On 22 November 2022, the Telangana High Court entertaining the Writ Petition 4180 of 2022 expounds that The acceptance of the One Time Settlement scheme is ultimately for the bank to take conscious decision. No bank can be compelled to accept a lesser amount under the One Time Settlement scheme despite a bank is able to conduct auction, to secure property or mortgage property and no borrower as a matter of right pray for grant One Time Settlement scheme.

Facts of the Case

This petition is filed seeking a direction more particularly one in the nature of Writ of Mandamus declare the Pro.No.AFC/RRE/MR&R/2021-22/233, dated 30.12.2021 of the respondents in rejecting the request of the petitioner for OTS and directing to pay interest even after receipt of the entire principal amount as illegal, arbitrary and consequently, to set aside the impugned proceedings dated 30.11.2021 by directing the respondent to accept the OTS proposal made by the petitioner.

PETITIONER CONTENTIONS

The Petitioner contends before the Hon’ble Court that the

  1. Petitioner has availed a term loan of Rs.336.69 lakhs to set up a unit for manufacture of Precision Engineering Components under General Loan Scheme. The total project of Rs.605 lakhs. That the said loan was obtained against collateral security worth Rs.138.02 lakhs by way of urban immovable properties including value of unit’s land surplus value of securities offered to the associated unit to the satisfaction of respondent.
  2. Petitioner has decided to close the business by settling all the liabilities in order to avoid the burden of interest, the petitioner had approached the respondent corporation and made a proposal of One Time Settlement.
  3. Payment of total principal amount respondent has not considered the One Time Settlement proposal of the petitioner and issued letter directing the petitioner to pay Rs.1,40,73,567/- without any basis, without mentioning the details of interest accrued thereon is illegal, arbitrary and unconstitutional and contrary to the guidelines issued by the RBI under OTS scheme.

RESPONDENT SUBMISSIONS

The Respondent contends before the Hon’ble Court that

  1. the petition is not maintainable as the petitioner borrowed a term loan for an amount of Rs.336.69 lakhs and failed to pay the borrowed amount regularly
  2. he cannot pressurise the respondent Corporation to settle the matter under One Time Settlement scheme.

COURT OBSERVATION

The Court in its Observation stated that:

The acceptance of the One Time Settlement scheme is ultimately for the bank to take conscious decision. No bank can be compelled to accept a lesser amount under the One Time Settlement scheme despite a bank is able to conduct auction, to secure property or mortgage property and no borrower as a matter of right pray for grant One Time Settlement scheme.

Further, the Court relies upon the Observation by The Hon’ble Supreme Court in  the case title Bijnor Urban Cooperative Bank Limited, Bijnor vs Meenal Agarwal, in which Apex Court held that 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 and such a decision should be left to the commercial wisdom of the bank whose amount is involved and it is always to be presumed that that financial institution/bank shall take a prudent decision whether to grant the benefit or not under the OTS scheme.

Further, the Court dismissed the Writ Petition.

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