HIGH COURT OF MADHYA PRADESH,

AT JABALPUR

HON’BLE SHRI JUSTICE SANJAY DWIVEDI

ON THE 3RD OF SEPTEMBER, 2022

WRIT PETITION No.8213 / 2022

BETWEEN:-

SHRI PAWAN AGRAWAL,

S/O. SHRI KAILASH AGRAWAL,
AGED ABOUT 55 YEARS,
R/O. E-1/50, ARERA COLONY, BHOPAL
GUARANTOR OF M/S MADHYA BHARAT
PHOSPHATE PRIVATE LIMITED

….PETITIONER

(REPRESENTED BY SHRI SANJAY AGRAWAL, SENIOR ADVOCATE

WITH SHRI PRAMOD KUMAR SAHU, ADVOCATE)

AND

SMALL INDUSTRIES DEVELOPMENT

BANK OF INDIA (SIDBI)
STRETCHED ASSETS RECOVERY BRANCH,
SAMRUDDHI VENTURE PARK,
UPPER GROUND FLOOR, MIDC ROAD,
MIDC INDUSTRIAL AREA, MAROL,
ANDHERI EAST, MUMBAI – 400093
THROUGH ITS ASSISTANT GENERAL MANAGER

...RESPONDENT

(REPRESENTED BY NONE, THOUGH REPORTEDLY SERVED)

-------------------------------------------------------------------------------------------------
 -:- 2 -:-
W.P.No.8213/2022

Reserved on : 03.09.2022
Delivered on : 15.09.2022

(O R D E R)

As per the office note dated 13.08.2022, although notice sent through

RAD is not served yet, but as per the appendage document downloaded from the

website showing Track Consignment, delivery of notice on respondent-Bank is

confirmed on 14.07.2022. However, nobody has put-in appearance on behalf of the

respondent-Bank. In the circumstance, the petition is finally heard and decided on

the basis of submissions made on behalf of the petitioner, as also taking note of the

documents available on record.

2. The encapsulated facts are that the respondent-Bank had sanctioned

credit facilities to M/s. Madhya Bharat Phosphate Private Limited and the petitioner

being the Director of the said Company stood as guarantor for the Company and

mortgaged his immovable property bearing Survey No.233/1/2/2, area admeasuring

0.320 hectare situated at Village Salam, Tahsil Huzur, District Bhopal (M.P.).

Indeed, the loan account of the Company had become NPA and

Corporate Insolvency Resolution Process was initiated before NCLT and based on

NCLT order dated 11.09.2018, the respondent-Bank obtained a sum of

Rs.3,28,91,948/- in lieu of agreed loan facility. Accordingly, the respondent-Bank

issued NOC in favour of the Company. A copy of NOC is made available on record
 -:- 3 -:-
W.P.No.8213/2022

as Annexure-P/1. The NOC granted by the respondent-Bank in favour of main

borrower i.e. the Company gives understanding that the recovery of required

amount from the borrower has been made, despite they are initiating recovery from

the guarantor i.e. petitioner.

In relation to full and final settlement of personal guarantee, the respondent-

Bank by letter dated 23.10.2020 (Annexure-P/2) asked the petitioner to submit a

compromise proposal.

The petitioner by letter dated 29.10.2020 (Annexure-P/3) submitted a

proposal of Rs.30,00,000/- towards full and final settlement of his personal

guarantee, but it was brushed aside by the respondent-Bank asking the petitioner to

ameliorate the amount of proposal.

Thereafter, the petitioner by letter dated 23.12.2020 (Annexure-P/4) modified

his offer by escalating the amount to the extent of Rs.35,00,000/- towards full and

final settlement of personal guarantee. However, the respondent-Bank again

declined that offer and insisted the petitioner to modify it again.

Then, the petitioner on 15.01.2021 (Annexure-P/5) again modified the order

to the extent of Rs.40,00,000/- towards full and final settlement of personal

guarantee. Thereafter, on 21.02.2021 the petitioner was asked to visit the Branch for

oral discussion on the issue. On the basis of discourse undergone between the

parties, the petitioner extended the offer to the tune of Rs.56.30 Lac and deposited
 -:- 4 -:-
W.P.No.8213/2022

10% of proposed amount i.e. Rs.5.65 Lac as upfront amount with the respondent-

Bank.

