State Bank of India, Madhupatna, Cuttack Vs M/S Mohta Technocrats Pvt. Ltd., Kolkata

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Signature Not Verified Digitally Signed Signed by: SASANKA SEKHAR SATAPATHY Reason: Authentication Location: HIGH COURT OR ORISSA CU TTACK Date: 25-Jun-2025 10:47:21

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IN THE HIGH COURT OF ORISSA AT CUTTACK

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W.P.(C) No. 5454 OF 2025

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(An Application under Articles 226 and 227 of the

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Constitution of India, 1950)

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******

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1. State Bank of India , represented through its Chief Manager and Authorized Officer,

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2. The Authorised Officer- cum- Chief Manager, State Bank of India,

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3. The Assistant General Manager, State …. Petitioners Bank of India

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(Having their Office at Stress Asset Recovery Branch, Madhupatna, Cuttack)

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-versus-

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1. M/s Mohta Technocrats Private Limited, having its registered office at A-3/1, Gillander House, 8, N.S Road, Kolkata – 700001,

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2. Bhagwan Das Mohta , son of Late M.C. Mohta,

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3. Ajay Kumar Mohta , s/o Bhagwan Das, Mohta,

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4. Kiran Devi Mohta , s/o Bhagwan Das Mohta,

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(Sl. Nos.2 to 4 are residing at Main Automobiles, Keonjhar, Road, Opposite Utkal Barbil, PO Barbil, Odisha PIN758035,

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5. Debts Recovery Appellate Tribunal, Kolkata through its Chairperson, At 7 Post Office, Street Kiran Shankar Roy Road, Kolkata …. Opp. Parties

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Advocates for the Parties For Petitioners : Mr. Subrat Mishra, Advocate For Opposite Parties : Mr. Nimish Mishra, Advocate & Mr. Soumya Ranjan Mohanty, Advocate

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Page 1 of 14

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W.P.(C) No. 38399 OF 2023

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Signature Not Verified Digitally Signed Signed by: SASANKA SEKHAR SATAPATHY Reason: Authentication Location: HIGH COURT OR ORISSA CU TTACK Date: 25-Jun-2025 10:47:21

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CORAM:

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JUSTICE K.R. MOHAPATRA JUSTICE SANJAY KUMAR MISHRA

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-------------------------------------------------------------------------Date of Hearing :10.03.2025 :: Date of Judgment : 08.04.2025 -------------------------------------------------------------------------------------------------------------------

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JUDGMENT

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K.R.Mohapatra, J :

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1. This matter is taken up through hybrid mode.

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2. Petitioners, State Bank of India, Stressed Asset Recovery Branch, Madhupatna, Cuttack (for brevity ‘the Bank’) along with its functionaries have filed this writ petition assailing the common order dated 16^th January, 2025 (Annexure-3) passed by the Debts Recovery Appellate Tribunal, Kolkata (for brevity ‘Appellate Tribunal’) in IA Nos.117 and 118 of 2022 (arising out of Appeal No.81 of 2019).

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3. Case of the Petitioners :-

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The Opposite Party No.1- M/s Mohta Technocrats Private Limited availed cash credit and term loan from the Jagatpur Industrial Estate Branch of the State Bank of India, which was secured by Opposite Party Nos.2 and 3, the Directors of Opposite Party No.1, in terms of mortgage and guarantee. The loans were also secured by the guarantee of Opposite Party No.4, who is the wife of Opposite Party No.2 and mother of Opposite Party No.3. Due to non-payment of the outstandings, the loan Accounts became Non-Performing Asset (NPA). In due course, the Bank issued notices under Section 13 (2) of the Securitization and Re-Construction of Financial Assets and Enforcement of Securities Interest Act, 2002 (for brevity ‘SARFAESI Act’) on 13^th December, 2014. The Bank, responding to the representation submitted by Opposite Party

