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TMI Blog2021 (2) TMI 256X X X X Extracts X X X X X X X X Extracts X X X X ..... l was initiated by petitioner no. 1 itself. The bank, at best, modified the proposal and accepted it on the Bank s terms. Hence, the petitioner no. 1 cannot claim that November 5, 2019 was the date of acceptance of any proposal. The letter dated November 5, 2019 at best reopened the discussions on settlement, thereby rendering irrelevant the concluded OTS scheme already reached on August 19, 2019. Thereafter, further correspondences were exchanged between the Bank and the petitioners, each of which sought to offer new modifications to the already-concluded OTS scheme, but there was no consensus ad idem between the parties at any other juncture, fit to crystallise into a further concluded OTS scheme. As such, the several correspondences between the parties could not justify the petitioners arguments that there was an existing OTS scheme at the juncture when the RBI Circulars came in. If the petitioners take the stand that the OTS scheme was concluded on November 5, 2019, such contention has to be turned down in view of the subsequent replies of the Bank. Vide the communication dated February 13, 2020, for example, the Respondent No. 2-Bank categorically iterated that the date of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arked NPA and was not a standard account to which the benefits of the Circulars could be extended. Petition dismissed. - WPO No. 309 of 2020 - - - Dated:- 28-1-2021 - The Hon ble Justice Sabyasachi Bhattacharyya The North Western Cachar Tea Company Limited and another Vs. Reserve Bank of India and others For the petitioner : Mr. Ratnanko Banerji, Sr. Adv., Mr. S. N. Mookherjee, Sr. Adv., Mr. Meghajit Mukherjee, Mr. Kanishk Kejriwal, Mr. Rajesh Gupta, Mr. Shivangi Thard, Mr. R. Agarwal For respondent no.1 : Mr. Debdutta Sen, Ms. Suchishmita Chatterjee, Mr. Malay Kr. Seal, Mr. Rahul Auddy For respondent no.2 : Mr. Sabyasachi Chowdhury, Mr. Rajarshi Datta, Mr. Rahul Auddy The Court: 1. The petitioner no.1 is a company. Petitioner no.2 is a Managing Director of petitioner no.1. The company is engaged in the production and sale of tea products and other business activities. Facing shortage of funds regarding tea business, the petitioners approached respondent no.2 (UCO Bank) for grant of credit facilities. On October 5, 2013, respondent no.2 approved ₹ 3.50 crore towards Fund Based Working Capital Limits, ₹ 0.5 crore towards Non-Fund ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 26, 2019, petitioner no.1 objected to certain conditions of the counter-offer. Vide letter dated November 5, 2019, petitioner no.1 accepted the Bank s counter-offer on the terms as mentioned in such letter. After subsequent correspondence, respondent no.2 issued a letter dated June 25, 2020 requesting petitioner no.1 to make payment of the OTS amount of ₹ 10 crore within August 7, 2020 and the balance of ₹ 6.01 crore in 36 months. Such contention deviated from the previous counter-offer of the Bank. 8. The Reserve Bank of India (respondent no.1) issued a Circular dated March 27, 2020, in view of the intervention of the pandemic, permitting Banks to grant a moratorium of three months from March 1, 2020 to May 31, 2020, to be attended by rescheduling of the tenure by three months post-moratorium. 9. By a Circular dated May 23, 2020, such moratorium was extended by another three months by the Reserve Bank of India. 10. By an e-mail dated June 30, 2020 and a letter dated July 7, 2020, petitioner no.1 requested the respondent no.2-Bank to extend the repayment schedule by six months due to the lock-down which followed the pandemic, citing substantial loss of produc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , which necessarily means that a debt repayment of an account is the subject-matter thereof. Since the RBI Circulars were issued as a Covid-19 Regulatory Package to mitigate the burden of debt servicing brought about by disruption on account of the pandemic and to ensure the continuity of viable businesses and pertained to imparting priority to relaxing repayment pressures and prevent transmission of financial stress to the real economy, and since the OTS covered both Term Loan Account and Working Capital Facility Accounts, the OTS does not change the nature of credit facility, thus attracting the RBI Circulars to it. 18. The Debt Resolution Framework of respondent no.2 covers accounts in respect of which there has been an OTS as on March 1, 2020. Since the business of the petitioners was adversely affected by the pandemic, the RBI Circulars apply to the petitioners and are required to be interpreted in such manner. 19. Counsel argues that the opinion of the RBI, as expressed in the present writ petition, cannot be a determinant of the independent assessment of the effect of the Circulars by the court. 20. Learned senior counsel cites Punjab Traders Ors. Vs. State of P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the letter dated August 19, 2020, in view of the terms of the OTS being plain and unambiguous. 28. In any event, the issue of whether the time for payment of first instalment under OTS was August 19 or November 5, 2020 is of no direct consequence to the petitioners prayer in the instant writ petition, since the petitioners seek extension of time owing to the impact of the pandemic on their earning and ability to repay debt. Moreover, in view of the ongoing OTS, there was no default on the part of the petitioner no.1 prior to March 1, 2020. 