'One-time settlement' can be changed by courts in extraordinary situations: HC

S Shyam Prasad | NT

Bengaluru: Rejecting the appeal of the State Bank of India (SBI), the High Court of Karnataka has said that a ‘One-time settlement’ the bank has arrived at with a customer can be changed by the court in extraordinary situations.

A borrower had failed to repay a loan during the Covid Pandemic and a single-judge bench had allowed him to repay it after a delay.

The SBI had claimed that this was against the rules as OTS cannot be substituted by the courts.

“Keeping in view the extraordinary circumstances through which the society was passing, we deem it to be equitable to allow the extension of time during the extraordinary times the society was passing through. That apart, the petitioner has also paid a sum of Rs.32,50,000/- as compensation for the delay. In that view of the matter, we do not find any grave error which would warrant interference in the considered order passed by the learned Single Judge,” the division bench of G Narendar and Justice Vijaykumar A Patil said in their judgement recently.

The SBI had filed an appeal challenging a single judge bench which had allowed a petition by Economic Transport Organisation Limited, Kolkata. The Company had approached the single-judge bench seeking additional time to repay the dues to SBI.

The Company and the Bank had arrived at an OTS in November 2020. Allowing the petition, the single judge had also imposed an additional sum of Rs.25 lakh to be paid by the company to the Bank as compensation for delayed payment.

The single judge had considered the COVID-19 pandemic in 2020 and 2021 to allow the belated payment. The Company had sought two months from the Bank but SBI did not even reply to it forcing the Company to approach the HC.

During the hearing of the appeal by the division bench, the Company voluntarily offered to pay a further amount just to demonstrate bonafide. On the suggestion of the court, the Company handed over a demand draft for Rs.7.5 lakh to the Bank in the court.

The Division Bench felt that the SBI should have allowed more time.

“In the totality of the facts and circumstances surrounding the case, we are of the considered opinion that because of the extraordinary circumstances and the intended volatility that was faced by the society in general, the appellant ought to have appreciated the request for extension of time fixed under the proceedings dated 27.11.2020,” it said.

Refusing to interfere with the single judge order the HC said, “That apart, the petitioner has also paid a sum of Rs.32,50,000/- as compensation for the delay. In that view of the matter, we do not find any grave error which would warrant interference in the considered order passed by the learned Single Judge.”

However, the division bench made it clear that this case would not be a precedent for other such cases.

“It is made clear that this order shall not be construed as a precedent and is made in the peculiar facts and circumstances of the case as narrated above and as the attempt has been made by the debtor to clear the debts even during the raging pandemic. It is made clear that this order shall not be treated as a precedent,” it said. (WA 1196/2023)