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IN THE HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD
UJJAL BHUYAN, A. VENKATESHWARA REDDY, JJ.
M/s. Stallion Telecom Pvt. Ltd. – Appellant
Versus
State Bank of India, Rep. by its Chairman and Managing Director – Respondent
W.P.No.9818 of 2022
Decided on : 23-02-2022
Constitution of India,1950 - Article 226 - Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 - Section 13(2) and 13(4) - Recovery of Debts due to Banks and Financial Institutions Act, 1993 - Section 19 - Recovery of dues from the petitioner amounting - Loan account of the petitioner as Non-Performing Asset - Demand notice - Petitioner had availed loan from respondent-SBI in the year 2011. SBI had sanctioned an overall loan amount to the petitioner. It is stated that for various reasons, there was default on the part of the petitioner in repaying the loan amount. Despite request of the petitioner for re-schedulement of the loan, SBI classified the loan account of petitioner as Non-Performing Asset (NPA), following which demand notice petitioner under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (briefly referred to hereinafter as ‘SARFAESI Act’). This was followed by issuance of possession notice under Section 13(4) of the SARFAESI Act - Respondent-SBI filed application under Section 19 of Recovery of Debts due to Banks and Financial Institutions Act, 1993 (briefly referred to hereinafter as ‘the 1993 Act’) before the Debts Recovery Tribunal, Hyderabad (Tribunal) for recovery of dues from the petitioner amounting - Held, must be a letter issued by SBI to the borrower - Till this point of time, we do not find any difficulty in understanding or interpreting Sub-Clause (ii) of Clause 2.1 of the Scheme. However, when we look at Sub-Clause (v), it is evident that the situation contemplated under Sub-Clause (ii) would have to give way in a case where a decree is awarded by the Debts Recovery Tribunal. Entering into a compromise for settlement (OTS) is a private contract between the borrower and the secured creditor. On the other hand, a decree awarded by the Debts Recovery Tribunal is an order of a quasi judicial authority discharging judicial functions under the statute. In the event of conflict between a private contract and a decree of a statutory Tribunal, it goes without saying that the decree of a statutory Tribunal will prevail. There can be no manner of doubt on this proposition. If this is the position, we fail to appreciate the submission of learned counsel for the petitioner that there is contradiction between Sub-Clause (ii) and Sub-Clause (v) of Clause 2.1 of the Scheme. In fact, a conjoint reading of the two provisions will make it clear that Sub-Clause (ii) is conditioned by Sub-Clause (v) i.e., Sub-Clause (ii) is subject to Sub-Clause (v). In other words - we are of the unhesitant opinion that there is no legal infirmity in Sub-Clause (v) of Clause 2.1 of the Scheme; not to speak of being vitiated by any element of arbitrariness or discrimination - Writ Petition is dismissed
ORDER :
UJJAL BHUYAN, J.
Heard Smt. Ch.Laxmi Chaya, learned counsel for the petitioner and Mr. N.Meher Prasad, learned counsel for respondent-State Bank of India (SBI).
2. By filing this writ petition under Article 226 of the Constitution of India, petitioner seeks a declaration that Sub-Clause (v) of Clause 2.1 of the SBI OTS Scheme, 2021 (briefly referred to hereinafter as ‘the Scheme’) is arbitrary, discriminatory and thus violative of Article 14 of the Constitution; and consequently to quash the same. Further prayer made by the petitioner is for a direction to the respondents to extend the benefit of the Scheme to the petitioner.
3. Before we advert to the prayer made by the petitioner, we may mention that petitioner had availed loan from respondent-SBI in the year 2011. SBI had sanctioned an overall limit of Rs.9,00,00,000.00 as loan amount to the petitioner. It is stated that for various reasons, there was default on the part of the petitioner in repaying the loan amount. Despite request of the petitioner for re-schedulement of the loan, SBI classified the loan account of the petitioner as Non-Performing Asset (NPA), following which demand notice dated 14.07.2012 was issued to the petitioner under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (briefly referred to hereinafter as ‘the SARFAESI Act’). This was followed by issuance of possession notice under Section 13(4) of the SARFAESI Act on 13.09.2012. It is stated that against such steps taken by SBI, petitioner had filed W.P.No.12007 of 2013 before the Karnataka High Court. By order dated 08.03.2013, Karnataka High Court had stayed further proceedings, which interim order was made absolute on 01.10.2013.
4. Respondent-SBI filed application under Section 19 of the Recovery of Debts due to Banks and Financial Institutions Act, 1993 (briefly referred to hereinafter as ‘the 1993 Act’) before the Debts Recovery Tribunal, Hyderabad (Tribunal) for recovery of dues from the petitioner amounting to Rs.7,40,07,798.00 with interest and costs. The said application was registered as O.A.No.312 of 2014. The said O.A. was decreed on 05.06.2017 in favour of the applicant-SBI.
5. SBI has issued the related Scheme for recovery of outstanding dues. The said Scheme provides for a schedule of time lines. The time line for intimation to all eligible borrowers was 31.01.2022; last date for receipt of application under the Scheme was 21.02.2022; and the last date for conveying sanction under the Scheme is 28.02.2022. The Scheme provides for settlement of loan accounts in the manner provided. Clause 2.1 of the Scheme deals with cases not eligible to be covered under the Scheme. According to learned counsel for the petitioner and as per the prayer made, Sub-Clause (v) of Clause 2.1 of the Scheme is wholly arbitrary and discriminatory. For a better appreciation of the contention as made, it would be apposite to extract Clause 2.1 of the Scheme in its entirety, which is as under:
(i) Central Govt./State Govt. Guaranteed Accounts will not be considered under the Scheme.
(ii) “Compromise Settlement cases” where repayment has already commenced as per the agreed terms, are not eligible. However, cases of failed Compromise Settlement where the amount is not received within the stipulated time can be considered afresh. Cancellation of failed compromise letter to be issued to the borrower before considering application under OTS.
(iii) Any case admitted in NCLT will not be eligible.
(iv) Units under Liquidation will not be eligible.
(v) Units where Decree awarded by DRT will not be eligible.
(vi) Accounts declared as Fraud will not be eligible.
(vii) Accounts declared as Wilful Defaulters will not be eligible.”
6. From the above, we find that Clause 2.1 of the Scheme enumerates classes of cases which are not eligible to be covered under the Scheme. As per Sub-Clause (ii) “Compromise Sett
The bank has the exclusive discretion to determine a borrower's eligibility under an OTS Scheme, and the grant of benefit is subject to the eligibility criteria mentioned under the Scheme and the gui....
(1) No borrower can, as a matter of right, pray for grant of benefit of One Time Settlement Scheme.(2) No bank can be compelled to accept a lesser amount under OTS Scheme despite the fact that Bank i....
Strict adherence to the terms and conditions of the Scheme is necessary, and failure to meet the pre-conditions justifies the rejection of the application.
OTS scheme is non-discriminatory and ncn- discretionary. Once the Scheme is in place, a borrower or guarantor is entitled to the benefit of the Scheme
Banks are not mandated to disclose benchmarks or consider OTS proposals, and courts cannot compel alteration of existing financial agreements under Article 226.
Courts cannot compel banks to provide benefits of One Time Settlement Schemes if borrowers fail to meet payment obligations under the scheme, preserving the contractual sanctity and banks' discretion....
The court held that claims regarding compliance with OTS schemes do not bar a legal suit and that the plaint disclosed a valid cause of action warranting adjudication under the RDB Act.
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