Md. Afroz Baig vs State Bank Of India
2022 Latest Caselaw 4724 Tel

 IN THE HIGH COURT FOR THE STATE OF TELANGANA
                 AT: HYDERABAD
                     CORAM:
      * THE HON'BLE SRI JUSTICE K.LAKSHMAN

               +WRIT PETITION No. 18997 OF 2021


% Delivered on:19-09-2022

Between:

# Md. Afroz Baig                                           ..Petitioner
                                 Vs.
$ State Bank of India, Mumbai,
  and another                                          .. Respondents

! For Petitioner                 : Sri E.Madan Mohan Rao,
                                   Lr.Sr.Counsel, representing
                                   Sri M.Srinivas, Lr.Counsel.

^ For Respondent Nos.1&2         : Sri Mettu Srinivas Reddy,
                                   Lr.Standing Counsel.

< Gist                                 :

> Head Note                            :

? Cases Referred                       :

   1. CWP-5518-2020, dt.22.09.2020(DB)
   2. MANU/PH/0719/2022
   3. Order dated 15.03.2022 in CWP.No.15579 of 2021
   4. (2009) 8 SCC 257
   5. (2002) 1 SCC 367
   6. AIR 1981 P H 213
   7. Man/DE/1668/2022
                                    2


      THE HONOURABLE SRI JUSTICE K.LAKSHMAN

               WRIT PETITION No.18997 OF 2021

ORDER:

This Writ Petition is filed to declare the letter No. SARB: HYD:

PMR:MAB 21-22-335, dated 31.07.2021 and letter No. SARB: HYD:

PMR:MAB: 21-22:350, dated 06.08.2021, issued by 2nd respondent as

illegal and contrary to the SBI OTS 2020 Circular dated 12.10.2020

and OTS sanction letter Ref.No.1149, dated 27.11.2020 and

consequently set aside the said letters and direct 2nd respondent to

receive the cheque bearing No.141267, dated 27.07.2021 drawn on

Axis Bank Limited, Masab Tank, Hyderabad for Rs.37,87,567/-

submitted by the petitioner to 2nd respondent bank on 28.07.2021 as

compliance of the final installment pursuant to above said OTS

sanction letter dated 27.11.2020, and close the loan Account vide

A/c.No.35424522518.

2. Heard Sri E.Madan Mohan Rao, learned Senior Counsel

representing Sri M.Srinivas, learned counsel for the petitioner and Sri

Mettu Srinivas Reddy, learned standing counsel for the respondent -

Bank. Perused the record.

3. The petitioner herein is in real estate business. He constructs

flats and sell the same to the prospective purchasers. During the

course of business, he had obtained loan facility of Rs.1.55 Crores

from 2nd respondent - Bank vide A/c.No.35424522518. He could not

repay the said loan amount and therefore, 2nd respondent Bank had

declared the account of the petitioner as Non Performing Asset (NPA)

on 30.10.2020. Despite several and specific requests, the petitioner did

not repay the said loan amount and therefore, 2nd respondent Bank

had filed OA No.596 of 2012 before the Debt Recovery Tribunal,

Hyderabad (DRT), and the same was decreed on 17.08.2015 directing

the petitioner to pay an amount of Rs.1,63,89,562.15ps.

4. In the meanwhile, respondent Bank had issued special

circular dated 12.10.2020 offering SBI OTS 2020 scheme, applicable

to all the NPAs as on 31.03.2020 with outstanding dues of above

Rs.20 lakhs and upto Rs.50 Crores. The said OTS scheme is made by

the operators of the respondent Bank throughout the country. The said

scheme is a special and unique one and is non-discretionary and non-

discriminatory. Pursuant to the said scheme, the petitioner herein had

submitted an application on 27.11.2020 and the bank has accepted the

same on the following terms and conditions:-

i)      The       OTS   amount   payable   by   the   petitioner   is
        Rs.76,14,995-38ps.
ii)     Application money of Rs.3,81,000/- paid by the petitioner
        will be appropriated towards the OTS Amount.
iii)    Another 10% of the OTS amount will have to be deposited

by the petitioner as first installment within thirty days from the date of sanction of OTS failing which the OTS sanction will be rendered infructuous and OTS treated as failed.

