Case Note & Summary
The dispute arose from a writ petition filed by the original writ petitioner against the Bijnor Urban Cooperative Bank regarding the rejection of her application for the One Time Settlement (OTS) Scheme. The petitioner had taken a loan of approximately Rs. 1 crore, which was categorized as a Non-Performing Asset (NPA). After her application for OTS was rejected, she deposited Rs. 60 lakhs to improve her eligibility but was still denied the benefit. The Bank contended that the loan was recoverable through auctioning the mortgaged property and that the petitioner did not meet the eligibility criteria for OTS. The High Court directed the Bank to reconsider her application, leading to the Bank's appeal. The Supreme Court analyzed whether the High Court had the authority to issue such a mandamus and concluded that the Bank's decision was based on valid grounds and within its discretion. The Court emphasized that the benefit of OTS could not be claimed as a matter of right and that the Bank's commercial judgment regarding recovery was paramount. Ultimately, the Supreme Court quashed the High Court's order, affirming the Bank's decision-making process and the necessity of adhering to the OTS eligibility criteria.
Headnote
A) Constitutional Law - Writ of Mandamus - Jurisdiction of High Court - Article 226 of the Constitution of India - The High Court exceeded its jurisdiction by directing the Bank to grant benefit under the OTS Scheme, which is subject to eligibility criteria. The decision of the Bank and Settlement Advisory Committee was based on a conscious assessment of the borrower's eligibility and recovery prospects, thus mandamus was not warranted (Paras 12).
Issue of Consideration
Whether the High Court can issue a writ of mandamus directing the Bank to consider the grant of benefit under the OTS Scheme?
Final Decision
The Supreme Court allowed the appeal, quashed the High Court's order directing the Bank to consider the OTS application, and held that the benefit under the OTS Scheme is not a matter of right and is subject to eligibility criteria.
Law Points
- Writ of mandamus
- Article 226
- One Time Settlement Scheme
- eligibility criteria
- Non-Performing Asset
- SARFAESI Act
Case Details
2021 LawText (SC) (12) 236
Civil Appeal No. 7411 of 2021
M.R. Shah, B.V. Nagarathna
Meenakshi Arora, V.K. Shukla
The Bijnor Urban Cooperative Bank Limited, Bijnor & others
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Nature of Litigation
Writ petition challenging the rejection of application for One Time Settlement.
Remedy Sought
The original writ petitioner sought a writ of mandamus directing the Bank to consider her application for OTS.
Filing Reason
The Bank rejected her application for OTS on grounds of ineligibility due to the loan being classified as NPA.
Previous Decisions
The High Court previously directed the Bank to consider the petitioner's grievance regarding her OTS application.
Issues
Whether benefit under the OTS Scheme can be prayed as a matter of right?
Whether the High Court can issue a writ of mandamus directing the Bank to positively consider the grant of benefit under the OTS Scheme?
Submissions/Arguments
The Bank argued that the High Court erred in issuing a writ of mandamus as the petitioner did not meet the eligibility criteria for OTS.
The petitioner contended that she was willing to pay the entire amount under the OTS Scheme and that the Bank's rejection was arbitrary.
Ratio Decidendi
The Supreme Court held that a writ of mandamus cannot compel a financial institution to grant benefits under the OTS Scheme as it is subject to eligibility criteria and the Bank's discretion based on recovery prospects.
Judgment Excerpts
The High Court exceeded its jurisdiction by directing the Bank to grant benefit under the OTS Scheme, which is subject to eligibility criteria.
No writ of mandamus can be issued by the High Court in exercise of powers under Article 226 of the Constitution of India, directing a financial institution/bank to positively grant the benefit of OTS to a borrower.
Procedural History
The original writ petitioner filed multiple writ petitions challenging the Bank's rejection of her OTS application, leading to the High Court's directive which was subsequently appealed by the Bank.
Acts & Sections
- Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002:
- Constitution of India: Article 226
