Merely Because Mode Of Payment Differs, Settlement Can’t Be Revoked Unilaterally: Bombay HC

In a peculiar case that came up before the Bombay High Court, a one-time settlement arrived at between petitioner M/s Akhil Fabrics Pvt Ltd and the Central Bank of India was sought to be revoked by the respondent bank on the ground that post-dated cheques were not deposited even though, as per the said settlement, even though the total amount of Rs. 40 lakh was already paid.

A bench of Justice BR Gavai and Justice Riyaz Chagla was hearing the writ petition, which was filed because Central Bank sought revocation of the settlement that was mutually agreed upon merely because the mode of payment was not post-dated cheques.

As per the said agreement, the total amount of Rs.40 lakh was to be paid with interest by June 20.

An amount of Rs.35 lakh was already paid by the petitioner before the petition was filed.

During the pendency of this petition, the total amount was paid and a demand draft of Rs.71,750 (interest amount) was also submitted before the court by the petitioners.

Central Bank’s counsel Rohan Cama submitted that terms of agreement between the parties are reduced to writing, the parties are bound to comply with the same and any deviation from these terms is not permissible.  Therefore, since petitioners were unable to provide post-dated cheques, on non-fulfilment of conditions, his client was justified in seeking revocation of the settlement.

The court noted that respondent-bank is a nationalised bank and said:“It is settled law that every organ of the State is required to adhere the principles of reasonableness, equity, fairness and good conscience. A very essence of the settlement is that an amount of Rs.40 Lakh along with the interest, has to be paid by the Petitioners to the Respondent-Bank. When the Petitioners have in essence complied with the terms and conditions, merely because the mode is different, in our considered view, cannot be a ground for the bank to revoke the settlement unilaterally. 

In that view of the matter, we find that the stand taken by the Bank would not stand the touchstone of the parameters laid down by the Apex Court under Article 14 of the Constitution of India. We therefore, find that the action of the bank is not justified in law.”

Thus, the bank was directed to release the petitioner from the liability of the loan