Case Note & Summary
This civil appeal by special leave arose from a judgment and order dated 21st December 2022 of a Division Bench of the High Court of Judicature of Andhra Pradesh at Amravati, which dismissed the bank's writ appeal and upheld a Single Judge's direction to process a borrower's One Time Settlement proposal under the OTS 2020 Scheme. The State Bank of India was the secured creditor under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, and the respondent Tanya Energy Enterprises was the borrower. The borrower had availed credit facilities by mortgaging seven immovable properties and defaulted in repayment, leading to classification of the account as a non-performing asset. A demand notice under Section 13(2) of the SARFAESI Act was issued on 31st May 2017 for approximately Rs 7 crore. Recovery proceedings under Section 19 of the Recovery of Debts and Bankruptcy Act, 1993 were initiated before the Debts Recovery Tribunal, Visakhapatnam. A prior compromise settlement in 2018 failed, and the bank initiated measures under Section 13(4) of the SARFAESI Act, leading to sale notices and an auction of one property. The borrower challenged the measures before the DRT, which initially granted interim stay but later vacated it due to non-payment. The DRT later allowed the borrower's Section 17 application and set aside the measures, though a subsequent auction in 2022 was challenged in a fresh Section 17 application. Separately, the bank introduced a One Time Settlement scheme on 12th October 2020. The borrower submitted letters dated 19th October 2020 and 10th November 2020 seeking settlement, but the bank rejected the OTS application on 17th November 2020, citing past conduct, failure to comply with DRT orders, and suppression of facts. The borrower filed a writ petition before the High Court seeking quashing of the rejection and a direction to consider the OTS application. The Single Judge allowed the writ petition and directed processing of the borrower's letters in accordance with the OTS 2020 Scheme. The Division Bench dismissed the bank's writ appeal, holding that clause 2.1 of the OTS 2020 Scheme did not bar cases where SARFAESI proceedings had been initiated and auction was underway, and that cases outside the listed ineligible criteria should be treated as eligible. In the Supreme Court, the bank argued that the OTS scheme could not be enforced under Article 226 unless all terms were satisfied and a public duty existed, and that the borrower's conduct disentitled relief. The borrower argued that rejection must be reasoned and based on scheme eligibility, relying on Bijnor Urban Coop. Bank Ltd. v. Meenal Agarwal. The record ends with the arguments; the final decision of the Supreme Court is not included in the provided text.
Headnote
A) Constitutional Law - Writ Jurisdiction under Article 226 - Mandamus and Public Duty - Constitution of India, 1950, Article 226 - The bank contended that the OTS 2020 Scheme cannot be enforced under Article 226 unless all terms and conditions are satisfied and a public duty to consider or accept exists; the respondent acknowledged no absolute right to OTS but argued that rejection must be reasoned and based on scheme eligibility. (Paras 3-10)
B) Banking Law - One Time Settlement - Eligibility under OTS 2020 Scheme - SARFAESI Act, 2002, Sections 13(4) and 17 - The High Court single judge held the OTS 2020 Scheme was non-discretionary and non-discriminatory and directed processing of the borrower's letters dated 19th October 2020 and 10th November 2020; the Division Bench held that clause 2.1's list of ineligible cases did not bar cases where SARFAESI proceedings and auction were underway, and cases outside the ineligible criteria should be treated as eligible. (Paras 2(s)-2(t))
C) Securitisation - Enforcement of Security Interest - Conduct of Borrower and Rejection of OTS - SARFAESI Act, 2002, Sections 13(2), 13(4), 17 - The borrower defaulted, failed to comply with a compromise settlement and interim deposit orders, leading to cancellation of settlement and auction of one property; the bank rejected the OTS application citing past conduct, failure to comply with DRT orders, and suppression of facts; the appeal focused on whether such conduct disqualified the borrower from OTS consideration under the Scheme. (Para 2)
Issue of Consideration
Whether the One Time Settlement (OTS) 2020 Scheme can be enforced under Article 226 of the Constitution in the absence of a public duty, and whether the respondent-borrower was eligible for the OTS despite pending SARFAESI proceedings, auction of security assets, and past conduct of default and non-compliance
Law Points
- Mandamus under Article 226 requires a public duty
- OTS scheme cannot be enforced unless terms and conditions are satisfied
- eligibility under OTS 2020 Scheme determined by clause 2.1
- conduct of writ petitioner is relevant
- rejection must be reasoned and based on scheme eligibility
- SARFAESI proceedings and auction underway do not automatically disqualify a borrower from OTS eligibility
Case Details
2025 LawText (SC) (09) 107
Civil Appeal No. 11134 of 2025 [Arising out of SLP (Civil) No. 2456 of 2025]
Mr. Venkatraman, Additional Solicitor General; Mr. D.S. Naidu, Senior Counsel
Assistant General Manager State Bank of India & Anr.