By letter dated 22.06.2021 (Annexure-P/8), the respondent-Bank principally

accepted the offer of the petitioner to consider One Time Settlement (OTS) offer of

Rs.56.30 lac subject to upfront deposit of Rs.5.63 Lac i.e. 10% of OTS amount. In

response thereto, the petitioner submitted a compromise offer (Annexure-P/9) in

the prescribed format as demanded by the respondent-Bank. Thereafter, the

respondent-bank demanded a copy of order dated 11.09.2018 passed by NCLT,

Ahmedabad. Then the petitioner submitted a copy of the order dated 11.09.2018

passed by the NCLT, Ahmedabad Bench vide Annexure-P/11. Thereafter, vide order

dated 23.11.2021 (Annexure-P/12) the respondent-Bank itself gave an offer to the

petitioner to pay Rs.75,21,690.80 with 5% upfront amount towards full and final

satisfaction of his personal guarantee.

On 26.11.2021 vide Annexure-P/13, the petitioner accepted the offered OTS

amount by the respondent-Bank to pay Rs.75,21,690.80. As per the petitioner,

astoundingly, the respondent-Bank by letter dated 03.12.2021 (Annexure-P/14)

withdrew its offer dated 23.11.2021.

Then, the disgruntled petitioner made a representation to the respondent-

Bank on 29.01.2022 vide Annexure-P/15. However, the respondent-Bank vide letter

dated 04.03.2022 (Annexure-P/16) demanded the entire outstanding dues from the
 -:- 5 -:-
W.P.No.8213/2022

petitioner. Then, the petitioner again represented before the respondent-Bank by

letter dated 14.03.2022 for settling the issue as offered by the respondent-Bank, but

that representation is yet not responded and therefore left with no option, the

petitioner has knocked the door of this Court praying for the following relief(s);

“7.1 Issue a Writ of Certiorari quashing the Letter dated

03.12.2021 (Annexure-P/14) & Letter dated 04.03.2022
(Annexure P/16) issued by Respondent Bank.
7.2 Issue a Writ of Mandamus commanding the
Respondent for accepting the bona fide compromise offer
dated 26.11.2021 of Petitioner which was given on the
basis of the letter dated 23.11.2021 issued by Respondent
Bank.
7.3 The Hon’ble Court may please be kind enough to
direct the Respondent Bank to provide all the benefits of
their Letter dated 23.11.2021 to the Petitioner.
7.4 The Respondent Bank may please be commanded not
to make illegal demand from the Petitioner who was the
guarantor.
7.5 Any other relief the Hon’ble Court deems fit in the
circumstances may kindly be granted.
7.6 Cost of the petition may also be awarded.”

3. The learned Senior counsel appearing for the petitioner submits that

after much correspondence of haggling between the petitioner and respondent-Bank

with regard to full and final settlement of the petitioner’s personal guarantee under

OTS, the respondent-Bank itself gave an offer to the petitioner vide letter dated

23.11.2021 (Annexure-P/12) to pay Rs.75,21,690.80 with 5% upfront amount

towards full and final satisfaction of his personal guarantee and that offer was

accepted by the petitioner vide letter dated 26.11.2021 (Annexure-P/13), then there
 -:- 6 -:-
W.P.No.8213/2022

was no reason for the respondent-Bank to digress by withdrawing the said offer. He

emphasizes on the very object of One Time Settlement Scheme formulated by the

respondent-Bank and submits that there was no reason or justification in

withdrawing the offer, that too made on the basis of offer given by the respondent-

Bank itself, even without assigning any reason. He accentuates that the respondent-

Bank even did not respond to the representation made by the petitioner despite

certain amount has already been deposited by the petitioner as per terms of offer.

He vigorously castigates the conduct of the respondent-Bank inasmuch as neither

the Bank responded to his representation nor did it appear before this Court to

justify their withdrawal of offer, which was offered by them and accepted by the

petitioner. He propounds that the petitioner is not the main borrower, but he is

settling his dispute relatable to his personal guarantee and casting a slur upon,

learned Senior Counsel submits that the respondent-Bank is a Government Bank

and it is highly unexpected from it to behave in such a manner. Lastly, he submits

that since the respondent-Bank has not come-forward before this Court to justify its

action, it is equivalent to have no logical reason behind it. Ergo, the petition filed by

the petitioner deserves to be allowed.

4. I have heard the learned senior counsel for the petitioner patiently and

perused the documents available on record.

