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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 ..... Working Capital Limits, Rs. 0.5 crore towards Non-Fund Based Working Capital Limits and Rs. 4.2875 crore towards Term Loan. The petitioners approached respondent no.2 again for sanction of a fresh Term Loan against security of a residential property, which was sanctioned on November 1, 2016 to the extent of Rs. 2.4 crore. 2. When petitioner no.1, by a letter dated January 17, 2017, submitted a fresh proposal to the respondent no.2-Bank for review of the credit limits, the respondent no.2-Bank informed the petitioner no.1, vide letter dated February 3, 2017 that the account of petitioner no.1 had been classified as Non-Performing Asset (NPA) on January 31, 2017. 3. Subsequently, respondent no.2 issued a notice under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (the SARFAESI Act). By a letter dated July 23, 2018, respondent no.2 informed petitioner no.1 that the Competent Authority had decided to refer the loan account of petitioner no.1 to the National Company Law Tribunal (NCLT) under the Insolvency and Bankruptcy Code, 2016 (IBC). On January 21, 2019, respondent no.2 issued a notice under Section 13(4) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of production in the tea business due to inability to pluck green leaves in time resulting from the lock-down. 11. Respondent no.2 refused to extend the repayment period on July 8, 2020 and warned that if the petitioner no.1 failed to pay as per payment schedule, the OTS would be treated to have failed, enabling the Bank to take recovery action as per its Guidelines. Petitioner no.1, however, renewed its request for a meeting with the CMD of the Bank on July 16, 2020. There were further requests by the Bank for the petitioner no.1 to make payment of the OTS amount. 12. On August 19, 2020, petitioner no.1 informed respondent no.2 that they could not honour the commitment schedule due to default by buyers of the tea estate as well as loss of production due to the Covid- 19 pandemic. A further offer of immediate payment of Rs. 2 crore was also given by petitioner no.1. 13. On September 2, 2020 the Bank informed respondent no.1 (RBI) that, since the petitioner no.1 had failed to make payment of the OTS amount, the respondent no.2-Bank had started recovery action by eauction, declaring the petitioners as wilful defaulters and by filing proceedings before the Debts Recovery Tribunal a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orted at (1991) 1 SCC 86 and Bengal Iron Corporation & Anr. Vs. Commercial Tax Officers & Ors., reported at (1994) Supplement 1 SCC 310, in this context. 21. The decision of a learned Single Judge of the Delhi High Court in Amit Khaneja & Ors. Vs. IL&FS Limited, dated December 18, 2020, relied on by respondent no.2 for the proposition that OTS settlement are independent of the RBI Circulars and, being in respect of a party who has already defaulted, cannot entitle the borrower to the benefits of the RBI Circulars, it is argued by the petitioners in reply, is not applicable in the present context. 22. In the said report, it is argued, the OTS was not final but a counteroffer which was contained in an "in-principle Agreement for One-Time Settlement". The challenge was to the revocation of the same. Defaults had been incurred by the petitioner therein with regard to orders of court. The petitioner therein had also failed to establish disruption of business due to the Covid-19 pandemic. 23. Rather, in fit cases, the High Court granted extension of time to make OTS payments in view of the RBI Circulars. In support of such proposition, learned senior counsel cites Lhakpa Trading Agenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... il Writ Petition No. 5518 of 2020 [Anu Bhalla & Anr. Vs. District Magistrate Pathankot & Anr.], rendered by the Punjab and Haryana High Court (at Chandigarh), is relied on for the proposition that the court, in exercise of its jurisdiction under Article 226 of the Constitution, can extend the period of making payment under an OTS. The said case pertained to the Covid-19 pandemic as well. 32. A Division Bench of the High Court at Telangana at Hyderabad, in its order dated July 2, 2020 in Writ Petition No. 9408 of 2020 [Sri Yadadri Lifesciences Pvt. Ltd. Vs. State Bank of India], endorsed the same view. 33. The petitioners submit that the circumstances of the present case, as evident from the pleadings of the parties, clearly indicate that the petitioners suffered production loss due to the pandemic. There is no controversy in such regard in the affidavit-in-opposition filed by respondent no.2. The petitioner no.1 supplied industry data to respondent no.2 in support of such contention, which were never controverted by respondent no.2. 34. Learned senior counsel next argues that respondent no.2 failed to take into consideration relevant materials in refusing to extend time to petit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n. 42. Apart from a sum of Rs. 1.30 crore, it is alleged, no further payment was made by petitioner no.1 in terms of the OTS proposal dated August 19, 2019. By subsequent e-mails dated June 30 and July 7, 2020, petitioner no.1 requested for extension of six months' time for repayment of the OTS amount. Thereafter, correspondence ensued regarding sale of a tea estate of the petitioners. However, as no payment was forthcoming from petitioner no.1 in terms of the approved OTS, the Bank, vide letter dated August 10, 2020, informed the petitioner no.1 that the OTS was treated as failed, further calling upon petitioner no.1 to pay the entire outstanding dues with interest. Such failure was admitted by the petitioners in a letter dated August 19, 2020. Thereafter, recovery action was taken by the Bank. 43. Learned counsel for the respondent nos. 2 to 5 argues that although the OTS scheme took on the shape of a concluded contract on August 19, 2019, binding both parties, petitioner no.1 failed to honour the same, alleging deviation from the original OTS proposal. 44. The conduct of petitioner no.1 in requesting for extension of time via e-mail and by a letter dated August 19, 2020 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re permitted to grant moratorium of six months on payment of all instalments of Term Loans falling due between March 1, 2020 and August 31, 2020. Amit Khaneja & Ors. Vs. IL&FS Limited (supra) is also relied on by the RBI in this context. 49. Any recovery proceeding initiated by the concerned lending institutions, including recovery pursuant to a compromise settlement agreement, would lie beyond the scope of the two Circulars, as evident from paragraph no. 8 of the Circular dated April 17, 2020. 50. Thus, the RBI takes a specific stand that the Circulars issued by it are not applicable to the petitioners in the present case. 51. The first question which falls for consideration is whether there was a concluded OTS scheme between the parties. The materials on record, as referred to by the parties, clearly indicate that there was a concluded OTS scheme between petitioner no.1 and the respondent no.2-Bank as on August 19, 2019. The Bank's letter dated August 19, 2019 assumes particular importance in this context. The previous correspondences on settlement between the parties culminated in the said letter, which is captioned: "Compromise proposal of M/s The North-Western Cachar tea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The proposal of petitioner no. 1, although couched cleverly as an 'acceptance', was never accepted by the Bank unconditionally at any subsequent point of time, nor was any sanction letter issued for any further OTS scheme on the basis of the November 5, 2019 letter. In fact, Respondent no. 2 insisted upon payment by petitioner no. 1 in terms of the OTS dated August 19, 2019, inter alia by its letter dated June 25, 2020. Thus, the only concluded OTS, if any, was reached on August 19, 2019 by the Bank's acceptance and sanction of the previous offer of petitioner no. 1. In the event the petitioners argue that OTS was not finalized on August 19, 2019, there is no other concluded OTS scheme that the petitioners can rely on. 54. Since the petitioner no.1 failed to honour its commitments under the concluded OTS scheme of August 19, 2019, as mentioned above, no further extension of time on the basis of the OTS could be claimed validly by the petitioners. The Respondent no. 2-Bank, by its letter dated August 10, 2020, made it clear that, in view of the failure of petitioner no. 1 to honour payment of OTS amount as per sanction terms, the OTS was treated as failed and, as a consequence, req ..... X X X X Extracts X X X X X X X X Extracts X X X X
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