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IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH
M.S. Ramachandra Rao,Jasjit Singh Bedi, JJ.
Amrik Singh – Appellant
Versus
Dcb Bank Ltd. & Anr. – Respondents
CWP-4631-2021
Decided On : 06-04-2022
OTS - Extension of Time for Payment - Securitization & Reconstruction of Financial Assets & Enforcement of Security Interest Act, 2002 - [Section 13(2)] - [Section 17] - The judgment discusses the OTS policy of the bank, the power of the court to grant extension of time for payment under the OTS, and the legal principles governing the extension of OTS timelines.
Fact of the Case:
The petitioner availed a loan from the respondents-DCB Bank against property. The loan accounts were declared as NPA, and the petitioner submitted multiple One Time Settlement (OTS) proposals. The respondents accepted a settlement proposal for Rs.85 lakh, with a payment schedule. The petitioner paid Rs.49 lakh but was unable to raise the balance amount of Rs.36 lakh by the last date of payment. The petitioner sought an extension of 90 days, citing unavoidable circumstances.
Finding of the Court:
The court found the Writ Petition maintainable and rejected the plea of availability of alternative remedy. It held that the petitioner was entitled to an extension of time for complying with the OTS sanctioned on 25.07.2020. The court directed the petitioner to deposit the balance amount with interest, and the respondents to release the securities upon receipt of the payment.
Issues: The issues involved the maintainability of the Writ Petition, the availability of alternative remedy, and the entitlement of the petitioner to an extension of time for complying with the OTS.
Ratio Decidendi: The court held that the Reserve Bank of India's guidelines are binding on all Scheduled Banks, and the courts have the jurisdiction to extend the period of settlement as originally provided for in the OTS letter. The court also considered the factors and circumstances to determine the entitlement for the extension of OTS timelines.
Final Decision: The Writ petition was allowed, and the petitioner was directed to deposit the balance amount with interest, and the respondents were directed to release the securities upon receipt of the payment.
ORDER
M.S. Ramachandra Rao, J. - The Background facts
2. The petitioner is the proprietor of a proprietary concern by name, M/s New Bajaj Electronics, dealing in the business of electronic goods.
3. His brother was the proprietor of another proprietary concern by name, M/s Bajaj T.V. Centre.
4. These two concerns availed loan from the respondents-DCB Bank against property to the tune of Rs. 67 lakh in 2013. The loan against property was later enhanced to Rs.95 lakh in September, 2015, repayable over a period of 15 years in equal monthly installments of Rs. 1.14 lakhs each. The petitioner, in his personal capacity, also stood a guarantor to the credit facility availed by the firms by mortgaging his property in favour of the respondents-DCB Bank.
5. When the EMIs of the loans were not paid, the respondents declared the loan accounts as NPA on 01.12.2018 and issued notice dt. 06.12.2018 (PI) under Section 13(2) of the Securitization & Reconstruction of Financial Assets & Enforcement of Security Interest Act, 2002 [for short 'the SARFAESI Act'].
The First OTS dt.22.08.2019
6. Petitioner and his brother submitted an OTS proposal along with a demand draft of Rs. 10 lakh on 22.08.2019 (P2) to the respondents with a condition to encash the same subject to acceptance of the settlement proposal. The respondents however encashed the said demand draft but did not accept the settlement proposal.
The Second OTS dt.18.06.2020 and its refusal
7. Petitioner and his brother again made a joint settlement proposal on 18.06.2020 (P3) offering Rs.75.32 lakh to the respondents but, the same was not accepted.
Revised Settlement proposal dt. 16.7.2020 and its acceptance
8. Petitioner then submitted a revised settlement proposal on 16.07.2020 (P4) offering Rs.85 lakh.
9. On 25.07.2020, the respondents-Bank accepted the settlement proposal submitted by the petitioner for Rs.85 lakh and issued a OTS sanction letter dt.25.07.2020 (P5).
10. According to the said sanction letter, Rs.25 lakh is payable by 31.07.2020, Rs.20 lakh by 30.08.2020 and Rs.40 lakh by 30.09.2020.
11. Petitioner by 30.09.2020 paid a sum of Rs.49 lakh as against the total settlement amount of Rs.85 lakh and was unable to raise the balance amount of Rs.36 lakh by the last date of payment i.e. 30.09.2020.
Request of petitioner for extension of time to pay amount as the OTS sanctioned and its refusal
12. On 30.09.2020, petitioner requested the respondents-Bank to grant extension of 90 days time for making payment of the balance amount of Rs.36 lakh. He stated that delay had occurred in making this payment as the purchaser to whom the petitioner had sold the property did not make payment of Rs.40 lakh in time (which was to be paid by the said purchaser by 28.09.2020). It was also mentioned that due to Covid-19, there was slow down in business because of which the purchaser of the property could not raise the funds to make full payment to the petitioner by the last date and thus, the petitioner was constrained to seek extension.
13. When there was no response from the respondents-Bank, petitioner represented on 31.12.2020 seeking time to make payment of Rs.36 lakh with interest for the delayed payment.
14. According to the petitioner, the official of respondent No.2-Bank refused to receive the letter/representation dt. 31.12.2020 (P7) and so he sent the same by registered post.
Filing of instant Writ Petition
15. Petitioner therefore, filed the instant Writ Petition for a direction to the respondents to accept the balance amount of Rs.36 lakh out of the total settlement amount of Rs.85 lakh along with interest at 9% p.a. w.e.f. 01.10.2020 to 31.12.2020.
Contention of the counsel for the petitioner
16. Counsel for the petitioner contends that the letter dt.31.12.2020 (P7) was received by the respondents on 02.01.2021 and the petitioner filed the instant Writ Petition on 24.02.2021, and thereafter, deposited the sum of Rs.36 lakh in the Punjab and Sindh Bank by way of a Fixed Deposit on 25.03.2021.
17. Counsel
The judgment establishes the court's power to grant extension of time for payment under the OTS, based on the RBI guidelines and the principles of equity and justice.
The court emphasized that the OTS scheme cannot be extended as a matter of right and must be exercised with discretion, considering the borrower's bonafide intent and substantial payments made.
The High Courts have the jurisdiction to extend the period of settlement as originally provided for in OTS letter, subject to certain guidelines, and the Court may consider granting extension of time....
The Court emphasized the Bank's obligation to act fairly and reasonably, and held that the refusal to grant an extension for OTS payment was arbitrary and violative of constitutional provisions.
The court emphasized that the delay in legal proceedings should not prejudice the parties and outlined illustrative guidelines for granting OTS extension, considering the borrower's bona fide intent ....
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 g....
The court can extend the time for repayment under an OTS scheme, considering the impact of external factors such as the COVID-19 pandemic and the borrower's efforts to raise funds for repayment.
Point of law: Loans by financial institutions are granted from public money generated at the taxpayer’s expense. Such loan does not become the property of the person taking the loan, but retains its ....
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