TaxTMI 
TaxTMI 
2020 (9) TMI 1194
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.... 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 is dependant upon the State Government. The peti....
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....sbursement 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 No. 2. Anticipating that the due amounts were now be r....
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....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 repayment schedule of the remaining amount to be paid under the One Time Settlement Letter (P-11) was considered, and the matter was adj....
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....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 relied upon the judgments of Hon'ble Supreme Court in State Bank of India v. Vijay Kumar 2007 (3) RCR (Civil) 380 and P. Vijayakumari v. ....
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.... 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 any case, the petitioners in the writ petition have claimed extension till 30.09.2020, and therefore, no further time beyond this can be grant....
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....ein 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 date stipulated for deposit of the entire settlement amount. The relevant para No. 2 of the said judgment reads as under:- "2. It is not in dispute that in the month of Augu....
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....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. This Court while accepting the request of the petitioner, held that the action of the bank in cancelling the settlement and claiming the entire dues alongwith contractual rate of interest was unsustainable. The ....
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....5.2012 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 and 3 therein expired and due to family circumstances, the balance amount could not be arranged. Vide impugned letter dated 24.08.2011, the bank withdrew the One Time Settlement, on account of failure of the petitioner to deposit the amount within the stipulated time p....
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....ion 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 amount, while allowing the writ petition, it is directed that in case, the petitioners deposit another sum of Rs. 50 lakhs in terms of the statement made by their counsel on 25.7.2012 within two months of receipt of a certified copy of this order, the OTS shall be implemented. It....
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....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 the rate of 15% (reducing) on the defaulted amount as also interest at the rate of 15% on the amounts deposited by respondents No. 3 to 5 as auction money, for the period from the date(s) of deposit of these amounts till the expiry of the afore-stated period of four weeks, to the respondent bank ....
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....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 closed. In the writ petition filed by the Bank the position was reversed. 9. In the facts of the present case, the view taken by the learned Appellate Tribunal (DRAT), as noted above, cannot be said to be so wholly unreasonable or unsustainable so as to justify interference by the High Court. If the agreed amount....
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..... 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. The amount was to be deposited in terms of such settlement upto 31.3.2002. The petitioners failed to deposit the amount settled before the date fixed and, therefore, the concessions extended to the petitioners are no longer available. Therefore, the bank is entitled to recover the amount as per recovery certificate issued by the Debt Recovery Tribunal. It has ....
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....nt 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 the observations therein, were different and distinguishable. Lastly, in view of the later/recent judgment of the Hon'ble Supreme Court in P. Vijayakumari Vs Indian Bank supra, wherein it has been held that condonation of delay while seeking extension in OTS is possible, no support can be drawn in favour of respondent on the basis of the aforesaid judgment. Thus, while dealing with the conspe....
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....ll 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 (Amended)" dated 08.08.2018, which also provides for extension of time in OTS, and the relevant extract of the same is as under:- "B. EXTENSION/CONDONATION OF DELAY IN PAYING SETTLEMENT AMOUNT The normally acceptable time in making payment of settlement amount alongwith interest is 12 months w.e.f. the date of intimation of sanction to the borrower. If the sanction initially stipulates a repayment period less than 12 months, the same can be extended/condoned upto 12 months by....
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....e 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 India, cannot extend such time period of settlement. 23. Further, it is also to be noticed, that invariably in all the settlement schemes or the policies, there are already sufficient checks and balances to identify eligible borrowers to whom such concessions can be extended to lead to an OTS. It is needless to mention that settlement takes place, only after the case of the borrower has been tested on the basis of criteria of eligibility for settlement provided under the scheme or policy itself. For example we see, that cases of w....
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.... 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. ii. Extent of payments already deposited under the settlement or before filing of the petition - While considering an application for extension of time under OTS, the prime objective to be noticed is the intention of the borrower to culminate the settlement. If the borrower has already paid substantial amounts, to the creditor under the OTS, and for some remaining amounts, is seeking a reasonable extension, such requests can be considered favourably. This shows, that the applicant had an intention to clear the settlement and the deposit of substantial....
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....lea 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 offer of the borrower was found to be unacceptable. vi. Time period being demanded by the applicant to clear the remaining/balance settlement amount. - An applicant whose intention would be to clear the balance settlement amounts, would not claim for an unreasonable period of an extension, as otherwise, the intention would be to gain more time, without any actual intent to clear the settlement. In the facts and circumstances of each case, the Courts would therefore determine a reasonable period, to enable the borrower to clear the remaining settlement amount, subject of course, t....
