High Courts Are Empowered To Extend The One Time Settlement Time Period: Punjab & Haryana High Court

A Division Bench comprising of Justice M.S. Ramachandra Rao and Justice Jasjit Singh Bedi of the Punjab and Haryana High Court, in the matter of Amrik Singh v DCB Bank Ltd. and Anr., has held that the High Court, in the exercise of its powers under Article 226 of the Constitution of India, can grant an extension of time for completion of the payment under the One Time Settlement (OTS), if the guidelines given in the case of Anu Bhalla and another v District Magistrate, Pathankot, 2021 (1) RCR (Civil), are met. The order was passed on 06.04.2022. Facts Of The Case Two proprietary firms were being run by the Petitioner and his brother to carry out business. Both these firms had availed loan from DCB Bank ("Respondent No.1/Bank") amounting to Rs. 67 Lakh in 2013. The loan was against property, and in 2015 it was enhanced to Rs. 95 Lakh. The Petitioner also stood as a personal guarantor to the credit facility by mortgaging his property in favour of Respondent No. 1. The loan account of the Petitioner was declared Non-Performing Asset (NPA) 01.12.2018 when EMIs were not paid on time. Accordingly, notices under Section 13(2) of the Securitization & Reconstruction of Financial Assets & Enforcement of Security Interest Act, 2002 ("SARFAESI Act") were issued. The Petitioner had submitted its first One Time Settlement ("OTS") proposal to the Bank on 22.08.2019, along with a Demand Draft ("DD") of Rs. 10 Lakh, which was to be encashed subject to acceptance of the proposal. The Bank encashed the DD but did not accept the proposal. The Petitioner and his brother made a joint settlement proposal on 18.06.2020, offering Rs. 75.32 Lakh to the Bank; however the same was also not accepted. After that, the Petitioner submitted a revised proposal on 16.07.2020 offering Rs. 85 Lakh, which was accepted by the Bank and a sanction letter was issued on 25.07.2020. The OTS was payable in three instalments, i.e., Rs. 25 Lakh was payable by 31.07.2020, Rs. 20 Lakh by 30.08.2020 and Rs. 40 lakh by 30.09.2020. Till 30.09.2020, the Petitioner had paid Rs. 49 Lakhs against the total OTS amount and was unable to raise the balance amount of Rs. 36 Lakh. Therefore, it requested the Bank for an extension of 90 days for paying the balance amount. The third instalment had got delayed since the purchaser to whom the Petitioner had sold his property had not made payment of Rs. 40 Lakh in time, which was to be paid by the said purchaser by 28.09.2020. Due to Covid-19 and resultant slow down in business, the purchaser of the property was unable to make full payment on time. The Petitioner had also addressed a representation to the Bank on 31.12.2020 through Registered Post requesting extension of time, to which no response was received. Thereafter, the Petitioner filed a writ petition before the Punjab and Haryana High Court seeking direction to the Respondents to accept the balance amount of Rs. 36 lakh along with interest at 9% p.a. w.e.f. 01.10.2020 to 31.12.2020. Contentions Of The Petitioner The Petitioner contended that since a substantial payment of Rs. 49 Lakhs was already made towards the OTS; an extension of time should be granted for the balance payment, which remained unpaid due to unavoidable circumstances. The Petitioner also apprised the Court that the Petitioner had already deposited the sum of Rs. 36 Lakh in the Punjab and Sindh Bank by way of a Fixed Deposit on 25.03.2021. The Petitioner placed reliance on the Division Bench judgment of Punjab and Haryana High Court passed in Anu Bhalla and another vs District Magistrate, Pathankot, 2021 (1) RCR (Civil) and in Aseem Gaind Vs. Axis Bank, Retail Assets Centre, CWP-32015-2019. It was further argued that the OTS policy of the Bank was issued pursuant to the circular issued by the RBI on 04.10.2007 and 21.06.2010, and Clause 6.9 of the said Policy contemplated even delayed payment of OTS by extending timelines subject to approval by the sanctioning authority. Contentions Of The Respondents The Respondents contended that the writ petition is not maintainable as Petitioner has not exhausted an equally efficacious remedy under Section 17 of the SARFAESI Act. Further, it was argued that the Bank received only the OTS proposal dated 22.08.2019 and admittedly the DD amounting to Rs. 10 Lakhs was encashed by the Bank. The Respondents argued that Petitioner failed to dispense its obligations as per the OTS, hence, the OTS lapsed and became invalid. The Bank had accordingly informed the Petitioner that it would not receive the balance amount of Rs. 36 Lakhs. Observations Made By The Court The Bench observed that the DCB Bank is a Scheduled Bank mentioned in the Schedule of the Reserve Bank of India Act, 1934 and is governed by the Banking Regulation Act, 1949 ("1949 Act"). Admittedly, the OTS policy framed by the Bank was pursuant to circulars issued by the RBI. The guidelines issued...

High Courts Are Empowered To Extend The One Time Settlement Time Period: Punjab & Haryana High Court

Pallavi Mishra

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