Allowed

Economic Transport Oraganisation Limited v. State Bank of India

Karnataka HC28 Sept 2021WP/13226/2021

Case brief

AI extract

What is this about?

This writ petition challenged letters under the One Time Settlement (OTS) scheme due to the petitioner's inability to meet timelines caused by the COVID-19 pandemic. The Court held that the OTS scheme has a statutory flavor derived from RBI guidelines and is not merely a contract. Considering the extraordinary impact of the pandemic on businesses, the Court recognized the 'State' obligation to act

What did the court decide?

Direction issued to the first respondent-Bank to consider and accept petitioner's request for extension of the OTS timelines.

Economic Transport Oraganisation Limited… — Contract and Commercial Disputes | Karnataka HC (2021)

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU

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DATED THIS THE 28^TH DAY OF SEPTEMBER, 2021

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BEFORE

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THE HON’BLE MR. JUSTICE KRISHNA S.DIXIT

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WRIT PETITION NO.13226 OF 2021 (GM-RES)

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BETWEEN:

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ECONOMIC TRANSPORT ORAGANISATION LIMITED., A COMPANY WITHIN THE MEANING OF COMPANIES ACT, 2013 HAVING ITS REGISTERED OFFICE AT GROUND FLOOR, PODDAR COURT, 18 RABINDRA SARANI, KOLKATA 700 001. AND ITS ADMINISTRATIVE OFFICE AT: B1, GOLDEN ENCLAVE (CORPORATE BLOCK), 5^TH FLOOR, OLD AIRPORT ROAD, BENGALURU 560 017.

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REPRESENTED BY ITS AUTHORIZED SIGNATORY, MR. SUDARSHAN KUMAR ARYA , AGED ABOUT 69 YEARS, S/O DWARKA PRASAD ARYA , (SENIOR CITIZEN BENEFIT NOT CLAIMED)

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…PETITIONER

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(BY SRI. MANU KULKARNI, ADVOCATE A/W SRI.ISHI PRAKASH, ADVOCATE)

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AND:

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STATE BANK OF INDIA, A STATUTORY CORPORATION CONSTITUTED UNDER STATE BANK OF INDIA ACT, 1955 THROUGH ITS STRESSED ASSETS, MANAGEMENT BRANCH, BENGALURU, 2^ND FLOOR, OFFICE COMPLEX BUILDING, LHI CAMPUS, NO. 65, ST. MARKS ROAD, BENGALURU - 560 001. REPRESENTED BY ITS DGM.

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RESERVE BANK OF INDIA A STATUTORY CORPORATION ESTABLISHED UNDER THE RESERVE BANK OF INDIA ACT, 1934, HAVING ITS CENTRAL OFFICE AT, SHAHID BAGAT SINGH MARG, MUMBAI - 400 001. REPRESENTED BY ITS GOVERNOR.

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MINISTRY OF MICRO, SMALL AND MEDIUM ENTERPRISES, UNION OF INDIA REPRESENTED BY THE SECRETARY, UDYOG BHAWAN, RAFI MARG, NEW DELHI – 110 011.

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MINISTRY OF FINANCE, REPRESENTED BY ITS SECRETARY, DEPARTMENT OF FINANCIAL SERVICES, 3^RD FLOOR, JEEVAN DEEP BUILDING, SANSAD MARG, NEW DELHI - 110 001.

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…RESPONDENTS

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(BY SRI. ASHOK KUMAR M, ADVOCATE FOR R1; SRI.P.NISHAN UNNI, ADVOCATE FOR R3 & R4)

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THIS WRIT PETITION IS FILED UNDER ARTICLES 226 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH R1S LETTERS DATED 19.05.2021 ANNEXURE-L 01.07.2021 ANNEXURE-N AND 15.07.2021 ANNEXURE-R AND ETC.,

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THIS PETITION COMING ON FOR PRELIMINARY HEARING THIS DAY, THE COURT MADE THE FOLLOWING:-

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ORDER

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Petitioner-Company, a Medium Enterprise falling within

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the definition given under the provisions of Micro Small and

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Medium Enterprises Development Act, 2006 had availed a cash credit facility aggregating to Thirty Crore rupees,

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pursuant to the sanction letter dated 24.9.2010 issued by the first respondent-Bank; the repayment having not been done, its credit account was classified as NPA on 22.6.2019 and the proceedings under the SARFAESI Act were taken in the second half of 2019 and matter reached the Debt Recovery Tribunal in S.A.No.368/2019.

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When that was the position, the first respondentBank issued the scheme for One Time Settlement (OTS for short) of NPAs on 12.10.2020 for the borrowers whose loan was ranging between Rs.20,00,000/- and Rs.50,00,00,000/-; in terms of the invitation to offer made by the respondentBank, the petitioner deposited a sum of Rs.85,88,774/- being 5% of the OTS amount; later, in all, he deposited a sum of * Rs.4,55,28,402/- being the 25% of the OTS amount on various dates; however, because of the difficulty created by the COVID-19 pandemic, the business of the petitioner enormously went down and therefore, he could not adhere to the prescribed timelines for payment of sums in terms of the OTS Scheme.

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*Corrected Vide Court Order Dated 08.10.2021.

