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TMI Blog2021 (7) TMI 1468X X X X Extracts X X X X X X X X Extracts X X X X ..... pondent borrower having entered caveat/appearance through it's counsel resists the appeals making submission in justification of the impugned order and the reasons on which it has been constructed; it is pertinent to mention here itself that during the course of hearing, the principal borrower, surety and the auction purchaser were given an option to revive their offers; both the appellants have come up with much higher offers; the appellant surety came forward with an offer of Rs. 23 Crore and the auction purchaser revised his offer from Rs. 15,00,52,000/- to Rs. 25,20,99,999/-; the principal borrower did not avail the opportunity; these aspects have been discussed by us, infra. 3. BRIEF FACTS OF THE CASE: (a) Under the Term Loan Agreement and Hypothecation Agreement both dated 29.01.2009, the writ petitioner had availed a loan of Rs. 53.60 Crore and a cash credit facility upto Rs. 3 Crore from the respondent-Canara Bank; the appellant Shri K. Ramappa was the surety; the loans having bulged to above Rs. 100 crore now owing to run of time and not been repaid despite demand, the coercive actions for recovery were resorted to by the bank. (b) The writ petitioner (hereafter & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ulgence in the matter as under and for the following reasons: (I) A BRIEF LEGAL POSITION AS TO OTS SCHEMES: (i) The field of banking business is occupied by several legislations and the Rules/Regulations promulgated thereunder; the Reserve Bank of India Act, 1934, the Banking Regulation Act, 1949. The Recovery of Debts and Bankruptcy Act 1993, SARFAESI Act, 2002, are a few to name; the RBI is a watchdog of finance and economy of the nation, apart from being the prime banking institution of the country; it is conferred with the authority of issuing binding directions inter alia to the Public Sector Banks vide Central Bank of India v. Ravindra (2002) 1 SCC 367 : (AIR 2001 SC 3095); the One Time Settlement Schemes obtaining in the Banks and Financial Institutions are governed by the Guidelines issued by the RBI under Sections 21 and 35A of the 1949 Act; the Banks are bound by the same under Section 21(3). (ii) These OTS Schemes having statutory force require the prescription of time lines for making the payments as agreed; time schedules which are stipulated consensually by the bank and the borrower are the essential terms of bargain and ordinarily cannot be altered, subject to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 39;s first OTS proposal dated 22.04.2017 in a sum of Rs. 5 crore was later upwardly revised to Rs. 11 crore on 30.01.2019; Bank having not agreed; the offer was upwardly revised to Rs. 15.20 crore on 21.11.2019; borrower had already paid Rs. 4.2 crore; all this happened after the bank resorted to coercive acts of recovery; (ii) the lender bank vide letter dated 30.11.2019, had accepted the latest OTS offer of Rs. 15.20 Crore, is true; however, it had specifically stipulated the timeline as under: "iv. In the event of non-compliance with any of the terms of the sanction by you, including payment of the OTS amount as per the stipulated schedule, the OTS sanction stands automatically withdrawn without assigning any reasons for the same and the Bank reserves the right to proceed as it deems fit including proceeding legally for recovery of the entire dues." It cannot be disputed that the timelines mandatorily prescribed for making the payments in terms of OTS were not adhered to, is not in' dispute; the borrower had failed to remit the agreed amount within the stipulated period i.e. on or before 15.03.2020. (iii) The borrower vide letter dated 13.03.2020 had sought for elong ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the bank/financial institution, or where the bank acts unfairly/unreasonably; Courts exercising constitutional jurisdiction u/A 226 do not sit as Appellate Authorities over the acts and deeds of the bank and seek to correct them; even the doctrine of fairness/reasonableness does not convert the Writ Courts into appellate authorities over administrative decisions concerning the banking business; unless the action of the bank is apparently mala fide, even a wrong decision taken by it cannot be interfered. (iv) It is not for the Court or a third party to substitute it's decision howsoever prudent or business like it may be, for the decision of the bank; in commercial matters, the Courts do not risk their judgments for the judgments of the bodies to which that task is assigned; a Public Sector Bank or a Financial Institution cannot wait indefinitely to recover its dues; the fairness required of the bank cannot be carried to the extent of disabling it from recovering what is due; in matters of loan transactions, fairness cannot be a one-way street; both the bank and the borrower have to be equally fair to each other; nearly, thus said the Apex Court in Cavalet India (supra); ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a is right in contending that once the OTS payment is made, the surety too is discharged; when the law of contract was enacted during the Colonial Regime about a century and half ago, the proposition was as simple as it was stated; but, now the matter has become a bit complex; some implications ensue from the intervening legislation namely, the Credit Information Companies (Regulation) Act, 2005; the loan transaction culminating in the availment of OTS facility and its subsequent rescinding by the lender bank arguably constitute a 'credit information' as defined u/S. 2(d) of the Act; the guarantor of loan answers the inclusive definition of 'client' given u/S. 2(c); similarly the borrower fits in Section 2(b) and the banker, in the definition of 'credit institution' given u/S. 2(f); the surety arguably suffers an adverse 'credit scoring' as defined u/S. 2(g); thus, the surety has some legal stake in the OTS deals, more particularly when the letter containing the OTS offer was officially marked to him, as well. (ii) However, the above having been said, there is no contract between the borrower and the surety for protecting the arguable 'credit s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l fairness ought to have arraigned him as a respondent to the writ petition; that having not been done, he is not justified in opposing surety's request for the grant of leave to file the writ appeals; added to this, the borrower did not avail the opportunity of revising his OTS offer; therefore, we granted the leave as sought for and heard the appeals on merits. (V) LOCUS STANDII OF THE AUCTION PURCHASER: During the pendency of the writ petition, the learned single Judge vide ad interim order dated 24.03.2021 had, in a sense, permitted auctioning of the property by restraining the confirmation of contemplated auction sale; auction purchaser had also sought for his impleadment in the writ petition; the e-auction was held on 08.04.2021 (presumably being unaware of the disposal of the writ petition on 06.04.2021) and the highest bid of Rs. 15,00,52,000/- of the appellant in Writ Appeal No. 100103/2021 came to be accepted; he has also paid Rs. 78 lakh on 05.04.2021 being the pre-deposit for participation in the auction; he has also remitted Rs. 2,97,13,000/- on 09.04.2021; that apart, he has now come forward with a very high offer of Rs. 25,20,99,999/-; this is much higher tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 15.20 crore in November 2019; borrowers writ petition was allowed on 06.04.2021; the same day surety's writ petition was also disposed off directing the bank to consider his representation wherein he has specifically mentioned about the possibility of fetching a much higher auction money; (ii) Strangely the mortgaged property was auctioned on 08.04.2021; the highest bid of Rs. 150,052,000/- of the appellant auction purchaser came to be accepted; the very same buyer has revised the bid to Rs. 252,099,999/- before us; even the surety has come up with an offer of Rs. 23 crore; the OTS deal struck between the bank and the borrower in a small sum of Rs. 150,052,000/- raises a strong suspicion as to there being some 'shady deal' with the connivance of authorities of the bank; this needs to be investigated into by the Reserve Bank; matter merits attention of the Comptroller and Auditor General of India, as well. In the above circumstances, we make the following: ORDER (i) Both these appeals succeed in part; the impugned Judgment and Order made by the learned single Judge are set at naught; Writ Petition No. 100312/2021 of the borrower, is dismissed; (ii) The lender ..... X X X X Extracts X X X X X X X X Extracts X X X X
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