THE BIJNOR URBAN COOPERATIVE BANK LIMITED, BIJNOR & OTHERSversusMEENAL AGARWAL & OTHERS

416                       [2021]
               SUPREME COURT     9 S.C.R. 416
                              REPORTS                       [2021] 9 S.C.R.


A         THE BIJNOR URBAN COOPERATIVE BANK LIMITED,
                        BIJNOR & OTHERS
                               v.
                       MEENAL AGARWAL & OTHERS
                         (Civil Appeal No. 7411 of 2021)
B
                             DECEMBER 15, 2021
               [M. R. SHAH AND B. V. NAGARATHNA, JJ.]
             Constitution of India: Art. 226 – Power under – Exercise of –
      Grant of benefit under the One Time Settlement (OTS) Scheme – On
C     facts, writ petitioner obtained credit facility from the financial
      institution/Bank and the said loan amount was declared as Non-
      Performing Asset (NPA) – Writ petition seeking issuance of writ of
      mandamus directing the Bank to positively grant of benefit under
      the OTS Scheme to the writ petitioner-borrower – Allowed by the
D     High Court – Sustainability of – Held: Not sustainable – 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
E     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 – Such a decision
      should be left in the interest of the bank and in its commercial wisdom
      – Thus, the High Court erred and exceeded in its jurisdiction in
F     issuing writ of mandamus directing the Bank to positively grant the
      benefit of OTS to the petitioner – Order passed by the High Court is
      quashed and set aside.
            Allowing the appeal, the Court
            HELD: 1.1 As per the guidelines issued, the grant of benefit
G     of OTS Scheme cannot be prayed as a matter of right and the
      same is subject to fulfilling the eligibility criteria mentioned in
      the scheme. The defaulters who are ineligible under the OTS
      Scheme are mentioned in clause 2. A wilful defaulter in repayment
      of loan and a person who has not paid even a single installment
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                                       416
    THE BIJNOR URBAN COOPERATIVE BANK LIMITED,                             417
             BIJNOR v. MEENAL AGARWAL

after taking the loan and will not be able to pay the loan will be         A
considered in the category of “defaulter” and shall not be eligible
for grant of benefit under the OTS Scheme. Similarly, a person
whose account is declared as “NPA” shall also not be eligible.
As per the guidelines, the Bank is required to constitute a
Settlement Advisory Committee for the purpose of examining
                                                                           B
the applications received and thereafter the said Committee has
to take a decision after considering whether a defaulter is entitled
to the benefit of OTS or not after considering the eligibility as
per the OTS Scheme. While making recommendations, the
Settlement Advisory Committee has to consider whether efforts
have been made to recover the loan amount and the possibility              C
of recovery has been minimized, meaning thereby if there is
possibility of recovery of the amount, either by initiating
appropriate proceedings or by auctioning the property mortgaged
and/or the properties given as a security either by the borrower
and/or by guarantor, the application submitted by the borrower
                                                                           D
for grant of benefit under the OTS Scheme can be rejected.
[Para 5.2][429-D-H; 430-A]
      1.2 In the instant case, despite the fact that it was specifically
pointed out before the High Court by way of counter affidavit
that the recovery proceedings under SARFAESI Act are pending;
the borrower and her husband have availed two credit facilities            E
and both the loan accounts are maintained regularly and the money
is being deposited on regular basis; the Settlement Advisory
Committee concluded that the borrower is enjoying a good
financial status and the secured assets are sufficient in case if
any recovery is to be made and by auctioning the mortgaged                 F
property the bank can recover the entire loan amount, the High
Court failed to consider the said aspects in their true perspective
and issued a writ of mandamus as if the grant of benefit under
the OTS Scheme can be claimed as a matter of right. [Para 6]
[430-A-C]
                                                                           G
      1.3 In the instant case, a conscious decision was taken by
the Bank as well as the Settlement Advisory Committee which is
reflected from the Board’s Resolution and the decision. Even
personal hearing was afforded to the original writ petitioner by

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418            SUPREME COURT REPORTS                      [2021] 9 S.C.R.


