High Court · 2025

Judgment

1. Heard Dr. L.P. Mishra and Shri Sharad Pathak, learned counsel for the petitioners and Shri Prashant Kumar Srivasvata, learned counsel for respondent no.3 - Bank.

2. Present petition has been filed for the following reliefs: "1. Issue a writ, order or direction in the nature of certiorari quashing the impugned order dated 27.01.2025, passed by Opposite Party No.1, as is contained in Annexure No.1 to this writ petition, and proceedings of auction, if any, taken place may also be set aside and all consequential action taken in furtherance thereof may also be set aside;

2. Issue a writ, order or direction in the nature of certiorari quashing the impugned order dated 24.07.2024 passed by the Debt Recovery Appellate Tribunal, New Delhi, as is contained in Annexure No.2 to this writ petition;

3. Issue a writ, order or direction in the nature of certiorari quashing the impugned notice dated 22.01.2025, as is contained in Annexure No.3 to this writ petition;

4. Issue a writ, order or direction in the nature of certiorari quashing the impugned auction notices dated 13.12.2024, as is contained in Annexure no.4 to this writ petition;

5. Issue a writ, order or direction in the nature of certiorari quashing the auction notice dated 26.01.2025, as is contained in Annexure No.5 to this writ petition;

6. Issue a writ, order or direction in the nature of mandamus commanding the Opposite Parties to proceed further with the One Time Settlement which has been initiated with the Petitioners in furtherance of application dated 30.12.2024 of the Petitioners, and conclude the same with its logical end." 2

Submission of learned counsel for the petitioners is that on account of the petitioners not being able to adhere to the financial discipline, the account maintained by the petitioners was classified as NPA and thereafter proceedings were initiated.

4. For the purpose of the present petition, it is essential to notice that the proceedings went up to DRAT. The DRAT passed the following order on 24.07.2024, which is still subsisting: "This matter has beer taken up by me through Video Conferencing. Appellant has filed the instant appeal against the impugned order dated 04.07.2024 passed by Ld. Presiding Officer, DRT, Lucknow in S.A. No.18/2024, whereby appellant bank was restrained from dealing with and proceeding further in any manner against the properties involved in the matter. Ld. counsel for the appellant bank submits that the bank has scheduled the auction of the properties in question for tomorrow, i.e. 25.07.2024. After arguing for some time, the Ld. counsel for the appellant submits that the purpose of filing the present appeal would stand satisfied in case the bank is allowed to conduct the auction scheduled for 25.07.2024 making the same subject to the final outcome of the S.A. filed by the respondents before Ld. DRT and Ld. DRT is directed to decide the same expeditiously. Ld. counsel for the appellant further submits that the date fixed in the S.A. before the Ld. DRT is 30.07.2024 and the Ld. DRT be directed to decide the same within 90 days so that if the property is auctioned the payment is made within that period. Ld. counsel for respondent has no objection to the aforesaid suggestion made by Ld. counsel for the appellant bank. He submits that in the meanwhile the respondent will also try to settle the matter with the bank. Heard. In view of the above, let bank proceed with the auction scheduled for 25.07.2024, but same shall be subject to the final outcome of S.A. No.18/2024 filed by the respondent before the Ld. DRT-Lucknow. Ld. Presiding Officer of DRT, Lucknow is requested to take up the S.A. on the next date of hearing i.e. 30.07.2024, if it is not possible to take up the matter on the said date, then let it be taken up soon thereafter, and dispose of the same expeditiously in accordance with law, preferable within a period of two months after hearing the counsel for the parties. With the above direction, the appeal stands disposed of. File be consigned to record room. 3 Copy of the order be sent to the concerned DRT."

5. In the meanwhile, the petitioners persuaded the bank to accept one time settlement. In terms of the proposal as given, the communication was addressed to the petitioner on

12.07.2024 for depositing an amount of 5% in the bank as specified so that the OTS can be processed. It also bears from record that the petitioners had sent a fresh OTS offer through their communication dated 11.12.2024. The said email was replied by the bank through their reply dated 23.12.2024. On the basis of the understanding as appeared to the petitioner, an application was moved on 30.12.2024 giving a detailed OTS proposal; alongwith the said, the amount of 5% was also deposited. It also bears from record that on the one hand, the bank had asked the petitioners to give the proposal on

23.12.2024, on the one hand, steps were taken for auction of one of the properties mortgaged through an e-auction held on

27.01.2025.

6. It has been stated by learned counsel for the respondent Bank that when the proposal/application dated 30.12.2024 contained in Annexure - 17 was considered, an order came to be passed on 22.01.2025 stating that as per the extant bank's policy, the case of the petitioners falls under the category where minimum upfront amount should be 35% of the amount offered; the petitioner was called to deposit an upfront amount of 35% so that the bank can consider the OTS proposal.

