Judgment:
$~32 * + IN THE HIGH COURT OF DELHI AT NEW DELHI W.P.(C) 5067/2018 & CM Nos. 19561-19562/2018, 35611/2018, 43353/2018 M/S NIMBUS AUTOMOTIVE PVT. LTD. ........ Petitioner
Through: Mr T. Roy, Advocate with Mr the Vijay Kapoor, AR of petitioner. versus STATE BANK OF INDIA AND ANR. ........ RESPONDENTS
Through: Ms Nikita Salwan, Advocate for R-3/DSIIDC. Mr S. L. Gupta with Mr Mithilesh Pal, Advocates for respondents. CORAM: HON'BLE MR. JUSTICE VIBHU BAKHRU ORDER
2112.2018 % VIBHU BAKHRU, J The petitioner has filed the present petition, inter alia, 1. impugning a communication dated 28.12.2017 issued by the respondent bank (State Bank of India - hereafter ‘SBI’) rejecting the petitioner’s consent for One time Settlement (OTS) as conveyed by a letter dated 24.11.2017. The petitioner that an appropriate directions be given to SBI to give effect to the “SBI Scheme for One Time Settlement of NPA’s and AUCAs in Manufacturing, Trade, Services & Agriculture Sector” (hereafter “SBI OTS2017). further prays W.P. ( C ) 5067/2018 Page 1 of 10 The petitioner company had availed of certain financial 2. facilities from State Bank of India of Bikaner and Jaipur (hereafter ‘SBBJ’). The said facilities included Export Packing Credit (EPC) and Cash Credit Limits. The said facilities were secured by hypothecation of current assets and a charge over immovable and movable assets of the petitioner company. It is stated that the funds provided by SBBJ were utilized by the petitioner for making supplies to its customers.
3. On 09.06.2012, the petitioner entered into a Supply Agreement with the Sri Lanka Transport Board (hereafter ‘SLTB’), a Government of Sri Lanka Enterprise, for supply of spare parts and tyres for TATA and Ashok Leyland buses operated by SLTB. In terms of the said agreement, the petitioner supplied the goods to SLTB. Sometime in early 2015, SLTB defaulted in honouring its commitment to pay for the goods supplied by the petitioner. This led to certain disputes with SLTB, which the petitioner claims were pursued diligently including with the assistance of the Government authorities.
4. In view of the above, the petitioner also defaulted in repayment of its dues to SBBJ and on 23.09.2015, the petitioner’s account was classified as a Non-Performing Asset (NPA) in terms of the norms specified by RBI.
5. In view of the aforesaid defaults, on 27.07.2016, SBBJ issued a notice under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereafter ‘SARFAESI Act’) calling upon the petitioner to pay a sum W.P. ( C ) 5067/2018 Page 2 of 10 of ₹9,44,68,124/- inclusive of interest as on that date.
6. The amounts owed by the petitioner to SBBJ were not disputed. On the contrary, the petitioner informed SBBJ of its efforts to resolve the issue with SLTB and continued to assure SBBJ that the amounts due to it would be repaid. The said assurance was also repeated by the petitioner in response to the notice issued by SBBJ under Section 13 (2) of the SARFAESI Act. The petitioner also filed its objections under Section 13 (3A) of the SARFAESI Act.
7. On 19.10.2016, SBBJ caused a legal notice to be issued to the petitioner calling upon the petitioner company to pay an amount of ₹9,50,72,104.73/-. This was followed by a notice under Rule 8 (1) of the Security Interest and Enforcement Rules, 2002 for taking over possession of the mortgaged properties. In the aforesaid context, the petitioner approached SBBJ for 8. entering into a OTS in respect of its dues. On 30.01.2017, the petitioner offered a sum of ₹5.50 crores as an OTS. The petitioner also sent a demand draft for a sum of ₹27,00,000/- and a cheque of ₹50,000/- as part payment of the OTS amount.
9. On 22.02.2017, SBBJ was merged with SBI in terms of the order passed under Section 35(2) of the State Bank of India Act, 1955. Thereafter, on 24.03.2017, SBI rejected the OTS offer made by 10. the petitioner.
11. On 29.03.2017, the petitioner enhanced its OTS offer from ₹5.5 W.P. ( C ) 5067/2018 Page 3 of 10 crores to ₹6.20 crores. SBI rejected the said offer as well and by an e- mail sent on 11.04.2017, called upon the petitioner to improve its offer for an OTS. Subsequently, on 11.05.2017 SBI also returned the cheque of ₹50,000/- and the draft of ₹27,00,000/- furnished by the petitioner in respect of its OTS proposal.
