A Financial Institution cannot be forced to enter into One-Time Settlement arrangement with the Borrower, through issuance of Writ of Mandamus

The following issues had arisen for adjudication before the Division bench of the Hon’ble Supreme Court of India (SC), comprising of Mr. Justice MR Shah and Ms. Justice BV Nagarathna, in The Bijnor Urban Cooperative Bank Limited, Bijnor & others v. Meenal Agarwal & others: –

1. Whether benefit under the One Time Settlement (OTS) scheme can be prayed by the borrower as a matter of right?
2. Whether the High Court (HC), under Article 226 of the Constitution of India, can issue a writ of mandamus directing the Bank to positively consider an OTS proposal, even when such proposal is not covered within the eligibility criteria mentioned under the OTS scheme?

The SC held that the grant of benefit of OTS scheme cannot be prayed by the borrower as a matter of right, and the same is subject to the borrower fulfilling the eligibility criteria mentioned in the OTS scheme. The SC further held that no writ of mandamus can be issued by the HC for directing a financial institution/bank to grant the benefit of OTS scheme to a borrower, and such grant of benefit would always be subject to the eligibility criteria mentioned under the OTS scheme. The SC also observed that banks cannot be compelled to accept a lesser amount under the OTS scheme, when it is in a position to recover the entire loan amount by auctioning the secured assets.