AI Drafter 
TaxTMI 
TaxTMI 
2020 (9) TMI 1194
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....pe of Loan Against Property (LAP) against the security of a residential house and was repayable in a tenure of 15 years with Equated Monthly Instalment (EMI) of Rs. 2,07,036/-. The second Term Loan was availed for Rs. 58 Lakhs, against the same security of the said residential house, (mortgaged in both the accounts) which was to be repaid in a tenure of 30 years with Equated Monthly Instalment of Rs. 75,284/-. 3. The petitioners are stated to be the founder members of Aman Bhalla Foundation, which has set up educational institutions, imparting education in the field of Polytechnic, Engineering, Nursing, Teachers training, Hotel Management etc. at Pathankot (Punjab). Government of India, had introduced Post Matric Scholarship Scheme, pursuant to which educational institutions, would not charge tuition fee from the students of SC/ST/OBC/BC category, which was to be then reimbursed by the State Government, after having received the same from the Centre Government. The petitioners contend that pursuant to the said scheme, various students belonging to SC/ST/OBC/BC category take admission for which their Institutes do not charge tuition fee, and for such reimbursement the Institute i....
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....ad faced financial difficulties, on account of non-disbursement of the reimbursement, to be made by the Government under the Post-Matric Scholarship Scheme, to the Institutions due to which they had even approached this Court by filing CWP No. 16997 of 2015 tilled as "Aman Bluilla Foundation and others v. State of Punjab", seeking direction to the Government, to release the pending reimbursement under the aforesaid Scheme for the Session 2013-14 onwards. The said writ petition was disposed off vide order dated 22.03.2016, whereby directions were issued to the Government to disburse the dues of the petitioners. Against the aforesaid order, State of Punjab preferred LPA No. 1819 of 2017, which was attached with another LPA No. 410 of 2017, wherein vide interim order dated 01.11.2017, the recovery of the amount was stayed. The petitioners acting on behalf of their educational society, contested the said appellate proceedings and finally on 26.09.2018, the Division Bench of this Court vacated the interim order which was earlier passed in favour of the Appellant-Government. The petitioners contend that during this period, the accounts of the petitioners were declared NPA by respondent N....
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....r a brief hearing, this Court passed the following order:- "Case has been taken up through video conferencing in view of the outbreak of Pandemic COVID-19. CM No. 7213-CWP of 2020 Notice in the application, which has been accepted by Mr. Aalok Jagga, Advocate appearing for non-applicant- petitioners. CWP No. 5518 of 2020 Learned counsel for the petitioners has submitted a schedule of refund of loan amount whereas learned counsel for respondent No. 2-Bank submits that three loans amount are outstanding against the family of the petitioners and there is delay in not only making payment but the petitioners have backed out from the settlement earlier arrived at between the parties. Just to show their bonafide, learned counsel for the petitioners undertakes to deposit an amount of Rs. 15 lacs by the petitioners before the next date of hearing. Adjourned to 22.09.2020. Meanwhile, respondent No. 2-Bank is directed to give a schedule of refund of outstanding amount after considering the schedule, submitted by the petitioners." It is apparent, that while adjourning the matter to 22.09.2020, the proposed/fresh statement of rep....
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....it the balance amount within reasonable time period, as would permitted by this Court and with reasonable interest, which this Court may deem fit in the facts of the present case. Fourthly, he emphasised that, where the inability to clear the remaining amount of settlement, is on account of circumstances which were completely beyond their control of the petitioners, delay in making payment of the balance amount can be condoned keeping in view the bonafide intent of the borrower and the respondent can be compensated with interest. He then argues that extension in repayment of the balance OTS amount is permissible and that various banks, like for example, State Bank of India, Punjab National Bank and Punjab and Sind Bank have settlement policies which itself permit extension of time in making balance payment of the settlement amount. Thus, extension of time, to make the balance settlement amount, is not an alien concept and if the banks themselves have such a provision of granting extension, then this Court, would definitely have the jurisdiction under Article 226 of the Constitution of India to extend such period of settlement. 12. Sh. Jagga, learned counsel for petitioner has re....
