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Judgment
P. Jyothimani, J.—Heard the learned Senior Counsel appearing for the petitioner and Mr. A.V. Arun, learned counsel appearing for the
respondent bank. The writ petition challenges the order of the bank dated 20.04.2012, in and by which the bank has considered the representation
made by the petitioner for the purpose of approving the OTS proposal. By the said letter, the bank while accepting the OTS at Rs.7.43 Crores
besides recovery expenses has directed the petitioner that the acceptance of the said OTS is subject to the following conditions;-
i) payment of 25% of the settlement amount on receipt of approval letter
ii) the balance settlement amount along with recovery expenses should be paid within 30 days from the approval of the OTS proposal and
iii) the bank will release all the securities after settling the entire dues.
The above-said settlement is challenged by the petitioner on the ground that once OTS proposal is accepted by the bank as per the policy of
settlement, the bank has to give the maximum period upto 12 months. As submitted by the learned Senior counsel appearing for the petitioner,
Clause 4 of the Recovery Policy - 2010 justifies the said stand, which reads as follows;
PAYMENT OF SETTLEMTN AMOUNT:
As far as possible, settlement amounts should be recovered in lumpsum. Where the borrowers desire to pay the settlement amounts in installments,
a maximum time period of 12 months from the date of approval, be allowed. Payment of settlement amount in installments will attract interest at
BPLR (simple). Where ever installment payments are sought, there should be a minimum of 25% down payment of the settlement amount.
The learned Senior Counsel further submitted that the bank is entitled to persuade the borrower to dispose of the properties which are given as
securities either by mortgage or otherwise so as to liquidate the obligation of repayment. That is also available in the Recovery Policy - 2010 under
clause number 14.1, which is as follows:
RELEASE OF SECURITY:
14.1 There may be cases, where bank is able to persuade Borrowers/guarantors to dispose of the properties mortgaged to Bank to reduce their
liability. There may also be request from Borrowers/guarantors for release of mortgaged properties against payment of fair present realizable value
of such properties. The acceptance of the proposal without considering any sacrifice at that point of time would be in the interest of the Bank as
well as the Borrower to reduce further interest burden on the amount so recovered.
The policy also shows the method of recovery by permitting the mortgagor to sell the properties secured for the purpose of repayment and that
is based on the agreement in respect of collateral settlement so as to earn income for the interest of the general public. In the letter of the
respondent bank dated 10.03.2012 the bank informed the proposal of OTS as requested by the petitioner and consequently as stated above the
amount of OTS culminated to Rs.7.43 Crores.
The learned Senior Counsel appearing for the petitioner would submit that while the petitioner is willing to pay the enter amount, as per the
policy of the bank, one or two properties given as securities can be realized for the purpose of enabling the petitioner to sell and forward the sale
consideration in respect of the amount due to the bank, which is acceptable as per the policy enunciated above. In spite of it, by the impugned
letter the bank has directed the petitioner to pay 25% of the settlement amount at the first instance immediately and the balance amount within 30
days.
On the other hand, the learned counsel appearing for the respondent bank filed the counter affidavit and would submit that when once OTS
proposal is accepted, the same is based on understanding that the payment must be made immediately. If the payment is postponed either by virtue
of permitting the mortgagor to sell the portion of the property or otherwise, the bank will be losing the security and in the event of failure on the part
of the borrower, it would be difficult to recover the amount which is against the Public Interest.
Mr. A.V. Arun, learned counsel appearing for the bank would vehemently oppose the prayer in the writ petition and submitted that when once
OTS proposal is accepted by the petitioner, it is the duty of the petitioner to pay the entire amount. After the acceptance of the OTS proposal, no
further leniency can be expected by any borrower especially when the outstanding amount is large in nature.
On a reference to number of securities given by the petitioner, we find that six properties have been given as security for repayment of the
amount which are as follows;
Vacant land located at Cotton Market S.No. 320/12 Quilon-Madurai NH (208) Road (Western Row) Rajapalayam Municipality owned by
Late. Mr. K.P. Jeyaram Raja.
Land and Workshop building property at Tenkasi Road, Rajapalayam T.S.No. 17/2, 17/4 and 18/5 at Rajapalayam Municipality, Rajapalayam
owned by Mr. K.J. Ravichandra Raja, K.J. Sri Rengaperumal Raja, M.S. Shanthi & C. Vidya Raja.
6.58 acres of land and building at 250, 251, 252, Tenkasi Road, Ward No. 3, S.No. 940/1B, 941/2, 948/1B, 950/2B, 951/1, 952/2, 952/1,
953, 954/1, 972 Rajapalayam Village, Rajapalayam owned by M/S Jai Renga Mills P. Ltd.
5.78 acres of land at S.NO.701/2, 706, South Venganallu Panchayat, Rajapalayam Village, Tenkasi Road, Rajapalayam owned by M/s. Jai
Renga Mills P. Ltd.
4.50 acres of factory land at Ayyan Kollan Kondan at S.No. 954/2, 954/4, 954/5, 970/2, 971/2, 973/3, 974/4 at Ayyan Kollan Kondan
Village, Rajapalayam Taluk, Rajapalayam owned by M/S Jai Renga Mills P. Ltd.
Plant and machinery at Jai Renga Mills P. Ltd. at 3/251, 252, Ayyan Kollan Kondan Village, Tenkasi Road, Rajapalayam.
Admittedly, the value of all the six properties given as security put together is around Rs.20 Crores, while the OTS accepted is for Rs.7.43
Crores. Therefore, on fact, it is clear that the respondent bank is well secured. But as per the policy if one or two properties are realized, it is not
as if the respondent bank is going to lose its security, since the value of the other properties are certainly sufficient to recover the entire amount in
case of failure of the petitioner. Inasmuch the petitioner is agreeable to pay the amount due, as submitted by the learned Senior Counsel,
permission must be given to sell one or two properties which are sufficient to make the full amount of Rs.7.43 Crores along with recovery
expenses.
In such view of the matter, considering the fact that the petitioner has been making payments, we are of the view that the impugned letter is not
in consonance with the policy and that the bank would have been more pragmatic in applying practical wisdom. Accordingly, the writ petition is
disposed of with the following conditions;
i) On request by the petitioner, the respondent back shall give a letter of consent permitting the petitioner to sell the 6th item of property as
enunciated above which are plant and machinery.
ii) On receipt of such consent letter, the petitioner shall pay a sum of Rs.1 Crore within one week and thereafter, a further sum of Rs.2 Crores shall
be paid on or before 29.06.2012.
iii) If the petitioner complies with the above said conditions, on request of the petitioner, the bank shall again permit the petitioner to sell any one of
the remaining 5 items of the properties by giving letter of consent.
iv) on receipt of such letter, it will be open to the petitioner to sell the property and pay the balance amount of Rs.4.43 Crores along with the
recovery expenses as indicated by the bank besides 9% interest on the balance amount and that the entire amount shall be paid on or before
29.09.2012.
In the event of failure of compliance of any one of the above conditions, it would be open to the respondent bank to take physical possession and
sell the properties in accordance with the SARFAESI Act. Once the claim of the bank is settled on payment of the amount as stated above, it shall
be treated as full and final settlement of entire claim and the bank shall release all the documents which includes any other collateral security. In
view of the order passed in W.P.(MD).NO.7552 of 2012, the other writ petitions, namely W.P.(MD).No. 5752 of 2010, W.P.(MD).Nos. 31
and 32 of 2011 and W.P.(MD).No. 155 of 2012 are unnecessary. Accordingly the said four writ petitions are closed. No costs Consequently, the
connected miscellaneous petition is closed.