Telangana High Court
Mr. K. Suryanarayana vs State Bank Of India And 2 Others on 15 July, 2022
Author: B. Vijaysen Reddy
Bench: B. Vijaysen Reddy
HON'BLE SRI JUSTICE B. VIJAYSEN REDDY
WRIT PETITION No.12451 OF 2021
ORDER:
This writ petition is filed by the petitioner -
K. Suryanarayana aggrieved by issuance of letter dated 24.05.2021 vide Reference No.SBI/SAMB-II/HYD/2021-22/BRS/200 by respondent No.1 - State Bank of India, Hyderabad, Telangana and its action in unduly refusing to accept payment made in furtherance of One-Time Settlement (OTS), that was previously accepted by respondent No.1 on 07.09.2020, has been illegal, arbitrary and unconstitutional.
2. The case of the petitioner (company) is that it was registered under the Companies Act 1956 on 22.02.1985. It was set up in 1989 for processing of Seamless Pipes to Casing, Tubing and Drill Pipes with Technical Collaboration from Baker Hughes Tubular Services (US Company) under indigenization and import substitution programme of Government of India. The company was established in Nalgonda District in 1989.
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(i) That due to general recession and economic down trend in India and abroad especially in the steel industry and also due to serious disturbances faced before and after bifurcation of the erstwhile State of Andhra Pradesh, as the petitioner company faced severe stress, the company approached the banks for restructuring of the accounts and after discussions with the lenders, had submitted a restructuring proposal on 06.02.2017 as per the guidelines issued by the Reserve Bank of India. After prolonged correspondence and deliberations, as there was no proper response from the banks to the restructuring proposal, the company had alternatively offered an OTS/Resolution Plan vide letter dated 16.08.2018 as per the discussions with the banks and in accordance to the RBI circular dated 12.02.2018. However, the same was not considered by the banks.
(ii) One of the lenders, State Bank of India (SBI), based on a debt amount of Rs.53,84,89,580/- filed a Company Petition C.P.(IB) No.220/7/HDB/2019 under Section 7 of the Insolvency and Bankruptcy Code 2016 on 28.01.2019 before the National Company Law Tribunal, Hyderabad Bench (NCLT) for initiation 3 of Corporate Insolvency Resolution Process of the Company. As per the averments in company petition, the date of default was in 2015 and the company petition was filed in 2019. The NCLT passed order dated 28.01.2020 in C.P. (IB) No.220/7/HDB/2019 and admitted the company into CIRP declaring moratorium and appointed Mr. Sisir Kumar Appikatla as Resolution Professional (RP). The RP invited claims from all creditors and then constituted the Committee of Creditors (CoC) as per the provisions of the Insolvency and Bankruptcy Code 2016 (for short 'Insolvency and Bankruptcy Code).
(iii) The petitioner, who is suspended director of the company, approached the majority lenders i.e., SBI, Indian Bank (Allahabad Bank merger with Indian Bank w.e.f. 01.04.2020) and Indian Overseas Bank with an OTS proposal vide letter dated 18.05.2020 under Section 12-A of the Bankruptcy Code with an offer of Rs.60.00 crores. Upon further negotiation between the petitioner and the lenders, a revised OTS Proposal of Rs.70.00 crores through letter dated 18.06.2020 was submitted by the 4 petitioner to the three lenders. The relevant clause of proposal dated 18.06.2020 are as under:
"Revised Compromise Proposal u/s 12A of the IBC, 2016:
1. Total compromise settlement amount, which includes the settlement of the total liabilities of all the three banks including outstanding BGs: Rs.70.0 crores.
2. Payment terms: The Compromise settlement amount shall be paid to the lenders proportionate to their outstanding as per the claims submitted by the lenders to the Resolution Professional as per the schedule mentioned below.
a. 10% of the Settlement amount on receipt of in-principle approval from all the lenders b. The balance 90% of the settlement amount shall be paid within four weeks from the date of receipt of final approvals from all the lenders and on receipt of statutory approvals for external finding.
