Full Judgment Text
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 6954 OF 2022
State Bank of India …Appellant
Versus
Arvindra Electronics Pvt. Ltd. …Respondent
J U D G M E N T
M.R. SHAH, J.
1. Feeling aggrieved and dissatisfied with the impugned
judgment and order dated 10.03.2022 passed by the High
Court of Punjab and Haryana at Chandigarh in CWP No.12953
Signature Not Verified
of 2018 by which in exercise of powers under Article 226 of the
Digitally signed by
NIRMALA NEGI
Date: 2022.11.04
16:23:55 IST
Reason:
Constitution of India the High Court has granted further six
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weeks’ time to the original writ petitioner to make the payment
of balance amount (Rs.2.02 crores with interest) as per the
sanctioned letter of OTS dated 21.09.2017, the State Bank of
India has preferred the present appeal.
2. The facts leading to the present appeal in a nutshell are as
under:
2.1 That the State Bank of India (hereinafter referred to as ‘the
Bank’) sanctioned a cash credit in favour of the respondent
Arvindra Electronics Private Ltd. (hereinafter referred to as
‘Borrower’). In 2012, the account of the borrower was classified
as NPA in 2015. The Bank came out with one time settlement
(hereinafter referred to as ‘OTS Scheme’) dated 01.09.2017.
OTS specifically provided for making payment as settled under
the OTS scheme within six months from the date of sanction,
else infructuous. The Bank sent OTS offer to the borrower for
OTS and ledger outstanding as on 31.03.2017 was
Rs.13,99,89,273.99. The amount payable under the OTS was
Rs.10,53,75,069.74. The borrower accepted the OTS offer and
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deposited an amount of Rs.1.40 crores with the Bank on
31.10.2017.
2.2 The Bank sanctioned OTS and confirmed receipt of
Rs.1.40 crores. Under the sanctioned OTS the borrower was
required to deposit 25% of the OTS amount by 21.12.2017 and
the balance amount to be deposited within six months from the
date of letter upto 21.05.2018 with interest. The borrower was
also informed that on nonpayment of the aforesaid amount
within the time stipulated under the OTS, the OTS will be
rendered infructuous. The borrower deposited amounts of
Rs.4,51,45,000/ on 31.12.2017/21.05.2018. The borrower
agreed/committed to pay Rs.3.50 crores on 21.05.2018 and
requested extension of 8 to 9 months for repayment of the
balance amount of Rs.2.50 crores. The bank declined
extension of 9 months and directed the borrower to make the
payment of 2.52 crores by 21.05.2018. Feeling aggrieved the
borrower filed the writ petition before the High Court for
extension of 8 to 9 months to pay the outstanding amount of
Rs.2.52 crores beyond 21.05.2018.
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2.3 That thereafter the Bank floated another OTS Scheme for
settlement of outstanding payment of Rs.9,48,39,614/ for an
amount of Rs.4,48,79,711/. However, the borrower did not
opt for the said scheme. That thereafter one another OTS
Scheme was floated by the Bank in the year 2019 and the Bank
made an offer to the borrower to settle the account for an
amount of Rs.4,11,13,953/ against outstanding amount of Rs.
5,98,39,614/. The borrower again did not opt for the scheme.
Even one another OTS Scheme was floated which was offered to
the borrower and the borrower did not opt for the scheme. Vide
communication dated 24.02.2021 the bank rejected the OTS
offer of Rs.2.05 crores as according to the Bank amount due by
the borrower was Rs.23.54 crores. By the impugned judgment
and order the High Court has set aside the communication
dated 24.02.2021 rejecting the OTS offer of Rs.2.05 crores
made by the borrower and has granted further six weeks’ time
from the impugned judgment and order passed by the High
Court to the borrower to make the payment of Rs.2.02 crores
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with interest as per the OTS sanctioned letter dated
21.09.2017.
2.4 Feeling aggrieved and dissatisfied with the impugned
judgment and order passed by the High Court granting further
six weeks’ time to the borrower to make the payment of balance
amount under the OTS Scheme, the Bank has preferred the
present appeal.
3. Shri Sanjay Kapur, learned counsel appearing on behalf of
the Bank has vehemently submitted that the High Court has
committed a very serious error in granting further six weeks’
time to the borrower to make the payment of balance amount
due and payable under the OTS which was due and payable in
the year 2017, in exercise of powers under Article 226 of the
Constitution of India.