Tanya Energy Enterprises Through Its Managing Partner Shri Alluri Lakshmi Narasimha Varma
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Nature of Litigation
Civil appeal by special leave challenging a Division Bench judgment of the High Court of Andhra Pradesh which dismissed the bank's writ appeal and upheld the borrower's entitlement to consideration under the OTS 2020 Scheme.
Remedy Sought
The bank sought setting aside of both the Single Judge and Division Bench orders and permission to proceed with sale of the remaining six secured properties by public auction.
Filing Reason
The borrower's One Time Settlement application under the OTS 2020 Scheme was rejected by the bank; the High Court allowed the borrower's writ petition and directed processing of the OTS proposal, leading the bank to appeal.
Previous Decisions
Single Judge of the High Court allowed the writ petition holding the borrower entitled to the benefit of the OTS 2020 Scheme and directed processing of letters dated 19th October 2020 and 10th November 2020; Division Bench dismissed the writ appeal holding no bar to eligibility under clause 2.1 of the OTS 2020 Scheme; DRT had set aside earlier SARFAESI measures and a subsequent auction was challenged in a pending Section 17 application.
Issues
Whether the OTS 2020 Scheme can be enforced under Article 226 of the Constitution of India in the absence of a public duty to accept or consider settlement.
Whether the borrower was eligible for the OTS 2020 Scheme despite pending SARFAESI proceedings, auction of one property, and past defaults and non-compliance.
Whether the borrower's conduct was relevant in writ jurisdiction and disentitled discretionary relief.
Whether the bank's rejection order was reasoned, objective, and based on scheme eligibility.
Submissions/Arguments
The bank argued that the OTS 2020 Scheme cannot be enforced under Article 226 unless all terms and conditions are satisfied, and a public duty must exist before mandamus can issue; no such public duty existed given the borrower's conduct.
The bank highlighted that under the prior OTS offer of 23rd November 2018, except for the upfront Rs 50 lakh, the borrower paid nothing, and failed to comply with the DRT's interim deposit order, leading to vacation of stay.
The bank emphasized that the borrower's conduct, including failure to honour commitments and disregard for DRT orders, was relevant in writ jurisdiction under Article 226.
The bank contended that the rejection order had no infirmity as all factors were objectively considered.
The borrower acknowledged that OTS cannot be claimed as an absolute right and that no mandamus can compel discretion in a particular manner, citing Bijnor Urban Coop. Bank Ltd. v. Meenal Agarwal (2023) 2 SCC 805.
The borrower argued that any rejection of an OTS proposal must be reasoned, based on scheme eligibility, and in compliance with principles of natural justice.
Judgment Excerpts
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 Amravati.
Respondent was held entitled to the benefit of the OTS 2020 Scheme, which was non-discretionary and non-discriminatory, and the appellants were directed to process the respondent’s prayer contained in its letters dated 19th October, 2020 and 10th November, 2020 in accordance with such scheme.
The Bench was of the opinion that there was no bar for considering cases where proceedings under the SARFAESI Act have been initiated and auction of the property is underway; hence, the respondent could not have been held not eligible under the OTS 2020 Scheme.
Procedural History
Demand notice under Section 13(2) of SARFAESI Act issued on 31st May 2017; original application OA No. 4013 of 2017 filed before DRT Visakhapatnam on 22nd December 2017 under Section 19 RDB Act; compromise sanction letter issued on 23rd November 2018 and cancelled on 22nd February 2019; sale notice under Section 13(4) issued on 16th October 2019; S.A. No. 399 of 2019 filed before DRT on 25th October 2019 with interim stay granted on 21st November 2019 and later vacated; fresh sale notice issued on 12th February 2020 and one property auctioned on 18th March 2020 with sale confirmation on 15th April 2020; OTS 2020 Scheme introduced on 12th October 2020; borrower submitted letters dated 19th October 2020 and 10th November 2020; bank rejected OTS on 17th November 2020; Writ Petition No. 22706 of 2020 filed; DRT allowed Section 17 application setting aside measures including sale notice and sale certificate; fresh sale notice issued on 6th April 2022 and auction on 27th April 2022 challenged in S.A. No. 238 of 2022, pending; Single Judge allowed writ petition; Division Bench dismissed writ appeal on 21st December 2022; present appeal by special leave before Supreme Court.
Acts & Sections
- Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act): Section 2(zd), Section 2(f), Section 13(2), Section 13(4), Section 17
- Recovery of Debts and Bankruptcy Act, 1993 (RDB Act): Section 19
- Constitution of India, 1950: Article 226
