2005 (11) TMI 519 - HC - Indian Laws

Summary

Issues Involved:
1. Acceptance of One Time Settlement (OTS) by the respondent bank.
2. Contractual obligations and defaults by the petitioners.
3. Jurisdiction and discretion under Article 226 of the Constitution of India.
4. Impact on financial institutions and the economy due to non-recovery of loans.

Issue-wise Detailed Analysis:

1. Acceptance of One Time Settlement (OTS) by the respondent bank:

The petitioners requested the court to direct the respondent State Bank of India to accept their One Time Settlement (OTS) offer of Rs. 25 Lakhs as per the Reserve Bank of India's guidelines. The bank had initially agreed to an OTS of Rs. 20 Lakhs but the petitioners failed to pay the full amount, paying only Rs. 10.86 Lakhs. The petitioners later increased the OTS offer to Rs. 25 Lakhs under alleged pressure from the bank, which the bank refused to accept. The bank contended that the petitioners abandoned the concessional settlement offer themselves and that the OTS scheme was a time-bound measure that had expired and could not be revived.

2. Contractual obligations and defaults by the petitioners:

The petitioners had an overdraft limit of approximately Rs. 18 Lakhs sanctioned in 1995, which was withdrawn in 1997 with Rs. 16 Lakhs outstanding. The bank initiated recovery proceedings, resulting in an ex-parte final order by the Debt Recovery Tribunal (DRT) holding the petitioners liable to pay Rs. 18,78,240/- along with interest. The petitioners failed to adhere to the financial discipline and committed various defaults, making them ineligible under the OTS scheme as clarified by the Reserve Bank of India. The petitioners had also disposed of stocks hypothecated with the bank and pocketed the proceeds.

3. Jurisdiction and discretion under Article 226 of the Constitution of India:

The court held that the matter was entirely contractual and no writ could be issued in this connection. A writ lies if there is a violation of law or error of law apparent on the face of the record, which was not the case here. The court emphasized that a writ cannot be issued merely on sympathetic considerations and that there are well-settled principles of exercise of writ jurisdiction. The court also noted that the petitioners were not entitled to the equitable remedy under Article 226 of the Constitution as they were defaulters.

4. Impact on financial institutions and the economy due to non-recovery of loans:

The court highlighted the adverse effects of non-recovery of loans on the economy, stating that recovery of tens of thousands of Crores of Rupees of bank loans is pending in the country, which holds up the industrialization of the nation. The court emphasized the need for fiscal discipline and observed that interfering with such recoveries causes incalculable harm to the economy as new businessmen cannot get loans if borrowers do not repay. The court cited several Supreme Court judgments underscoring the importance of regular realization of installments and the detrimental impact of non-payment on financial institutions.

Conclusion:

The court dismissed the petition, stating that there was no merit in it. The one-time settlement offered by the bank had expired and could not be revived. The bank could not be compelled to accept an amount less than the contractual amount, and the petitioners' defaults and irregularities in their account disqualified them from equitable relief. The court reiterated the importance of judicial restraint in matters relating to loan recoveries and the necessity of fiscal discipline for the economic progress of the nation.