PUNJAB NATIONAL BANK v. MS WALIA TRADERS LIMITED AND OTHERS, Debts Recovery Appellate Tribunal, Judgment, Law, casemine.com

Citation Codes

Equivalent Citations

citation codes

Case Number

REGULAR APPEAL/66/2021

Advocates

Judges

HON'BLE Mr. Justice Brijesh Sethi

Acts

COMPANIES ACT 2013
SECTION 17 A SECURITISATION AND RECONSTRUCTION OF FINANCIAL ASSETS AND ENFORCEMENT OF SECURITY INTEREST ACT 2002
SECTION 7 CONTRACT ACT
provisions of SARFAESI Act of 2002. vi)
Section 13(4) read with Rule 8(1) of the Security Interest (Enforcement) Rules, 2002
Provision 31(1) of Act of 2002,
provisions of Section 30 (1) of the SARFAESI Act of 2002.
Section 18 of Securitization & Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act in short)
Rule 8 & 9 of the Rule of 2002
section 17 of the SARFEASI Act of 2002
Section 18 Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002,

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Smart Summary

Factual and Procedural Background

This opinion disposes of two connected appeals (No. 66/2021 and No. 67/2021) filed against the Final order dated 29.09.2021 passed by DRT-II, Chandigarh in Securitization Applications No. 95/2021 and No. 96/2021 respectively. The appeals arise from disputes between Punjab National Bank (Appellant Bank) and borrowers/respondents including M/s Walia Traders Limited and M/s K.C. Social Welfare Trust, along with their associate entities.

The respondents had availed substantial credit facilities from the Appellant Bank, secured by various immovable properties including hotel properties and land. The loan accounts were declared Non-Performing Assets (NPA) following defaults. The Bank initiated recovery proceedings under the SARFAESI Act, 2002, including issuance of statutory notices, symbolic possession, and attempts at e-auction of secured assets which failed due to lack of bids.

The respondents submitted multiple One Time Settlement (OTS) proposals, some of which were sanctioned by the Bank subject to terms and conditions. However, disputes arose regarding compliance with OTS terms, particularly concerning an afterthought condition relating to demerger of the company. The Bank rejected subsequent revised proposals citing non-compliance and inadequate upfront payments. The respondents challenged these actions before the DRT and the High Court, leading to the impugned order by the DRT-II, Chandigarh allowing the Securitization Applications and directing the Bank not to initiate recovery actions until the OTS proposals were finally decided and certain amounts refunded.

Legal Issues Presented

Whether the DRT-II, Chandigarh had jurisdiction to examine and issue directions regarding the OTS proposals under Section 17 of the SARFAESI Act, 2002.
Whether the rejection of the OTS proposals by the Bank was legally admissible, particularly concerning the requirement of post facto approval by the Management Committee/Board (MC/Board) after rejection by HOCAC-III.
Whether the upfront amount deposited by the respondents under the OTS proposals was liable to be appropriated by the Bank or refundable upon rejection of the proposals.
Whether the property claimed as agricultural land and exempted under Section 31(1) of the SARFAESI Act was correctly classified and exempted from recovery proceedings.
Whether the limitation period for filing the Securitization Applications was complied with.

Arguments of the Parties

Appellant Bank's Arguments

The DRT has no jurisdiction to interfere in the Bank's commercial decisions regarding OTS proposals or to stall SARFAESI recovery proceedings.
The OTS proposal for Rs. 239 Crores was sanctioned by the competent authority (MC/Board) and accepted by respondents; subsequent conditions such as demerger were afterthoughts and not part of the accepted proposal.
The Bank was entitled to appropriate the upfront amount deposited by the respondents as per the terms of the sanctioned OTS.
The rejection of revised OTS proposals by HOCAC-III was within competent authority's power as per the Bank's circular dated 13.11.2019, and post facto scrutiny by MC/Board is an internal administrative process not affecting the validity of rejection.
The land claimed as agricultural was not agricultural in nature as per revenue authority reports; it was vacant land with no cultivation and had commercial use (NHAI plant), hence not exempt under Section 31(1) of SARFAESI Act.
The limitation period for filing the Securitization Applications was complied with, considering the exclusion period granted by the Supreme Court during the COVID-19 pandemic.
The impugned order is illegal, unjust, without jurisdiction, and liable to be set aside.

Respondents' Arguments

The DRT-II, Chandigarh rightly held that SARFAESI action was not justified without finally deciding the OTS proposals.
The rejection letters dated 21.01.2020 and 02.01.2021 are not legally admissible as the proposals were not considered by the competent authority i.e. MC/Board, but only by HOCAC-III.
The respondents are entitled to have their OTS proposals considered by MC/Board as per the Bank's own OTS policy and circulars.
The upfront amount deposited by the respondents or their investors was not liable to be appropriated by the Bank unless the OTS was accepted; on rejection, it must be refunded with interest.
The land claimed as agricultural land is exempt under Section 31(1) of the SARFAESI Act, supported by Jamabandi revenue records and the nature of use as agricultural land.
Reliance on judicial pronouncements supports the proposition that no borrower has a right to OTS but is entitled to fair consideration and that the Tribunal has jurisdiction to consider OTS proposals in SARFAESI proceedings.
The impugned order is correct and based on sound legal principles and facts; the appeals may be kept in abeyance pending fresh OTS consideration.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Satnam Agri Products Ltd. v. Union of India	DRT has no jurisdiction under Section 17 of SARFAESI Act to consider OTS proposals; Tribunal limited to statutory functions.	The Court relied on this precedent to hold that the DRT cannot probe internal bank procedures or question competence of authority rejecting OTS.
Bijnour Urban Cooperative Bank Limited v. Meenal Agarwal	No borrower has a right to OTS; grant of OTS is commercial wisdom of the bank.	The Court held that the Bank's decision to accept or reject OTS is discretionary and not subject to coercion by Tribunal.
State Bank of India v. Arvindra Electronics Pvt. Ltd.	Borrower cannot claim extension of OTS as a matter of right; binding precedent on OTS discretionary nature.	Used to reinforce that Tribunal cannot direct Bank to accept or reconsider OTS beyond policy framework.
ITC Ltd. v. Blue Coast Hotels Ltd. (2018) 15 SCC 99	Security interest cannot be created on agricultural land; if created, parties did not consider land as agricultural.	Applied to reject exemption claim of land as agricultural when security interest was created and land was vacant without cultivation.
Axis Bank v. SBS Organics Private Limited (2016) 12 SCC 18	Upfront amount deposited for OTS is to be refunded if OTS is rejected; cannot be appropriated by Bank.	The respondents relied on this to argue for refund of upfront amount; Court distinguished it as applicable only if OTS was not accepted.
Kut Energy Private Limited v. Authorized Officer, Punjab National Bank (2019) 4 RCR (Civil) 151	Similar principle as Axis Bank regarding refund of upfront amount on rejected OTS.	Reiterated that upfront amounts are refundable if OTS is not accepted; distinguished on facts in this case.
Sardar Associate v. Punjab & Sind Bank, 2009 (8) SCC 257	DRT has jurisdiction to consider OTS proposals as part of recovery proceedings under SARFAESI Act.	Supported respondents' contention that Tribunal can consider enforceability and compliance of OTS policy.
Canara Bank v. C.H Venkataraman & Ors., DRAT Chennai	Debtor entitled to OTS under RBI guidelines; Tribunal can enforce consideration of OTS proposals.	Used to support respondents' argument on Tribunal jurisdiction over OTS proposals.
Hari Kewal Pvt. Limited v. Debts Recovery Appellate Tribunal, Punjab & Haryana High Court	Upfront amounts are treated as bailment and refundable if OTS is rejected.	Respondents cited this to contend that Bank's appropriation of upfront amount was illegal if OTS was not accepted.
Standard Chartered Bank v. Dharmender Bohi (2013) 12 Scale 124	DRT functions within statutory parameters; no inherent powers beyond SARFAESI Act.	Reinforced limits on Tribunal's powers regarding directions on OTS and recovery.
Upper Doab Sugar Mills Ltd. v. Shahdara (Delhi) Saharanpur Light Rly. Co. Ltd., AIR 1963 SC 217	Tribunal cannot grant refund or act beyond jurisdiction when not conferred by statute.	Applied to hold that DRT cannot direct refund or interfere with Bank's internal decisions beyond statutory powers.

Court's Reasoning and Analysis

The Tribunal found that the Securitization Applications were within limitation, given the exclusion period during the COVID-19 pandemic and the fact that the sale notice was issued within that period. The Court carefully examined the Bank's OTS policy and circulars, particularly the delegation of authority to reject OTS proposals.

The Tribunal observed that while HOCAC-III had power to reject proposals, such rejection required post facto scrutiny and approval by the MC/Board, which was not shown to have occurred conclusively. Thus, the OTS proposals were not finally decided by the competent authority, rendering the rejection letters legally inadmissible for the purpose of SARFAESI proceedings.

Given the pending status of OTS proposals before the competent authority, the Tribunal held that the Bank's actions to appropriate upfront amounts and initiate recovery proceedings were premature and not justified. It relied on judicial precedents that no recovery action should be taken while OTS proposals are pending and that the upfront amount deposited must be refunded with interest if the OTS is rejected without proper authority.

Regarding the land claimed as agricultural and exempt under Section 31(1), the Tribunal accepted the Jamabandi record and revenue documents showing the land was agricultural in nature, thereby exempting it from SARFAESI enforcement.

However, the Appellate Tribunal in the present opinion reviewed these findings and held that the Bank's rejection of OTS was valid as the competent authority was HOCAC-III per the Bank’s circular dated 13.11.2019, and post facto approval by MC/Board is an internal administrative process that does not invalidate the rejection. The Tribunal held that the DRT had no power to probe internal bank procedures or question the competence of the rejecting authority.

The Court further held that the OTS proposal for Rs. 239 Crores was sanctioned by the Bank and accepted by the respondents, and the condition of demerger was an afterthought raised by the respondents after acceptance. The Bank was justified in appropriating the upfront amount deposited pursuant to the sanctioned OTS.

Concerning the agricultural land exemption, the Court relied on the revenue authority’s report and the Supreme Court ruling in ITC Ltd. v. Blue Coast Hotels Ltd. to hold that the land was not agricultural as it was vacant with no cultivation and had commercial use, thus not exempt under Section 31(1).

Accordingly, the Court reversed the impugned order of the DRT-II, Chandigarh, holding it illegal and without jurisdiction to interfere with the Bank’s recovery actions and OTS decisions.

Holding and Implications

The appeals are allowed and the impugned order dated 29.09.2021 passed by DRT-II, Chandigarh is set aside.

The Court held that the DRT did not have jurisdiction to interfere with the Bank’s internal decision-making regarding OTS proposals once rejected by the competent authority as per the Bank’s policy. The Bank was justified in appropriating the upfront amount deposited under the sanctioned OTS proposal. The land claimed as agricultural was not exempt under Section 31(1) of SARFAESI Act. The Securitization Applications were within limitation.

The direct effect of this decision is that the Bank may proceed with recovery actions under SARFAESI Act without awaiting further consideration of OTS proposals by MC/Board, and the respondents are not entitled to refund of upfront amounts appropriated pursuant to the sanctioned OTS. No new precedent expanding Tribunal powers was created; the ruling reaffirms the limited jurisdiction of DRTs in OTS matters and the discretionary commercial wisdom of banks in accepting or rejecting settlement proposals.

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PUNJAB NATIONAL BANK v. MS WALIA TRADERS LIMITED AND OTHERS

Brijesh Sethi, Chairperson:— Vide this common order I shall dispose of two connected appeals i.e. appeal no. 66/2021 and appeal no. 67/2021 filed against the Final order dated 29.09.2021 passed by DRT-II, Chandigarh.

Facts of Appeal No. 66/2021

2. This is an appeal filed on behalf of Appellant Bank under Section 18 of Securitization & Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (‘SARFAESI Act’ in short) against the Final order dated 29.09.2021 passed by DRT-II, Chandigarh in S.A. No. 95 of 2021 titled as Walia Traders Ltd. v. Punjab National Bank whereby the DRT-II, Chandigarh has allowed the Securitization Application and observed that the amounts deposited by the SA Applicant along with OTS proposal is not liable to be appropriated. It has further been held that as per Jamabandi Report, the adjacent land is to be treated as Agricultural Land and exempted as per provisions of Section 30 (1) of the SARFAESI Act of 2002. The DRT-II, Chandigarh while passing the impugned order has made observations holding that SARFAESI action was not justified without finally deciding the OTS proposal. It has been further observed that the rejection of OTS is not legally admissible and the Respondent Bank is at liberty to place the OTS before MC/Board to examine the decision taken by HOCAC-III and in case the proposal is rejected, the amount of Rs. 19,76,22,937/- is to be refunded alongwith simple interest @11% p.a. It has been directed that till such time the amount is not refunded, the Respondent shall not initiate any action with regard to the mortgaged properties as per the provisions of SARFAESI Act.

3. It is further submitted that the Respondent No. 1 Company has been availing credit facilities of the following nature:

A. OD Facility (93723)- Rs. 36 crores

B. Term Loan (IC170)- Rs. 35 crores

C. Term Loan (IC277)- Rs. 11 crores

D. Term Loan (IC374)- Rs. 65 crores

E. Bank Guaranties - Rs. 2.20 crores

4. It is further submitted that the other Associates Organizations of the Respondent No. 1 are as follows:—

i) M/s KC Educational Social & Welfare Society

ii) M/s KC Hostel

iii) M/s KC Social Welfare Trust

5. These companies have also been availing credit facilities from the Appellant Bank. However, the aforesaid Associates Organizations i.e. the Borrowers in their respective loan accounts have not been made party in the Securitization Application filed by the Respondent No. 1.

6. It is further submitted that the loan account of the Respondent No. l Company is secured with the following securities:—

a) Pari Pasu Charge with Oriental Bank of Commerce (since merged with Punjab National Bank) on fixed assets (existing and future) of the Company comprising of land and building (existing and future) by way of extension of equitable mortgage of immovable property comprising of land and building on land measuring 1.65 acres situated at Sector 3, Punchkula and a multistoried Five Star Hotel Building built thereon;

b) Equitable mortgage of land and building of Hotel KC Residency, SCO 377-380, Sector-35B, Chandigarh (Pari Pasu Charge with Oriental Bank of Commerce which is since merged with the Appellant Bank).

c) Extension of equitable mortgage of land at Banga-Nawanshahar Road, measuring 83.475 kanal (10 acres approx..) in the name of Sh. Prem Lal Gandhi, Sh. Hitesh Gandhi and M/s KC Land & Finance Limited i.e. Respondents No. 2 to 4 (pari pasu charge with Oriental Bank of Commerce since merged with Appellant Bank).

d) Equitable mortgaged of land at Village Pandoga measuring 7.91 acres in the name of Sh. Hitesh Gandhi i.e. Respondent No. 3 (exclusively charged with the Appellant Bank).

7. Respondents No. 2 to 4 are the Guarantors/Mortgagors to the credit facilities availed by the Respondent No. l Company and have executed and delivered various loaning and security documents in favour of the Appellant Bank to secure their repayment.

8. Respondent No. 1 Company while maintaining their loan accounts with the Appellant Bank has failed to adhere to the financial discipline of such credit facilities sanctioned in their favour and defaulted in repayment of principal amount and interest thereon. As a result of continuing default, the loan account of the Respondent No. l Company was declared a Non-Performing Asset on 17.04.2015 as per guidelines of Reserve Bank of India.

9. It is further submitted that the consequence of classification of their loan account as NPA, the Appellant Bank initiated measures under the provisions of SARFAESI Act and issued a statutory demand notice under Section 13(2) of the SARFAESI Act on 14.05.2015 calling upon the Respondents to pay the entire amount of Rs. 1,05,60,96,347.1 Op with interest at the contractual rate within the statutory period of time. However, the Respondents failed to discharge their liability in full.

10. It is further submitted that the Respondents filed their objections under Section 13(3A) of the SARFAESI Act on 14.07.2015 which was duly considered by the Authorized Officer of the Appellant Bank and responded to vide their reply dated 27.07.2015 and the objections raised by the Respondent No. l were found to be false and frivolous.

11. It is further submitted that the Appellant Bank while initiating further measures under the SARFAESI Act issued notice under Section 13(4) read with Rule 8(1) of the Security Interest (Enforcement) Rules, 2002 and the symbolic possession of the property at SI. No. (a) mentioned in para 6 was taken on 07.08.2015 and in respect of properties at SI. No.(b), (c) & (d) was taken on 11.08.2015.

12. It is further submitted that on an Application filed by the Appellant Bank under Section 14 of the SARFAESI Act, the concerned District Magistrate passed its orders on 22.09.2015 and 08.10.2015 for taking over physical possession of the properties:

13. It is further submitted that the Appellant while taking further measures under the SARFAESI Act to enforce its security interest in the secured assets, issued sale notice for e-auction of the properties on 19.11.2015 for the property at Sector 3, Panchkula at a reserve price of Rs. 180 crores and the date of auction was on 24.12.2015. However, the auction failed as no bid was received. Another auction notice dated 26.02.2016 was issued with a reserve price of Rs. 166 crores with the date of auction on 30.03.2016, however, the said auction also failed for want of any bids. Thereafter, another sale notice was issued on 28.01.2018, but the said sale also failed for want of any bid.

14. It is further submitted that the Respondent No. l firstly filed an Application before the District Magistrate, Panchkula who ordered that no further action be taken against the properties of the Applicant. Secondly, the Respondent No. l filed a Writ Petition being CWP No. 18902/2017 before the Hon'ble High Court of Punjab & Haryana at Chandigarh. Vide order dated 23.08.2017, the Respondent No. l was directed to deposit a sum of Rs. 5 crores as upfront money within a week for the Court to consider their proposal for OTS where under they were directed to pay Rs. 2 crores per month for a period of 7 months and thereafter the balance payment in a Iime bound manner. However, on a subsequent date i.e. on 04.09.2017, the Petitioner sought to withdraw the Writ Petition with liberty to raise all issues in the petition filed by the Recovery Suit filed by the Bank before the Tribunal below. Accordingly, the Writ Petition was dismissed as withdrawn vide order dated 04.09.2017.

15. It is further submitted that the District Magistrate who had earlier passed an order that no further action be taken, subsequently vacated the said order vide order dated 09.05.2017.

16. It is further submitted that the Respondent No. 1 submitted a OTS proposal to the Appellant for Rs. 75 crores which was rejected. The Respondent No. l kept on revising their offers which were not viable to the Appellant and were rejected. The Appellant Bank again issued Sale Notices on 09.08.2020, 05.09.2020 and again on 14.12.2020.

