The court upheld the principle that borrowers are bound by the contractual terms of a settlement agreement, emphasizing that the bank's retention of documents was justified as per terms accepted by borrowers.

JUDGMENT

Muralee Krishna, J.

The petitioners in W.P.(C)No.46617 of 2024 filed this writ appeal under Section 5 (i) of the KERALA HIGH COURT ACT , 1958 , challenging the judgment dated 28.05.2025 passed by the learned Single Judge in that writ petition.

2. According to the appellants, who are husband and wife, they are facing unjust and unfortunate eviction from their residential property due to arbitrary actions initiated by the respondent bank under the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short, ’SARFAESI Act’). It is pleaded in the writ petition that the 1^st appellant, as a partner of the 4^th respondent Partnership business, namely, M/s. Nooh Exports Private Ltd. and the 2^nd appellant, as guarantor, mortgaged their joint residential property in Sy. No. 899/19 having an extent of 4.25 Ares situated in Velloorkunnam Village, Muvattupuzha Taluk, Ernakulam District, along with a residential building with Door No.8/152 (Old No.5/89A) having 246.36 Sq.meters, in the year 2013, as a part of helping the 4^th respondent firm to raise funds for its business operations. On 01.02.2013, an amount of Rs.40 lakhs was sanctioned by the 3^rd respondent vide, Overdraft Facility Loan Account, and thereafter, on account of Covid-19 pandemic, i.e., on 22.01.2021, an additional GECLS facility was given for an amount of Rs.10.92 lakhs also to the 4^th respondent. The 3^rd respondent on 29.04.2021 declared the aforesaid loan accounts of the 4^th respondent firm as a Non-Performing Asset (for short ’NPA’) and started to initiate recovery measures under the SARFAESI Act. The 5^th respondent, who is a relative of the appellants and the Managing Partner of the 4^th respondent Partnership business, assured the appellants that the loan liability would be cleared in a short span of time. However, by Ext.P1 letter dated 19.12.2024, the bank informed the appellants that they will be taking possession of the mortgaged property on 01.01.2025 at 10.00 a.m. Thereafter, the appellants approached the 1^st respondent with a proposal for full and final One Time Settlement scheme (for short ’OTS’) stating that they are ready to settle the loan liability of the partnership firm. The appellants submitted Ext.P2 request dated 23.12.2024 for OTS before the bank. By Ext.P3 letter dated 26.12.2024, the respondent bank permitted the appellants to clear the entire loan liability for an amount of Rs.75 lakhs, provided an amount of Rs.50 lakhs to be paid on or before 27.12.2024 and the balance amount of Rs.25 lakhs on or before 30.12.2024. It is further stated by the 1^st respondent that the mortgaged documents shall be released to the appellants only after the closure of NPA account of M/s. Nooh Exports and Imports Private Ltd. in which the 1^st appellant is also one among the Directors. Contending that the conduct of the bank in issuing the Ext.P3 letter directing the appellants to clear the proposed OTS amount within a short span of time was unjust, arbitrary, and illegal, and also contending that the condition that only after the NPA account of M/s. Nooh Exports and Imports Private Ltd. is closed the mortgaged document will be released to the appellants as improper, they approached this Court by filing W.P.(C)No.46617 of 2024, seeking the following reliefs;

"(i) Issue a writ of mandamus or any other writ, order or direction directing the respondents 1 to 3 to give sufficient breathing time to the petitioners to pay the proposed OTS amount covered by Ext.P3, either in lumpsum or in monthly installments.

(ii) Issue a writ of mandamus or any other appropriate writ, order or directi