7. In response to the said, learned counsel for the petitioners argues that the petitioners had deposited 5% of the amount upfront in terms of the earlier directions given and now the bank is taking an unfair stand in directing the petitioners to deposit an amount of 35%. 4

8. In terms of the said submission, this Court had directed learned counsel for the respondent bank to produce the policy which prescribes for deposit of 35% of the amount upfront for consideration of the OTS proposal.

9. In response to the said, learned counsel for the respondent bank has produced a copy of the NPA Management Policy, 2024 of the respondent bank wherein in respect of the settlement that may be made by the bank, following is observed: "7.3.2. Payment Terms: a) The amount of settlement should preferably be paid in one lump sum. OTS will be valid for maximum of 3 years. After expiry of validity, OTS will be treated as revoked. Further, extension thereof will not be considered. It will be evaluated afresh proposal. b) In case the borrowers are unable to pay the entire amount in one lump sum, the following procedure may be adopted - "Normally minimum upfront/ down payment of 10% of the compromise offer be deposited in a No Lien account. Upfront must be insisted upon; however, it shall not come in the way of entertaining OTS proposal if otherwise acceptable. In case, where the compromise amount is expected to be paid by the sale of securities charged to the Bank, the down payment may not be insisted upon". Not obtaining of upfront/down payment shall not be treated as deviation. c) Delegatee upto ZLCC can approve repayment periods up to 12 months subject to levying applicable interest. d) NBGLCC/HLCC-I/CAC/M.Com can approve repayment periods up to 36 months and also deviation in rate of interest for repayment period within their delegated authority of approving sacrifice. e) Repayment of compromise amount to be fixed such that minimum 25% of amount is paid within 3 months. f) Balance amount of 75% should be recovered in equal monthly / quarterly installments within a period of further 9 months (maximum 1 year) together with applicable interest from the date of conveying approval for the sanctions up to ZLCC level. For longer repayment period more than 1 year NBGLCC onwards will be delegated authority. While recommending repayment period more than 12 months Zone/NBG to ensure reliability of sources of payment (cash-flows) and to make specific comments in this regard. 5 g) The rate of interest to be charged for payment of compromise amount is as under:- i) No interest if, 25% upfront is received and full OTS amount paid within 90 days of conveying approval of OTS. ii) For other cases Particular Applicable interest 10% simple on reducing balance Interest to be charged for repayment period of OTS from the date of communication of approval of OTS. Branch must communicate OTS approval immediately upon sanction. (In all cases and for any tenure)

10. He also relies upon an interoffice memorandum dated

01.01.2025 issued by the General Manager, Recovery wherein it was stated that steps should be taken by the bank official for earlier recovery and the zones were advised to make endeavour to get maximum upfront amount and full OTS amount within 30 days of issuance of sanction letter adopting the following strategies: Sr. No. 1 1 2 3 Scenario Minimum Upfront Amount % Maximum Repayment Period Properties possession Symbolic 25% As per the scheme DM permission applied, permission yet to be obtained 25% 30 Days DM permission obtained, Physical possession yet to be taken 35% 30 Days Properties under Physical Possession 50% 30 Days

11. It is stated that in pursuance to the said interoffice memorandum, the petitioner was sent a communication dated

22.01.2025 contained in Annexure – 3.

12. In the light of the said, it is argued by learned counsel for the petitioner that the said communication dated 22.01.2025 is 6 based upon an interoffice memorandum which cannot supersede the NPA Management Policy of the year 2024. He further argues that in any case, the proposal of the petitioners was in the year 2024 which had to be decided as per the NPA Management Policy of 2024 and the interoffice memorandum dated 01.01.2025 could not have been applied to the petitioners.

13. Learned counsel for the respondent Bank, on the other hand, states that the interoffice memorandum was issued to persuade all the zones to expeditiously recover all the amounts and to press for maximum repayment. He admits that the NPA Management Policy of 2024 has not been superseded and is still on the go.

14. In view of the rival submissions, as recorded above, it is clear that the proposal of the petitioners given and as contained in communication dated 30.12.2024 had to be processed by the Bank in terms of the NPA Management Policy 2024. The subsequent interoffice memorandum is only to persuade the zones for maximum realization and the same cannot be interpreted to supersede the NPA Management Policy 2024. It is well settled that although the parties cannot be forced for settlement, however, the Bank being a State within the meaning of Art. 12 of Constitution is bound to adhere by its own policy.

