M/S S M Pharmaceuticals Pvt. Ltd., Vs State Bank of… — Banking and Recovery | Karnataka HC (2025)

M/S S M Pharmaceuticals Pvt. Ltd., Vs State Bank of… — Banking and Recovery | Karnataka HC (2025)

What the court decided

AI extract

Outcome

None; petition disposed of with all contentions kept open and liberty to take appropriate proceedings as regards the impugned action before the DRT under Section 17 of the SARFAESI Act, 2002

Issue for consideration

Whether the respondent bank should be directed by writ of mandamus to extend the time for payment of the OTS amount under the joint memo dated 18.01.2025 (filed before the District Legal Services Authority, Bengaluru, DRT-II, in O.A.No.889/2024) by a total period of six months. +1 more

Court's answer

A party in default cannot claim the benefit of extension of time on the ground of any ambiguity in the joint memo; the contention that, absent a stipulation for default, the six-month period must be taken as time for performance cannot be accepted.

Ratio / Principle

Since the first instalment of Rs.5.00 crores required to be paid before 20.02.2025 was admittedly not paid, the petitioners did not comply with the terms of the OTS; violation of any condition of the OTS results in revocation of the proposed settlement, the petitioners cannot rely on the OTS offer any more, and no order extending time for the OTS can be passed.

Key takeaways

Any grievance as regards measures under Section 13 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (including the auction sale) is for the petitioners to pursue by appropriate proceedings under Section 17 of the Act before the DRT; all contentions were kept open.ratio¶44

Detailed headnote1 paragraphs

Writ petition under Articles 226 and 227 of the Constitution by a borrower-company, its director and family members seeking (i) a six-month extension of time to pay the one-time settlement (OTS) amount under a joint memo dated 18.01.2025 filed before the District Legal Services Authority, Bengaluru, DRT-II, in O.A.No.889/2024 concerning their loan account with State Bank of India, and (ii) setting aside of the sale deed dated 07.05.2025 issued following auction. HELD: (a) a person who commits default cannot have the benefit of extension of time in case of any ambiguity in the joint memo; (b) the first instalment of Rs.5.00 crores payable on or before 20.02.2025 was admittedly not paid and the cheque for that amount was dishonoured due to insufficient funds, so the petitioners had not complied with the OTS terms - violation of OTS conditions results in revocation of the proposed settlement and the petitioners cannot rely on the OTS offer any more; (c) any grievance regarding Section 13 measures of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 lies through appropriate proceedings under Section 17 of the Act before the DRT. Taking note of Union Bank of India v. Satyawati Tondon, (2010) 8 SCC 110, the petition was disposed of with all contentions kept open.

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NC: 2025:KHC:24562 WP No. 16838 of 2025

HC-KAR

IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 7^TH DAY OF JULY, 2025

BEFORE

THE HON'BLE MR. JUSTICE S SUNIL DUTT YADAV WRIT PETITION NO. 16838 OF 2025 (GM-RES)

BETWEEN:

M/S S M PHARMACEUTICALS PVT LTD., A COMPANY REGISTERED UNDER THE PROVISIONS OF THE COMPANIES ACT 2013, HAVING ITS REGISTERED OFFICE AT NO 44/8, GROUND FLOOR, 15TH CROSS, MALLESHWARAM, BENGALURU 560009

ALSO AT: PLOT NO 37/A-2, CHOKKAHALLI VILLAGE, PILLAGUPPE INDUSTRIAL AREA, HOSKOTE TALUK 562114 REPRESENTED BY ITS DIRETOR MR YASHWANTH K RAJU AGED ABOUT 31 YEARS.

Digitally signed by PRAKASH N Location: HIGH COURT OF KARNATAKA

SRI YASHWANTH K RAJU S/O K DORESWAMY RAJU AGED ABOUT 31 YEARS RESIDING AT LAKSHMINARASIMHA NILAYA, NO 44/8, GROUND FLOOR, 15TH CROSS, MALLESHWARAM, BENGALURU 560003.

K DORESWAMY RAJU S/O LATE NARASA RAJU AGED ABOUT 65 YEARS RESIDING AT LAKSHMINARASIMHA NILAYA, NO 44/8, GROUND FLOOR, 15TH CROSS, MALLESHWARAM,

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HC-KAR

BENGALURU 560003 (SENIOR CITIZEN BENEFIT NOT CLAIMED)

GEETHA D RAJU W/O K DORESWAMY RAJU AGED ABOUT 54 YEARS RESIDING AT LAKSHMINARASIMHA NILAYA, NO 44/8, GROUND FLOOR, 15TH CROSS, MALLESHWARAM, BENGALURU 560003.