A     the Settlement Advisory Committee. The High Court observed
      that no opportunity was given to the original writ petitioner, which
      is factually incorrect. Therefore, the decision cannot be said
      to be in violation of the principle of natural justice. [Para 7]
      [430-D-E]
B           1.4 While passing the impugned judgment and order, the
      High Court observed that the proceedings under the SARFAESI
      Act have remained pending for seven years and the Bank has
      been unable to recover its dues and therefore the hope of
      recovery is illusory. This conclusion is not supported by any
      material on record. Merely because the proceedings under the
C     SARFAESI Act have remained pending for seven years, the Bank
      cannot be held responsible for the same. No fault of the bank can
      be found. What is required to be considered is a conscious
      decision by the Bank that the Bank will be able to recover the
      entire loan amount by auctioning the mortgaged property and a
D     due application of mind by the Bank that there are all possibilities
      to recover the entire loan amount, instead of granting the benefit
      under the OTS Scheme and to recover a lesser amount. No bank
      can be compelled to accept a lesser amount under the OTS
      Scheme despite the fact that the Bank is able to recover the
      entire loan amount by auctioning the secured property/mortgaged
E     property. When the loan is disbursed by the bank and the
      outstanding amount is due and payable to the bank, it will always
      take a conscious decision in the interest of the bank and in its
      commercial wisdom. [Para 8][430-F-H; 431-A-B]
             1.5 In a given case, it may happen that a person would borrow
F     a huge amount, for example Rs. 100 crores. After availing the
      loan, he may deliberately not pay any amount towards installments,
      though able to make the payment. He would wait for the OTS
      Scheme and then pray for grant of benefit under the OTS Scheme
      under which, always a lesser amount than the amount due and
G     payable under the loan account will have to be paid. This, despite
      there being all possibility for recovery of the entire loan amount
      which can be realised by selling the mortgaged/secured
      properties. If it is held that the borrower can still, as a matter of
      right, pray for benefit under the OTS Scheme, in that case, it

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    THE BIJNOR URBAN COOPERATIVE BANK LIMITED,                          419
             BIJNOR v. MEENAL AGARWAL

would be giving a premium to a dishonest borrower, who, despite         A
the fact that he is able to make the payment and the fact that the
bank is able to recover the entire loan amount even by selling
the mortgaged/secured properties, either from the borrower and/
or guarantor. This is because under the OTS Scheme a debtor
has to pay a lesser amount than the actual amount due and payable
                                                                        B
under the loan account. Such cannot be the intention of the bank
while offering OTS Scheme and that cannot be purpose of
the Scheme which may encourage such a dishonesty. [Para 9]
[431-C-F]
      1.6 If a prayer is entertained on the part of the defaulting
unit/person to compel or direct the financial corporation/bank to       C
enter into a one-time settlement on the terms proposed by it/
him, then every defaulting unit/person which/who is capable of
paying its/his dues as per the terms of the agreement entered
into by it/him would like to get one time settlement in its/his
favour. Who would not like to get his liability reduced and pay         D
lesser amount than the amount he/she is liable to pay under the
loan account. In the instant case, the original writ petitioner and
her husband are making the payments regularly in two other loan
accounts and those accounts are regularised. Meaning thereby,
they have the capacity to make the payment even with respect to
the present loan account and despite the said fact, not a single        E
amount/installment has been paid in the present loan account for
which original petitioner is praying for the benefit under the OTS
Scheme. [Para 10][431-F-H; 432-A-B]
       1.7 No writ of mandamus can be issued by the High Court
in exercise of powers under Article 226 of the Constitution of          F
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    G
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

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420             SUPREME COURT REPORTS                      [2021] 9 S.C.R.