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Signature Not Verified Digitally Signed Signed by: SASANKA SEKHAR SATAPATHY Reason: Authentication Location: HIGH COURT OR ORISSA CU TTACK Date: 25-Jun-2025 10:47:21

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No.1 under Section 13 (3-A) of the SARFAESI Act, issued notice under Section 13(4) of the said Act claiming an amount of Rs.1,87,23,645/- with interest applied up to 30^th September, 2014. Due to non-payment of the outstanding, the Bank issued notice of auction on 30^th April, 2016 following due procedure of law. The said auction was challenged by the Opposite Parties before the Debts Recovery Tribunal, Cuttack (for brevity ‘the Tribunal’) under Section 17 of the SARFAESI Act in SA No. 60 of 2015, which was disposed of by the learned Tribunal on 18^th August, 2017 holding that possession notice as well as auction notice were not published in local vernacular and thus the same was in violation of the provisions of the SARFAESI Act. The Tribunal also held that out of three properties, which were put to sale/auction, one property in Hal Plot No.363/250 under Hal Khata No.29 to an extent of Ac.0.200 decimal situated in mouza Sundara stood in the name of Opposite Party No.4 and was allegedly the residence and the said residential house was permitted to be redeemed by depositing an amount of Rs.61.00 lakhs. Along with other grounds, it was also held therein that another property, which was a vacant land, owned by the Opposite Party No.2 measuring Ac.0.060 decimal bearing Plot No.508/828 under Khata No.28 situated at mouza Barbil in the district of Keonjhar was permitted to be redeemed by making deposit of Rs.12.00 lakh. Thus, by setting aside the possession notice and sale notice learned Tribunal directed for release of the mortgaged property at mouza Sundara in Keonjhar and vacant

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Signature Not Verified Digitally Signed Signed by: SASANKA SEKHAR SATAPATHY Reason: Authentication Location: HIGH COURT OR ORISSA CU TTACK Date: 25-Jun-2025 10:47:21

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land at mouza Barbil in Keonjhar district in favour of respective owners.

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3.1 The Bank challenged the said order dated 18^th August, 2017 passed in SA No.60 of 2015 in Appeal under Section 18 of the SARFAESI Act before the Appellate Tribunal. Vide its order dated 30^th July, 2018, the Appellate Tribunal set aside the order passed in SA No.60 of 2015 and remitted the matter to the Tribunal for fresh adjudication in the light of the observation made therein.

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3.2 The Bank also filed OA No. 647 of 2015 under Section 19 of the Recovery of Debts and Bankruptcy Act, 1993 (for brevity ‘RDB Act’) for recovery of loan amount of Rs.2,17,39,757/- before the Tribunal. The OA was partly allowed vide order dated 13^th March, 2019 for an amount of Rs.1,40,27,757/-. The properties involved in SA No. 60 of 2015 and OA No.647 of 2015 were one and the same. However, the Bank challenged the final order passed in OA No.647 of 2015 before the Appellate Tribunal, which is pending for adjudication (Diary No.113 of 2019). In the meantime, SA No.60 of 2015 was heard afresh after remand and final order was passed on 13^th March, 2019 reiterating the earlier order dated 18^th August, 2017. Thus, the Bank again filed an Appeal before the learned Appellate Tribunal, which has been registered as Diary No.112 of 2019. In the said proceeding before the Appellate Tribunal, order passed in SA No.60 of 2015 has been stayed.

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Signature Not Verified Digitally Signed Signed by: SASANKA SEKHAR SATAPATHY Reason: Authentication Location: HIGH COURT OR ORISSA CU TTACK Date: 25-Jun-2025 10:47:21

