M/S Dennis Steel Pvt. Ltd. v State Bank of India & Annai Builders Real Estates Pvt. Ltd.

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT:** **THE HONOURABLE MR.JUSTICE A.M.SHAFFIQUE** **TUESDAY, THE 14TH DAY OF JUNE 2016/24TH JYAISHTA, 1938** **WP(C).No. 39218 of 2015 (B) ---------------------------** **PETITIONER(S): -------------** **M/S.DENNIS STEEL PVT. LTD. VALAVANADU, KALAVOOR P.O., ALAPPUZHA-688 522, REPRESENTED BY ITS MANAGING DIRECTOR.** **BY ADVS.SRI.DEVAN RAMACHANDRAN (SR.) SRI.V.A.SHAJI SRI.V.S.AFSAL KHAN** **RESPONDENT(S):** **--------------** **1. STATE BANK OF INDIA, STATE BANK BHAVAN, MADAME CAMA ROAD, NARIMAN POINT, MUMBAI, 400 021, MAHARASHTRA, REPRESENTED BY ITS CHAIRMAN.** **2. THE AUTHORIZED OFFICER/THE BRANCH MANAGER STATE BANK OF INDIA, ALAPPUZHA BRANCH, ALAPPUZHA-688 522. 3. M/S. ANNAI BUILDERS REAL ESTATES PVT. LTD., CORPORATE OFFICE AT ALPHA CENTRE, 4TH FLOOR, NOS. 150-151, NORTH USMAN ROAD, T.NAGAR, CHENNAI-600 017, REPRESENTED BY ITS MANAGING DIRECTOR.** **R1 & R2 BY ADV. SRI.GEORGE THOMAS(MEVADA), SC, SBI R3 BY ADVS. SRI.DEEPU THANKAN SMT.NIMMY JOHNSON** **THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 09-06-2016 THE COURT ON 14-06-2016, DELIVERED THE FOLLOWING:** **msv/** ## **WP(C).No. 39218 of 2015 (B)** ## **----------------------------** ## **APPENDIX** **PETITIONER(S)' EXHIBITS -----------------------** **EXHIBIT P1: TRUE COPY OF THE NOTICE DATD 26.9.2011 U/S 13(2) SARFAESI ACT ISSUED BY THE 2ND RESPONDENT BANK. EXHIBIT P2: TRUE COPY OF THE LETTER SAMB/EKM/1240 DATED 2.12.2013 ISSUED BY RESPONDENT BANK TO THE PETITIONER. EXHIBIT P3: TRUE COPY OF THE LETTER NO.SAMB/EKM/2015-16/011 DATED 7.4.2015 ISSUED BY THE RESPONDENT BANK. EXHIBIT P4: TRUE COPY OF THE LETTER DATED 26.6.2015 FILED BY THE PETITIONER. EXHIBIT P5: TRUE COPY OF THE LETTER DATED 26.6.2015 SENT BY THE PETITIONER. EXHIBIT P6: TRUE COPY OF THE LETTER SAMB/EKM/2015-16/148A DATED 11.7.2015 AND ISSUED BY THE RESPONDENT BANK. EXHIBIT P7: TRUE COPY OF THE LETTER DATED 1.10.2015 FILED BY THE PETITIONER BEFORE THE RESPONDENT BANK. EXHIBIT P8: TRUE COPY OF THE LETTER DATED 11.9.2015 ISSUED BY THE RESPONDENT BANK TO THE PETITIONER. EXHIBIT P9: TRUE COPY OF THE DEMAND DRAFT NO.002325 DATED 2.11.2015. EXHIBIT P10: TRUE COPY OF THE DEMAND DRAFT NO.002326 DATED 2.11.2015. EXHIBIT P11: TRUE COPY OF THE LETTER DATED 30.11.2015 SENT BY THE PETITIONER TO THE RESPONDENT BANK. EXHIBIT P12: TRUE COPY OF THE LETTER DATED 7.12.2015. EXHIBIT P13: TRUE COPY OF THE NOTICE SAMB/EKM/2015-16/362 DATED 11.2.2015. EXHIBIT P14: TRUE COPY OF THE DD/CHEQUE NO.011162 DTD.31.3.2016 FOR RS.1 CRORE. EXHIBIT P15: TRUE COPY OF DD/CHEQUE NO.011171 DTD.7.4.2016 FOR RS.1.5 CRORES.** **Msv/** **-2-** **-2-** **WP(C).No. 39218 of 2015 (B) ---------------------------** **EXHIBIT P16: TRUE COPY OF THE CHEQUE NO.122118 DTD.12.4.2016 FOR RS. 3 CRORES.** **EXHIBIT P17: TRUE COPY OF THE CHEQUE NO.122119 DTD.19.4.2016 FOR 2 SRORES. EXHIBIT P18: TRUE COPY OF THE CHEQUE NO.122121 DTD.26.4.2016 FOR R2.2.5 CRORES. EXHIBIT P19: TRUE COPY OF THE PROPOSAL DTD.15.3.2016 FOR SETTLING THE BALANCE AMOUNT WITH INTEREST FILED BY THE PETITIONER. RESPONDENT(S)' EXHIBITS: ------------------------** **EXT.R2(A): TRUE PHOTOCOPY OF THE COMMUNICATION SENT BY THE PETITIONER DTD.15.9.2011. EXT.R2(B): TRUE PHOTOCOPY OF THE REPRESENTATION SENT BY THE PETITIONER DTD.27.11.2013. EXT.R2(C): TRUE PHOTOCOPY OF THE LETTER SENT BY THE PETITIONER DTD.26.6.2014. EXT.R2(D): TRUE PHOTOCOPY OF THE LETTER SENT BY THE PETITIONER DTD.16.10.2014. EXT.R2(E): TRUE PHOTOCOPY OF THE LETTER SENT BY THE PETITIONER DTD.29.3.2014. EXT.R2(F): TRUE PHOTOCOPY OF THE APPLICATION SENT BY THE PETITIONER DTD.26.6.2014. EXT.R2(G): TRUE PHOTOCOPY OF THE LETTER SENT BY THE BANK DTD.13.9.2015. EXT.R2(H): TRUE PHOTOCOPY OF THE APPLICATION SENT BY THE PETITIONER DTD.29.12.2014.