29. The next question addressed by learned senior counsel for the petitioners is whether, in the facts and circumstances of the case, respondent no.2 was required to extend time for petitioner no.1 to make payments of instalment under the OTS, even if the RBI Circulars and the Debt Resolution Framework of respondent no.2 were not applicable. 30. By relying on P. Vijaya Kumari Anr. Vs. Indian Bank represented by its Chief Manager, reported at (2018) 14 SCC 735 , learned senior counsel argues that it is permissible for the Bank, as also this court, to grant extension of time to make payment of amounts agreed in a settlement reached b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f. Such tea estate still remains with petitioner no.1, furnishing further security to allay apprehensions of respondent no.2 with regard to non-payment. 39. The conduct of respondent no.2 in contending, as an afterthought, that there was no OTS and its failure to look into relevant materials referred to above justifies grant of reliefs to petitioner no.1, it is submitted. 40. Learned counsel for respondent nos. 2 to 5 corroborates substantially the facts of the case, as contended by the petitioners, apart from minor deviations. However, counsel lays stress on certain portions of the facts. 41. It is admitted by respondent nos. 2 to 5 that the Competent Authority of the Bank had approved an OTS proposal for the sum of ₹ 17.31 crore on the terms and conditions indicated in a letter dated August 8, 2019. On the basis of such approval, respondent no.5, by a letter dated August 19, 2019, informed petitioner no.1 and its Directors the terms and conditions on which the OTS offer for such sum was accepted and approved. Petitioner no. 1 issued a letter dated August 26, 2019, alleging deviation in the OTS approval from the proposal of the petitioners. On November 5, 2019, peti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st, 2020 cannot be tested on the benchmark of the RBI Circulars and Policy Guidelines. Moreover, an OTS is independent of the said Circulars and Guidelines. The Bank relies in this regard on the unreported judgment dated December 18, 2020 delivered by the Delhi High Court in the matter of Amit Khaneja Ors. Vs. IL FS Limited (supra), already referred to above while discussing petitioners reply. 47. By placing reliance on relevant Clauses of the RBI Circulars, in particular Clauses 2 and 3 of the Circular dated March 27, 2020, learned counsel for the respondent nos. 2 to 5 submits that such Circulars are for continuity of viable businesses and in respect of those Term Loans/Working Capital Facilities where there is no default and where the account has not been declared as NPA. In case of an OTS, the amount is crystallised and question of deferment of recovery of interest by granting moratorium cannot arise. 48. Learned counsel appearing for the Reserve Bank of India (RBI) argues that the Regulatory measures announced by the RBI vide Circulars dated March 27, 2020 and May 23, 2020, had the limited objective of mitigating the burden of debt servicing brought about by disr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as initiated by petitioner no. 1 itself. The bank, at best, modified the proposal and accepted it on the Bank s terms. Hence, the petitioner no. 1 cannot claim that November 5, 2019 was the date of acceptance of any proposal. The letter dated November 5, 2019 at best reopened the discussions on settlement, thereby rendering irrelevant the concluded OTS scheme already reached on August 19, 2019. Thereafter, further correspondences were exchanged between the Bank and the petitioners, each of which sought to offer new modifications to the already-concluded OTS scheme, but there was no consensus ad idem between the parties at any other juncture, fit to crystallise into a further concluded OTS scheme. As such, the several correspondences between the parties could not justify the petitioners arguments that there was an existing OTS scheme at the juncture when the RBI Circulars came in. 53. If the petitioners take the stand that the OTS scheme was concluded on November 5, 2019, such contention has to be turned down in view of the subsequent replies of the Bank. Vide the communication dated February 13, 2020, for example, the Respondent No. 2-Bank categorically iterated that the date o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the RBI Circulars to them. 57. Amit Khaneja Ors. Vs. IL FS Limited (supra) , although rendered in respect of an in-principle Agreement for One-Time Settlement, the propositions laid down therein apply to the present case. Applying the tests laid down in the said report, an OTS proposal, once revoked, could not be tested on the benchmark of the RBI Circulars. Such settlements are, by their very nature, independent of the said Circulars and Guidelines. An OTS is a settlement scheme and does not confer any special sanctity to the NPA status of the defaulters. Undoubtedly, if an OTS scheme is honoured to the hilt, the borrowers might revert back and ask for their NPA status to be reversed and the account to be reverted back to a standard classification. However, in case the borrower fails to honour its commitments as per the OTS, the question of claiming benefits of the Circular does not arise. 58. In the present case, not only was there no existing OTS in place when the RBI Circulars were issued, in view of the previous OTS scheme having been revoked due to default of the petitioners, there was no scope to argue that the benefits of the RBI Circulars were applicabl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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