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....in which notice of motion has been issued by this Court. Thus, the petitioner while relying upon the aforesaid two orders contends that since the petitioners have defaulted with other institutions, the relief claim in the present petition should not be granted. Secondly, since the petitioner have concealed the factum of the order Annexures R-2/1 and R-2/2, therefore, the present petition is liable to be dismissed. Thirdly, the plea taken by the petitioners with regard to its inability to repay the loan account on account non-disbursement of scholarship fee under the Post-Matric Scholarship Scheme by the Government has been considered and rejected by this Court in CWP No. 3683 of 2018 and CWP No. 5907 of 2018 disposed off vide common orders dated 04.09.2015 (Annexure R-2/3) and therefore, the petitioners cannot take advantage of the aforesaid plea to claim the relief as prayed for in the instant petition. Fourthly, he submits that this is the second settlement, with the petitioners and therefore, since they had not deposited the settlement amount on time, therefore concession granted to the petitioners, by virtue of OTS no longer exist and therefore extension cannot be granted. In a....
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....y, a Division Bench of this Court, in Sat Kartar Ice and General Mills v. Punjab Financial Corporation 2008 (1) ISJ Banking 248 considered a situation, where petitioner therein failed to deposit the settlement amount in terms of the schedule fixed by the financial corporation but deposited the settlement amount at a belated stage. He filed an application for condonation of delay before the Respondent-Financial Corporation, and the same having not been considered, it led to the filing of the writ petition seeking condonation of delay in depositing the balance amount of settlement. This Court while noticing the fact that the borrower, had paid the entire amount of settlement, though at a belated stage, condoned the delay on examining the reasons explaining such delay, which were found to be reasonable.. It also noticed that in large number of cases since Respondent Corporation itself had condoned the delay and it was not justified for the respondent -financial corporation to claim cancellation of settlement, especially when the petitioner was ready to pay interest for the delayed period and also on the ground that the corporation, itself had accepted the amount even after the last da....
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....hri Sagar has only stated that as the petitioner had not utilised the amount, for the purpose for which it was released, the Corporation was justified in demanding the entire amount. Be that as it may; once one time settlement has already been offered to the petitioner and no such plea was taken in the written statement, no relief can be given to the respondent Corporation on this account. We feel that in the case of the petitioner also, the Corporation was bound to condone the delay and it was not open to the Corporation to reject the offer made under one time settlement scheme, after accepting the entire amount. In view of this, the writ petition is allowed and action of the respondent Corporation in rejecting the one time settlement offered to the petitioner is declared null and void." [Emphasis supplied] 16. Similarly another Division Bench of this Court in M/s. Lord Budha Society and others v. State Bank of Patiala 2013 (3) PLR 146, also considered a similar situation where the petitioner, could not deposit the entire settlement amount within the stipulated period and claimed extension in time to make the payment of the remaining settlement amount. T....
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.... the petitioners and the guarantors of the borrowers. However, the interest for the period from 01.04.2013 till today shall be paid by the petitioners, within one week from today. 16. The petitions are accordingly allowed. The order dated 02.05.2012 subject matter of challenge in CWP No. 9186 of 2012 is set aside. CWP No. 4348 of 2012 is disposed of in view of the payment of settlement amount only subject to payment of interest for the period 01.04.2013 till 12.04.2013. Petitions allowed." [Emphasis supplied] 17. Again a Division Bench of this Court in M/s. A-One Megamart Pvt. Ltd. v. HDFC Bank and Anr. 2013 (1) PLR 688 considered a similar issue and extended the period to deposit the remaining amount of settlement pursuant to OTS having been entered between the parties. In the said case, parties had entered into One Time Settlement vide letter dated 22.01.2011 for Rs. 250 Lakhs, which amount was to be paid by 22.03.2011, The Petitioner could deposit Rs. 50 lakhs in terms of the said settlement but was unable to pay the remaining amount of Rs. 200 lakhs by 22.03.2011. It sought extension from the bank. In the meantime, the father of petitioner Nos. 2 a....