The other terms shall be as per the revised Compromised Proposal submitted to the Banks vide our letter dt. May 18, 2020."
(iv) After receiving the letter dated 18.06.2020, in a Joint Lenders Meeting held on 19.06.2020, the three lenders State Bank of India (SBI), Indian Bank (IB) and Indian Overseas Bank (IOB) 5 conveyed their acceptance of the OTS proposal of Rs.70.00 crores. As per the minutes of the joint lenders meetings held on 19.06.2020, 01.07.2020 and 02.11.2020, each of the lender was entitled to following amounts:
Sl. No. Name of Lender OTS Amount
1. State Bank of India Rs.26.50 Crores
2. Indian Overseas Bank Rs.21.36 Crores
3. Indian Bank Rs.22.14 Crores
Total Rs.70.00 Crores
(v) Respondent Nos.1 and 2 along with other bank had accepted the OTS proposal of the petitioner and in furtherance of the same, have issued letters of acceptance dated 07.09.2020 (SBI), 23.10.2020 (IB) and 02.11.2020 (IOB). The CoC members in the third CoC meeting held on 02.11.2020 have agreed to OTS proposal of the petitioner, minutes of which are as under:
"RESOLVED that all the 3 lender banks communicated their acceptance for the compromise offer submitted by the promoters of the company vide their respective sanction letters viz dated 7th September 2020 from SBI, 23rd October 6 200 from the Indian Bank and 2nd November 2020 from the IOB."
"RESOLVED FURTHER that the promoters of the company have agreed to abide by the terms and conditions of the bankers unconditionally and also committed to pay up the agreed compromise amount within days well before the time of 4 weeks stipulated by the bankers."
(vi) Pursuant to acceptance by the SBI, IB and IOB, an upfront amount of Rs.7.00 crores being 10% of the total agreed amount of Rs.70.00 crores was paid on 07.07.2020 as per the terms of the OTS and the same was informed to the members of the CoC vide e-mail dated 07.07.2020. As per OTS terms, Company Petition was to be withdrawn upon payment of OTS amount.
(vii) As per Section 12A of the Insolvency and Bankruptcy Code, a compromise proposal is to be effectuated within 90 days form the date of commencement of CIRP process. In view of the same, the payment of the accepted OTS proposal was instituted.
(viii) It is stated that as per the OTS, an amount of Rs.60.54 crores out of Rs.70.00 crores, was paid to the lenders as on 7 11.05.2021 which constitutes 87% of the OTS amount and irrefutably reflects the petitioner's intention to effectuate the settlement proposal in its entirety. Under the OTS proposal, payments that were due to IB and IOB were made and accepted by the said banks. As on 11.05.2021, an amount of Rs.9.45 crores remained as balance which was due to be paid to the respondent bank. Due to the onset of the second wave of COVID-19 Pandemic which was beyond control of the petitioner, payment of final tranche of the OTS amount was briefly delayed owing to difficulty in securing necessary statutory / regulatory approvals and compliances from Reserve Bank of India (RBI) and other authorities. The same was communicated to respondent No.1 through e-mail dated 11.05.2021. To make good the delay, an interest at the rate of 12% per annum was agreed to be paid in a bona fide manner. It is further submitted that as advised by the lenders, it was agreed that interest for delayed payment will be made at Marginal Cost of Funds Based Lending Rate (MCLR) of SBI which is around 7% per annum. The petitioner addressed letter dated 02.12.2020 to all the three banks and informed that he 8 undertakes to pay interest on delayed payments. However, an interest at the rate of 12% per annum was paid to the respondent bank which amounted to Rs.1.11 crores as per the IBC Regulations for the delayed payment which is substantially more than SBI's MCLR which shows bona fide intention of the petitioner.
