The main legal point established in the judgment is the need for financial institutions to act fairly and in good faith, and the rights of defaulters to be considered for One Time Settlement under the guidelines issued by the Reserve Bank of India.

Cash credit facility was granted by the Union Bank of India to M/s Bahudesshiya Audyogik Utpadan Sahkari Samiti Limited and M/s Janta Udyog Samit. The petitioner is a guarantor for M/s Bahudesshiya Audyogik Utpadan Sahkari Samiti Limited and was also the Secretary in Janta Udyog Samiti. The Accounts became irregular and were declared as non-performing assets (NPA). Approximately a sum of Rs.1.5 crores became due and payable by these two Samities. The respondent bank proceeded to recover the amount by filing two claim applications before the Debts Recovery Tribunal, which, after contest, was decreed by an order dated 19/20.8.2005 for recovery of approximate Rs.1.50 crores.

2. It transpires that parties entered into a One Time Settlement on 22.8.2006 pursuant to the guidelines issued by the Reserve Bank of India. The One Time Settlement was settled by the higher authorities of the bank for Rs.75 lacs, which was to be deposited within a week and the balance Rs.65 lacs was to be deposited by 20th September, 2006. Based on this One Time Settlement, the petitioner deposited Rs.7.5 lacs on 22.8.2006 and Rs.2.5 lacs on 23.8.2006 and, consequently, the first part of the One Time Settlement was compiled by the petitioner. The balance amount of Rs.65 lacs was required to be paid on or before 20.9.2006.

3. It further transpires, that the petitioner made a request to the bank seeking permission to sell the properties, which was mortgaged with the bank, namely, property No.128/31, K-Block, Kidwai Nagar, Kanpur. Since permission was not forthcoming and, in the meanwhile, the respondent bank issued a letter dated 11.1.2007 intimating the petitioner that the One Time Settlement had become defunct and has been withdrawn. The Bank also issued a sale proclamation notice for sale of the mortgaged property.

4. At this stage, the petitioner knocked the doors of the High Court by filing Writ Petition No.8566 of 2007, which was disposed of at the admission stage itself by an order dated 19.2.2007. For facility, the order of the Writ Court dated 19.2.2007 is being extracted herein:

"Heard Sri V. B. Upadhyay, learned Senior Advocate, assisted by Sri Pankaj Barman for the petitioners and Sri R. B. Sahai, learned Counsel for the respondents.

Brief facts of the case are that there was a one time settlement for an amount of Rs.75,00,000/- between the petitioners and the respondent Bank. Initially, the petitioners were required to deposit a sum of Rs.10,00,000/- within a week from the date of acceptance of one time settlement. The petitioners deposited an amount of Rs.7.50 lakh on 22.8.2006 and the balance amount of Rs.2.50 lakh as required under the one time settlement proposal. Meaning thereby that the first condition of one time settlement was complied with by the petitioners. It is pertinent to mention here that the petitioners are guarantor. The Bank can recover its dues first from the borrower and in case the borrower fails to repay the dues then it can be recovered from the guarantors.

The petitioners request that they may be issued a letter of permission from the respondent Bank to sell the property No.128/131/10, K-Block, Kidwai Nagar, Kanpur within a period of one month. After selling the aforesaid property, the petitioner will deposit Rs.30,00,000/- with the respondent Bank within a period of three months thereafter. In case, the aforesaid conditions are complied with the then balance amount of Rs.35,00,000/- will be deposited by the petitioners within a period of three months thereafter.

Considering the facts and circumstances of the case, the respondent Bank is directed to issue a letter of permission to the petitioners to sell the aforesaid property. In case the aforesaid property is sold by the petitioners and the amount of Rs.30,00,000/- indicated above, is deposited with the respondent Bank within the time stipulated, then the petitioners may be issued letter of permission for selling the other property mortgaged with the r