Supreme Court

The Bijnor Urban Cooperative Bank Limited, Bijnor and Ors. vs. Meenal Agarwal and Ors.

MANU/SC/1258/2021

15.12.2021

Banking

Writ of mandamus cannot be issued by the High Court directing a financial institution/bank to grant the benefit of OTS to a borrower

The Bank has preferred the present appeal, feeling aggrieved and dissatisfied with the impugned judgment and order passed by the High Court, by which the High Court has allowed the said writ petition preferred by Respondent No.1 herein (original writ petitioner) and has, in exercise of powers under Article 226 of the Constitution of India, 1950 issued a writ of mandamus directing the Appellant – Bank to positively consider the original writ Petitioner’s application for One Time Settlement (OTS).

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. The grant of benefit under the OTS is always subject to the eligibility criteria mentioned under the OTS Scheme and the guidelines issued from time to time.

If the bank/financial institution is of the opinion that, the loanee has the capacity to make the payment and/or that the bank/financial institution is able to recover the entire loan amount even by auctioning the mortgaged property/secured property, either from the loanee and/or guarantor, the bank would be justified in refusing to grant the benefit under the OTS Scheme. Ultimately, 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 the financial institution/bank shall take a prudent decision whether to grant the benefit or not under the OTS Scheme, having regard to the public interest involved and having regard to the factors which are narrated hereinabove.

The High Court, in the present case, has materially erred and has exceeded in its jurisdiction in issuing a writ of mandamus in exercise of its powers under Article 226 of the Constitution of India by directing the Appellant-Bank to positively consider/grant the benefit of OTS to the original writ Petitioner. The impugned judgment and order passed by the High Court is hence unsustainable and deserves to be quashed and set aside and is accordingly quashed and set aside. Appeal allowed.

Tags : OTS Benefit Direction

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