12. In the meanwhile, the petitioner was successful in securing release of a total amount of USD139205.34/- from SLTB. The said amount was received by the petitioner in its account with Oriental Bank of Commerce (hereafter ‘OBC’). The precise date on which the said amount was received by the petitioner has not been disclosed. However, it does appear that the said amount was received sometimes in the month of June/July, 2007. SBI alleges that the petitioner had fraudulently opened an 13. account with OBC for diverting the funds, which were to be received by SBI. The petitioner disputes the aforesaid allegation. The petitioner submits that the said amount was received in the Nostro Account of OBC since, the petitioner was not sure as to the account in which the said funds were to be remitted considering that the SBBJ had merged with SBI.
14. According to the petitioner, the said amount was remitted by OBC Bank to SBI pursuant to the instructions issued by the petitioner voluntarily on 31.08.2017. SBI has a different version and it is affirmed on behalf of the SBI that it became aware of the said remittance received by OBC and on its intervention the same was remitted by OBC on 06.09.2017. W.P. ( C ) 5067/2018 Page 4 of 10 In the meantime, on 01.09.2017, SBI floated a Scheme for OTS15 of dues in respect of accounts that were categorised as NPAs – SBI OTS2017 informed the petitioner that 16. On 16.09.2017, SBI sent a letter to the petitioner informing the petitioner that SBI had floated the SBI OTS2017and that the petitioner’s account was eligible for settlement under the said scheme. It the amount outstanding excluding from the date of NPA as on 31.03.2017 was accrued interest `8,57,24,567/- and the OTS amount as per the scheme was `6,01,74,779/-. It further informed the petitioner that in terms of SBI OTS2017 the application for OTS would be processed only on deposit of a minimum of 5% of the ledger outstanding as on 31.03.2017 and 20% of the OTS amount would be required to be deposited upfront. Prior to the aforesaid letter, the petitioner had sent a letter dated 17. 01.09.2017 informing SBI that the amount of USD139205.34/- would be credited in its account and further requesting SBI to hold the same to its credit in the aforesaid account, as portion of the said amounts are intended to be applied towards OTS being negotiated with SBI. the petitioner sent a letter conveying its 18. On 19.09.2017, willingness to settle the dues in terms of the SBI OTS2017and further authorizing SBI to debit the amount of `42,86,228/- from its account towards its obligation for OTS.
19. The amount remitted by OBC in US dollars was converted into W.P. ( C ) 5067/2018 Page 5 of 10 Indian rupees and SBI has affirmed that on conversion a sum of `8,86,12,175/- was realized on 13.09.2017. As of the said date, the amount recoverable from the petitioner was an excess of `11 crores.
20. On 26.10.2017, SBI informed the petitioner that it was ready to settle the petitioner’s dues with the payment already received and called upon the petitioner to unconditionally accept the said settlement within a period of thirty days failing which the OTS offer would become infructuous. the petitioner sent certain Thereafter, communications 21. reiterating its willingness for settling its dues in terms of SBI’s letter dated 16.09.2017 and requesting that the balance amount be refunded to the petitioner. This was not acceptable to SBI. Finally, on 24.11.2017, the petitioner sent a letter indicating its willingness to settle the amount due on the terms as offered by SBI that is for the consideration of this acceptance was without prejudice to the petitioner’s right to challenge SBI’s action in retaining amounts in excess of the OTS amount as offered in terms of the letter dated 16.09.2017. Since, the said acceptance was not unconditional, SBI rejected the same by a letter dated 28.12.2017, which is impugned in the present petition. the amount already received. However, The controversy involved in the present case is very limited.
22. According to the petitioner, it was entitled to settle OTS in terms of SBI’s letter dated 16.09.2017, that is, for an amount of `6,01,74,779/-. SBI disputes the same as according to SBI, the SBI OTS2017does not envisaged any refund of dues. W.P. ( C ) 5067/2018 Page 6 of 10 This Court is of the view that the case set up by the petitioner is 23. wholly unsustainable. There is no dispute that the SBI is entitled to appropriate the amounts remitted by SLTB. The bills and documents had been forwarded by SBBJ and such remittance was required to be received directly by SBBJ (since merged with SBI). The said funds had been diverted by the petitioner to its account with OBC. Whilst SBI contends that it was deliberate, the petitioner claims that this was bona fide since, SBBJ had merged with SBI and there was uncertainty as to which account the funds were to be remitted. However, there is no dispute that these funds were required to be remitted to the SBI. It is also not disputed that on 13.09.2017 – that is the date on which the funds and Indian currency were realised from the remittance sent by OBC – the amount due from the petitioner was an excess of `11 crores. Plainly, SBI was required to credit the petitioner’s account with the sum received and reduce its outstanding. However, there appears to be a lapse on the part of SBI as the amount received from OBC was not credited to the petitioner’s loan account immediately. However, SBI’s contention that it was entitled to appropriate the same against the petitioner’s outstanding is merited and cannot be disputed.
