AI Drafter 
TaxTMI 
TaxTMI 
2022 (10) TMI 259
X X X X Extracts X X X X
X X X X Extracts X X X X
....ing the money from their sundry debtors in 2017, they addressed several letters to the Allahabad Bank to consider the rehabilitation proposal of the petitioners in terms of the Reserve Bank of India (RBI) guidelines known as "Framework for Revival & Rehabilitation of Micro, Small & Medium Enterprises" dt. 17.03.2016. The said request was rejected by the Allahabad Bank vide letter dt. 13.10.2017 without placing it before the Designated Committee. CWP No. 22963 of 2017 4. The petitioners challenged the same by filing CWP No. 22963 of 2017 in this Court, which was allowed on 14.08.2018 by this Court, holding that the rejection of the petitioners' proposal for restructuring by the Allahabad Bank without referring it to the Designated Committee amounts to contravention of the RBI guidelines, and a direction was given to the Allahabad Bank to place it before the Designated Committee. 5. Thereafter, the Allahabad Bank again rejected the proposal of the petitioners by getting the proposal examined by the said Committee. 6. But the said Committee was not constituted in terms of Clause 3 of the above RBI guidelines dt. 17.03.2016 which mandated that a Government nominee shoul....
X X X X Extracts X X X X
X X X X Extracts X X X X
....7. The petitioners then approached the Allahabad Bank on 15.11.2019 seeking extension of time for paying the balance amount payable under the OTS of Rs. 9.20 Crores. 18. In the meantime, a suit for permanent injunction was filed by one Saleem Ansari in respect of the property which had been agreed to be sold by the petitioners to the purchaser under the agreement of sale dt. 30.4.2019. 19. Due to the pendency of the said suit, the purchaser refused to pay the balance amount till he was assured of getting physical possession of the property. Petitioners' request for extension of time to pay the OTS amount and CWP No. 35810 of 2019 20. When the request of the petitioners for extension of time for complying with the terms of the OTS made on 15.11.2019 was not taken up by the Allahabad Bank, petitioners filed another CWP No. 35810 of 2019 in this Court. 21. The said Writ Petition came to be disposed of on 09.01.2020, directing the Allahabad Bank to take a final decision on the request for extension made by the petitioners on 15.11.2019 within three weeks. The rejection of the OTS extension request by the Allahabad bank 22. Allahabad Bank then rejected the reque....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n making the balance payments, and the occupant of the property in respect of which the Civil Suit was filed by Saleem Ansari, who was to vacate the same by 30.06.2020 also requested time to vacate the premises. The petitioners therefore sought extension again on 09.09.2020 for six more months for making the balance payment pursuant to the OTS sanctioned on 26.03.2020 to them. The instant Writ Petition 31. The petitioners then filed the instant Writ Petition and sought the Writ in the nature of Mandamus directing the respondent to grant extension of time for making the balance payment of the OTS pursuant to the Annexure P-16 letter dt. 26.03.2020 stating that the settlement was for Rs. 10,60,32,000/- out of which they have already paid Rs. 4 Crores, and the payment of the balance amount got delayed due to the circumstances beyond their control. They also sought a direction to respondent not to take any coercive action against the properties of the petitioners, and to maintain status quo regarding the mortgaged properties pending the disposal of this Writ Petition. The events after filing of the Writ Petition 32. On 08.10.2020, when the matter was listed before this Cour....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 10,60,32,000/- in the second OTS dt. 26.03.2020 sanctioned vide Annexure P-16. It is stated that there was a condition in the said OTS letter that in the event of failure to repay the entire OTS amount within stipulated time period, the OTS would become infructuous, and so the petitioners were not entitled for any extension of time. 40. It was also contended that the petitioners ought not to have entered into any agreement to sell on 30.04.2019, since there was a status quo order granted on 05.02.2020 in CWP No. 2555 of 2020. 41. It is contended that the without prior permission of the respondent, such agreements to sell could not have been entered into, and that even though registration of the sale deeds was to happen by 18.11.2019, they were not done even though no COVID-19 pandemic was prevailing in India at that time. 42. It is further contended that the petitioners have incorrectly mentioned that they have not filed any other Writ Petition, though they have filed CWP No. 2555 of 2020 which was pending in this Court. 43. It is pointed out that the petitioners were not running the factory and a Local Commissioner be appointed to verify whether the factory is being r....
