Court grants extension for OTS payments due to COVID-19 hardships, emphasizes flexibility and equitable relief.

The court granted the petitioners' request for an extension of time to complete the One Time Settlement (OTS) payments due to financial difficulties exacerbated by the COVID-19 pandemic. The court extended the OTS period to 31.03.2021, subject to interest for the delay, emphasizing the need for flexibility and equitable relief in enforcing financial agreements during extraordinary circumstances. The decision aimed to balance the interests of both parties, allowing the petitioners to meet their obligations while compensating the bank for the delay.

---

---

Issues Involved:
1. Validity of the rejection of the petitioners' rehabilitation proposal by Allahabad Bank.
2. Compliance with RBI guidelines for MSME revival.
3. Validity of the One Time Settlement (OTS) agreements.
4. Extension of time for payment under the OTS due to COVID-19.
5. Petitioners' entitlement to equitable relief under Article 226 of the Constitution of India.

Detailed Analysis:

1. Validity of the rejection of the petitioners' rehabilitation proposal by Allahabad Bank:
The petitioners, a partnership firm under MSME, faced financial difficulties and sought rehabilitation under the RBI guidelines for MSME revival. The Allahabad Bank initially rejected this proposal without referring it to the Designated Committee, which was deemed a contravention of RBI guidelines by the High Court in CWP No. 22963 of 2017. Subsequently, the proposal was again rejected by a committee not properly constituted per Clause 3 of the RBI guidelines. This led to another writ petition (CWP No. 657 of 2019), resulting in an OTS offer from the bank.

2. Compliance with RBI guidelines for MSME revival:
The Allahabad Bank's actions were scrutinized for non-compliance with RBI guidelines. The court found that the bank's rejection of the restructuring proposal without Designated Committee review was a breach of these guidelines. The bank's subsequent actions, including the improper constitution of the committee, further violated the stipulated procedures.

3. Validity of the One Time Settlement (OTS) agreements:
The court examined the terms of the OTS agreements dated 07.06.2019 and 26.03.2020. The first OTS required a payment of Rs. 14.75 Crores, with specific conditions for upfront and balance payments. The petitioners paid Rs. 5.25 Crores but failed to meet the full terms due to external factors, including a civil suit affecting property sales. The second OTS reduced the amount to Rs. 10,60,32,000/- with similar conditions. The petitioners sought extensions due to the COVID-19 pandemic, impacting their ability to pay within the stipulated time.

4. Extension of time for payment under the OTS due to COVID-19:
The court acknowledged the impact of the COVID-19 pandemic on the petitioners' ability to fulfill the OTS terms. The lockdowns and restrictions significantly hindered their operations and financial transactions. The court considered these unprecedented circumstances as valid reasons for granting an extension, aligning with the principles laid out in the case of Anu Bhalla and others, which allows for equitable relief under such conditions.

5. Petitioners' entitlement to equitable relief under Article 226 of the Constitution of India:
The court referred to the case of Anu Bhalla, which established that High Courts have the jurisdiction to extend OTS periods under Article 226. The court emphasized that OTS agreements are not rigid and can be extended in deserving cases where the borrower shows bona fide intent and substantial compliance. The court rejected the respondent's reliance on Bijnor Urban Cooperative Bank Ltd. vs. Meenal Aggarwal, clarifying that it did not address extensions of already sanctioned OTS agreements.

Conclusion:
The court granted the petitioners' request for an extension of time to complete the OTS payments, recognizing the genuine difficulties posed by the COVID-19 pandemic. The court ordered that the OTS period be extended to 31.03.2021, subject to the payment of interest for the delay. This decision balanced the equities between the parties, ensuring that the petitioners could fulfill their obligations while compensating the bank for the delay. The court's judgment underscores the importance of flexibility and equitable considerations in enforcing financial settlements, especially under extraordinary circumstances like a global pandemic.

---