On failure of borrower to honour payment of settlement amount as per sanction terms, benefits of RBI Circulars issued during Pandemic cannot be availed
Reserve Bank of India issued a Circular dated March 27, 2020, on account of pandemic, permitting Banks to grant a moratorium of three months from March 1, 2020, to May 31, 2020, to be attended by the rescheduling of the tenure by three months post-moratorium. By a Circular dated May 23, 2020, such a moratorium was extended by another three months by the Reserve Bank of India.
There was a concluded OTS scheme between petitioner/borrower and Bank. The Bank’s letter assumes particular importance in this context. The previous correspondences on a settlement between the parties culminated in the said letter, which is captioned: Compromise proposal. The bank informed Petitioner in the said letter that the compromise proposal, as well as various correspondences resting on the subject, had been ‘approved by the Competent Authority as per the conditions set out therein. The Bank issued a sanction letter and requested the petitioner to return one copy of the same duly signed, “having accepted” all terms and conditions of the sanction “unconditionally”. Thus, the proposal of OTS of the petitioner was accepted at the Bank’s end, if at any point in time, by the letter dated August 19, 2019. However, admittedly, the petitioners failed to honour such a scheme.
Several correspondences between the parties could not justify the petitioners’ arguments that there was an existing OTS scheme at the juncture when the RBI Circulars came in. The proposal of the petitioner, although couched cleverly as an ‘acceptance’, was never accepted by the Bank unconditionally at any subsequent point of time, nor was any sanction letter issued for any further OTS scheme based on the November 5, 2019, letter. Bank insisted upon payment by petitioner in terms of the OTS, inter alia by its letter dated June 25, 2020. Since the petitioner failed to honour its commitments under the concluded OTS scheme of August 19, 2019, no further extension of time-based on the OTS could be claimed validly by the petitioners. The Bank, by its letter dated August 10, 2020, made it clear that, because of the failure of the petitioner to honour payment of OTS amount as per sanction terms, the OTS was treated as failed.
At the juncture when the pandemic set in and the Covid-19 Circulars in question were issued, petitioner no.1 was already a defaulter and its account had been declared NPA. Such default could not be connected with the pandemic, for the victims of which the Circulars were intended. Thus, such an account could not be considered to be a ‘standard account’ to attract the benefits of the RBI Circulars. Even if the petitioners seek an extension of the Circular benefits to the petitioners on the ground that the NPA declaration was subject to compliance of the OTS scheme, the absence of any concluded OTS, at the juncture when the Circulars came in, negates the plausibility of such an argument.
RBI Circulars are not applicable in respect of accounts that have already been declared NPA. Therefore, the benefit of the moratorium cannot be extended to the account of the borrower company. An account must have been classified as ‘standard’ to derive benefit under the Circulars dated March 27 and April 17, 2020. Any recovery proceeding initiated by the concerned lending institutions, including recovery according to a compromise settlement agreement, would lie beyond the scope of the two Circulars of RBI.
The petitioners have consistently defaulted in repayment, having only paid a meagre part of the dues, let alone interest, and having subsequently defaulted on the OTS scheme as well. Thus, there is no handle in favour of the petitioners to extend the benefits of the RBI Circulars to them.
Appearing counsels ; Mr. Ratnanko Banerji, Mr. S. N. Mookherjee, , Mr. Meghajit Mukherjee, Mr. Kanishk Kejriwal, Mr. Rajesh Gupta, Mr. Shivangi Thard, Mr. R. Agarwal, Mr. Debdutta Sen, Ms. Suchishmita Chatterjee, Mr. Malay Kr. Seal, Mr. Rahul Auddy, Mr. Sabyasachi Chowdhury, Mr. Rajarshi Datta, Mr. Rahul Auddy