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....r 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 petitioners are in litigation with other creditors the same by no stretch of imagination constitutes to be a material fact, disclosure of which would have had any impact over the decision of the present case. So long as the respondent No. 2 is getting its money back, under a settlement voluntarily entered into by it, it would have no concern with what the petitioners are litigating with the other creditors. We therefore have no hesitation in rejecting this argument of the respondent. 27. The next argument of the learned counsel for respondent No. 2 is that in another case bearing CWP No. 3683 of 2018 and....
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....ke 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 noticed i.e. the delay on the part of the Government to disburse the reimbursement to which the Institute of the petitioners were entitled to on account of Post Matric Scholarship Scheme, for which petitioners did make sufficient efforts by filing CWP No. 16997 of 2015 seeking direction to the Government to release the funds, which was allowed vide order dated 22.03.2016, and then the petitioners contested the interim stay granted by the Division Bench in LPA No. 1819/2017 and 410/2017 preferred by the Government challenging the final order passed by the learned Single Judge. The petitioners who are stated to b....
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....ers, 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 settlement/OTS. It shall be the responsibility of Respondent No. 2 to calculate the amounts due on account of interest and inform the petitioners well in advance, so as to enable the petitioners to ensure adherence to the time schedule of repayment. ISSUE NO. 3 31. Learned counsel for the respondent No. 2 has argued that Reserve Bank of India has initiated insolvency proceedings under the provisions of Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as "Code, 2016") against respondent No. 2 by filing CP (IB)- 4258/MB/2019 in terms of Rule 5 of the Insolvency and Bankruptcy (Insolvency and Liquidation Pro....
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....torium 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, in para No. 12 held as under:- "12. It can thus be seen that the primary focus of the legislation is to ensure revival and continuation of the corporate debtor by protecting the corporate debtor from its own management and from a corporate death by liquidation. The Code is thus a beneficial legislation which puts the corporate debtor back on its feet, not being a mere recovery legislation for creditors. The interests of the corporate debtor have, therefore, been bifurcated and separated from that of its promoters/those who are in management. Thus, the resolution process is not adversarial to the corporate debtor but, in fact, protective of its interests. The moratorium imposed by Section 14 is ....
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....kness. 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. In these circumstances, we do not see as to how, with the relief so claimed by the petitioner herein, i.e. seeking to repay the settlement amount with interest, would adversely effect the interest or the assets of respondent No. 2. 33. We find the present case is peculiar in nature, inasmuch as, usually it is Corporate Debtors of private and public nature which are subjected to Insolvency proceedings at the instance of the creditors (Financial/Operational). However, proceedings before the Adjudicating Authority i.e. the "National Company Law Tribunal, in the present case, have been initiated against the Respondent/Financial Service Provider i.e. the creditor itself, at the instance of the Regulator i.e. Reserve Bank of I....
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....ts 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 to Insolvency proceedings of the financial service provider, cannot be stretched to mean that proceedings which are non-adversarial in nature, like the instant proceedings, which aim at replenishing the funds to the back into the coffers of such financial service provider, would not be maintainable in view of Section 14 of the Code, 2016 read with Rules, 2019. 34. It is to be noticed that Insolvency proceedings under the Code, 2016 commence when the Adjudicating Authority i.e. National Company Law Tribunal is satisfied, that the Corporate Debtor is unable to meet its financial obligations and hence the petition is admitted and an independent person by the name of Resolution Professional or Administrator, as in this case, is appointed in place of management. After the admission order moratorium ....
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.... 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 Authority/Tribunal while exercising its jurisdiction under the Code, 2016. The judgments referred to us in paras No. 14-18, while deciding Issue No. 1, have considered granting extension in OTS in exercise of jurisdiction of this Court under Article 226 of the Constitution of India which is also an equitable jurisdiction. It is well settled, that every provision must be interpreted with the precise aim and object of the Statute, for which it was enacted. Code, 2016 was enacted with the primary object to provide for a time bound manner for maximisation of value of assets of such persons, to promote entrepreneurship, availability of credit and balance the interests of all the stakeholders including alteration in the order of priority of payment of Government dues. In our view, the relief as sought for by the....