Restructuring sanction within the cut-off period cannot be ignored merely because post-sanction formalities remain pending.

Where a restructuring sanction is issued within the RBI-prescribed implementation period, it is not treated as unimplemented merely because post-sanction formalities remain pending. The bank's reading that every formality had to be completed by the cut-off date was held to be incorrect, and the cancellation of the sanctioned restructuring letter was therefore unsustainable. As the cancellation letter identified no specific breach of the sanctioned conditions, the consequent classification of the account as NPA and SARFAESI action founded on that premise also could not stand. The restructuring sanction was held to remain operative and the parties were directed to act on it.

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Issues: Whether the bank was justified in treating the restructuring proposal as not implemented by the cut-off date and cancelling the sanctioned restructuring letter, and whether the consequent action under the SARFAESI regime could be sustained.

Analysis: The restructuring circular required implementation by 31 March 2021. The sanctioned restructuring letter was issued on 30 March 2021, which satisfied the requirement of implementation in substance, subject to fulfilment of the stipulated conditions. The bank's view that all formalities had to be completed by the cut-off date was held to be an incorrect reading of the circular. The cancellation letter did not disclose any specific breach of the sanctioned conditions, and the subsequent classification of the account as NPA and initiation of SARFAESI action were founded on that incorrect premise. The authorities relied on by the bank were distinguished because they did not involve an already sanctioned restructuring proposal.

Conclusion: The cancellation of the restructuring sanction and the consequential communication were quashed. The sanctioned restructuring letter was held to remain operative and the parties were directed to act on it.

Ratio Decidendi: Where a restructuring sanction is issued within the RBI-prescribed implementation period, the restructuring cannot be treated as unimplemented merely because post-sanction formalities remain to be completed, and action taken on an erroneous contrary interpretation is liable to be set aside.

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