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Petitioner’s request for the extension of the

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timelines for remainder of the OTS amount having not been considered, it is knocking at the doors of the Writ Court; learned counsel for the petitioner vehemently contends that although the terms of OTS have imperative nature, the same needs to be construed favourably to the scrupulous debtors because of the COVID-19 difficulty which has affected the world at large and that the business of the petitioner has suffered a lot; he points out that but for the business losses suffered on account of this pandemic, petitioner is an honest debtor.

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To show its bonafide, petitioner has also filed a Memo dated 28.9.2021 offering to hand the three banker cheques dated 16.9.2021, 21.9.2021 & 28.9.2021, in all for a sum of *Rs.12,62,47,070/- drawn in favour of the lender bank; this apart, he has voluntarily undertaken to pay an addl. sum of Rs.25,00,000/- over and above what is payable up to this day in terms of OTS.

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Learned counsel for the respondent-Bank opposes

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the Writ Petition contending that OTS is a matter of contract

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*Corrected Vide Court Order Dated 08.10.2021.

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and therefore, the writ jurisdiction is not invocable; he also contends that if relief is granted to the petitioner, that may be quoted as a precedent by other similarly circumstanced debtors and the bank would be put to prejudice.

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Having heard the learned counsel for the parties and having perused the Petition Papers, this Court is inclined to grant relief to the petitioner inasmuch as the business difficulties generated by the COVID-19 pandemic constitute an extraordinary situation which the court cannot lost sight of; several coercive actions that were otherwise time bound were kept in suspended animation by the successive orders made by the Apex Court of the country and the Division Bench of this Court; even the limitation periods for taking legal action also were extended; such is the enormity of the impact of COVID-19 on the lives of people and the run of businesses; that being the position, the first respondent-Bank which answers the description of “State” u/a 12 of the Constitution, has to conduct itself as a model lender and has to grant reprieve to the scrupulous debtors.

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The contention of the respondent-Bank that the

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OTS matters pertain to the domain of Contract Law and therefore, the Writ Court should keep away from the disputes arising thereunder, at the first blush appears to be attractive; however, a deeper examination shows that the OTS Schemes promulgated by the RBI have statutory flavour and they are not matters of pure & simple contract; where sincere citizens suffer because of certain acts that can be likened to the Act of God, a Writ Court cannot turn its blind eye to their bleeding; justice & equity have their role to play in matters like this.

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The petitioner is ready with three bank drafts for the entire money due under the OTS which it has quantified at * Rs.12 Crore plus ; he undertakes to pay an extra sum of Rs.25 Lakh which shall be in addition to what is payable by it over & above all the interests and charges leviable up to this day; there is absolutely no reason for the lender bank to oppose such a reasonable offer made by a scrupulous debtor; what prejudice would be caused to the bank if this arrangement is accepted, is not forthcoming by the submissions of learned Panel Counsel for the bank.

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*Corrected Vide Court Order Dated 08.10.2021.

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The vehement contention of learned Panel Counsel

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for the bank that the Writ Courts should keep away from the disputes of the kind, is bit difficult to countenance; the said submission is founded on a wrong premise that the OTS is purely contractual in nature and the Writ Court should not dare to interfere; the Apex Court in a catena of decisions has observed to the contrary; even the Co-ordinate Benches of this court too have granted reprieve where for the causes not attributable to the borrower, the OTS timelines have been skipped off vide M/s Vandothra Fashions Private Limited Vs. Karnataka State Financial Corporation in W.P.No.40894/2011, decided on 20.09.2012.

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The last contention of the Panel Counsel for the

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Bank that in any event, this judgment should not be treated as a precedent, does not warrant much debate; law in this regard is nearly settled decades ago; whether a decision is an authority or not is for the court before whom it is cited later; ordinarily, the court which hands the judgment itself cannot undertake to decide its precedential value; this appears to be the broad view of jurists like Rupert Cross & J.W.Harris,

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“Precedent in English Law” (Oxford University Press, 4^th ED,

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Page 42:

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“ If a judge has this amount of freedom to determine which of his observations is ratio decidendi and which obiter dictum, is there not a grave danger that he will exercise an undue influence on the future development of the law? He only has to state twenty propositions and say that he bases his decision on each of them to have created twenty new legal rules.”

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In the above circumstances, this Writ Petition succeeds;

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a direction issues to the first respondent-Bank to consider and accept petitioner’s request for extension of the OTS timelines in accordance with the extant RBI guidelines and the observations hereinabove made.

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This court places on record the fact that the petitioner has delivered to the Panel Counsel for the first respondentBank the three bankers cheque dated 16.9.2021, 21.9.2021 & 28.9.2021, in all for a sum of *Rs.12,62,47,070/- (Twelve Crore Sixty Two Lakh Forty Seven Thousand & Seventy rupees) only; the petitioner shall pay the addl. sum of Rs.25,00,000/- (Twenty Five Lakh rupees) only, over & above what is payable as interest and charges that would accrue due on the OTS amount, within a period of four weeks, failing which the relief granted by this order stands rescinded on its

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*Corrected Vide Court Order Dated 08.10.2021.

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own, relegating the contesting parties to their original

position.

Sd/-

JUDGE