BANKS CANNOT RETAIN MONEY & AUCTION PROPERTY AFTER CANCELLING ONE TIME SETTLEMENT
CEV TECHNO NEWS-(Bengaluru): If a bank cancels a one-time settlement (OTS), it cannot retain the amount paid under it and put the borrower’s property on sale as well, the high court observed recently while disapproving the action of a nationalised bank.
Allowing a petition filed by Rima Transformers and Conductors Pvt Ltd, Bengaluru, Justice M Nagaprasanna noted that the petitioner’s OTS offer was accepted by Canara Bank with certain conditions and the petitioner had also agreed to them. Before the February 28, 2021 deadline fixed by the bank for compliance with OTS conditions, the petitioner deposited Rs 18.9 crore, and another Rs 77 lakh was deposited after the bank withdrew the OTS.
“In one breath, the amount is accepted and in the other, Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFAESI), 2002 proceedings are instituted by cancelling OTS. If the bank had cancelled the OTS, it could not have retained the amount paid under it and put the petitioner’s property on sale as well. This action of the bank does not behove its status of being a ‘state’ under Article 12 of the Constitution,” Justice Nagaprasanna observed. He quashed the bank’s March 23, 2021 communication withdrawing the OTS offer and also the April 29, 2021 re-auction order vis-a-vis the petitioner’s other properties.
The petitioner claimed that on August 28, 2019, Rs 18 crore ought to have been paid in terms of OTS. But there was a delay of three months in executing the same. Later, with the onset of Covid-19, the bank itself extended the OTS and directed that the entire amount be paid on or before February 28, 2021. The petitioner was also permitted to sell the property mortgaged with the bank as he had a potential buyer. Thus, the property was sold and Rs 18.9 crore deposited to the bank towards the account.
On the other hand, Canara Bank claimed the amount was not paid in full, interest had to be paid and, therefore, exercising liberty that it had reserved for itself while offering OTS, the latter was cancelled. The bank further argued that the high court cannot direct it to offer OTS or extend the time stipulated in the same.
