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 date (23rd July 2021) but credited on 27th July 2021, court held SBI unconditionally accepted payment without protest and credited it. SBI's subsequent refusal to issue no-dues certificate was deemed an after-thought lacking reasonable explanation for delayed response. Court emphasized banks must act fairly and reasonably, finding petitioner complied with sanction letter terms. Petition allowed.

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Issues Involved
1. 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 Analysis

1. Condonation of Delay in Filing Counter Affidavit
The 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 Terms
The 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 OTS
The 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 Proceedings
The 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.

Conclusion
The 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.

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