** **EXT.R2(I): TRUE PHOTOCOPY OF THE LETTER SENT BY THE BANK DTD.31.12.2014.** **EXT.R2(J): TRUE PHOTOCOPY OF THE LETTER SENT BY THE PETITIONER DTD.25.9.2015.** **EXT.R2(K): TRUE PHOTOCOPY OF THE LETTER SENT BY THE BANK DTD.30.12.2015. Msv/** **-3-** **-3-** **WP(C).No. 39218 of 2015 (B) ---------------------------** ## **RESPONDENT(S)' ANNEXURES:** **ANNEXURE A: TRUE PHOTOCOPY OF THE ORDER DTD.27.1.2016.** - **ANNEXURE 1: TRUE PHOTOCOPY OF THE LETTER SENT BY THE PETITIONER TO THE RESPONDENT BANK DTD.30.4.2016.** - **ANNEXURE 2: TRUE PHOTOCOPY OF THE LETTER SENT BY THE PETITIONER TO THE RESPONDENT BANK DTD.3.5.2016.** - **ANNEXURE 3: TRUE PHOTOCOPY OF THE LETTER SENT BY THE RESPONDENT BANK TO THE PETITIONER DTD.6.5.2016.** **//TRUE COPY//** **P.S.TO JUDGE** ## **Msv/** ## **A.M. SHAFFIQUE, J.** ## ============= W.P. (C) No. 39218 of 2015 =================== Dated this, the 14[th] day of June, 2016 ## **J U D G M E N T** ## This writ petition is filed seeking the following reliefs; _“(i) To call for the records relating to Exhibits P1 to P13 and to issue a writ in the nature of certiorari or any appropriate writ, direction or order to quash the Exhibits P13 initiated by the respondents._ _(ii) To issue a writ in the nature of mandamus or any appropriate writ, direction or order directing the Respondent Bank to grant sufficient and reasonable time to the petitioner to clear the balance amount of Rs.80,00,00,000/- (Rupees Eighty Crores) legally outstanding as per compromise Settlement and till such time direct the respondents to keep in abeyance all further proceedings pursuant Ext.P13._ _(iii) To declare that the petitioner is liable to pay only Rs.80,00,00,000/- (Rupees Eighty Crores) as per compromise Settlement between the petitioner and the respondent._ _(iv) To issue a writ in the nature of mandamus or any appropriate writ, direction or order directing the 1[st] respondent to consider and pass orders on Ext.P12 after affording sufficient opportunity to the petitioner of being heard.”_ 2. The short facts involved in the writ petition would W.P(C) No.39218/15 ## -:2:- disclose that the petitioner is a company incorporated under the Indian Companies Act, which has an Industrial unit at Tamil Nadu. Petitioner had availed of financial facilities from the Alappuzha Branch of State Bank of India for business purposes and several items of property had been mortgaged as security for the financial facility granted by the Bank. Petitioner submits that on account of various reasons, the accounts were classified as Non Performing Assets (NPA). Petitioner was served with a notice dated 26/9/2011 under Section 13(2) of SARFAESI Act demanding an amount of `135,97,70,057/-. Petitioner offered to settle the liability by way of One Time Settlement (OTS) for an amount of 125 crores. Ext.P2 is the letter dated 2/12/2013 issued by the respondent Bank by virtue of which the liability has to be settled on or before 15[th] March, 2014. According to the petitioner, though a sum of `45 crores was paid towards compromise settlement and certain other payments were made, the balance amount could not be remitted due to recession in the real estate scenario. However, the petitioner again approached the Bank seeking for concession and for remitting the balance amount and accordingly, Ext.P3 had been issued by which petitioner agreed to pay the amount in the -:3:- ## W.P(C) No.39218/15 ## following manner; _“We refer to your letter dated 27/1/2015 and have to advise that the competent authority has acceded to your request for (the second) extension of the OTS upto 30/6/2015, subject to the following terms;_ |a)|_Amount of_<br>_compromise_<br>_offer_|_Rs.125.00 crores_|_Rs.125.00 crores_|_Rs.125.00 crores_| |---|---|---|---|---| |b)|Terms of<br>payment|**Instl.