JUDGMENT :- 1. This Writ Petition challenges the order passed by the Management Committee of Union Bank of India rejecting the request made by the petitioner to condone the delay in complying with the conditions of one time settlement and to extend the time for payment, as per the recovery policy of the Bank and in the light of the guidelines framed by the Reserve Bank of India. Background facts :- 2. M/s. A.D. Jeyaveerapandia Nadar & Brothers and their sister concern M/s. A.R.J. Textiles Pvt. Ltd., took over a sick unit from Small Industries Corporation of Tamil Nadu. The sick unit was engaged in processing of fabrics. The Company was renamed as M/s.Narmada Textiles Processing Mill Private Ltd. Since the promoters were known to the Bank and in view of their long standing banking relationship since the year 1982, the Bank sanctioned term loan and working capital loan to the new concern towards its expansion cum modernization. Subsequently, during the year 1999, the existing Companies promoted by A.D. Jeyaveerapandia Nadar & Brothers, A.R.J. Textiles Pvt. Ltd. and Narmatha Textiles Processing Mills Pvt. Ltd., were all merged under a single group and was named as M/s.Narmada Textiles Ltd. The Bank renewed the existing credit facilities periodically. 3. While the matters stood thus, the Union Bank of India [hereinafter referred to as 'the Bank'], in exercise of the power conferred under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act [hereinafter referred to as the SARFAESI Act], issued demand notice under Section 13(2) on 8 August 2006 calling upon the petitioner to pay a sum of Rs.47,61,67,924/- being the outstanding as on 31 June 2006. The demand notice was followed by possession notice dated 18 December 2006. The petitioner in response to the notice dated 8 August 2006, submitted a representation before the Bank on 13 January 2007, and requested for one time settlement. The settlement proposal was considered by the Bank and ultimately, the petitioner was directed to pay a sum of Rs.30,75,00,000/- by their letter dated 27 June 2007. As per the one time settlement, the petitioner was expected to pay the entire amount in four installments on or before 30 October 2007. 4. The petitioner paid a sum of Rs.79 lakhs on 3 January 2007 and Rs.308 lakhs on 24 April 2007. As per the one time settlement, the petitioner was expected to pay the entire amount in four installments on or before 30 October 2007. 4. The petitioner paid a sum of Rs.79 lakhs on 3 January 2007 and Rs.308 lakhs on 24 April 2007. The third installment [Rs.1275 lakhs] was to be paid on or before 30 June 2007 and the last payment of Rs.1413 lakhs has to be made on or before 30 October 2007. The Bank in their order sanctioning one time settlement indicated that the installment to be paid on 30 June 2007 should be raised by the sale of Kodambakkam property and by borrowing the remaining amount. Since the petitioner was not in a position to sell the Kodambakkam property, the payment was delayed. In the meantime, a third party filed a SARFAESI Application before the Debt Recovery Tribunal with respect to the Kodambakkam property. The Bank was also a party to the said proceeding. In view of the pendency of the SARFAESI application in S.A.No.150/2007, the petitioner was not in a position to raise the money necessary for paying the third installment. 5. Subsequently, the petitioner was able to arrange a buyer to purchase the Kodambakkam property for a sum of Rs.15 crores. Accordingly, a sum of Rs.1275 lakhs was appropriated towards the dues. Since the petitioner experienced difficulties in paying the balance amount, representation was given to the Bank seeking extension. Accordingly, time was extended till 31 December 2009 subject to payment of interest and penalty of Rs.5 crores. Though the petitioner made certain payments, they were not in a position to wipe out the entire arrears. This made the bank to withdraw the one time settlement. 6. The order passed by the Chief Manager of the Bank withdrawing the one time settlement was challenged before this Court in W.P.No.17626/2010. The Division Bench taking into account the earnest efforts made by the petitioner to discharge the loan amount, opined that the order passed by the Chief Manager cancelling the one time settlement was not in accordance with the guidelines framed by the Reserve Bank of India. Accordingly, the Writ Petition was allowed and the matter was remitted to the Bank for fresh consideration. 7. Subsequently, Credit Recovery Department [hereinafter referred to as 'Regional Office'] forwarded the proposal made by the petitioner to the Management Committee. Accordingly, the Writ Petition was allowed and the matter was remitted to the Bank for fresh consideration. 7. Subsequently, Credit Recovery Department [hereinafter referred to as 'Regional Office'] forwarded the proposal made by the petitioner to the Management Committee. The Management Committee considered the proposal routed through the Settlement Committee and concurred with the views expressed by the Regional Office and recommended to decline the offer. The Management Committee while rejecting the proposal observed that it was not in line with the Reserve Bank of India guideline requiring the Bank to recover not less than net present value of realizable value of the available securities. Feeling aggrieved by the order of rejection, the petitioner is before this Court. 8. The Bank filed a counter affidavit in answer to the contentions raised in the affidavit filed in support of the Writ Petition. 9. The material contentions in the counter affidavit reads thus ;- (i) One time settlement amount was fixed at Rs.3075 lakhs and the said amount was directed to be paid in four tranches. The first two installments were duly paid. However, in spite of repeated reminders and extension of time, the petitioner has not paid the balance amount. Therefore, the Bank was compelled to cancel the one time settlement on 28 September 2007. (ii) The Bank accepted the revised one time settlement proposal subject to payment of Rs.2508 lakhs with interest from 1 August 2009 vide letter dated 27 August 2009. The petitioner sought time till 31 March 2010 to clear the arrears. The Bank however extended the time up to 20 January 2010. Even then the petitioner has not paid the amount. (iii) The petitioner is having an alternative remedy and as such, the Writ Petition is not maintainable. (iv) The order passed by this Court in W.P.No.17626/2010 was duly complied with in its letter and spirit and after considering the matter, at various levels the application