 -:- 7 -:-
W.P.No.8213/2022

5. Indeed, the dispute herein is only with regard to personal guarantee

given by the petitioner. In the petition, it is averred that the respondent/Bank has

already recovered a huge amount of Rs.3,28,91,948/- in June/July 2020 from the

borrower. It has become a conundrum as to why the respondent-Bank is not settling

the dispute finally despite the fact the offer was itself made by them to the

petitioner, which he accepted and also complied with the necessary stipulations

therein by depositing the required upfront amount. It is to be kept in mind that when

the Bank sponsors One Time Settlement Scheme for settling the liabilities finally,

thereby it proffers an opportunity to the borrower for settling his dispute with the

Bank by offering a lump sum amount so as to amicably settle the account. The basic

object of the OTS Scheme is that the account which became irregular and/or

declared Non-Performing Account and if an acceptable offer is made by the

defaulter for settling the dispute finally, then to avoid time consuming litigation in

the courts and wasting energy in recovering the amount, it could be settled so as to

recover the amount, which is undoubtedly a public money. In other words, the

Bank may be writing off possibly substantial portion of its liabilities, but once it

agrees, the borrower can take appropriate steps to raise the amount, and ordinarily,

the bank should not resile from this arrangement. In the case at hand, the petitioner

being a guarantor had mortgaged his personal property and after much haggling

happened between the parties, the offer made by the respondent-Bank was accepted
 -:- 8 -:-
W.P.No.8213/2022

by the petitioner and therefore looking to the object of OTS Scheme which ensures

speedy closer of the cases to avoid tardy recovery from borrower in which to larger

extent the bank faces difficulty to recover the amount, unflaggingly I find no

justifiable reason for the respondent-Bank to back-out from the offer accepted by

the petitioner that too pursuant to the offer made by the Bank. Conversely, it can be

understood that if the offer given by the borrower does not appeal to the Bank, then

the Bank is not under obligation to accept it and no borrower can, as a matter of

right, pray for grant of benefit of One Time Settlement Scheme. However, in the

case at hand, the offer given by the Bank has been accepted by the borrower, but

then the Bank backed out from the said offer that too without assigning any reason.

Obviously, the respondent-Bank is a Government Bank and creation of Statute

come within the definition of State, therefore, it is expected to act in a bona fide

manner and take a prudent decision having regard to involvement of the public

money.

6. The Division Bench of this court in the case of Shri Mohanlal

Patidar v. Bank of Maharashtra & Another rendered in W.P.No.22127/2021 on

21.02.2022 dealing with the matter of One Time Settlement (OTS) Scheme has also

discussed the doctrine of ‘Legitimate Expectation’ and relied upon a decision

rendered by the Supreme Court in re Sardar Associates and Ors. v. Punjab and

Sind Bank and Ors. (2009) 8 SCC 257 in which it is observed that OTS Scheme is
 -:- 9 -:-
W.P.No.8213/2022

binding and Bank could not have enhanced the amount nor by any stretch of

imagination can treat that the offer which was duly accepted as elapsed. Here in this

case, from the documents available it is clear that letter dated 23.11.2021

(Annexure-P/12) was given by the respondent-Bank to the petitioner informing that

his case was found eligible for settlement under the OTS-NDND2022 with certain

terms and conditions mentioned in the letter itself. The said letter contained OTS

amount as Rs.75,21,690.80 and the petitioner was asked to submit his willingness

till November 30, 2021 so that the matter will be processed for acceptance. In

response thereto, the petitioner vide letter dated 26.11.2021 (Annexure-P/13) which

was prior to the last date of submitting willingness i.e. 30.11.2021, accepted the

offer given by the Bank and also submitted the details as to in what period the

amount would be paid.

7. The Division Bench dealing with the case of OTS has also taken note

of letter of Bank given to the borrower and reproduced the same in which the Bank

had informed that the proposal was under consideration and had to be processed

and sanction letter will be conveyed if the borrower’s case is found eligible.

Meaning thereby, the Division Bench determined the case of petitioner therein

whether it comes under the eligible case or not. But, here in this case as per letter of

respondent-Bank, the case of petitioner was already shortlisted as eligible case for

settlement and the only process was to be done for acceptance of the same. The
 -:- 10 -:-
W.P.No.8213/2022