3.1 Shri Kapur, learned counsel appearing on behalf of the
Bank relying upon the decision of this Court in the case of
Bijnor Urban Cooperative Bank Limited, Bijnor and Others
vs. Meenal Agarwal and Others , (2021) SCC Online SC 1255
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has submitted that as observed and held by this Court, the
grant of benefit of OTS Scheme cannot be claimed as a matter
of right and shall always be subject to fulfilling the eligibility
criteria mentioned in the scheme. It is submitted that in the
present case the borrower was required to fulfil the terms and
conditions of the OTS and was required to make the payment
as per the schedule mentioned in the sanctioned letter of OTS.
It is submitted that any deviation from making the payment as
per the sanctioned OTS Scheme would render the OTS sanction
infructuous, as per the sanction letter dated 21.11.2017. It is
submitted that therefore the High Court in exercise of powers
under Article 226 of the Constitution of India ought not to have
granted any further time de hors the sanctioned scheme and/or
the sanction letter dated 21.11.2017 and that too in exercise of
powers under Article 226 of the Constitution of India.
3.2 It is submitted by Shri Kapur, learned counsel appearing
on behalf of the Bank that the Hon’ble High Court under Article
226 of the Constitution of India cannot direct rescheduling the
payment under the OTS as it amounts to modification of the
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contract which can be done by mutual consent under Section
62 of the Indian Contract Act.
3.3 It is submitted that the Hon’ble High Court ought to have
appreciated that the OTS does not involve any public element
and the OTS is/was nondiscriminatory and nondiscretionary
and shall be applicable uniformly to all borrowers.
3.4 It is submitted that by the impugned judgment and order
the Hon’ble High Court has rewritten the contract which is not
permissible that too while exercising the powers under Article
226 of the Constitution of India.
3.5 It is further submitted by learned counsel appearing on
behalf of the Bank that though the decision in the case of
Bijnor Urban Cooperative Bank Limited (supra) was pointed
out to the High Court, the High Court has not followed the said
binding decision by observing that the earlier decision of this
Court in the case of Sardar Associates versus Punjab & Sind
Bank and Others , (2009) 8 SCC 257 is more elaborate and
accurate. It is submitted that apart from the fact that the issue
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involved in the case of Sardar Associates (supra) was entirely
different, the decision in the case of Bijnor Urban Cooperative
(supra) is subsequent and on the point the same
Bank Limited
was binding upon the High Court and the High Court ought to
have followed the same.
Making above submissions and relying upon the decision
of this Court in the case of Bijnor Urban Cooperative Bank
Limited (supra), it is prayed to allow the present appeal and set
aside the judgment and order passed by the High Court.
4. Present appeal is vehemently opposed by Shri D.P. Singh,
learned Advocate appearing on behalf of the respondent.
4.1 Learned Advocate appearing on behalf of the borrower has
submitted that the appellant being a State is duty bound to act
in a fair, transparent and nondiscriminatory manner and any
arbitrary action of the Bank is amenable to the writ jurisdiction
of the High Court.
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4.2 It is submitted that in the present case the Bank
arbitrarily and without just cause or explanation rejected the
respondent’s request for extension while extending the benefit
of extension of OTS to other borrowers.
4.3 It is submitted that as per the Bank the refusal was
because the OTS is nondiscretionary and nondiscriminatory.
However, at the same time the Bank has been granting time to
other such borrowers who are similarly placed at the
respondents. It is submitted that therefore differential
treatment by the Bank to the similarly placed borrowers is
nothing but an arbitrary action and therefore the Hon’ble High
Court has wrongly granted further six weeks’ time to the
borrower to make the payment of balance amount under the
OTS Scheme.
4.4 It is submitted that even the action of the Bank is contrary
to the spirit of the guidelines of the Reserve Bank of India. It is
submitted that the Bank has not set any eligibility criteria
under any policy or under any OTS Scheme under which it can
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or cannot grant extension. It is submitted that the same is
contrary to the spirit of the guidelines of the Reserve Bank of
India, especially since one of the Scheduled Banks have already
set a criterion of such nature which has also been dealt with by
the High Court in the case of Anu Bhalla and Another vs.
, (2020 SCC
District Magistrate, Pathankot and Another
Online P&H 4387), the judgment which has been relied upon by
the High Court. It is submitted that thus, in absence of any
criterion and an arbitrary rejection by the Bank, the Hon’ble
High Court has rightly allowed the prayer of the respondent
borrower for extension of time.