A     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
B
      narrated. [Para 11][432-B-E]
             1.8 The High Court, materially erred and has exceeded in
      its jurisdiction in issuing a writ of mandamus in exercise of its
      powers under Article 226 by directing the appellant-Bank to
      positively consider/grant the benefit of OTS to the original writ
C     petitioner. The impugned judgment and order passed by the High
      Court is hence unsustainable and is accordingly quashed and set
      aside. [Para 12][432-E-F]
              M.M. Accessories v. U.P. Financial Corporation,
              Kanpur AIR 2002 All 96; Vipin Kumar Gupta v. Branch
D             Manager, Union Bank of India, Gyanpur AIR 2004
              All 319 – referred to.
                              Case Law Reference
      AIR 2002 All 96                 referred to             Para 3
E     AIR 2004 All 319                referred to             Para 3
              CIVIL APPELLATE JURISDICTION : Civil Appeal No.7411 of
      2021.
            From the Judgment and Order dated 16.08.2021 of the High Court
      of Judicature at Allahabad in WRIT-C No.15194 of 2021.
F
            Ms. Meenakshi Arora, Sr. Adv., Jasbir Singh Malik, Varun Punia,
      Advs. for the Appellants.
            V. K. Shukla, Sr. Adv., Ms. Parul Shukla, Ms. Kirti Aggarwal,
      Advs. for the Respondents.
G             The Judgment of the Court was delivered by
              M. R. SHAH, J.
            1. Feeling aggrieved and dissatisfied with the impugned judgment
      and order dated 16.08.2021passed by the High Court of Judicature at
      Allahabad in Writ Petition No. 15194 of 2021, by which the High Court
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    THE BIJNOR URBAN COOPERATIVE BANK LIMITED,                                   421
      BIJNOR v. MEENAL AGARWAL [M. R. SHAH, J.]

has allowed the said writ petition preferred by respondent No.1 herein           A
(original writ petitioner) and has, in exercise of powers under Article
226 of the Constitution of India, issued a writ of mandamus directing the
appellant – Bank to positively consider the original writ petitioner’s
application for One Time Settlement (OTS), the Bank has preferred the
present appeal.
                                                                                 B
         2. The facts leading to the present appeal in a nutshell are as
under:
      That the original writ petitioner had obtained credit facility from
the bank of about Rs. 1 crore. The said loan account with the Bank was
categorised as “Non-Performing Asset, (NPA)”. The Bank also initiated            C
proceedings under the provisions of the Securitization and Reconstruction
of Financial Assets and Enforcement of Security Interest Act, 2002
(hereinafter referred to as the ‘SARFAESI Act’). That there were two
other loan accounts also which were being regularly serviced by
respondent no.1 – original writ petitioner, meaning thereby that the
payment was regularised insofar as two other loan accounts are                   D
concerned. However, so far as the present loan account is concerned,
which was declared as NPA, not a single amount was paid till an
application for extending the benefit of OTS was submitted.
        2.1 That One Time Settlement Scheme was issued by the Bank
vide OTS Circular dated 01.08.2013 which provided that on the conditions         E
contained in the said circular being complied with, the benefit of OTS
can be taken by the debtor. The benefit of OTS Scheme came to be
extended till 30.11.2019. The original writ petitioner submitted an
application for consideration of her case under OTS vide application
dated 22.07.2019. Vide communication dated 17.09.2019, her application           F
for grant of benefit under the OTS came to be rejected on the ground
that she is not eligible for OTS under the OTS Scheme and that the loan
can be recovered by auction of the mortgaged property and that there
are chances of recovering the loan amount and that her loan account
has been declared as ‘NPA’. It appears that to come out of NPA eligibility,
the original writ petitioner deposited a sum of Rs.60 lakhs on 02.03.2020,       G
i.e., after rejection of her earlier application on the ground that as her
loan account is “NPA’, she is not eligible for OTS Scheme.
      2.2 The Board of the Bank also passed a resolution dated
28.12.2020 to the effect that original writ petitioner is not eligible for the
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422             SUPREME COURT REPORTS                            [2021] 9 S.C.R.