submitted by the petitioner was rejected. SUBMISSIONS :- 10. The learned Counsel appearing for the petitioner would submit :- (i) The note made by the Regional Office to the Management Committee was not in accordance with the guidelines framed by the Reserve Bank of India. (ii) The Bank failed to consider the earnest efforts taken by the petitioner to pay the amount as per the one time settlement. The learned Counsel appearing for the petitioner would submit :- (i) The note made by the Regional Office to the Management Committee was not in accordance with the guidelines framed by the Reserve Bank of India. (ii) The Bank failed to consider the earnest efforts taken by the petitioner to pay the amount as per the one time settlement. (iii) The note prepared by the Regional Office and forwarded to the Management Committee contains a statement that 64 acres of land is easily marketable. The said property was shown as a secured item. In fact, it was not a secured item of property. Because of the inclusion of a non-secured item, the value of the secured asset was shown at a higher rate and that was the primary reason which actually weighed with the Managing Committee to reject the proposal. (iv) The Bank accepted the payments made by the petitioner by selling their Kodambakkam property and those payments were made long after the expiry of the time granted by the Bank to pay one time settlement amount and as such, the Bank was not justified in rejecting the request to pay the OTS amount with interest for the period of delay. (vi) Neither the Settlement Committee nor the Management Committee took any efforts to consider the genuine attempt made by the petitioner to comply with the time schedule and the funds raised even through private source to pay the amount. (vii) The Settlement Committee mechanically adopted the report prepared by the Regional Office and recommended to reject the proposal. (viii) The Management Committee has not passed a detailed order and even the Bank has no case that there was a fulfledged deliberation with respect to the proposal made by the petitioner. (ix) The guidelines permitted the Bank to condone the delay on payment of interest. There was no attempt made by the Committee to consider the request made for condoning the delay. 11. The learned senior counsel for the Bank would contend thus :- i. The petitioner has already filed an appeal before the Debts Recovery Tribunal challenging the measures taken by the Bank under the SARFESI Act and as such, the issues raised in the present writ petition can also be agitated before the Debts Recovery Appellate Tribunal. ii. When the petitioner has got a clear alternative remedy, the writ petition is not maintainable. iii. ii. When the petitioner has got a clear alternative remedy, the writ petition is not maintainable. iii. The proposal placed by the Regional Office was duly deliberated by the Settlement Committee and later, the Management Committee also considered the issue and it was found that the petitioner has not made out a case for OTS. Therefore, the proposal was rightly rejected. iv. The OTS was a time bound one and as such, the petitioner was bound to comply with the schedule of payment strictly. Having failed to pay the amount, the petitioner cannot be heard to say that they should be given the benefits even after the expiry of the time granted originally. v. The Settlement Committee considered the issue at its meeting held on 28 December 2010 and submitted their recommendations to the Management Committee. The Management Committee at its meeting held on 30 December 2010 considered the issue independently and rejected the proposal. Therefore, no interference is called for in the said order. DISCUSSION :- 12. The note prepared by the Regional Office of the Bank indicates that the petitioner was having a very good relationship with the Bank originally. Sl.No.5.9 read along with Sl.No.5.10.7 of the note would amply prove that the petitioner suffered huge loss during the year 1999 due to one of their overseas buyer becoming bankrupt. The Company did not receive any export order and they were forced to sell their stock in the domestic market at a low price, thereby further compounding their losses. The petitioner thereafter remitted total amount of Rs.316.72 lakhs. This made the Bank to upgrade their account to Standard Category. However, on account of the Audit Objection, it was again downgraded and declared as NPA with retrospective effect from 30 September 2001. 13. The petitioner submitted a proposal for one time settlement on 17 April 2007 offering a sum of Rs.3075 lakhs in full and final settlement of the claim made by the Bank. The said proposal was considered by the Bank and ultimately, the Bank agreed to receive the said sum of Rs.3075 lakhs in full quit. 14. 13. The petitioner submitted a proposal for one time settlement on 17 April 2007 offering a sum of Rs.3075 lakhs in full and final settlement of the claim made by the Bank. The said proposal was considered by the Bank and ultimately, the Bank agreed to receive the said sum of Rs.3075 lakhs in full quit. 14. The terms of payment as contained in the proceedings dated 27 June 2007 read thus :- Date of Amount in lakhs Remarks Payment 3/1/07 79 Remittance from personal sources 20.04.2007 308 Sale Proceeds of Ashok Nagar property 30.06.2007 1275 Saleof Kodambakkam property and by borrowing 30.10.2007 1413 Out of sale of Erode Factory or otherwise Total 3075 15.The petitioner appears to have made substantial payments towards one time settlement. The first two installments were paid very promptly. It was only when the third installment was due, a dispute arose with respect to the Kodambakkam property. It is also a matter of record that a SARFESI Application was filed at the instance of a third party on the basis of a sale agreement. The Bank was also a party to the said proceeding. 