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....2012 which were deposited with the Registrar (Judicial) of this Court. Further on 25.7.2012, learned counsel for the petitioners had stated that besides the aforesaid amount of Rs. 2 crores, the petitioners were prepared, to pay additional amount of Rs. 50 lakhs. This intention clearly depicts the bonafides of the petitioners. The narration of events noticed hereinbefore shows that it was due to certain unfortunate exigencies, the petitioners could not honour the terms of the OTS. In such circumstances, the action of the respondent-Bank in rejecting the OTS is harsh and unjust. It may also be noticed that the petitioners have no other remedy available against the rejection of extension of time for OTS proposal. This Court in Sat Kartar Ice and General Mills v. Punjab Financial Corporation, 2008 (1) ISJ Banking 248 had condoned the delay in depositing the amount of OTS and directed the Bank to abide by the OTS. Similarly in State Bank of India v. Vijay Kumar, AIR 2007 SC 1689 again, the delay in depositing the amount which was condoned by the High Court was upheld by the Apex Court. Accordingly, in the present facts and circumstances after condoning the delay in depositing the amoun....
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....hat as against the settled amount of Rs. 3,98,27,000.00 under the second OTS an amount of Rs. 2,05,00,000.00 stands deposited by or on behalf of the petitioners in the 'no lien account' with the respondent Bank and if that amount of money is adjusted towards the loan account of the petitioners only an amount of Rs. 1,93,27,000.00 would be payable by the petitioners to the respondent. For the delay in repayment of the settled amount, respondent bank can be duly compensated by payment of interest for the period of delay. At the same time, the auction purchasers can be compensated by refund of the amount(s) deposited by them, together with interest for the period during which they have been deprived of user of the deposited amounts. 11. Therefore, we accept the writ petition and extend the time for repayment of the settled amount under the second OTS by four weeks reckonable from today. While the respondent bank shall be at liberty to adjust the amount of Rs. 2,05,00,000.00 already deposited by or on behalf of the petitioners towards their loan account and the petitioners shall pay, within four weeks, the balance amount of Rs. 1,93,27,000.00, together with interest at....
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.... the petition and had set aside of the impugned order of DRAT. Laying challenge to the said order passed by the High Court, the borrower approached the Hon'ble Supreme Court and prayed for condonation of delay of having paid the settlement amount with the aforesaid delay Hon'ble Supreme Court, while condoning the delay held in para Nos. 8 to 11, as under:- "8. We have considered the matter. There was undoubtedly some delay in payment of the amount due as per the terms of the settlement reached in the Lok Adalat. It was also agreed by and between the parties that if the terms of payment including the time schedule of payment is not adhered to, the respondent-Bank will be at liberty to recover the entire amount due. The DRAT in the impugned order had considered the matter and had taken the view that even on the face of the express terms between the parties that the bank would have a right to recover the full amount due in the event of default on the part of the appellants, the same was not the only course of action or the sole option and that on the grounds shown for the delay the same is liable to be understood in favour of the borrower. Accordingly, the matter was ....
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....06 AIR (Punjab) 95, in which it was held that since the petitioner did not make the entire payment upto the last date prescribed under the OTS, it would not confer any enforceable right in favour of the petitioner seeking direction to the bank to accept such deposit. The relevant paras being Para No. 8 to 10 of the judgment, reads as under:- "8. Learned counsel for the petitioners has vehemently argued that the revised guidelines issued by the Reserve Bank of India on 29.1.2003 are in continuation of earlier guidelines dated 27.7.2000. The petitioners have deposited the balance 75% amount on 23.7.2004. Therefore, the terms of one time settlement scheme stand fully complied with. Thus, it is not open to the Bank to put the property of the petitioner No. 2 to sale. It was argued that the guidelines issued by the Bank are non-discretionary and non-discriminatory for settlement and, therefore, the petitioners having deposited the amount in terms of the said scheme, the bank has no jurisdiction to auction the property of the petitioners. 9. On the other hand, it is the stand of the respondents that the petitioners had entered into one time settlement in the year 2001. ....