A     benefit under the OTS Scheme for the reason that the loan account is
      fully recoverable and all the measures to recover the loan amount have
      not yet been exhausted and the chances of recovery of the loan amount
      are still there.
             2.3 The original writ petitioner filed a writ petition before the High
B     Court being Writ Petition No. 18221 of 2020 challenging the order dated
      17.09.2019 passed by the Bank rejecting her application for giving the
      benefit of OTS scheme. Vide order dated 25.01.2021, the High Court
      disposed of the said writ petition by directing the Bank to consider the
      grievance of the original writ petitioner and to decide her representation
      dated 22.07.2019 after affording due opportunity of hearing to her, as
C     expeditiously as possible and preferably within a period of four weeks.
      At this stage, it is required to be noted that in the said writ petition, the
      original writ petitioner also prayed for a writ of mandamus directing the
      Bank to give the benefit of OTS so that the original writ petitioner may
      deposit the entire amount at once so as to clear her dues for the loan
D     which she had taken in the year 2013, which prayer was not granted by
      the High Court and the High Court only directed the Bank to consider
      her grievance and decide her representation dated 22.07.2019.
             2.4 Thereafter, the original writ petitioner again submitted an
      application dated 06.02.2021 to the Bank to grant the benefit under the
E     OTS, which again was rejected by the Bank vide communication dated
      08.01.2021 and 25.02.2021. The original writ petitioner filed a fresh writ
      petition before the High Court being Writ Petition No. 15194 of 2021
      with a prayer to quash the aforesaid impugned orders dated 08.01.2021
      and 25.02.2021 rejecting her application for grant of benefit of OTS and
      also prayed for a writ of mandamus to direct the Bank to give the benefit
F     of OTS issued vide Circular Nos. C-108 and C-121.
             2.5 The aforesaid writ petition was vehemently opposed by the
      Bank by filing a detailed affidavit-in-reply. It was inter alia submitted
      that the writ petitioner was not entitled to get any relief under the OTS
      Scheme as the probabilities of recovery of loan amount does not diminish
G     and still stands and sufficient amount of property is mortgaged with the
      Bank and therefore by auctioning the mortgaged property the Bank can
      recover the loan amount. It was also submitted that her case does not
      come under the eligible category for OTS. It was submitted that even
      the case of the original writ petitioner was referred to the Settlement
H     Advisory Committee for consideration which after hearing the writ
    THE BIJNOR URBAN COOPERATIVE BANK LIMITED,                                  423
      BIJNOR v. MEENAL AGARWAL [M. R. SHAH, J.]

petitioner also rejected her application for grant of benefit under the         A
OTS Scheme. By the impugned judgment and order and in exercise of
powers under Article 226 of the Constitution of India, the High Court
has issued a writ of mandamus and has directed the Bank to positively
consider her application for grant of benefit under the OTS Scheme.
       2.6 Feeling aggrieved and dissatisfied with the impugned judgment        B
and order passed by the High court, by which the High Court in exercise
of powers under Article 226 of the Constitution of India has issued a
writ of mandamus directing the Bank to positively consider her application
for OTS, the Bank has preferred the present appeal.
      3. Ms. Meenakshi Arora, learned Senior Advocate has appeared              C
on behalf of the appellant herein – Bank and Shri V.K. Shukla, learned
Senior Advocate has appeared on behalf of respondent no.1 herein.
       3.1 Ms. Meenakshi Arora, learned Senior Advocate appearing on
behalf of the appellant herein has vehemently submitted that the High
Court has materially erred in issuing a writ of mandamus directing the          D
Bank to positively consider the application of the original writ petitioner
for grant of OTS which, according to the learned counsel appearing on
behalf of the Bank, could not have been passed in exercise of powers
under Article 226 of the Constitution of India.
       3.2 It is vehemently submitted that as such a conscious decision         E
was taken by the Bank as well as the Settlement Advisory Committee
that the original writ petitioner is not eligible for grant of benefit of OTS
as she is not fulfilling the eligibility criteria for availing the benefit of
OTS.
       3.3 It is further submitted that a conscious decision was taken          F
considering the RBI guidelines as well as the OTS Scheme and that too
after giving an opportunity to the original writ petitioner and therefore
the same ought not to have been set aside by the High Court.
      3.4 It is further submitted that as such the benefit of OTS cannot
be asked/prayed as a matter of right by any person who is in default. It
                                                                                G
is submitted that the benefit of OTS is to be granted as per the Guidelines
issued by the RBI as well as the conditions in the OTS Scheme itself. It
is submitted that if it is found that there are chances of recovering the
loan amount by auctioning the mortgaged property and/or by auctioning
the other properties which are put as a security and the chances of
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424             SUPREME COURT REPORTS                           [2021] 9 S.C.R.