15. In view thereof, Relief Nos.1 to 5 as claimed by the petitioners cannot be granted by this Court, as the same are subject matter of DRT proceedings.

16. With regard to Relief No.6, the present petition is disposed off directing the respondent Bank to decide the application of the petitioner dated 30.12.2024 strictly in terms of NPA Management Policy of 2024 within a period of four 7 weeks from today and communicate the result thereof to the petitioners.

17. The respondent Bank shall also communicate the facts with regard to auction sale of one of the properties which has been conducted.

18. Needless to say that the auction of the properties is subject matter of DRT Proceedings in S.A. No.18 of 2024 which shall be taken to its logical end in accordance with law. Order Date :- 14.2.2025 nishant [Pankaj Bhatia, J.] NISHANT MOHAN High Court of Judicature at Allahabad, Lucknow Bench

Submission of learned counsel for the petitioners is that on account of the petitioners not being able to adhere to the financial discipline, the account maintained by the petitioners was classified as NPA and thereafter proceedings were initiated.

4. For the purpose of the present petition, it is essential to notice that the proceedings went up to DRAT. The DRAT passed the following order on 24.07.2024, which is still subsisting: "This matter has beer taken up by me through Video Conferencing. Appellant has filed the instant appeal against the impugned order dated 04.07.2024 passed by Ld. Presiding Officer, DRT, Lucknow in S.A. No.18/2024, whereby appellant bank was restrained from dealing with and proceeding further in any manner against the properties involved in the matter. Ld. counsel for the appellant bank submits that the bank has scheduled the auction of the properties in question for tomorrow, i.e. 25.07.2024. After arguing for some time, the Ld. counsel for the appellant submits that the purpose of filing the present appeal would stand satisfied in case the bank is allowed to conduct the auction scheduled for 25.07.2024 making the same subject to the final outcome of the S.A. filed by the respondents before Ld. DRT and Ld. DRT is directed to decide the same expeditiously. Ld. counsel for the appellant further submits that the date fixed in the S.A. before the Ld. DRT is 30.07.2024 and the Ld. DRT be directed to decide the same within 90 days so that if the property is auctioned the payment is made within that period. Ld. counsel for respondent has no objection to the aforesaid suggestion made by Ld. counsel for the appellant bank. He submits that in the meanwhile the respondent will also try to settle the matter with the bank. Heard. In view of the above, let bank proceed with the auction scheduled for 25.07.2024, but same shall be subject to the final outcome of S.A. No.18/2024 filed by the respondent before the Ld. DRT-Lucknow. Ld. Presiding Officer of DRT, Lucknow is requested to take up the S.A. on the next date of hearing i.e. 30.07.2024, if it is not possible to take up the matter on the said date, then let it be taken up soon thereafter, and dispose of the same expeditiously in accordance with law, preferable within a period of two months after hearing the counsel for the parties. With the above direction, the appeal stands disposed of. File be consigned to record room. 3 Copy of the order be sent to the concerned DRT."

5. In the meanwhile, the petitioners persuaded the bank to accept one time settlement. In terms of the proposal as given, the communication was addressed to the petitioner on

12.07.2024 for depositing an amount of 5% in the bank as specified so that the OTS can be processed. It also bears from record that the petitioners had sent a fresh OTS offer through their communication dated 11.12.2024. The said email was replied by the bank through their reply dated 23.12.2024. On the basis of the understanding as appeared to the petitioner, an application was moved on 30.12.2024 giving a detailed OTS proposal; alongwith the said, the amount of 5% was also deposited. It also bears from record that on the one hand, the bank had asked the petitioners to give the proposal on

23.12.2024, on the one hand, steps were taken for auction of one of the properties mortgaged through an e-auction held on

27.01.2025.

6. It has been stated by learned counsel for the respondent Bank that when the proposal/application dated 30.12.2024 contained in Annexure - 17 was considered, an order came to be passed on 22.01.2025 stating that as per the extant bank's policy, the case of the petitioners falls under the category where minimum upfront amount should be 35% of the amount offered; the petitioner was called to deposit an upfront amount of 35% so that the bank can consider the OTS proposal.

7. In response to the said, learned counsel for the petitioners argues that the petitioners had deposited 5% of the amount upfront in terms of the earlier directions given and now the bank is taking an unfair stand in directing the petitioners to deposit an amount of 35%. 4

8. In terms of the said submission, this Court had directed learned counsel for the respondent bank to produce the policy which prescribes for deposit of 35% of the amount upfront for consideration of the OTS proposal.

