The High Court stated that an OTS offer, its acceptance, and the sanction letter together form a binding contract. Therefore, Punjab and Sind Bank, as a nationalised bank and instrumentality of the State, cannot act arbitrarily in contractual matters. The court further emphasised that once payments are accepted, the OTS is binding and cannot be unilaterally revoked.

"Accordingly, the letter dated August 1, 2023, issued by the bank withdrawing the OTS is hereby set aside. Consequently, the bank is directed to release the securities furnished by the company in the subject Loan Account and release charge thereon," Justice Mini Pushkarna stated, describing the withdrawal of the OTS as a "cryptic order, bereft of any reasons."

Citing Supreme Court precedents, the judge clarified that the terms of sanction alone are final and binding on the parties. Any pre-sanction negotiations or subsequent additions not reflected in the Sanction Letter are not binding.

Ambience had secured a term loan of Rs 1.55 billion from Punjab & Sind Bank in March 2013 for a real estate project in Sector-50, Noida, under a Multiple Banking Arrangement. Other banks involved included Punjab National Bank (PNB) and HDFC Ltd, which provided loans of Rs 1.24 billion and Rs 250 million, respectively. Initially, the loans were managed under a Multiple Banking Arrangement, which later evolved into a consortium with PNB as the lead bank. Ambience repaid HDFC in full by July 2018.

In February 2023, Ambience made separate OTS proposals to PNB and Punjab & Sind Bank to settle its debts. The OTS proposal of Rs 1.22 billion was accepted by Punjab & Sind Bank. In May 2023, Ambience forwarded a no-dues certificate to Punjab & Sind Bank from PNB, indicating full repayment of the latter's dues without an OTS. Subsequently, on August 1, 2023, Ambience deposited the entire OTS amount to Punjab & Sind Bank, which then withdrew the extension of time granted to the firm and recalled the OTS, alleging misrepresentation and concealment by the builder.

Punjab & Sind Bank accused Ambience of misrepresentation by offering better terms to PNB. However, the High Court rejected the bank?s claims, stating that Ambience had paid the entire OTS amount along with interest as stipulated in the sanction, negating any deviation, violation, or breach of the sanction terms.

(Source: ET)