**<br>**No.**|**Amount**|**Release of security**| |||1|45.00|83 acres of DTCP<br>approved layout| |||2|15.00|NOC for dismantling and<br>sale of factory buildings,<br>plant, machinery and<br>metal scrap| |||3|30.00|100 acres of land| |||4|35.00<br>+<br>Delayed payment<br>interests<br>+<br>Infusion of Rs.60 crs<br>promoters funds into<br>DCMPL|Residual portion of land| |c)|Interest for the<br>repayment<br>period|Simple interest @ SBAR on the OTS outstandings<br>will be recovered from 01.04.2014 upto 31.12.2014,<br>and @ Base Rate + 2% from 01.01.2015 onwards.||| W.P(C) No.39218/15 ## -:4:- _However, it may be noted that the changes in the instalments and the related partial releases of securities have been permitted based on your undertaking to deposit any amount exceeding Rs.60 crores received by sale of assets (i.e. DTCP- approved layout and the scrap value of factory Plant & Machinery) into the loan account with the Bank._ _Please ensure that the OTS terms are adhered to, failing which the OTS will be treated as cancelled and recovery measures initiated to recover the bank's dues.”_ Petitioner submits that he filed an application dated 26/6/2015 seeking for extension of time stating the reasons by which the payment could not be made in the matter. While so, petitioner had a purchaser for an item of property who was willing to pay the money to the Bank by sale of 83 acres of land. The petitioner submitted letter dated 10/7/2015. It is stated that pursuant to the said letter, `3.89 crores was remitted to the Bank and the Bank released the title deed of the property. It is further stated that a further discussion was held with the officers of the respondent Bank pursuant to which petitioner submitted another letter dated 1/10/2015 requesting for extension of time for the compromise settlement upto 31/3/2016. By letter dated 11/9/2015, (Ext.P8), W.P(C) No.39218/15 ## -:5:- Bank had informed the petitioner that the balance outstanding would come to `82,87,48,260.75 as on 31/3/2015. Petitioner submits that he had certain purchasers for the property but since the Bank was not willing to extend the time for settlement, the purchasers did not remit the money. It is submitted that in the meantime, proceedings had been taken by the Bank to auction the property as per notice dated 11/12/2015. Ext.P13 is the said notice. According to the petitioner, having paid substantial amount for settlement of the liability, petitioner should be given some more time to pay the amount covered by the settlement arrived at with the Bank and in the meantime, if the properties are sold, petitioner will be put to serious hardship and loss and hence this writ petition is filed. 3. Counter affidavit has been filed by the 2[nd] respondent _inter alia_ contending that the writ petition is not maintainable to challenge the sale notice published by the Bank. When proceedings are taken by the Bank under Section 13(4) of the Act, it is not open for the petitioner to approach this Court. If at all there is any dispute, the remedy is to approach the Tribunal under Section 17 of the Act. Reference is also made to the judgment of W.P(C) No.39218/15 -:6:- the Apex Court in _**United Bank of India v. Satyawati Tondon and others**_ [(2010) 8 SCC 110]. It is submitted that in so far as the petitioner had not complied with the terms of OTS offered, he cannot have a right to seek extension of time. As matters stand now, the liability of the petitioner is about `200 crores and the respondent Bank is entitled to proceed to recover the amount by sale of the assets which cannot be curtailed by any direction issued by this Court. Respondent also contended that the petitioner had been dodging the matter for quite a long time by writing letters one after another, but, no action had been taken in the matter. Finally, as per letter dated 6/5/2016, Bank had already informed the petitioner that his representation dated 15/3/2016 cannot be accepted and that the offer of OTS was no longer in force. 