M/S VEETEE FINE FOODS LIMITED v. PUNJAB NATIONAL BANK AND ORS.

1. The writ petitioner became a defaulting debtor of Punjab National Bank, Oriental Bank of Commerce and State Bank of India. The three were secured creditors. A factory premises at Sonipat and a flat at Greater Kailash, Delhi were the securities. The three banks took recourse to remedies under the Recovery of Debts due to Banks and Financial 2016:DHC:666-DB Institutions Act, 1993 and SARFAESI Act, 2002. Proceedings under the two statutes terminated and challenge by the appellant to the action initiated under Section 13 of SARFAESI Act, 2002 failed.

2. Thereafter, as per guidelines issued by the three banks, the petitioner made an offer for a onetime settlement. The same was accepted by the three banks. The amounts as per the settlement were paid to Punjab National Bank and Oriental Bank of Commerce. The dispute pertains to the amount payable to the State Bank of India.

3. Undisputedly, on February 13, 2014, the Stressed Asset Management Branch of the State Bank of India accepted the onetime settlement offer to receive `20.96 crores towards full and final settlement of the loans advanced, on the terms as under:- “i) The upfront amount of `2.00 crores, already deposited by you, will be appropriated in your Loan account immediately. ii) The remaining amount of `18.96 crores will be deposited as per the undernoted schedule: a) An amount of `17.00 crore will be deposited by 31st March, 2014. b) Remaining amount of `1.96 crore will be deposited within 6 months from the date of this letter. iii) Charge on mortgaged properties will be released only after payment of entire OTS amount and delayed interest, if any. iv) The above compromise offer of `20.96 crores is against our dues of `45.18 crores as on 30.09.2013. In case, you offer or offered anything extra in any form whatsoever to any other consortium lender, a similar amount shall also be paid to our bank and a stamped undertaking will be submitted by you accordingly. v) In case of default in payment of OTS amount/instalment on/within due date/stipulated period and non-compliance of terms & conditions of OTS, the Bank will have the right to treat the compromise as null and void and withdraw all the concessions/waivers. In the event of exercise of such right, the total dues outstanding in the account with uptodate interest at contractual rate and other costs shall be payable by the company. The Bank will be at liberty to take appropriate action to recover its entire dues in accordance with law as it may deem fit. vi) A consent decree has to be executed by the company at DRT, Chandigarh incorporating the Terms and conditions of the Compromise proposal.”

4. Apparent from condition No.(i) from out of the agreed sum of `20.96 crores, SBI acknowledged having received `2 crores upfront and as regards the balance sum of `18.96 crores, `17 crores had to be deposited by March 31, 2014 and further sum of `1.96 crores within 6 months from the date of the letter dated February 13, 2014, meaning thereby by August 13, 2014.

5. It is not in dispute that by March 27, 2014, SBI received `18.76 crores, leaving a balance of only `20 lacs.

6. Apparent would it be that the petitioner not only paid `17 crores required to be paid by March 31, 2014 but also paid further sum of `1.76 crores by said date, notwithstanding that it had to pay `1.96 crores within 6 months of the issuance of the letter dated February 13, 2014.

7. The petitioner prayed for time to be extended to deposit `20 lacs and on August 29, 2014 the Stressed Asset Management Branch of SBI conveyed approval of the Competent Authority for time to be extended till February 13, 2015 provided delayed interest, as per condition No.(iii) of the letter dated February 13, 2014 was paid. Petitioner’s request to grant further extension of time to pay `20 lacs beyond February 13, 2015 was declined by SBI on February 07, 2015 resulting in the bank sending a letter on February 26, 2015 recording that the settlement stood revoked.

8. Ill-advised by the counsel, the petitioner filed an application before the Debts Recovery Appellate Tribunal which was dismissed, the Appellate Tribunal holding the same not to be maintainable in a disposed of matter, but observing that the petitioner would be at liberty to take appropriate action for return of possession of the secured assets.

9. For the reason the writ petitioner is left with no remedy before either the Debts Recovery Tribunal or the Debts Recovery Appellate Tribunal, the instant writ petition has been filed laying a challenge to the letter dated February 26, 2015 and praying for a direction that the secured assets be released pointing out to this Court, a fact not disputed by State Bank of India that on February 28, 2015 i.e. two days after the letter dated February 26, 2015 was written by the bank the petitioner had paid `21 lacs to square up the sum of `20 lacs to be paid and interest for late payment in terms of condition No.(iii) of the letter dated February 13, 2014.

10. To the query as to why the petitioner, which had paid well in time `20.76 crores out of the agreed amount of `20.96 crores, a petty sum of `20 lacs was retained, learned senior counsel for the petitioner gives a reason, which in the Indian environment of nepotistic abuse of power appears to be sound.

11. Whereas State Bank of India and Oriental Bank of Commerce, states learned senior counsel for the petitioner, honestly and with bona-fides processed the settlement proposal by the petitioner as per their guidelines, the officers of Punjab National Bank, in knowledge of the fact that State Bank of India and Oriental Bank of Commerce had settled the amount receivable by them, delayed the proposal submitted by the petitioner to arm twist the petitioner because they knew that if the petitioner pays the agreed amount to State Bank of India and Oriental Bank of Commerce, the lien of said two banks on the securities would no longer be there and the petitioner could then be arm twisted by Punjab National Bank, which would be the only surviving secured creditor. The only strategy, under the circumstances, explains learned senior counsel for the petitioner, was for the petitioner to hold back some amount payable to the State Bank of India so that the Sword of Damocles could equally be hanging on Punjab National Bank with regards to its armour of having no competitor.

12. Ultimately, informs learned senior counsel for the petitioner, the officers of Punjab National Bank also accepted the onetime settlement since it was as per the policy guidelines. The moment this happened, the petitioner not only paid balance outstanding in sum of `20 lacs but even paid `1 lac towards interest on late payment to State Bank of India.

13. The principle de minimis non curat lex guides the Court that trifles need to be overlooked while considering wrongs and defaults. The OTS settlement amount was `20.96 crores out of which `2 crores was payable upfront. From the balance sum of `18.96 crores, `17 crores had to be paid by March 31, 2014, which was paid well before the stipulated date. Of the remaining sum of `1.96 crores, which had to be deposited by August 13, 2014, `1.76 crores was paid well before the six months i.e. on March 27,

2014. The defaulting amount is 0.9% of the sum payable. The delay is of 6 months reckoned from August 13, 2014, but would be of two weeks, reckoned from February 13, 2015 the date extended by the bank as per its letter dated February 07, 2015.

14. The principle of de minimis requires relief to be granted to the petitioner along with another reason, being condition No.(iii) of the letter dated February 13, 2014 which envisaged interest on delayed payment of the OTS amount i.e. the settlement would be that the principle sum to be re-paid was frozen i.e. `20.96 crores, with a schedule for re-payment with added on liability to pay interest on the delayed payment.