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3.3 At this juncture, SBI floated a Scheme, i.e., SBI OTS 2020 for One Time Settlement of outstanding dues and issued necessary instructions to its branches for implementation. The Opposite Parties thus applied for OTS of their loan dues under the said OTS Scheme. The offer of OTS made by the Opposite Parties was rejected on the ground that the Appeal challenging the order of the Tribunal in the matter of auction of the secured assets, is sub judice . It was thus held that the Opposite Parties are not eligible to avail OTS. Being aggrieved by rejection of such proposal of OTS under SBI OTS 2020 Scheme, the Opposite Party No.1 approached this Court in W.P.(C) No.33291 of 2020. The Opposite Party No.1 therein prayed for setting aside the rejection of OTS vide letter dated 17^th November, 2020 and to issue direction to the Bank to settle the loan Account under SBI OTS 2020 Scheme. This Court, upon hearing the parties, vide order dated 18^th March, 2021, disposed of the said Writ Petition observing that it was open to the Opposite Party No.1 (Petitioner therein) to approach the Tribunal by filing appropriate application. Both the Petitioners as well as Opposite parties filed two separate Review Petitions, i.e., RVWPET No.79 of 2021 and RVWPET No.109 of 2021 respectively, against the final order dated 18^th March, 2021 passed in W.P.(C) No.33291 of 2020. Both the Review Petitions were disposed of vide common order dated 26^th July, 2021 permitting the parties to make all submissions in accordance with law before the Appellate Tribunal in the pending Appeals. Thus, Opposite Parties filed IA Nos.117 of 2022 and 118 of 2022 in pending Appeal No.81 of 2019

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Signature Not Verified Digitally Signed Signed by: SASANKA SEKHAR SATAPATHY Reason: Authentication Location: HIGH COURT OR ORISSA CU TTACK Date: 25-Jun-2025 10:47:21

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seeking enforcement of SBI OTS 2020 Scheme. The Petitioners-Bank filed objection as well as supplementary affidavit enclosing the amendment to SBI OTS 2020 Scheme. It was alleged by the Bank that the OTS proposal of the Opposite Parties could not be accepted in view of the pending cases challenging auction sale, which are pending before the Appellate Tribunal. The Appellate Tribunal passed a common order on 16^th January, 2025 in IA Nos.117 of 2022 and 118 of 2022 arising out of Appeal No.81 of 2019 directing the Bank to consider the case of the Opposite Parties under SBI OTS 2020 Scheme strictly in accordance with law and relevant circulars and directions issued by the Bank as well as Reserve Bank of India within thirty days from the date of the order. Being aggrieved by the said common order dated 16^th January, 2025 (Annexure-3), this Writ Petition has been preferred.

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Case of the Opposite Parties;

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4 . The matter was taken up for hearing and final disposal at the stage of admission on consent of learned Counsel for the parties. Though no Counter has been filed, a written notes of submission was filed by the learned Counsel for the Opposite Parties opposing to the prayer made in the writ petition.

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4.1 Mr. Mishra, learned counsel for contesting Opposite Parties submitted that in order to bring an end to the litigation pending in respect of the loan account, the Opposite Parties made a proposal to settle the loan account in terms of SBI OTS 2020. But the Bank did not accept the OTS proposal on the ground of pending litigations before the Court/Tribunal challenging the legality and validity of the auction of the secured asset. The offer

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Signature Not Verified Digitally Signed Signed by: SASANKA SEKHAR SATAPATHY Reason: Authentication Location: HIGH COURT OR ORISSA CU TTACK Date: 25-Jun-2025 10:47:21

