2022 (7) TMI 1547 - HC - Indian Laws

SBI must issue no-dues certificate after accepting OTS payment despite delayed bank credit

Delhi HC ruled in favor of petitioner-company in OTS scheme compliance dispute with SBI. Despite final payment cheque being deposited on scheme's last ... Compliance with One Time Settlement (OTS) scheme terms - construction of the terms of the sanction letter - the last payment made by Petitioner-company by way of a negotiable instrument (a cheque) on 23rd July, 2021 i.e. the last date of the validity period, stood credited into the account of SBI only on 27th July 2021 - HELD THAT:- When Petitioner- company tendered the final amount by cheque, SBI accepted the same without any condition. During the course of arguments, Ms. Tomar made an oral submission, without any supporting specific averment in the counter affidavit, that it could be a possibility that Petitioner-company simply deposited the cheque in the dropbox/ dak and moved away. However, the Court finds no mention of such contention in the counter affidavit. The Court also finds it hard to believe that the exact calculation of payable interest amount would have been done by Petitioner-company unilaterally. Nonetheless, SBI did not dispute the cheque even on the subsequent date, and instead, proceeded to encash the same. There is no explanation why the cheque was not sent for clearing on 23rd July, 2021 itself. Although it is orally argued that the same was perhaps for the reason that it was deposited by Petitioner-company after the clearing hours; however, again, there is no such averment in the counter affidavit. The first communication relied upon by SBI to defend its inaction is the letter dated 31st January, 2022 wherein for the first time, referring to a meeting held in the first week of January and on 31st January, 2022, it is contended that no-dues certificate cannot be issued towards the settlement of account. In view of the above, it emerges that SBI unconditionally accepted the payment; made no protest and credited the payment. Having accepted the payment and not offering any plausible explanation for the delay in responding can only lead to one inference– the stand now put forth by SBI is an after-thought. SBI has a duty to act fairly and reasonably. The OTS cannot be rendered infructuous on fanciful reasons otherwise the intent of bringing an OTS scheme, and the ensuing consequences, would stand defeated. The reasons offered by SBI have trivialized the ‘non-discretionary’ aspect of the scheme. The Court is satisfied that Petitioner- company has complied with the terms of the sanction letter, and therefore, the petition deserves to be allowed - petition allowed. Issues Involved1. Condonation of delay in filing counter affidavit.2. Compliance with One Time Settlement (OTS) scheme terms.3. Validity of final payment under OTS.4. Obligation of the bank to issue a no-dues certificate and withdraw DRT proceedings.Issue-wise Detailed Analysis1. Condonation of Delay in Filing Counter AffidavitThe court addressed the application for condonation of delay in filing the counter affidavit. The court allowed the application and accepted the counter affidavit filed on 19th July 2022.2. Compliance with One Time Settlement (OTS) Scheme TermsThe petitioner, Prayag Polytech Private Limited, availed credit facilities from the respondent, State Bank of India (SBI). Due to financial deterioration, SBI declared the petitioner's account as a Non-Performing Asset (NPA) and initiated proceedings before the Debt Recovery Tribunal (DRT). SBI offered a One Time Settlement (OTS) scheme to settle the outstanding amount of Rs. 7,15,72,836/- for Rs. 2,29,51,380.10/-. The petitioner accepted the OTS terms and made payments accordingly. The terms of the OTS included specific timelines for payments, with condition no. 5 stipulating that the balance amount must be paid within eight months from the sanction letter date, with interest, failing which the OTS would be rendered infructuous.3. Validity of Final Payment under OTSThe petitioner complied with the payment schedule, making the final payment of Rs. 40,13,586/- by cheque on 23rd July 2021. The cheque was encashed by SBI on 27th July 2021. SBI argued that the payment was invalid as it was credited after the validity period, thereby rendering the OTS infructuous. The court, however, found this argument unconvincing, noting that SBI accepted the cheque without any conditions and encashed it without protest. The court emphasized that the cheque was presented within the validity period, and SBI's acceptance and encashment implied compliance with the OTS terms.4. Obligation of the Bank to Issue a No-Dues Certificate and Withdraw DRT ProceedingsThe petitioner sought a no-dues certificate and the closure of DRT proceedings. Despite the petitioner's compliance with the OTS terms, SBI neither issued the no-dues certificate nor withdrew the DRT proceedings. The court held that the petitioner had fulfilled the OTS conditions and directed SBI to issue the no-dues certificate and inform the DRT to close the ongoing proceedings.ConclusionThe court concluded that the petitioner had complied with the terms of the OTS sanction letter. The petition was allowed, and SBI was directed to issue the no-dues certificate and take necessary steps to close the DRT proceedings.