2021 Supreme(SC) 820

SUPREME COURT OF INDIA
(From the High Court of Judicature at Allahabad)
M.R. Shah, B.V. Nagarathna, JJ.
The Bijnor Urban Co-operative Bank Limited, Bijnor & others – Appellants
Versus
Meenal Agarwal & others - Respondents
Civil Appeal No. 7411 of 2021
Decided On : 15-12-2021

IMPORTANT POINTS
(1) No borrower can, as a matter of right, pray for grant of benefit of One Time Settlement Scheme.
(2) No bank can be compelled to accept a lesser amount under OTS Scheme despite the fact that Bank is able to recover entire loan amount by auctioning secured property/mortgaged property.

Headnote:

(A) Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 – Section 13 – Recovery of debt – One Time Settlement (OTS) – As per guidelines issued, grant of benefit of OTS Scheme cannot be prayed as a matter of right and same is subject to fulfilling eligibility criteria mentioned in scheme – A wilful defaulter in repayment of loan and a person who has not paid even a single installment after taking loan and will not be able to pay loan will be considered in category of “defaulter” and shall not be eligible for grant of benefit under OTS Scheme – Similarly, a person whose account is declared as “NPA” shall also not be eligible – As per guidelines, Bank is required to constitute a Settlement Advisory Committee for the purpose of examining applications received and thereafter Committee has to take a decision after considering whether a defaulter is entitled to benefit of OTS or not after considering eligibility as per OTS Scheme. (Para 5.2)

(B) Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 – Section 13 – Constitution of India – Article 226 – Recovery of debt – One Time Settlement (OTS) – No borrower can, as a matter of right, pray for grant of benefit of One Time Settlement Scheme – It is ultimately for Bank to take a conscious decision in its own interest and to secure/recover outstanding debt – No bank can be compelled to accept a lesser amount under OTS Scheme despite the fact that Bank is able to recover entire loan amount by auctioning secured property/mortgaged property – When loan is disbursed by bank and outstanding amount is due and payable to bank, it will always take a conscious decision in interest of bank and in its commercial wisdom – Merely because proceedings under SARFAESI Act have remained pending for seven years, Bank cannot be held responsible for the same – If a prayer is entertained on part of defaulting unit/person to compel or direct financial corporation/bank to enter into a one-time settlement on terms proposed by it/him, then every defaulting unit/person which/who is capable of paying its/his dues as per terms of agreement entered into by it/him would like to get one time settlement in its/his favour – No writ of mandamus can be issued by High Court in exercise of powers under Article 226 of Constitution of India, directing a financial institution/bank to positively grant benefit of OTS to a borrower – Grant of benefit under OTS is always subject to eligibility criteria mentioned under OTS Scheme and guidelines issued from time to time – High Court, in present case, has materially erred and has exceeded in its jurisdiction in issuing a writ of mandamus in exercise of its powers under Article 226 of Constitution of India by directing appellant-Bank to positively consider/grant benefit of OTS to original writ petitioner – Impugned judgment and order passed by High Court is unsustainable and deserves to be quashed and set aside and accordingly quashed and set aside. (Paras 8, 9, 10, 11 and 12)

Facts of the case:

Challenging impugned judgment and order dated 16.08.2021passed by High Court of Judicature at Allahabad in Writ Petition No. 15194 of 2021, by which the High Court has allowed the said writ petition preferred by respondent No.1 herein (original writ petitioner) and has, in exercise of powers under Article 226 of the Constitution of India, issued a writ of mandamus directing the appellant-Bank to positively consider the original writ petitioner’s application for One Time Settlement (OTS), Bank has preferred the present appeal.

Findings of Court:

A conscious decision was taken by Bank as well as Settlement Advisory Committee which is reflected from Board’s Resolution dated 28.12.2020 and decision dated 08.01.2021. Even personal hearing was afforded to the original writ petitioner by the Settlement Advisory Committee on 25.02.2021. High Court in the impugned judgment and order has observed that no opportunity was given to the original writ petitioner, which is factually incorrect. Therefore, decision cannot be said to be in violation of principle of natural justice.

Result : Appeal allowed.