Default In Payment Because Of CoVID: Supreme Court Grants Relief To Company To Pay OTS Amount With Interest

The Supreme Court recently granted relief to a company to pay OTS amount with interest considering that the default in payment was due to CoVID.

The bench of Justices Vineet Saran and Aniruddha Bose was considering a SLP assailing Madras High Court's order dated July 22, 2021.

The petitioner had availed loan from the State Bank of India. Since, there was default in repayment of the loan, the petitioner entered into a One Time Settlement under the OTS Scheme with the bank in November, 2020. Out of the installments due to be paid under the OTS Scheme, the petitioner paid approximately 25% of the amount but, thereafter defaulted in payment.

Aggrieved, the petitioner had approached the Madras High Court seeking extension of time for a period of 180 days from July 29, 2021 to settle the final payment under the OTS Scheme.

The High Court however while dismissing the petition in its order dated July 22, 2022 had said,

"Again, the court cannot come to the assistance of the petitioners, however sympathetic the court may be in recognising the plight of business entities in the wake of the lockdowns imposed pursuant to the second surge of the pandemic. For one, OTS terms are offered to similarly placed constituents and there can be no good ground as to why the terms should be relaxed for one constituent simply because such constituent has come to court or has the ability to come to court. Secondly, there is no element of public interest involved in such matter particularly since the contract pertaining to the credit facilities and the OTS terms are private agreements made between two parties and the status of the bank as a nationalised bank has nothing to do with the terms of the contracts."

Petitioner's counsel had submitted before the Top Court that the default was on account of Covid pandemic as the business was not doing very well. Counsel further made a statement for depositing the entire amount due, as per the OTS Scheme, with the Bank by the 14th of this month. The petitioner further undertook to pay 12% interest on the defaulted OTS amount from the respective due dates, within five days thereafter.

Thus the Top Court while granting the petitioner liberty to deposit the amount as per the OTS scheme, directed bank to furnish within 3 days from date of order the amount of interest due to be paid by the petitioner at the rate of 12% per cent from the date the amount became due till 14th March, 2022.

While adjourning the matter for March 21, 2022 the bench also directed the the petitioner to file proof of payment of the amounts.

"It is understood that in case there is default in payment of either of the two amounts, as indicated above, these petitions shall be dismissed," bench said in its order.

Case Title: M/S Ganga Foundations Pvt Ltd v The State Bank Of India & Anr| Special Leave to Appeal (C) Nos. 14979-14980/2021

Coram: Justices Vineet Saran and Aniruddha Bose

Click Here To View/ Download Supreme Court's Order

Click Here To View/Download Madras High Court's Order