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2024 Supreme(Online)(KER) 4370
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR.JUSTICE N.NAGARESH
MONDAY, THE 4TH DAY OF MARCH 2024 / 14TH PHALGUNA, 1945
WP(C) NO. 44053 OF 2023
PETITIONER:
UMA SANKAR ALIAS ARUN KUMAR
AGED 56 YEARS
S/O. BALAKRISHNAN NAIR,
GOVINDAMANGALATHU HOUSE,
VALAMUCHUZHY, PATHANAMTHITTA P.O.,
PATHANAMTHITTA, PIN – 689645
BY ADV VISHAK.K.JOHNSON
RESPONDENT:
THE AUTHORISED OFFICER
STATE BANK OF INDIA,
STRESSED ASSETS RECOVERY BRANCH,
LMS COMPOUND,
OPP: MUSEUM WEST GATE VIKAS BHAVAN P.O.,
THIRUVANANANTHAPURAM, PIN – 689672
BY ADV JAWAHAR JOSE
THIS WRIT PETITION (CIVIL) HAVING COME UP FOR
ADMISSION ON 04.03.2024, THE COURT ON THE SAME DAY
DELIVERED THE FOLLOWING:
N. NAGARESH, J.
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W.P.(C) No.44053 of 2023
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Dated this the 4th day of March, 2024
Non-compliance with the terms of a compromise settlement can result in the dismissal of a challenge to its cancellation.
Headnote:
Loan - Compromise Settlement - The court dismissed the writ petition challenging the cancellation of a compromise settlement and the demand for an OTS Scheme extension. The court found that the petitioner failed to comply with the terms of the compromise settlement, and therefore, relief could not be granted.
Fact of the Case:
The petitioner availed a loan from the State Bank of India and sought a compromise settlement after defaulting on the loan repayment. The bank accepted the compromise proposal, but later cancelled it due to alleged non-compliance by the petitioner. The petitioner filed a writ petition challenging the cancellation and seeking an extension of the OTS Scheme.
Finding of the Court:
The court analyzed the terms of the compromise settlement, the petitioner's payments, and the legal precedents related to One Time Settlements. The court concluded that the petitioner failed to comply with the terms of the settlement and therefore dismissed the writ petition.
Issues: Non-compliance with compromise settlement terms, challenge to cancellation of settlement, demand for OTS Scheme extension.
Ratio Decidendi: The court found that when the terms of a One Time Settlement are not substantially complied with, relief cannot be granted. Legal precedents were cited to support the decision.
Final Decision: The writ petition was dismissed, and no relief was granted to the petitioner.
J U D G M E N T
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The petitioner, who has availed a loan from the State Bank of India, is challenging Ext.P2 communication cancelling a compromise settlement and seeking to direct the respondent to extend OTS Scheme allowed to the petitioner as per Ext.P1.
2. The petitioner availed a loan from the State Bank of India. The petitioner could not repay the loan promptly. The Bank therefore issued Section 13(2) notice under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. Thereafter, the Bank filed MC No.41/2019 in the Chief Judicial Magistrate's Court, Pathanamthitta seeking aid to take over physical possession of the secured asset. The Court appointed an Advocate Commissioner. The Advocate Commissioner issued a notice dated 30.03.2019 to the petitioner.
3. The petitioner in the meanwhile approached the Bank with an offer for compromise settlement. The respondent-Bank accepted the compromise proposal and the loan accounts were agreed to be settled for a total amount of ₹75 lakhs as per Ext.P1.
4. As per Ext.P1, the petitioner has to pay the remaining amount of ₹63.75 lakhs at the earliest. The petitioner states that Ext.P1 did not provide a specific date to close the accounts. The petitioner made part payments towards the compromise settlement.
5. To the surprise of the petitioner, the respondent issued Ext.P2 letter intimating the petitioner that the petitioner had not made full payments towards compromise settlement. Ext.P2 stated that the compromise settlement of ₹75 lakhs stands cancelled. Now, the Advocate Commissioner has issued Ext.P4 notice proposing to take over physical possession of the secured asset.
6. The petitioner states that there is no wilful default on the part of the petitioner in complying with the OTS proposal. The benefit of settlement therefore cannot be unilaterally denied. Out of total ₹75 lakhs payable under the settlement, the petitioner has paid ₹72 lakhs. The petitioner is ready and willing to clear off the balance amount of ₹3 lakhs. Therefore, if the Bank accepts ₹3 lakhs from the petitioner along with permissible interest, the compromise settlement should be treated as executed. The petitioner is entitled to get the account closed under the settlement already entered into.
7. The respondent opposed the writ petition. The respondent stated that as per Ext.R1(a) compromise offer, out of ₹75 lakhs, an amount of ₹11.25 lakhs was to be paid as upfront amount. The petitioner should thereafter pay ₹7.5 lakhs being 10% of the compromise amount on approval and the entire balance amount of ₹56.25 lakhs within six months from the date of approval.
8. The respondent submitted that the petitioner paid a total amount of ₹54.75 lakhs between 30.09.2019 and 29.07.2021. As on 22.10.2023, the petitioner is obliged to pay ₹1,21,04,625/-. The petitioner cannot seek the One Time Settlement as matter of right, urged the respondent.
9. Relying on the judgment of the Hon’ble Apex Court in P. Vijayakumari and others v. Indian Bank [(2018) 14 SCC 735], the counsel for the petitioner argued that when the terms of a One Time Settlement are substantially complied with and a small part of the amount is remaining to be paid, the borrowers can be permitted to pay the balance amount payable under the One Time Settlement along with interest so as to treat the OTS conditions as satisfied. This Court has also taken a similar view in K.P. Umasankar v. The Punjab National Bank (W.P.(C) No.4909/2020).
10. The Standing Counsel representing the respondent, on the other hand, relied on the judgment of this Court in Muhammed Kutty T. v. State Bank of India [2024 SCC Online Ker 615] to contend that this Court in exercise of the powers under Article 226 of the Constitution of India cannot vary the terms of a One Time Settlement. The Standing Counsel also relied on the judgment of the Apex Court in Bijnor Urban Co-operative Bank Limited, Bijnor and others v. Meenal Agarwal and ot
