OTS Failed Due to Borrower’s Default: High Court
The Delhi High Court has quashed criminal proceedings against Central Bank of India and its senior officers.
The Court held that when a borrower defaults on a One Time Settlement (OTS), the bank may adjust the deposited amount towards outstanding dues.
Justice Neena Bansal Krishna passed the ruling while setting aside a summoning order against bank officials.
Criminal Charges Not Made Out
The complaint alleged offences under Sections 420 (cheating), 406 and 409 (criminal breach of trust), and 120B (criminal conspiracy) of the Indian Penal Code.
The Court found no material to support these allegations.
It held that the essential ingredients of cheating were absent.
Deposit in “No-Lien” Account Could Be Adjusted
Under the OTS, the borrower deposited ₹58 lakh in a “no-lien” account as part payment.
However, the borrower failed to pay the remaining settlement amount within the stipulated time.
As a result, the OTS stood automatically cancelled under its terms.
The Court held that the bank was well within its rights to adjust the ₹58 lakh against outstanding liabilities.
The adjustment, the Court said, did not amount to cheating or criminal breach of trust.
Background of the Dispute
The borrower’s loan accounts were earlier classified as non-performing assets (NPAs).
The Debt Recovery Tribunal issued recovery certificates totalling around ₹13 crore.
Following this, the parties entered into an OTS.
When the borrower defaulted again, the bank adjusted the deposit and later assigned the debt to an asset reconstruction company.
Dispute Is Civil in Nature
The borrower accused the bank and its officers of dishonest misappropriation.
He also alleged a conspiracy to cheat by refusing to refund the deposit.
Rejecting these claims, the Court held that the dispute was purely civil.
It noted that the borrower had already filed a civil suit for recovery of ₹58 lakh, which is pending.
The Court emphasised that criminal law cannot be used to settle civil disputes.
No Fraudulent Intent at Inception
The High Court observed that cheating under Section 420 IPC requires dishonest intent from the beginning.
No such intent was evident in this case.
The Court also upheld the bank’s decision to assign the debt to UVARCL.
It described the assignment as a commercial decision taken in the bank’s business wisdom.
Proceedings Quashed
Accordingly, the High Court quashed the criminal complaint and all consequential proceedings against the bank officials.
Case Details
Case Title: Mohan Tanksale v. State
Appearances:
– Mr. Rakesh Tiku, Senior Advocate, with Mr. Jaswainder Singh and Monu Kumar, Advocates, for the petitioner
– Mr. Utkarsh, APP, with SI Vivek
– Ms. Sima Gulati with Ms. Diksha Narula, Advocates, for Respondent No. 2