(ix) It is stated that despite bona fide reasons put forth by the petitioner, respondent bank by the impugned letter dated 12.05.2021, in an unjustified and highhanded manner informed that they are unwilling to extend the time for payments and refused to accept OTS payments. In spite of previously detailed strenuous circumstances, the balance amount of Rs.9.45 crores was cleared on 15.05.2021 along with interest. As on date, the OTS amount that was accepted by the three lenders including the respondent bank has been fulfilled.
(x) It is stated that the e-mail dated 11.05.2021, previous tranche payments made towards fulfillment of the OTS were accepted by the respondent bank and also other two banks viz., IB and IOB without any demur whatsoever. The entire OTS amount 9 was paid to IB (Rs.22.14 crores) and IOB (Rs.21.364 crores) and the same was confirmed by the bank i.e., Indian Bank vide letter dated 30.04.2021 and mail dated 17.05.2021 and IOB through mail dated 15.05.2021 and also through e-mails dated 24.05.2021. The details of OTS payments made by the petitioner to the respondent bank in tranches are as follows:
Name of OTS Date of Date of Amount
Financial Amount Sanction Payment Paid
Creditors (Crores) (Crores)
State Bank 26.496 07.09.2020 06.07.2020 4.540
of India (acceptance
letter dated 07.12.2020 2.500
02.11.2020)
09.12.2020 2.500
11.05.2021 7.500
15.05.2021 9.456
Total 26.496 26.496
(xi) The respondent bank addressed an e-mail dated 18.05.2021 to the petitioner and other lenders pursuant to the CoC meeting dated 17.05.2021 requesting a meeting to be scheduled on 19.05.2021 to discuss the OTS proposal. Accordingly, a lenders 10 meeting was held on 19.05.2021 wherein it was proposed that the OTS amount be enhanced. It was decided that the OTS amount would be enhanced to Rs.74 crores from Rs.70.00 crores, the delayed payment interest of Rs.2.70 which had already been paid to the lenders would be adjusted against the enhanced amount and an amount of Rs.1.30 crores would be payable to all the lenders. In furtherance of the same, petitioner made a total payment of Rs.28.009 crores to the respondent bank towards OTS. The revised OTS amount as on 19.05.2021 areas follows:
Sl. No. Name of Lender OTS Amount
1. State Bank of India Rs.28.009 Crores
2. Indian Overseas Bank Rs.22.5848 Crores
3. Indian Bank Rs.23.4062 Crores
Total Rs.74.00 Crores
(xii) The aforementioned amounts were remitted to the accounts of the three lenders in accordance to the decision taken during the meeting dated 19.05.2021 and the same was 11 communicated to each of the lenders through e-mails dated 20.05.2021 (State Bank of India), 24.05.2021 (Indian Overseas Bank) and 24.05.2021 (Indian Bank). In reply to the same, the respondent bank issued the impugned letter dated 24.05.2021 by which it refused to extend validity of the terms and conditions of the compromise proposal and refused to accept the payments made under the OTS.
(xiii) That due to outbreak of the second wave of COVID- 19 impacted business, financial markets and economies all over the world including India and created uncertainty and stress. The repercussions of the effect were beyond the control of the petitioner and resulted in brief delay in fulfilling payment of final trance of the OTS. The reasons for delay in arranging funds were explained as evident from the recordings of the CoC meetings. Therefore, all the three banks had agreed to receive amounts in a phased manner and as such have never cancelled the OTS or issued any communication expressing their intention of cancellation of OTS even after lapse of four (4) weeks. Thus, the amounts were 12 paid from time to time to the banks and received and accepted by the banks and the OTS was in full force and valid.
(xiv) The final OTS offer was arrived at Rs.70.00 crores with a clear understanding that the CoC would move withdrawal application under Section 12A as evidence in the records mae in all CoC/lenders meetings. The action of the banks in refusing to accept OTS payment is without any basis or reasoning and issuing the letter dated 24.05.2021 despite the petitioner's earnest and bona fide intention to honor the OTS despite having agreed for an enhancement in the lenders meeting dated 19.05.2021 has resulted in grave injustice and harm to the petitioner and the company.