iv) Another 10% of the OTS amount will have to be deposited by the petitioner as 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.

v) The balance amount can be paid within 8 months from the date of the sanction letter i.e. on or before 27.07.2021 together with interest @ 6 months MCLR on reducing balance basis effective from the date of the letter dated 27.11.2020 i.e. to be paid on or before 27.07.2021, failing which the OTS Sanction will be rendered infructuous.

vi) No interest will be charged if the entire OTS amount is paid within six months from the date of the offer letter dated 27.11.2020.

vii) The petitioner is eligible for additional incentive of 15% on the OTS amount, on making payment of the entire OTS amount.

viii) The petitioner is eligible for additional incentive of 10% on the OTS amount, if the petitioner pays the entire OTS

amount within two months from the date of sanction and 5% if the petitioner pays the OTS amount by 31.03.2021.

ix) The petitioner is eligible for incentive of 7.5% on the OTS amount, if the petitioner pays 50% of the OTS amount within one month from the date of sanction and 5% if the petitioner pays the50% of the OTS amount within two months from the date of sanction.

The payments made by the petitioner are as follows:-

Rs.3,81,000/- paid on 27.11.2020.

Rs.7,62,000/- paid on 24.12.2020 Rs.7,62,000/- paid on 27.01.2021 Rs.22,00,000/- paid on 17.07.2021 Thus, in all, the petitioner had paid an amount of Rs.41,05,000/- to the

respondent bank and did not pay the loan installments i.e. balance

amount by 27.07.2021 which is the due date for payment as per the

terms of OTS accepted by the respondent bank.

5. The petitioner herein had submitted letter dated 28.07.2021

duly enclosing a cheque bearing No.141267, dated 27.06.2021 drawn

on Axis bank Limited, Masab Tank branch for Rs.37,87,567/-

(Rs.35,09,995-38ps + interest of Rs.2,77,571-62ps). But the same was

not accepted by the respondent - Bank on the ground that the

petitioner herein has not paid the aforesaid amount by 27.07.2021 as

per the terms and conditions of the OTS Scheme. Therefore, the bank

vide letter dated 31.07.2021, cancelled the OTS scheme and requested

the petitioner to repay the entire outstanding amount together with

interest. Challenging the same, the petitioner herein has filed the

present writ petition.

6. Sri E.Madan Mohan Rao, learned Senior Counsel would

submit that the petitioner herein is in the real estate business, He

sustained huge loss due to the COVID-19 pandemic situation.

However, to pay the said amount in terms of OTS, the petitioner

herein had sold his agricultural land situated at Cheemaldari Village,

Momipet Mandal, Vikarabad District, by way of executing agreement

of sale dated 27.07.2021, mobilized funds and paid the said amount of

Rs.37,87,567/- by way of above said cheque on 28.07.2021 along with

a letter dated 28.07.2021. Thus, there is delay of only one day as on

28.07.2021. The available balance with the petitioner account was

Rs.37,90,000/-. In proof of the same, he had filed bank statement for

a period from 01.08.2020 to 31.07.2021. Thus, according to him, there

is only one day delay. Even then, the respondent bank, instead of

accepting the said amount, cancelled OTS and returned the said

cheque along with the letter dated 31.07.2021. The bank failed to

consider the request made by the petitioner that due to the present

COVID-19 pandemic situation, the petitioner is unable to pay the loan

amount within the stipulated time i.e. 27.07.2021. He has also placed

reliance on the order dated 02.07.2020 in W.P.No.9408 of 2020 and

order dated 15.09.2021 in W.P.No.13092 of 2021 passed by Division

Bench of this Court wherein it was considered the present COVID-19

pandemic situation and extended the time for payment of the amount

agreed under OTS and directed the bank to receive the same.

