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 a One Time Settlement (OTS) under the 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 come out of NPA status. The Bank maintained that the petitioner was not eligible for OTS due to the recoverability of the loan amount through auctioning mortgaged property. The High Court directed the Bank to consider her application, which the Bank appealed against, arguing that the High Court erred in issuing a mandamus without considering the eligibility criteria outlined in the OTS Scheme. The Bank's counsel emphasized that the decision to reject the application was made after a thorough review by the Settlement Advisory Committee, which found that the chances of recovery were still viable. The petitioner contended that she was willing to pay and had deposited more than the required amount under the OTS Scheme, claiming the Bank's refusal was arbitrary. The Supreme Court analyzed the eligibility criteria for the OTS Scheme and concluded that no borrower could claim the benefit as a matter of right. It held that the Bank's decision to reject the application was justified based on the potential for full recovery of the loan amount. Ultimately, the Supreme Court quashed the High Court's order, affirming the Bank's discretion in such matters and emphasizing that the decision to grant OTS lies within the Bank's commercial wisdom.
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 issuing a writ of mandamus directing the Bank to consider the application for OTS, as the grant of benefit under the OTS Scheme is subject to eligibility criteria. The decision of the Bank was based on a conscious assessment of the borrower's eligibility and recovery prospects, thus the High Court's order was unsustainable (Paras 12).
Issue of Consideration
Whether benefit under the OTS Scheme can be prayed as a matter of right and 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 grant of benefit under the OTS Scheme is subject to eligibility criteria.
Law Points
- Article 226
- One Time Settlement Scheme
- eligibility criteria
- mandamus
- commercial wisdom
- natural justice