(xv) Aggrieved by the action of IOB in issuing tender dated 25.09.2020, the petitioner herein filed W.P. No.17155 of 2020 before this Court wherein, an interim order dated 30.09.2020 was granted staying all further proceedings pursuant to tender dated 25.09.2020 and the writ petition is pending. That challenging the action of the banks in inviting third party proposals before expiry of the timelines set forth in the OTS proposal, the petitioner filed 13 W.P. No.20376 of 2020 and this Court protected interest of the petitioner by the orders dated 16.11.2020 and 17.12.2020. Aggrieved by the same, a third party viz., M/s. Maharashtra Seamless Limited had approached the Hon'ble Supreme Court by filing a SLP (Civil) Diary No.4617 of 2021 as the NCLT, Hyderabad was restrained to proceed with the CIRP proceedings in view of the orders dated 16.11.2020 and 17.12.2020 and the Hon'ble Supreme Court was pleased to grant stay of the orders dated 16.11.2020 and 17.12.2020 passed by this Court. W.P. No.9857 of 2021 was filed before this Court challenging the order dated 28.01.2020 passed in CP (IB) NO.220/7/HDB/2019 wherein the NCLT was pleased to admit the company petition dated 25.01.2019 filed by the SBI under Section 7 of the Insolvency and Bankruptcy Code 2016 against the petitioner company and ordered initiation of corporate insolvency resolution process in violation of the Limitation Act 1963.
3. Respondent No.1 - SBI filed its counter. The case of the SBI is that three (3) banks viz., SBI, IB and IoB filed their financial claims with the resolution professional aggregating to 14 Rs.1,53,58,19,357-00. The petitioner in his capacity as suspended director of OCTL approached the Members of the CoC through his representative and expressed his intention to settle the dues of the company through a compromise proposal under the provisions of Section 12A of the Code. After several deliberations, the CoC agreed for total compromise amount of Rs.70.00 crores. 10% of the compromise offer to be deposited upfront in a No Lien Account and balance 90% to be paid within four weeks from the date of receipt of final approval from the three banks.
(i) The SBI communicated its proposal for the compromise vide letter dated 07.09.2020, likewise, IB vide letter dated 23.10.2020, IoB vide letter dated 02.11.2020. The detailed terms and conditions have been conveyed in the individual sanction letters. After making final upfront payment of Rs.7.00 crores, the petitioner failed to make payment of balance amount within the specified period and adhered to the agreed timeline i.e. four (4) weeks from 03.11.2020.
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(ii) The Supreme Court of India, time and again reiterated the principles relating to maintainability of writ petition pertaining to enforcement of terms and conditions of contract and held that same being in the realm of contract, writ Courts should seldom entertain such petitions for enforcement of contractual obligations unless there is definite breach of constitutional right and that the element of arbitrariness or unreasonableness etc.
(iii) It was contended in the counter of SBI that the petitioner miserably failed to comply with the terms and conditions of the accepted terms of OTS/compromise settlement and committed breach of the terms and conditions. The CIRP process was going on and resolution of 30.06.2021 and the resolution applicants were likely to submit their plan by 30.06.2021 and it was a considered decision of the bank to go ahead with the resolution process. Accordingly, conveyed its disinclination to accept settlement vide letter No.SBI/SAMB-II/HYD/2021- 22/BRS/200 dated 24.05.2021. The amounts deposited by the petitioner - applicant admittedly have been in a Non-Lien Account and as such have not adjusted against the loan dues since such 16 appropriation was depending on adherence to the terms and conditions of compromise under OTS. That mere non-issuance of cancellation letter of the frustrated OTS cannot be deemed as acceptance and condonation of delay and deviation from accepted terms and conditions.
4. In the counter filed by respondent Nos.2 and 3 in W.P. No.20376 of 2020, it was specifically and categorically pleaded about cancellation of OTS by non-compliance of the terms and conditions by the petitioner within the stipulated timeframe. The OTS transaction was voidable in terms of the provisions of Section 55 of the Indian Contract Act 1872. The withdrawal application under proviso to Section 12-A of the Insolvency and Bankruptcy Code 2016 can be initiated only after successful satisfaction of the compromise settlement, OTS stood frustrated and was cancelled owing to non-compliance of terms and conditions thereof.