17. It is further submitted that the Respondent No. l again approached the Appellant with a proposal offering a sum of Rs. 205 crores as settlement of dues in the group accounts vide offer letter dated 04.06.2018. The said offer was again revised by the Respondent No. l vide its revised proposal offer dated 11.06.2018 agreeing to pay an amount of Rs. 239 crores towards the settlement of group accounts.

18. It is further submitted that the Appellant Bank considered the proposal of the Respondent No. l and accorded sanction for Rs. 239 crores to be paid on the terms and conditions contained in the said sanction letter. The said sanction was duly accepted by the Respondent No. l vide its letter dated 27.07.2018 stating for the first time that as the Hotel properties are owned by Respondent No. l, the demerger of the Company should be permitted so that the properties can be sold independently. Needless to mention that there was no such condition in the proposal dated 04.06.2018 and 11.06.2018 submitted by the Respondent No. 1 and the aforesaid condition was incorporated as an afterthought.

19. It is further submitted that the Appellant immediately responded to the communication of the Respondent No. 1 vide letter dated 16.08.2018 making it clear that the aforesaid sanctioned amount of Rs. 239 crores has to be deposited without linking the receipt of OTS with the demerger proposal of the Company which was followed by another communication dated 27.08.2018 conveying that the amount kept in no lien account stands appropriated towards recovery as per terms of approval of OTS and demanded another Rs. 10 crores to be paid immediately as agreed.

20. It is further submitted that the Respondent No. 1 without complying with the terms of OTS sanction, kept on harping on the issue of demerger, which was never an agreed term of OTS sanction which was again communicated to the Respondent No. 1 vide letter dated 16.03.2019. However, the Respondent No. l still failed to honour the terms of sanction. The Appellant had made it clear vide letter dated 09.05.2019 that in case the amounts are not deposited, the legal action including the proceedings under IBC shall continue.

21. It is further submitted that the Respondent No. l failed to comply with the terms of OTS sanction, the Appellant was left with no option but to reject the proposal for revival of OTS which was submitted on 27.09.2019.

22. It is further submitted that the Respondent No. l again approached the Hon'ble High Court by way of Writ Petition being CWP No. 36014 of 2019, however, the Respondent No. l after addressing the Hon'ble Court, sought to withdraw the Writ Petition in view of Annexure P-39 dated 04.09.2019. The Hon'ble Court while permitting the withdrawal of the Writ Petition which was dismissed as withdrawn, observed that the competent Authority shall decide the representation within one week in accordance with law.

23. It is further submitted that in compliance of the aforesaid directions dated 14.01.2020, the competent Authority of the Appellant Bank considered the proposal and the competent Authority in its meeting held on 20.01.2020 after considering the facts of the matter and due deliberation, declined the proposal of revised demerger scheme and OTS proposal and rejected the same. The said decision of the competent Authority was conveyed to the Respondent No. l.

24. It is further submitted that in compliance of the order dated 14.01.2020 passed by the Hon'ble High Court, the Appellant filed a detailed affidavit before the Hon'ble High Court specifically stating that the Respondent No. l cannot claim the refund of the amount deposited and appropriated in accordance with the terms of OTS and the Respondents are trying to thwart the recovery process of the Appellant Bank.

25. It is further submitted that the Respondent No. 1 submitted a fresh proposal on 11.12.2020 offering a lesser amount against the amount for which the OTS had already been sanctioned. The Appellant vide its letter dated 06.01.2021 conveyed to the Respondents that the offer on stand-alone basis for all four accounts amounting to Rs. 167.68 crores is much lower than the previous offer of Rs. 239 crores and hence not acceptable.

26. It is further submitted that the proposal of the Respondent No. l was considered and rejected by the competent Authority. As per the latest guidelines issued vide circular dated 13.11.2019, the power to reject the proposal in terms of the circular lies with HOCAC Level-Ill. It is submitted that the earlier circular No. 5 of 2016 dated 12.02.2016 has been superseded by the Circular dated 13.11.2019. Accordingly, the proposal was rejected by the competent Authority after considering the same and by a speaking order. The decision of the competent Authority was conveyed to the SA Applicant.

27. It is further submitted that the Appellant had asked the Applicant to improve the offer and resubmit the same. However, as per the circular, in case the improving/recommending authority feels that the offer is on the lower side, than further negotiation may be held. In the instant case the recommending Authority found that the proposal was on the lower side and asked the SA Applicant to improve the offer. However, no revised offer was made.

28. It is further submitted that the Respondent No. l again approached the Hon'ble High Court by way of Civil Writ Petition bearing No. 3411 of 2021 challenging the rejection letter of the Appellant Bank passed by HOCAC-III and also contended that the upfront amount of Rs. 20 crores deposited with the Appellant is also required to be refunded. The Hon'ble Court directed the Appellant to file an affidavit which directions was complied with and the Appellant Bank in its affidavit filed before the Hon'ble High Court stated that the offer has been rightly rejected by the competent Authority in terms of circular dated 13.11.2019. After the Affidavit was taken on record, the Respondent No. l i.e. the Petitioner before the High Court withdrew the Writ Petition with liberty to file appropriate application before DRT. The Writ Petition was accordingly dismissed as withdrawn by order dated 07.04.2021 for the Tribunal to decide the same as per law.

29. It is further submitted that the aforesaid WritPetition was dismissed by order dated 07.04.2021, the Respondent NO. l i.e. SA Applicant filed an objection before the District Magistrate against the orders passed on 22.09.2015 and 09.05.2017. The District Magistrate, however, rightly observed that it has no power of recall of its order already passed under Section 14 of the Act.

30. It is further submitted that the Respondent No. l i.e. SA Applicant filed the Securitization Application bearing No. 95/2021 on 13.04.2021 which has been finally decided by the impugned order dated 29.09.2021.

31. It is further submitted that the Securitization Application No. 95 of 2021 was only in the account of M/s Walia Traders Limited. The other connected accounts of the group which are claimed to be Associates Organizations are neither parties to the said Securitization Application nor have they filed independent challenge to the measures taken by the Appellant Bank under SARFAESI Act except in the account of M/s KC Social Welfare Trust in SA No. 96/2021. By the impugned order, the Tribunal below has decided both the Securitization Applications together.

32. It is further submitted that during the course of proceedings the Respondent No. l i.e. SA Applicant filed an Application being IA No. 652 of 2021 and sought to place on record the documents concerning the Revenue Record. The said documents were not filed alongwith the Securitization Application. The Respondent No. l claimed that the property at SI. No. 3 is an Agricultural Land and exempted under Section 31(1) of the Act. The Tribunal allowed the Application and the Revenue Records were taken on record with copy provided to the Appellant Bank for verification and objection. The Appellant after verification found that the property is not an Agricultural Land and filed an Application placing on record the report of Tehsildar based on the report of Patwari concerned about the nature of the land. Vide report dated 18.06.2021 it has been stated by the Revenue Authority that the subject land is lying vacant and no crop is being cultivated. It was also reported that there is plant of NHAI (National Highway Authority of India) and the lease amount was being paid by NHAI to the owners. The translated copy of the report along with the photographs of the property taken in July 2021 were placed on record which clearly show that there is neither any crop nor any cultivation being undertaken on the property.

33. It is further submitted that the Respondent Company, during the course of hearing, made another offer of Rs. 190 crores for settlement of the account vide letter dated 13.07.2021. The Bank replied to the said letter vide their letter dated 03.09.2021 seeking deposit of upfront amount. The Respondent Company further communicated with the Appellant Bank vide letters dated 15.09.2021 in reference to the fresh OTS offer dated 13.07.2021. The Respondent, however, did not disclose these facts before the DRT-II, Chandigarh which were not part of their original pleadings. The Tribunal below was kept in dark resultantly there was no reference in the impugned order about the constant change of stand of the Respondent Company, which spoke volumes about their conduct and intentions. The Borrower Company again vide letter dated 18.10.2021 even after passing of the impugned order sought status of their fresh offer of OTS.

34. It is further submitted that the OTS proposal dated 04.09.2019 and 23.10.2019 which was rejected by the Competent Authority i.e. HOCAC-III in its meeting held on 20.01.2021 pertained to the account of the Appellant Bank i.e. Punjab National Bank only. The said proposal did not cover the exposure of the Oriental Bank of Commerce which has since merged with the Punjab National Bank w.e.f. 01.04.2021 as per Government Notification dated 04.03.2020 and, therefore, the exposure of Punjab National Bank has increased. Accordingly, the impugned order dated 29.09.2021 vide which letter dated 21.01.2020 has been declared not legally admissible, cannot be considered due to change of circumstances and the increase in the exposure.

35. It is further submitted that the Tribunal has passed the impugned order by which the Appellant has been directed not to initiate any action with regard to the mortgage properties as per provisions of the SARFAESI Act pending fresh consideration of OTS proposal and also directed the refund of the upfront amount along with interest and further exempted one secured asset under Section 31(1) of the Act. The entire action of the Appellant has been stalled despite the fact that the huge amount of public money is to be recovered from the Respondents and while admitting their liabilities, the Respondents have offered an amount of Rs. 239 crores as settlement offer, which was not adhered to by the Respondents and consequently rejected.

36. It is further submitted that the impugned order passed by the Tribunal below on 29.09.2021 is ex-facie illegal, unjust, unreasonable and without jurisdiction and is therefore liable to be set aside.

37. It is further submitted that Ld. Tribunal below has failed to appreciate that the orders passed by District Magistrate and being matter of challenge in the SA are dated 22.09.2015, 30.03.2017 and 08.10.2015. The subsequent order dated 13.04.2021 cannot give a fresh cause of action as the said order was deliberately invited to cover the limitation, on an application filed after the order passed by the Hon'ble High Court on 07.04.2021. The Applicant has challenged the sale notice dated 14.12.2020 and since no sale was held pursuant to the said notice, therefore, the said challenge has become infructuous.

38. It is further submitted that Ld. Tribunal below has committed an error in issuing the-directions in the impugned order without considering the fact that One Time Settlement proposal of the Respondent was duly considered and sanctioned by the competent Authority, however, the Respondent instead of complying with terms of settlement, incorporated new conditions which were never part of the earlier proposal and/or considered by the Appellant Bank.

39. It is further submitted that Ld. Tribunal below has failed to consider that the Respondent Company i.e. the borrower moved a fresh OTS offer dated 13.07.2021 for Rs. 190 crores which was much less than the earlier offer of Rs. 239 crores which had already been rejected. The revised offer was made when the matter related to OTS was already sub-judice and the Respondent Company did not inform about the said revised offer to the Tribunal below which amounts to deliberate concealment of facts which are relevant to the decision of the DRT-II, Chandigarh.

40. It is further submitted that Ld. DRT-II, Chandigarh has failed to consider that on the OTS proposal being not sanctioned, the Appellant Bank was within its rights to appropriate the upfront amount, the amount subsequently deposited by the Respondent towards the OTS and adjust the same against the outstanding dues.

41. It is further submitted that Ld. Tribunal below has failed to consider that the Respondents company was already a defaulter and had failed to honour the settlement already sanctioned by the Appellant on 23.07.2018. On the contrary, after having accepted its entire liability, the Respondents are not entitled to be accommodated in any way much less in the manner as decided by the DRT-II, Chandigarh for which no jurisdiction or authority lies with the DRT-II, Chandigarh.

42. It is further submitted that Ld. DRT-II, Chandigarh has committed a grave error in issuing the directions contained in the impugned order which is beyond the purview of the powers conferred upon the Tribunal under the scheme of the Act.

43. It is further submitted that Ld. Tribunal below acted against the principles as provided under Section 17(1) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (in short SARFAESI Act) which empowers any person aggrieved to approach DRT against the measures of Bank under Section 13(4) of the Act. Thus, once the basic question leading to filing of SA has vitiated, the direction issued to Appellant to consider the case of the Respondents under the Special OTS Scheme which already stood considered and decided by the competent Authority, is apparently beyond the scope, object and Jurisdiction of the Tribunal conferred under the scheme of the Act.

44. It is further submitted that Ld. Tribunal below while passing the impugned order has observed that the Appellant is at liberty to place the OTS proposal before MC/Board to examine the decision taken by the HOCAC-III and to make scrutiny that if the decision is as per the terms of OTS Policy or not, the said observation is beyond the scheme of the Act as the same is not a measure taken by the Appellant under Securitization Act which can be scrutinized while exercising power under Section 17 of the Act.

45. It is further submitted that Ld. Tribunal below has committing an error in observing that the rejection letter dated 21.01.2020 is not legally admissible as the rejection was not taken into consideration by the competent Authority.

46. It is further submitted that Ld. Tribunal below has committed an error in observing that in case the Bank comes out with rejection of the OTS proposal, the amount of Rs. 19,76,22,937/- is to be refunded from the date of deposit if the date of refund.

47. It is further submitted that Ld. Tribunal below has committed an error in observing that till the time the amount is not refunded or if the proposal is forwarded to the competent Authority, the Appellant Bank shall not initiate any action with regard to the mortgaged properties as per provisions of SARFAESI Act.

48. It is further submitted that Ld. Tribunal below has committed a grave error in observing that the secured asset at Nawashahar shall remain exempted in light of Provision 31(1) of Act of 2002, being shown as Agricultural Land.

49. It is further submitted that Ld. Tribunal below has committed an error has exceeded its jurisdiction to go into the issue of alleged demerger of Respondent No. l Company, which was not a part of proposal for OTS which was considered and sanctioned by the competent Authority.

50. It is further submitted that Ld. Tribunal below has failed to consider that the competent Authority after considering had already conveyed to the Respondent No. 1 that issue of demerger cannot be linked with the sanction of OTS, however, the OTS was not complied with by the Respondent No. 1.

51. It is farther submitted that Ld. Tribunal below has failed to consider that the judgment of the Hon'ble High Court of Delhi in the case of “Satnam Agri Products Limited v. Union of India” wherein the scope of Section 17 has been considered by the Hon'ble Court and observed that the Tribunal has no jurisdiction under Section 17 of the SARFAESI Act to consider the OTS.

52. It is further submitted that Ld. Tribunal below has committed a grave error in observing that in case the OTS proposal is rejected, the amount deposited by the borrower towards upfront amount shall be refunded along with interest.

53. It is further submitted that Ld. Tribunal below has failed to consider that the upfront amount has been deposited by the Respondent No. l i.e. Borrower through its Associates towards payment of compromise amount. The upfront amount was liable to be appropriated and adjusted against the recoverable dues once the proposal received sanction from the Appellant. The Appellant has appropriated the said amount on the basis of the approval accorded by the competent Authority of the Appellant and any subsequent condition imposed by the Respondent No. 1 does not prevent the Appellant Bank from appropriating the said amount.

54. It is further submitted that Ld. Tribunal below has made observation on the aspect of OTS in the impugned order without considering the circular which provides powers of rejection to HOCAC Level-Ill. The power to reject the proposal has been rightly enforced and the Respondent have nothing to do with post facto scrutiny which is only for internal examination by the Appellant. Hence, the decision taken by HOCAC Level-Ill is a decision taken by the competent Authority.

55. Ld. Counsel for the appellant has lastly prayed to set-aside/quash the Final order dated 29.09.2021 passed by Debts Recovery Tribunal-II, Chandigarh in S.A. I\Jo.95 of 2021 titled as Walia Traders Limited v. Punjab National Bank and to Stay the operation of the impugned Final order dated 29,09.2021 passed by Debts Recovery Tribunal-II, Chandigarh in S.A. No. 95 of 2021 titled as Walia Traders Limited v. Punjab National Bank. It is further prayed to permit the Appellant Bank to take physical possession of the secured asset during pendency of the present Appeal in pursuance to the orders passed by the concerned District Magistrate under Section 14 of the Act.

Facts in Appeal No. 67/2021

56. This is an appeal filed by the appellant under Section 18 Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, against the order dated 29.09.2021, passed by the Presiding Officer, Debts Recovery Tribunal-II, Chandigarh in S.A. 96/2021 titled as “K.C. Social Welfare Trust v. Punjab National Bank”

57. The Appellant is aggrieved by order dated 29.09.2021, (for short, the impugned order) passed by Debt Recovery Tribunal II, Chandigarh, in Securitization Application No. 96/2021 titled as “K.C. Social Welfare Trust v. Punjab National Bank”, by which the Ld. Tribunal below has allowed the Securitization Applications and observed that the amounts deposited by the SA Applicant in SA No. 95/2021 along with OTS proposal is not liable to be appropriated.

58. It is submitted that DRT-II, Chandigarh while passing the impugned order made observations holding that SARFAESI action was not justified without finally deciding the OTS proposal. It has been further observed that the rejection of OTS are not legally admissible and the Respondent Bank is at liberty to place the OTS before MC/Board to examine the decision taken by HOCAC-III and in case the proposal is rejected, the amount of Rs. 19,76,22,937/- is to be refunded along with simple interest @11% p.a. It has been directed that till such time the amount is not refunded, the Respondent shall not initiate any action with regard to the mortgaged properties as per the provisions of SARFAESI Act.

59. It is further submitted that the Respondent No. 1 Company has been availing credit fcilities to the tune of Rs. 89 crores from the Appellant Bank for setting up Educational Institute. The Financial Exposure is secured with the property being a Hotel Property i.e. K.C. Crossroad, Sector-10, Panchkula in the name of Respondent No. 2. The other property mortgaged in the loan account is “situated at SBS Nagar on the land measuring about 11 Acres.

60. It is further submitted that the Respondent No. 2 to 5 are the Guarantors/Mortgagors to the credit facilities availed by the Respondent No. 1 Trust and have executed and delivered various loaning and security documents in favour of the Appellant Bank to secure their repayment.

61. It is further submitted that the Respondent No. l Trust while maintaining their loan accounts with the Appellant Bank, failed to adhere to the financial discipline of such credit facilities sanctioned in their favour and defaulted in repayment of principal amount and interest thereon. As a result of continuing default, the loan account of the Respondent No. l Trust was declared a Non-Performing Asset on 31.03.2015 as per guidelines of Reserve Bank of India.

62. It is further submitted that the consequence of classification of their loan account as NPA, the Appellant Bank initiated measures under the provisions of SARFAESI Act and issued a statutory demand notice under Section 13(2) of the SARFAESI Act on 21.05.2015 calling upon the Respondents to pay the entire amount of Rs. 86,02,32,719.24p with interest at the contractual rate within the statutory period of time. However, the Respondents failed to discharge their liability in full.

63. It is further submitted that Respondents filed their objections under Section 13(3A) of the SARFAESI Act on 21.07.2015 which was duly considered by the Authorized Officer of the Appellant Bank and responded to vide their reply dated 04.08.2015 and the objections raised by the Respondent No. l were found to be false and frivolous.

