One-time settlement crystallisation and Covid moratorium limits: failed settlement on an NPA account could not justify extra time.
A concluded one-time settlement was treated as crystallised on the bank's acceptance letter dated 19 August 2019; later correspondence only reopened discussions and did not create a fresh consensus. The Covid-19 moratorium circulars were held inapplicable because they were intended for viable standard accounts, whereas the borrower's account had already become a non-performing asset and the earlier settlement had failed for non-payment. A failed settlement could not be revived by invoking the moratorium framework or justify further time for payment. The writ petition therefore failed, as no enforceable basis existed to extend the settlement period.
Issues: (i) Whether a concluded one-time settlement existed between the borrower and the bank, and if so, when it crystallised; (ii) whether the RBI circulars granting moratorium during the Covid-19 period extended to an account already classified as non-performing asset and covered by a failed settlement, so as to justify extension of time for payment under the settlement.
Issue (i): Whether a concluded one-time settlement existed between the borrower and the bank, and if so, when it crystallised.
Analysis: The correspondence between the parties showed that the bank's letter approving the compromise proposal on 19 August 2019 brought the settlement process to a concluded stage. The later letter of 5 November 2019 did not create a fresh concluded settlement, but merely reopened discussions and did not displace the earlier acceptance. The subsequent exchanges only reflected further attempts at modification, without any further consensus ad idem.
Conclusion: A concluded one-time settlement existed, and it crystallised on 19 August 2019.
Issue (ii): Whether the RBI circulars granting moratorium during the Covid-19 period extended to an account already classified as non-performing asset and covered by a failed settlement, so as to justify extension of time for payment under the settlement.
Analysis: The moratorium measures were intended for viable standard accounts and for mitigating debt servicing stress arising from the pandemic. The borrower's account had already been classified as non-performing asset before the relevant cut-off date, and the earlier settlement had failed because the borrower did not honour the payment schedule. A failed or incomplete settlement could not convert the account into a standard account for the purpose of the circulars, nor could it enlarge the bank's obligation to grant further time. The court also held that the settlement stood outside the protective ambit of the circulars once default had already occurred.
Conclusion: The RBI moratorium circulars did not apply, and no extension of time was warranted.
Final Conclusion: The writ petition failed because the borrower was already in default, the settlement had not been honoured, and the Covid-19 moratorium framework did not furnish any enforceable basis for relief.
Ratio Decidendi: RBI moratorium measures meant for standard accounts cannot be invoked to resuscitate a failed one-time settlement or to confer relief on an account that had already become non-performing asset before the pandemic.
TaxTMI 
AI Drafter ✕
TaxTMI 
