The court ruled that a bank's failure to honor a settlement agreement violated natural justice, preventing it from compelling a pre-deposit for appeal.

JUDGMENT :

(Per M. M. Sathaye J):

1. Rule. Learned counsel for contesting Respondent No.1-Bank waives service. Rule made returnable fortwith. Heard finally by consent.

2. In this order, Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 is referred to as ‘SARFAESI Act’ and Recovery of Debts and Bankruptcy Act, 1993 is referred to a ‘RDB Act’ for convenience.

CASE AND SUBMISSIONS

3. Few facts necessary for passing this order, are as under.

3.1 The Petitioners (Urmiladevi and Pannalal together) are 40% partners in Respondent No. 2-Vardhaman Enterprise (‘the said Firm’ for short) alongwith Respondent No. 3 (Renudevi) who is remaining 60% partner. Petitioner No. 1 is 62 years old lady and Petitioner No. 2 is 97 year old man.

3.2 Loan was sanctioned to the said Firm in 2015 by Respondent No. 1 Bank. The Petitioners and Respondent No. 3 executed deeds of guarantee and mortgage in favour of Respondent No. 1 Bank. In October 2019, the account of the Firm was declared as non-performing asset (NPA) and notice under Section 13(2) of the SARFAESI Act was issued, thereby initiating measures for recovery. The Respondent No. 1-Bank filed Original Application No. 7 of 2020 for recovery of Rs.3,99,91,884/-. The Petitioners filed S.A.No.36 of 2020 and Respondent No.3 filed separate S.A.No.52 of 2020 before the Debt Recovery Tribunal-I at Ahmedabad. Since, the Petitioners and Respondent No. 3 were having certain internal disputes, Respondent No. 3 refused to join the Petitioners in seeking to discharge the dues of the Bank. In the meantime, Respondent No. 1 Bank initiated action for sale of the mortgaged property, however the same failed and thereafter Covid-19 pandemic hit.

3.3 By a letter dated 07.07.2020, the Petitioners offered to settle the dispute inter-alia making an offer of Rs.1,60,00,000/- as full and final settlement for Petitioners. The said offer specifically mentioned that the Petitioners are arranging funds from their near and dear once and release of the properties against such payments would be peremptory. The offer further mentioned that on receipt of Rs.1,60,00,000/- from the Petitioners, the Bank shall issue no due certificate to the Petitioners (both partners) as also release them from personal guarantee both in the sense as personal guarantee as partners of the firm as also the personal guarantee secured by the Bank and also release charge from the mortgage and also execute release deed of the two properties. It is further mentioned that Bank shall withdraw the cases filed against the Petitioners including Original Application No. 7 of 2020.

3.4 The Respondent No. 1-Bank accepted the said proposal and issued 1^st sanction letter dated 18/07/2020, thereby clearly agreeing as under :

“9. Bank shall continue recovery action against remaining obligants for recovery of Bank’s dues” (Emphasis supplied)

3.5 Thereafter under 2^nd sanction letter dated 20/07/2020, Respondent No. 1 Bank again clearly agreed as under:

“2. On entire payment of Rs.160 Lacs Bank will withdraw the DRT suit filed against the guarantors and partners of M/s. Vardhman Enterprises namely Shri Pannalal M. Jain, Smt. Urmila M. Jain only. However, the remaining obligants i.e. the Firm M/s Vardhaman Enterprises and Smt. Renu A. Jain shall continue to be liable for the outstanding amount payable to the bank along with interest and charges till repayment in full and bank will proceed with DRT suit against M/s Vardhman Enterprises and Smt. Renu A. Jain.”

[Emphasis supplied]

3.6 The Petitioners accordingly paid full amount of Rs. 1,60,00,000/-, as promised, and after completion of said payment, Respondent No. 1-Bank issued No Dues Certificates dated 29/07/2020 and 04/08/2020, mentioning as under:-

“Now Any due in bank on behalf of both partners of Shri Pannalal M. Jain And Urmila Jain of Account of M/S. Vardhaman Enterprises, N-15 Madhupura market Ahmedabad (Gujarat) A/c. 0033008700602029 does not remain”

(Emphasis supplied)

3.7 Consequently, registered Re