Gujarat High Court
Gujarat Credit Corporation Ltd & vs Punjab National Bank on 3 May, 2017
Author: S.G. Shah
Bench: S.G. Shah
C/SCA/17805/2016 ORDER
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
SPECIAL CIVIL APPLICATION NO. 17805 of 2016
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GUJARAT CREDIT CORPORATION LTD & 1....Petitioner(s)
Versus
PUNJAB NATIONAL BANK, & 1....Respondent(s)
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Appearance:
MR SN SHELAT, SR. COUNSEL with MRS VD NANAVATI, ADVOCATE for
the Petitioner(s) No. 1 - 2
MS NALINI S LODHA, ADVOCATE for the Respondent(s) No. 1 - 2
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CORAM: HONOURABLE MR.JUSTICE S.G. SHAH
Date : 03/05/2017
ORAL ORDER
1. Heard learned advocates for the parties and perused the record.
2. The dispute raised by the petitioner in this petition is with reference to non issuance of No Due Certificate by the respondent - Bank even after payment of agreed amount between them as per communication dated 21.7.2010. Factual details are not reproduced herein for want of sufficient time to complete all listed cases on a given day. However, the relevant information may be summarized as under: [2.1] It is undisputed fact that Page 1 of 14 HC-NIC Page 1 of 14 Created On Sat Aug 12 12:25:50 IST 2017 C/SCA/17805/2016 ORDER petitioner has applied for loan from the respondent - Bank when they wants to participate in an auction to bid for purchasing land from Income Tax Department and when they need financial support for completing such sale transaction.
[2.2] It is undisputed fact that Bank has approved the loan of Rs.11 crores in favour of the petitioners [2.3] It is also undisputed fact that repayment schedule was not regular but ultimately petitioner has offered for One Time Settlement (For Short `OTS') by making payment of agreed amount.
[2.4] It is also undisputed fact that pursuant to communication dated 21.7.2010, the authorities of the Bank have approved OTS at Rs.886 lacs including Rs.70 lacs already deposited on 31.3.2010 with as many as nine conditions.
3. The dispute arises from such communication itself when condition No.7 in such communication reads as under: Page 2 of 14 HC-NIC Page 2 of 14 Created On Sat Aug 12 12:25:50 IST 2017 C/SCA/17805/2016 ORDER "In case of transfer of land or release of funds by IT department in favour of the Company, Bank shall reserve the right to recompense itself to the extent of sacrifice plus further interest @ 10%. The necessary agreement be got drafted through Bank's Advocate and shall be executed by the Company."
4. Thereby, now, it is also undisputed fact that on one hand, petitioner has not agreed to include such condition in the terms of settlement and, therefore, no financial conveyance deed has been executed between the parties and on the other hand, Bank is keen to initiate and activate such condition contending that after the payment as per OTS as agreed by the Bank till such communication, now, petitioner is able to enter into sale transaction of the property in question which is proposed to be purchased by the petitioner under an auction by the Income Tax Department.
5. In background of above facts and circumstances, if we consider the above Page 3 of 14 HC-NIC Page 3 of 14 Created On Sat Aug 12 12:25:50 IST 2017 C/SCA/17805/2016 ORDER referred condition again, it has got two different conditions, when `OR' is used in first line itself which reads thus in case of transfer of land `OR' release of funds by Income Tax Department in favour of the Company. This makes it clear that irrespective of any other details in both the cases i.e. (1) if petitioner succeeds in getting the auction completed in his favour or (2) even if petitioner does not succeed in his aim to get the property under auction, the Bank shall claim its right to recompense itself to the extent of amount sacrifice by it with further interest @ 10%. Therefore, such condition itself is void ab initio because the respondent wants to recompense the OTS in every condition i.e. by both the means, irrespective of sale transaction being complete under the auction by the Income Tax Department i.e. thereby practically there is a condition while accepting / approving OTS which ultimately refuses the OTS.
