BENGALURU: Noting that it is rather strange that banks lend money without tangible security and offer to receive a portion of it under the One Time Settlement (OTS) scheme, the Karnataka High Court said it is appropriate for the Ministry of Finance and RBI to take a relook at the scheme.Justice PS Dinesh Kumar made this observation while dismissing a petition filed by Balkishan Boob (69) from Rajajinagar in Bengaluru, against the Bank of Maharashtra, Basavanagudi branch, and also imposed costs.
Bhagwan Cotton Ginners Private Limited had borrowed money from Bank of Maharashtra in 2014, and on failing to repay, the bank had initiated recovery proceedings. The mortgaged property was put up for auction, and Boob, the owner, filed a petition to consider the OTS option.
Referring to his counsel’s contention that OTS will have to be considered only on the ledger balance, as on the date of Non-Performing Assets (NPA) declaration, the court said if this contention is to be accepted, any borrower or guarantor may choose to repay at leisure several years after declaration of NPA, and this is an antithesis of economic progress.
“Logically, this is preposterous because banks deal with money belonging to depositors. Waiver of a portion of money lent by whatever name it is called, directly results in inflation and will have an adverse impact on the economic health of the nation,” the court observed.The counsel for the petitioner argued that under the OTS scheme, the petitioner is liable to pay 70 per cent on the secured portion and 35 per cent on the unsecured portion.
To this, the court questioned why a borrower is permitted to pay only 70 per cent on the secured portion and the remaining 30 per cent is waived. This means that borrowers are absolved by paying only 70 per cent value. The petitioner was directed to pay cost of Rs 1 lakh to the bank, and Rs 1 lakh in the name of the HC Registrar General.