7. Learned counsel appearing for the 2nd respondent would

submit that the petitioner herein failed to pay the balance amount by

the stipulated time i.e. dated 27.07.2021, the 2nd respondent has

cancelled acceptance of OTS and requested the petitioner to pay the

entire amount. Having agreed for the said amount, it is the duty of the

petitioner to clear the entire amount as per the agreed terms. In the

OTS acceptance letter dated 27.07.2020, there is a default clause

stating that if the petitioner fails to pay the amount, the OTS shall be

cancelled. Therefore, according to him, the petitioner has to pay the

entire amount. With the said submissions, he sought to dismiss the

present writ petition.

8. It is relevant to note that the respondent bank has admitted

that the petitioner herein had paid an amount of Rs.41,05,000/- within

the time i.e. on or before 17.07.2021 and failed to repay the remaining

amount by 27.07.2021. 2nd respondent in paragraphs No.3(g) of the

counter affidavit categorically admitted that the petitioner herein had

submitted letter dated 28.07.2021 duly enclosing the aforesaid cheque

for Rs.37,87,567/- (Rs.35,09,995.38ps + interest of Rs.2,77,571.62

paise). Since the petitioner has not paid the said amount by

27.07.2021, 2nd respondent has treated the OTS cancelled and

requested the petitioner to pay the entire outstanding amount vide its

letter dated 31.07.2021.

9. In proof of the sale of the property, the petitioner herein had

filed agreement of sale, dated 27.07.2021. In proof of the availability

of funds by 28.07.2021, he had filed the aforesaid statement of

account for a period from 01.08.2020 to 28.07.2021. Perusal of the

said statement would show that there was balance of Rs.37,80,000/- in

the account of the petitioner by 28.07.2021. Thus, there is delay of

only one day.

10. 2nd respondent vide letter dated 31.07.2021 returned the

aforesaid cheque to the petitioner herein on the ground that the

petitioner herein has not paid the said amount within the stipulated

time i.e. by 27.07.2021. Moreover, vide letter dated 06.08.2021, 2nd

respondent has informed the petitioner that it had appropriated the said

amount of Rs.41,05,000/- paid by the petitioner to his loan account.

11. It is relevant to note that in Anu Bhalla Vs. District

Magistrate, Pathankot1, the Division Bench of Punjab and Haryana

High Court held that High Court in exercise of its jurisdiction under

Article 226 of the Constitution of India is having power to extend the

period of settlement as of originally provided for in the OTS Letter. In

the said case, the Division Bench has laid down certain illustrative

guidelines to be considered cumulatively or individually on facts on

case to case basis whether an applicant would be entitled for extension

of OTS or not and the same are mentioned below:-

i. The Original Time provided in the Settlement-in our considered opinion the first and foremost aspect to be noticed would be the time period originally granted by the bank to pay off the settlement amount. If the time period originally stipulated in the settlement letter to pay off the settlement amount is short or not excessive, the case for extension then could be considered. It is to be noticed that the borrower is to arrange funds to complete the OTS. If reasonable time period is not given, the very purpose of settlement would be defeated. In that eventuality application for extension can be considered so that the borrower gets a reasonable time to clear off the settlement and the deposit of substantial amount and the ultimate purpose of settlement is achieved.

ii. Extent of payments already deposited under the settlement or before filing the petition- while considering an application for extension of time under OTS, the prime objective to be noticed is the intention of the borrower to culminate the settlement. If the borrower has already paid substantial amounts,

CWP-5518-2020, dt.22.09.2020(DB)

to the creditor under the OTS, and for some remaining amounts is seeking a reasonable extension, such requests can be considered favorably. This shows, that the applicant had an intention to clear the settlement and the deposit of substantial amounts, is an indication in this regard.

iii. Reasons which led to delay in the payment- it is important to notice, the reasons, which led to delay on the part of the borrower. If the borrower was prevented by certain reasons or circumstances beyond his control, it could be a reason to consider an application for extension favorably. It would be imperative for the borrower to show, that he made his best efforts to ensure that the requisite amounts, are arranged within the specified time, but in spite of all his best efforts, he could not arrange the same.