16. The petitioner failed to pay the third installment within the time granted by the Bank. This resulted in withdrawal of the OTS on 28 September 2007. In fact, the letter sent by the Bank withdrawing OTS contains a clear statement that it was only on account of the failure of the petitioner to pay Rs.1275 lakhs on or before 30 June 2007 that the Bank was constrained to cancel the OTS. The petitioner thereafter submitted an application on 25 July 2008 to extend the time. The petitioner also agreed to pay interest @ 9% for the delayed period. The petitioner appears to have discussed the matter with the General Manager of the Bank and pursuant to the said discussion on 20 July 2009, a revised offer was given wherein it was made clear that besides interest, penalty would also be paid. The Bank, as per their letter dated 27 August 2009 granted OTS once again for a sum of Rs.25.08 crores payable by 31 December 2009. Though the petitioner made a request to extend the time for payment till 31 March 2010, the Bank in their communication dated 15 September 2009 made it clear that the amount has to be paid before 31 December 2009. Though the petitioner made a request to extend the time for payment till 31 March 2010, the Bank in their communication dated 15 September 2009 made it clear that the amount has to be paid before 31 December 2009. However, as per communication dated 4 January 2010, the Bank informed the petitioner that the time was extended till 20 January 2010. Since the amount was not paid, the OTS was cancelled on 21 January 2010. The petitioner thereafter submitted an application on 29 July 2010. In the said application, the petitioner made a request to condone the delay in making payment. The Bank by way of their communication dated 16 August 2010, informed the petitioner of their decision rejecting the proposal. Subsequently, on 20 August 2010, the petitioner paid a sum of Rs.180 lakhs and the payment was duly acknowledged by the Bank. The petitioner again paid a sum of Rs.100 lakhs on 16 September 2010. The petitioner as per their representation dated 11 October 2010, requested the Bank to review the situation, considering their difficulties. 17. Since there was no follow up action, the petitioner challenged the order of withdrawal of OTS dated 21 January 2010 before this Court in W.P.No.17626/2010. The Division Bench as per order dated 25 November 2010, allowed the writ petition and the matter was remitted for fresh consideration by the Competent Authority. While allowing the writ petition, the Division Bench observed that the petitioner has made earnest efforts to settle the amount. 18.The petitioner made a fresh representation on 2 December 2010 to permit them to pay the OTS amount as per proceedings dated 27 June 2007. THE ISSUE :- 19.The core question is whether there was a genuine effort made by the Bank to consider the request of the petitioner to condone the delay in paying the OTS amount in accordance with the guidelines issued by the Reserve Bank of India and the relevant norms prescribed by the Bank and more particularly in the light of the order dated 25 November 2010 in W.P.No.17626/2010 20.The recovery policy adopted by the Bank contains basic guidelines governing the settlement by way of one time settlement, consideration of such proposals and sanctioning the OTS, condonation of delay in paying the amount as per the settlement, the functions of the Settlement Committee and the Management Committee and the matters incidental thereto. THE GUIDELINES :- 21.The basic guidelines framed by the Bank in accordance with the RBI directives mandates the Bank to make a distinction between chronic defaulters and defaulters due to circumstances beyond their control. The relevant guideline reads thus :- "1(B) While tackling NPAs, a proper distinction will have to be made between wilfuldefaulters and defaulters due to circumstances beyond their control, while in case of the former, a tough stand has to be taken, in the latter case a sympathetic view is to be taken". 22.Clause 11.1 deals with the constitution of Settlement Advisory Committee. The Settlement Advisory Committee at the Central Level alone can taken up OTS and waiver in case the amount is more than Rs.200 lakhs. The Chairman and Managing Director and in his absence the Executive Director will constitute the Management Committee at the Central Office Level. The Settlement Committee should comprise the senior officials of the bank as members besides two independent members. There should be a coram of four members with presence of at least one independent member. 23. The Guidelines on the working of the Settlement Advisory Committee reads thus :- "11.2 Guidelines on the working of the Settlement Advisory Committees :- i. The task of the Committees is to examine the compromise/ relief/ write-off proposals and ensure that the settlement offer is fair, reasonable, in the best interests of the Bank and in line with the guidelines for settlement of such proposals as contained in the policy. ii. The Committees will meet at regular intervals in keeping with the flow of proposals. The frequency of Committee meetings will be such that proposals are cleared expeditiously. iii. The Committees will record minutes of the happenings, giving account wise observations/ recommendations. Extracts of such minutes will form part of final proposals submitted to the delegated authorities. iv. There shall be a monthly reporting system for cases disposed of by a delegatee, to the next higher authority, in the existing format." 24. The guidelines regarding the working of the settlement advisory committee indicates that the Committee should examine the compromise proposal and deliberation of the committee should be properly recorded in the minutes of the meetings. The recovery policy permits the Bank to condone the delay in making payment as per one time settlement in case justifiable reasons are shown. 25. The guidelines regarding the working of the settlement advisory committee indicates that the Committee should examine the compromise proposal and deliberation of the committee should be properly recorded in the minutes of the meetings. The recovery policy permits the Bank to condone the delay in making payment as per one time settlement in case justifiable reasons are shown. 25. Clause 15 deals with miscellaneous matters which includes the delay in payment of amount under OTS. The said clause read thus :- 15. Miscellaneous matters 15.1 Delay in payment of amounts under O.T.S. 15.1.1. The purpose of O.T.S. is to receive settlement amount quickly so that same can be recycled to earn income. Hence generally payment terms of settlement should be strictly enforced. However in some genuine cases where borrower could not arrange the settlement amount in prescribed time schedule due to delay in sale of assets or arranging funds from relatives/ friends etc. some flexibility is needed. 