6. It is undisputed fact that loan is availed for completing such sale transaction and, Page 4 of 14 HC-NIC Page 4 of 14 Created On Sat Aug 12 12:25:50 IST 2017 C/SCA/17805/2016 ORDER therefore, in either of the two conditions i.e. sale transaction is `over' or `not over,' if Bank has to recompense itself to the extent of sacrifice with further interest @ 10% then, practically there is no offer of any OTS by the Bank to the petitioners.
7. At this stage, learned advocate for the respondent - Bank has vehemently contended that when agreement for OTS by the conveyance deed as per such terms of OTS is not signed by both the sides, even term of OTS in such letter cannot be considered in force and thereby also petitioner is supposed to pay the entire amount which is sacrificed by the Bank at the time of OTS.
8. It goes without saying that the nonsigning of final conveyance deed is under consideration between the parties for long time and that alone would not result into nullity of whatsoever is done between the parties, more particularly, when competent authority of the Bank has already approved OTS at particular amount which is already paid by the petitioner.
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9. It is also contended by Bank that there is inordinate delay by the petitioner in applying for such relief contending that communication under reference is of the year 2010 and, thereafter, though petitioner has repeatedly offered to pay some amount to recompense the OTS and though Bank has refused to accept some lesser amount than Rs.1,45,87,448/ by its letter dated 6.4.2015, now, petitioner cannot press for such relief at this stage and that it cannot be said that Bank has approved OTS and that when contingency as described in condition No.7 which is reproduced hereinabove is applied i.e. when petitioner is able to transfer the land in their favour, the Bank would not like to sacrifice the amount which they have sacrificed under OTS and would like to use their right and recompense with further interest of 10% pursuant to such stand. In fact amount of Rs.1,45,87,448/ has been arrived at by adding 10% interest on the amount of sacrifice by the Bank being Rs.98,89,794.90 Paisa. It is also contended by the Bank that infact petitioners have agreed to pay some more amount and, therefore, it is to be considered that Page 6 of 14 HC-NIC Page 6 of 14 Created On Sat Aug 12 12:25:50 IST 2017 C/SCA/17805/2016 ORDER petitioners are aware about their position that they have to pay some more amount to the Bank and, therefore also, no such relief can be granted at this stage.
10. However, I do not find any substance in the submission by the respondent Bank for the simple reason that on one hand, Bank has already agreed to accept some fixed amount under OTS and on the other hand, they put a condition in such a manner which binds the petitioner both ways i.e. even after sale transaction is completed or not completed.
11. In that case, Bank should not have entered into OTS but once Bank has entered into OTS, then, they have to abide by their decision to settle the dispute amicably instead of adding such condition and raising technical issues.
12. Learned advocate for the petitioner is relying upon Circular dated 26.3.2010 by the RBI which is having a heading that `guidelines of RBI on Recompense' wherein condition No.3 relates to Elements Ineligible for Computation of recompense amount, wherein, it is specifically stated Page 7 of 14 HC-NIC Page 7 of 14 Created On Sat Aug 12 12:25:50 IST 2017 C/SCA/17805/2016 ORDER that the following shall not be taken into computation of recompense amount, while providing a list of as many as 9 items which reads as under: 3.1 One Time Settlement (OTS) / Negotiated Settlement: The lender opting for onetime settlement or negotiated settlement under the package.
3.2 Conversion into equity or equity related instruments: If any portion of the loan or facility was converted into equity or equity related instruments, the converted portion shall not be taken into account for computation of the recompense amount. However, in this case, from the cut off date till conversion takes place and the shares are allotted, the lender can claim recompense. If any other dues are converted into equity, the nonconvertible portion (Koka Portion) shall not be eligible for recompense.
Page 8 of 14HC-NIC Page 8 of 14 Created On Sat Aug 12 12:25:50 IST 2017 C/SCA/17805/2016 ORDER 3.3 Sacrifices and waivers prior to the cut off date: Any loss on account of sacrifice or waiver suffered by any lender prior to the cut off date(unless the same is pursuant to the restructuring package).
3.4 Additional finance:
Additional finance (Term Loan / Working Capital) provided by lenders otherwise than under the package.
3.5 Refinancing / Rollover Lenders: The amount of fresh funds advanced by the lenders to pay off the existing loans, in case of roll over, the lender would be eligible to recover recompense upto the date of refinancing or roll over of such debt.
