Case Note & Summary
The present appeal arises from a judgment of the Allahabad High Court which, in exercise of powers under Article 226 of the Constitution of India, issued a writ of mandamus directing the Bijnor Urban Cooperative Bank Limited to positively consider the application of the original writ petitioner, Meenal Agarwal, for One Time Settlement (OTS). The Bank had rejected the petitioner's application for OTS on the ground that her loan account was classified as a Non-Performing Asset (NPA) and that there were chances of recovery of the loan amount by auctioning the mortgaged property. The petitioner had obtained a credit facility of about Rs. 1 crore, which became NPA. The Bank initiated proceedings under the SARFAESI Act. The petitioner applied for OTS under a scheme dated 01.08.2013, which was rejected on 17.09.2019. Subsequently, the petitioner deposited Rs. 60 lakhs to come out of NPA, but the Bank again rejected her application. The High Court, in a writ petition, directed the Bank to positively consider the OTS application. The Supreme Court, allowing the appeal, held that OTS is not a matter of right and the Bank's decision was based on RBI guidelines and the OTS Scheme. The Court observed that the High Court erred in issuing a writ of mandamus as the Bank had taken a conscious decision after considering the eligibility criteria. The Supreme Court set aside the High Court's order and dismissed the writ petition.
Headnote
A) Constitutional Law - Writ of Mandamus - One Time Settlement - Article 226 of the Constitution of India - The High Court cannot issue a writ of mandamus directing a bank to positively consider an application for One Time Settlement (OTS) as OTS is not a matter of right and the bank's decision based on RBI guidelines and OTS Scheme is not arbitrary. (Paras 5-6) B) Banking Law - One Time Settlement - Eligibility - RBI Guidelines and OTS Scheme - A loanee is not entitled to OTS as a matter of right; the bank may reject the application if there are chances of recovery of the loan amount by auctioning mortgaged property and the account is NPA. (Paras 5-6) C) Banking Law - One Time Settlement - Judicial Review - Article 226 of the Constitution of India - The High Court cannot substitute its own view in contractual matters and cannot direct the bank to grant OTS when the bank has taken a conscious decision after considering the eligibility criteria. (Paras 5-6)
Issue of Consideration
Whether the High Court was justified in issuing a writ of mandamus directing the Bank to positively consider the application for One Time Settlement (OTS) under Article 226 of the Constitution of India.
Final Decision
The Supreme Court allowed the appeal, set aside the impugned judgment and order of the High Court dated 16.08.2021, and dismissed the writ petition filed by the original writ petitioner.
Law Points
- One Time Settlement (OTS) is not a matter of right
- Writ of mandamus cannot be issued to direct bank to consider OTS application
- Bank's decision to reject OTS based on RBI guidelines and OTS Scheme is not arbitrary
- High Court cannot substitute its view in contractual matters under Article 226