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....another opportunity was given to the borrowers to come forward for settlement of the outstanding dues. It was thus contended that since, the petitioner therein had deposited the amount within the stipulated period of the revised guidelines, therefore, the payment made by the petitioner ought to be considered towards the settlement of the loan account. The Court did not accept the aforesaid argument and hence did not consider the payments deposited by the petitioner towards the settlement under the original scheme dated 27.07.2000. Secondly, it is to be noticed that in the aforesaid case, the settlement had taken place pursuant to OTS Scheme formulated by the Reserve Bank of India and not by the respondent therein - State Bank of India, therefore the State Bank of India was right in contending that it (the Bank) could not have extended the period provided under the aforesaid original scheme issued by Reserve Bank of India, having no jurisdiction to do so. Thirdly, the Court granted option to the petitioner therein to seek settlement under the revised guidelines enforce or fresh settlement scheme, if any meaning issued by RBI. It is thus to be acknowledged that the entire context of ....
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....up to- 25.1.2 Same/Similar powers shall be exercised by a higher authority for the OTS proposal approved by their lower authority. 25.1.3 HOCAC Level III may approve extension as above even in cases sanctioned by MC. 25.2 With Further Sacrifice 25.2.1 Extension of Time Period with further sacrifices i.e. without/partial payment of interest shall be placed to the next higher authority other than who had originally approved the OTS, who shall exercise the above powers subject to his delegated authority provided total sacrifice (sacrifice at the time of approval plus further proposed sacrifice of interest loss) remains in his powers. Proposals approved originally by MC shall be placed to MC only. 25.2.2 Proposals sanctioned by HOCAC Level II or earlier by Executive Director/HOCAC Level III or earlier by CMD/MD and CEO/Management Committee shall be considered by respective Sanctioning Authority within delegated powers." Apart from above, we have found a similar provision in the One Time Settlement Policy of Punjab and Sind Bank as well, by the name of "Recovery Management Policy and Guidelines for Settlement/Write off in Borrowal Accounts....
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.... for the extended period of 3 months i.e. from 01.07.2020 to 30.09.2020". [Emphasis supplied] It is thus clear from the above few illustrations, that the banks themselves, have the discretion to extend the period of OTS keeping in view attending and demanding circumstances, which is only to ensure that ultimately the purpose of settlement is achieved. 22. We are conscious of the fact, that each Institution has its own set of settlement policies but the reference of the aforesaid three settlement schemes by the three nationalised banks is only for illustrative purpose to bring home the point, that looked even from the perspective of the Financial Institutions, One Time Settlement is not cloaked with such rigorous principles which may not permit extension of period to pay the remaining/balance settlement amount. Had that been so the banks itself would not have provided for an extension clause in their respective settlement policies. If the settlement policies of the banks itself provide for an extension subject to payment of interest, there is no reason to hold that the Courts in exercise of their equitable jurisdiction under Article 226 of the Constitution of In....
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....r the petitioners would be deserving of this concession or not. Once having held in Issue No. 1, that extension of time in making balance payment of OTS is permissible in law, it would now be appropriate to lay down certain illustrative guidelines, to be considered cumulatively or individually, on case to cases basis, whether an applicant would be entitled for an extension of OTS or not. In our view, some of them would be:- i. The Original Time provided in the Settlement - In our considered opinion, the first and foremost aspect to be noticed would be the time period originally granted by the bank to pay off the settlement amount. If the time period originally stipulated in the settlement letter to pay off the settlement amount is short or is not excessive, the case for extension then could be considered. It is to be noticed that the borrower is to arrange funds to complete the OTS. If reasonable time period is not given, the very purpose of settlement would be defeated. In that eventuality application for extension can be considered so that the borrower gets a reasonable time to clear off the settlement amount and the ultimate purpose of settlement is achieved. ....
