Point of Law : The OTS cannot be rendered infructuous on fanciful reasons otherwise intent of bringing an OTS scheme, and ensuing consequences, would stand defeated.

JUDGMENT :

SANJEEV NARULA, J.

CM APPL.32079/2022 (seeking condonation of delay in filing counter affidavit)

1. For the grounds and reasons stated in the application, the same is allowed and disposed of. The counter affidavit filed on 19th July, 2022 is taken on record.

W.P.(C) 1591/2022

2. Briefly stated, Petitioner No. 1 – Prayag Polytech Private Limited had availed credit facilities from Respondent – State Bank of India (“SBI”). Subsequently, somewhere in 2018, after deterioration of Petitioner-company’s financial condition and non-availability of funds, SBI declared Petitioner-company’s account to be a Non-Performing Asset (“NPA”) and initiated proceedings before the Debt Recovery Tribunal (“DRT”), State Bank of India v. Prayag Polytech Private Limited & Anr. in (OA/490/2020).

3. In the meantime, on 28th October, 2020, SBI sent a communication to Petitioner-company informing it of a One Time Settlement (“OTS”) scheme of NPAs and offered to settle the total outstanding amount i.e., Rs. 7,15,72,836/- for Rs. 2,29,51,380.10/-. The said proposal was discussed by the board of Petitioner-company in its meeting held on 10th November, 2020 and the acceptance was conveyed to SBI on 11th November, 2020.

4. Thereafter, SBI issued a letter dated 24th November, 2020 [hereinafter, “sanction letter”], setting-out the terms of the OTS. Since the controversy revolves around the construction of the said terms, for quick reference, the same are reproduced hereinbelow:

“Scheme for One Time Settlement of NPAs & AUCAs (Sill OTS 2020)

We refer to your letter no. NIL dated 11.11.2020 for settlement of your dues to the Bank under the captioned scheme. We are pleased to advise that your application under the captioned scheme has been accepted by the appropriate authority.

1. OTS amount payable under the OTS Scheme will be Rs.2,29,51,380,10 Only.

2. Application money of Rs. 11,47,570.00 paid by you will be appropriated towards your OTS amount.

3. Another 10% of the OTS Amount will have to be deposited by you as first instalment within thirty days from the date of sanction of OTS failing which the OTS sanction will be rendered infructuous and OTS treated as failed.

4. Another 10% of the OTS Amount will have to be deposited by you 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.

5. The balance amount can he paid within 8 months from the date of this letter, i.e. 24/11/2020 (the validity period) together with interest @ 6 Months MCLR on reducing balance basis effective from the date of this letter, i.e. 24.11.2020 failing which the OTS sanction will be rendered infructuous.

6. However, no interest will be charged if the entire OTS amount is paid within 6 months from the date of this letter, i.e. 24 /11/2020.

7. You will be eligible for an additional incentive on the OTS amount, on making payment of the entire OTS amount as given below:

A :

Full payment of OTS amount by Incentive on full payment of OTS Amount

Within one month from the date of sanction. 15%

Within two months from the date of sanction. 10%

By 31.03.2021 5%

B. Incentive on 50% payment of OTS Amount:

50% payment of OTS amount by Incentive on full payment of OTS Amount

Within one month from the date of sanction. 7.5%

Within two months from the date of sanction 5%”

[Emphasis Supplied]

5. In terms of the above-extracted conditions no. 5 & 6, the OTS amount of Rs. 2,29,51,380.10/- could have been paid either (i) within six months without interest from the date of the sanction letter (condition no. 6); or (ii) within eight months with interest @ six-months Marginal Cost of Funds Based Lending Rate (“MCLR”) on reducing balance basis, effective from the date of the sanction letter (condition no. 5). It is further stipulated in condition no. 5 that failure of payment would render the OTS sanction infructuous.

6. Petitioner-company complied with the terms of sanction letter and made payments t