64. It is further submitted that the Appellant Bank while initiating further measures under the SARFAESI Act issued notice under Section 13(4) read with Rule 8(1) of the Security Interest (Enforcement) Rules, 2002 and the symbolic possession of the properties were taken on 24.08.2015 and 25.08.2015.

65. It is further submitted that on an Application filed by the Appellant Bank under Section 14 of the SARFAESI Act, the concerned District Magistrate passed its orders on 01.09.2016 for taking over physical possession of the properties. The objections filed by the Respondent No. l against the order passed by the Ld. DM was also rejected vide order dated 13.04.2021.

66. It is further submitted that the Applicant in connected SA No. 95/2021 i.e. Walia Traders claimed to have submitted a proposal for OTS in connection with four group accounts including the Respondent No. l herein, to the Appellant offering a sum of Rs. 205 crores as settlement of dues in the group accounts vide offer letter dated 04.06.2018. The said offer was again revised vide its revised proposal offer dated 11.06.2018 agreeing to pay an amount of Rs. 239 crores towards the settlement of group accounts.

67. It is further submitted that the Appellant Bank considered the proposal of the Respondent No. l and accorded sanction for Rs. 239 crores to be paid on the terms and conditions contained in the said sanction letter. The said sanction has been duly accepted by the Respondent No. 1 vide its letter dated 27.07.2018 stating for the first time that as the Hotel properties are owned by Respondent No. l, the demerger of the Company should be permitted so that the properties can be sold independently. Needless to mention that there was no such condition in the proposal dated 04.06.2018 and 11.06.2018 submitted by the Respondent No. 1 and the aforesaid condition was incorporated as an afterthought.

68. It is further submitted that the Appellant immediately responded to the said communication vide letter dated 16.08.2018 making it clear that the aforesaid sanctioned amount of Rs. 239 crores has to be deposited without linking the receipt of OTS with the demerger proposal of the Company which was followed by another communication dated 27.08.2018 conveying that the amount kept in no lien account stands appropriated towards recovery as per terms of approval of OTS. and demanded another Rs. 10 crores to be paid immediately as agreed.

69. It is further submitted that the Borrowers without complying with the terms of OTS sanction, kept on harping on the issue of demerger, which was never an agreed term of OTS sanction which was again communicated to the Respondent No. 1 vide letter dated 16.03.2019. However, the Respondent No. l still failed to honour the terms of sanction. The Appellant had made it clear vide letter dated 09.05.2019 that in case the amounts are not deposited, the legal action including the proceedings under IBC shall continue.

70. It is further submitted that the Respondent No. l failed to comply with the terms of OTS sanction, the Appellant was left with no option but to reject the proposal for revival of OTS which was submitted on 27.09.2019.

71. It is further submitted that M/s Walia Traders i.e. Applicant in SA No. 95/2021 again approached the Hon'ble High Court by way of Writ Petition being CWP No. 36014 of 2019, however, the Petitioner after addressing the Hon'ble Court, sought to withdraw the Writ Petition. The Hon'ble Court while permitting the withdrawal of the Writ Petition which was dismissed as withdrawn, observed that the competent Authority shall decide the representation within one week in accordance with law.

72. It is further submitted that in compliance of the aforesaid directions dated 14.01.2020, the competent Authority of the Appellant Bank considered the proposal and the competent Authority in its meeting held on 20.01.2020 after considering the facts of the matter and due deliberation, declined the proposal of revised demerger scheme and OTS proposal and rejected the same.

73. It is further submitted that in compliance of the order dated 14.01.2020 passed by the Hon'ble High Court, the Appellant filed a detailed affidavit before the Hon'ble High Court specifically stating that the Rcspondent No. 1 cannot claim the refund of the amount deposited and appropriated in accordance with the terms of OTS and the Respondents are trying to thwart the recovery process of the Appellant Bank.

74. It is further submitted that M/s Walia Traders submitted a fresh proposal on 11.12.2020 offering a lesser amount against the amount for which the OTS had already been sanctioned. The Appellant vide its letter dated 06.01.2021 conveyed to the Respondents that the offer on standalone basis for all four accounts amounting to Rs. 167.68 crores is much lower than the previous offer of Rs. 239 crores and hence not acceptable.

75. It is further submitted that the proposal of the Borrower was considered and rejected by the competent Authority. As per the latest guidelines issued vide circular dated 13.11.2019, the power to reject the proposal in terms of the circular lies with HOCAC Level-Ill. It is pertinent to mention here that the earlier circular No. 5 of 2016 dated 12.02.2016 has been superseded by the Circular dated 13.11.2019. Accordingly, the proposal has been rejected by the competent Authority after consideration and by a speaking order. The decision of the competent Authority was conveyed to the SA Applicant.

76. It is further submitted that it is a matter of record that the Appellant had asked the Applicant to improve the offer and resubmit the same. However, as per the circular, in case the improving/recommending authority feels that the offer is on the lower side, then further negotiation may be held. In the instant case the recommending Authority found that the proposal was on the lower side and asked the SA Applicant to improve the offer. However, no revised offer was made. Needless to reiterate that the order dated 14.01.2020 was fully complied with.

77. It is further submitted that M/s Walia Traders i.e. the Applicant in SA No. 95/2021 again approached the Hon'ble High Court by way of Civil Writ Petition bearing No. 3411 of 2021 challenging the rejection letter of the Appellant Bank passed by HOCAC-III and also contended that the upfront amount of Rs. 20 crores deposited with the Appellant is also required to be refunded. The Hon'ble Court directed the Appellant to file an affidavit which directions was complied with and the Appellant Bank in its affidavit filed before the Hon'ble High Court stated that the offer has been rightly rejected by the competent Authority in terms of circular dated 13.11.2019. After the Affidavit was taken on record, the Petitioner before the High Court withdrew the Writ Petition with liberty to file appropriate application before DRT. The Writ Petition was accordingly dismissed as withdrawn by order dated 07.04.2021 for the Tribunal to decide the same as per law.

78. It is further submitted that after the aforesaid Writ Petition was dismissed by order dated 07.04.2021, the Respondent NO. l i.e. SA Applicant filed an objection before the District Magistrate against the orders passed under section 14 of the SARFAESI Act to create a purported cause of action knowing fully well that the said objections were without jurisdiction. The District Magistrate has rightly observed that it has no power of recall of its order already passed under Section 14 of the Act.

79. It is further submitted that the Respondent No. l i.e. SA Applicant filed the Securitization Application bearing No. 96/2021 on 15.04.2021 which has been finally decided by the impugned order dated 29.09.2021. The Appellant filed its reply to the Securitization Application dated 27.04.2021 making its stand clear while placing reliance on the necessary documents which are a part of record.

80. It is further submitted that the Securitization Application No. 96 of 2021 was filed only in the account of M/s K.C. Social Welfare Trust. The other connected accounts of the group which are claimed to be Associates Organizations are not parties to the said Securitization Application nor have they filed independent challenge to the measures taken by the Appellant Bank under SARFAESI Act except in the account of M/s Walia Traders in SA No. 95/2021. By the impugned order, the Tribunal below has decided both the Securitization Applications together without referring to the merits of each case or finding any flaw in the measures taken by the Appellant as Secured Creditor under section 13(4) of the Act.

81. It is further submitted that during the course of proceedings, the Respondent No. l i.e. SA Applicant in SA No. 95/2021 filed an application to place on record, the documents concerning the Revenue Record. The said documents were not filed along with the Securitization Application. The SA Applicant therein claimed that one of the secured assets is an Agricultural Land and exempted under Section 31(i) of the Act. The Tribunal allowed the Application and the Revenue Records were taken on record with copy provided to the Appellant Bank for verification and objection. The Appellant after verification found that the property is not an Agricultural Land and filed an Application placing on record the report of Tehsildar based on the report of Patwari concerned about the nature of the land. Vide report dated 18.06.2021, it has been stated by the Revenue Authority that the subject land is lying vacant and no crop is being cultivated. It was also reported that there is plant of NHAI (National Highway Authority of India) and considerable lease amount was being paid by NHAI to the owners. The translated copy of the report along with the photographs of the property taken in July 2021 were placed on record which clearly shows that there is neither any crop nor any cultivation being undertaken on the property in question.

82. It is further submitted that M/s Walia Traders, during the course of hearing, made another offer of Rs. 190 crores for settlement of the account vide letter dated 13.07.2021. The Bank replied to the said letter vide their letter dated 03.09.2021 seeking deposit of upfront amount. The Respondent Company further communicated with the Appellant Bank vide letters dated 15.09.2021 in reference to the fresh OTS offer dated 13.07.2021. The Respondent has not disclosed these facts before the Tribunal below which were not part of their original pleadings. The Tribunal below was kept in dark resultantly there was no reference in the impugned order about the constant change of stand of the Respondent Company, which spoke volumes about their conduct and intentions. The Borrower Trust again vide letter dated 18.10.2021 even after passing of the impugned order sought status of their fresh offer of OTS.

83. It is further submitted that the OTS proposal dated 04.09.2019 and 23.10.2019 which was rejected by the Competent Authority i.e. HOCAC-III in its meeting held on 20.01.2021 was pertaining to the account of the Appellant Bank i.e. Punjab National Bank only. The said proposal did not cover the exposure of the Oriental Bank of Commerce which has since merged with the Punjab National Bank w.e.f. 01.04.2021 as per Government Notification dated 04.03.2020 and therefore the exposure of Punjab National Bank has increased. Accordingly, the impugned order dated 29.09.2021 vide which letter dated 21.01.2020 has been declared not legally admissible, cannot be considered due to change of circumstances and the increase in the exposure.

84. It is further submitted that the Tribunal has passed the impugned order by which the Appellant has been directed not to initiate any action with regard to the mortgage properties as per provisions of the SARFAESI Act pending fresh consideration of OTS proposal and also directed the refund of the upfront amount along with interest and further exempted one secured asset under Section 31(i) of the Act. The entire action of the Appellant has been stalled despite the fact that the huge amount of public money is to be recovered from the Respondents and while admitting their liabilities, the Respondents have offered an amount of Rs. 239 crores as settlement offer, which was not adhered to by the Respondents and consequently rejected.

85. It is further submitted that the impugned order passed by the Tribunal below on 29.09.2021 is ex-facie illegal, unjust, unreasonable and without jurisdiction and is, therefore, liable to be set aside.

Written Submissions on behalf of Ld. Counsel for the appellant.

86. Ld. Counsel for the appellant has filed common written submissions in both the cases. It is submitted that by the impugned order dated 29.09.2021, passed in SA No. 95 of 2021 in the case of Walia Traders Limited v. Punjab National Bank, the Tribunal below allowed the SA of the borrower with following observations:—

i) The action of the Bank with regard to SARFAESI Act of 2002 are not justified as the action were taken without finally deciding the OTS Proposals given by the Applicant.

ii) Rejection letter dated 21.01.2020 and 02.01,2021 are not legally admissible as the said rejection was not taken into consideration by the Competent Authority.

iii) Still the Respondent Bank is at liberty to place the OTS Proposals before MC/Board to examine the decision taken by HOCAC-

III and to make a scrutiny that if the decision is as per the terms of the OTS Policy or not.

iv) In case the Bank comes out with the rejection of the OTS Proposal, the amount of Rs. 19,76,22,937/- is to be refunded along with simple interest Cal 11% pa from the date of deposit till the date of refund.

v) Till the time amount as directed above is not refunded or if, the proposal is forwarded to the Competent Authority, the Respondent Bank shall not initiate any action with regard to the mortgaged properties, as per provisions of SARFAESI Act of 2002.

vi) The Secured assets at Nawashahar, subject matter of revenue record, shall remain exempted in the light of provision 31(1) of the Act of 2002, being shown as agricultural land.

87. It is submitted that the borrowers have admitted the availment of huge financial facilities in the four loan accounts maintained with the Appellant Bank, namely:

a) M/s Walia Traders Limited

b) M/s K.C. Educational Social & Welfare Society

c) M/s K.C. Hostel

d) M/s K.C. Social Welfare Trust (Para 2 of SA at page 170)

88. It is further submitted that in order to secure the repayment of credit facilities availed, the borrowers created the security interest in the properties as mentioned in para 4 of the appeal, which is not disputed.

89. It is further submitted that the loan account of Respondent No. 1 Company was declared NPA on 17.04.2015 and consequently a statutory demand notice dated 14.05.2015 demanding an amount of Rs. 105,60,96,347.10/- along with interest at the contract rate was issued, which is not disputed.

90. It is further submitted that the Respondent filed a Writ Petition before the Hon'ble High Court of Punjab & Haryana being CWP No. 18902 of 2017 and the respondent was directed to deposit Rs. 5 crore as upfront money within a week so that OTS proposal can be considered by the court where under they will firstly pay Rs. 2 crores per month for a period of 7 months and thereafter the balance payment in a time bound manner. On the next date i.e. on 04.09.2017, the Respondent sought permission to withdraw the suit as the recovery suit filed by the Bank is pending before DRT, with liberty to raise all issues before DRT at the appropriate stage.

91. It is further submitted that the Respondent approached the appellant with an offer of Rs. 205 crores as settlement of the dues in the group accounts which was revised to Rs. 239 crores. The said proposal was considered by the Appellant who accorded sanction for the amounts to be paid on the terms and conditions contained in the sanction letter which was duly accepted by the Respondent on 27.07.2018 and incorporated that the hotel properties are owned by Respondent No. l and demerger of the company should be permitted. In response, the Appellant made it clear that the sanction amount of Rs. 239 crores has to be deposited without linking the receipt of OTS with the demerger proposal of the company. Consequently the Respondent failed to comply with the terms of OTS which was finally rejected on 27.09.2019.

92. It is further submitted that the Respondent again approached the Hon'ble High Court by way of Writ Petition being CWP No. 36014 of 2019 however the same was withdrawn and while permitting the Respondent to withdraw the Writ Petition, it was observe that the competent authority shall decide the Representation of the Respondent within one week. In compliance of the said direction, the competent authority considered the proposal and declined the proposal for revised demerger scheme and OTS proposal. The decision was duly conveyed to the Respondent.

93. It is further submitted that the Respondent again submitted the proposal on 11.12.2020 for the lesser amount i.e. Rs. 167.68 crores as against their previous proposal of Rs. 239 crores. Since the offer was on lower side, the same was not acceptable. The proposal was considered and rejected by the competent authority as per the latest guidelines of the Appellant and the power to reject the proposal in terms of circular lies with HOCAC-III. Thus, the proposal was rejected by the competent authority and duly conveyed to the Respondent. Needless to mention that as per the circular, in case the improving/recommending authority feels that the offer is on the lower side, than further negotiation may be held. In the instant case the recommending authority found the proposal on the lower side and ask the Respondent to improve the same, but no revised offer was made.

94. It is further submitted that the Respondent again approached the Hon'ble High Court in CWP No. 3411 of 2020 challenging the rejection letter of the Appellant issued by HOCAC-III and sought refund of upfront amount deposited with the Appellant. The Hon'ble Court directed to Appellant to file an Affidavit which was filed stating that the offer has been rightly rejected by the competent authority in terms of circular dated 13.11.2019. After the Affidavit was filed, the Respondent again withdraws the Writ Petition with liberty to file appropriate application before the DRT.

95. It is further submitted that thereafter, the Respondent filed the securitization Application before DRT-Jaipur, which was allowed by the impugned.

96. It is further submitted that by the impugned order, the Tribunal below has exceeded its jurisdiction in making observations as mentioned herein above by which the letter rejecting the OTS proposal was held not to be legally admissible. By the impugned order, the Bank has been asked to place the OTS proposal before MC/Board for examination of the decision taken by HOCAC-III and further the bank, in case of rejection is asked to refund an amount of Rs. 19,76,22,937/- along with interest and till such time that the directions issued by the DRT for refund or the proposal to be forwarded to MC/Board, the Bank has been restrained from initiating any action against the mortgaged property.

97. It is further submitted that the impugned order passed by the Tribunal below is in direct conflict with various judicial pronouncements where the courts have repeatedly observed that No borrower can, as a matter of right, pray for grant of benefit of One Time Settlement Scheme, which should be best left to the commercial wisdom of the creditor. In this regard, the Appellant has placed reliance on the following judicial pronouncements:

i) Satnam Agri Products Ltd. v. Union of India WP(C) No. 7158/2014 DOD : 10.12.2014 Wherein the Division Bench of the Hon'ble High Court of Delhi has observed that “Even if DRT in a section 17 proceedings under the Securitisation Act were to have jurisdiction to adjudicate the debt, still it would not have the jurisdiction to issue a direction as sought by the Petitioners, to the creditor bank to consider a proposal for rehabilitation/settlernent,

ii) The Bijnour Urban Cooperative Bank Limited v. Meenal Agarwal-Civil Appeal No. 7411/2021 DOD : 15.12.2021 Wherein the Hon'ble Supreme Court has held that “No borrower can, as a matter of right, pray for grant of benefit of One Time Settlement Scheme If a prayer is entertained on the paret of the defaulting unit/person to compel or direct the financial corporation/bank to enter into a one-time settlement on the terms proposed by it/him, then every defaulting unit/person which/who is capable of paying its/his dues as per terms of the agreement entered into by it/him would like to get one time settlement in its/his favour .Ultimately, such a decision should be left to the commercial wisdom of the bank whose amount is involved and it is always to be presumed that the financial institution/bank shall take a prudent decision whether to grant the benefit or not under OTS Scheme, having regard to the public interest involved..”

iii) State Bank of India v. Arvindra Electronics Pvt. Ltd.-Civil Appeal No. 6954/2022 DOD : 04.11.2022 Wherein the Hon'ble supreme Court observed that “The borrower as a matter of right cannot claim that though it has not made the payment as per the sanctioned OTS scheme still it be granted further extension as a matter of right. There cannot be any negative discrimination claimed. The borrower has to establish any right in their favour to claim the extension. It is further observed that in view of the direct decisin of this court in the case of Bijnor Urban Cooperative Bank Ltd. (Supra), the decision of this court would be binding on the High Court”

98. It is further submitted that the Tribunal below while passing the impugned order directed that the secured asset at Nawashahar shall remain exempted in light of Section 31(i) of the Act of 2002, being shown as agricultural land.