15.1.2. Under the existing policy it is not clarified as to how delay in payment of amounts under O.T.S. should be dealt with. This has led to proposals approved by MCM being referred again to MCM for condonation of delay and accepting amounts under O.T.S. with or without interest for period of delay. It is felt some flexibility should be introduced with regard to condoning delay in payment of O.T.S. as indicated below :- (a) It is permissible to accept amounts under O.T.S. and there is no need to cancel the O.T.S. if the delay is not inordinate and the borrower is willing to pay interest for the period of delay. (b)The period of delay to be calculated from the last date when entire settlement amount becomes due for payment as per settlement terms. (c) The interest chargeable should be preferably at BPLR rate, however considering the specific circumstances it may be reckoned up to 9% per annum simple. However, under no circumstances it should be less than the rate of interest payable, if any, as per the original settlement terms. The interest should be calculated on reducing balance. (c) The interest chargeable should be preferably at BPLR rate, however considering the specific circumstances it may be reckoned up to 9% per annum simple. However, under no circumstances it should be less than the rate of interest payable, if any, as per the original settlement terms. The interest should be calculated on reducing balance. (d) Delegation of powers for condonation of delay for MCM sanctioned proposals is as under :- Period of delayApproving Authority More than 6 months to 1 year C.M.D. Up to 6 months E.D. (e) In the case proposals sanctioned by R.M./FGM delay condonation should be by the concerned sanctioning authority to the extent of period permitted as under :- Delay period Original proposal sanctioned by Regional ManagerGeneral Manager Up to 3 months Regional Manager General Manager beyond3 months General Manager E.D./M.D. up to 6 months Beyond 6 months E.D./M.D. E.D./M.D. (f) In the case of ED/MD sanctioned proposals delay condonation can be for any period. (g) In exceptional circumstances the sanctioning authority can consider a fresh proposal within his delegated authority depending upon the merit of the case subject to confirmation by next higher authority". 26. The Bank modified the recovery policy on 1 August 2008 and the modified policy was circulated by way of Instruction Circular No.8065. The provision regarding condonation reads thus :- 4. Administrative Powers for condonation of delay is modified. In order to expedite recovery process the powers for condonation of delay in payment of O.T.S. amounts have been simplified. Now for all the proposals approved by executives viz., RM/FGM/ED/CMD, the power for condonation of delay shall be as under :- Original proposal sanctioned by RM/FGM/ED/CMD Delay periodAuthority to condone delay 3 months ... Regional Manager Up to 6 months ... Regional Manager Beyond 6 months up to 12 months ... FGM/GM/CRLD Beyond 12 months upto 36 months ... ED/MD 4.3.For MCM approved proposals, the existing instructions will continue and no change has been envisaged. 4.4. It is to be noted that these powers are to be exercised in genuine difficulty cases only and subject recovery of interest @ BPLR rate for delayed period. 4.5. In case delay is beyond 36 months proposal to be re-negotiated and placed for approval of competent authority afresh. 27.There is no dispute that the Recovery Policy of the Bank was made in accordance with the directives issued by the Reserve Bank of India. 4.5. In case delay is beyond 36 months proposal to be re-negotiated and placed for approval of competent authority afresh. 27.There is no dispute that the Recovery Policy of the Bank was made in accordance with the directives issued by the Reserve Bank of India. The question whether the guidelines issued by the Reserve Bank of India is statutory in nature and binding on the banks is no more res integra in view of the decision of the Supreme Court in SardarAssociates & Ors. Vs. Punjab and Sind Bank & Ors., [ 2009 (8) SCC 257 ]. 28. The OTS sanctioned by the Bank permitted the petitioner to pay the amount by way of sale of specified properties. The petitioner was permitted to pay the amount in four installments. The petitioner promptly paid the first and second installments amounting to Rs.387 lakhs. Admittedly, SARFESI Application was filed by an agreement holder and the said proceedings stood in the way of selling the Kodambakkam property and to pay the third installment of Rs.1275 lakhs. The Bank was a party to the said proceeding and as such, the Bank was fully aware of the reasons which actually prevented the petitioner from selling the Kodambakkam property and to pay the third installment. 29. The guidelines proceeds on the basis that while tough stand should be taken against wilful defaulters, sympathetic view has to be taken in the case of those defaulters who are victims of circumstances. Therefore, the issue regarding condonation of delay has to be considered in the light of these basic guidelines. 30.The materials available on record gives a clear indication that the petitioner was not in a position to sell the Kodambakkam property on account of the stay obtained by Mr.P.Sitaram Reddy who has entered into a joint venture agreement for developing the property. 31. The brief history as found in the note submitted by the Regional Office to the Management Committee contains the details of the efforts taken by the petitioner to revive the unit and to pay the loan installments. The note contains the payment made by the petitioner for the period from 1 July 2004 to 31 July 2006. The Bank in recognition of the steady payment made by the petitioner upgraded the account to standard category on 30 September 2005. The Bank renewed the facilities in the existing levels. The note contains the payment made by the petitioner for the period from 1 July 2004 to 31 July 2006. The Bank in recognition of the steady payment made by the petitioner upgraded the account to standard category on 30 September 2005. The Bank renewed the facilities in the existing levels. However, Central Statutory Auditors during the audit of the branch dated 31 March 2006 did not concur with the upgradation and reverted the account of the petitioner to NPA category with retrospective effect from 30 September 2001. It was only the defects pointed out by the Audit Wing which prompted the Bank to declare the account as NPA and to issue notice under Section 13(2) of the SARFESI Act on 8 August 2006. Even after the withdrawal of OTS on 28 September 2007, the petitioner made substantial payments. 32. The petitioner made efforts to sell their property ad-measuring 64 acres. Immediately, the Bank initiated proceedings before the Debts Recovery Tribunal and obtained an order of injunction restraining them from alienating the property. The said property was also later included as an asset and the value of the property was also taken to show the total value of the secured assets. 