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Compassionate Approach May Be Considered Due to Ongoing COVID-19 Pandemic: Kerala High Court

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Facts

The world and the country have received a blow since the year 2020. The spread of the pandemic and the subsequent lockdown has caused many damages in various fields. In the instant case, the Petitioners run the company M/s Dilmax Traders. 1st Petitioner is the proprietor of the company. They availed the cash credit facility on 4th September 2014 from the respondent bank, i.e., Canara Bank. The credit was Rs 1,10,000/- as of 2014. However, the business did not flourish as expected by the Petitioners, and in the year 2016, the Respondent bank issued a notice to Petitioners demanding the repayment of Rs 1,12,90,936.50 Only. The Bank granted 14 days to pay Rs 6,72,091/- agreeing to the Petitioner’s request, and payment of 4 lakh and odd was paid.

In the year 2018, the Bank filed a suit in the Debt Recovery Tribunal, and the court granted 15 EMIs for the repayment by the Petitioners. By Paying 15 lakhs, the Petitioner complied with the Court’s order, and as of 2018, they had paid Rs 19 Lakhs to the Bank. After suffering more losses in 2020 and 2021, the Petitioner moved an application for One Time Settlement, and the court decided it to Rs 70 Lakh. Rs 3 Lakh was remitted immediately, and the deadline was 31st May 2021 to settle the amount. Nevertheless, the Petitioners have moved to the court to extend the deadline of the OTS. 

Arguments before the Court

The petitioners were represented by Advocate K. Mohankannan assisted by T.V. Nemma, who argued that the Petitioners had suffered a loss in the business. Due to the COVID-19 pandemic, the buyer who agreed to buy the Petitioners’ land postponed it considering the surge of the disease. Hence the counsels requested the court to provide extra time for the Petitioners to comply with the deadline of the OTS and direct the Bank to defer the proceeding of recovery initiated against the Petitioner. 

The respondents were represented by the learned standing counsel Parvathy Menon and Gopikrishnan Nambiar. The counsels put forth their argument that the Petitioner had a default of payments for more than five years as of 2021, and the opportunities were provided with an ample number of times, yet they failed. They also argued that the Petitioners once decided the OTS cannot be altered or extended and bargain for more time. The court recorded the arguments of both the counsel for Petitioners and Respondents. 

Court’s Observation

The Court was of the view that a party entering into an OTS must adhere to the timelines prescribed and conditions for the settlement arrangement with the Bank. However, in the present case, the court concurred with the Petitioner’s request about their awareness of legal limitation, and this matter is also capable of viewing in the compassionate approach as the COVID-19 pandemic has caused distress everywhere. Hence the Court observed that the Bank could also take a compassionate approach in the instant matter. 

Court’s Orders

The learned single Judge considered the prayer by the Petitioner valid and legitimate. The court directed the Respondents 1-3 to consider the deadline extension request of the petitioners, and a decision is taken within two weeks from the day of the judgment. The bench also declared that any proceedings initiated or planned to be initiated to recover the amount were deferred.   

Click here to view the Judgement.


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