99. The aforesaid finding of the Tribunal below is not only illegal but perverse in view of settled position of law. Initially no such ground of challenge was made by the SA Applicant in its SA before the Tribunal. As an after thought, an IA was filed seeking to place on record the documents concerning the revenue record claiming the property as an Agricultural Land. The said application was allowed and documents were taken on record. The Appellant Bank after verification found that the property is not an Agricultural land and filed an Application to place on record the report of Tehsildar concerning the nature of the land contained in report dated 18.06.2021. As stated by the Revenue Authorities, the subject land was lying vacant and no crop was cultivated on it. It was also reported that there is a plant of NHAI and the considerable lease amount was being paid by NHAI to the owners. The said report it a part of the record. Thus, the finding of the Tribunal below as regards Section 3 l(i) of the Act is misplaced and illegal.

100. The Appellant has also placed reliance on the judgment of the Hon'ble Supreme Court in the case of “ITC Ltd. v. Blue Coast Hotels Ltd., (2018) 15 SCC 99”, where in the Hon'ble Apex Court has considered Section 31(i) of SARFAESI Act and inter-alia held as “Obviously, since no security interest can be created in respect of Agricultural Lands and yet it was so created, goes to shows that the parties did not treat the land as Agricultural land and thatthe debtor offered the land as security on this basis”.

101. It is further submitted that admittedly, the property at Nawashahar being part of the impugned order is a secured asset of the Appellant Bank and in view of the fact that the security interest has been created on the said property, therefore, the same cannot be treated as an Agricultural land. Moreover, as per revenue records no crop is being cultivated on the said land.

102. It is lastly submitted that in view of the aforesaid facts and circumstances and the binding judicial pronouncements, the impugned order dated 29.09.2021 passed by DRTII Chandigarh (Holding Additional Charge) in SA No. 95/2021 is illegal and bad in law and therefore liable to be set aside/quashed.

Written Submissions on behalf of Ld. Counsel for the respondents.

103. Ld. counsel for the respondent has not filed reply to the appeals but has filed written submissions. Ld. Counsel for respondent has submitted that the Respondent No. 1 i.e. M/s Walia Traders Limited had availed a loan of 149.20 Crores from the Appellant Bank in the shape of credit facilities. Along with this credit exposure to the tune of Rs. 149.20 Crores, sanctioned in favor of Respondent No. 1, there are total 4 Loan Accounts maintained with the Appellant Bank by the Respondent No. 1 and its group organizations/entities, namely

i. M/s Walia Traders Limited (Respondent No. 1)

ii. M/s KC Social Welfare Trust.

iii. M/s KC Educational Social & Welfare Society

iv. M/s KC Hostel

104. It is further submitted that the above said all four accounts were declared NPA on 17.04.2015, 31.03.2015, 18.04.2016 and 01.07.2016 respectively and the amount due on the respective dates of NPA in all the Four group accounts was Rs. 105.61 Crores, Rs. 86.01 Crores, Rs. 62.65 Crores and 21.62 Crores.

105. It is next submitted that in order to settle the above mentioned accounts of the Respondent and its group companies Several OTS proposals were submitted by the Respondent No. 1. The first proposal for Rs. 75 Crores was submitted on 21.06.2017 which was further revised for 85 Crores as against total outstanding of 149.20 crores for its individual account on 18.07.2017, however, the same was rejected on 21.07.2017.

106. It is further submitted that a 2 fresh revised OTS proposal was submitted by the Respondent No. 1 for Rs. 119.51 Crores on 03.08.2017, though this offer was initially accepted by the Appellant Bank vide its letter dated 08.09.2017 however, the Appellant Bank modified the terms and conditions which were proposed by the Respondent No. 1, hence, the acceptance cannot be said to be absolute and therefore, no contract stands concluded between the parties on 08.09.2017 and this sanction letter can be said to be nothing but a counter offer from the Appellant bank which was never accepted by the Respondent No. 1. In this regard Section 7 of the Contract Act becomes relevant which is reproduced hereunder:

“Section 7 - Acceptance must be absolute.

7. In order to convert a proposal into a promise, the acceptance must—

(1) be absolute and unqualified;

(2) be expressed in some usual and reasonable manner, unless the proposal prescribes the manner in which it is to be accepted. If the proposal prescribes a manner in which it is to be accepted, and the acceptance is not made in such manner, the proposer may, within a reasonable time after the acceptance is communicated to him, insist that his proposal shall be accepted in the prescribed manner, and not otherwise; but if he fails to do so, he accepts the acceptance.”

107. It is further submitted that Respondent No. 1 submitted 3 OTS proposal on 04.06.2018 for Rs. 205 Cr. towards all 4 Group Accounts. However, the same was revised to Rs. 239 Cr. and the Respondent further deposited Rs. 4 Crores on 14.06.2018 as upfront money towards fair OTS proposal as its bona fide gesture. However, Appellant Bank vide its letter dt. 23.07.2018 allegedly sanctioned the OTS for Rs. 239 Cr. with modified terms and conditions other then what was proposed by the Respondent No. 1 which were not acceptable to the Respondent, hence, no Contract stands concluded between the parties on 23.07.2018 rather this letter amounts to nothing but a counter offer from the Appellant Bank, because acceptance must be absolute and unqualified in terms of the above-mentioned provision under Section 7 of Contract Act and therefore, the earnest money of Rs. 4 Crores deposited by Respondent No. 1 as a bona fide gesture towards the OTS proposal dated 02.07.2018 cannot be appropriated as the same being deposited in No-Lien Account of Bank and is liable to be refunded by the appellant bank on rejection of OTS proposal.

108. It is further submitted that Respondent No. 1 vide letter dated 27.07.2018 again submitted 4 fresh OTS proposal with a request inter alia to allow the Respondent No. 1 to undergo the process of demerger in terms of the provisions of the Companies Act, 2013, so that the properties can be sold independently and/or the 3 properties i.e. Hotels can be divided amongst 3 companies and if required the company itself can be transferred to the purchaser, for which the Respondent No. 1 was required to be demerged into 3 Companies, so that 3 independent persons/entities can take over the company or properties because finding a single buyer for the properties was virtually next to impossible. However, the said proposal of the Respondent was never approved by the bank despite the continuous deliberation between the Bank and the Respondent for over a period of approx. 1 year. Since the Appellant bank had no intention to approve the OTS with demerger Scheme as requested by the Respondent, it kept on delaying the OTS proposal on one pretext or the other and under the cloak of sanction of OTS with demerger, the Appellant Bank had received a substantial payment of about more than 20 Crores and further threatened to cancel the OTS vide its letter dated 09.05.2019 despite the fact that no contract qua OTS with demerger or otherwise has ever concluded between the parties and kept on insisting for further payment of huge amount of Rs. 50 Crores in absence of any OTS whatsoever.

109. It is further submitted that consequent upon the demand of the appellant Bank for deposit upfront amount towards OTS, the Respondent replied to the bank vide its letter dated 19.09.20219 that 20 Cr. has already been deposited by the prospective buyers, who were anticipating the approval of OTS with the demerger scheme, however, the Respondent further deposited 2 Cr. as upfront amount to be kept in no lien account but the Appellant Bank was still asking for 10 Crores more as upfront amount.

110. It is further submitted that when the Respondent vide its letter dt. 30.09.2019 called upon the Appellant Bank to refund Rs. 2 Cr. kept in no-lien account, the Appellant bank refunded the same to the Respondent which itself is an acknowledgement of the fact that the earnest money or upfront money deposited by the Respondent borrower cannot be appropriated by the Appellant bank and the same is liable to be refunded either on rejection of OTS proposal or when no contract is concluded qua OTS proposal.

111. It is further submitted that the Appellant Bank cannot retain the upfront amount while rejecting the proposal. The said earnest money was given to the Bank after categorically informing them that these are third party funds of the investor, which clearly shows that the Bank accepted the amount knowing fully well that the said amounts do not belong to Respondent No. 1 i.e. M/s Walia Traders Ltd. If the Bank had any difficulty in accepting the condition, it could have returned the same amount, by contending that it would not accept any amount from the third party investor and would have insisted upon the deposit by the Respondent itself. No such contention was raised by the Bank, while accepting the third party deposit. It clearly shows that once the appellant Bank signified acceptance of third-party deposit which naturally had to be returned in case the proposal rejected or when no contract is concluded qua OTS, the Bank cannot turn around and contend to retain the said amount. Thus, the upfront amount belonging to the third party deposited along with the proposal had to be refunded as the said amount did not pertain to the Respondent No. l company and are the deposits by the investor and this fact was duly informed to the bank and moreover this upfront amount was never intended by the Respondent to be adjusted towards payment of outstanding debt and the same was deposited as a bonafide gesture towards OTS.

112. It is further submitted that the respondent kept on pursuing the appellant bank for settling the matter bonafide and submitted further proposals vide letters dated 23.10.2019, 11.12.2020, 30.12.2020, 30.12.2020 and 10.01.2021, however, bank rejected all the proposals without even placing the matter before the competent authority i.e. MC/Board.

113. It is further submitted that the Appellant Bank has appropriated more than Rs. 20 crore, in spite of the fact that the settlement proposals, submitted by the petitioner since the year 2018 onwards, have been never accepted by the Respondent and it had no right to appropriate the upfront amount of Rs. 20 crore. The Bank cannot, on one hand, reject the offer of settlement and on the other hand, appropriate the upfront money.

114. It is submitted that it is clear from the bare perusal of Clause 22.2 of the OTS policy, which states that “the upfront amount may be kept in escrow/no-lien account with a mandate to appropriate the proceeds towards adjustment of the dues in the event of the acceptance of the OTS proposal.” Thus, Clause 22.2 clearly mandates that the upfront can be appropriated only in the case of approval of the OTS proposal and not otherwise. Since, the proposal of the petitioner had never been accepted but only conditional acceptances and conditional counter offers have been given, upfront amount could not be appropriate. The bank has appropriated the amount, rejected the proposal and wants to take physical possession also which is unfair, illegal and unsustainable.

115. It is further submitted that if the Bank, in any case, had to reject such proposals, it was mandatory for the Bank to return the amount of Rs. 20 crore taken as upfront money, in view of the law laid down by the Hon'ble Punjab & Haryana High Court in Hari Kewal Pvt. Limited, Anaj Mandi Sunam District Sangrur v. Debts Recovery Appellate Tribunal, New Delhi, RA-CW No. 267 of 2020 (O&M) in CWP No. 2930 of 2019, Decision 26.03.2021 wherein the Hon'ble HC held that:

“It is thus clear that even the respondent bank(s) follow this settled principle (whether specifically provided or not in the instructions) that the upfront amounts deposited with the banks are to be appropriated only in case, if the settlement proposal pursuant to such deposits is finally accepted. This is based on the principle of law, that the upfront amount deposited by the borrower is treated as bailment for the purpose of considering its proposal for settlement. If the proposal is accepted, the upfront is adjusted in terms of approved OTS and in case if rejected, then the upfront amount is to be returned back to the borrower, which is so contemplated by Section 148 of the Act, 1872.”

116. Ld. Counsel for the respondent further submits that the Hon'ble Supreme Court, in the case of Axis Bank v. SBS Organics Private Limited, (2016) 12 SCC 18, followed in the case of Kut Energy Private Limited v. Authorized Officer, Punjab National Bank, (2019) 4 RCR (Civil) 151, have held that in such circumstances, amount deposited by the Borrower to show bonafide for consideration of the OTS proposal, on rejection, the upfront amount is to be refunded back to the Borrower and cannot appropriated by the Bank. Thus, in terms of the said Judgments, the action of the Bank is wholly illegal. In case if the OTS is not accepted, the applicant is entitled for the refund of the amount, which in turn, has to be paid to the Investor.

117. It is submitted that the action of the Bank is wholly illegal and the amount deposited by the investor as upfront money is required to be refunded in terms of the aforesaid Judgments and the OTS Policy of the Appellant Bank itself as discussed in the preceding paras.

118. It is further submitted, in reply to the submission of Appellant Bank that the Tribunal has gone beyond its Jurisdiction with regard to OTS, the Hon'ble Supreme Court in the case of Sardar Associate v. Punjab & Sind Bank, 2009 (8) SCC 257, held that:

“31…. The Appellate Tribunal in terms of the provisions of the Act like the original Tribunal is interested only in recovery of the amount. While doing so, it, in our considered opinion, has the requisite jurisdiction to consider the prayer made by a debtor for one time settlement particularly in view of the fact that the same is within the purview of One Time Settlement Scheme of the Reserve Bank of India.

32… If a public sector bank is otherwise bound by any guidelines issued by the Reserve Bank of India, we see no reason as to why the same cannot be enforced in terms of the provisions of the Act by the Tribunal and consequently by the Appellate Tribunal. It is not a case where the appellants had prayed for quashing of a policy decision taken by the respondent Bank.”

119. It is further submitted that the Hon'ble DRAT, Chennai in the case of Canara Bank v. C.H Venkataraman & Ors. 20, held in para 26 that:

“26. For the foregoing discussions, I hold that the respondent is entitled for OTS under the modified guidelines of the RBI. The PO, DRT-I, has stated in his Order that the Bank shall consider the One Time Settlement offer made by the defendants in their representation dated 23.7.2002 as per the OTS under the modified guidelines of the RBI and shall make necessary compromise after receiving the balance amount from the defendants within 30 days from the date of the Bank.”

120. It is further submitted that in the light of the above said law laid down by the Supreme Court and the directions given by the DRAT, Chennai, it is clear that the issue of OTS can very well be considered by this Hon'ble Court as well the DRT and it is also clear that the OTS proposal dated 04.09.2020 and 11.12.2020 were not decided by the Competent Authority as the Competent Authority is MC/Board and not HOCAC-III.

121. It is next submitted that the Respondent is not seeking as a matter of right that the Appellant Bank be directed to consider the OTS, on the contrary, the Respondent is just seeking that the OTS should be considered as per the OTS Policy of the Bank, which says that Competent Authority is the MC/Board and not HOCAC-III. The Rule of Law states that decisions must be made using known principles and laws or rules and should not be made arbitrarily. The judgments relied upon by the Appellant Bank would not apply in the present case as the Respondent is not claiming OTS as a matter of right rather he is seeking that the same be considered in accordance with the rules and not arbitrarily.

122. It is further submitted that with regard to the nature of land that the Respondent has not claimed the land upon which the education institution is built up as agricultural land but it is the vacant & adjoining area, adjacent to the college which is being used for agricultural activities and the same is recorded in the Jamabandi record.

123. It is lastly submitted that the impugned order dated 29.09.2021 passed by DRT-II, Chandigarh in SA No. 95/2021 and SA No. 96/2021 does not suffer from any infirmity in terms of law and facts and the same is correct and based on the sound legal preposition. In view of the fact that Respondents have already entered into a fresh OTS vide letter dated 01.12.2022 and the same has already been agreed in principle by the bank. Hence, this appeal may be kept in abeyance.

REBUTTAL OF WRITTEN SUBMISSIONS ON BEHALF OF THE APPELLANT BANK.

124. It is submitted that without prejudice to the contentions as regards jurisdiction of the Tribunal to go into the aspect of settlement between the creditor and the debtors, it is a matter of record that the respondents have lastly submitted a proposal for one-time settlement in the group account on 11.06.2018, offering a total amount of Rs. 239 crores payable as per the schedule setout therein. It is submitted that in the said proposal there is no mention about the permission for de-merger of Company, as subsequently claimed to have imposed a new condition.

125. It is further submitted that the proposal dated 11.06.2018 for a composite settlement of group accounts at Rs. 239 crores was placed before the management committee and approved in there meeting held on 23.07.2018 on the terms and conditions contained in the said letter and to be paid in the manner setout therein. Thus, the proposal dated 11.06.2018 was accepted and sanctioned by the Appellant and conveyed to the respondents.

126. It is further submitted that after the sanction was conveyed to the respondents which is duly acknowledged that the respondent in response vide letter dated 27.07.2018 for the first time submitted a fresh condition of demerger. The Appellant submitted a response vide letter dated 16.08.2018 and informed the respondent that in terms of sanction dated 23.07.2018, the receipt of OTS amount cannot be linked with sale of immovable properties and also with the de-merger proposal of the company.

127. It is next submitted that the Appellant was entitled to appropriate the upfront amount as per the mandate to appropriate the same towards adjustments of dues in the event of acceptance of OTS. Thus, the contention of the respondent is baseless and ill founded. Moreover, the contention that the said amount deposited towards the upfront amount belong to third party is also a concerted assertion. In a short affidavit filed by the Appellant before the Hon'ble High Court of Punjab & Haryana in CWP No. 3411 of 2021, it has been categorically stated that the respondent/borrower, pursuant to offer made, deposited a sum of Rs. 4 crores out of the upfront amount of Rs. 10 crores on 14.06.2018 and the said amount was received from one M/s Munish. It appears that M/s Munish was not a genuine investor but merely a stooge of the petitioner as one of the associates of M/s KC School (Group Concern) transferred a sum of Rs. 4 crores on 04.06.2018 to the account of one Munish Kumar Bhandari.

128. It is further submitted that the very fact that the OTS proposal of the respondents was accepted by that Appellant Bank on 23.07.2018, establishes that on sanction of OTS which did not contain any condition about de-merger, entitled the Appellant to appropriate the up-front amount towards recovery of its dues. It would also pertinent to mention here that even prior to that on 02.07.2018, the respondents deposited 3 post-dated cheques of worth Rs. 15 crores and there was not mention of de-merger in the said letter. Thus, the contention to incorporate the subsequent condition of de-merger was an afterthought to wriggle out of the conditions of the terms of OTS.

129. It is further submitted that the judgments referred to and relied upon by the respondents are clearly distinguishable both on facts and law. Needless to reiterate that the judgments referred to are much prior to the judgments referred to and relied upon by the appellant including the latest observations and findings of the Hon'ble Apex Court on the issue of powers of the Court/Tribunals to issue any directions to the Banks as regards the issue of One Time Settlements.

130. It is further submitted that as regards the Judgments referred to by the Respondents on the return of the upfront amount to the borrower, it is a matter of record that in such judgments, the amounts were deposited pursuant to an interim directions issued by the Courts to establish the bonafides of the borrowers. However, in the present case, the upfront amount was deposited in terms of the policy which was liable to be appropriated on sanction of the OTS proposal. During the course of arguments, the counsel for the respondent submitted that a fresh proposal for settlement has been given to the appellant. As is borne out from the record that earlier a composite proposal for settlement of group accounts at Rs. 239 crores was offered which was sanctioned but not acted upon by the respondents. As an eye wash, now a separate proposal for one of the group companies for a meager amount has been submitted but as of now there is no fresh settlement. In view of the above, it is lastly prayed to allow the Appeal and the impugned order dated 29.09.2021 be set aside being illegal and bad in law.

FINDINGS

131. I have heard the Ld. Counsel for the parties and given my thoughts to the rival submissions. The relevant part of the impugned order dt. 29.09.2021, passed by Ld. PO DRT-II, Chandigarh runs as follows:—

“Heard arguments and perused the record.