iv. Payments having been accepted by the bank/Financial institutions, after the stipulated date - if the bank or the financial institution has been accepting the payments from the borrower towards the settlement even after the stipulated period of time, it shows that the time was not the essence of contract. It would be apparent from such conduct of the parties, that certain amount of relaxation or flexibility in making the payment of OTS amount is reserved between the parties.

v. Bona fide Intent of the borrower to pay the remaining amounts under the settlement- In order to test the bona fide intention of such an applicant, it could be reasonably be tested while asking such an applicant to deposit some further amount, towards the balance amount before calling upon the bank to consider the issue of the extension. If such amounts are deposited under the orders of the court and the bona fides are established, such an applicant would be entitled for a favorable consideration of an application for extension. We would like to add a caveat that if for any reason, the effort doesn't lead to extension of time, as prayed for by the petitioner, then the amount deposited by the borrowers/depositors under the interim orders of the court, would have to be returned by the creditor to the petitioner. We draw strength from the recent judgment of the Hon'ble supreme court in Kut energy Pvt. Ltd .v, Authorized officer, Punjab National Bank bearing Civil Appeal No.6016- 6017/2019 decided on 20.08.2019. In the said case, the petitioner therein deposited upfront amount in the registry of the court to show its bona fide in support to its OTS proposal which was offered for consideration of the bank. The bank while rejecting the proposal sought to adjust the upfront amount

against the contractual dues. The plea of refund raised by the petitioner was rejected by the high court which led to filing of an appeal before Hon'ble Supreme court. While allowing the appeal, it was held the deposit of the amounts in terms of interim order of high court was only to show the bona fides of the appellants when the revised order was made by them. The deposit was not towards the satisfaction of the debt in question. Hence, the bank was not justified in retaining the said upfront amount, while rejecting the OTS offer of the appellant therein and hence the bank ought to have refunded the upfront amount, if the OTS offer of the borrower was found to be unacceptable.

vi. Time period being demanded by the applicant to clear the remaining/balance settlement amount.- An applicant whose intention would be to clear the balance settlement amounts, would not claim for a unreasonable period of an extension, as otherwise, the intention would be to gain more time, without any actual intent to clear the settlement. In the facts and circumstances of each case, the Courts would therefore determine a reasonable period, to enable the borrower to clear the remaining settlement amount, subject of course, to payment of reasonable interest for the delayed period, to balance the equities.

vii. Attending factors and circumstances:- Attending factors and circumstances involved, while making an application for extension play an important role to identify eligible and deserving cases as also to determine the extent of extension to be granted. For example , the current situation where the entire country has been adversely effected on account of COVID-19 pandemic, the difficulties in arranging the amounts could be taken note of while determining the period of extention to be granted to an applicant. Further, accounts which have suffred losses and became NPA on account of having suffered antural calamities, unfortunate accidents, fire incidents, thefts, damage by floods, storm etc., and have come forward for an eventual settlement, can also be considered for extension of time.

viii. Irreparable loss and injury to the applicant:- While examining an application for extension of settlement, it could also be seen to be noticed, the extent of an injury to be suffered by an applicant.

12. In Samarth Woolen Mills Vs. Indian Bank (Erstwhile

Allahabad Bank)2 in CWP No.15895 of 2020 (O&M), decided on

04.06.2022 by the Division Bench of Punjab and Haryana High Court,

relying on the principle laid down by the Division Bench of the same

Court in Anu Bhalla (supra) held that High Court in exercise of its

inherent power under Article 226 of the Constitution of India can

extend period mentioned in the OTS letter under certain

circumstances. In the said case, considering the fact that the Loanee

had paid the entire amount of OTS though with some delay and the

circumstances of the case justified and granted extension of time by

about six months and the said delay, the bank cannot be compensated

by payment of interest.

13. Another Division Bench of P&H High Court in Hindustan

Trading Company Vs. Indian Oversees Bank3, has also reiterated

the said principle and granted extension of time to the petitioner for

making payment as per the sanctioned OTS.

