IMPORTANT POINT
The acceptance of late payments under a One Time Settlement can imply a waiver of strict compliance with payment timelines, and interest clauses remain enforceable.

JUDGMENT :

(Shampa Sarkar, J.) :

1. The revisional application arises out of an order dated September 21, 2022 passed by the learned Debts Recovery Appellate Tribunal (DRAT) Kolkata, in Appeal Dy. No.12 of 2022 from an order passed by the learned Debts Recovery Tribunal-II (DRT), Kolkata, in IA 983 of 2021 arising out of OA No.94 of 2015.

2. The learned DRAT dismissed the appeal filed by the bank, thereby, affirming the order dated December 24, 2021 passed by the DRT-II. The learned DRAT was of the opinion that under the One Time Settlement Scheme (OTS) contained in the letter dated September 26, 2019, the initial period of three months was settled for payment of Rs. 5.50 crores by the borrower/opposite party No.1. There was a clause that in case of delay beyond three months, simple interest @ MCLR (applicable on the date of sanction on reducing balance basis) would be charged. Thus, even at the time of finalising the OTS proposal, the bank was conscious of the fact that there could be a situation where the payment could not be made by the borrower within the time stipulated in the OTS. The provision for charging interest had been kept by the bank to meet a situation when the borrower failed to pay the money on time. The proposal was not time bound and an extension was contemplated by incorporation of the interest clause. Initially, extension was granted by the bank upto August 31, 2020. The opposite party No.1 sought for extension upto October 2020. Such prayer for extension was not denied by the bank, although no communication was made in this regard. The rejection letter with regard to the prayer for extension was communicated by the bank on September 14, 2021, and September 30, 2021 when the interim application being IA 983 of 2021 seeking recording of satisfaction with regard to payment made by the borrower under OTS and prayer for release of title deeds by the bank was pending before the learned DRT-II. The bank could not explain before the DRAT as to why no rejection letter was issued to the opposite party No.1, soon after such prayer was made. In the meantime, the entire OTS amount of Rs.5.50 crores had been paid by the opposite party No.1 within October 2020. The bank had appropriated the same.

3. Thus, according to DRAT, non-communication of an order of rejection and acceptance of the balance amount of Rs.1.35 crores within October 2020, would amount to estoppel by conduct and the bank could not treat the OTS as cancelled.

4. The learned Appellate Tribunal further held that in the facts of this case, the decisions of the Hon’ble Apex Court that Courts or Tribunals could not compel the banks and financial institutions to enter into a settlement with the borrower, would not apply. Upon perusal of the records and the letters exchanged between the parties, the learned DRAT arrived at the conclusion that the DRT-II had not directed the bank to enter into any settlement with the opposite party No.1. Rather, the settlement was arrived at between the parties. Later on, there was some delay on the part of the opposite party No.1 to make the payment within three months and extension was requested. The bank allowed such extension upto August 31, 2020.

5. The learned DRAT also held that time was not the essence of the contract and in the settlement scheme; no specific time frame had been fixed. Initially, three months’ time was mentioned in the letter dated September 26, 2019 which was the first proposal of the OTS. Time was extended and even delayed payments were accepted. Had time been the essence of the settlement, the bank would not have accepted the delayed payments and the interest clause would not be added to the OTS letter dated September 26, 2019. The Appellate Tribunal also discussed a decision of the Hon’ble Supreme Court in the matter P. Vijay Kumari vs. Indian Bank reported in AIR 2018 SC 759 and held that if the agreed amount was paid, condonation of delay was a possible course of action. In this case, the Covid-19