The first objection raised by Ld. Counsel for the respondent bank is with regard to limitation of this SA and therefore, it is necessary to decide the issue of limitation before proceeding ahead.

As per the provisions of the SARFEASI Act of 2002 it is a well settled law that the limitation arises at each and every stage when the secured creditor takes any measure to enforce their right for recovery of the outstanding amount under the Act of 2002 and in my opinion the SA applicant, to challenge the actions under the provisions of Section 17(1) of the Act of 2002 within 45 time. In the present matter the applicant has challenged various Act's of the respondent bank including the sale Notice dated 14.12.2020 (Annexure A-19) through the bank has taken steps to sale the secured assets and when the bank didn't received any bid but the applicant do have every right to challenged the exercise, their rights under the Rule 8 & 9 of the Rule of 2002 and therefore, if no bid is received and but still the validity of every action of the respondent bank in exercising their right under Rule 8 can be challenged and it would definitely given a fresh cause of action to the appellant to file this securitization application and therefore, I am of the view that the securitization application is well within limitation and is liable to be entertained. The another grounds taken by the ld. Counsel for the respondent bank is that the SA is barred by limitation and this Tribunal do not have any jurisdiction to decide the prayer of SA applicant with regard to refund of amount of Rs. 20 Crores deposited and appropriated by him as such action is not within the ambit of section 17 of the SARFEASI Act of 2002 and finally it was argued that only of these grounds, the SA is not maintainable and is reliable to be dismissed.

With regard to limitation in filing of the SA Ld. Counsel for the applicant referred the order dated 08.03.2021 passed by Hon'ble Apex Court in recognizance for extension of limitation bearing suo motu writ petition (Civil No. 3 of 2020) in which it was held that “in computing the period of limitation for any suit, appeal, application or proceeding, the period from 15.03.2021 till 14.03.2021 shall stand excluded. This order was subsequently continued vide order dated 27.04.2021 and recently Hon'ble Apex Court vide order dated 23.09.2021 held that period from 15.03.2020 till 02.10.2021 shall remain excluded.

Accordingly, in any case while determining the period of limitation the aforesaid period shall excluded. In the present matter the sale notice is defiantly is a course of action under Section 13(4) of the Act of 2002, sale notice was issued on 14.12.2020 and as it was issued during the period of 15.03.2020 to 14.03.2021, the period under which limitation is to be excluded and coupled with the fact that appellant also approached to the Hon'ble High Court by way of filing CWP No. 3411 of 2021, wherein an liability was granted to the SA appellant to file this SA before the appropriate forum and therefore based on the above said observations I am of the view that the SA is well within the limitation and therefore the argument on behalf of the respondent bank that SA is barred by limitation is not liable to be accepted and accordingly the same is rejected. With regard to arguments raised by Ld. Counsel for the respondent bank that prayer to refund the upfront amount of Rs. 20 Crores deposited by them is not liable to be accepted and therefore the issue is to be considered with regard to the finalization of the OTS application given by the applicant with the respondent bank. Here the one time settlement policy dated 12.12.2016 (Annexure A-71) dated 13.11.2019 within (Annexure A-84) dated 27.03.2020 and (Annexure A-86) arc the basic policy and the prime contention of the SA applicant is that under the aforesaid OTS policies the Competent Authority was supposed or bound to consider the proposal of settlement of the appellant before the MC/Board of the respondent bank keeping in view the financial powers vested with them as well as with the various Authorities is clarified under the said OTS scheme.

Applicant further referred the OTS policy dated 12.02.2016 wherein at Page No. 222 the powers delegated to various Higher Authorities to approve the OTS policies are prescribed. As per this table at Page No. 222 of the paper book it is mentioned that the HOCAC-III has the power to examine the proposals up to Rs. 200 Lakhs only, the next higher level is of MC/Board which has wider power to consider and approve the OTS policies for final extension. In the present matter, the applicant gave a proposal for an amount which was more than Rs. 2 Crores, the Committee of HOCAC-III was not competent to consider the said OTS. As per OTS policy, the HOCAC-III was competent to consider the proposal, involving, the outstanding book amount for Rs. 150 Lakhs to Rs. 300 Lakhs and this power do not comes within the preview to consider the case of the SA applicant as it was the amount of more than Rs. 300 Lakhs. As per this OTS policy the Higher Authority was MC/Board who is having jurisdiction to consider the proposals involving book balance/outstanding amount more than Rs. 3 Crores and as per OTS policy dated 27.03.2020 again the similar financial powers were provided in Clause No. 11.5.4 (at Page No. 346) of the paper book and accordingly it was argued on behalf of the SA applicant that the appropriate Authority to consider the OTS proposal in the matter of SA applicant was MC/Board and not the HOCAC-III who has conveyed or has decided the OTS proposals given by the SA applicants.

As pointed out by Ld. Counsel for the applicant the order of Hon'ble High Court of Punjab Haryana High Court passed in CWP No. 36014 of 2019 where the Hon'ble High Court has directed the Competent Authority shall decide the representation within one weeks time from today in accordance with law. A perusal of the above said order given to show that the Hon'ble High Court give a specific direction that the proposal dated 04.09.2019 was to be decided by the Competent Authority and the bank in compliance of the aforesaid order vide letter dated 21.01.2020 (Annexure A-75) rejected the OTS proposal given by the applicant and it is clear from the said letter that the decision was taken by HOCAC-II in the meeting held on 20.01.2020 and so the applicant again submitted a proposal on 11.12.2020(Annexure A-76) which was also rejected vide letter dated 02.01.2021 by the Zonal Head and not by the Competent Authority.

I have gone through the competency level of the authorities of the Respondent Bank with regard to OTS policy dt. 13.11.2019 and Clause No. 26.3, reads as under-

“Any proposal submitted by the branch can be rejected by an authority one step higher than the authority competent to approve the proposal. Accordingly, competent authority should refer the case for rejection to his next higher authority, giving reasons thereof. However, proposals falling under the powers of HOCAC Level III and above may be rejected at the level of HOCAC Level III itself, as hitherto fore. Such rejections shall also be put up for post facto scrutiny to the next higher authority.”

Based on this Clause, Ld. Counsel for Respondent Bank argued that Competent Authority may be MC/Board, but in case if the proposal falling under the powers of HOCAC-III and above, the same can be rejected at the level of HOCAC-III itself and therefore, the proposal of the applicant was not required to be placed before the MC/Board. But based on same clause, Ld. Counsel for the Applicant argued that the decision taken by the HOCAC-III is not final as this Clause says that such rejection, since passed by delegated authority, requires to be put up for post fact a scrutiny by MC/Board. Ld. Counsel for the Bank argued that this is merely internal administrative approval of the Bank and so such approval is not required and is not all sufficient to vitiate the decision taken by HOCAC-III.

Ld. Counsel, in rebuttal argued and referred Clause 30.1, saying that the post facto scrutiny includes “over sighting” which means examination to ensure that the delegated financial powers have been exercised in the line with the Bank's OTS regulatory guidelines etc.

For ready reference, Clause 30.1 is reproduced hereunder -

“Clause 30.1 - Information about OTSs/negotiated settlements/write off proposals for bad debts/losses/sacrifice etc., approved by any functionary shall be promptly reported to the next higher authority for post-facto scrutiny as per L&A Circulate No. 83/2014 dated 09.07.2014, the minutes of Credit Appraisal Committees shall beplaced to the next higher authority for over sighting as under:—

S. No Minutes of Credit Appraisal to be placed for post facto committee Scrutiny To

1. COCAC Level 1 ZOCAC

2. ZOCAC (previously COCAC Level II) HOCAC Level II

3. HOCAC Level I IIOCAC Level II 4 HOCAC Level II Board/MC

5. HOCAC Level III Board/MC

Over sighting shall include ensuring that delegated financial powers are exercised in line with the Bank's OTS/Recovery related regulatory guidelines and other instructions etc.”

In order to decide the level of competency with regard to decision of OTS policy, I am of the view that as per Clause 26.3, it gives powers to competent authority to MC/Board and can be delegated to HOCAC-III but the decision taken by IIOCAC requires post facto approval which can be an administrative approval but this argument of administrative approval is not liable to be accepted because as per Clause 30.1 and the word “shall” is used and so approval of MC/Board is necessary and it cannot be mere formality. So, I find myself in agreement with the Ld. Counsel for the Applicant that post facto scrutiny is not merely a formality like putting a rubber stamp and, so the decision taken by HOCAC-III, was required post facto approval/scrutiny by MC/Board. From the documents filed and relied upon by both the parties, it cannot be confirmed that the OTS proposal was, at any point of time, was rejected by competent authority i.e. MCV Board, by process of over sighting. The Bank also could not place on record any such document, which can prove that the decision of HOCAC-III with regard to OTS proposal dt. 04.09.2019 and 11.12.2020, was finally and conclusively decided by MC/Board and so it can be presumed that the said OTS proposals have not been finally decidec by MC/Board in term of conditions of Clause 30.01, discussed as above.

Further, the letter dt. 02.01.2021, issued by Zonal Manager is about rejection of OTS proposal but the same do not reflects approval of competent authority in the sense of level of competent authority. Respondent Bank relied upon letter dt. 22.02.2021 (Annexure-R/8) and it was one of the arguments that the rejection was based on the decision of competent authority but I do not find it acceptable because a letter dt. 02.01.2021 was issued and after a letter at Annexure-R/8, dt. 22.02.2021 was not required to be issued as the proposal was already rejected through letter dt. 02.01.2021.

As pointed out by Ld. Counsel for the Applicant, date of taking decision by the competent authority is not mentioned in the letter dt. 22.01.2021, (Annexure-R/8) and any decision, if at all, taken by MC/Board, is not placed in record, even during arguments and so, I am of the view that the decision taken by HOCAC-III is not a decision taken by competent authority in the light of Clause 26.3 & 30.01, jointly and decision of MC/Board is still pending as the same is not filed on record. Ld. Counsel for the Applicant relied upon the following Judgment -“Shyam Ice and Cold Storage v. Allahabad Bank AIR 2012 All 87, the relevant extract of which reads as under:—

“Although there may not be a bar in the Bank proceeding under the Act of 2002 even when the One Time Settlement proposal is under active consideration, but permitting simultaneous proceedings against the borrower would amount to wielding the sword and the stick at the same time, which should not be appropriate. Even a defaulter has his rights. He can be proceeded against only in accordance with law. Merely because he has defaulted in payment of some instalments would not mean that he should be dealt a double or multiple blow. If he has a right to have his One Time Settlement considered (as per the Reserve Bank of India guidelines) then during the pendency of such One Time Settlement Proposal, initiation of recovery proceedings under the Act of 2002 will not be permissible. It is for the Bank to choose as to whether they are to proceed for One Time Settlement or they are to recover money from the borrower under the Act of 2002 or any other process. It is only after the Bank rejects the application for One Time Settlement (or if accepted and the borrower does not comply with the terms of settlement) that the Bank can proceed to recover the dues. As held by the Apex Court the guidelines of the Reserve Bank of India have statutory force. The scheme for One Time Settlement is under the guidelines of the Reserve Bank of India, which would mean that the petitioners have statutory right for their application/proposal for One Time Settlement filed under the scheme for being considered by the Bank. It is for the Bank to assess the proposal of the borrower and then either reject or accept the proposal after negotiations but as long as the said proposal remains pending with the Bank, it would neither be proper nor permissible for the Bank to proceed to recover the amount from the borrower.

In such view of the matter, it is directed that the proposal of the petitioners dated 15.10.2011 and the one dated 25.02.2012 for One Time Settlement be considered by the respondent-Bank in terms of the guidelines issued by the Reserve Bank of India is expeditiously as possible. The notice under Section 13(2) of the Act of 2002 issued on 30.01.2012 during the pendency of the proposal for One Time Settlement is hereby quashed. If the proposal of the petitioners for One Time Settlement is not accepted, the respondent-Bank shall thereafter be at liberty to issue fresh notice under the Act of 2002 and proceed against the petitioners, in accordance with law.”

Ld. Counsel for the Applicant argued that as per abovesaid Judgments, it is clear that till the OTS proposal is pending for its disposal by the competent authority, no action under SARFAESI Act, 2002, can be taken.

With regard to objection raised by Ld. Counsel for the Bank, with regard to jurisdiction of this Tribunal with regard to OTS, Ld. Counsel relied upon para 29 of the Judgment of Hon'ble Apex Court, in the matter of Sardar Associate v. Punjab & Sind Bank, 2009 (8) SCC 257, which reads as under -

“It may be that no specific prayer was made but the same, in our opinion, keeping in view the provisions of the 2002 Act, did not preclude the Appellate Tribunal to consider the offer of the appellants. The appellate Tribunal in terms of the provisions of the Act like the original Tribunal is interested only in recovery of the amount. While doing so, it, in our considered opinion, has the requisite jurisdiction to consider the prayer made by a debtor for one-time settlement particularly in view of the fact that the same is within the purview of One Time Settlement Scheme of the Reserve Bank of India. If a public sector bank is otherwise bound by the guidelines issued by the Reserve Bank of India, we see no reason as to why the same cannot be enforced in terms of the provisions of the Act by the Tribunal and consequently by the Appellate Tribunal. It is not a case where the appellants had prayed for quashing of a policy decision taken by the respondent-Bank. The question which arose for consideration before the Appellate Tribunal as also before the High Court was as to whether offer having been made by the bank to the appellants herein, it could have turned around the contend that only because the appellants had furnished security to the extent of Rs. ll crores, the same by itself would entitle if to take recourse to a discriminatory treatment. The answer to the said question must be rendered in the negative.”

Based on the above said observations, I am of the view that the DRT has power to examine the issue regarding enforceability and compliance/non-compliance of OTS scheme of the Bank and Applicant cannot be directed to approach to Civil Court because, such measures arc related to SARFAESI Act of 2002 and approaching to Civil Court will further increase, multiple litigations before different forum for the same issues. Therefore, I am of the considered view that, considering the view taken by Hon'ble Apex Court, DRT have jurisdiction to examine the issue of enforceability/compliance of OTS Scheme.

Accordingly, based on above discussion, it is clear that the issue of OTS can be decided/consider by this Tribunal and it is also clear that the OTS proposal dt. 04.09.2020 and 11.12.2020 has not been decided by the competent authority as the such rejection by HOCAC-III still requires final scrutiny by the process of over sighting by MC/Board, in terms of Clause 30.1 of the OTS policy dt. 13.11.2019 and Clause 31 of OTS policy dt. 27.03.2020, and so without deciding the OTS finally, the Respondent Bank is not supposed to initiate any action with regard to sale or with regard to taking physical possession of the mortgaged properties in question.

As an amount of Rs. 19,76,22,937/- have been appropriated by the Bank, as per letter dt. 06.08.2019, (at page no. 163), but the OTS proposal dt. 27.07.2018 is still pending, no OTS proposal is either accepted/approved or rejected by the competent authority, so the ground taken by Respondent Bank that the appropriation of above said amount is as per policy, is not sustainable, not liable to be accepted and hence the same is rejected. From the record, it is clear that a proposal of OTS for an amount of Rs. 239 Crore in all four accounts was given on 02.07.2018 (Annexure-A.22) along with an upfront amount of Rs. 5.00 Crore, deposited in “no lien account”, said proposal was accepted on 23.07.2018 and so as argued by Respondent Bank, no amount lying in ‘no lien account’ as upfront was appropriated on 23.07.2018 and on 27.07.2018 Applicant gave proposal at Annexure-A/24, in which the Applicant intended the scheme of demerger and to link the same with the repayment of OTS amount. In reply to this proposal, Respondent Bank wrote that the demerger will be considered separately on receipt of complete proposal and demerger was not to be linked with the said proposal, so it can be safely presumed that the OTS proposal dt. 02.07.2018 was suppressed, as new/fresh proposal dt. 27.07.2018 came up for consideration, which is pending for final decision by the competent authority.

As per record, an amount of Rs. 20.00 Crore was appropriated, whereas as per proposal dt. 02.07.2018, only Rs. 10.00 Crore was deposited, which lying, in ‘no-lien account’ was not appropriated and later on, remaining amount deposited under the head of upfront amount under OTS scheme, deposited after 23.07.2018 and therefore the ground taken by Respondent Bank that the said amounts were appropriated on account of acceptance of OTS, through letter dt. 23.07.2018 is not liable to be accepted, because of the fact that in letter dt. 16.08.2018, Respondent Bank mentioned that -

“upfront amount of Rs. 10.00 Crore deposited and kept in ‘no lien account’ shall be appropriated immediately on conveying the approval of amendment in terms and conditions…” “Rs. 10.00 Crore, to be deposited by the party immediately on conveying the approval of amendment in terms and conditions.”

It is clear that upfront amount was to be appropriated only after conveying the approval of amendment in the terms and conditions, and this was with regard to demerger request as the intention of the Applicant to link demerger with OTS proposal. Further, Respondent Bank on 26.09.2018, issued a letter to the Applicant stating therein, the consideration of OTS proposal with demerger and relevant condition is reproduced here as under -“We have received your demerger plan vide your mail dated 15.09.2018 followed by mail dated 24.09.2018 where in you confirmed that you have deposited Rs. 2.50 crore with our Branch, Mohali Phasc-I in no lien amount but confirmation of same is yet to be received from the Branch. The amount of Rs. 2.50 crore deposited in no-lien account at BO : Phase-I, Mohali shall be appropriated immediately on conveying of approval of demerger plan.”

So, from the above para of letter dt. 26.09.2018, it is clear, that the amount deposited as upfront amount was to be appropriated only, in the case, if Bank could have approved the scheme of demerger as mentioned in proposal dt. 27.07.2018 but such proposal was never approved/rejected by the competent authority.

Ld. Counsel referred Clause 23.2 of OTS Policy dt. 12.02.2016 and argued that upfront amount can be appropriated in case of acceptance of OTS proposal only. Clause 23.2 reads as under-The upfront amount may be kept in an “Escrow/No-Lien Account” with a mandate to appropriate the proceeds towards adjustment of the dues in the event of acceptance of OTS Proposal.” Abovesaid Clause is repeated in OTS Policy dt. 13.11.2019 and dt. 27.03.2019(Annexure-A/84) and so the amount, so appropriated was required to be appropriated, only if the OTS proposal dt. 27.07.2018 accepted.

