The Gujarat High Court applied the principle of promissory estoppel in the context of an Art 226 petition while ruling in favour of the petitioner Harekrushna Infra Projects Pvt Ltd against the respondent State Bank of India (SBI), concerning the One Time Settlement (OTS) scheme. Single Bench of Justice Biren Vaishnav directed the State Bank of India to issue a no due certificate to the Petitioner-Company and further release the mortgage documents in its custody for the release of the properties in question.
Justice Vaishnav clarified, “the act on behalf of the bank therefore in not releasing the title documents, not issuing of a no due certificate and not withdrawing the pending legal actions against the petitioners is arbitrary and violates the constitutional guarantee enshrined under Article 14 of the Constitution of India as held by the Hon’ble Supreme Court in the case of Central Bank of India versus Devi Ispat (2010) 11 SCC 186.”
The High Court further directed SBI to withdraw all pending proceedings against the Petitioners. The Single Bench stated that under Section 14 of the SARFAESI Act the pending proceedings are illegal, nulla and void abinitio.
Justice Vaishnav said, “it is clear that the principle of promissory estoppel applies. The bank by its conduct of offering an OTS settlement intended to create legal relations which the petitioners had acted upon in light of the promise made and paid the amount on or before the 30th of December 2017. This action was apparently accepted in principle by the bank as not only for the title clearance certificate but valuation reports letters were written by the bank to the advocates and the valuers. The amounts were paid and accepted by the bank and once the petitioners had acted upon the promise set out by the bank, the bank cannot be allowed to go back on its proposal on the basis of a letter dated 28th August 2018 stating that the scheme of OTS was not applicable as the cases of the petitioners was reported as fraud.”
The Petitioner herein had received a letter from the Respondent-Bank offering a One Time Settlement (OTS) of outstanding dues to the tune of Rs. 12, 34, 54,566 by a payment of Rs. 9,90,58,133. The Bank offered that if this amount was paid before 31st December 2017, the Petitioners would be eligible for an additional incentive of 10% over the OTS amount. The Petitioner indicated in October 2017 that it would remit the amount by the due date but the Bank should release the documents and give a no due certificate. However, the same was not released despite full payment.
Justice Vaishnav observed, “When the entire amount was paid pursuant to the OTS settlement, the bank could not have cancelled the settlement vide its letter dated 28.08.2018 stating that as the case of the petitioners was reported as fraud, the petitioners were not entitled to the benefits of OTS. In light of the decision in the case of Lotus Hotel (Supra), it is clear that the principle of promissory estoppel applies.”
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