4.5 Relying upon the decision of the High Court of Punjab and
Haryana in Anu Bhalla (supra) and the decision of this Court in
the case of Sardar Associates (supra), it is vehemently
submitted by learned Advocate appearing on behalf of the
respondent – borrower that the High Court has powers under
Article 226 of the Constitution of India to extend the time
period under the OTS.
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4.6 It is submitted by learned Advocate appearing on behalf of
the respondent – borrower that even otherwise, consistent view
has been taken by different High Courts that the High Court
look into justiciability of the actions taken by the banks.
4.7 It is further submitted by learned Advocate appearing on
behalf of the respondent that the High Court has rightly
observed that the decision of this Hon’ble Court in the case of
Bijnor Urban Cooperative Bank Limited (supra) is
distinguishable since it deals with the issue of grant of OTS and
not extension of time once OTS has already been granted and
acted upon by the parties.
4.8 Learned Advocate appearing on behalf of the respondent –
borrower has submitted that equities are in favour of the
respondent. In support of the above it is submitted that
(i) the respondent paid 80% of the OTS amount i.e. INR
8,01,45,000/ within the stipulated time by selling its
residential establishment;
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(ii) In addition to the above, the cleared pending mortgage lien
of INR 3,50 crores to the appellant – bank;
(iii) the respondent – borrower sold 31% of its share in
commercial establishment and used the advance of INR 3.50
crores to repay the OTS amount to the appellant – bank;
(iv) the remaining amount had to come by the sale of the other
property and therefore the extension was sought on this ground
alone which was in the knowledge of the officials of the bank;
(v) the respondent – borrower is an MSME and does not have
the requisite legal framework which is as efficient/effective as
the SARFESI Act to retrieve its dues from defaulting parties;
4.9 It is submitted that the respondent has paid the entire
amount with interest and is ready to pay further reasonable
interest with this Hon’ble Court or the Bank deem fit to impose
which would balance both the appellant – bank and that of the
respondent – borrower.
Making the above submissions and relying upon the
decision of this Court in the case of Sardar (supra)
Associates
and the decision of the Punjab and Haryana High Court in Anu
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Bhalla (supra) and decisions of some of the High Courts, it is
prayed to dismiss the present appeal.
5. Heard learned counsel for the respective parties at length.
6. At the outset, it is required to be noted that by the
impugned judgment and order the High Court has extended
time by a further period of six weeks from 10.03.2022 in favour
of the respondent borrower – original writ petitioner to make
the payment of the balance amount which was due and payable
under the sanctioned OTS Scheme which was sanctioned in the
year 2017 in exercise of powers under Article 226 of the
Constitution of India.
6.1 Therefore, the short question which is posed for
consideration of this Hon’ble Court is whether in the facts and
circumstances of the case the High Court is justified in
extending the period to make the payment of balance amount
under sanctioned OTS Scheme beyond the time granted under
the sanctioned OTS Scheme, while exercising the powers under
Article 226 of the Constitution of India?
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6.2 While considering the aforesaid issue the recent decision
of this Court in the case of Bijnor Urban Cooperative Bank
Limited (supra) is required to be referred to.
6.3 In the case of Bijnor Urban Cooperative Bank Limited
(supra) this Court answered the following two questions:
“(i) Whether benefit under the OTS Scheme can be
prayed as a matter of right?;
(ii) Whether the High Court in exercise of powers
under Article 226 of the Constitution of India can
issue a writ of mandamus directing the Bank to
positively consider the grant of benefit under the OTS
Scheme and that too de hors the eligibility criteria
mentioned under the OTS Scheme?”
6.4 On a detail analysis of the OTS Scheme, it is observed and
held by this Court that, (i) no borrower can, as a matter of
right pray for a grant for the benefit of onetime settlement
scheme; (ii) No writ of mandamus can be issued by the High
Court in exercise of Article 226 of the Constitution of India,
directing the financial institution/bank to positively grant a
benefit of OTS to a borrower; (iii) The grant of benefit of OTS
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Scheme is subject to the eligibility criteria and the guidelines
issued from time to time.
Though the decision of this Court in the case of Bijnor
(supra) was specifically
Urban Cooperative Bank Limited
pressed in service on behalf of the Bank and was pointed out to
the High Court, the High Court instead following the binding
decision of this Court in the case of
Bijnor Urban Cooperative
Bank Limited (supra) has not followed the same by observing
that the earlier decision of this Court in the case of Sardar
Associates (supra) is more elaborate. We do not approve such
an observation by the High Court and not following the
subsequent binding decision of this Court which as such was
on the point. Being a subsequent decision on the point/issue,
the High Court was bound to follow the same.
