Borrower Not Permitted To Seek Court’s Direction Compelling Bank To Honour Its Obligations When He Commits Breach Of Terms Of OTS Scheme: Kerala HC
The Kerala High Court observed that if the borrower is not in a position to or unwilling to act in accordance with any of the terms and conditions of the OTS (One Time Settlement) Scheme or committed breach of the terms he cannot be permitted to seek direction from the Court to compel the bank to honour its obligations.
The High Court was considering the appeals filed by the State Bank Of India where the main issue revolved around the scope of interference in writ petitions pleading for grant of the benefits of One Time Settlement Schemes (OTS Schemes).
The Division Bench comprising Chief Justice Nitin Jamdar and Justice S. Manu explained, “Banks provide special schemes such as One Time Settlement Schemes to enable defaulters to wipe off the liabilities. Terms and conditions of such schemes are formulated on the basis of commercial prudence. Often, waiver of penal interest or other components is offered as a benefit to the borrowers.”
Advocate Jawahar Jose represented the Appellants while Advocate V.K Peermohamed Khan represented the Respondents.
The Bank was deeply aggrieved by the directions issued by the Single Judge extending the benefits of OTS Schemes to the party Respondents in spite of the lapses in discharging their obligations under the Scheme.
The various respondents in this case had either availed loan facilities, credit facilities or committed default in repayment of loan amount. The Bank accounts of two of the holder of bank account was classified as Non-Performing Assets (NPA). Proceedings were carried out under the SARFAESI Act. The High Court extended the time period of the OTS Scheme. The Bank was also asked to keep on hold the dispossession and was further prevented from proceeding with coercive measures.
It was the case of the Bank that the High Court wasn’t justified in interfering with proceedings initiated under the provisions of the SARFAESI Act in writ petitions filed under Article 226 of the Constitution of India. On contrary, the Respondents defended the impugned judgment stating that directions therein had been issued on equitable considerations and the discretionary orders passed by the Single Judge were not liable to be interfered with in the intra-court appeal.
Referring to a catena of judgments of the Apex Court, the Bench observed,“A borrower availing the benefit of the Scheme is bound by terms and conditions of the Scheme in its entirety. If the borrower is not in a position to or unwilling to act in accordance with any of the terms and conditions of the OTS Scheme or committed breach of the terms he cannot be permitted to seek direction from the Court to compel the bank to honour its obligations. If such pleas are acceded to, that will definitely amount to re-writing of the agreement between the creditor and the borrower.”
In light of such factual and legal aspects, the Bench observed that the Respondents in none of these cases are entitled for the reliefs granted by way of the impugned judgments and interim order. It was also evident from the pleadings in all these cases that the borrowers had failed to discharge their obligations under the OTS Scheme.
Thus, allowing the appeal, the Bench set aside the earlier orders passed by the High Court.
Cause Title: The State Bank of India v. Sham P.S. & Ors. [Neutral Citation: 2024:KER:92019]
Appearance:
Appellant:Advocates Jawahar Jose, S.Lakshmy, M.Jithesh Menon
Respondents: Advocates V.K Peermohamed Khan, J.G.Syamnath, E.A.Bijumon, Sreehari V.