Borrower Can't Seek Time Extension To Repay Balance 'One Time Settlement' Amount As A Matter Of Right: P&H High Court

The Punjab and Haryana High Court has observed that the High Court has the power to grant an extension of time for completion of the loan repayment under the OTS (One Time Settlement) Scheme, however, such power can't be invoked at the instance of the borrower as a matter of right.

The bench of Justice M. S. Ramachandra Rao and Justice J. S. Bedi also held that it is not open for the Public Sector Banks or Private Sector Banks to decline OTS sought by a borrower, provided he/she falls within the OTS Policy being followed by the Bank.

The case in brief 

Petitioner Aseem Gaind and his co-applicant had been sanctioned a home loan of `2,32,00,000/- in February 2014 by Axis Bank. The Amount was to be repaid in 240 monthly installments on a floating rate of interest @ 0.25% above the base rate.

Later, a home loan (against property) was also sanctioned for`1.74 Crores in February 2014 to be repaid in 180 monthly installments on a floating rate of interest @ 1.75% above the base rate.

Later on, he was not able to repay the loan and so he availed the benefit of the OTS scheme of the bank, and it was decided that he will have to pay a total OTS of 2.63 Crores, however, till October 2019, he could only deposit 96.29 Lakhs.

He also sought another 6 months' time to repay to the loan as per the OTS Scheme, however, vide letter dated July 12, 2019, the respondent-Bank rejected his prayer for extension of time for repayment of the balance amount of `1.76 Crores, out of total One Time Settlement 2.36 Crores.

Thereafter, the petitioner moved the Court with the instant Writ Petition or issuance of a Writ in the nature of Certiorari for quashing of the letter issued by the bank rejecting his request for a time extension for loan repayment. The petitioner also claimed that that the decision of the bank was unreasonable, harsh, and contrary to the law and decisions of the HC.

Bank's stand

It was contended by the Bank that it is not within the purview of the High Court to grant the relief of extension of six months period for making balance payments of OTS as per sanctioned letter dt.31.03.2018 issued by it.

It was further stated that the Bank is not an instrumentality of the State in terms of Article 12 of the Constitution of India and is, therefore, not amenable to the Writ jurisdiction of this Court under Article 226 of the Constitution of India.

Further, it was also argued that the petitioner had an effective alternative remedy under Section 17 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 before the Debt Recovery Tribunal, and in view of the same, this Writ Petition cannot be entertained

Court's observations

At the outset, the Court observed that if the denial of the OTS by a Financial Institution is not in terms of the OTS Policy framed by it or as per guidelines framed by the Reserve Bank of India, then a Writ Petition is certainly maintainable.

Further, the court dealt with the questions as to in what circumstances an OTS scheme can be extended by the High Court and observed that in the case of Anu Bhalla and Another v. District Magistrate, Pathankot and Another CWP No. 5518 of 2020, the Division Bench of the High Court had specifically held that in exercising the jurisdiction under Article 226 of the Constitution of India, the High Courts would have the jurisdiction to extend the period of settlement as originally provided for, in OTS letter, but, in this case, certain guidelines were laid down. The guidelines issued in the 2020 case could be read here.

Therefore, taking note of the guidelines issued in the Anu Bhalla Case, the Court examined the facts of the instant case to see whether the petitioner falls within the guidelines framed in the case for grant of extension of time for completion of the OTS.

The Court noted that the petitioner, within the period of OTS, as against 2.63Crores, paid only37,67,573/-, therefore, finding it to be a figure which is too low to be considered as payment of a substantial amount, the Court observed thus:

"With such slow pace of payment, in our opinion, the petitioner cannot claim that his case would fall within the guidelines framed in the case of Anu Bhalla and Another. Admittedly, even according to the petitioner, his business has been closed since 2015. The reason for the closure of the petitioner's business is only indicated as 'unavoidable and unforeseen circumstances', and no particulars are forthcoming. Even according to the decision in the case of Anu Bhalla and Another, the borrower cannot seek an extension of time for making payment of the balance OTS amount, as a matter of right," the Court remarked as it dismissed the plea.

Advocate V.K. Sachdeva appeared for the petitioner. Advocates D.K. Singal and Mukund Gupta appeared for the respondent-bank.

Case title - ASEEM GAIND v. AXIS BANK, RETAIL ASSETS CENTRE

Case Citation: 2022 LiveLaw (PH) 29

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