24. It was contended on behalf of the petitioner that it had requested the SBI not to appropriate the aforesaid amount and, therefore, it was entitled to use the same towards payment of OTS. This contention is wholly bereft of any merit as the petitioner was in no position to direct whether to be In the first instance, the said remittance appropriated by SBI or not. the remittance received from the OBC ought W.P. ( C ) 5067/2018 Page 7 of 10 ought to have been received by the SBI directly and SBI was entitled to adjust the same. The petitioner is, essentially, attempting to take advantage on 25. the lapse on the part of the SBI in not accounting for the receipt of the remittance from SLTB (through OBC) as on 16.09.2017. Plainly, no such advantage can be drawn by the petitioner. It is also relevant to state that the letter dated 16.09.2017 did not bind SBI to accept OTS offer on the terms as stated therein. The relevant paragraph of the said letter is read as under:-
"“2. (Where applicable) Since your cases is pending before Court/DRT any settlement will be subject to filing of consent term for consent from Court/Lok Adalat/DRT, and this letter is without prejudice to the rights and contentions of the Bank in the said proceedings. necessary decree/ orders Since you have been issued notice under Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest, 2002, this notice is without any prejudice to our rights to take/ continue actions under the Act unless a compromise is settled under the present SBI OTS2017Scheme as stated above.
3. Please advise your willingness to settle the dues by 31.10.2017. Your request for settlement will be processed your for communication and deposit of minimum 5% of the outstanding as on 31.03.2017.” acceptance otherwise receipt or on of 26. It is apparent from the above that the letter dated 16.09.2017 W.P. ( C ) 5067/2018 Page 8 of 10 was only an invitation to offer and not an offer capable of acceptance. Thus, the petitioner’s willingness to accept the OTS in terms of the letter dated 16.09.2017 did not result in any binding contract or arrangement. In view of the above, the only question to be addressed is 27. whether in terms of the SBI OTS2017 the petitioner was entitled to settle its dues on the terms as set out in the letter dated 16.09.2017. Plainly, the answer to the same must be in the negative. A plain reading of the SBI OTS2017indicates that it is only applicable for settlement of the dues outstanding. It clearly does not envisage refund of amounts already received. Thus, the settlement on the part of the SBI could only be with regard to the amount due over and above the amounts already received. The principal object of the SBI OTS2017was “to boost recovery in NPA and AUCA.” The scheme cannot be read as a scheme to provide refund of any amounts already collected.
28. The petitioner’s contention that even though, it owed monies to SBI, SBI was required to refund the same in terms of the SBI OTS2017is fundamentally flawed.
29. The petitioner had relied on the decision of the Supreme Court in M/s Devidayal Castings Pvt. Ltd. v. Haryana Financial Corporation and Anr.:
2016. SCC OnLine SC1134in support of its case. The said decision has no application in the facts of the present case. In that case, certain borrowers had indicated their willingness the policy issued by Haryana Financial for OTS in terms of W.P. ( C ) 5067/2018 Page 9 of 10 Corporation. The said Corporation then decided to carve out an exception to the said policy by not accepting settlement in cases where the value of securities with it was higher than the settlement amount. The Supreme Court in that case referred to its earlier decision in Sardar Associates v. Punjab & Sind Bank (2009)8 SCC257wherein it was observed that the Board of Directors could make deviations in relation to some minor matters but could not touch the broad aspects of the policy. The Court further observed that the actions of the corporation in rejecting cases of the borrowers for settlement of the dues as per policy in force should not have the approval of the Court. Plainly, the said decision has no application as the SBI OTS2017cannot be read in a manner so as to contemplate refund of amounts already recovered. In view of the above, the petition is dismissed. All pending 30. application is also disposed of. DECEMBER21 2018 pkv/MK VIBHU BAKHRU, J W.P. ( C ) 5067/2018 Page 10 of 10