.14.06.2017 and there was no provision in the

circular for the refund of the amounts recovered through auction/amounts

appropriated to the loan account of the borrower prior to the issuance of

the e-circular.

6. The learned counsel for the petitioner further submitted that

respondent Bank had received the auction sale proceeds on 02.05.2017 i.e.,

after 31.03.2017 and the same were adjusted towards principal and interest,

but failed to furnish the details of amounts adjusted towards principal and

interest. In terms of RINN SAMADHAN scheme the petitioner was

entitled for a total waiver of the interest from the date of declaring its loan

account as NPA i.e., from 28.08.2011 to the date of OTS i.e., 24.10.2017

and further entitled for concession of 30% on the secured portion of the

assets. Under the RINN SAMADHAN Scheme 2017-18, the respondent

Bank was not entitled to recover any amount towards interest from the date

of declaring the loan account as NPA i.e., 28.08.2011 to till 24.10.2017

and not entitled for any legal expenses, however, admittedly the huge

amounts were received by the respondent Bank from the auction proceeds

towards the outstanding interest, contrary to the scheme to waive the

interest from the date of NPA to date of OTS settlement and concession of

30% on securities portion of assets and the same was illegal and the said Dr.GRR,J

amount was liable to be refunded to the petitioner. The Scheme 2017-18

did not permit the respondent Bank to recover legal expenses after

introduction of RINN SAMADHAN Scheme, thus the said amount of

Rs.7,61,454/- received towards legal expenses have to be refunded to the

petitioner and prayed to allow the petition.

7. The learned panel counsel for the respondent Bank submitted that

the Petitioner availed the loan facility from State Bank of Hyderabad

(presently State Bank of India), Dilshuknagar Branch Telangana, for

conducting its business. After availing the said loan facility, the petitioner

committed default in repaying the loan amount, as such, loan account was

declared as Non Performing Asset on 28.08.2011. Thereafter, recovery

proceedings were initiated by the Respondent Bank under the provisions of

the SARFAESI, Act 2002 by issuing Demand Notice under Section 13(2),

Possession Notice under 13 (4) of the said Act read with SARFAESI

Rules, 2002. After publication of the said Possession Notice under the

provisions of SARFAESI Rules, 2002, the Respondent Bank in

continuation of the recovery proceedings issued notice prior to sale under

Rule 8(6) of SARFAESI Rules, 2002. Further, the Respondent Bank

conducted auction of the secured assets by publishing the sale notices

under Rule 9(1) of SARFAESI Rules, 2002 in daily newspapers. Last Dr.GRR,J

auction was held on 29.03.2017 by taking valuation of the secured assets

by the Bank's Panel Valuer.

8. The respondent bank addressed letter dated 01.09.2017 to the

petitioner informing about the RINN SAMADHAN scheme 2017-18 (One

Time Settlement). The OTS was subject to withdrawal of all the cases

filed against the respondent bank. The petitioner acknowledged the same.

The respondent bank addressed letter dated 13.09.2017 to the petitioner

informing about receipt of part amount of Rs.2,85,382/- and intimated the

petitioner to pay the remaining OTS amount of Rs.4,38,000/- (total OTS

amount Rs.7,23,382/-) on or before 31.03.2018. The petitioner addressed

letter dated 26.09.2017 about his willingness to pay balance OTS amount

of Rs. 4,38,000/- within a week. After receiving the balance OTS amount

of Rs. 4,38,000/-, the respondent bank addressed letter dated 21.11.2017 to

the Petitioner that the Loan account was settled under RINN SAMADHAN

scheme 2017-18 and the concerned documents would be delivered on

withdrawal of all the cases filed against the respondent bank. The

petitioner had accepted the OTS offer amount of Rs. 7,23,382/- with terms

and conditions stipulated therein, but suppressed the respondent bank's

letter dated 13.09.2017.

Dr.GRR,J

9. The allegation of the petitioner that the respondent Bank

undervalued the secured assets before conducting auction and thereby

causing financial loss to the petitioner was not correct. The allegations of

the petitioner that the respondent Bank informed/assured the petitioner that

the balance due amount would be credited to the Petitioner's account on

payment of OTS amount and failed to furnish details of amounts adjusted

towards principal and interest were not correct.