9. In response to the said, learned counsel for the respondent bank has produced a copy of the NPA Management Policy, 2024 of the respondent bank wherein in respect of the settlement that may be made by the bank, following is observed: "7.3.2. Payment Terms: a) The amount of settlement should preferably be paid in one lump sum. OTS will be valid for maximum of 3 years. After expiry of validity, OTS will be treated as revoked. Further, extension thereof will not be considered. It will be evaluated afresh proposal. b) In case the borrowers are unable to pay the entire amount in one lump sum, the following procedure may be adopted - "Normally minimum upfront/ down payment of 10% of the compromise offer be deposited in a No Lien account. Upfront must be insisted upon; however, it shall not come in the way of entertaining OTS proposal if otherwise acceptable. In case, where the compromise amount is expected to be paid by the sale of securities charged to the Bank, the down payment may not be insisted upon". Not obtaining of upfront/down payment shall not be treated as deviation. c) Delegatee upto ZLCC can approve repayment periods up to 12 months subject to levying applicable interest. d) NBGLCC/HLCC-I/CAC/M.Com can approve repayment periods up to 36 months and also deviation in rate of interest for repayment period within their delegated authority of approving sacrifice. e) Repayment of compromise amount to be fixed such that minimum 25% of amount is paid within 3 months. f) Balance amount of 75% should be recovered in equal monthly / quarterly installments within a period of further 9 months (maximum 1 year) together with applicable interest from the date of conveying approval for the sanctions up to ZLCC level. For longer repayment period more than 1 year NBGLCC onwards will be delegated authority. While recommending repayment period more than 12 months Zone/NBG to ensure reliability of sources of payment (cash-flows) and to make specific comments in this regard. 5 g) The rate of interest to be charged for payment of compromise amount is as under:- i) No interest if, 25% upfront is received and full OTS amount paid within 90 days of conveying approval of OTS. ii) For other cases Particular Applicable interest 10% simple on reducing balance Interest to be charged for repayment period of OTS from the date of communication of approval of OTS. Branch must communicate OTS approval immediately upon sanction. (In all cases and for any tenure)

10. He also relies upon an interoffice memorandum dated

01.01.2025 issued by the General Manager, Recovery wherein it was stated that steps should be taken by the bank official for earlier recovery and the zones were advised to make endeavour to get maximum upfront amount and full OTS amount within 30 days of issuance of sanction letter adopting the following strategies: Sr. No. 1 1 2 3 Scenario Minimum Upfront Amount % Maximum Repayment Period Properties possession Symbolic 25% As per the scheme DM permission applied, permission yet to be obtained 25% 30 Days DM permission obtained, Physical possession yet to be taken 35% 30 Days Properties under Physical Possession 50% 30 Days

11. It is stated that in pursuance to the said interoffice memorandum, the petitioner was sent a communication dated

22.01.2025 contained in Annexure – 3.

12. In the light of the said, it is argued by learned counsel for the petitioner that the said communication dated 22.01.2025 is 6 based upon an interoffice memorandum which cannot supersede the NPA Management Policy of the year 2024. He further argues that in any case, the proposal of the petitioners was in the year 2024 which had to be decided as per the NPA Management Policy of 2024 and the interoffice memorandum dated 01.01.2025 could not have been applied to the petitioners.

13. Learned counsel for the respondent Bank, on the other hand, states that the interoffice memorandum was issued to persuade all the zones to expeditiously recover all the amounts and to press for maximum repayment. He admits that the NPA Management Policy of 2024 has not been superseded and is still on the go.

14. In view of the rival submissions, as recorded above, it is clear that the proposal of the petitioners given and as contained in communication dated 30.12.2024 had to be processed by the Bank in terms of the NPA Management Policy 2024. The subsequent interoffice memorandum is only to persuade the zones for maximum realization and the same cannot be interpreted to supersede the NPA Management Policy 2024. It is well settled that although the parties cannot be forced for settlement, however, the Bank being a State within the meaning of Art. 12 of Constitution is bound to adhere by its own policy.

15. In view thereof, Relief Nos.1 to 5 as claimed by the petitioners cannot be granted by this Court, as the same are subject matter of DRT proceedings.

16. With regard to Relief No.6, the present petition is disposed off directing the respondent Bank to decide the application of the petitioner dated 30.12.2024 strictly in terms of NPA Management Policy of 2024 within a period of four 7 weeks from today and communicate the result thereof to the petitioners.

17. The respondent Bank shall also communicate the facts with regard to auction sale of one of the properties which has been conducted.

18. Needless to say that the auction of the properties is subject matter of DRT Proceedings in S.A. No.18 of 2024 which shall be taken to its logical end in accordance with law. Order Date :- 14.2.2025 nishant [Pankaj Bhatia, J.] NISHANT MOHAN High Court of Judicature at Allahabad, Lucknow Bench