The Delhi High Court recently overturned Punjab and Sind Bank's decision to retract a INR 120 crore one-time settlement offered to Ambience Pvt Ltd for a Noida residential project, citing it as arbitrary. The court emphasised that once accepted, such settlements constitute a binding contract. Justice Mini Pushkarna deemed the bank's actions unclear and unsubstantiated, nullifying their cancellation letter and ordering return of securities. The court upheld Supreme Court laws, affirming the settlement terms as final. Ambience, part of a multiple bank arrangement, settled debts with P&S Bank but faced withdrawal alleging non-disclosure to PNB.
The Delhi High Court recently cancelled Punjab and Sind Bank's choice to take back a one-time loan settlement of INR 120 crores that was offered to the real estate company Ambience Pvt Ltd for building a residential project in Noida, UP, citing the reasons 'arbitrary and unsustainable'.
The High Court stated that it's clear that an offer for a one-time loan settlement (OTS), its acceptance, and the approval letter together make a valid contract. Therefore, Punjab and Sind Bank, being a government bank, cannot act arbitrarily or randomly in contract matters. The HC declared that the OTS is legally binding on the bank and cannot be cancelled by the bank alone after it has received payments.
Justice Mini Pushkarna pointed out that the bank's decision to cancel the OTS was unclear and lacked any reasonable explanation, and stated that the court had nullified the bank's letter from August 1, 2023, which cancelled the one-time loan settlement (OTS). The court has also ordered the bank to return the securities that the company had provided for the loan and to remove any claims on those securities.
The judge cited the laws stipulated by the Supreme Court to affirm that the terms of the sanction are final and binding on all parties. She further went on to say that any negotiations or discussions, either before or after the agreement was finalised by either of the parties, that are not articulated in the letter will not be enforceable. Thus, the bank's claims that certain discussions before the approval gave them the right to compensation cannot be accepted. Any terms from those negotiations that were not included in the final approval are not legally binding.
Ambience Pvt Ltd received a term loan of INR 155 crores from Punjab and Sind Bank in March 2013 to help finance the construction and development of a real estate project in Sector 50 of Noida. This loan was part of a Multiple Banking Arrangement, where other banks like Punjab National Bank and HDFC Ltd also provided loans of INR 124 crores and INR 25 crores, respectively. Initially, each bank independently sanctioned and disbursed their loans.
Subsequently, the banks formed a consortium, with Punjab National Bank as the lead bank. Ambience Pvt Ltd repaid HDFC's entire loan amount by July 2018.
In order to pay off their debts, Ambience made separate OTS proposals in February of 2023 to both Punjab National Bank and Punjab and Sind bank. P&S Bank accepted a proposal of INR 122 crores. In May 2023, Ambience gave P&S Bank a certificate from PNB stating that all their dues were paid off without any special settlements. Then, on August 1 of the same year, the builder paid the entire agreed settlement amount to Punjab and Sind Bank. However, the bank withdrew the extra time they had given to the company and cancelled the settlement, claiming that the builder had not been honest about their plans and actions.
Punjab and Sind Bank claimed that the company misled them and offered better terms to Punjab National Bank by fully paying off their dues. However, the High Court dismissed the bank's argument, stating that Ambience had indeed paid the entire agreed settlement amount, including interest as per the approved terms, thereby refuting any claims of deviation, violation, or breach of the terms set in the sanction.
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