Division Bench finally criticized the action of the Bank that once offer is given then

the Bank should not enhance the amount by increasing the amount of offer already

proposed. But, here in this case, the offer given by the Bank was timely accepted by

the petitioner and even though the respondent-Bank has withdrawn its offer on false

premise that the eligibility of account of petitioner was reviewed and account was

found ineligible for settlement under OTS-NDND2022. Lo and behold, nothing has

been shown in the letter as to why, when account has already been shortlisted as

eligible account and offer given by the Bank was accepted by the petitioner, the

account was reviewed by the Bank and as to how when it was found eligible, the

Bank without assigning any reason found the same ineligible. The Apex Court in

the case of Sardar Associates (supra) has held as under:-

“While making a deviation, the Board of Directors of a public

sector bank could not have taken recourse to a policy decision
which is per se discriminatory. The respondent Bank is ‘State’
within the meaning of Article 12 of the Constitution of India apart
from the fact that it is bound to follow the guidelines issued by
Reserve Bank of India. If, therefore, the broad policy decision
contend in the guidelines were required to be followed, the power
of the Board of Directors to make deviation in terms of Clause 4
thereof would only be in relation to some minor matters which
does not touch the broad aspects of the policy decision and in
particular the one governing the non-discriminatory treatment. In a
case of this nature, we are satisfied that the respondent Bank is
guilty of violation of the equality clause contend in the Reserve
Bank of India Guidelines as also Article 14 of the Constitution of
India.”
 -:- 11 -:-
W.P.No.8213/2022

Although in the present case, the Scheme of OTS was formulated and

sponsored by the respondent-Bank itself and therefore it was binding upon them.

The Division Bench of this Court in the case of Shri Mohanlal Patidar (supra) has

also observed while dealing with the doctrine of legitimate expectation as under:-

“Legitimate Expectation :
29. The impugned action of the Bank can be tested on the doctrine
of legitimate expectation. The concept of legitimate expectation is of
European origin. It is one of the fundamental Principles of European
Community Law. (See: Durbeck v Hauptzollant Frankfurt an
Main Flughafen, (1981) ECR 1095, at 1120; Mulder v. Minister
Van Landbouw en Visserji, (1988) ECR 2321; Spagl v.
Hauptzollant Rosenteim (1990) ECR 453. For some more cases
on legitimate expectation from European Law, see, Sedley, J.’s
opinion in R. v. Maff, ex p. Hamble Fisheries, (1995) 2 All ER
714).
The statement of Lord DIPLOCK in CCSU [1985] AC 374 at 408
is regarded as envisaging legitimate expectation extending to an
expectation of a benefit. This may arise from-
(i) what a person has been permitted by the concerned authority to
enjoy and which he can legitimately expect to be permitted to
continue to enjoy until “there has been communicated to him some
rational grounds for withdrawing it on which he has been given an
opportunity to comment”;
(ii) he has received assurance from the concerned authority that the
benefit will not be withdrawn without giving him first an
opportunity of advancing reasons for contending that it should not
be withdrawn.
(iii) It may also extend to a benefit in the future which has not yet
been enjoyed but has been promised.

30. Lord FRASER {Page No.1656 of Principles of

Administrative Law by M.P. Jain & S.N. Jain} also observed as
follows:
“ But even where a person claiming some benefit or
privilege has no legal right to it, as a matter of private law,
he may have a legitimate expectation of receiving the
 -:- 12 -:-
W.P.No.8213/2022

benefit or privilege, and, if so, the courts will protect his

expectation by judicial review as a matter of public law…
Legitimate or reasonable expectation may arise from an
express promise given on behalf of a public authority or
from the existence of a regular practice which the claimant
can reasonably expect to continue.”

31. Characterizing the doctrine of legitimate expectation as a

valuable and developing doctrine, BINGHAM, L.J., stated in the
case of R. v. Inland Revenue Commissioners, ex. p. MFK
Underwriting Agents Ltd., (1990) 1 All ER 90 as under:
“If a public authority so conducts itself as to create a
legitimate expectation that a certain course will be
followed it would often be unfair if the authority were
permitted to follow a different course to the detriment of
one who entertained the expectation, particularly if he
acted on it… The doctrine of legitimate expectation is
rooted in fairness.”

32. SEDLEY, J., ruled that even though policy change may take
place from time to time, the policy maker should seek to
accommodate legitimate expectations.

33. SEDLEY, J., has observed :

“Thus it is an obligation to exercise powers fairly which
permits expectations to be counterpoised to policy change,
not necessarily in order to thwart it but. in order to seek a
proper exception to the policy within the British Oxygen
principle." {see British Oxygen Co Ltd v. Minister of
Technology, (1970) 3 WLR 488}
He went on to observe:
“While policy is for the policy maker alone, the fairness of
his or her decision not to accommodate reasonable
expectations which the policy will thwart remains the
court’s concern….”
While the court accepts ministerial freedom to formulate and to
reformulate policy, ‘it is equally the court’s duty to protect the
interest of those individuals whose expectation of different treatment
has a legitimacy which in fairness out-tops the policy choice which
tends to frustrate it’.
 -:- 13 -:-
W.P.No.8213/2022