10. The RINN SAMADHAN scheme 2017-18 was formulated vide

e-circular dated 14.06.2017 for small value NPA accounts and the

eligibility criteria was that the account with a balance outstanding up to 20

lakhs as on 31.05.2017 and categorized as Doubtful or Loss Asset as on

31.03.2017. The Petitioners loan account was made eligible in the said

OTS Scheme as it was meant for the loan accounts having outstanding

below 20 lakhs. After adjusting the auction proceeds for the auction

conducted on 29.03.2017, the book outstanding of the Petitioner's loan

account came down to Rs. 1.40 ps. and interest due (unapplied) was

Rs.7,60,73,001/- as on 31.05.2017. The Respondent Bank settled the

Petitioner's loan account by waiving all the balance amount of

Rs.7,60,73,001/- as on 31.05.2017 and recovered only Rs. 7,23,382/- (i.e.,

equivalent to 95% of legal expenses out of Rs. 7,61,454/- incurred) by Dr.GRR,J

providing additional 5% incentive for paying the total amount within 30

days. The Petitioner herein accepted the OTS Scheme on 01.09.2017 and

paid Rs.2,85,382/-, which was acknowledged by the respondent Bank on

13.09.2017 and further advised Petitioner to pay the remaining balance of

Rs.4,38,000/- on or before 31.03.2018, the same was accepted by the

petitioner and conveyed willingness to pay the balance of Rs.4,38,000/-

vide letters dated 13.09.2017 and 26.09.2017 with terms and conditions

stipulated in the letter dated 13.09.2017. On such payment of balance

amount of Rs. 4,38,000/-, the Respondent Bank addressed letter dated

21.11.2017 to the Petitioner that the Loan account was settled under RINN

SAMADHAN scheme 2017-18 and the concerned documents would be

delivered on withdrawal of all the cases filed against the Respondent Bank.

The petitioner by its letter dated 9-3-2018 acknowledged that the original

deeds documents were delivered by the respondent Bank pursuant to

payment of the OTS amount.

11. The learned counsel for the respondents relied upon the

judgments of the Hon'ble Apex Court in The Bijnor Urban Cooperative

Bank Limited, Bijnor & Ors v. Meenal Agarwal & Ors.1 as well as the

judgment of this Court in M/s. Satva Infra Tech Pvt. Ltd v. State Bank

2021 SCC OnLine SC 1255 Dr.GRR,J

of India2 where in it was held that, OTS was a matter between RBI and

concerned Banks to decide and that the Courts could not interfere

therewith as it lacked expertise. It is a commercial decision taken by the

Banks in view of various circumstances, the same could not be tampered

with judicially.

12. Perused the record. As seen from the record, the petitioner

obtained overdraft facility of Rs. 6.35 crores from the SBH in the year

2010 but failed to repay the loan amount, as such his account was declared

as Non Performing Asset w.e.f. 28-8-2011. Recovery proceedings were

initiated and auction of the secured assets were conducted as on 29-3-2017.

13. As per the counter affidavit filed by the respondents, after

adjusting the auction proceeds for the auction conducted on 29-3-2017, the

book outstanding of the petitioner's loan account came down to Rs. 1.40

ps. and interest due (unapplied) was Rs. 7,60,73,001/- as on 31-5-2017.

14. The One Time Settlement Scheme by name RINN

SAMADHAN was formulated vide e-circular dated 14-6-2017. As per the

learned counsel for the respondents, the scheme was formulated for small

value NPA accounts and the eligibility criteria was that the balance

2018 (3) ALD 2016 Dr.GRR,J

outstanding of the account should be upto Rs. 20,00,000 as on 31-5-2017

and the account should be categorized as doubtful or loss asset as on

31-3-2017.

15. The respondent Bank informed the petitioner about the scheme

vide letter dated 1-9-2017 and the petitioner accepted the same and paid an

amount of Rs. 2,85,382/-. The respondent vide letter dated 13-9-2017

acknowledged the receipt of the said amount and advised the petitioner to

pay the balance amount of Rs. 4,38,000/- on or before 31-3-2018 as per the

Scheme. The petitioner conveyed his willingness to pay the balance

amount within a week as per his letter dated 26-9-2017 and paid the said

amount. The respondent informed the petitioner about the settlement of his

account vide letter dated 21-11-2017 and informed him that the concerned

documents would be delivered on filing of satisfaction memo in DRT,

Hyderabad which would be made on withdrawal of all the cases filed

against the Bank.

16. The contention of the petitioner was that the Bank was not

entitled to recover any amount towards the interest and towards the legal

expenses. The amounts received from the auction of the securities were not

liable to be credited to the loan account of the petitioner by the Bank, as Dr.GRR,J

the Scheme envisaged relief by way of waiver of notional interest.

However, after crediting the amount received from the auction of securities

only, the account of the petitioner became eligible for the Scheme, as the

balance outstanding amount in his account came down to Rs. 1.40 ps. The

respondents have waived the interest for the period from 28-8-2011 to 25-

10-2017 amounting to Rs. 7,60,73,001/- which was exclusive of the

amounts received in the auction held on 20-3-2017. Thus the petitioner

accrued benefit under the Scheme. The contention of the learned counsel

for the petitioner that the respondent Bank was bound to refund the amount

received towards the interest from the date of declaring the loan account as

NPA till the date of One Time Settlement and for refund of legal expenses

is not valid, as the Scheme would envisage waiver of notional interest as

on the date of the eligibility of the account of the petitioner for the Scheme.

The amounts received from the auction proceeds of the secured assets were

appropriated to the loan account of the petitioner prior to the issuance of e-

circular dated 14-6-2017, as per the respondents. As the OTS Scheme

announced by the respondents was for the loan accounts having

outstanding below 20 lakhs as on 31-5-2017, if the auction proceeds were

not appropriated to his loan account, the petitioner would not have been Dr.GRR,J

entitled for the Scheme. Hence, this court does not find any merit in the

contention of the leaned counsel for the petitioner.

17. Hence, the writ petition is dismissed as devoid of any merit. No

order as to costs. Miscellaneous Petitions pending, if any, shall stand

closed.

_____________________ Dr. G. RADHA RANI, J July 08, 2022 KTL