5. Heard Mr. D. Prakash Reddy, learned senior counsel, appearing for Mr. P. Vikram, learned counsel for the petitioner, 17 and Mr. Ganga Reddy, learned counsel for respondent Nos.1 and 2
- SBI , and perused the material on record.
6. Mr. D. Prakash Reddy, learned senior counsel appearing for the petitioner, has submitted that though the OTS amount was to be paid within four weeks from 03.11.2020, all the banks received the due amount upto 11.05.2021. Rs.60.4 crores were paid out of Rs.70.00 crores and Rs.9.45 crores was the balance amount which was also paid subsequently. The rejection letter dated 24.05.2021 is arbitrary. The respondent bank did not take into consideration the minutes of the meeting held on 19.05.2021. The balance amount was paid with interest. The SBI received in all a sum of Rs.26.05 crores without raising any objection from 07.09.2020 to 12.05.2021.
7. Mr. Ganga Reddy, learned counsel appearing for SBI, has submitted that there is non-compliance of OTS conditions by the petitioner which were agreed upon by the SBI along with other creditor banks. Total amount paid by the petitioner before the stipulated period of four weeks as per OTS is only 18 Rs.17.00 crores. Merely because the remaining amount is deposited beyond stipulated time, it cannot be treated as acquiescence or that it is condoned as the amount was deposited in a non-lien account as per the OTS settlement. The bank only offered to take proposal or to refer it to fresh committee.
8. Under the impugned letter dated 24.05.2021, the petitioner was informed that the bank is unable to consider petitioner's request for compromise settlement and withdrawal under Section 12A by accepting the delayed payments. It was stated in the said letter that since full amount has not been paid within the stipulated date, it is now not possible for the bank to extend the validity of the terms and conditions of compromise settlement. Surprisingly, the letter dated 24.05.2021 does not refer to the minutes of lenders meeting held virtually on 19.05.2021. Out of 12 members present in the meeting held on 19.05.2021, three members viz., Mr. G.V. Sastry, Mr. B.V. Rangadham and Mr. B. Ravi Singh represented SBI. Though it was specifically stated in the letter dated 24.05.2021 that the SBI has received Rs.26.49 crores towards compromise settlement, it has expressed 19 its inability to accept the amount towards compromise settlement since it was not deposited as per the accepted terms conveyed through SBI sanction letter dated 07.09.2020; that the validity of the sanction of compromise settlement conveyed earlier is therefore treated as expired; hence, the promoters request has to be reexamined and internal approvals have to be obtained afresh if it is decided to reconsider the promoters request. The relevant portion of the minutes of the meeting dated 19.05.2021 is as under:
"He admitted that there had been a delay of around 4 ½ months due to sudden spurt in second covid pandemic wave across India and the world, which is unprecedented, unexpected and had a catastrophic effect on all walks of life, which was way beyond the control of our company Additionally there were other extraneous factors like non receipt of timely clearances from statutory authorities in foreign inward remittances.
This time around, despite all the challenges stated above, they were are able to meet the compromise settlement obligations and pursuant to the acceptance of sanction terms of OTS, that they have paid the full OTS amount of Rs 70.00 Cr with 20 interest to all 3 banks and now requested condonation of the delay and file application under 12 A of IPC-2016.
Lenders then asked him to enhance the offer amount, to which Dr Shashidhar replied that the present amount had been arranged with a great deal of effort and that it was difficult to enhance the amount as requested. He requested that Banks to consider the amount of Rs.2.70 Cr already paid toward delayed period interest and stated that he was willing to deposit an additional Rs 1.30 Crores so as to make a total payment of Rs.74.00 Cr to the 3 banks combined.