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of the Opposite Parties for settlement of the loan accounts squarely falls under the scope of SBI OTS 2020 Scheme issued by the State Bank of India. The Scheme was Non-Discretionary and Non-Discriminatory one. Thus, the Bank had no other option than to settle the loan accounts of the Opposite Parties under the said Scheme. But the Bank refused to accept the offer for OTS on the ground of pending litigations. Clause (iii) under the heading ‘ Coverage’ of the OTS Scheme clearly stipulates that case in which litigation is pending is also eligible. Further, S.A. No. 60 of 2015 filed by the Opposite Parties under Section 17 of the SARFAESI Act and O.A. No.647 of 2015 filed by the Bank under Section 19 of the RDB Act are already disposed of. The Bank has preferred two appeals, which are pending before the Appellate Tribunal. No litigation at the instance of the Opposite Parties is pending. But, the Bank on the basis of an amendment to the OTS 2020 issued vide purported Circular dated 20^th October, 2020, rejected the proposal for settlement made by the Opposite Parties on the ground of pending litigation. There is nothing on record to infer that the so-called clarificatory Office Memo was ever translated into Circular under approval of the Board of Directors of the SBI. Thus, the said Office Memo has no legal sanctity and cannot be considered as a clarificatory Circular to deny the proposal of the Opposite Parties for settlement of their loan accounts under OTS 2020. Learned Appellate Tribunal, considering the above, rightly directed the Petitioners-Bank to consider the OTS proposal of Opposite Parties in terms of SBI OTS 2020. The ground of rejection is not sustainable in the eye of law, more particularly, in view of the ratio in the case of

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Signature Not Verified Digitally Signed Signed by: SASANKA SEKHAR SATAPATHY Reason: Authentication Location: HIGH COURT OR ORISSA CU TTACK Date: 25-Jun-2025 10:47:21

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Sardar Associates and others Vs. Punjab and Sindh Bank and others ; (2009) 8 SCC 257.

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4.2 It was further submitted that when the SBI OTS 2020 was a Non-Discretionary/ Non-Discriminatory Scheme and has created a right in favour of the Opposite Party No.1 to make an application to settle the loan account under the said Scheme, subsequent so-called amendment to the Scheme, which was never approved by the Board of Directors, cannot take away such valuable right of the Opposite Party No.1. Accordingly, learned Counsel for the opposite parties prayed for dismissal of the writ petition and to consider the OTS proposal submitted by the Opposite Party No.1 in terms of SBI OTS 2020, as directed by the Appellate Tribunal.

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5. We have heard learned counsel for the parties and perused the case record as well as the case laws cited.

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6. It reveals from the record that the Opposite Party No.1 had availed loan facility from the Bank. Due to non-payment of instalments, the loan accounts of the Opposite Party No.1 became NPA. Accordingly, notice under Section 13 (2) of the SARFAESI Act was issued on 13^th December, 2014 and subsequently, notice under Section 13 (4) of the said Act claiming Rs.1,87,23,645/- with interest applied up to 30^th September, 2014 was issued. In due course, the secured asset was put to auction. Assailing the same, the Opposite Party No.1 filed SA No.60 of 2015 before the Tribunal under Section 17 of the SARFAESI Act. The said SA was disposed of on 18^th August, 2017 setting aside the auction notice on the ground that

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Signature Not Verified Digitally Signed Signed by: SASANKA SEKHAR SATAPATHY Reason: Authentication Location: HIGH COURT OR ORISSA CU TTACK Date: 25-Jun-2025 10:47:21

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possession notice and auction sale notice were not published in local vernacular, which is in violation of the provisions of the SARFAESI Act. Learned Tribunal also found some other defects in the auction sale notice. Assailing the same, the Bank preferred Appeal before the Appellate Tribunal under Section 18 of the SARFAESI Act. The Appellate Tribunal set aside the order passed in SA No.60 of 2015 and remitted the matter back to the Tribunal for fresh adjudication. The Bank had also filed OA No.647 of 2015 before learned Tribunal for recovery of loan amount of Rs.2,17,39,757/-. The said OA was partly allowed vide judgment dated 13^th March, 2019 for recovery of an amount of Rs.1,40,27,757/-. Being aggrieved, the Bank challenged the final order in OA No.647 of 2015 before the Appellate Tribunal, which is pending for consideration in Appeal No.81 of 2019 (arising out of Diary No.112). When the matter stood thus, the SBI floated SBI OTS 2020 for one time settlement of the loan account. Accordingly, Opposite Party No.1 applied for settlement of its loan account under the said Scheme. The OTS proposal was turned down on the ground that several litigations concerning the loan account are pending. Assailing the rejection of the OTS proposal, the Opposite Party No.1 filed W.P.(C) No.33291 of 2020 before this Court. The said writ petition was allowed vide order dated 18^th March, 2021 granting liberty to Opposite Party No.1 to move learned Tribunal by filing appropriate application. Both the Petitioners and Opposite Party No.1 filed two separate Review Petitions, i.e., RVWPET No.109 of 2021 was filed by Opposite Parties and RVWPET No.79 of 2021 was filed by the Petitioners

