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.

JUDGMENT

M.S. Ramachandra Rao, J. -

The Background facts

1. Petitioner is a guarantor to the loan taken by the Cheema Spintex Limited (for short 'the Company') from the State Bank of India (for short 'the Bank').

2. In 1997, the Company had obtained certain facilities from the Bank and at that time the petitioner, who was also a Director of the Company, stood as a guarantor and pledged his assets in support of the loan.

3. According to the petitioner, on account of the reasons beyond the control of the Company, it could not meet its repayment obligations and came to be classified as Non Performing Asset on 13.03.2016.

4. After the Covid-19 Pandemic started in 2020, the Bank floated an OTS scheme called 'SBI OTS Scheme 2020' and pursuant thereto the Bank itself issued a letter dt.26.10.2020 (P1) informing the Company that it is eligible for settlement under the said scheme. In that letter dt. 26.10.2020, OTS amount was fixed at Rs. 2,96,53,886.98. The Company had to deposit minimum of 5% of the OTS amount along with its application and on 21.11.2020 vide letter (P-2), the Company submitted a response agreeing to the terms set forth in ( P1)letter dt. 26.10.2020 and also made the deposit of 5% of the OTS amount.

5. Thereafter the Bank issued a letter dt. 23.11.2020 (P-3) confirming the acceptance of OTS. The said OTS sanction letter dt. 23.11.2020 (P3) provided that balance amount should be paid within 8 months from the date of the letter.

6. The Company could make the following payment towards the OTS by way of RTGS before 22.7.2020, the last date of the payment as per the OTS: -

7. In the months of April-July 2021, according to the petitioner, there was a second wave of Covid-19 Pandemic which lead to huge disruptions in business and the ability of the Company to generate funds was severely diminished. Petitioner also claims to be actively following up with the Bank and was requesting for a short extension in the time frame granted for the OTS on account of the second wave of Covid-19 Pandemic prevalent at that time.

8. According to the petitioner, the Bank was orally promising the petitioner that an extension would be granted on account of the prevailing circumstances.

9. However, on 21.07.2021, the Company allegedly got a letter from the Bank stating that it had received only Rs. 1,41,13,500/- out of Rs. 2,96,53,886.98 and balance of Rs. 1,55,40,386.98 plus interest was yet to be paid and that the last date for payment was 22.07.2021.

10. Petitioner claims that he immediately got in touch with the officials of the Bank seeking a short extension since there was only one day left to make the balance payment. Thereafter, vide Annexure P5 dt.30.07.2021, a Whatsapp message communicated to the petitioner. It was informed that petitioner should deposit Rs. 1,61,05,000/-, that the said amount would remain in Bank's Parking Account and would be appropriated towards the OTS settlement only after they got confirmation from their controller.

11. Petitioner contends that he was also asked to deposit remaining amount with interest for the extra 7 days i.e. Rs. 1,61,05,000/- which had accrued from 23.07.2021 onwards.

12. Petitioner then transferred Rs. 41,05,000/- on 30.07.2021 and a further amount of Rs. 1,20,00,000/- on 30.07.2021 complying with the deposit of the entire OTS amount. After the amount was remitted, petitioner claims that he was asked to write a letter to the Bank stating that the Company was willing to enter into what was called a compromise settlement and because of the delay of 7 days, petitioner has to do so for the Bank to process the existing OTS.

13. Petitioner addressed a letter on 30.07.2021 (P6) informing about the deposit of th