Further he informed that apart from the payment of Rs.70.00 Cr to the three banks, the company was assuming full liability towards other dues such as Rs.79.72 Cr to other financial creditors, Rs 5.90 Cr towards CIRP expenses, along with statutory & contingent liabilities of Rs 277.34 Cr. This meant a total outlay of Rs 442.00 Cr to the promoters over the next 2-3 years.
xxx xxx xxx xxx xxx xxx 21 Shri Madhaw Jha, AGM IOB, suggested that modalities of taking the preent proposal forward be worked out as to whether it should be treated as a fresh compromise offer or a revalidation of the earlier sanction. In the ensuing deliberations, it was left open to individual banks to approach their controllers/sanctioning authorities and obtain an extension of earlier sanction or revalidation or a fresh sanction as deemed suitable."
9. From the contents of the minutes of the lenders meeting dated 19.05.2021, it was clear that proposal forwarded by the petitioner's representative should be treated either as a fresh compromise offer or a revalidation of the earlier sanction. Thus, it was decided by the three creditor banks to approach their controllers / sanctioning authorities and in that regard. The action of the banks in not referring to the minutes of the meeting dated 19.05.2021 in the impugned letter dated 24.05.2021 reflects non- application of mind. The representatives of SBI participated in the meeting and agreed for certain proposals including interest on the delayed payments. The minutes of the meetings dated 19.05.2021 would show that all the three banks including SBI intended to re- 22 examine the compromise offer of the company by taking approval from the controllers / sanctioning authorities.
10. The learned senior counsel for the petitioner relied on the decision of the Hon'ble Supreme Court in State Bank of India v. Vijay Kumar1, wherein it was held as under:
"8. Additionally, we find that the respondent had paid Rs 45,000 as interest for the defaulted period. Interestingly, pursuant to the direction of the High Court the appellant Bank had charged interest of Rs 29,353. (sic) There into arrangements with third party for selling the property but the payment in respect of the sale was to be made directly to the Bank.
9. It is noted that Bank at no point of time before the final payment was made appears to have indicated that settlement failed because of failure to stick to the time schedule.
The learned senior counsel for the petitioner also relied on the following unreported decisions of this Court:1
(2007) 11 SCC 369 23 In M/s. Sri Yadadri Life Sciences (P) Ltd., Serlingampally, Madinaguda, Hyderabad v. M/s. State Bank of India, Stressed Assets Recovery Branch (SARB), Koti, Hyderabad (W.P. No.9408 of 2020 dated 02.07.2020), a Division Bench of this Court held as under:
"In this case, it is to be seen that the Hon'ble Apex Court has extended the limitations under several statutes, where there is no provision for condonation of delay also, till further orders or till the lockdown is lifted. The Hon'ble full Bench of this Court also extended interim orders taking into consideration of the prevailing Covid-19. No doubt, as contended by the learned Standing Counsel for the respondent Bank that the OTS is a special scheme and time for payment under said scheme is provided and same as extended to the petitioner, and same cannot be again extended as it will violate the very scheme itself. But the situation is extraordinary affecting the entire humanity and judicial notice has already been taken of the same. Learned Standing Counsel could not dispute the situation due to Covid-19 prevailing in the country.24
In view of above extraordinary circumstances, we are of the opinion that the petitioner can be granted time for payment entire due under OTS till the end of August, 2020."
In Bandla Ganesh Babu v. Union Bank of India (W.P. No.13284 of 2021 dated 30.06.2021), this Court held as under:
"This Court, having considered the rival submissions made by learned counsel for respective parties, is of the considered view that the respondent Bank, on its own, offered OTS in favour of the petitioners on 24.03.2020 and the action of the respondent Bank in cancelling OTS vide impugned order dated 02.06.202, more so during the pandemic situation, is not proper. Further, before cancelling the OTS, which was sanctioned in favour of the petitioners, the Bank ought to have given opportunity to the petitioners to submit a fresh representation. Thus, cancellation of OTS by the respondent Bank, without giving opportunity to the petitioners, is violative of principles of natural justice. On this short point, the impugned order dated 02.06.2021 is liable to be set aside and accordingly the same is set aside. The petitioners are directed to submit a fresh representation to the respondent Bank 25 within two weeks from the date of receipt of a copy of this order. Upon such a representation being received, the respondent Bank shall consider the same and pass appropriate orders in accordance with law in another eight weeks thereafter."
