HC expounds One Time Settlement Scheme (OTS) cannot be rendered infructuous on fanciful reasons

 

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The Single Bench of the Delhi High Court in the case of Prayag Polytech Private Limited &Anr. vs State Bank of India consisting of Justice Sanjeev Narula noted that State Bank of India should act fairly and that a One Time Settlement Scheme (OTS)cannot be rendered infructuous on fanciful reasons; otherwise the intent of bringing an OTS scheme, and the ensuing consequences, would stand defeated.

Facts

In 2018, after deterioration of Petitioner-company’s (“Petitioner”) financial condition and non-availability of funds, SBI declared its account to be a Non-Performing Asset (“NPA”) and initiated proceedings before the Debt Recovery Tribunal (“DRT”). But in 2020 SBI sent a communication informing it of a One Time Settlement (“OTS”) scheme of NPAs and offered to settle the total outstanding amount, for which acceptance was also conveyed by the Petitioner. Thereafter, SBI issued sanction lettersetting-out the terms of the OTS, as per which failure of payment would render the OTS sanction infructuous.The final was duly encashed by SBI, yet the loan account was not closed. Neither did SBI withdraw the DRT proceedings nor issued the no-dues certificate. Aggrieved, the Petitioner filed this instant petition.

Procedural History

Being aggrieved, the Petitioner preferred an Appeal which is currently pending adjudication before the CIT (A). Meanwhile, the respondent issued the impugned reassessment notice u/s 148 of the Act seeking to reassess the income of the petitioner. Aggrieved, he filed a writ petition challenging the notice before this Court but failed to get it listed immediately. The petitioner subsequently another writ petition impugning the assessment order.

 

Contentions Made

Respondent: The petition is not maintainable as the Petitioner-company was obligated to deposit/ transfer the entire balance amount to SBI by 23^rdJuly, 2021 – which they have failed to do since the cheque was cleared only on 27^thJuly 2021.Any deposit after the cut-off date cannot revive the OTS which had become infructuous on account of non-payment.As regards the contention that the payment was made to SBI on 23^rdJuly 2021, it was submitted that the cheque was payable on presentation and encashment, and not on demand.

Observations of the Court

 

The Bench noted that when Petitioner-company tendered the final amount by cheque, SBI accepted the same without any condition. It did not dispute the cheque even on the subsequent date, and instead, proceeded to encash the same. Moreover, after having received communication regarding the final payment, there was radio silence on SBI’s end. So, it was concluded that SBI unconditionally accepted the payment; made no protest and credited the payment. Having accepted the payment and not offering any plausible explanation for the delay in responding can only mean that the current contention is an after-thought.

It further opined that if SBI was to consider the date of encashment of cheque as the date of payment, Petitioner-company should have been intimated of this stipulation in the sanction letter itself, or at least on the date when the cheque was accepted by SBI.

Relying on CIT & Ors. v. Chhabil Das Agarwal, it was further noted that as the Act provides complete machinery for assessment/reassessment of tax, assessee is not permitted to abandon that machinery and invoke jurisdiction of High Court under Article 226, unless the case fell under the exceptional grounds on which a writ petition is maintainable at the interim stage in tax matters.

 

Judgment

The Bench concluded that the Petitioner complied with the terms of the sanction letter, and SBI was directed to issue the no-dues certificate in terms of the OTS sanction letter. The intimation of OTS was also directed to be brought to the notice of DRT by filing an appropriate application to bring closure to the ongoing proceedings against the Petitioner. 

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(With input from news agency language)

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