The court affirmed that banks have discretion regarding the one time settlement scheme, and cannot be compelled to grant benefits if they can recover the full amount through other means.

J U D G M E N T

This writ petition has been filed challenging Ext.P3 by which the application for one time settlement submitted by the petitioners has been rejected by respondents 1 & 2.

2. The learned counsel for the respondents 1 & 2 would submit that in the light of the judgment of the Supreme Court in Bijnor Urban Cooperative Bank Ltd. and others v. Meenal Agarwal and others; AIR 2022 SC 56, the prayers sought for in this writ petition cannot be granted as the question as to whether any one time settlement is to be granted and if so on what terms is purely within the domain of the respondents and the petitioner cannot insist that the one time settlement proposal should be accepted.

3. Having heard the learned counsel for the petitioner and the learned counsel appearing for the respondent bank, I am clearly of the opinion that the present writ petition is not maintainable. One of the issues considered inBijnor Urban Cooperative Bank (supra) was whether the High Court in exercise of powers under Article 226 of the Constitution of India can issue a writ of mandamus directing the bank to positively consider the grant of benefit under the one time settlement scheme and that too dehors the eligibility criteria under the said scheme.

Answering the said question the Supreme Court held as follows;

“What is required to be considered is a conscious decision by the Bank that the Bank will be able to recover the entire loan amount by auctioning the mortgaged property and a due application of mind by the Bank that there are all possibilities to recover the entire loan amount, instead of granting the benefit under the OTS Scheme and to recover a lesser amount. It is ultimately for the Bank to take a conscious decision in its own interest and to secure/recover the outstanding debt. No bank can be compelled to accept a lesser amount under the OTS Scheme despite the fact that the Bank is able to recover the entire loan amount by auctioning the secured property/mortgaged property. When the loan is disbursed by the bank and the outstanding amount is due and payable to the bank, it will always take a conscious decision in the interest of the bank and in its commercial wisdom.

9. Even otherwise, as observed hereinabove, no borrower can, as a matter of right, pray for grant of benefit of One Time Settlement Scheme. In a given case, it may happen that a person would borrow a huge amount, for example Rs. 100 crores. After availing the loan, he may deliberately not pay any amount towards installments, though able to make the payment. He would wait for the OTS Scheme and then pray for grant of benefit under the OTS Scheme under which, always a lesser amount than the amount due and payable under the loan account will have to be paid. This, despite there being all possibility for recovery of the entire loan amount which can be realised by selling the mortgaged/secured properties. If it is held that the borrower can still, as a matter of right, pray for benefit under the OTS Scheme, in that case, it would be giving a premium to a dishonest borrower, who, despite the fact that he is able to make the payment and the fact that the bank is able to recover the entire loan amount even by selling the mortgaged/secured properties, either from the borrower and/or guarantor. This is because under the OTS Scheme a debtor has to pay a lesser amount than the actual amount due and payable under the loan account. Such cannot be the intention of the bank while offering OTS Scheme and that cannot be purpose of the Scheme which may encourage such a dishonesty.

10. If a prayer is entertained on the part of the defaulting unit/person to compel or direct the financial corporation/bank to enter into a one-time settlement on the terms proposed by it/him, then every defaulting unit/person which/who is capable of paying its/his dues as per the terms of the agreement entered into by it/him would like to get one time settlement in its/his favour. Who would not like to get his liabil