No Borrower Has Right To Grant Of One Time Settlement Scheme: Telangana High Court

"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."

Brief Facts:

The Petitioner filed a writ petition seeking a Writ of Mandamus to the Bank/Respondent to accept the OTS proposal made by Petitioner. The Petitioner had taken a term loan of Rs. 336.69 lakhs from the Respondent to set up a manufacturing unit against collateral security worth Rs. 138.02 lakhs. However due to market conditions, it had to be closed down. The Petitioner made a proposal for One Time Settlement in order to avoid the burden of interest. Although the principal amount was paid, the Respondent did not accept the OTS proposal.

The standing counsel for Respondent contended that the respondent Corporation cannot be pressurised to settle the matter under OTS scheme.

Ruling of the Court :

Justice K. Sarath after considering the facts of the case, relied on the judgment of the Apex Court in Bijnor Urban Cooperative Bank Limited (Supra):

"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."

In the light of the above ruling the Court held that the acceptance of the One Time Settlement scheme is ultimately for the bank to make a conscious decision.

Hence, the writ petition was dismissed as it was devoid of merits.

Case Title: M/s.Rajeshwara Rings Private Limited v. The Andhra Pradesh State Financial Corporation Telangana Division

Citation: 2022 LiveLaw (Tel) 98