Case Note & Summary
The petitioner, M/s Rima Transformers and Conductors Pvt Ltd, a private limited company, availed a credit facility of Rs. 18 crores from Canara Bank. Due to default in repayment, the account was declared a Non-Performing Asset (NPA). The bank issued a notice under the SARFAESI Act and scheduled an e-auction of the secured assets on 29.04.2021. The petitioner negotiated a One Time Settlement (OTS) with the bank, but the bank subsequently withdrew the OTS and proceeded with the e-auction. The petitioner filed a writ petition under Articles 226 and 227 of the Constitution of India seeking to quash the e-auction notice and to direct the bank to accept the OTS. The court examined the maintainability of the writ petition against a private bank in a contractual matter. It held that Canara Bank, being a nationalized bank, is not a 'State' under Article 12 for the purpose of writ jurisdiction, and the dispute is purely contractual. The court further held that an OTS is a contractual offer and the bank has the discretion to accept or reject it; no writ of mandamus can be issued to compel acceptance. Additionally, the petitioner has an alternative efficacious remedy under Section 17 of the SARFAESI Act before the Debt Recovery Tribunal. Consequently, the writ petition was dismissed as not maintainable, leaving the petitioner to pursue remedies under the SARFAESI Act.
Headnote
A) Constitutional Law - Writ Jurisdiction - Maintainability against Private Banks - Article 226 of the Constitution of India - The court examined whether a writ petition under Article 226 is maintainable against a private bank like Canara Bank in a contractual matter concerning OTS and e-auction - Held that the bank is not a 'State' under Article 12 and the dispute is contractual, thus writ jurisdiction is not available; alternative remedy under SARFAESI Act is efficacious (Paras 10-15). B) Banking Law - One Time Settlement - Enforceability by Writ - Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) - The court considered whether a borrower can compel a bank to accept an OTS through a writ petition - Held that OTS is a contractual offer and the bank has discretion to accept or reject it; no writ of mandamus can be issued to compel acceptance (Paras 16-20). C) Banking Law - E-Auction - Challenge under SARFAESI Act - Section 13 of SARFAESI Act - The court addressed the challenge to the e-auction notice issued by the bank - Held that the petitioner has an alternative remedy under Section 17 of the SARFAESI Act before the Debt Recovery Tribunal, and the writ petition is not maintainable (Paras 21-25).
Issue of Consideration
Whether a writ of mandamus can be issued to a bank to accept a One Time Settlement (OTS) and quash an e-auction under the SARFAESI Act, and whether the bank's withdrawal of OTS is arbitrary.
Final Decision
The writ petition is dismissed as not maintainable. The petitioner is at liberty to avail the alternative remedy under Section 17 of the SARFAESI Act before the Debt Recovery Tribunal.
Law Points
- Writ jurisdiction under Article 226 not available against private banks in contractual matters
- One Time Settlement is a contractual offer not enforceable by writ
- SARFAESI Act provides alternative remedy
- Bank's discretion to accept or reject OTS cannot be compelled by writ