A     recovery of the entire loan amount are not diminished, the Bank is justified
      in refusing to grant the benefit under the OTS Scheme.
             3.5 It is submitted that in the present case, in other two loan
      accounts, the original writ petitioner is making the payments, however,
      insofar as the present loan account is concerned, not a single amount
B     was deposited till 2.3.2020. It is submitted that a sum of Rs. 60 lakhs
      was deposited cleverly by the original writ petitioner to come out of
      NPA. It is submitted only when, after her first application for grant of
      benefit under the OTS Scheme was rejected on 17.09.2019, the original
      writ petitioner thereafter deposited a sum of Rs.60 lakhs to come out of
      NPA and to take the benefit under the OTS Scheme. It is submitted that
C     under the OTS Scheme, once the account is declared as NPA and not a
      single amount has been deposited till the application for grant of benefit
      under the OTS is filed and there are chances of recovery of the entire
      loan amount by auctioning the mortgaged property or other properties
      put as a security, the application for grant of benefit under the OTS
D     scheme can be rejected.
            3.6 It is therefore submitted that in the present case, as it was
      found that the original writ petitioner is not eligible for grant of benefit
      under the OTS Scheme, her application was rightly rejected, both, by
      the Bank as well as the Settlement Advisory Committee.
E           3.7 It is further submitted that the decision/s to reject her
      application for grant of benefit under the OTS Scheme was absolutely in
      consonance with the guidelines issued by the RBI as well as the OTS
      Scheme itself. It is submitted that the High Court ought not to have
      issued a writ of mandamus directing the Bank to positively consider her
F     case for grant of benefit under the OTS Scheme, in absence of any
      absolute/vested right in her favour.
              3.8 Ms. Meenakshi Arora, learned counsel appearing on behalf
      of the appellant Bank has heavily relied upon the decisions of the
      Allahabad High Court in the case of M.M. Accessories v. U.P. Financial
G     Corporation, Kanpur, reported in AIR 2002 All 96 as well as another
      decision in the case of Vipin Kumar Gupta v. Branch Manager, Union
      Bank of India, Gyanpur, reported in AIR 2004 All 319 by submitting
      that in the aforesaid two decisions, it is specifically observed and held by
      the very High Court that no such writ of mandamus directing to grant
      the benefit of OTS can be issued in exercise of powers under Article
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    THE BIJNOR URBAN COOPERATIVE BANK LIMITED,                                  425
      BIJNOR v. MEENAL AGARWAL [M. R. SHAH, J.]

226 of the Constitution of India. It is submitted that though the aforesaid     A
decisions were cited before the High Court, the same have not been
dealt with and considered by the High Court.
      3.9 Making the above submissions, it is prayed to allow the present
appeal and quash and set aside the impugned order passed by the High
Court directing the Bank to positively consider the case of the original        B
writ petitioner for grant of benefit under the OTS Scheme.
       4. The present appeal is vehemently opposed by Shri V.K. Shukla,
learned Senior Advocate appearing on behalf of respondent no.1 – original
writ petitioner. It is submitted that in the present case as it was found
that though the original writ petitioner is ready and willing to deposit the    C
entire amount under the OTS Scheme and though she is eligible for the
grant of benefit under the OTS Scheme, her application for grant of
benefit under the OTS Scheme was rejected which is found to be
arbitrary and against the principle of natural justice, the High Court has
rightly set aside the decision rejecting the application of the original writ
petitioner for grant of benefit under the OTS Scheme.                           D

      4.1 It is submitted that under the OTS Scheme, a loanee is required
to deposit at least 25% of the total amount along with the application,
however, the original writ petitioner deposited more than 50% of the
amount to be paid – before her application for grant of benefit under the
OTS is considered. It is submitted that the cheque for the said amount          E
came to be accepted by the Bank and even the same was credited in the
NPA account, thereby showing that her request for OTS has been
accepted. It is submitted that thereafter to reject the application for grant
of benefit under the OTS is malafide and arbitrary and therefore the
High Court has rightly issued a writ of mandamus and has rightly directed       F
the bank to positively consider her case for grant of benefit under the
OTS Scheme.
       4.2 It is further submitted that as such the original writ petitioner
was being harassed by the Bank even when she was eligible to the
benefit under the OTS Scheme. It is submitted that the Bank with an ill/        G
ulterior motive deliberately refused to grant the benefit under the OTS
Scheme just to grab her property. It is therefore prayed not to interfere
with the impugned judgment and order passed by the High Court, in
exercise of powers under Article 136 of the Constitution of India.

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426             SUPREME COURT REPORTS                           [2021] 9 S.C.R.