4. In fact, when the above writ petition came up for hearing, this Court stayed further proceedings pursuant to Ext.P13 on condition of the petitioner remitting `5 crores on or before 14/1/2016. The said amount has been deposited in a non lien account with the respondent Bank. This Court posted the matter again on 21/1/2016 to enable the petitioner to come back with a proposal for payment of an amount of `20 crore on or before W.P(C) No.39218/15 -:7:- 31/3/2016. When the matter came up hearing on 27/1/2016, learned senior counsel appearing for the petitioner offered to pay a further amount of `2 crores in a non lien account. This Court observed that, on deposit of the said amount, Bank will be free to appropriate the total amount of `7 crores towards the liability of the petitioner to the respondent Bank subject to the result of the writ petition. On such appropriation, the Bank was permitted to release to the petitioner, the factory building and plant and machinery scrap which was proposed to be auctioned. By order dated 9/3/2016, the recovery proceedings were stayed on condition of the petitioner paying `10 crores on or before 31/3/2016. Petitioner remitted `1 crore in a non lien account on 31/3/2016 and offered to remit the balance amount on or before 7/4/2016. An application was filed as IA No.4753/2016, seeking extension of time for effecting the payment. 5. Another application is filed as IA No.5146/2016 _inter alia_ stating that petitioner has arranged the entire amount directed to be paid by 30/4/2016. Petitioner also sought for release of the properties to enable the petitioner to arrange funds. 6. Later, by a further order dated 8/4/2016, this Court W.P(C) No.39218/15 -:8:- extended the interim order on condition of the petitioner remitting `10 crores on before 30/04/2016 and a further amount of `3 crores on or before 16/5/2016. It was made clear that, if the payments are not made, then the attempt of settlement of issues between the parties will be deemed to have failed. However, if the payments are effected as directed, then the prayer of the petitioner for release of additional items of properties will be considered. 7. Another application is filed as IA No.6256/2016 in which it is stated that petitioner had remitted `9.75 crores on 30/4/2016 and the balance amount of `25 lakhs on 3/5/2016. Petitioner sought for further time of three weeks to deposit `3 crores. 8. Counter affidavit is filed in IA No.6256/2016. The respondent Bank submitted that the proceeds of cheques for `9.75 crores could be collected only on 3/5/2016 which has been appropriated towards the discharge of liability of the petitioner. It is also stated that the petitioner is not entitled for any benefit under the OTS scheme which has already lapsed. 9. Learned senior counsel appearing on behalf of the petitioner seeks for indulgence of this Court to avail of the benefit W.P(C) No.39218/15 -:9:- of OTS on the ground that all sincere efforts had been taken by the petitioner to discharge the liability and when substantial portion of the amount had been remitted, and the amounts as directed by this Court by interim order dated 8/4/2016 has also been paid, though after the period prescribed therein, the petitioner may be given a further opportunity to settle the liability. 10. On the other hand, placing reliance on _**Satyawati Tondon**_ (supra), the learned senior counsel appearing for the respondent Bank seeks for dismissal of the writ petition. It is stated that the first relief had become infructuous as the sale could not take place as proposed and the other reliefs cannot be granted by this Court when the OTS has already lapsed. 