2021 (2) TMI 256 - HC - Companies Law

Court dismisses writ petition due to lack of valid OTS scheme, NPA status, and non-compliance with RBI Circulars.

The North Western Cachar Tea Company Limited and another Versus Reserve Bank of India and others

The North Western Cachar Tea Company Limited and another Versus Reserve Bank of India and others - TMI Issues Involved:1. Existence and conclusion of One-Time Settlement (OTS) scheme between the petitioners and the respondent bank.2. Applicability of RBI Circulars dated March 27, 2020, and May 23, 2020, to the petitioners' account.3. Petitioners' entitlement to an extension of time under the OTS scheme due to the Covid-19 pandemic.Issue-Wise Detailed Analysis:1. Existence and Conclusion of OTS Scheme:The court examined whether there was a concluded OTS scheme between the petitioners and the respondent bank. The materials on record indicated that an OTS scheme was concluded on August 19, 2019, through the bank’s letter which approved the compromise proposal submitted by the petitioners. However, the petitioners failed to honor this scheme, alleging deviations from the original proposal. The court noted that the subsequent correspondences did not culminate in a new concluded OTS scheme, and the petitioners' argument that the OTS was concluded on November 5, 2019, was rejected. The only concluded OTS was the one dated August 19, 2019, which the petitioners failed to comply with, leading to its revocation by the bank.2. Applicability of RBI Circulars:The court addressed whether the RBI Circulars, which provided a moratorium on loan repayments due to the Covid-19 pandemic, applied to the petitioners' account. The RBI Circulars were intended to mitigate the burden of debt servicing for standard accounts affected by the pandemic. The petitioners' account, however, was classified as a Non-Performing Asset (NPA) since 2017, and thus did not qualify as a standard account. The court held that the RBI Circulars did not apply to accounts already declared as NPAs, and since the petitioners' account was in default prior to the pandemic, they could not claim the benefits of the Circulars.3. Extension of Time under OTS Scheme:The court considered whether the petitioners were entitled to an extension of time to make payments under the OTS scheme due to the Covid-19 pandemic. The petitioners argued that the pandemic adversely affected their business, justifying an extension. However, the court found that the petitioners had consistently defaulted on their payments and had not honored the concluded OTS scheme. The court noted that the RBI Circulars were not applicable to the petitioners' account, and there was no basis for extending the benefits of the Circulars to them. The court also referenced previous judgments, including Amit Khaneja & Ors. Vs. IL&FS Limited, which supported the view that OTS settlements are independent of the RBI Circulars and cannot be tested on their benchmark.Conclusion:The court dismissed the writ petition, concluding that there was no valid OTS scheme in place when the RBI Circulars were issued, and the petitioners' account did not qualify for the benefits of the Circulars. The petitioners' consistent defaults and the classification of their account as an NPA precluded them from claiming any relief under the RBI Circulars.