X X X X Extracts X X X X
X X X X Extracts X X X X
....her [CWP-5518-2020 DT.22.9.2020 (DB)] and the decision in the Arvindra Electronics Pvt. Ltd. Vs. State Bank of India [CWP No.12953 of 2018, dt. 10.03.2022 (DB)]. Consideration by the Court 51. From the facts and circumstances narrated above, it is clear that certain loan facilities have been availed by the petitioner No. 1 from the Allahabad Bank by mortgaging properties covered by three sale deeds bearing No. 18465, 18479 and 22379. 52. Since, there was no proper consideration of the petitioners' restructuring proposals made in the year 2017, petitioners had to approach this Court by way of CWP No. 22963 of 2017 and CWP No. 657 of 2019, both of which were disposed by this Court after the first OTS dt. 07.06.2019 (Annexure P-3) was granted by the Allahabad Bank to the petitioners for Rs. 14.75 Crores. 53. It is not disputed by the respondent that while this OTS was in force upto 07.12.2019, petitioners had paid Rs. 5.25 Crores to the respondent, and they had also deposited a sum Rs. 50 Lakhs in a no lien account by 02.12.2019. 54. In the meantime, respondent had again sanctioned an OTS vide letter dt. 26.03.2020 (Annexure P-16) for Rs. 10,60,32,000/- and upfront ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cifically held that in exercise of the jurisdiction under Article 226 of the Constitution of India, the High Courts would have the jurisdiction to extend the period of settlement as originally provided for in OTS letter, but laid down certain guidelines to be followed. 63. It held that One Time Settlement is not cloaked with rigorous principles which may not permit extension of period to pay the remaining/balance settlement amount; and in fact OTS policies of certain Banks themselves contain provisions for extension for the time period in their respective settlement Policies. 64. Once this is so, the Bench held that 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. 65. It held that the willful defaulters and fraudsters would not be entitled to such extension, and in the case of a deserving borrower, who has deposited substantial amount within the original stipulated period of settlement, and proved his bona fides, and is willing to clear the remaining amount in a reasonable period and also compensate the creditor with interest for the period o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....emaining/balance settlement amount. An applicant whose intention would be to clear the balance settlement amounts, would not claim an unreasonable period of time 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, to payment of reasonable interest for the delayed period, to balance the equities. G. Attending factors and circumstances- Illustrations of such factors could be the situation created by COVID-19 pandemic, and the difficulties in arranging the amounts could be taken note of while determining the period of extension to be granted to an applicant. Likewise, losses suffered on account of natural calamities, unfortunate accidents, fire incidents, thefts, damage by floods, storms etc. could also be the factors to be taken into account for extension of time. H. Irreparable loss and injury to the applicant The Division Bench in Anu Bhalla2 (Supra) clarified that the guidelines/factors are not exhaustive but only ill....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Bank of India Act, 1934. It held that guidelines have been issued by the Reserve Bank of India through a letter dt. 03.09.2005 addressed to the Chairman/Managing Director of all Public Sector Banks; that the said letter refers to circular dt. 19.08.2005 issued by the Reserve Bank of India; in terms of the said circular, guidelines for grant of OTS scheme for recovery NPAs below Rs. 10 crore were laid down; and the letter dt. 03.09.2005 categorically stated that such OTS scheme had to be implemented by all Public Sector Banks and the guidelines were non-discretionary and non-discriminatory in SME Sector. 75. It held that the Public Sector Banks have to implement the guidelines of the RBI relating to the OTS as per it's decision in Central Bank of India v. Ravindra 2002 (1) SCC 367, that the Board of Directors of the Bank in the said case could not have deviated from the said guidelines, and it's conduct was violative of the equality Clause contained in the RBI guidelines and also Article 14 of the Constitution of India. 76. It held that the Bank itself had made an offer to accept the proposal of the appellant in regard to enforcement of OTS pursuant to the RBI gu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....te that there was COVID-19 pandemic which resulted in lockdowns in the country which continued from 24.03.2020 to 30.06.2020 preventing operation of industries and movement of men and vehicles. Even though lockdown was lifted on 01.07.2020, still the restrictions on running of factories continued for considerable period of time. 84. According to the petitioners, for the above reason and also because the purchasers, who had agreed to purchased the properties under the agreements of sale dt. 30.04.2019 (Annexures P-6 and P-7) delayed payment of the amounts thereunder to the petitioners, it was forced to seek extension of time for making payment under the said OTS. 85. Out of 10,60,32,000/-, substantial payment of Rs. 4 Crores was made on the date of sanction, and subsequently, as per the scheduled fixed by this Court in its order dt. 15.10.2020 as modified on 21.10.2020, the balance payments were made by 31.03.2021 except the interest component. 86. The contention of the Bank that the time limit fixed in the OTS is final, and the same cannot be extended under any circumstances cannot be countenanced since having regard to the COVID-19 pandemic, it would have been virtually i....