Dismissed

Idbi Bank Ltd. v. M/s Sabari Supermarkets Pvt. L

DRAT10 Oct 2022REGULAR APPEAL/161/2018

Case brief

AI extract

What is this about?

The Appellate Tribunal dismissed the Bank's appeal against a DRT order limiting recovery to the One Time Settlement (OTS) amount. The court held that since the OTS terms lacked a default clause restoring original dues (unlike standard formats), the settlement was binding and the Bank could not claim the full outstanding amount.

What did the court decide?

The appeal was dismissed; both parties shall bear their own costs.

Idbi Bank Ltd. versus M/s Sabari Supermarkets Pvt. L — Banking and Recovery | DRAT (2022)

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RA 161/2018

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IN THE DEBT RECOVERY APPELLATE TRIBUNAL AT CHENNAI

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Dated the 10^th of October, 2022

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PRESENT: Hon’ble Mr. Justice S. Ravi Kumar CHAIRPERSON

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RA 161/2018

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(OA 699 /2016 on the file of DRT-II, Chennai)

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Between

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IDBI Bank Limited No.115, Anna Salai, Saidapet, Chennai 600 015.

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……Appellant Bank

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And

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M/s Sabari Supermarkets Private Limited, No.29, Thirumalai Pillai Street, T. Nagar, Chennai 600 017.

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Mr. K.R. Ramani, S/o Mr. K.R. Ramachandran, No.9/5, First Cross Street, Seethammal Colony Extension, Teynampet, Chennai 600 018.

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Mrs. Aruna Ramani, W/o Mr. K.R. Ramani, No.9/5, First Cross Street, Seethammal Colony Extension, Teynampet, Chennai 600 018.

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Sabari Inn Ltd., No.29, Thirumalai Pillai Road, T. Nagar, Chennai 600 017.

….. Respondents

RA 161/2018

Counsel for Appellant Bank	: M/s Shivkumar & Suresh
Counsel for respondents	: M/s G. Vijayakumar & Co.

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ORDER

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This Appeal is preferred under Section 20 of the Recovery of Debts Due to Bank and Financial Institution Act, 1993 against order dated 6.9.2018 in OA 699/2016 on the file DRT-II, Chennai, Brief facts leading to this appeal are as follows.

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Appellant herein filed above referred OA for recovery of

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Rs.20,91,88,859.40p together with future interest as per agreed terms from 1.9.2016 till date of realisation and costs. Respondents herein resisted the said claim and during pendency of OA, filed IA 677/2018 requesting Tribunal below to

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pass final order in OA in terms of OTS Sanction Letter in reference No.1412/2017/18/SSMPL dated 21.2.2018 and that application is opposed by appellant contending as respondents herein have not paid instalments as per terms of OTS and bank revoked the said OTS, therefore, respondents cannot be permitted to enforce OTS and they are liable to pay OA claim amount. Tribunal below, on consideration of contentions and rival contentions of both parties accepted the request of respondents herein and passed final order in terms of amount arrived at under OTS and ordered for issue of recovery certificate

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RA 161/2018

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accordingly. Aggrieved by the said order, appellant bank preferred the present appeal.

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Heard both sides.

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Advocate for appellant submitted that respondents have to pay Rs.20,91,88,859.40p as on 30.8.2016, which is the amount claimed in OA and during pendency of OA, bank sanctioned OTS for Rs.15.00 crores through letter dated 21.2.2018, according to which, respondents have to pay a sum of Rs.1.40 crores at the time acceptance of OTS letter, Rs.10.60 crores on or before 20.3.2018 and balance Rs.3.00 crores on or before 30.6.2018. But, respondents having accepted the terms failed to honour any of above referred conditions of OTS. It is further submitted that as per terms and conditions of OTS, bank has the right of revocation and as respondents failed to honour the terms, same is revoked and bank intimated the same to the respondents through letters and finally through letter dated 2.6.2018 making it clear that unless payment of Rs.1.40 crores is paid on or before 17.6.2018, it should be treated as final date of payment and as

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per terms of OTS conditions, OTS shall automatically stand revoked and payment was not paid by respondents before the said expiry date. It is further submitted that respondents filed IA 677/2018 to pass final order in OA in terms of OTS Sanction Letter 21.2.2018 and in spite of filing a detailed counter along with letter of revocation dated 18.6.2022, Tribunal below passed final order without considering the terms and conditions of OTS. It is submitted that respondents are

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RA 161/2018

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liable to pay OA amount with future interest and costs. It is further submitted that order of Tribunal below is erroneous and contrary to terms and conditions of OTS and the same has to be set aside and appeal has to be allowed.

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On the other hand, advocate for respondents submitted that terms and conditions of OTS are very clear and as per Clause 3 of terms and conditions, failure to pay instalment amount would carry interest at 12% +2% p.a.(14% p.a.) or one year MCLR + 2% p.a., whichever is higher. Tribunal below considering the said condition, passed the final order and there is no illegality in the order of Tribunal below. It is further submitted that conditions referred to by advocate for appellant bank is only with regard to revocation of OTS but nowhere it is stipulated that failure to pay arrived amount as per the due dates of instalments indicated in the OTS, that bank is entitled to claim OA amount, therefore, entire arguments of advocate for appellant bank is without any material. It is submitted that respondents have cleared almost 90% of loan amount by sale of some properties during pendency of OA and considering these aspects, Tribunal below rightly accepted OTS amount and passed final order and there are no grounds to interfere.

