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Debt policy cannot be changed mid-way

If the defaulting borrowers are given an opportunity to settle the dues according to an existing policy, it can not be changed later to their disadvantage, the Supreme Court ruled in the case, Devidayal Castings Ltd vs Haryana Financial Corporation.

In this case, two borrowing firms did not repay the loans and therefore they were declared non-performing assets. In 2005, the corporation promulgated a policy whereby borrowers were given an option to settle their dues on the basis of the principal amount of the out standing in the loan accounts as on the date on which the accounts were de clared as NPA. The two firms were given the offer and asked to de posit 10 per cent of the dues as precondition for consideration of their cases. The borrowers accepted the offer.

However, in 2015, the corporation changed the policy and according to the new one, where the value of the securities was more than the settlement amount, the corporation should resort to the sale of the secured prop er ties. Thus the applications of the firms invoking the earlier policy were rejected. They moved the Punjab and Haryana High Court, which dismissed their petitions. On appeal, the Supreme Court over ruled the high court and stated that when the firms have acted on the policy, it could not be departed from. Though nonessential features of a policy could be altered, the core could not be changed. More over, the firms showed the Supreme Court that their RTI in quiries had shown that the corporation had departed from the new policy in the cases of several other firms.

Article referred: https://www.pressreader.com

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