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....t, would have to be returned back by the creditor to the petitioner. We draw strength from the recent judgment of the Hon'ble Supreme Court in M/s. Kut Energy Pvt. Ltd. v. Authorized Officer, Punjab National Bank bearing Civil Appeal No. 6016-6017/2019 decided on 20.08.2019. In the said case, the petitioner therein deposited upfront amount with the Registry of the Court to show its bonafide in support of its OTS proposal which was offered for consideration to the bank. The bank while rejecting the proposal sought to adjust the upfront amount against the contractual dues. The plea of refund raised by the petitioner was rejected by the High Court, which led to filing of an appeal before the Hon'ble Supreme Court. While allowing the appeal, it was held that deposit of the amounts in terms of the interim order of the High Court was only to show the bona fides of the appellants when a revised offer was made by them. The deposit was not towards satisfaction of the debt in question. Hence, the bank was not justified in retaining the said upfront amount, while rejecting the OTS offer of the appellant therein and hence the bank ought to have refunded the upfront amount, if the OTS o....
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....unsel for the respondent No. 2. The first contention of learned counsel for respondent No. 2 is that the petitioners have concealed the factum of having availed loans from other two banks and there being a litigation pending qua the same. The said argument cannot be a reason to reject the plea of the petitioners. Hon'ble Supreme Court in M/s. SJS Business Enterprises Pvt. Ltd. v. State of Bihar 2004 (7) SCC 166, held that as a general rule, suppression of a material fact by a litigant disqualifies such litigant from obtaining any relief. This rule has been evolved out of the need of the Courts to deter a litigant from abusing the process of Court by deceiving it. But the suppressed fact must be a material one in the sense that had it not been suppressed, it would have had an effect on the merits of the case. It must be a matter which was material for the consideration of the Court, whatever view the Court may have taken. In the present case, the petitioner has prayed for extension of settlement period pursuant to an OTS entered with respondent No. 2 and has paid substantial portion of the same and is willing to pay the remaining with interest. In our considered opinion, if the ....
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....aving entered into a second settlement cannot be permitted to have a grievance regarding the same. As regards the claim of the petitioners for extension is concerned, it is admitted fact, that the petitioners have paid Rs. 83.80 lacs out of the settlement amount of Rs. 1.60 Crore, before filing of the present petition, and another sum of Rs. 30 lacs in compliance of the interim directions passed by this Court, sum totaling to Rs. 113.80 lacs as on today. This shows that the petitioners have paid more than 50% of the settlement amount before filing the petition. The time period provided to the petitioner to make payment of the settlement amount was about 6 months which cannot be said to be excessive. During the pendency of the present petition, the bona fide of the petitioners were tested and on two occasions i.e. vide order dated 28.02.2020 and 07.09.2020, they were directed to deposit Rs. 15 lacs each, which they have complied with. It is the respondent No. 2, which kept on accepting the amounts even after the settlement and did not issue any specific revocation of settlement letter. The financial difficulty of the petitioners to make the balance settlement amount has also been no....
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....e, not much impressed by this argument of the respondent as well. 30. To conclude, on a careful examination of facts and circumstances, of the present case as also the rival arguments of the parties, we find that since that the petitioners are entitled to extension of time to repay the remaining settlement amount, as they meet most of the factors deliberated upon in para No. 27.1 hereinabove (not repeated for the sake of brevity), they are entitled for extension of time. Though the petitioners, have pleaded that keeping in view the current situation where COVID-19 has adversely the capabilities of the petitioners, they may be permitted to repay the amount in 4 quarterly instalments (one year), but we feel that an extension of 6 months would be reasonable keeping in view the current situation. Thus, we hold and direct that the petitioners would have to pay the remaining amount due in two quarterly instalments, of which a sum of Rs. 25 lacs shall be payable on or before 31.12.2020 and the remaining amount by 31.03.2021. The petitioners shall also pay interest @ 9% p.a. simple on the delayed payments on reducing balance payable w.e.f. 01.06.2019 i.e. the closing date of the settlem....