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I have perused material papers and impugned order dated 6.9.2018. There is no dispute with regard to availment of loan and also about letter of OTS and negotiated settlement (NS) of dues dated 21.2.2018. According to advocate

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RA 161/2018

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for appellant, as per terms and conditions of OTS/NS, if settlement amount is not fully paid by the expiry date of package, OTS/NS shall stand revoked automatically,

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which means, original claim has to be accepted. On the other hand, it is the contention of advocate for respondents that there is no such clause in the letter dated 21.2.2018 agreeing to pay original claim amount in case of non payment of settled amount. In reply, advocate for appellant submitted in all OTS Schemes, this is the format of terms and conditions, therefore, objection of the other side is not tenable. Then, this Tribunal requested advocate for appellant to produce OTS terms and conditions of any other bank so that both can be compared, for which, Ld. Advocate for bank produced terms and conditions of OTS of Export-Import Bank of India (EXIM Bank) along with a memo. It may be appropriate to extract both formats of terms and conditions for better appreciation of submissions made

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across the Bar, which are given below.

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I. Terms and Conditions of OTS/NS - Appellant Bank

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1.	Settlement Amount	Rs.1500 lakhs*
2	Payment Schedule	Rs.140 lakhs at the time of issuance of LOA
	Upfront Payment
	Balance payment	Balance settlement amount of Rs.1360 lakhs is payable in instalments as follows: Rs.1060 lakhs on or before March 20,2018 Rs.300 lakhs on or before June 30,2018 (Shri K.R.V.Ramani to provide PDC for Rs.300 lakhs at the time of issuance of LOA)

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RA 161/2018

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3	Interest on settlement amount	12% p.a. after March 20,2018
	Delayed period interest	If the borrower fails to pay as per the above schedule, the instalment amount would carry interest at 12% p.a. + 2% p.a.(14% p.a) or 1 year MCLR + 2% p.a.(Present effective Rate 10.55% p.a.) whichever is higher
4	NOC for partial release of Security Release of Security	NOC for release of primary security (Convention Centre) viz. Land and Commercial Building situated at old No.15, New No.29, Chinnaiah Street, T.Nagar, Chennai 600 017on land of 4,794 sq.ft. and a total built up area admeasuring 13,000 sq.ft. on payment of Rs.12 crore on or before March 20,2018 Proportionate collateral security would be released on payment of balance amount of Settlement.

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*settlement amount is excluding the expected sale proceeds of 1 flat located in flat No.D, Third Floor, 1^st Block, Sabari Terrace, Wipro Street, OMR, Sholinganallur, Chennai.

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II. Terms and Conditions of OTS – EXIM Bank

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a)	Amount of one time Settlement	Rs.8.00 crores (Rupees Eight Crores only)
b)	Terms of Payment	(i)10% of OTS amount (Rs.80 lakhs) by February 17, 2020 along with acceptance of OTS.
		(ii)Next 10% of OTS amount (Rs.80 lakhs) by March 31, 2020.
		(iii)Balance 80% of OTS amount (Rs.6.40 crore) by June 30, 2020.
c)	Other terms and conditions	Existing security available to lenders (including personal guarantee of Shri Sankaranarayana Mathur)would be released onlyafterpayment of

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RA 161/2018

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		full amount under this OTS. If, any point, OTS scheme fails due to non performance of any term, the recovered amount shall be treated as normal recovery and the existing or any other necessary legal action/recovery proceedings shall continue to be in force. The primary security by way of pledge of share in Alpha Group SA will continue to rest with EXIM bank on transfer basis and will not be released, even after payment of OTS Amount.
d)	Default Clause	In case of non payment of OTS amount as stipulated above, OTS proposal will be treated as failed and cancelled, and any amount deposited towards the OTS will be forfeited as normal recovery towards the loan dues. Exim Bank shall have the right to revoke the settlement and reverse the waiver of dues as envisaged in the OTS proposal and restore the original liabilities as per the terms of the Loan agreements Security documents entered into by Welbrun Candles with Exim Bank. In case of non payment of OTS amount as per above mentioned terms of payment, Exim Bankat its sole discretion may revive the OTSproposal subject to company paying additional interest at Prime lending rate(currently being 15% p.a.) from the date ofdefault on the outstanding OTS amount till final settlement date.
e)	Initiation of CIRP	In the event of CIRP initiation by NCLT, the amounts recovered before the public announcement shall be adjusted to the outstanding dues and the bank reserves the right to file its claim for remaining amount in NCLT for recovery of entire dues and the OTS sanction shall stand cancelled on admission of Welburn Candles into CIRP.
f)	Legal action/ proceedings	This OTS offer letter is without any prejudice to our rights to take/continue action under the SARFAESI Act/DRT/NCLT, etc. unless the OTS is fully settled under the terms as stated above.