11. There cannot be any dispute about the fact that this Court's jurisdiction to enter into contractual obligations with the petitioner and the respondent Bank cannot be adjudicated in a writ petition under Article 226 of the Constitution of India. As far as SARFAESI proceedings are concerned, the Supreme Court has made it very clear that this Court shall not interfere in such proceedings especially when an alternate forum has been provided for adjudicating such issues. ## W.P(C) No.39218/15 -:10:- 12. But, in this case, the petitioner has come up with a slightly different relief or rather the petitioner wants to discharge the liability as agreed upon on the basis of Ext.P3. Learned senior counsel submits that the petitioner is ready and willing even to pay the entire amount as per the OTS with interest on the delayed payment. 13. As rightly pointed out by the learned senior counsel for respondent Bank and under normal circumstances, this Court will not interfere with any internal arrangement arrived at between the parties with reference to OTS. The very purpose of OTS is to ensure that the amount specified in the settlement offer is paid within a specified time and for that purpose, the Bank offers some concessions to the borrower. If OTS is taken as a decree, it will affect the interest of the banking institution. The offer is made on the premise that the payment will be made within a specified time. If the payment is not made within the specified time, the offer stands withdrawn and the loanee cannot rely upon the said offer. OTS offered by the Bank was therefore conditional on the petitioner remitting the amount as specified. It is therefore rather admitted that the OTS has failed. W.P(C) No.39218/15 -:11:- 14. The question is whether this Court will be justified in reviving an OTS that has virtually failed. Under normal circumstances, this Court will not interfere in such situations. But, in this case, by virtue of certain interim orders, this Court felt that an opportunity should be granted to the petitioner to settle the liability and accordingly, the interim orders as specified above had been issued. Petitioner has also remitted certain amounts as directed by this Court though not strictly within time as stated. The Bank also has appropriated the said amount towards the liability. For extending the period, the Bank can be compensated by way of interest on the delayed payments. In such circumstances, I am of the view that one more opportunity should be granted to the petitioner to settle the entire liability as per Ext.P3 and accordingly, this writ petition is disposed of as under; (i) That the petitioner shall pay to the respondent Bank the entire balance amount covered by Ext.P3 letter dated 7/4/2015 with interest @12% per annum from 30/6/2015 and also comply with all other terms as stated in the said letter within a period of three months from today. Interest shall be paid for the payments W.P(C) No.39218/15 ## -:12:- already made, taking into account the delay in remittance from the respective dates as shown in Ext.P3. However, during the aforesaid period, Bank will have no obligation to release any of the securities, unless otherwise decided by the Bank. (ii) The sale of the scheduled property shall be fixed only after the expiry of three months as stated above. However, the Bank will be free to take all other steps, to notify the property for sale, if so advised. (iii) If any of the payments aforesaid are not made within the time as stated above, it shall be open for the Bank to proceed further and recover the entire amount ignoring the direction as stated in Clause (i) above. Sd/- ## **A.M. SHAFFIQUE, JUDGE** Rp //True Copy// P.S to Judge