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....nbsp;[(3) The provisions of sub-section (1) shall not apply to- (a) such transaction as may be notified by the Central Government in consultation with any financial regulator; (b) a surety in a contract of guarantee to a corporate debtor.] (4) The order of moratorium shall have effect from the date of such order till the completion of the corporate insolvency resolution process: Provided that where at any time during the corporate insolvency resolution process period, if the Adjudicating Authority approves the resolution plan under sub-section (1) of section 31 or passes an order for liquidation of corporate debtor under section 33, the moratorium shall cease to have effect from the date of such approval or liquidation order, as the case may be." A careful reading of Section 14 of the Code, 2016 would show that the purpose and object of the moratorium imposed by Section 14 is to preserve the assets of the Corporate Debtor (like respondent No. 2 herein) during the resolution process and to save the Corporate Debtor from its own management. Hon'ble Supreme Court in Swiss Ribbons Pvt. Ltd. v. Union of India 2019 (4) SCC 17, ....
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....tory freeze that has thus been made is, unlike its predecessor in the SICA, 1985 only a limited one, which is expressly limited by Section 31 (3) of the Code, to the date of admission of an insolvency petition up to the date that the Adjudicating Authority either allows a resolution plan to come into effect or states that the corporate debtor must go into the liquidation. For this temporary period, at least, all the things referred to under Section 14 must be strictly observed so that the corporate debtor may finally be put back on its feet albeit with a new management." [Emphasis supplied] Even the aforesaid judgment reiterates the very purpose of imposing a statutory moratorium i.e. to alleviate corporate sickness. This clearly shows that the precise intent to restrict initiation or continuation of proceedings against a Corporate Debtor is to preserve its assets so that during Corporate Insolvency Resolution Process (CIRP), the Corporate Debtor is subjected to remedial acts to improve its financial condition. It has been further held that Section 14 must be strictly observed so that the corporate debtor may finally be put back on its feet albeit with a new management.....
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.... or rejection; and (ii) the license or registration which authorises the financial service provider to engage in the business of providing financial services shall not be suspended or cancelled during the interim-moratorium and the corporate insolvency resolution process. Explanation.- For the purposes of this clause. "interim moratorium" shall have the effect of the provisions of sub-sections (1), (2) and (3) of section 14. xxx xxxx" It can be seen from the aforesaid provision, that during the continuation of moratorium the license or registration of financial service provider which authorises the financial service provider to engage in the business of providing financial services shall not be suspended or cancelled. It therefore, continues to maintain and retain its character as Financial Service Provider, even during the period of moratorium, in so far as its debtors are concerned. This assumes significance of the objective of moratorium, in relation to Insolvency Proceedings of Financial Service Provider. In our view, a holistic reading of Section 14 read with Rules, 2019 in the peculiar facts of the present case particularly when it is pertaining ....
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....etitioners and the petitioners would be left remediless. Law cannot be permitted to be interpreted in such a manner which would put the petitioners in an unreasonably disadvantageous position, leaving it remediless virtually to the mercy of respondent No. 2/lender [refer to para 31 in Sunil Vasudeva v. Sundar Gupta 2019 (8) SCALE 488]. A relief of such a nature, where petitioner is coming forward to pay his dues, cannot be denied on such limited interpretation of Section 14(1)(a) of the Code, 2016. Moreover, pursuant to two interim directions of this Court dated 28.02.2020 and 2.9.2020 passed by this Court, the petitioners complied with the same and deposited Rs. 30 lacs to show their bonafide in support of their claim in the writ petition. Respondent No. 2 having accepted the aforesaid amounts from the petitioners without any protest or demur during the pendency of petition, we find it unreasonable for respondent No. 2 to claim that the petition is not maintainable. 36. Moreover, in our considered opinion, a relief of such nature claiming extension payment of balance settlement amount pursuant to mutually agreed OTS by the borrower cannot be considered by the Adjudicating Autho....