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Signature Not Verified Digitally Signed Signed by: SASANKA SEKHAR SATAPATHY Reason: Authentication Location: HIGH COURT OR ORISSA CU TTACK Date: 25-Jun-2025 10:47:21

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seeking review of the order dated 18^th March, 2021 passed in W.P.(C) No.33291 of 2020. Both the Review Petitions were disposed of vide common order dated 26^th July, 2021 permitting the parties to make all submissions in accordance with law before the Appellate Tribunal in Appeal No.81 of 2019. Accordingly, the Opposite Party No.1 filed IA No.117 and 118 of 2022, in pending Appeal No.81 of 2019 seeking for a direction to allow its proposal for settlement of loan account under SBI OTS 2020.

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6.1 The Petitioners filed objection to both the IAs on the ground that Opposite Party No.1 is not eligible for being considered under the SBI OTS 2020 due to pendency of cases challenging the auction in Court/Tribunal. Considering both the IAs, the impugned order under Annexure-3 has been passed directing the Petitioners to consider the proposal of the Opposite Parties for settlement of loan account under SBI OTS 2020.

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7. Upon hearing learned counsel for the parties, it reveals that SBI OTS 2020 was published on 12^th October, 2020 and uploaded in the public domain. Soon thereafter, the Bank came up with an amendment to the SBI OTS 2020 incorporating certain restrictions in the eligibility criteria of the borrowers to apply under the said Scheme. Amongst other, one of the restrictions was that the loan account in respect of which litigation(s) is/are pending before Court/Tribunal would not be eligible to be considered for settlement under SBI OTS 2020. Thus, the proposal submitted by the Opposite Party No.1 was rejected. Learned Appellate Tribunal holding that the so-called

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Signature Not Verified Digitally Signed Signed by: SASANKA SEKHAR SATAPATHY Reason: Authentication Location: HIGH COURT OR ORISSA CU TTACK Date: 25-Jun-2025 10:47:21

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amendment to the OTS proposal is not in accordance with law, rejected the objection raised by the Bank and directed to consider the OTS proposal of Opposite Party No.1 strictly in terms of SBI OTS 2020.

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8. We have perused the SBI OTS 2020 at Annexure- 2 series (at page-95) and the subsequent amendment to the eligibility criteria at Annexure-2 series (at page-114). Upon perusal of the One Time Settlement Scheme, it is apparent from Clause (iii) under the heading ‘Coverage’ that case(s) in respect of which litigation(s) is/are pending is/are also eligible to be considered under the OTS 2020. The Scheme was issued and uploaded in the public domain pursuant to the approval of the Board of Directors of State Bank of India dated 12^th October, 2020. But the so-called clarifications/amendment to the OTS 2020 had never received approval of the Board of Directors. In the said clarification, a foot note was given to the effect that after approval, the said clarification/amendment would be circulated. But, there is nothing on record to substantiate that the so called clarification/amendment to the OTS 2020 had ever received approval of the Board of Directors. Thus, question of its circulation amongst the branches of the SBI, including the Bank, does not arise at all. As such, the clarification / amendment to the SBI OTS 2020 with regard to eligibility criteria has never come into force.