33. When the petitioner challenged the order cancelling the OTS in W.P.No.17626/2010, a conditional order was passed by this Court directing them to deposit a sum of Rs.5.50 crores in a 'no lien' account before 13 August 2010. The Division Bench considered the deposit and granted stay of further proceedings till the disposal of the writ petition. The note prepared by the Regional Office contains a statement that the petitioner has deposited a sum of Rs.180 lakhs on 28 September 2010 and Rs.100 lakhs on 21 October 2010 and therefore, the total amount deposited after OTS would come to Rs.2053.78 lakhs. 34. The developments that had taken place subsequent to the disposal of the writ petition in W.P.No.17626/2010 was also taken note of by the Regional Office. According to the said note, the petitioner tendered Rs.4.71 crores along with a letter dated 2 December 2010 and requested the Bank to condone the delay in complying with the terms of the OTS dated 27 June 2007. Therefore, the proposal before the Bank was one to condone the delay in making payment as per the original OTS. 35. The question is whether the regulations permits the Bank to condone the delay. Therefore, the proposal before the Bank was one to condone the delay in making payment as per the original OTS. 35. The question is whether the regulations permits the Bank to condone the delay. 36. The recovery policy gives a clear indication that the Managing Director was empowered to condone the delay beyond 12 months and up to 36 months. The Executive Director was also authorized to condone the delay. The delay in the present case is less than 36 months and as such, the Managing Director and in his absence the Executive Director are the authorities to condone the delay. 37. The further question is whether the Settlement Committee and the Management Committee have considered the request made by the petitioner to condone the delay in its proper perspective and in the light of the directions given by this Court earlier in W.P.No.17626/2010. 38. The original OTS was made on 27 June 2007. The petitioner has paid substantial amount even after the cancellation of OTS. The petitioner has also explained the difficulties faced by their industry for the purpose of depositing the third installment. The note prepared by the Regional Office also gives a clear indication about the efforts taken by the petitioner to comply with the terms of OTS. The recovery policy also mandates that such genuine reasons should weigh with the authorities while taking a decision in the matter of condoning the delay to pay the amount under one time settlement. 39. The Regional Office along with their note made two recommendations. The first recommendation wanted the Management Committee to decline the relief. The second recommendation gives details about the payment to be made by the petitioner upto 31 March 2011, in case extension is granted. However, after giving these two alternate recommendations, the Regional Office has also enclosed a draft resolution denying the benefit. 40. It is true that two independent members were nominated to the Settlement Advisory Committee. Mr.Umarji, Chief Advisor, Legal, Indian Bank's Association was made as an independent member of the Settlement Committee and he was present during the meeting held on 28 December 2010. The other member was not present. 41. Clause 11.2(iii) indicates that the settlement advisory committee will record the minutes of the meetings, giving account wise observations/ recommendations and extracts of such minutes would form part of the final proposals submitted to the Management Committee. 42. The other member was not present. 41. Clause 11.2(iii) indicates that the settlement advisory committee will record the minutes of the meetings, giving account wise observations/ recommendations and extracts of such minutes would form part of the final proposals submitted to the Management Committee. 42. We have perused the original file produced by the Bank. Though the Settlement Committee was expected to deliberate on the issue, no discussion was found recorded in the minutes. 43. The minutes of the Settlement Committee meeting reads thus :- MINUTES OF SETTLEMENT ADVISORY COMMITTEE CRLD:CO:10-11/128 The following proposal was circulated to the settlement advisory committee who have recommended the same to be placed before the Management Committee. Sr.No. Date Name of the Account Branch Rs.inLacs Sanctioning Amount Authority 1 omitted 2 27.12.10 NarmathaTextiles OTS A.R.B. Chennai M.C.M. 1021 3 omitted (T.S.Sahni) (V.K.Khanna) (N.S.Mehta) General Manager General Manager General Manager (C.Abraham) (S.Govindan) General Manager General Manager (M.R.Umarji) [Justice S.D.Pandit (Retired)] Member SAC Member SAC (Not present) 44. The Settlement Committee merely accepted the proposal made by the regional Office and forwarded it to the Management Committee in spite of the guidelines requiring the Committee to record reasons. 45. The Reserve Bank of India directives wanted the Bank to include two independent members in the Settlement Committee. The said direction was made with a specific purpose. Reserve Bank of India wanted the Settlement Committee to consider the proposal independently and it was only with the said purpose, two independent members were directed to be included in the Settlement Committee. Clause 11.2 of the Recovery Policy gives clear guidelines to the Settlement Advisory Committee as to how they should function. 46. The records produced by the Bank relating to the meeting conducted by the Management Committee on 30 December 2010 also does not contain any details about the deliberations. The Management Committee observed that the proposal was not in tune with the guideline issued by the Reserve Bank of India and rejected the proposal. 47. The Management Committee is the Appellate body empowered to decide the proposal for condoning the delay in honouring the OTS. It is true that there were several cases before the Committee and it would be impossible to conduct a detailed enquiry with respect to each of the proposals. In fact, it was only with a view to assist the Management Committee, Settlement Advisory Committee was constituted. It is true that there were several cases before the Committee and it would be impossible to conduct a detailed enquiry with respect to each of the proposals. In fact, it was only with a view to assist the Management Committee, Settlement Advisory Committee was constituted. The constitution of Settlement Committee was in accordance with the instruction given by the Reserve Bank of India. The Settlement Committee was expected to discuss the issue threadbare and submit their recommendation to the Management Committee. Therefore, in the absence of any deliberation and consideration of the matter, the recommendation made by the Settlement Committee cannot be taken as a valid recommendation. 