2022 (10) TMI 187 - HC - Indian Laws

Court orders reinstatement of OTS scheme due to COVID-19 impact on real estate business

The court allowed the writ petition, setting aside the letters issued by the respondent bank canceling the OTS scheme due to minimal delay in payment by ... Extension of time under Article 226 - one time settlement (OTS) scheme - non-discretionary and non-discriminatory nature - bona fide payment and acceptance of OTS instalment - COVID-19 pandemic as relevant ground for extension - bank's right to cancel OTS for failure to pay by stipulated timeExtension of time under Article 226 - one time settlement (OTS) scheme - non-discriminatory application - bona fide payment and acceptance - COVID-19 pandemic as relevant ground for indulgence - Whether the High Court should, in exercise of its jurisdiction under Article 226, extend the OTS timeline and direct the bank to accept the delayed payment and close the loan account. - HELD THAT: - The Court applied the established principle that it may, under Article 226, extend the period stipulated in an OTS letter when facts justify indulgence, having regard to factors set out by earlier benches such as extent of payments made, reasons for delay, bona fides of the borrower, conduct of the bank, and attendant circumstances including the COVID-19 pandemic (Anu Bhalla ; Samarth Woolen Mills ; Hindustan Trading Company ). The petitioner had paid substantial instalments under the OTS and demonstrated that the balance was realized by sale of property and placed to his account immediately after the due date, resulting in only a one-day delay. The bank admitted receipt of earlier payments and the petitioner's submission of the cheque and enclosing letter after 27.07.2021. Balancing the non-discriminatory nature of the OTS scheme and the bank's contractual right to cancel on default, the Court found these circumstances sufficient to exercise supervisory power to extend time as a matter of equity and justice. Consequently, letters cancelling the OTS were set aside and the bank was directed to accept the payment within the limited period granted, failing which the bank may proceed in accordance with law. The Court limited relief by permitting the bank to recover agreed interest for the delayed period and by giving a short fixed period for compliance, thereby preserving the bank's statutory and contractual rights if the petitioner fails to comply. [Paras 18, 19, 20]The writ petition is allowed; letters dated 31.07.2021 and 06.08.2021 issued by the bank are set aside and the bank is directed to receive the said payment and close the loan account; ten days from the date of order are granted to the petitioner to make payment at the agreed rate, failing which the bank may proceed in accordance with law.Final Conclusion: The High Court exercised its Article 226 power to grant a limited extension of the OTS deadline on facts showing substantial prior payments, bona fide efforts to arrange the balance (including sale proceeds), and only a one day delay; the bank was directed to accept the payment and close the account within ten days, subject to agreed interest, failing which it may act in accordance with law. Issues Involved:1. Legality of letters dated 31.07.2021 and 06.08.2021 issued by the respondent bank.2. Compliance with the SBI OTS 2020 Circular and OTS sanction letter.3. Petitioner's delay in payment and its justification.4. Court's power to extend the period of settlement under OTS.Issue-wise Detailed Analysis:1. Legality of Letters Dated 31.07.2021 and 06.08.2021:The petitioner challenged the letters issued by the respondent bank, which canceled the OTS scheme due to non-payment by the stipulated date. The court found that the petitioner had submitted a cheque for the outstanding amount on 28.07.2021, just one day after the due date. The bank's refusal to accept the cheque and subsequent cancellation of the OTS was deemed unjustified given the minimal delay and the petitioner's efforts to comply.2. Compliance with the SBI OTS 2020 Circular and OTS Sanction Letter:The petitioner had applied for and was granted an OTS under the SBI OTS 2020 scheme, which required payment of the OTS amount in installments. The petitioner paid Rs.41,05,000/- before the due date but failed to pay the remaining amount by 27.07.2021. The court noted that the petitioner had made substantial payments and showed intent to comply with the OTS terms, but faced a delay due to the COVID-19 pandemic.3. Petitioner's Delay in Payment and Its Justification:The petitioner argued that the delay was due to the COVID-19 pandemic, which affected his real estate business. He managed to arrange funds by selling property and submitted the payment one day late. The court considered the pandemic's impact and the petitioner's efforts to comply, referencing similar cases where courts extended payment deadlines due to extraordinary circumstances.4. Court's Power to Extend the Period of Settlement Under OTS:The court referred to various precedents, including Anu Bhalla Vs. District Magistrate, Pathankot, and Samarth Woolen Mills Vs. Indian Bank, which established that courts have the power to extend OTS deadlines under Article 226 of the Constitution of India. The court emphasized that the petitioner's delay was minimal and justified, warranting an extension to fulfill the OTS terms.Conclusion:The court allowed the writ petition, setting aside the letters dated 31.07.2021 and 06.08.2021 issued by the respondent bank. The bank was directed to accept the payment of Rs.37,87,567/- from the petitioner and close the loan account. The petitioner was granted ten days to clear the amount along with interest, failing which the bank could proceed according to the law. The court's decision was based on the petitioner's bona fide efforts, minimal delay, and the extraordinary circumstances of the COVID-19 pandemic.