In Anu Bhalla v. District Magistrate, Pathankot [Civil Writ Petition No.5518 of 2020 (O&M) dated 22.09.2020], a Division Bench of Punjab & Haryana High Court, Chandigarh, held as under:
"26. Coming back to the facts of the present case, and on examining the instant case on the basis of the factors laid down above, we find that the petitioner is entitled to extension of time to repay the remaining amount of settlement as we have not been able to agree with the contentions raised by the learned counsel for the respondent No.2. The first contention of learned counsel for respondent No.2 is that the petitioners have concealed the factum of having availed loans from other two banks and there being a litigation pending qua the same. The said argument cannot be a reason to reject the plea of the petitioners. Hon'ble Supreme Court in M/s SJS Business 26 Enterprises Pvt. Ltd. V/s State of Bihar 2004 (7) SCC 166, held that as a general rule, suppression of a material fact by a litigant disqualifies such litigant from obtaining any relief. This rule has been evolved out of the need of the Courts to deter a litigant from abusing the process of Court by deceiving it. But the suppressed fact must be a material one in the sense that had it not been suppressed, it would have had an effect on the merits of the case. It must be a matter which was material for the consideration of the Court, whatever view the Court may have taken. In the present case, the petitioner has prayed for extension of settlement period pursuant to an OTS entered with respondent No.2 and has paid substantial portion of the same and is willing to pay the remaining with interest. In our considered opinion, if the petitioners are in litigation with other creditors the same by no stretch of imagination constitutes to be a material fact, disclosure of which would have had any impact over the decision of the present case. So long as the respondent No.2 is getting its money back, under a settlement voluntarily entered into by it, it would have no concern with what the petitioners are litigating with the other creditors. We 27 therefore have no hesitation in rejecting this argument of the respondent."
11. According to SBI, the timeline for payment of OTS amount expired after four (4) weeks from 03.11.2020. It is noticed that the OCTL vide letter dated 02.12.2020 informed all the three banks that remaining balance of Rs.63.00 crores could not be paid in time i.e., by 02.12.2020 for want of receipt, certain necessary statutory and regulatory approval and compliance from the Reserve Bank of India and other authorities, due to various restrictions imposed against them due to COVID-19 Pandemic situation and sought extension of four weeks time to pay the balance amount and offered to pay balance amount of Rs.63.00 crores along with applicable interest.
12. In the fourth meeting by CoC dated 03.12.2020, the representative of the petitioner OCTL requested the three Banks to grant extension of time for payment of OTS amount. In response thereto, the SBI representatives stated that extension of time would necessitate obtaining fresh internal approvals from the authorities; 28 that CoC or lender banks were restrained from taking any decisions due to orders passed by the High Court in W.P. No.20376 of 2020 until 07.12.2020 which was in force till 07.12.2020.
13. Even in the CoC meetings held on 16.12.2020, 26.02.2021, 09.03.2021, 30.03.2021 and 22.04.2021, there was no discussion about cancellation of OTS. Subsequently, IB vide its letter dated 30.04.2021 and IOB vide its e-mail dated 15.05.2021 confirmed that entire dues payable to them under OTS was received. Several letters and e-mails were addressed by the OCTL to the SBI. It is noticed that the letter dated 12.05.2021 was issued by the SBI informing the petitioner that the SBI is unable to consider extension of validity of terms and conditions of compromise settlement. However, it is curious to note that in the Joint Lenders Meeting held on 19.05.2021 as pointed out above in paragraph No.8, the three banks expressed their intention to reconsider the proposal of the petitioner for making delayed payment. As borne out of record from the various correspondence and CoC meetings, Banks never expressed that OTS was cancelled.
