Civil Procedure Code (CPC)

One time settlement guideline


In the Instant Case borrower, a lady enterpreneur has availed CC limit for her trading business for Rs.25.00 Lacs from SBI and given a collateral security, a residentail house in which she resides with her spouse, children and old grand laws.

The account has become NPA in Nov. 2011. A 13(4) notice has already been issued in the matter. According to the bank, they have already taken all the necessary permission for local authorities including DM & police for taking physical possession of the house.

Though the borrower is making payment on regular basis, but the same is not enough to liquidate the loan. The principal outstanding as per bank is Rs.23..35 Lacs and total outstanding is Rs.30.00 lacs.

The query is how can the borrower apply for one time settlement of the account. At what amount bank will normally accept as OTS. Does the bank take in to consideration the value of Mortgaged property while negotiating for OTS.

What time the bank may allow if bank agrees for OTS to liquidate the OTS amount.

Thanks.

 
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Advocate

Here, the outstanding amount is Rs. 30.00 lacs on higher side. The value of the property must be more than that. The Bank will never agree for OTS, because they have got property in their hand. It is advisable to pay off completely, or else they will take away the possession of the property as provided under Section 13 (4) of the Securitization Act and auction the property and credit the proceed in the NPA account. 

 
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I am sorry, but I do not find the answer of Mr. Hemang acceptable. The bank will never agree for OTS, I really can't understand. Bank always agrees for OTS in all cases. The matter of contention is the amount of OTS the bank agrees for settlement.

If the amount of security is more than the outstanding, than the bank may not extend any relaxation. But cases where security is 50% of the amount is due in that case banks become liberal to certain extent.

My question is from you learned peoples, how much relaxation bank may extend in the example case mentioned.

 
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 It's valuable advice senior...I am practicing in the field of DRT also.....ashok kushwaha

 
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Mr Hemang is absolutely right..You may file appeal u/s 17 of securitisation Act against the order passed in sec 13[4] of the act for taking possession.In appeal you may offer a proposal for OTS and if the proposal is genuine than court [DRT] may also support to you.

 
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LAWYER

Mr. Pawan,

It is not advisable to mix the issues. U r talks with Bank about OTS etc are good and need be continued, but the legal proceeding must be opposed b4 the appropriate forum.

As adviseed by Adv. Goyal Sir, file a Securitazation Appeal b4 the DRT and raise all u r valid contentions.

If u r from Mumbai or Maharashtra u may contact me at - mharit@in.com

 
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Advocate

It has been categorically mentioned by you to the effect that: 

 

13(4) notice has already been issued in the matter. According to the bank, they have already taken all the necessary permission for local authorities including DM & police for taking physical possession of the house.

 

In this view of the matter, my presumption is that the Bank would hardly enter into compromise. And more particularly, when the orders have been obtained by the mortgagees. However, as suggested by Shri Goyal sir, you may prefer an appeal before Debts Recovery Tribunal and take all contentions. You may request the Court as well as the Bankers for "settlement". You can happily concluded, provided the Bankers agree.

 
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OTS are of two different kinds. OTS under bank's cmprehensive corporate's policy. Another OTS policy evolved by RBI. The first one is framed under settlement management policy and is not only discretionay but also discriminatory. Whereas RBI OTS has statutory flavour and is neither discretionary nor discriminatory.

Allahabad High Court in  Sardar Prem Singh Vs. Bank of Baroda & Others III(2004)BC 455(DB) held that the party cannot claim for One Time Settlement (which has no statutory flavour) as the same would amount to rewriting of contract. No court or tribunal has any power to direct parties to enter into contract. Therefore non-statutory OTS cannot be claimed as matter of right. But RBI OTS can be claimed as a matter of right provided the NPA account fits into the RBI OTS norms and the propsal must be in tune with the policy. Supreme Court in Sardar Associates Vs. Punjab & Sindh  Bank: 2009 (8) SCC 257 reversing the the view taken in Oriental Bank of Commerce Vs Sunder Lal Jain & Anr.: AIR 2008 SC 1339,  while fortifying its view taken in Central Bank Of India Vs. Ravindra 2002 (2) CTC 354 (SC) held that (a) RBI is conferred with authority of issuing binding directions and are having statutory force; (b) any violation of RBI guidelines is an offence and attracts punishment within the meaning of Sec 46(4) of Banking Regulations Act 1949.

  


 
Reply   
 
Advocate

In my view OTS by RBI is given for a specified period of time beyond which time the borrower loses right to apply for OTS as a matter of right though it can be taken as a matter of convenience by both banker and borrower as a yardstick to arrive at some truce.

 
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Yes I do agree with the view of Mr. Chandrasekhar. Supreme Court in Oriental Bank of Commerce Vs. Sunderlal Jain AIR 2008 SC 1339 held that, the OTS proposal should be in tune with the OTS policy. Otherwise it cannot be entertained. This view is not contradicted in Sardar Associates's case referred to above.

 
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