14. In Sardar Associates Vs. Panjab & Sind Bank , the

Apex Court held that the Reserve Bank of India is a statutory

authority. It exercises supervisory power in the matter of

MANU/PH/0719/2022

order dated 15.03.2022 in CWP.No.15579 of 2021

(2009) 8 SCC 257

functionings of the Scheduled Banks. The matter relating to

supervision of Scheduled Banks is also governed by the Reserve

Bank of India Act, 1934. It held that the guidelines were issued by

the Reserve Bank of India by reason of a letter dated 3.09.2005

addressed to the Chairman/ Managing Director of all public sector

banks. It clearly refers to a circular dated 19.08.2005 issued by the

Reserve Bank of India in terms whereof it was directed that one

time settlement scheme for recovery of NPA below Rs. 10 crore

was laid down. The said letter was issued pursuant to the

aforementioned circular in terms whereof one time settlement

scheme was formulated for recovery of NPA below Rs. 10 crores. It

was categorically stated therein that the same was required to be

implemented by all public sector banks. The guidelines issued were

to provide a simplified, non- discretionary and non-discriminatory

mechanism therefor in SME sector.

15. The Apex Court further held that the public sector banks

have to implement the guidelines of RBI relating to OTS as per its

decision in Central Bank of India Vs. in Central Bank of India

v. Ravindra5, that the Board of Directors of Bank in the said case

(2002) 1 SCC 367

could not have deviated from the said guidelines and it's conduct

was violative of the equality clause contained in the RBI guidelines

and also Article 14 of the Constitution of India. The bank itself has

made an offer to accept the proposal of the payment in regard to

enforcement of OTS pursuant to the RBI guidelines and it was

certainly aware of the amount of securities lying with it.

16. In M/s Indo Swiss Time Limited vs Umrao , the Full

Bench of Punjab & Haryana High Court held that if there is direct

conflict between the decisions of the Apex Court rendered by two

equal Benches, the High Court must follow the judgment which

appears to it to lay down the law more elaborately and accurately.

The mere incidence of time whether the judgment earlier or later

could hardly be relevant.

17. In Punjab and Sind Bank Vs. Oberoi Cars Pvt.Ltd.7

Delhi High Court relying on the terms of OTS Policy therein, held that

the High Court can extend timelines of OTS on examination of the

facts therein and also on satisfying the reasons mentioned by the

loanee. The said principle was reiterated by the High Court of Kerala

at Ernakulam in WPC No.19673 of 2021, dated 03.01.2022.

AIR 1981 P H 213

Man/DE/1668/2022

18. The sum and substance of the above stated judgments is that

this court by invoking its inherent powers under Article 226 of the

Constitution of India can extend the time to the loanee to pay the

amount agreed under OTS on satisfying the reasons mentioned therein

on examination of the facts. In the similar circumstances, the Division

Bench of this Court has already extended the time.

19. In the present case, it is specifically contended by the

petitioner that he is doing real estate business, due to the present

COVID-19 pandemic situation, he sustained loss. However, to clear

the loan, he sold the property and received money from the purchaser

and deposited the same in the account and paid the entire loan amount

including the interest vide his letter dated 28.07.2021. There is only

one day delay. Therefore, according to this Court, it is a fit case to

extend the time to the petitioner to repay the loan amount.

20. In view of the same, this writ petition is allowed. The

letters, dated 31-07.2021 and 06.08.2021 issued by 2nd respondent

bank are set aside. 2nd respondent bank is directed to receive the said

amount of Rs.37,87,567/- (Rs.35,09,995.38ps + interest of

Rs.2,77,571.62ps) from the petitioner and close the loan account

bearing No.A/c.No.35424522518 of the petitioner. Ten days time

from today is granted to the petitioner to clear the said amount along

with interest, at the agreed rate between the petitioner and 2nd

respondent Bank, failing which, 2nd respondent bank is at liberty to

proceed with the matter in accordance with law.

Miscellaneous Petitions, if any, pending, shall also stand closed.

_________________ K. LAKSHMAN, J Date:19.09.2022 vvr