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14. The contention of the learned senior counsel for the petitioner is that the respondent bank cannot unilaterally cancel the OTS proposal as its share therein is only 35% and that too without concurrence of other two banks, which, in the opinion of this Court, is not subject matter in this writ petition.
15. Though the learned senior counsel relied upon several decisions, in the opinion of this Court, the said decisions cannot be treated as binding precedents. The decisions therein are rendered owing to peculiar facts and circumstances existing in each of those cases. The impact of COVID-19 on the petitioner and the reasons mentioned for not complying with the terms and conditions within the agreed timelines are the matters to be decided by the lender banks. This Court is only concerned with the manner in which decision was taken by the SBI in issuing impugned letter dated 24.05.2021.
16. The learned counsel for the SBI heavily relied on the decision of the Hon'ble Supreme Court in The Bijnor Urban 30 Cooperative Bank Limited, Bijnor v. Meena Agarwal2, wherein the Hon'ble Supreme Court set aside the order of the High Court issuing directions to the appellant - bank therein to positively consider application of the respondents for grant of benefit under the OTS scheme. The contention of the bank therein was that the case of the respondent - writ petitioner does not come under the eligibility criteria for OTS. The probabilities of recovery of loan amount did not diminish and the bank had sufficient property mortgaged with it and the loan amount can be recovered by auctioning the mortgaged property. Further, that the case of the writ petitioner was referred to Settlement Advisory Committee for consideration, which after hearing the writ petitioner, rejected her application for grant of benefit under the OTS scheme. In such background facts, the Hon'ble Supreme Court held that in exercise of powers under Article 226 of the Constitution of India, the High Court has exceeded in its jurisdiction in issuing a direction positively to grant OTS to the writ petitioner.
2 Civil Appeal No.7411 of 2021 dated 15.12.2021 31
17. This Court is conscious of its limitations that direction cannot be given in a writ jurisdiction to consider application of the petitioner for OTS or to extend the timelines under the OTS agreed on 07.09.2020. It is seen from the record that the SBI does not come out clearly as to what is its specific stand. Even in the counter filed by the SBI, there is no light thrown upon the minutes of the lenders meeting held on 19.05.2021. The SBI should spell out in clear terms whether it is canceling the OTS or not. Another important factor to be noted is the effect of only one bank i.e., the SBI withdrawing from OTS and what would be the consequences of one out of three banks alone not extending time for payment of OTS amount or cancelling the OTS. The IB and the IOB have been impleaded, but they have not chosen to file counters. As pointed out above, the SBI is also not clear in its counter as to whether it has decided to cancel the OTS and at the same time what would be the consequence of other two banks not falling in line with the decision of the SBI. This court is of the view that the SBI cannot take an inconsistent stand when a conscious decision was taken in the lenders meeting held on 19.05.2021 that extension 32 of timeline of OTS will be subject to sanction or revalidation by the controllers / sanctioning authorities. The SBI also did not say in its counter that minutes of the meeting are not binding on it. So also, why the SBI is ignoring the decision taken on 19.05.2021 is also not clearly explained in the impugned letter dated 24.05.2021 or in its counter. The stand of the SBI lacks transparency and clarity. Thus, action of the SBI is arbitrary, unreasonable, unjust and violative of Article 14 of the Constitution of India.
18. In view of the above observations, the writ petition is allowed setting aside the impugned letter dated 24.05.2021. Consequently, the SBI, IB and IOB are directed to consider afresh the proposal of the petitioner for payment of OTS beyond the stipulated time along with interest by duly taking into consideration the minutes of the Joint Lenders meeting dated 19.05.2021. This exercise shall be completed by the SBI within a period of one (1) month from the date of receipt of a copy of this order. No order as to costs.
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As a sequel thereto, miscellaneous applications, if any, pending in the writ petition stand closed.
______________________ B. VIJAYSEN REDDY, J July 15, 2022.
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