6.4 Even otherwise it is required to be noted that the decision
of this Court in the case of Sardar Associates (supra) is
distinguishable on facts. In the case of
Sardar Associates
(supra) it was found that the Bank deviated from the OTS
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guidelines issued by the Reserve Bank of India and therefore
this Hon’ble Court held that the RBI Guidelines are binding on
the bank and that the bank shall deal with the case of the
borrower under the RBI Guidelines on OTS. Therefore, even
otherwise on facts the said decision was not applicable at all.
6.5 In the present case in the sanctioned letter dated
21.11.2017 it was specifically provided that the entire payment
to be made by 21.05.2018. The schedule to make the payment
under the instalments was also mentioned. It is an admitted
position that the borrower did not make the payment due and
payable under the sanctioned OTS Scheme on or before the
date mentioned in the sanctioned letter. The prayer of the
borrower for extension of nine months came to be rejected as
far as back on 16.05.2018 and the borrower was directed to
make the payment of Rs.2.52 crores by 21.05.2018, the
borrower failed to make the payment. At this stage, it is
required to be noted that during the pendency of the writ
petition there were as many as three different OTS floated by
the Bank and the Bank offered the respondent borrower to
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settle the outstanding payment under the OTS Scheme.
However, the borrower did not opt for any of the scheme. By
the impugned Judgment and Order the High Court has granted
further six weeks’ time from 10.03.2022 which would be
beyond even the time prayed by the borrower in the year 2018.
As observed above earlier period of 8 to 9 months was sought in
the year 2018 and by the impugned judgment and order the
borrower has got time upto May, 2022. Even otherwise as
rightly submitted on behalf of the Bank directing the Bank to
reschedule the payment under OTS would tantamount to
modification of the contract which can be done by mutual
consent under Section 62 of the Indian Contract Act. By the
impugned judgment and order rescheduling the payment under
the OTS Scheme and granting extension of time would
tantamount to rewriting the contract which is not permissible
while exercising the powers under Article 226 of the
Constitution of India.
6.6 It is required to be noted that under the OTS Scheme
which was originally sanctioned in the year 2017 the borrower
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was required to pay Rs.10,53,75,069.74 against the
outstanding of Rs.13,99,89,273.99. Therefore, under the
original sanctioned OTS Scheme the borrower was getting the
substantial relief of approximately 3 crores. The Bank agreed
and accepted the OTS offer on the terms and conditions
mentioned in the letter dated 21.11.2017. In the sanctioned
letter dated 21.11.2017 it was specifically mentioned in Clause
(iv) that the entire payment under the OTS Scheme was to be
made by 21.05.2018, otherwise OTS would be rendered
infructuous. Therefore, borrowers were bound to make the
payment as per the sanctioned OTS Scheme. Therefore, the
High Court ought not to have granted further extension de hors
the sanctioned OTS Scheme while exercising the powers under
Article 226 of the Constitution of India.
7. The submissions on behalf of the borrower that in case of
some other borrowers the time was extended is concerned, the
same is neither here nor there. The Bank mutually can agree
to extend the time which is permissible under Section 62 of the
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Indian Contract Act. The borrower as a matter of right cannot
claim that though it has not made the payment as per the
sanctioned OTS Scheme still it be granted further extension as
a matter of right. There cannot be any negative discrimination
claimed. The borrower has to establish any right in their favour
to claim the extension as a matter of right.
7.1 Now so far as the reliance placed upon the decision of
Punjab and Haryana High Court in the case of Anu Bhalla
(supra) is concerned, in view of the direct decision of this Court
in the case of Bijnor Urban Cooperative Bank Limited
(supra), the decision of this Court would be binding on the High
Court.
8. In view of the above and for the reason stated above, the
impugned judgment and order passed by the High Court
granting further time to the respondent – borrower to make the
balance payment under the OTS Scheme in exercise of powers
under Article 226 of the Constitution of India is unsustainable
and the same deserves to be quashed and set aside and is
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accordingly quashed and set aside. Consequently, the original
writ petition filed by the respondent – borrower stands
dismissed.
Present appeal is accordingly allowed. However, in the
facts and circumstances of the case there shall be no order as
to costs.
…………………………..J.
(M. R. SHAH)
…………………………...J.
(KRISHNA MURARI)
New Delhi;
November 04, 2022.
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