48. The Supreme Court in Woolcombersof India Ltd. vs. Workers Union, [ 1974 (3) SCC 318 ], indicated the requirement of giving reasons in support of a particular conclusion. The Supreme Court said :- "5. .... The giving of reasons in support of their conclusions by judicial and quasi judicial authorities when exercising initial jurisdiction is essential for various reasons. First, it is calculated to prevent unconscious unfairness or arbitrariness in reaching the conclusions. The very search for reasons will put the authority on the alert and minimize the chances of unconscious infiltration of personal bias or unfairness in the conclusion. The authority will adduce reasons which will be regarded as fair and legitimate by a reasonable man and will discard irrelevant or extraneous considerations". 49. The Supreme Court in M/s.Kranti Associates Pvt. Ltd. & Anr. vs. Sh.Masood Ahmed Khan and ors., 2010(9) Scale 199, surveyed the earlier decisions of the Supreme Court and observed that even in administrative decisions, reasons should be recorded, in case such decisions would affect anyone prejudicially. The Supreme Court summarized the legal position thus :- 51.... (a) In India the judicial trend has always been to record reasons, even in administrative decisions, if such decisions affect anyone prejudicially. (b) A quasi-judicial authority must record reasons in support of its conclusions. (c) Insistence on recording of reasons is meant to serve the wider principle of justice that justice must not only be done it must also appear to be done as well. (d) Recording of reasons also operates as a valid restraint on any possible arbitrary exercise of judicial and quasi-judicial or even administrative power. (e) Reasons reassure that discretion has been exercised by the decision-maker on relevant grounds and by disregarding extraneous considerations. (d) Recording of reasons also operates as a valid restraint on any possible arbitrary exercise of judicial and quasi-judicial or even administrative power. (e) Reasons reassure that discretion has been exercised by the decision-maker on relevant grounds and by disregarding extraneous considerations. (f) Reasons have virtually become as indispensable a component of a decision-making process as observing principles of natural justice by judicial, quasi-judicial and even by administrative bodies. (g) Reasons facilitate the process of judicial review by superior courts. (h) The ongoing judicial trend in all countries committed to rule of law and constitutional governance is in favour of reasoned decisions based on relevant facts. This is virtually the lifeblood of judicial decision-making justifying the principle that reason is the soul of justice. (n) Since the requirement to record reasons emanates from the broad doctrine of fairness in decision-making, the said requirement is now virtually a component of human rights and was considered part of Strasbourg Jurisprudence. See Ruiz Torija v. Spain EHRR, at 562 para 29 and Anya v. University of Oxford, wherein the Court referred to Article 6 of the European Convention of Human Rights which requires, “adequate and intelligent reasons must be given for judicial decisions”. 50. The proposal submitted by the Regional Office to the Management Committee contains certain information which are found to be incorrect. The property ad-measuring 64 acres was shown as a property belonging to the petitioner. Admittedly, the said property jointly belongs to the petitioner and third parties. It was not an item mortgaged to the Bank. The value of the said property was also included in the total value of the secured assets and this made the Management Committee to observe that the proposal was not in line with the Reserve Bank of India guideline requiring the Bank to recover not less than net present value of realizable value of the available securities. 51. The petitioner in their representation dated 2 December 2010 wanted the Bank to condone the delay in paying one time settlement amount. The letter concluded with the following request :- "Ours is a genuine case, where we could not arrange the settlement amount in prescribed time schedule due to delay in sate of assets and arranging funds. Therefore, it is justified to condone the delay without interest for period of delay." 52. Therefore, the proposal was in the nature of a request to condone the delay. Therefore, it is justified to condone the delay without interest for period of delay." 52. Therefore, the proposal was in the nature of a request to condone the delay. 53. The Bank has no case that the Recovery Policy is in the nature of guidelines to the Officers to decide the issues relating to one time settlement and the same is not mandatory in nature. On the other hand, it is the admitted position that these guidelines were framed as per the directions given by the Reserve Bank of India and as such, they are statutory in character. 54. The Management Committee proceeded on the premise that it was a fresh proposal for OTS. 55. The recovery policy permits the Bank to condone the delay up to a period of 36 months, of course subject to payment of interest. 56. It is true that it is for the Bank to exercise the discretion to condone the delay. In view of the guidelines requiring the Bank to consider the request to condone the delay in complying with the one time settlement, the petitioner has got a right to call upon the Bank to consider the condonation application, in accordance with the RBI Guidelines and there is a corresponding duty on the part of the Bank to examine the proposal on merits. 57. The learned senior counsel for the bank raised a preliminary objection with regard to the maintainability of writ petition. According to the learned senior counsel, the petitioner has already filed an appeal challenging the measures taken by the Bank under the provisions of SARFESI Act. Therefore, the issue raised in the present writ petition could also be raised before the Debts Recovery Tribunal. We are not in a position to agree with the said contention for more than one reason. 