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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 ..... T:- The borrower vide letter dated 13.03.2020 had sought for elongation of stipulated period of payment up to 31.05.2020; the bank vide letter dated 30.05.2020 rescinded the OTS facility, the agreed amount not reaching its hands in terms of OTS. The borrower vide representation dated 26.06.2020 requested the bank to withdraw the aforesaid Rescinding Letter dated 30.05.2020 stating that minimum 45 days were required for assignment of debt and that he would pay interest on the delayed payment, as well; the bank declined and went ahead with the coercive acts of recovery since the conduct of the borrower did not generate confidence. Recovery of debts - HELD THAT:- The OTS offers have been made by the borrower thrice; he was accorded consent by the Bank to the assignment of loan to the company in question subject to the rider that the timeline for payment in terms of OTS would not be altered; the loan transaction essentially being a matter of contract, the OTS- like-arrangement is only a novatio and a new arrangement is brought about by the bargain of parties namely the lender, the borrower and the surety, done across the table; that being the position, ordinarily, the Courts cannot alt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of disabling or delaying the very recovery of the public money which they have lent; while not insisting upon the borrower to honour the OTS commitment undertaken by him, the Banks alone cannot be shackled hand and foot by invoking the doctrine of promissory estoppel - a Writ Court has to assume a realistic role of a trustee in ensuring that the public money is not lost in the conundrums of constitutional contentions; Courts have to have a pragmatic approach when matters touching economics are brought before them for adjudication. Suspicious conduct of bank officials - HELD THAT:- 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 Gen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent 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 'borrower') vide letter dated 22.04.2017 had offered to pay Rs. 5 crore by way of One Time Settlement; that was turned down by the bank by letter dated 15.11.2018; later he revised the OTS offer to Rs. 11 crore vide letter dated 30.01.2019; this was accompanied by Banker's Cheques in all for Rs. 20 lakh; the mortgaged properties were sought to be put to e-auction vide notice dated 21.06.2019 u/S. 14(2) of SARFEASI Act, 2002 read with Rule 8(6) of Security Interest (Enforcement) Rules 2002; fearing this, the borrower remitted Rs. 4 crore on 22.07.2019 and requested-the bank to defer the e-auction that was scheduled held on 24.07.2019. (c) After seeing the reluctance of the bank, the borrower further revised his OTS offer to Rs. 15 crore and 20 lakh; this having im ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 all just exceptions; normally, OTS facility being a statutory concession, and eventually result in some loss of public money; the borrowers are bound to honour the agreed terms OTS and the breach thereof entitles the Banks to rescind the facility, and recall the entire loan too; the schemes of the kind are intended to get back the debts (minus the concession granted) to the lender institutions swiftly and without much complication; loanees are also benefited to the extent of differential of the amount offered in the OTS and the amount otherwise actually payable by them. (iii) There is a duty cast on the banks and financial institutions to ensure that the operation of OTS schemes would not cause avoidable loss of public money and therefore the concessions given in the form are reasonable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uding 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 elongation of stipulated period of payment up to 31.05.2020; the bank vide letter dated 30.05.2020 rescinded the OTS facility, the agreed amount not reaching its hands in terms of OTS. The borrower vide representation dated 26.06.2020 requested the bank to withdraw the aforesaid Rescinding Letter dated 30.05.2020 stating that minimum 45 days were required for assignment of debt and that he would pay interest on the delayed payment, as well; the bank declined and went ahead with the coercive acts of recovery since the conduct of the borrower did not generate confidence. (III) RECOVERY OF DEBTS. WRIT JURISDICTION AND APEX COURT DECISION IN CAVALET INDIA CASE: (i) The vehement contention of learned Sr. Adv. Mr. Uday Holla appearing for the borrower that already Rs. 4.20 crore was paid to the bank, and rest of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncial 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); these observations equally apply to the appeals at our hands. (v) As already mentioned above, the OTS offers have been made by the borrower thrice; he was accorded consent by the Bank to the assignment of loan to the company in question subject to the rider that the timeline for payment in terms of OTS would not be altered; the loan transaction essentially being a matter of contract, the OTS- like-arrangement is only a novatio and a new arrangement is brought about by the bargain of parties namely the lender, the borrower and the surety, done across the table; that being the position, ordinarily, the Courts cannot alter the terms of contract even when it has statutory elements; the time within which the remittance of the amount has to be made is an essential term of OTS, disentitles the defaulting borrower from inv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bly 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 scoring' of the later; a surety is entitled to the protection of credit scoring so that he will not be disfavoured when he goes to other banks for borrowing, is understandable; having this in mind, presumably, the surety had made the representation alarming the bank that the auction of mortgaged property would fetch more money than the OTS offer; he had moved the Writ Court too; he himself has come up with an offer of Rs. 23 crore before us; this is about Rs. 8 crore more than the last OTS offer; however a caveat needs to be entered: the right of contribution which the surety may have qua the borrower may not exceed the value of the said OTS offer; we hasten to add that we have not expressed any opinion on these aspects here, the same not falling within the focal point of our consideration. (iii) The records disclose that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 than the revised OTS offer of the borrower i.e., Rs. 15,20,00,000/-; the borrower despite giving the same opportunity as was given to the appellants herein, declined to improve his offer figure; when the public money is involved, a Writ Court has to scrutinize the things with objectivity and ensure that no loss of such money takes place. Therefore, leave is granted for maintaining the appeal. VI. LOAN TRANSACTION: BREACH OF OTS: DEBTOR'S EQUITY ARGUMENTS and JUDICIAL INTERVENTION: (i) The learned single Judge has granted relief to the borrower on the doctrine of promissory estoppel; this doctrine has several shades of meanings and limitations; it cannot be operated as a thumb rule; several civilized jurisdictions treat promissory estoppel as an offshoot of equity; as already mentioned above, the equity and fairness required of a Public S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erits 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 bank shall accept the revised offer of the appellant auction-purchaser in a sum of Rs. 25,20,99,999/- (Rupees twenty five crore, twenty lakh, ninety nine thousand, nine hundred and ninety nine) only; he shall remit the remainder of the said amount within a period of six weeks failing which, the amount which he has already deposited shall stand adjusted to the credit of the principal borrower; (iii) If what is directed in the immediately preceding paragraph (ii) above, does not materialize because of the fault attributable to the auction-purchaser, then the offer of the surety appellant Mr. K. Ramappa in a sum of Rs. 23,00,00,000/- (Rupees twenty three crore) only shall be accepted; he shall remit 50% of this amount within four weeks and the remainder within next four weeks; if he fails to adhere to the undertaking given to this Court, he shall pay to the B ..... X X X X Extracts X X X X X X X X Extracts X X X X
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