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RA 161/2018

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Any settlement will be subject to requisite consent/permission/order of the court/Tribunal as the case may be.

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On perusal of above two charts or formats, as rightly pointed by advocate

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for respondents, there is no condition to paying original claim in case of default of payment of amount arrived at under settlement. In the format relating to EXIM Bank, there is a specific default clause stating that if OTS amount is not paid as stipulated, it will be treated as OTS failed and amount deposited towards OTS will be forfeited as normal recovery towards loan dues and EXIM Bank has the right to revoke the settlement and reverse the waiver of dues as envisaged in the OTS proposal and restore the original liabilities as per the terms of Loan Agreements / Security documents entered into by Welburn Candles with EXIM Bank. Advocate for appellant underlined the clause of additional interest rate , i.e, in respect of a situation where bank restores or revives the OTS proposal, which will in no way helpful to the appellant to the present facts of the case.

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In the terms and conditions of this case, no such default clause is incorporated and only settlement amount payment schedule, interest on settlement amount, penal interest for delayed period and NOC for partial release of security are the only terms and conditions incorporated in the OTS/NS letter dated 21.2.2018. Advocate for appellant mainly harped on Condition No.6, which says that if settlement amount is not fully paid by expiry date of the package, the

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RA 161/2018

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OTS/NS shall automatically stand revoked unless further period for payment is expressly granted by the bank. So, it speaks only about revocation but nowhere it is stated that in default, bank is entitled to claim original amount. When bank already initiated legal proceedings and filed OA, which was pending by the date of this letter dated 21.2.2018 and if bank is really intended to claim entire amount in case of default, it should have definitely incorporated such a condition in the said letter dated 21.2.2018 and without such express condition, it is not open to the bank now to contend that they are entitled for OA claim. Normally in One Time Settlement cases, default clause as mentioned in the case of EXIM Bank would appear. When such normal condition is not incorporated and letter dated 21.2.2018 refers it as OTS/NS, it has to be inferred Terms indicated in letter dated 21.2.2018 are negotiated Settlement Terms, for which, both parties agreed and signed. Therefore, contention of bank cannot be accepted.

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It is not in dispute that as per terms and conditions, final date is 30.6.2018 and first date of payment is at the time of LOA i.e., 21.2.2018 and bank finally revoked its proposal through letter dated 18.6.2018. In that letter, it is mentioned that letter is issued without prejudice to the rights and legal remedies/proceedings initiated/to be initiated against the borrower and guarantors for recovery of dues of IDBI Bank Ltd. When OA is already filed, there is no point in mentioning without prejudice to the rights and legal remedies/proceedings initiated/to be initiated and letter should have been very clear by indicating that revocation is without

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prejudice to the claim made in OA. When letter dated 21.2.2018 is signed by both parties agreeing to the terms, any further deviation or cancellation should have been signed by both parties. But there is no such document forthcoming.

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As already referred to above, when terms and conditions incorporated in

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letter dated 21.2.2018 extracted above did not refer to any default clause like EXIM Bank put it in black and white, contention of appellant bank that they are eligible for OA claim cannot be accepted. Therefore, Tribunal below is completely right in restricting the claim to the amount arrived at under letter dated 21.2.2018 and there are absolutely no grounds to interfere with findings of Tribunal below.

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Advocate for appellant referred to judgment of Hon’ble Supreme Court of India in re , Bijnor Urban Cooperative Bank Limited, Bijnor and others and Meena Agarwal and others reported in 2021 SCC Online SC 1255. That decision is no way applicable to the facts of this case because in that case High Court issued a Writ of mandamus directing bank to positively consider/grant benefit under OTS scheme, de hors the eligibility criteria mentioned in the OTS scheme. In that case, General Scheme is formulated with certain eligibility criteria and when respondents therein were not within eligibility criteria, bank refused their OTS request and when they approached, High Court by exercise of power under Article 226, issued a direction which was challenged before Hon’ble Supreme Court of India and Hon’ble Supreme Court of India held that High Court exceeded its jurisdiction in issuing writ of mandamus and pleased to quash and set aside the order of High

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RA 161/2018

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court. But, here, it is not as per the General Scheme formulated by RBI with eligibility criteria and it is a settlement between bank and borrower. The very letter dated 21.2.2018 refers it as OTS/NS (Negotiated Settlement). Therefore, that decision is no way applicable to the facts of the present case.

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In view of my foregoing discussion and observation, it is held that appeal is

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devoid of any merits and is liable to be dismissed.

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In the result, Appeal RA 161/2018 is dismissed. Both parties shall bear

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their own costs.

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14. All pending IAs, if any, stand closed.

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[Dictated to Steno(SN), transcribed by him, corrected, signed and pronounced by me in open court, this 10^th October, 2022]

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Sd/- [ Justice S. Ravi Kumar ] CHAIRPERSON

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Idbi Bank Ltd. v. M/s Sabari Supermarkets Pvt. L

Case brief

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Idbi Bank Ltd. v. M/s Sabari Supermarkets Pvt. L

Case brief

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