58. The petitioner has raised several questions in the earlier Writ Petition. This Court while allowing the writ petition and remitting the matter to the Management Committee, very clearly indicated that the OTS was cancelled by the Chief Manager on his own and the same was not in consonance with the RBI guidelines. It was further indicated that the petitioner had made efforts to settle the amount and therefore, wanted the Competent Authority to consider the claim on merits. It was further indicated that the petitioner had made efforts to settle the amount and therefore, wanted the Competent Authority to consider the claim on merits. In spite of making such observations and directing the Bank to consider the issue afresh, no serious efforts appears to have been taken by the Administrative Committee. In fact, the note prepared by the Regional Office wanted the Managing Committee to pass a resolution confirming the order passed by the Chief Manager which was already set aside by this Court. The Debts Recovery Tribunal would not be in a position to interpret the order passed by this Court and arrive at a decision as to whether the issue was considered by the Bank in accordance with the order in W.P.No.17626/2010. The materials available on record shows that the Bank has not considered the issue in the light of the mandatory guidelines and in accordance with the directions given by this Court earlier in W.P.No.17626/ 2010. Therefore, we are of the considered view that there is no point in directing the Debts Recovery Tribunal to consider the issue raised by the petitioner at this point of time. In fact, it is in the interest of the Bank to give a quietus to the matter and to recover the amount in case the petitioner is not entitled to an order to condone the delay in fulfilling the terms of one time settlement. 59. The Settlement Committee and the Administrative Committee of the Bank omitted to consider the relevant materials and by completely overlooking and ignoring the nature of application filed by the petitioner, rejected the request to condone the delay. The decision making process was therefore not in accordance with the directives of the Reserve Bank of India and the Recovery Policy and guidelines of the Bank. 60. In SatyavirSingh vs. State of Uttar Pradesh, [ 2010 (3) SCC 174 ], the Supreme Court considered the question as to what is meant by "perverse finding" and observed that "perverse finding" would include a finding which suffers from infirmity of distorted conclusions and glaring mistakes. 61. The Supreme Court in BhikhubhaiVithlabhai Patel and Ors. vs. State of Gujarat & Anr. [ 2008(4) Scale 278 ], observed that the term "consider" implies consideration of all relevant aspects of the matters. 61. The Supreme Court in BhikhubhaiVithlabhai Patel and Ors. vs. State of Gujarat & Anr. [ 2008(4) Scale 278 ], observed that the term "consider" implies consideration of all relevant aspects of the matters. The Supreme Court said :- "The term "consider" means to think over; it connotes that there should be active application of the mind. In other words the term "consider" postulates consideration of all the relevant aspects of the matter." 62. In Eureka Forbes Ltd., vs. Allahabad Bank and ors. [ 2010(6) SCC 193 ], the Supreme Court while considering the concept of public accountability and performance, indicated that the same would apply to the banks as well. The Supreme Court observed :- "82.Principle of public accountability is applicable to such officers/officials with all its vigour. Greater the power to decide, higher is the responsibility to be just and fair. The dimensions of administrative law permit judicial intervention in decisions, though of administrative nature, but are ex facie discriminatory. The adverse impact of lack of probity in discharge of public duties can result in varied defects not only in the decision-making process but in the decision as well. Every public officer is accountable for its decision and actions to the public in the larger interest and to the State administration in its governance." 63. The Supreme Court in JayrajbhaiJayanthibhai Patel vs. Anilbhai Jayanthibhai Patel and Ors. [ 2006(9) Scale 147 ], indicated the extent of judicial review in administrative matters. The Supreme Court said ::- "18.Having regard to it all, it is manifest that the power of judicial review may not be exercised unless the administrative decision is illogical or suffers from procedural impropriety or it shocks the conscience of the court in the sense that it is in defiance of logic or moral standards but no standardised formula, universally applicable to all cases, can be evolved. Each case has to be considered on its own facts, depending upon the authority that exercises the power, the source, the nature or scope of power and the indelible effects it generates in the operation of law or affects the individual or society. Each case has to be considered on its own facts, depending upon the authority that exercises the power, the source, the nature or scope of power and the indelible effects it generates in the operation of law or affects the individual or society. Though judicial restraint, albeit self-recognised, is the order of the day, yet an administrative decision or action which is based on wholly irrelevant considerations or material; or excludes from consideration the relevant material; or it is so absurd that no reasonable person could have arrived at it on the given material, may be struck down. In other words, when a court is satisfied that there is an abuse or misuse of power, and its jurisdiction is invoked, it is incumbent on the court to intervene. It is nevertheless, trite that the scope of judicial review is limited to the deficiency in the decision-making process and not the decision. 64. The Supreme Court in UttamraoShivdas Jankar vs. Ranjitsinh Vijaysinh Mohite Patil, 2009(13) SCC 131 , observed that an error of fact touching the merit of the decision vis-a-viz the decision making process would also come within the purview of the power of judicial review. The relevant observation reads thus :- "32.Undisputably, there exists a distinction between a decision making process adopted by a statutory authority and the merit of the decision. Whereas in the former, the Court would apply the standard of judicial review, in the latter, it may enter into the merit of the matter. Even in applying the standard of judicial review, we are of the opinion that the scope thereof having been expanded in recent times viz., other than (i)illegality, (ii) irrationality, and (iii)procedural impropriety, an error of fact touching the merit of the decision vis-a-viz the decision making process would also come within the purview of the power of judicial review." CONCLUSION :- 65. We are, therefore, of the view that the Management Committee failed to consider the issue in accordance with the order dated 25 November 2010 in W.P.No.17626/2010 and in the light of the guidelines/Recovery Policy framed by the Bank as per the directions of the Reserve Bank of India. 