A            5. Having heard learned counsel for the respective parties at length,
      the following issues/questions are posed for consideration of this Court:
            i) Whether benefit under the OTS Scheme can be prayed as a
            matter of right?;
            ii) Whether the High Court in exercise of powers under Article
B           226 of the Constitution of India can issue a writ of mandamus
            directing the Bank to positively consider the grant of benefit
            under the OTS Scheme and that too de hors the eligibility
            criteria mentioned under the OTS Scheme?
             5.1 While considering the aforesaid issues/questions, the relevant
C     clauses of the OTS Scheme are required to be referred to which are as
      under:
            1. “Introduction:-
            A large part of various types of loans dispersed from time to time
D           by the urban co-operative banks of the state to the institutions/
            members are currently in the form of time-less loans has been
            blocked. Despite all the efforts regarding recovery of such lapsed
            loans, the recovery of loans is not being done for a long time.
            According to the guidelines issued by the Reserve Bank of India
            for OTS from time to time, it has been decided to implement the
E           revised one time settlement (OTS) for recovery of non-performing
            assets in the state so that serious timeless debts of the bank can
            be saved to get maximum recovery.
            2. Coverage (Cut-off- date): -
            This scheme in respect of all types of debts classified as doubtful
F
            or loss assets as on 31 .3.2013 on entities/individuals as per the
            revised guidelines by the Reserve Bank of India will apply.
            According to the revised guidelines by the Reserve Bank of India,
            this scheme is applicable in respect of all types of loans on
            institutions and individuals as on 31.03.2013, which have been in
G           the category of doubtful or loss assets or have been classified in
            sub-standard on the said date.
            The following categories of defaulters will not be eligible under
            this scheme:

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THE BIJNOR URBAN COOPERATIVE BANK LIMITED,                                427
  BIJNOR v. MEENAL AGARWAL [M. R. SHAH, J.]

 1.    Willful defaulter in repayment of loan, (The person or             A
       institution who has not paid even one installment after taking
       the loan, he will not be able to pay the loan will be considered
       in the category of defaulter).
 2.    Cases of fraud and forgery.
 3.    Loans taken by salaried employees.                                 B

 4.    Such timeless loan which has been availed by the bank
       secretary / operator or whose guarantee has been taken by
       any director of the bank or the close relative of the operator
       or any institution in which the interest of the current or
       former director is vested.                                         C

 5.    Such a timeless loan whose guarantee has been given by
       the government.
 6.    Loans taken by government departments / institutions
       approved by the government.                                        D
 7.    Negotiable N.P.A. / Outstanding loan limit is only the amount
       of money aggregating all types of loan accounts of an
       organization / individual member, for which a lump sum
       agreement can be made that the limit of debt will be
       extinguished.
                                                                          E
 8.    Personal Borrowers Rs.10.00 Lakhs
 9.    Institutional Borrowers Rs.50.00 Lakhs
 In cases of more than the above limit, prior approval of the registrar
 co-operative societies will have to be obtained by making a
 separate plan by the board of directors of the concerned bank for        F
 one-time settlement.
 4. Settlement Formula:
 a) Accounts of non-performing assets which were or should have
 been classified as doubtful/loss as on 31st March 2013, the recovery     G
 of the amount will be equal to the total balance (principal and
 interest) in that account on the date the account is classified as
 doubtful and loss. If the interest has been charged in such accounts
 after the date of classification of doubtful/loss category, then the
 same can be waived, this policy will be applicable to all the
 borrowers and defaulters alike.                                          H
428        SUPREME COURT REPORTS                         [2021] 9 S.C.R.