I am of the view, that the Respondent Bank received amended OTs proposal dt. 27.07.2018 but it was never approved and so during the pendency of fresh OTS proposal dt. 27.07.2018, the act of appropriation of the outstanding amount is against the Clause 23.2 of OTS policy, dt. 12.02.2016. It is also important to mention here that Respondent Bank failed to finalize the OTS proposal dt. 27.07.2018 and correspondence goes to show that the OTS proposal along with permission of demerger was kept pending, or it was kept under consideration and relying upon the assurances, Applicant on depositing the upfront amount but as discussed above, OTS proposal with demerger plan was never accepted/approved/conveyed by Respondent Bank so the amount deposited is not liable to be appropriated.

It is also clear from the correspondence held between the parties that the Applicant time and again informed to the Bank that the amount as upfront is being deposited by the investors but at any point of time said submission/information was objected by Respondent Bank and it was objected only at the time of argument, whereas no such record/objection is filed on record.

With regard to nature of Land (mortgaged/property) as Agricultural Land, Ld. Counsel for the Applicant argued that Land upon which educational institute is built up in not being claimed as Agricultural Land but it is the vacant & adjoining area, adjacent to the college which is being used for agricultural activities and Bank also failed to produce on record any document, which can dispute the part of vacant secured assets are covered within the purview of Jamabandi. Lherefore, I am of the view that as per Jamabandi record, the adjacent land, is to be treated as Agricultural Land & exempted as per provision of Section 30(1) of the Act of 2002.

Based on the abovesaid observations the S.A. is allowed with the following observations -

1. The actions of the Bank with regard to SARFAESI Act of 2002 are not justified as the actions were taken without finally deciding the OTS proposals given by the Applicant.

2. Rejection letter dt. 21.01.2020 & 02.01.2021 are not legally admissible as the said rejection was not taken into consideration by the competent authority.

3. Still the Respondent Bank is at liberty to place the OTS proposal before MC/Board to examine the decision taken by HOCAC-III and to make a scrutiny that if the decision is as per the terms of OTS Policy or not?

4. In case, the Bank comes out with the rejection of the OTS proposal, the amount of Rs. 19,76,22,937/- is to be refund along with simple interest @ 11% per annum from the date of deposit till the date of refund.

5. Till the time, amount as directed above is not refunded or if, the proposal is forwarded to competent authority, the Respondent Bank shall not initiate any action with regard to mortgaged properties, as per provisions of SARFAESI Act of 2002.

6. The secured asset at Nawashahar, subject matter of revenue record, shall remain exempted in the light of provision 31(1) of the Act of 2002, being shown as agricultural land.

Accordingly the Securitization Application is disposed of as allowed with no cost. Copy of the order be given free to the parties concerned. File be placed before the Registrar for compliance. After compliance file be consigned to record.

(VIVEK SAXENA)

Presiding Officer DRT, Jaipur

(Add. charge DRT-II, Chandigarh)

132. The Ld. Counsel for the appellant Bank has challenged the above order on the ground that Ld. DRT has no power to stall the proceedings under the SARFEASI Act and it has wrongly held that till the OTS is forwarded to the competent authority and considered by it, the upfront amount of Rs. 19,76,22,937/-, deposited by the respondents, has been wrongly appropriated by the Bank and it should be released to the respondents.

133. The first question to be considered by this Tribunal is whether the Ld. PO has rightly come to the conclusion that OTS has been wrongly rejected by the Bank as there is nothing on record to suggest that it was put up before Competent Authority i.e. the MC/Board.

134. The next question to be considered is whether the Ld. PO, DRT has rightly held that if the said OTS proposal has been wrongly rejected as it was not put up before MC/Board, the upfront amount of Rs. 19,76,22,937/- is to be refunded to the respondent along with simple interest @ 11% p.a. from the date of deposit till the date of refund.

135. I have considered the rival submissions. Various OTS proposals were submitted by the respondents from time to time. The OTS proposal in question which is for Rs. 239 Crores was submitted to the appellant bank by the respondents vide letter dated 11.06.2018 which runs as under:—

Letter dated 11.06.2018

WALIA TRADERS LIMITED

Regd. Office : NC Tower, Chandigarh Road, Nawanshahr (Punjab)

Dated : 11 June, 2018

Punjab National Bank

Sub : Proposal of one time settlement (OTS) in group accounts.

We have availed finance facility form from your bank, the details of which area as under:

Name of borrower : M/s Walia Traders Limited, M/s KC Social Welfare Trust, M/s KC Educational & Social Welfare society & M/s KC Hostel.

We humbly submit that on the insistence of you & your authorities and after detailed discussion, we are agreeable to pay you total amount of Rs. 239 Crores (Rupees

Two Hundred & Thirty Nine Crore Only) Towards out OTS proposal to settle our group accounts, payable in three years.

The schedule of payment will be as follows:

S. No Schedule of Payment Amount (in Crores) 1. Down Payment (to be kept in no lien account) 05.00 2. At the time of sanction of proposal 10.00 3. Within 60 days of sanction the amount 05.00 4. Rs. 5 Crores at the end of each I, II, III quarter 15.00 5. At the end of the IV quarter 25.00 6. Rs. 5 Crores at the end of each V, VI & VII quarter 15.00 7. At the end of the VIII quarter 25.00 8. Rs. 5 Crores at the end of each IX, X & XI quarter 15.00 9. Balance amount of principal plus interest @ MCLR at the end of XII quarter

Submissions:

(a) Because of the economic scenario hotel industry got miserable set back and so is ours. Although we could complete the project with the finance facility provided by you as well as by infusing almost equivalent funds by ourselves but we couldn't get the desired results from the operations in the initial years as estimated.

(b) At present we have, to settle the account only with proceeds which can be realized form sale of properties mortgaged. You will appreciate that it became very difficult to sail out the properties especially which are mortgages with the bank. Moreover, our town is a small town and there are few buyers only. Bank will provide NOCs for sale of IPs after depositing entire sale proceeds that it should be released.

(c) We reiterate that amount can only be paid by sale of properties mortgaged and you have to draw out a schedule of release of properties simultaneously with the payment of loan amount as mutually agreed.

(d) After acknowledging the proposal, ban will neither initiate nor pursue any litigation complaint or whatsoever in any court of law, police station etc. Bank will withdraw all the litigations pending in any court of law, whatsoever.

(e) After depositing the above said amount, bank will hand over all the legal & other documents related to properties mortgaged by bank.

(f) After receiving the OTS amount, bank shall provide all NOCs/No Due Certificate and other relevant documents required to me as per the banking norms.

Keeping in view the above facts and circumstances, we request you to consider our application/offer for OTS favourable and accord sanction for the same. We shall be glad to provide any other requirements/information/clarification.

We are enclosing cheque no. 024916 dated 04.06.2018 for Rs. 400.00 Lacs which is drawn on Central Bank of India, Nawanshahr issues by M/s Munish Kumar Bhandari who is interested in buying our one Hotel, which was mortgaged with you. He will enter the final agreement with us only after receiving the approval OTS proposal from the Bank +100.00 Lacs already deposited in non-lien account.

The amount of Rs. 400.00 Lacs + 100.00 Lacs which is tendered herewith shall be kept in Non-lien Account and can be appropriated only after approval of OTS proposal.

Hope you will consider our proposal favorably and oblige.

Thanking You, For KC Group

(Mitesh Gandhi)

Director

136. Perusal of the record further reveals that the OTS offer of Rs. 239 Crores was duly approved by the Board of the appellant Bank and it is clear from the first para of the letter dated 27.07.2018, written by the respondent itself wherein the respondents have stated, ‘this is with reference to the proposal approved by your Board’. Thus, the offer and its acceptance stood concluded between the parties. However, perusal of the said letter further reveals that respondents had put a condition after acceptance of OTS offer to the effect that since the properties were owned by respondent no. 1 and, therefore, the demerger of the company should be permitted so that the properties can be sold independently. The letter dated 27.07.2018 written by respondent i.e. Walia Traders Ltd. to the appellant Bank runs as under:—

Walia Traders Limited

Regd. Office S.C.O. 377-380, Sector 38.

Chandigarh

Phones : - 0172-2615364

Dated : - 27.07.2018

The Zonal Manager Punjab National Bank Zonal Office. Ludhiana

Sub : compromise proposal

This is reference to the proposal approved by you board.

We have committed to your Managing Director, the following three things:

a. Compromise settlement at Rs. 239.00 Crores;

b. Repayment within 2 years;

c. Down payment of Rs., 20.00 Crores

We stand by your commitment and accordingly accept the proposal, subject to modification of repayment schedule as mentioned below.

a. In no lien account 10.00 b. within 60 days of sanction of proposal 10.00 c. on or before 31.03.2019 (by sale of Panchkula hotel) 50.00 d. On or before 30.09.2019 (by the sale of Holiday Inn) 100.00 e. on or before 31 : 03.2020 (by the sale of Chd Hotel) 50.00

The only properties to repay the debt are 3 hotels owned by M/s Walia Traders Ltd. The other properties consist of educational institutional which cannot be liquidated. This is very clear that repayment can be made by only through sale of properties. There is no other source to raise the huge amount.

As the hotel properties are owned by one company i.e. M/s Walia Traders Ltd, the demerger of the company should be permitted so that the properties can be sold independently. Demerger will take at least 3 months, which will be by the approval of NCLT.

Kindly get the terms of sanction modified as per our request from the-competent authority.

Thanking you

For KC Group

Prem Pal Gandhi

Chairman

137. Thus, perusal of above letter dated 27.07.2018 reveals that a new condition relating to demerger of the company was put by the respondent after acceptance of OTS which was not there even in their proposal dated 11.06.2018.

138. Perusal of the record further reveals that appellant bank had responded to the communication of respondent no. 1 vide its e-mail dated 16.08.2018, making it clear that the sanctioned amount of Rs. 239 Crores has to be deposited without linking the OTS with the demerger proposal. The letter dated 16.08.2018 runs as under:—

From : PNB ARMB

sent : Saturday, August 18, 2018 7 : 33 : 49

To : Hitcsh Gandhi

Subject : OTS approval

16.08.2018

M/s Walia Traders Ltd. KC Tower, Chandigarh Road, Nawanshahar.

Reg : Proposal for change in terms and condition In the OTS earlier approved by MC on 23.07.2018 in NPA A/cs.

1. M/s Walia Traders Ltd., 2. M/s K. C. Educational Social & Welfare Society, 3. M/s K.C. Hostel BO : Phase-1, Mohali, CO : Patiala & 4. M/s. K.C. Social Welfare Trust (Regd) BO : ARMB, Ludhlana, CO : Ludhiana.

Dear Sir,

In terms of your OTS offer for Rs. 239.00 Crore to resolve the captioned accounts, we are pleased to inform that matter was put up before competent authorities, who has approved for change in terms and conditions of our MC sanction dated 23.07.2018 without linking the receipt of OTS amount in stages with (i) sale of IPs, (ii) and also with demerger proposal of company on following terms & conditions:

• Upfront amount of Rs. 10.00 Crore deposited and kept in “No lien A/c” shall be appropriated immediately on conveying the approval of amendment in terms & conditions.

• Rs. 10.00 crore to be deposited by the party immediately on conveying the approval of amendment in terms & conditions.

• Rs : 50.00 crores on or before 31.03.2019.

• Rs. 120.00 crore on or before 30.09.2019.

• Rs. 30.00'crore on or before 31.03.2020.

• Rs. 19.00 crore + delayed Interest at Base rate on or before 30.06.2020.

• Post dated cheque for the aforesaid amount shall be obtained as per revised compromise schedule simultaneously at the time of conveying approval. However, last installment shall be paid for the balance amount plus remaining interest, 1 f any, on OTS amount.

• In the event of any default in payment of OTS amount as per revised schedule (either from sale of IPs or otherwise) shall render the OTS as failed and all reliefs concessions shall lapse automatically and bank will be entitled to recover the entire dues as per documents/prayer in the plaint, after adjusting the payment, if any, received including reference made with NCL'f and also all recovery/legal actions.

Other Conditions:—

1. The condition of release of IPs On payment of specific amount, IPs are proposed to be released as under:

S. No. Detail of IPs Amount to be deposited for release or IPs Last date of payment (on or before) 1. Hotel KC Cross situated at Sector 10, Panchkula belonging to M/s. Walia Traders Ltd. 50.00 31.03.2019 2. Our charge on company comprising of Land & Building measuring 1.65 acres situated at sector 3, Panchkula 120.00 30.09.2019 3, Hotel KC Residency at SCO 377-380, sector 35 B, Chandigarh measuring 579.67 Sq. Yds owned by Walla traders Ltd. 30.00 31.03.2020

(Amount in Crore)

2. Demerger Plan: Matter of issuance of NOC for permitting M/s Walia Traders Ltd. to proceed for demerger will be considered separately on receipt of complete proposal.

However, proposed demerger plan has not been treated as linked with the present OTS proposal.

All other terms and conditions of MC approval dated 23.07.2018 shall remain unchanged.

You are requested to adhere with all terms arid conditions of sanction as referred above.

Thanking You, Yours Sincerely,

BRANCH HEAD

139. Perusal of record reveals that another letter was written by the appellant Bank to the respondent on 27.08.2018 informing that OTS stood accepted and amount kept in no lien account stood appropriated towards recovery as per terms of approval of OTS. The said letter runs as under:—

Recovery Department Circle Office : 5, Ferozepur Road, Ludhiana-141012.

August, 27.2018

Shri Prem Pal Gandhi Shri Hitesh Gandni

M/s. KC Social Welfare Trust KC Tower Chandigarh Road, Nawanshahar (Pb).

Reg : Combined OTS proposal in NPA accounts 1, M/s Walla Traders Limited, 2, M/s K.C. Educational, Social and Welfare Society 3. M/s K.C. Hostel BO; Phase-1, Mohall (CO : Patiala) and 4. M/s. K.C. Social Welfare Trust (Regd) 80 : ARMB Ludhiana (CO Ludhiana)

We would like to inform that the approval of captioned ‘OTS’ for Rs. 239.00. crores by the competent Authorities was conveyed to you vide our letter dated 24.07.2018. However as requested by you the terms and conditions of the payment of OTS amount has been amended by the competent authorities and communicated to you vide our letter dated 16.08.2018. As per the amended terms and conditions of the payment of OTS, Rs. 10.00 crores kept in no lien account is to be appropriated immediately and Rs. 10.00 crores is to be deposited by you immediately on conveying the amended terms and conditions i.e. on 16.08.2018. Remaining amount Rs. 219.00 crores + (Interest is to be paid on various dates as per terms of approval.

The amount kept in “No lien”, account stands appropriated by us towards recovery as per terms of approval of captioned OTS. However, a another Rs. 10.00 crores which you should have paid/deposited. Immediately on conveying the amended terms and conditions i.e. on 16.08.2018; has not yet been deposited by you.

Please note that approved OTS is liable to be cancelled on account of non-adherence to the approved terms and conditions and concessions allowed will be withdrawn. As such, you are advised to pay immediately another Rs. 10.00 crores latest by tomorrow i.e. 28.08.2018 else approved OTS shall be cancelled.

Yours sincerely -

DEPUTY CIRCLE HEAD

140. However, since the respondent had kept on insisting upon the issue of demerger which was never part of terms of OTS sanction, the Bank had, therefore, again written a letter dated 09.05.2019 to the respondent that it has not linked the demerger plan with the terms of OTS proposal which already stood accepted and the respondent was asked to pay the instalment agreed upon towards the total outstanding as per the OTS, failing which the Bank would take legal action as per law. The letter dated 09.05.2019 runs as follows:—

Punjab National Bank

BO : SCO 16, Sector 55, Phase-I, Mohali

Date 09.05.2019

Sh. Prem Pal Gandhi

1. The Director,

Mis Walia Traders Limited, Sector 35-C, Chandigarh

2. Trustees:

K.C. Social Welfare Trust (Registered) K.C. Tower Chandigarh Road, Nawanshahar (Pb.)

Dear Sir(s)

Reg : Consolidated OTS approved in account 1. M/s Walia Traders Limited 2 : M/s K.C. Educational Social and Welfare Society 3. M/s K.C. Hostel and 4. K.C. Social Welfare Trust (registered).

Non-compliance of terms of sanction-

We wish to inform you our HO approved your OTS for Rs. 239.00 crorcs for dues in all above noted borrowing accounts and you were intimated accordingly by our Ludhiana Office. On your request, the bank amended terms of repayment vide letter dated 27.08.2018 of our Ludhiana Office and appropriating the upfront amount of Rs. 10.00 crores you were requested to submit your acceptance along with 1 installment of Rs. 10.00 crores towards repayment of OTS amount. Thereafter as per the terms of approved OTS, you were required to deposit Rs. 50.00 crores by 31.03.2019 for getting release of Hotel at Sector 10 Panchkula We also wish to inform you that while informing the amendments in the terms of OTS, you were informed-“The matter of issuance of NOC of permitting M/s Walia Traders Limited to proceed for demerger will be considered separately on receipt of complete proposal. However, proposed demerger plan has not been treated as linked with the present OTS proposal.

Keeping in view the terms of OTS, an amount of Rs. 50.00 crores has already become due from your side as on 31.03.2019. we wish to inform you that sufficient period has already elapsed after 31.03.2019, but you are not deposited Rs. 50.00 Crores (Rupees Fifty Crores only) by 24.05.2019 please not that in case of your failure to deposit Rs. 50.00 Crores, we shall continue our legal action including application filed under IBC in NCLT Chandigarh

Thanking your,

Yours Sincerely,

Branch Head

141. Record further reveals that respondent no. 1 had failed to comply with the terms of OTS sanction and the appellant Bank was left with no option but to reject the request of respondent for revival of the OTS and it is clear from the e-mail dated 07.10.2019 which runs as under:—

Reg : Amendment in Terms & Conditions of OTS in NPA A/C 1) M/s Walia traders Ltd., 2) M/s KC Educational Social & Welfare Society. 3) KC Hostel BO : Phase-1 Mohali & 4) M/s KC Social Welfare Trust (Reg.) BO : ARMB, Ludhiana.

From : MOHALI PHASE 1 (bol 155@pnb.co.in)

To : premgandhi_kc@ yahoo.co.in

Cc. : caneeraibatta@kchotelsandresorts.in

Date : Monday, 7 October, 2019, 05 : 35 pm IST:

07.10.2019

The Chairman,

M/s Walla Traders Ltd, SCO 377 to 380 Sector 35B

Chandigarh

Dear Shy

Reg : Amendment in Terms & Conditions of OTS in NPA A/C l) M/s Walia traders Ltd., 2) M/s KC Educational Social & Welfare Society. 3) KC Hostel BO : Phase-1 Mohali & 4)

M/s KC Social Welfare Trust (Reg.) BO : ARMB, Ludhiana.

This is in reference to your letter dated 01.10.2019, as you are already aware accepting OTS & making payments in turn you request to amend payment schedule turn and also requested us for allowing you the demerger of M/s Walia traders Ltd.