66. We are, therefore, of the view that the Management Committee failed to consider the issue in accordance with the order dated 25 November 2010 in W.P.No.17626/2010 and in the light of the guidelines/Recovery Policy framed by the Bank as per the directions of the Reserve Bank of India. 66. SUMMARY OF REASONS IN SUPPORT OF OUR CONCLUSION :- (i) This Court as per order dated 25 November 2010 in W.P.No.17626/2010, directed the Competent Authority to consider the claim of the petitioner for extension of time for making payment as per OTS, on merits and in the light of the efforts made by them to settle the amount. However, the impugned order or the file produced by the Bank does not contain any material indicating such consideration. (ii) The Regional Office made an incorrect note before the Administrative Committee and the said note was approved without considering the proposal independently and in accordance with the guidelines; (iii) The Regional Office in their note indicated that the account was classified as NPA on 30 September 2001, meaning thereby that it was an old case of NPA. It is a matter of record that the classification was only in the year 2006 and it was given retrospective effect from 30 September 2001. (iv) The recovery policy and the relevant guidelines mandates that the Bank has to consider the case of those who have defaulted on account of circumstances beyond their control, sympathetically. Adverse circumstances indicated by the petitioner including the order passed by the Debts Recovery Tribunal restraining them from selling the property and to pay the third installment was not considered by the Bank; (v) The Bank obtained an order of injunction restraining the petitioner from selling 64 acres of land. The said property was not the subject matter of mortgage. It was therefore, not a secured asset. Even then the value of the said property was included in the total value of the assets. The said property was valued at Rs.2600 lakhs. Because of the inclusion of the said amount, the value of secured assets was shown at a higher rate and as such, the Management Committee observed that the proposal was not in line with RBI guidelines requiring the Bank to recover not less than net present value of realizable value of the available securities. Because of the inclusion of the said amount, the value of secured assets was shown at a higher rate and as such, the Management Committee observed that the proposal was not in line with RBI guidelines requiring the Bank to recover not less than net present value of realizable value of the available securities. This inclusion of the value of an unsecured asset had taken the case of the petitioner out of the Reserve Bank of India guidelines. (vi) There was an error in the decision making process, on account of the failure on the part of the Bank to consider the proposal in accordance with the guidelines prescribed by RBI and the recovery policy of the Bank; (vii) The petitioner was able to sell the Kodambakkam property subsequently and a sum of Rs.1286.70 lakhs was deposited with the Bank. Similarly, to comply with the order passed by the Division Bench in W.P.No.17626/2010, the petitioner paid a sum of Rs.5.50 crores on 13 August 2010. Another payment of Rs.180 lakhs was made on 28 August 2010. Again a sum of Rs.100 lakhs was paid on 21 September 2010. Therefore, between the period from 20 June 2007 to 21 September 2010, a total sum of Rs.2053.78 lakhs was paid by the petitioner. These genuine efforts taken by the petitioner to pay the amount was not considered by the Managing Committee; (viii) The Bank made no efforts to consider the request made by the petitioner to condone the delay. The Bank proceeded on the basis that it was yet another proposal for settlement. This made the Bank to state that the proposal was not in line with the Reserve Bank of India guidelines. (ix) The policy permits the Bank to condone the delay and extend the time, subject to payment of interest. The impugned order does not indicate any such consideration; (x) The Settlement Committee was required to consider the proposal objectively indicating the reasons. However, there is nothing on record to show that there was any such discussion in respect of the proposal made by the petitioner. (xi) The Management Committee endorsed the views expressed by the Regional Committee. There was no independent consideration of the matter, on merits with reference to the delay factor. (xii) The file produced by the Bank indicates the total non-application of mind by the authorities. (xi) The Management Committee endorsed the views expressed by the Regional Committee. There was no independent consideration of the matter, on merits with reference to the delay factor. (xii) The file produced by the Bank indicates the total non-application of mind by the authorities. (xiii) Even after the withdrawal of one time settlement, the petitioner made substantial payments. Though the guidelines mandates that such genuine attempt to settle the dues must receive active consideration while deciding the question of bona fides, no effort was taken by the Settlement Committee or Management Committee even to look into those genuine attempts. 67. Accordingly, we quash the impugned order and remit the matter to the Management Committee of the Bank for fresh consideration. DIRECTION :- 68. The Management Committee is directed to consider the issue afresh on merits with reference to the applications dated 29 July 2010 and 2 December 2010 submitted by the petitioner to condone the delay in complying with the terms and conditions of one time settlement and in accordance with the guidelines/ Recovery Policy of the Bank taking into account the substantial payments made by the petitioner pursuant to the one time settlement and even after cancellation of the OTS. Such exercise shall be completed within a period of eight weeks from the date of receipt or production of a copy of this order. 69. We make it clear that our observation shall not be treated as an expression on the merits of the claim made by the petitioner and it is for the Management Committee to take a decision in the matter independently on merits and as per law. 70. The writ petition is allowed as indicated above. No costs. Consequently, connected Mps. are closed.