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9. In the case of Sardar Associates and others (supra), it is held as follows:-

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Signature Not Verified Digitally Signed Signed by: SASANKA SEKHAR SATAPATHY Reason: Authentication Location: HIGH COURT OR ORISSA CU TTACK Date: 25-Jun-2025 10:47:21

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36. While making a deviation, the Board of Directors of a public sector bank could not have taken recourse to a policy decision which is per se discriminatory. Respondent - Bank is a `State' within the meaning of Article 12 of the Constitution of India apart from the fact that it is bound to follow the guidelines issued by the Reserve Bank of India. If, therefore, the broad policy decisions contained in the guidelines were required to be followed, the power of the Board of Directors to make deviation in terms of Clause 4 thereof would only be in relation to some minor matters which does not touch the broad aspects of the policy decision and in particular the one governing the non-discriminatory treatment. In a case of this nature, we are satisfied that the respondent - Bank is guilty of violation of the equality clause contained in the Reserve Bank of India guidelines as also Article 14 of the Constitution of India.

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xx xx xx

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38. The question as to whether the guidelines issued by the Reserve Bank of India are binding or not now stands concluded by reason of a Constitution Bench Judgment of this Court in Central Bank of India v. Ravindra and Others [(2002) 1 SCC 367] in the following terms:

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"55... (5) The power conferred by Sections 21 and 35-A of the Banking Regulation Act, 1949 is coupled with duty to act. The Reserve Bank of India is the prime banking institution of the country entrusted with a supervisory role over banking and conferred with the authority of issuing binding directions, having statutory force, in the interest of the public in general and preventing banking affairs from deterioration and prejudice as also to secure the proper management of any banking company generally. The Reserve Bank of India is one of the watchdogs of finance and economy of the nation. It is, and it ought to be, aware of all relevant factors, including credit conditions as prevailing, which would invite its policy decisions. RBI has been issuing directions/circulars from time to time which, inter alia, deal with the rate of interest which can be charged and the periods at the end of which rests can be struck down, interest calculated thereon and charged and capitalised. It should continue to issue such directives. Its circulars shall bind those who fall within the net

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Signature Not Verified Digitally Signed Signed by: SASANKA SEKHAR SATAPATHY Reason: Authentication Location: HIGH COURT OR ORISSA CU TTACK Date: 25-Jun-2025 10:47:21

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of such directives. For such transaction which are not squarely governed by such circulars, the RBI directives may be treated as standards for the purpose of deciding whether the interest charged is excessive, usurious or opposed to public policy."

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10. In view of the ratio in Sardar Associates (supra) , this Court has no hesitation to hold that SBI OTS 2020 was issued as per the RBI guidelines. Thus, any clarification / amendment to the said expressed guidelines can only be made with approval of the Board of Directors of SBI in terms of the provisions in the guidelines of the RBI. In the instant case, no such approval of the Board of Directors has been received to issue any clarification / amendment to the eligibility criteria of the borrowers for being considered for OTS under SBI OTS 2020. Any clarification issued or amendment made to OTS 2020 without approval of the Board of Directors is a nullity and cannot be given effect to, as in the instant case. As such, the Appellate Tribunal has committed no error in directing the Bank to consider the OTS proposal of the Opposite Party No.1 strictly in terms of the SBI OTS 2020.

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11. In view of the discussions made above, this Court is not inclined to interfere with the impugned order dated 16^th January, 2025 (Annexure-3) passed by the Debts Recovery Appellate Tribunal, Kolkata in IA Nos.117 and 118, both of 2022 (arising out of Appeal No.81 of 2019).

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12. While parting with the judgment, we make it clear that time granted by the Appellate Authority for consideration of the OTS proposal of Opposite Party No.1 has lapsed in the

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Signature Not Verified

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Digitally Signed Signed by: SASANKA SEKHAR SATAPATHY Reason: Authentication Location: HIGH COURT OR ORISSA CU TTACK Date: 25-Jun-2025 10:47:21

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meantime. Hence, this Court allows further three months’ time from today to carry out the direction of the Appellate Tribunal.

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13. With the aforesaid observation / direction, the writ petition is disposed of. In the circumstances, there shall be no order as to costs.

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(K.R. Mohapatra) Judge