The main legal point established in the judgment is that, in certain circumstances, the court has the authority to grant an extension of time for payment of the One Time Settlement (OTS) as per RBI guidelines, taking into account factors such as the impact of external events like the COVID-19 pandemic and the petitioners' efforts to meet their obligations.

JUDGMENT

M.S. Ramachandra Rao, J. - The Background facts Petitioner No.1 is a partnership firm engaged in the business of manufacturing and trading of Yarn, Knitted clothes and Hosiery goods, and falls under the category of Micro, Small & Medium Enterprises (MSME). Petitioner No.2 is its partner.

2. Prior to 2016, it had availed a loan of Rs.18.4 Crores from the Allahabad Bank, the predecessor of the respondent-Indian Bank, and it had mortgaged 3 properties covered by 3 sale deeds bearing Nos. 18465, 18479 and 22379 measuring 1210 sq. yards, 1570 sq. yards and 9740 sq. yards in Village Bajra, Rahon Road, Village Meharban, Ludhiana in which the factory of the petitioners was located.

3. Since the petitioners faced financial difficulties in recovering the money from their sundry debtors in 2017, they addressed several letters to the Allahabad Bank to consider the rehabilitation proposal of the petitioners in terms of the Reserve Bank of India (RBI) guidelines known as 'Framework for Revival & Rehabilitation of Micro, Small & Medium Enterprises' dt. 17.03.2016. The said request was rejected by the Allahabad Bank vide letter dt.13.10.2017 without placing it before the Designated Committee.

CWP No.22963 of 2017

4. The petitioners challenged the same by filing CWP No.22963 of 2017 in this Court, which was allowed on 14.08.2018 by this Court, holding that the rejection of the petitioners' proposal for restructuring by the Allahabad Bank without referring it to the Designated Committee amounts to contravention of the RBI guidelines, and a direction was given to the Allahabad Bank to place it before the Designated Committee.

5. Thereafter, the Allahabad Bank again rejected the proposal of the petitioners by getting the proposal examined by the said Committee.

6. But the said Committee was not constituted in terms of Clause 3 of the above RBI guidelines dt. 17.03.2016 which mandated that a Government nominee should be a member in the same.

CWP No.657 of 2019

7. The petitioners again approached this Court by way of filing CWP No.657 of 2019, in which notice of motion was issued on 17.01.2019.

8. The First OTS dt.7.6.2019 sanctioned by Allahabad Bank While the said Writ Petition was pending, vide Annexure P-3 dt.7.6.2019, the Allahabad Bank offered an One Time Settlement (OTS) under which the petitioners had to pay Rs. 14.75 Crores.

9. The OTS letter stated that the application money of Rs.75 Lakhs would be appropriated towards the OTS amount; 20% of the OTS amount should be deposited as upfront money within thirty days from 06.07.2019; and the balance should be paid within six months from the date of the said letter i.e. 07.12.2019.

10. It was further stated that no interest would be charged if the entire OTS amount is paid within three months from that date i.e. by 06.09.2019, and if not, interest @ One year MCLR which was then 8.65% was to be paid on reducing balance basis w.e.f. 07.06.2019. Certain other incentives were also provided.

11. It was also stated that in the event of failure to repay the entire amount within the stipulated period, the OTS would become infructuous, and the amount paid under the OTS will not be refunded.

12. The petitioners thereafter withdrew CWP No.657 of 2019.

13. The payments made by petitioners between 7.6.2019-2.12.2019 Between 07.06.2019 and 23.09.2019, the petitioners deposited  Rs. 5,05,00,000/- and also made deposits totaling  Rs. 50 Lakhs in a no lien account by 02.12.2019.

14. The petitioners arranged the OTS money by getting buyers for two properties covered by sale deeds No. 18465 and 18479 by entering into agreements to sell dt. 30.04.2019, after informing the purchaser about the interest of the said Bank in the property.

15. The petitioners also entered into another agreement of sale dt. 30.04.2019 for another property measuring 10 marla in Village Daad, Hadbast No.279, Tehsil and District Ludhiana in the name of Shri Gagan Sarin for Rs. 95 Lakhs which was not encumbered to any financial institution.

16. The ta