On your request our competent authority has approved change in terms and conditions of original sanction along with Instructing you to submit demerger plan and it was also Informed you that the repayment plan will have no link with approval of demerger scheme.

As per the approval you had to deposit Rs. 10.00 crores and unconditional acceptance letter along with the demerger scheme acceptable to the bank. But, you could not deposit this amount till March end 2019 and your acceptance letter was also not unconditional.

You arc required to deposit Rs. 50.00 crores by 31.03.2019 which is still awaited from you.

We sent you a notice of failure of OTS on 27.05.2019 due to non-repayment of

50 crores but again your requested us to get your failed notice revived and deposited Rs. 2 crore whereas our competent authorities advised us Rs. 10 crores to be deposited by you to get the failed OTS revived but you couldn't deposit the same.

We also submit that after adjusting all the means available to us for recovery of dues, after lapse of almost 3 years of becoming account NPA, we have referred the case to NCLT under IBC. It is not justified to allege that we are using this tool at preliminary stage, we are using this as last resort to recover the dues. Even after filing of application under IBC, we have given you a chance to settle the account outside the NCLT.

You at previous instances also have failed to meet your commitments to adjust our a/c or honour the commitment under OTS.

Keeping in view this fact, competent authorities has rejected your proposal of revival of OTS in above group of accounts on 27.09.2019 on account of less upfront amount offered by you.

Branch Head

Phase-l, Mohali.

BO : MOHAL1 PHASE-1

SECTOR-55, SAS Nagar(Punjab)

PIN CODE-160055

Ph. : -0172-4334100/10i/102/104/109

142. The record further reveals that thereafter, the respondent had approached the Hon'ble Punjab and Haryana High Court by way of a writ petition bearing no. 36014/2019 (O&M). However, the said writ petition was withdrawn by the respondent. The Hon'ble High Court while permitting the withdrawal of the writ petition, observed that competent authority shall decide the representation of the respondents within one week in accordance with law. The order dated 14.01.2020 passed by Hon'ble Punjab and Haryana High Court runs as under:—

IN THE HIGH COURT OF PUNJAB & HARYANA AT CHANDIGARH

CWP-36014-2019 (O&M) Date of decision : 14.01.2020

M/s Walia Traders Limited … Petitioner

Versus

Punj ab National Bank and another … Respondents

CORAM : HON'BLE MR. JUSTICE RAJIV SHARMA HON'BLE MR. JUSTICE HARINDER SINGH SIDHU

Present : Mr. Anand Chhibber, Senior Advocate with

Mr. Aalok Jagga, Advocate for the petitioner.

Mr. Puneet Bali, Senior Advocate with

Mr. Vibhav Jain, Advocate & Ms. Mriganki Nagpal, Advocate for the respondents.

RAJIV SHARMA, J. (ORAL)

CM-517-2020

Heard. Written statement filed on behalf of respondents no. l & 2 is permitted to be taken on record.

Application is allowed.

CWP-36014-2019

Learned counsel appearing on behalf of the petitioner after arguing at length, prays for and is permitted to withdraw the present petition in view of Annexure P-39 dated 04.09.2019.

The competent authority shall decide the representation within one week from today, in accordance with law.

Accordingly, the present petition is dismissed as withdrawn.

(RAJIV SHARMA)

(HARINDER SINGH SIDHU)

January 14, 2020.

143. According to the appellant Bank, thereafter the competent authority had considered the proposal of the respondents in its meeting held on 20.01.2020 and after due deliberation, declined the revised proposal containing demerger clause. The letter dated 21.01.2020 to this effect runs as under:—

BO : SCO-16. PHASE-I (SECTOR-55) MOHALI (SAS Naear)

Date : 21.01.2020

The Director,

M/s Walia Traders Limited, SCO : 377-380, Sector-35B,

Chandigarh.

(Email/Courier)

Dear Sir,

Reg : Compliance of orders dated 14.01.2020 of Honorable Punjab and Haryana High Court in CWP no. 36014 of 2019 fded by you.

Please refer your revised demerger scheme and OTS proposal dated 04.09.2019 and 23.10.2009 respectively.

The above proposals were forwarded to Head Office through Proper Channel for consideration of the same by the competent authority. The Competent Authority (HOCAC-III) in meeting held on 20.01.2020, after considering the facts of the matter and due deliberations, has not agreed with the proposals of revised demerger scheme and OTS proposal for Rs. 74.37 crores as proposed and has rejected the same.

This is for your information with respect to CWP36014 of 2019 filed by you.

Thanking You,

Yours sincerely,

Branch Head.

144. As per record, thereafter, a fresh proposal dated 11.12.2020 was submitted by the respondents offering a lesser amount against the amount for which the OTS already stood sanctioned. The said offer was also rejected by the appellant Bank and the said fact was communicated to the respondent vide letter dated 06.01.2021 which runs as under:—

Punjab National Bank 5, Ferozepur Road, Ludhiana 141012, Zonal Sastra Center, Tel : 0161-2550120

Ref : ZSC Walia Dated : 06.01.2021

Sh. Prem Pal Gandhi Director

M/s Walia Traders Ltd. Regd. Office - SCO 377-380, Sector 35-8, Chandigarh.

Reg : Compromise Settlement of your accounts - i) M/s. Walia Traders Ltd. ii) M/s K.C. Educational & Social Welfare Society, M/s. K.C. Hostel & M/s. K.C Social Welfare Trust (Regd.).

This has reference to your letters dated 30.12.2020 for resolution of captioned accounts of standalone basis.

In this connection, we are to inform you that previously the OTS was approved for Rs. 239.00 Cr. by Head Office on 23.07.2018 in group account and the same was declared as failed on 29.05.2019 due to non-compliance of terms and conditions by you.

Your present offer on standalone basis for all the above 4 (Four accounts) amounting to Rs. 167.68 Cr. is on the much lower than the previous offer of Rs. 239.00 Cr. as such the same is not acceptable. Presently, no OTS proposal of the party is pending with the Bank.

Thanking you,

(Anil Kasliwal)

Zonal Sastra Head

145. Against the said rejection of the letter, the respondent had approached the Hon'ble Punjab and Haryana High Court by way of C.W.P. bearing no. 3411/2021, and contended that the upfront amount of Rs. 20 Crore, deposited with the appellant is required to be refunded. Perusal of the affidavit dated 06.03.2021, filed by the Bank before Hon'ble High Court gives all the details of the matter and reveals that Bank had submitted in the affidavit that the offer has been rightly rejected by the competent authority in terms of circular dated 13.11.2019. The affidavit dated 06.03.2021 filed by the Bank before the Hon'ble Punjab & Haryana High Court runs as under:—

Affidavit dated 06.03.2021

M/S Walia Traders limited and another's Petitioner

Versus

Punjab National bank and another Respondent

Short Affidavit of Sh. Ravi Kumar S/0 Sh. Ram Kumar Thakur, Chief Manager, Circle Sastra, 2 Floor, SCO 43, Sector 54, Phase II, SAS Nagar (Mohali) Punjab on behalf of respondent no. 1 and 2.

I, the deponent above named solemnly affirm and declare as under:

1. That, vide order dated 14.01.2020 passed in CWP no. 36014 of 2019 titled Walia Traders v. PNB, competent authority of the answering bank was directed to decide the representation. That, the petitioner company vide such. Writ petition had agitated that its OTS proposal dated 23.10.2019 (Annexure P-48) was rejected by authority who was not competent to decide the same.

2. That in compliance of the aforesaid order dated 14.01.2020, the proposal was placed before the competent authority i.e. HOCAC - III Committee at Head Office. That after rejection of the proposal by the said committee, rejection of such offer by competent authority was communicated to the petitioner vide letter, dated 21.01.2020 (Annexure P-53)

3. That the competent authority to decide the proposal was HOC AC Level-Ill as per banks Recovery Division circular 57 of 2019 dated 13/11/2019. True copy of the circular is submitted as Annexure R/1. Therefore, it is submitted that the OTS proposal has been decided by the competent authority. Settlement policy dated 12/02/2016.

4. That the OTS proposal in question was first time given by the petitioner on 04.06.2018, for a sum of Rs. 205 Crore. There was no mention of linking the said proposal with any demerger. A copy of letter dated 04.06.2018 is annexed herewith and marked as Annexure R/2.

5. That since the amount was found to be less than the actual recoverable amount, the petitioner enhanced the said amount vide its letter dated 11.06.2018 and proposed to pay Rs. 239 crore. A copy of letter dated 11.06.2018 is annexed herewith and marked as ANNEXURE R/3. In the said proposal also, the factum of prior approval of demerger of the petitioner was never mentioned.

6. That pursuant to the said offer, the petitioner deposited a sum of Rs. 4 crore out of the upfront amount of Rs. 10 crore on 14.06.2018. The said amount was received from one M/S Munish interestingly, it appears that M/S Munish was not a genuine investor but merely a stooge of the petitioner as one of the associates of the petitioner M/s K.C. School transferred a sum of Rs. 4 crore on 04.06.2018 to account of one Munish Kumar Bhandari.

7. That on 02.07.2018 (Annexure P-2), the petitioner deposited three postdated cheques worth Rs. 15 crore. In this letter also there was no mention of demerger.

8. That the OTS proposal was accepted by answering respondents on 23.07.2018. A copy of said letter dated 23.07.2018 is annexed herewith and marked as ANNEX. R/4.

9. That after the said proposal was accepted for the very first time vide letter dated 27.07.2018 (Annexure P-3), the petitioner raised the bogey of linking its OTS proposal to acceptance of its demerger. In the email dated 16.08.2018 (Annexure P-4), the answering respondents clearly mentioned that the OTS was approved by Management Committee on 23.07.2018. In the said communication dated 16.08.2018, answering respondents made it categorically clear that the proposed demerger plan has not been treated as linked with the present OTS proposal.

10. That even after the delinking of demerger and OTS was made clear to the petitioner, it continued to deposit the amounts as late as 31.03.2019 towards its OTS proposal. The chart of various payments received has been given in.

11. That as the petitioner failed to deposit Rs. 50 crores on or before 31.03.2019 in terms of the OTS proposal, the answering respondents vide its letter dated 09.05.2019 once again gave last opportunity to deposit the said amount on or before 24.05.2019 and as the same was not deposited, the answering respondents cancelled the OTS proposal and communicated the same to the petitioner vide its letter dated 29.05.2019 (Anncxure P-33). From the aforesaid narration of facts, it is crystal clear that as the petitioner has deliberately concealed material facts and documents from this Hon'ble Court, therefore, the present petition is liable to be dismissed with exemplary costs.

12. That the OTS proposal dated 04.06.2018 modified vide letter dated 11.06.2018, accepted by the answering respondents nowhere linked the same with the proposal of prior demerger of the petitioner Company. The issue of demerger was raked up by the petitioner for the very first time after its OTS proposal was accepted on 23.07.2018. In its communication dated 16.08.2018, wherein repayment schedule was slightly changed, it was categorically made clear by the answering respondents that the OTS proposal cannot be linked with the demerger plan. Even after the said communication, the petitioner continued to deposit various amounts in lieu of the OTS proposal submitted by it.

13. Granted in principle approval of demerger vide communication dated 29.12.2018 (Annexure P-15) subject to getting final draft of demerge : - approved from respondent Bank and other terms and conditions. The petitioner vide letter dated 20.03.2019 (Anncxure P-25) submitted a revised demerger scheme and also requested for deferment of payment which was to be made uptil 31.03.2019. Vide communication dated 01.04.2019, respondent No. 2 rejected the said request as the petitioner did not gave an actual date latest by which the said amount which was to be deposited by 31.03.2019 would be paid. A copy of said email dated 01.04.2019 is annexed herewith and marked as ANNEXURE R/4. As the amount was not deposited within the stipulated time despite giving repeated reminders, respondent Bank had no other option but to cancel the OTS. Even after the cancellation of the OTS; the petitioner vide its letter dated 10.09.2019 proposed to give Rs. 1 crore as upfront and two cheques of Rs, 50 Lakh each for revival of the OTS along with issuance of NOC for filing demerger proposal before NCLT, Chandigarh. Respondent bank rejected the said proposal and returned the said amount and communicated the same to petitioner vide email dated 30.09.2019 (Annexure P-44).

14. Whenever respondent bank initiates step to recover its amount by invoking provisions of SARFAESI Act, or filing liquidation proceedings before NCLT, the petitioner either comes up with a flimsy proposal or gets an ex-parte stay order by concealing material facts as will be clear by details of multiple proceedings initiated by petitioner mentioned in the succeeding paragraphs.

15. That the petitioner has very conveniently withheld the details of litigation initiated by it or in its behalf so as to thwart the recovery proceedings. The details of the said legal proceedings are enumerated herein below:—

(i) One of the shareholders of petitioner company filed a civil suit before the Civil Judge (Senior Division), Gurdaspur; and obtained an ex-parte stay restraining answering respondent from taking possession of any properties belonging to Petitioner vide order dated 25.08.2011. The ex parte stay was vacated vide order dated 29.11.2017 as the plaintiff in that matter was found to have concealed relevant facts from the court. A copy of order dated 29.11.2017 is annexed herewith and marked as ANNEXURE R/6.

(ii) That petitioner filed C.W.P. No. 18902 of 2017 titled as-“Walia Traders Ltd. v. Punjab National Bank” before this Hon'ble Court. On 23.08.2017, this Hon'ble Court was pleased to direct as follows:—

‘Subject to petitioners' depositing Rs. 5.00 crores as upfront money within one week, this Court would consider their proposal for ‘OTS’ whereunder they will firstly pay Rs. 2.00 crores per month fora period of seven months and thereafter the balance payment in a time-bound manner List on 04.09.2017 for one week, let status quo re : sale or possession of secured assets be maintained”

The petitioner did not pay in terms of the said order and withdrew the aforesaid petition by stating that recovery suit filed by the Bank was pending before Debt Recovery Tribunal, Chandigarh. Copies of Orders dated 23.08.2017 and 04.09.2017 passed by this Hon'ble Court in CWP No. 18902 of 2017 are annexed herewith as ANNEXURE R/7 (Colly)

(iii) M/s Holiday Inn with which Petitioner has a revenue sharing agreement in respect to the mortgaged Hotel at Sector 3, Panchkula, filed a Suit before Ld. Civil Judge (Sr Division) Panchkula, wherein status quo order was passed regarding possession of the suit property. A copy of order dated 28.11.2017 is annexed herewith and marked as ANNEXURE R/8. Interestingly, the respondent Bank was never made party to the said suit and the said order was shown to the competent authority under SARFAESI Act so as to thwart the efforts of the respondent Bank to take physical possession of the mortgaged Hotel in question.

16. That the petitioner has also tried to mislead this Hon'ble Court by stating false facts regarding appropriation of money from the no lien account. Petitioner has stated that amount lying in no lien account was appropriated without the Petitioner's consent. However, this is contrary to Petitioner's tenor in correspondence with the answering respondent, as well as Petitioner's conduct subsequent to appropriation of amount kept in no lien account. Petitioner itself stated it, its communication dated 02.07.2018 (Annexure-P-2) asked the respondent Bank to appropriate Rs. 5 crores lying in no lien account immediately on sanction of the OTS proposal. Accordingly, on 27.08.2018, Petitioner was informed by the answering respondents vide Annexure P-S that the amount kept in no lien account stood appropriated towards recovery as per terms of approval of petitioners OTS proposal. At this stage, much to the surprise of the answering respondents, Petitioner chose to raise objection to the appropriation of the above amount vide Letter dated 28.08.2018 (Annexure P-6) and letter dated 11.09.2018 (Annexure P-7). However, even as the Petitioner raised objection for the sake of appearance, Petitioner continued making deposits regarding the OTS to the answering respondents. Petitioner's duplicates behaviour is evident from the following deposits made by Petitioner.

Sr. No. Date Amount Deposited by 1. 24.09.2018 Rs. 50 lac Cheque No. 846963 Issued by Hotel KC Residency 2. 26.09.2018 Rs. 2 Crore M/s Hotel KC (Unit of M/s Walia Traders Ltd.) 3. 20.11.2018 Rs. 50 lac M/s KC Education Trust 4. 27.11.2018 Rs. 2,00,00,000 DD No. 162187 and 162189, with purchaser being M/s KC Land And 5. 25.03.2019 Rs. 1 Crore DD No. 297090, with purchaser being shveta 6. 31.03.2019 Rs. 75 lac M/s Satluj Service Station, a firm associated with Mr. Prem pan Gandhi

If Petitioner had truly had as strong an objection to appropriation of amount lying in no lien account as they have portrayed in the present petition, Petitioner would not have deposited significant amounts of money with the answering respondent on numerous occasions, and that too in pursuance of the very same OTS proposal. Due to the pendency of the said OTS proposal, the liquidation proceedings of the petitioner company which were filed in the month of May 2018 before Ld. NCLT, Chandigarh by the respondent bank did not make any headway. Respondent bank bonafidely believed that the petitioner company will honour its obligation under OTS, now in hindsight it clearly reflects from the conduct of the petitioner th.at its only objective was to delay the liquidation proceedings by one way or another and the petitioner was never serious to honour its obligations as per OTS scheme submitted by it. The objection taken by the petitioner in the present petition completely contradicts the past stance of the petitioner.

17. That petitioner has stated time and again that payment to answering respondent has been made by certain investors:—

(i) In letter date 28.08.2018 (Annexure P-6), Petitioner has stated that their investors have set aside Rs. 10 crores a deposit towards OTS and are awaiting approval of answering respondent.

(ii) In letter dated 11.09.2018 addressed to answering respondent (Annexure P-70, Petitioner has stated that their investors have approved deposit of Rs. 5 Crore immediately in no lien account, and Rs. 5 Crore on approval of demerger scheme.

(iii) Petitioner has stated in letter dated 04.09.2019 (Annexure - P-39) that Petitioner's investor has requested petitioner company to resolve the matter or refund Rs. 20 crores.

(iv) Letter dated 28.08.2019, allegedly written by investor ‘Ravindra Joshi to Petitioner company (Annexure P-38) portrays the same picture, as alleged investor Mr. Joshi requested the Petitioner company to resolve the matter with the bank or refund of investment of Rs. 20 crores made in Petitioner company.

(v) Letter dated 10.09.2019 addressed by Petitioner to Respondent bank (Annexure P-41) reflects the above position as cheques worth Rs. 1 Crore annexed with it are from Indigo Fincap P. Ltd.

However, an analysis of deposits made by the Petitioner demonstrates that on numerous occasions, when Petitioner stated that deposits were made by their investors, it was ‘in fact the Petitioner who was either directly depositing the money or routing it through so called investors. Lhis deceitful conduct of the Petitioner is apparent through a bare perusal of relevant account details, Demand Drafts and cheques.

