State Bank Of India vs Arvindra Electronics Pvt. Ltd.

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

JUDGMENT

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 Digitally signed by NIRMALA NEGI of 2018 by which in exercise of powers under Article 226 of the Date: 2022.11.04 16:23:55 IST Reason:

Constitution of India the High Court has granted further six

1 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

2 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.

3 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

4 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 5 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

6 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

7 involved in the case of Sardar Associates (supra) was entirely

different, the decision in the case of Bijnor Urban Cooperative

Bank Limited (supra) is subsequent and on the point the same

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.

8 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

9 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.

District Magistrate, Pathankot and Another, (2020 SCC

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.

10 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;

11

(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 Associates (supra)

and the decision of the Punjab and Haryana High Court in Anu 12 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?

13 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

14 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

Urban Cooperative Bank Limited (supra) was specifically

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 15 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

16 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

17 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

18 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

19 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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