A creditor's obligation to consider an OTS application is contingent on the borrower's compliance with eligibility criteria, including upfront payment requirements.

JUDGMENT :

DIPANKAR DATTA, J.

THE APPEAL

1. In this appeal, by special leave, a challenge has been mounted to the judgment and order dated 21st December, 2022 passed by a Division Bench of the High Court of Judicature of Andhra Pradesh at Amravati¹[High Court]. An intra-court writ appeal²[Writ Appeal No. 918 of 2022] of the Assistant General Manager and the Deputy General Manager³[the appellants] of the State Bank of India⁴[SBI] came to be dismissed thereby. The writ appeal was directed against the judgment and order dated 22nd September, 2022 of a Single Judge, who allowed the respondent’s writ petition⁵[Writ Petition No. 22706 of 2020].

THE FACTS

2. The facts leading to presentation of this appeal are not in dispute.

a) SBI is a “secured creditor” and the respondent a “borrower” as defined in Section 2(zd) and 2(f), respectively, of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002⁶[SARFAESI Act].

b) Having availed credit facilities from the SBI by mortgaging 7 (seven) immovable properties, the respondent failed to adhere to the payment schedule and defaulted in its obligation to repay. Additional time granted for regularising the payments proved abortive.

c) Respondent’s account was then classified as “non-performing asset”, triggering a demand notice dated 31st May, 2017 under Section 13(2) of the SARFAESI Act. A sum of Rs. 7 crore (approximately) was demanded from the respondent, with further interest from 1st June, 2017.

d) Such demand not having been met by the respondent, recovery proceedings under Section 19 of the Recovery of Debts and Bankruptcy Act, 1993⁷[RDB Act] were initiated by the SBI on 22nd December, 2017 by filing an original application⁸[OA No. 4013 of 2017] before the Debts Recovery Tribunal, Vishakhapatnam⁹[DRT]. A decree was sought in a sum of Rs. 8 crore approximately, with future interest at 13.65% till date of realisation.

e) On 14th May, 2018, while transferring Rs.50 lakh to the account of the SBI, the respondent requested for full and final settlement of the total dues of Rs.8.14 crore by paying Rs.5 crore. The first appellant acceded to the request and issued a “compromise sanction letter” on 23rd November, 2018 containing the following terms and conditions:

“a. Up-front amount of Rs 0.50 crores was already paid by you, which is kept in parking account will be appropriated immediately towards your settlement amount

b. If entire compromise amount is not paid within 4 months, interest at minimum MCLR for the balance compromise amount paid after 4 months shall be charged from 30th day from the date of letter conveying approval o