Supreme Court Scrutinizes Bank Settlements with Asian Hotels, Highlights Disparity in Treatment
The Supreme Court of India, on Wednesday, raised pointed questions regarding the decision of two prominent public sector banks – Punjab National Bank (PNB) and Bank of Maharashtra – to offer a one-time settlement (OTS) to Asian Hotels. This company is the owner of the luxurious five-star Hyatt Regency hotel located in New Delhi. The apex court has explicitly sought comprehensive details concerning the attempts, or the apparent lack thereof, made by these financial institutions to auction the property in order to recover the outstanding loan amount.
Bench Expresses Surprise Over Lack of Auction Efforts
Hearing allegations presented by advocate Prashant Bhushan, who was representing the petitioner NGO 'Infrastructure Watchdog', a bench led by Chief Justice of India Surya Kant expressed its astonishment. The court noted that it was surprising the banks did not initiate any auction proceedings for the assets and instead opted for a settlement figure that was significantly lower than the total amount owed by Asian Hotels.
"Why was no attempt made to auction the five-star hotel after 2023? The auction could have fetched a very high price," the bench remarked during the proceedings. This query underscores the court's concern over potentially missed opportunities for maximizing recovery through transparent market mechanisms.
Government's Defense and the Widow Contrast
Additional Solicitor General R Venkataramani, representing the banks, countered the allegations. He stated that the NGO was engaging in a "roving inquiry" while the banks had meticulously followed due process. He further emphasized that the financial institutions had successfully recovered 116% of the initial loan principal amount through the settlement, suggesting the process was financially sound from the banks' perspective.
However, the bench drew a stark and compelling contrast by referencing a previous case. Chief Justice Surya Kant recounted an instance where a widow, following her husband's demise, offered Rs 30 lakh to settle a bank loan of Rs 45 lakh. This loan was taken for the purchase of her sole residence. The court had to intervene to assist the widow because the banks involved refused the settlement, insisting instead on auctioning the house to recover the full outstanding amount.
"When it comes to a widow, the banks insist on recovering the entire amount due, but their consideration becomes entirely different when it is a five-star hotel," the CJI observed. This statement powerfully highlights the perceived inconsistency in the banks' recovery strategies and their application of discretion.
Court Directs Submission of Crucial Documents
In light of these concerns and the evident disparity in treatment, the Supreme Court has issued a directive. The bench has ordered the Additional Solicitor General to submit all relevant documents pertaining to the one-time settlement offered to Asian Hotels. Furthermore, the court has mandated the submission of records detailing any and all previous attempts made by Punjab National Bank and Bank of Maharashtra to auction the Hyatt Regency hotel property. This step is crucial for ensuring transparency and allowing the court to make a fully informed assessment of the banks' actions.
The case brings to the forefront critical questions about:
- The uniformity and fairness in the recovery policies of public sector banks.
- The discretion exercised by financial institutions in settling large corporate debts versus individual loans.
- The role of the judiciary in scrutinizing such financial decisions to prevent arbitrary actions.
The Supreme Court's intervention signals a rigorous examination of whether standard procedures were equitably applied in this high-profile corporate debt case, especially when contrasted with the hardship faced by ordinary citizens like the widow in the cited example. The outcome of this scrutiny could have significant implications for banking recovery norms and corporate accountability in India.
