Summary
| Category | Data |
|---|---|
| Court | Supreme Court of India |
| Case Number | C.A. No. 11134 of 2025 |
| Diary Number | 33541/2023 |
| Judge Name | HON’BLE MR. JUSTICE DIPANKAR DATTA |
| Bench | HON’BLE MR. JUSTICE DIPANKAR DATTA; HON’BLE MR. JUSTICE AUGUSTINE GEORGE MASIH |
| Precedent Value | Binding on all banks and recovery tribunals |
| Overrules / Affirms | Affirms existing precedents on mandamus and OTS mandatoriness |
| Type of Law | Banking law (SARFAESI Act, OTS Scheme) |
| Questions of Law |
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| Ratio Decidendi | The Court held that clause 4(i) of the OTS 2020 Scheme made the up-front deposit of 5 % of the OTS amount a precondition to processing any application; non-deposit rendered the application incomplete and ineligible. Even though the High Court directed reconsideration on eligibility under clause 2, it ignored clause 4(i), a fundamental condition. The Supreme Court reconciled precedents (Mohinder Singh Gill, Commissioner of Police, Opto Circuits, 63 Moons) and ruled that a court may uphold an administrative order on an alternative ground apparent on record, subject to notice and opportunity to respond. |
| Judgments Relied Upon |
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| Logic / Jurisprudence / Authorities Relied Upon by the Court |
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| Facts as Summarised by the Court |
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Practical Impact
| Category | Impact |
|---|---|
| Binding On | All banks, secured creditors, Debts Recovery Tribunals, High Courts, Supreme Court |
| Persuasive For | Other High Courts deciding challenges to OTS schemes and administrative order reviews |
| Follows | Meenal Agarwal (2023 2 SCC 805), Arvindra Electronics (2023 1 SCC 540) |
What’s New / What Lawyers Should Note
- Clause 4(i) of SBI’s OTS 2020 Scheme is a mandatory eligibility condition: non-payment of 5 % up-front bars processing.
- Courts may uphold administrative rejections on alternative grounds found in the record, even if not initially cited, provided parties get notice and a chance to respond.
- High Courts cannot direct reconsideration of OTS applications without regard to all scheme conditions.
- Borrowers must strictly comply with OTS scheme terms before invoking writ jurisdiction.
- Banks should record and rely on every disqualifying clause when rejecting OTS proposals to avoid procedural challenges.
Summary of Legal Reasoning
- Scheme Requirement: Clause 4(i) of the OTS 2020 Scheme obliges a 5 % up-front deposit with every application; absence renders the application non-processable.
- High Court Error: Both Single Judge and Division Bench ignored clause 4(i), focusing solely on clause 2.1 “not eligible” list.
- Alternative-Ground Principle: Reconciled Mohinder Singh Gill and subsequent decisions to permit courts to uphold orders on unmentioned but record-based grounds if original reasons collapse.
- Fairness Safeguard: Affected parties must receive notice and opportunity to address any newly invoked grounds.
- Conclusion: Respondent’s incomplete application justified rejection; HC’s direction for reconsideration set aside; SBI free to enforce security or consider fresh proposal outside OTS 2020.
Arguments by the Parties
Petitioner
- OTS 2020 benefit not a matter of right; scheme terms, including up-front payment, must be met before processing.
- No public duty exists to grant OTS when borrower defaulted repeatedly and violated earlier compromise.
- High Court lacked jurisdiction to override scheme conditions; rejection was reasoned and objective.
Respondent
- OTS 2020 Scheme was non-discriminatory and non-discretionary for eligible cases.
- Already paid ₹1.5 cr in good faith; deserved application consideration.
- Clause 2.1 ineligibility criteria inapplicable; auction set aside by DRT, no third-party rights.
- Rejection without hearing was arbitrary; HC rightly directed reconsideration.
Factual Background
Tanya Energy Enterprises mortgaged seven properties to SBI and defaulted. After NPA classification and DRT recovery proceedings, an initial compromise in 2018 failed. SBI auctioned one property in March 2020. SBI’s OTS 2020 Scheme required a 5 % up-front deposit but the borrower did not comply. SBI rejected the OTS proposal in November 2020. The High Court directed reconsideration; the Supreme Court set aside that direction, emphasizing clause 4(i).
Statutory Analysis
- Section 13(2) & (4), SARFAESI Act: demand notice and enforcement measures.
- Section 17, SARFAESI Act: challenge to enforcement notices before DRT.
- Recovery of Debts and Bankruptcy Act, 1993: original application before DRT.
- OTS 2020 Scheme (internal circular): clause 2.1 (ineligibility list) and clause 4(i) (5 % up-front payment requirement).
Procedural Innovations
- Recognition that courts can affirm administrative rejections on alternative, record-based grounds even if not originally cited.
- Clarification of the balance between Mohinder Singh Gill’s technicality rule and the need for substantive justice.
Alert Indicators
- ✔ Precedent Followed – Existing Supreme Court precedents on writ jurisdiction and OTS schemes were affirmed.