TaxTMI 
TaxTMI 
2020 (12) TMI 749
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....r 'OTS') with the Petitioners in relation to repayment of debt. The reliefs prayed for are set out below: "a) Issue a Writ of mandamus and/or any other appropriate writ/direction/or order setting aside Respondent's letter dated 26.05.2020 and grant all consequential reliefs; b) Pass any appropriate writ/direction/or order directing the Respondent to extend the time by 3 months for repayment under the terms of Respondent's in principle agreement for one-time settlement dated 03.03.2020/17.03.2020. c) Issue a Writ of mandamus and/or any other writ/direction/or order directing the Respondent to not take any coercive/adverse steps against the subject properties of the Petitioners. d) Issue a Writ of mandamus and/or any other appropriate writ/order/direction thereby directing the Respondent to not take any coercive/adverse steps against the subject properties of the Petitioner e) pass any other order(s) as this Hon'ble Court may deem fit and proper in the facts and circumstances of the case." Brief Background 3. A perusal of the facts in the present case shows that the Petitioners had availed of various credit facilities from IL&FS betw....
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....19 and finally possession was obtained of both properties by IL&FS. It was at this stage that settlement proposals were exchanged between the parties. 8. Various proposals were given by the Petitioners for a One Time Settlement (`OTS'), but the final proposal of Rs. 100 crores was given on 10th January, 2020 in respect of the outstanding loan of Rs. 93 crores. On 3rd March, 2020, the IL&FS agreed in-principle for the payment of 100 crores at one go, either by the Petitioners or by any third party on their behalf. However, the same was subject to various conditions. The principal condition was that the entire amount was to be paid on or before 27th March 2020. 9. The OTS did not fructify as the amounts could not be paid by the Petitioners in the period prescribed by IL&FS, despite requests for extension. This finally led to IL&FS's revocation of the said settlement proposal vide letter dated 26th May, 2020. It is this revocation letter which is under challenge in the present writ petition. 10. The primary ground on which the writ petition is based are the RBI circulars on 'COVID-19 Regulatory Package' bearing no. DOR.No.BP.BC.47/21.04.048/2019-20 dated 27th March 2020, DOR.....
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....incipal amount, interest as well as bullet repayment. In her submission, bullet repayment would also include the OTS amount. Reliance is also placed upon the amendment in Section 10(a) of the Insolvency and Bankruptcy Code, 2016 ("IBC"), by which the benefit of one year was given for insolvency proceedings to not be initiated during the lockdown period. The fact that the OTS amount was to be paid by 27th March, 2020 and revocation was made on 26th May, 2020 shows that the entire chain of events took place during the operation of first circular itself. 14. Reliance is also placed on the judgment in J. Rajiv Subramaniyan and Ors. v. Pandiyas and Ors. [(2014) 5 SCC 651], to argue that the intention of the SARFAESI Act, 2002 is to ensure that the secured asset earns maximum yield when being auctioned. According to Ms. Arora, the outstanding principal amount was of Rs. 93.5 crore, whereas the OTS amount is Rs. 100 crores. Recently, IL&FS has sought to sell their entire loan portfolio at the outstanding principal amount. Ld. Sr. counsel submits that under such circumstances, when the Petitioners are willing to honour the OTS amount, which is over and above the outstanding principal am....
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.... matter in any manner. 20. Mr. Mehra, ld. Sr. counsel vehemently urges that neither of the RBI circulars protect any defaulters under the garb of the pandemic, if they did not honour the loans which had become payable by or before the pandemic broke out. In the present case, the declaration of the Petitioner's account as NPA took place in 2018 and there is no existing loan. In fact, the judgment of the DRT dated 19th July, 2019 has upheld the liability of the amount to be recovered from the Petitioners under SARFAESI proceedings. It is submitted that the present case being one in which adjudication has taken place, the RBI circulars which provided for a moratorium and interim relief for borrowers would not apply in the case of the Petitioners. Moreover, since IL&FS has not invoked the IBC, the amendment to Section 10(a) would be of no assistance to the Petitioner in any manner. 21. He further submits that the proposal of assignment of the loan offer cannot be a reason for the Petitioners to get any additional time to make the payments. Assignment just means that there is new party that may step in at a later stage. However, the loan would still be recoverable. Reliance is pla....
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.... the reason for that. xxx Thus end-use of the facility was not done in the terms of the agreement. In such a situation, the respondent was justified in recalling the advance, even in the so-called moratorium period as the construction of projects were not started/remained incomplete. xxx In view of the above, classification to NPA category by the respondent is justified, even before the instalments fell due and were defaulted, as claimed by the applicant on the happening of 'event of default'. xxx The plea of the applicants that the recall notice was issued before the account being declared NPA has no footing, as the respondent bank was within its rights to recall the advance any time. All the actions taken under the SARFAESI Act, have admittedly been initiated after the NPA date i.e. 30.06.2018 and the applicants have failed to bring on record any violation of the rules in this regard." 27. Thus, the declaration of the Petitioner's loan account as an NPA was upheld by the DRT. 28. The basic premise on which relief is being sought by the Petitioners is that one M/s Puran Associates (NBFC) has sanctioned a loan of Rs. 100 c....
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....nce June, 2020 to November, 2020, the Petitioner had sufficient time to raise the money and pay IL&FS. However, no payment has been forthcoming from the Petitioner. Despite the lapse of more than six months, no concrete step was taken by the Petitioners to honour the OTS. 33. The circulars of the RBI and the guidelines thereunder relate to reliefs to be granted for payments of interest and declaration of accounts as NPAs etc., during the COVID-19 pandemic. These circulars and policy guidelines cannot lend any support to the Petitioners' case where the defaults are prior to the outbreak of the pandemic itself. The legality of the revocation of the OTS in May, 2020 cannot be tested on the benchmark of the recent RBI circulars and the policy guidelines inasmuch as these settlements are independent of the said circulars and guidelines. Moreover, the RBI circular itself make it clear that the same is for "continuity of viable businesses" and not for accounts which are already declared as NPA, as is in the present case. 34. The one-time settlement proposal by IL&FS was in respect of a party which had already defaulted, against whom legal proceedings had been initiated and propertie....