A     b) Under this scheme, with the consent of the defaulter, the total
      amount of the settlement will have to be deposited in one lump
      sum, but if the defaulter is unable to deposit all the amount in one
      lump sum, then 25 percent of such amount till the date of the
      consent letter and for the recovery of remaining 75 percent, amount
      will have to be deposited in three equal installments over a period
B
      of one year on which interest will be payable at the rate of
      minimum loan interest from the date of settlement till the date of
      final repayment. Penal interest, legal expenses and other expenses
      will be waived.
      5. Authority to sanction relief: -
C
      The Scheme will be first approved by the concerned bank
      management committee constituted under the provisions contained
      in the Uttar Pradesh Co-operative societies Act and the right to
      decide on one time settlement cases up to an amount of Rs 5.00
      Lakhs will be there’s and for the cases involving more than Rs.
D     5.00 Lakhs prior approval of the Registrar Co-operative Societies,
      Uttar Pradesh will have to be obtained. For this purpose, the bank
      will constitute a Settlement Advisory Committee, which after
      examining the applications received, will present suitable cases
      falling within the eligibility before the authority for decision. The
E     bank will abide by the guidelines relating to the settlement with
      the loan recipients without any discrimination. There will be no
      deviation from the policies by the Chief Executive Officers/Board
      of Directors. The decision of the Settlement Committee will be
      confirmed in the next meeting of the management committee or
      the general body.
F
      6. Settlement Advisory Committee. After examining the received
      cases and presenting the eligible cases before the competent
      authority, it will be as follows:
      1.     Chairman of the bank President
G     2.     Secretary / Executive officer concerned Member /
             Convener
      3.     A Director nominated by the board of Member Directors
             and one other person and bank officer who have enough
             experience in the field of banking/management or law.
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    THE BIJNOR URBAN COOPERATIVE BANK LIMITED,                                  429
      BIJNOR v. MEENAL AGARWAL [M. R. SHAH, J.]

      There will be three members for the purpose of the settlement             A
      advisory committee will examine the application received from
      the member and present it before the board of directors after
      making its clear recommendation. While making the
      recommendation, the following points will be considered-
      1.     The officer recommending the right off loan should not have        B
             personally sanctioned the loan.
      2.     The transfer has been granted as per the conditions
             prescribed by the Reserve Bank.
      3.     Adequate cares have been taken after the delivery of loan.
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      4.     Efforts have been made to recover the loan and the
             possibility of recovery has been minimized.
      The board of directors after due consideration will approve the
      one-time payment. The decision of the committee (S.A.C) will be
      reviewed every month by the board of directors and the settlement         D
      proceedings will be completed within the prescribed time-limit.”
       5.2 Therefore, as per the guidelines issued, the grant of benefit of
OTS Scheme cannot be prayed as a matter of right and the same is
subject to fulfilling the eligibility criteria mentioned in the scheme. The
defaulters who are ineligible under the OTS Scheme are mentioned in
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clause 2, reproduced hereinabove. A wilful defaulter in repayment of
loan and a person who has not paid even a single installment after taking
the loan and will not be able to pay the loan will be considered in the
category of “defaulter” and shall not be eligible for grant of benefit under
the OTS Scheme. Similarly, a person whose account is declared as
“NPA” shall also not be eligible. As per the guidelines, the Bank is required   F
to constitute a Settlement Advisory Committee for the purpose of
examining the applications received and thereafter the said Committee
has to take a decision after considering whether a defaulter is entitled to
the benefit of OTS or not after considering the eligibility as per the OTS
Scheme. While making recommendations, the Settlement Advisory
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Committee has to consider whether efforts have been made to recover
the loan amount and the possibility of recovery has been minimized,
meaning thereby if there is possibility of recovery of the amount, either
by initiating appropriate proceedings or by auctioning the property
mortgaged and/or the properties given as a security either by the borrower
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430             SUPREME COURT REPORTS                            [2021] 9 S.C.R.