Finally, SEDLEY, J., has said:

“Legitimate expectation is now in effect a term of art,
reserved for expectations which are not only reasonable
but which will be sustained by the court in the face of
changes of policy; secondly, that whether this point has
been reached is determined by the court, whether on
ground of rationality, of legality or of fairness, of all of
which the court, not the decisionmaker is the arbiter
{see R v. Ministry of Agriculture Fisheries and Food ex
p Hamble (offshore) Fisheries Ltd., (1995) 2 All ER at
732.}
34. The Supreme Court of India in the case of National Buildings
Construction Corporation v. S. Raghunathan, AIR 1998 SC
2779 has held as under:
“The doctrine of ‘Legitimate Expectation’ has its genesis
in the field of administrative law. The Government and
its departments, in administering the affairs of the
country are expected to honour their statements of policy
or intention and treat the citizens with full personal
consideration without any iota of abuse of discretion. The
policy statement cannot be disregarded unfairly or
applied selectively. Unfairness in the form of
unreasonableness is akin to violation of natural justice. It
was in his context that the doctrine of ‘Legitimate
Expectation’ was evolved which has today become a
source of substantive as well as procedural rights. But
claims based on ‘Legitimate Expectation’ have been held
to require reliance on representations and resulting
detriment to the claimant in the same way as claims
based on promissory estoppel.”
(Emphasis Supplied)
35. The Apex Court opined that the doctrine of legitimate
expectation is a 'latest recruit' to a long list of concepts fashioned by
the courts for review of administrative actions. No doubt, the
doctrine has an important place in the review. Under the said
doctrine, a person may have reasonable or legitimate expectation of
being treated in a certain way by an administrative authority even
though he has no right in law to receive the benefit. In such a
situation, if a decision is taken by an administrative authority
adversely affecting his interests, he may have justifiable grievance
 -:- 14 -:-
W.P.No.8213/2022

in the light of the fact of continuous receipt of the benefit, legitimate

expectation to receive the benefit or privilege which he has enjoyed
all throughout. Such expectation may arise either from the express
promise or from consistent practice which the applicant may
reasonably expect to continue (See: Confederation of Ex-
Serviceman Associations v. Union of India, (2006) 8 SCC 399,
416).”

8. As such, the decision taken by the respondent-Bank backing out with

its proposal, which had already been accepted by the petitioner, is nothing but an

arbitrary action and it can very well be held that the Bank has not acted in just,

proper and reasonable manner.

9. In view of above discourse, the action of respondent-Bank of

withdrawing its offer already accepted by the petitioner and asking him to deposit

full amount, cannot be given stamp of approval. Accordingly, the letter dated

03.12.2021 (Annexure-P/14) withdrawing the final offer dated 23.11.2021 and

letter dated 04.03.2022 (Annexure-P/16) demanding the entire outstanding dues

from the petitioner are hereby set aside. The petitioner is directed to deposit the

amount within a period of 10 days from today as per the offer dated 23.11.2021

(Annexure-P/12) given by the respondent-Bank itself for paying Rs.75,21,690.80

with 5% upfront amount (after adjusting the amount already paid by the petitioner

i.e. Rs.5.63 Lac) towards full and final satisfaction of his personal guarantee. In

turn, the respondent-Bank is directed to accept the amount within a period of 10

days of its payment by the petitioner. Consequently, the petitioner shall be freed and
 -:- 15 -:-
W.P.No.8213/2022

discharged from his personal guarantee, which he had tendered by way of

mortgaging his property with the Bank.

10. Ex consequentia, the petition is allowed with the aforesaid directions.

(Sanjay Dwivedi)
Judge
sudesh
SUDESH
Digitally signed by SUDESH KUMAR
SHUKLA
DN: c=IN, o=HIGH COURT OF MADHYA
PRADESH, ou=HIGH COURT OF MADHYA
PRADESH, postalCode=482001, st=Madhya

KUMAR
Pradesh,
2.5.4.20=1d5e479f08e68eda8f9271dbbe2c
4bc3916264aec736f7c5f5885257f5eeaeb7,
pseudonym=70EE703D36E97ABB20BA3C7
9C921929E09400A16,

SHUKLA
serialNumber=7D462390C18350EF7C4081
1B12AB45D82AF1259878762BAC356DCFA
877F02654, cn=SUDESH KUMAR SHUKLA
Date: 2022.09.15 17:55:20 +05'30'