…PETITIONERS

(BY SRI. MAHESH R D., ADVOCATE)

AND:

STATE BANK OF INDIA STRESSED ASSETS MANAGEMENT BRANCH, 2ND FLOOR, OFFICE COMPLEX BUILDING, LHO CAMPUS, NO 65, ST MARK'S ROAD, BENGALURU 560001 REPRESENTED BY ITS AUTHORISED OFFICER.

…RESPONDENT

(BY SRI. K V OMPRAKASH., ADVOCATE FOR C/R1)

THIS WP IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO DIRECTING THE RESPONDENT BANK TO EXTEND THE TIME FOR PAYMENT OF OTS AMOUNT AS PER JOINT MEMO BENGALURU AT DEBTS RECOVERY TRIBUNAL-II, BENGALURU IN CASE DATED 18.01.2025 FILED BEFORE DISTRICT LEGAL SERVICES AUTHORITY, BEARING O.A.NO.889/2024 BY TOTAL PERIOD OF SIX MONTHS IN RESPECT OF SUBJECT LOAN ACCOUNT, MAINTAINED BY THE PETITIONER WITH THE RESPONDENT BANK, VIDE ANNEXURE-T.

THIS PETITION, COMING ON FOR ORDERS, THIS DAY, ORDER WAS MADE THEREIN AS UNDER:

CORAM: HON'BLE MR. JUSTICE S SUNIL DUTT YADAV

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NC: 2025:KHC:24562 WP No. 16838 of 2025

HC-KAR

ORAL ORDER

Petitioners have sought for issuance of writ of mandamus to direct the respondent - Bank to extend the time for payment of OTS as per the joint memo dated 18.01.2025 filed before the District Legal Services Authority, Bengaluru, DRT-II, in O.A.No.889/2024 by a total period of 6 months. Petitioners have also sought for setting aside of the sale deed dated 07.05.2025.

It is the case of the petitioners that the matter was settled by way of a joint memo dated 18.01.2025. Learned counsel for the petitioners submits that due to bonafide reasons, joint memo could not be complied with and that petitioners are making arrangements to pay the entirety of the amount. It is further submitted that the period of 6 months for payment of the entirety of the amount as per the OTS would end on 18.07.2025 and accordingly, the Court may extend time.

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HC-KAR

Sri. K. V. Omprakash, learned counsel

appearing for the respondent - Bank submits that the Court ought not to pass any order extending the time with respect to OTS in light of the order of the Apex Court passed in the case of Arvindra Electronics Pvt. Ltd., Vs. State Bank of India in Civil Appeal No.6954/2022 . It is further submitted that the question of extending the time on the say of the petitioner with no demonstrable bonafides, cannot be accepted. It is further submitted that in terms of the joint memo, petitioner was required to pay 1^st installment of Rs.5.00 crores on or before 20.02.2025 and till date, the said amount of Rs.5.00 crores has not been paid. It is also submitted that the cheque issued for Rs.5.00 crores has also not been honoured due to insufficient funds. It is submitted that in the interregnum, due to absence of interim order, auction proceedings have progressed and the sale confirmation intimation has been made to the successful bidder. It is submitted that the proceedings could be taken to a logical finality.

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HC-KAR

Taking note of non-adherence to the terms of

the joint memo, the contention that there is no stipulation in the joint memo in case of default and accordingly, the period of 6 months must be taken as time for performance cannot be accepted. The person who commits default cannot have the benefit of extension of time in case of any ambiguity in the joint memo. Even otherwise, the joint memo is clear insofar as the 1^st installment of Rs.5.00 crores was required to be paid before 20.02.2025. Admittedly, such condition has not been honoured till date. The 2^nd installment is also of a substantial amount. Accordingly, it cannot be stated that the petitioners have complied with the terms of the OTS requiring any order to be passed extending the time for OTS. Violation of any of the conditions in the OTS would result in a revocation of the proposed settlement. Accordingly, the petitioner cannot rely on the OTS offer any more.

If there is any grievance as regards any of the measures under Section 13 of the Securitisation and

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NC: 2025:KHC:24562 WP No. 16838 of 2025

HC-KAR

Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, it is for the petitioners to take appropriate proceedings under Section 17 of the Act. Taking note of the law laid down in the case of Union Bank of India v. Satyawati Tondon and Others - (2010) 8 SCC 110, petition is disposed off . All contentions are kept open. It is open for the petitioners, if so advised to take appropriate proceedings as regards the impugned action before the DRT.

Sd/(S SUNIL DUTT YADAV) JUDGE

VP