A     and/or by guarantor, the application submitted by the borrower for grant
      of benefit under the OTS Scheme can be rejected.
             6. In the present case, despite the fact that it was specifically
      pointed out before the High Court by way of counter affidavit that (i) the
      recovery proceedings under SARFAESI Act are pending; (ii) the
B     borrower and her husband have availed two credit facilities and both the
      loan accounts are maintained regularly and the money is being deposited
      on regular basis; (iii) the Settlement Advisory Committee concluded that
      the borrower is enjoying a good financial status and the secured assets
      are sufficient in case if any recovery is to be made and by auctioning the
      mortgaged property the bank can recover the entire loan amount, the
C     High Court failed to consider the aforesaid aspects in their true perspective
      and has issued a writ of mandamus as if the grant of benefit under the
      OTS Scheme can be claimed as a matter of right.
             7. In the present case, a conscious decision was taken by the
      Bank as well as the Settlement Advisory Committee which is reflected
D     from the Board’s Resolution dated 28.12.2020 and the decision dated
      08.01.2021. Even personal hearing was afforded to the original writ
      petitioner by the Settlement Advisory Committee on 25.02.2021. The
      High Court in the impugned judgment and order has observed that no
      opportunity was given to the original writ petitioner, which is factually
E     incorrect. Therefore, the decision cannot be said to be in violation of the
      principle of natural justice.
             8. While passing the impugned judgment and order, the High Court,
      in response to the submissions on behalf of the Bank that, there are all
      possibilities of recovery of the loan amount and the efforts are being
F     made to recover the amount by initiating proceedings under the
      SARFAESI Act and that the properties mortgaged can be auctioned,
      has observed that the proceedings under the SARFAESI Act have
      remained pending for seven years and the Bank has been unable to
      recover its dues and therefore the hope of recovery is illusory. This
      conclusion is not supported by any material on record. Merely because
G     the proceedings under the SARFAESI Act have remained pending for
      seven years, the Bank cannot be held responsible for the same. No fault
      of the bank can be found. What is required to be considered is a conscious
      decision by the Bank that the Bank will be able to recover the entire loan
      amount by auctioning the mortgaged property and a due application of
H     mind by the Bank that there are all possibilities to recover the entire loan
    THE BIJNOR URBAN COOPERATIVE BANK LIMITED,                                     431
      BIJNOR v. MEENAL AGARWAL [M. R. SHAH, J.]

amount, instead of granting the benefit under the OTS Scheme and to                A
recover a lesser amount. It is ultimately for the Bank to take a conscious
decision in its own interest and to secure/recover the outstanding debt.
No bank can be compelled to accept a lesser amount under the OTS
Scheme despite the fact that the Bank is able to recover the entire loan
amount by auctioning the secured property/mortgaged property. When
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the loan is disbursed by the bank and the outstanding amount is due and
payable to the bank, it will always take a conscious decision in the interest
of the bank and in its commercial wisdom.
       9. Even otherwise, as observed hereinabove, no borrower can, as
a matter of right, pray for grant of benefit of One Time Settlement
Scheme. In a given case, it may happen that a person would borrow a                C
huge amount, for example Rs. 100 crores. After availing the loan, he
may deliberately not pay any amount towards installments, though able
to make the payment. He would wait for the OTS Scheme and then
pray for grant of benefit under the OTS Scheme under which, always a
lesser amount than the amount due and payable under the loan account               D
will have to be paid. This, despite there being all possibility for recovery
of the entire loan amount which can be realised by selling the mortgaged/
secured properties. If it is held that the borrower can still, as a matter of
right, pray for benefit under the OTS Scheme, in that case, it would be
giving a premium to a dishonest borrower, who, despite the fact that he
is able to make the payment and the fact that the bank is able to recover          E
the entire loan amount even by selling the mortgaged/secured properties,
either from the borrower and/or guarantor. This is because under the
OTS Scheme a debtor has to pay a lesser amount than the actual amount
due and payable under the loan account. Such cannot be the intention of
the bank while offering OTS Scheme and that cannot be purpose of the               F
Scheme which may encourage such a dishonesty.
       10. If a prayer is entertained on the part of the defaulting unit/
person to compel or direct the financial corporation/bank to enter into a
one-time settlement on the terms proposed by it/him, then every defaulting
unit/person which/who is capable of paying its/his dues as per the terms           G
of the agreement entered into by it/him would like to get one time
settlement in its/his favour. Who would not like to get his liability reduced
and pay lesser amount than the amount he/she is liable to pay under the
loan account? In the present case, it is noted that the original writ petitioner
and her husband are making the payments regularly in two other loan
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432                SUPREME COURT REPORTS                         [2021] 9 S.C.R.


A     accounts and those accounts are regularised. Meaning thereby, they
      have the capacity to make the payment even with respect to the present
      loan account and despite the said fact, not a single amount/installment
      has been paid in the present loan account for which original petitioner is
      praying for the benefit under the OTS Scheme.
B            11. The sum and substance of the aforesaid discussion would be
      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. 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
C     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
D     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.
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             12. In view of the aforesaid discussion and for the reasons stated
      above, we are of the firm opinion that 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/
F     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.
             13. The present appeal is accordingly allowed. However, in the
G     facts and circumstances of the case, there shall be no order as to costs.

      Nidhi Jain                                                     Appeal allowed.




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