3.6 Financing Capex: Any fresh funds advanced by any lender for meeting capital Page 9 of 14 HC-NIC Page 9 of 14 Created On Sat Aug 12 12:25:50 IST 2017 C/SCA/17805/2016 ORDER expenditure not envisaged under the package.
3.7 Penal Interest and Liquidated damages: Waiver of penal interest and liquidated damages by any lender or waivers and sacrifices in respect of them on account of conversion into any instrument or otherwise.
3.8 Foreign Currency Loan:
The converted portion of foreign currency loan in case Bank converts Rupee Term Loan into any foreign currency loan pursuant to Rehabilitation / Debt Restructuring package.
3.9 Longing at market rates:
Any existing loan / advance or fresh loan / advance provided to the borrower at market rates. Market rate for the purposes of this subparagraph means the rate at which the borrower is in a position to raise resources for its requirements.Page 10 of 14
HC-NIC Page 10 of 14 Created On Sat Aug 12 12:25:50 IST 2017 C/SCA/17805/2016 ORDER The Condition No.4 in Revised Guidelines on Right of Recompense in Corporate Debt Restructuring, it would be restricting the sale also confirms that OTS / Negotiated Settlement is considered to the effect that recompense will not be applicable in such cases.
13. Though it is submitted by the Bank that these guidelines are for Corporate Debt Restructuring Cell and, therefore, not applicable in the present case where there is no Corporate Debt Restructuring at all, the fact remains that as many as two different guidelines of the RBI is confirming that recompense will not be applicable in case of OTS / Negotiated Settlement and, therefore, there is reason to believe that if at all respondent - Bank has to enter into OTS and as disclosed hereinabove when Bank has already approved the OTS, then, Bank has to follow the guidelines of RBI which does not permit to allow the principle of recompense in case of such OTS.Page 11 of 14
HC-NIC Page 11 of 14 Created On Sat Aug 12 12:25:50 IST 2017 C/SCA/17805/2016 ORDER
14. The entire dispute is raised upon the non action on behalf of the respondent - Bank when they have refused to issue `No Due Certificate' and, thereby, to release their lien on the properties details which is disclosed in documents related to short term loan of Rs.11 crores under reference (more particularly described in appendix 1, page 26 of the petition).
15. It goes without saying that these properties has nothing to do with issue raised by the respondent - Bank with reference to condition No.7 which is discussed hereinabove but such properties are mortgaged and kept in lien with the Bank only with a purpose to secure the payment of loan by the petitioner.
16. It is also undisputed fact that out of the loan of Rs.11 crores, petitioner has paid the amount as agreed by the respondent - Bank under OTS. Therefore, at present, it is improper for the respondent - Bank to continue their lien and to sit tight om documents and refuse to issue No Due Certificate so far as such properties are Page 12 of 14 HC-NIC Page 12 of 14 Created On Sat Aug 12 12:25:50 IST 2017 C/SCA/17805/2016 ORDER concerned, at the most, respondent - Bank has any lien then it is only now limited to the tune of Rs.1,45,87,448/. Therefore, at the most, Bank may have a lien or claim for such amount only. For the purpose, petitioner may be directed to furnish Bank Guarantee or security in any appropriate manner including mortgage of any property so as to secure the recovery of such amount, if so require.
17. In view of above facts and circumstances, since matter could not be resolved at this stage, let there be Rule, returnable on 27.7.2017.
18. Interim Relief in terms of Paragraph 20(CC) is granted till then on condition that the petitioner shall furnish Bank Guarantee or Security of suitable property so as to secure the recovery of Rs.1.5 crores by the respondent - Bank. As soon as such Bank Guarantee is furnished before the Bank, the Bank shall release the documents and shall issue `No Due Certificate' within a week. Direct Service is permitted.
(S.G. SHAH, J.) Page 13 of 14 HC-NIC Page 13 of 14 Created On Sat Aug 12 12:25:50 IST 2017 C/SCA/17805/2016 ORDER * Vatsal Page 14 of 14 HC-NIC Page 14 of 14 Created On Sat Aug 12 12:25:50 IST 2017