Sr. no. Date Amount deposited in EMD account in pursuance of OTS Deposited by 1. 14.06.2018 Rs. 4 Crore Deposited by Munish Interestingly, an amount of Rs. 4 crore was deposited in account No. 3519002100016619 of one Munish Kumar Shandari by M/S K.C. School through RTGS 2. 17.07.2018 Rs. 4,14,75,000/- Deposited from Saving Account No. 3519002100016619 of Mr. Munish Kumar Bhandari, whereas the petitioner or its associates have deposited equivalent sum in the said saving account of Mr. Munish Kumar Bhandari which clearly shows that the petitioner was …. 3. 24.09.2018 Rs. 50 lac Cheque No. 846963 issued by Hotel KC Residency (unit of M/S Walia Traders Ltd.) 4. 26.09.2018 Rs. 2 Crore RTGS transfer from account belonging to M/S Hotel KC to no lien account of Petitioner. 5. 15.11.2018 Rs. 1 Crore 40 Lac D.D. No. 162187 issued by KC Land and Finance Ltd. (Guarantor) 6. 15.11.2018 Rs. 60 lac D.D. No. 162189 issued by KC Land and Finance Ltd. (Guarantor : ) 7. 19.03.2019 Rs. 75 Lac D.D No. 017173 purchased by Mr. Prem Pal Gandhi (Guarantor 8. 19.03.2019 Rs. 90 klac Demand Draft No. 017172 purchased by Mr. Prem Pal Gandhi. 9. 19.03.2019 Rs. 35 lac Cheque No. 014419 issued by Mr. Hitcsh Gandhi (Guarantor and 10. 19.03.2019 Rs. 1 Crore Demand Draft No. 297090 purchased by Sheveta Gandhi 11. 31.03.2019 Rs. 75 lac Deposit by M/s Satluj Service Station in Account No : 1155002100019539 (sister concern)

Copies of account statements, cheques, and demand drafts mentioned in Paras 7 and 8 arc annexed herewith and marked as ANNEXURE R/9 (Colly).

18. That therefore it is clear that the money has not been deposited by the. ‘investors as is being put forth. The money has been deposited by the borrowers and guarantors.

19. That as per the OTS approved with amended terms on 16/08/2018 Rs. 10 crore was to be deposited immediately on conveying the approval of amendment terms and conditions. Thus, on approval of the OTS, bank was a sum of Rs. 20.00 crore.

20. That in view of the above the following amount has been appropriated in the loan account:

Date Amount deposited/approp riated Appropriated in the A/C of 23.07.2018 1,58,000.00 KC Educational Social and welfare society 18.08.2018 9,14,75,000.00 KC Social welfare trust 20.08.2018 50,39,628.00 KC Social welfare trust 20.08.2018 34.88,500.00 KC Educational Social and welfare society 28.12.2018 5,44,00,000.00 Walia traders 28.12.2018 50,00,000.00 KC Educational Social and welfare society 27.03.2019 1,35,00,000 Walia traders 09.05.2019 74,88,437.00 Walia traders 23.10.2018 124,000.00 Walia traders 30.03.2019 1,65,00,000.00 Walia traders 29.06.2019 2,05,000 Walia traders

21. That the petitioner is : only one company. Other associates namely KC Educational Social and Welfare Society and KC Social Welfare Trust are not party to the present petition. The amount has been appropriated in loan their accounts. Earlier there was a Joint OTS proposal in respect of loan accounts of all the four associates in which the amount deposited has been appropriated in different loan accounts. However, the amount has been appropriated in terms of the approved-compromise proposal.

22. That the present petitioner cannot claim the refund of the amount deposited and appropriated in accordance with terms of OTS thedifferent accounts of different concerns.

23. That the petitioner has been constantly tried to thwart bank recovery proceedings by one way or other and when bank take any concrete step to effect recovery, then petitioner comes with flimsy ground before this Hon'ble Court to delay the recovery process of the bank. The petitioner is making payments in reference to the OTS proposal time to time but-now challenging the appropriation at belated stage when two insolvency petitions-filed by answering respondent bank against it before NCLT Chandigarh have been reserved for judgment.

Verification:

I, Ravi Kumar, Deponent above named verify that the contents of above affidavit are true to my knowledge based on official record.

No part of it is false and nothing material has been concealed therefrom.

Deponent

146. Perusal of the above affidavit filed before the Hon'ble High Court of Punjab & Haryana reveals that the Bank has referred to its circular dated 13.11.2019. According to the appellant Bank, the Competent Authority to decide the proposal was HOC AC Level-Ill as per Bank's Recovery Division circular 57 of 2019 dated 13.11.2019. Perusal of para no. 21 of the said affidavit further reveals that the amount has been appropriated in terms of the approved compromise proposal. In para no. 22, the Bank has categorically stated that the present petitioner cannot claim the refund of the amount deposited and appropriated in accordance with terms of OTS. The above writ petition was, thereafter, dismissed as withdrawn by the Hon'ble High Court of Punjab & Haryana vide its order dated 07.04.2021, on the request of the respondent.

147. Let this Tribunal now examine the question whether as per Circular dt. 13.11.2019, HOCAC III was competent to reject the OTS proposal. Clause 26.3 of the Circular dt. 13.11.2019 runs as under:—

Clause 26.3

26.3 Any proposal submitted by the Branch can be rejected by an authority one step higher than the authority competent to approve the proposal. Accordingly, competent authority should refer the case for rejection to his next higher authority, giving reasons thereof. However, proposals falling under the powers of HOCAC level III and above may be rejected at the level of HOCAC Level III itself, as hither-to-fore.

Such rejection shall also be put up for Post Facto scrutiny to the next higher authority.

148. Perusal of the above Clause reveals that the proposal falling under the powers of HOCAC level III and above can be rejected at the level of HOCAC III. However, such rejection has only to be put up for post facto scrutiny to the next higher authority.

149. In the present case, the power to reject the proposal was, thus, within the competence of HOCAC III, however, it was to be put up before MC/Board for post facto sanction/approval.

150. Ld. counsel for the respondent has argued that it is not clear whether the matter was put up before MC/Board and the proposal was, thus, not rejected by the Competent Authority and, therefore, Ld. PO, DRT has rightly held that the OTS proposal can still be considered to be pending before the MC/Board.

151. This Tribunal has considered the above submission of Ld. Counsel for the respondents and is afraid that the same cannot be accepted for the reason that the proposal of the borrower was, in fact, considered and rejected by the competent authority i.e. HOAC-III. So far as post facto scrutiny/approval by higher authority is concerned, such consideration pertains to internal procedure of the appellant bank and moreover, in the opinion of this Tribunal it is also not within the domain of Ld. PO, DRT to go into the question whether the OTS has been rightly rejected or not. It is a settled law that in Securitization Application, the Ld. DRT is only required to see compliance of Provisions of SARFAESI Act and has no power to issue direction for restructuring or settlement. In the case of Satnam Agri Products Ltd. v. Union of India 2014 SCC OnLine Del 6965, the Hon'ble Division Bench of Delhi High Court has held that DRT in a proceeding u/s. 17 of the SARFAESI Act has no power to consider the settlement proposal and it can only perform such functions as the Statute provide. The relevant paras of the judgment are quoted below for ready reference:—

21. It may also be added that DRT being a statutory Tribunal can perform only such functions as the Statute provides. From a reading of the Securitization Act, we are unable to find any provision empowering DRT, in a proceeding under Section 17, to issue any such direction to the creditor Bank/Financial Institution to consider the proposal for rehabilitation.

22. The Supreme Court in Standard Chartered Bank v. Dharmender Bohi, (2013) 12 Scale 124 held that the DRT is required to function within its statutory parameters and does not have any inherent powers. While observing that Section 19(25) of the DRT Act confers limited powers, it was held:

“27. The aforesaid provision makes it quite clear that the tribunal has been given power under the statute to pass such other orders and give such directions to give effect to its orders or to prevent abuse of its process or to secure the ends of justice. Thus, the tribunal is required to function within the statutory parameters. The tribunal does not have any inherent powers and it is limpid that Section 19(25) confers limited powers. In this context, we may refer to a three-Judge Bench decision in Upper Doab Sugar Mills Ltd. v. Shahdara (Delhi) Saharanpur Light Rly. Co. Ltd., AIR 1963 SC 217 wherein it has been held that when the tribunal has not been conferred with the jurisdiction to direct for refund, it cannot do so. The said principle has been followed in Union of India v. Orient Paper and Industries Limited (2009) 16 SCC 286.”

It was further observed in Para 29:

“…………………….. The tribunal under the RDB Act has been established with a specific purpose and we have already focused on the same. Its duty is to see that the disputes are disposed of quickly regard being had to the larger public interest. It is also graphically clear that the role of the tribunal has not been fettered by technicalities. The tribunal is required to bestow attention and give priority to the real controversy before it arising out of the special legislations. As has been stated earlier, it is really free from the shackles of procedural law and only guided by fair play and principles of natural justice and the regulations formed by it.”

The Supreme Court has also made it clear that the Tribunals cannot assume the role of a Court of different nature which really can grant “liberty to initiate any action against the Bank” and that it is only required to decide the lis that comes within its own domain.

23. We are thus, of the view that DRT docs not have any power to issue any direction to the creditor bank to consider the rehabilitation or settlement proposal, if any submitted by the borrower.

152. The Hon'ble Supreme Court in its recent judgments has also categorically held that Bank cannot be directed to consider and accept the OTS proposal given by the borrower. Reliance in this regard can be placed upon the judgment of Hon'ble Supreme Court titled “Bijnor Urban Cooperative Bank Limited, Bijnor v. Meenal Agarwal, 2021 SCC OnLine SC 1255” and “State Bank of India v. Arvindra Electronics Pvt. Ltd., 2022 SCC OnLine SC 1522, dt. 04.11.2022.

153. The law is, thus, very clear that Ld. PO, DRT could not have probed into the question whether the OTS proposal has been wrongly rejected by the Bank on the ground that there were no documents on record to suggest that it was put up for post-facto sanction before higher authority. The Ld. PO has, therefore, wrongly held that since there is no material to suggest that post facto sanction was granted, the proposal should still, therefore, be deemed to be pending before the MC/Board. The Ld. PO, DRT in an application u/s. 17 of SARFAESI Act is not supposed to go into the internal procedure of the Bank relating to acceptance or rejection of OTS or to probe about the details as to when post facto sanction was granted by the competent authority.

154. The next question to be considered is whether the Bank was justified in appropriating the amount submitted in pursuance of OTS proposal.

155. As discussed in detail in earlier part of the judgment, the OTS proposal was accepted by the Bank and sanction letter was issued to this effect. Thereafter, the respondent had tried to amend the proposal by raising the issue of demerger. However, the Bank had refused to allow any amendment in the OTS by linking the same with demerger and since the OTS stood approved by the Bank, it has rightly appropriated the amount of Rs. 19,76,22,937/- deposited by the respondent in pursuance of OTS proposal. Ld. counsel for the respondent has raised an objection that a part of upfront amount could not have been appropriated at all since it was deposited by a third party. The Tribunal has given its thought to the matter and is of the opinion that Bank is not concerned with the fact as to who has deposited the upfront amount. The respondents may have made some internal arrangement regarding payment of part of upfront amount towards OTS, however, one thing is clear that amount was deposited on behalf of the respondents and, therefore, there is no illegality if the same stands appropriated by the Bank towards the debt.

156. Ld. Counsel for the respondents, has, however, relied upon the judgment of Hon'ble Punjab and Haryana High Court in Hari Kewal Pvt. Limited, Anaj Mandi Sunam District Sangrur v. Debts Recovery Appellate Tribunal, New Delhi, RA-CW No. 267 of 2020 (O&M) in CWP No. 2930 of 2019, decided on 26.03.2021 wherein it was held that if OTS is not accepted, the borrower is entitled for refund of upfront amount. The relevant part of the judgment is quoted below for ready reference:—

157. Ld. Counsel for the respondents has also relied upon the judgment of Hon'ble Supreme Court, in the case of Axis Bank v. SBS Organics Private Limited-(2016) 12 SCC 18, which was followed in the case of Kut Energy Private Limited v. Authorized Officer, Punjab National Bank-(2019) 4 RCR (Civil) 151, wherein it is held that amount deposited by the Borrower to show bonafide for consideration of the OTS proposal is to be refunded back to the Borrower and cannot be appropriated by the Bank in case of rejection of OTS. Thus, it was held that in case, the OTS is not accepted, the respondent is entitled for refund of upfront amount deposited by it to show bonafide of the OTS proposal.

158. This Tribunal has carefully gone through the above judgments and is of the opinion that these will apply in a situation where the OTS proposal has not been accepted by the Bank. However, as discussed in detail, in earlier part of the judgment, the OTS proposal of Rs. 239 Crores was duly approved, accepted and sanctioned by the Bank and this fact was conveyed to the respondents and in fact, these were respondents who had raised the issue of demerger and tried to amend the approved OTS and, therefore, the Bank in such a situation was fully justified in appropriating the amount of Rs. 19,76,22,937/- towards the debt of the respondents. The judgments cited by the Ld. counsel for the respondents are, therefore, clearly distinguishable and reliance upon the same is misplaced.

159. Ld. Counsel for the appellant has lastly argued that the Ld. PO, DRT has wrongly held that land in question is an agricultural land and, therefore, exempted under Section 31 (i) of SARFAESI Act. This Tribunal has considered the contention of Ld. counsel for the appellant. Perusal of record reveals that a report of Halka Patwari has been placed on record, which runs as under:—

Report of Patwari.

Respected Tehsildar Sahib Tehsil Nawan Shahr District Shahid Bhagat Singh Nagar. Subject : Application regarding inspection and report regarding land in village Mahala Tehsil Nawanshahar District Shahid Bhagat Singh Nagar of Hitesh son of Prem Pal, Prem Pal son of Khushhal Chand son of Jawand Mal resident of Nawanshahar and KC Land and Finance Ltd. Nawanshahr bearing Khasra No. 1/1, 2, 3, 4, 5, 6, 7, 8/2, 9/2, 10, 11, 12, 13, 14, 15/2016/117/2, 18, 19,20,21, 54, 52, 53, 54/1

Respected Sir,

1. It is submitted that land owned by Hitesh son of Prem Pal, Prcm Pal son of Khushhal Chand son of Jawand Mal resident of Nawanshahar and KC Land and Finance Ltd. Nawanshahr situated in village Mahali-2 bearing Khasra No. 1/1, 2, 3, 4, 5, 6, 7, 8/2, 9/2, 10, 11, 12, 13, 14, 15/2016/117/2, 18, 19, 20, 21, 54, 52, 53, 54/1 on which there is plant for making material for construction of road. That the kind of land is Gair Mumkin Abadi.

2. Therefore it is requested that Patwari Halka be ordered to inspect the land on the spot and give report. We shall be thankful.

Thanking you,

Applicant

Punjab National Bank.

Patwari I Ialka to inspect the spot and report.

Respected Sir, today as directed the above mentioned Khasra no. 4 inspected at the spot. It was found that on the above mentioned Khasra Nos. there is plant for making material for construction of road. The kind of flat was Chahi but due to installation of plant been is lying vacant. The report is submitted. On the spot it was found that the above mentioned Khasra numbers no crop is being cultivated and there is plant of NHL The report along with details is submitted

Sd/- 18/6/2021 True Translation Advocate

160. Perusal of the above report reveals that land in question is not an agricultural land and therefore, not exempted under Section 31(1) of the Securitization Act. Reliance in this regard can also be placed upon the judgment of the Hon'ble Supreme Court in the case of ITC Ltd. v. Blue Coast Hotels Ltd. (2018) 15 SCC 99, where in the Hon'ble Apex Court has considered Section 3l(i) of SARFAESI Act and inter-alia held that though no security interest can be created in respect of Agricultural Lands and yet if it was so created, goes to show that the parties did not treat the land as Agricultural land and that the debtor offered the land as security on this basis. The relevant para of the above judgment runs as under:—

38. It is undisputed that these lands were mortgaged in favour of the creditor under a deed dated 26.02.2010. Obviously, since no security interest can be created in respect of agricultural lands and yet it was so created, goes to show that the parties did not treat the land as agricultural land and that the debtor offered the land as security on this basis.

161. In view of the report of Halka Patwari as well as the judgment of Hon'ble Supreme Court in ITC Ltd. v. Blue Coast Hotels Ltd. (Supra), it cannot be held that agricultural land in respect of which security interest was created cannot be treated as Agricultural land and stands exempted under Section 31 (i) of the SARFAESI Act.

162. So far as the issue of Limitation is concerned, this Tribunal is of the opinion that SA filed by the applicant is within the limitation, for the reason that the sale notice was issued on 14.12.2020 and the same was issued between the period from 15.03.2020 to 28.02.2022 during which the limitation was exempted by the Hon'ble Supreme Court vide its judgment dt. 10.01.2022 in “Miscellaneous application no. 21 of 2022 in Miscellaneous application no. 665 of 2021 in SUO MOTO Writ Petition (C) No. 3 of 2020 in Re : Cognizance for Extension of Limitation”. In these circumstances, the SA has been filed by the appellant within the period of limitation. Thus, though the above issue of limitation stands decided in favour of the respondents, however, it does not help them for the reason that the appeal stands allowed on merit.

163. In view of the above discussions, this Tribunal is of the opinion that impugned order 29.09.2021 passed by Ld. DRT cannot be sustained in the eyes of law as the Ld. PO, DRT had no power to probe into internal arrangement of the Bank or into the fact whether post fact sanction was granted or not or to go into the question whether the OTS proposal was rightly rejected by the Competent Authority as held by the Hon'ble High Court of Delhi in case titled Satnam Agri Products Ltd. (Supra) and moreover the Ld. PO, DRT also does not have the power to examine the issue of enforceability/compliance of OTS scheme in view of the judgments of Hon'ble Supreme Court in the cases titled Bijnor Urban cooperative Bank Limited (Supra) and State Bank of India v. Arvindra Electronics Pvt. Ltd. (Supra). The appeals are, therefore, allowed and the impugned order dated 29.09.2021 is set-aside.

164. Copy of this order be provided to the parties free of cost.

165. File be consigned to record room.

PUNJAB NATIONAL BANK v. MS WALIA TRADERS LIMITED AND OTHERS

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

Appellant Bank's Arguments

Respondents' Arguments

Table of Precedents Cited

Court's Reasoning and Analysis

Holding and Implications

PUNJAB NATIONAL BANK v. MS WALIA TRADERS LIMITED AND OTHERS

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