Without satisfying stipulations, defaulting borrowers can't claim entitled to bank's one time settlement scheme: Supreme Court

New Delhi: The Supreme Court has said a defaulting borrower is not entitled to the bank's one time settlement scheme, if it has not satisfied all the stipulations, including up-front payment.

A bench of Justices Dipankar Datta and Augustine George Masih said that no court can, by issuing a writ of mandamus, direct a secured creditor (bank) to positively grant benefit of OTS to a defaulting borrower as it is always subject to the eligibility criteria being satisfied.

"This principle of law may not have any direct application in a case, where it is merely a re-consideration that the High Court has directed and there is no positive direction for granting an OTS," the bench said.

Allowing SBI's appeal against the Andhra Pradesh High Court's judgments, the bench said, respondent Tanya Energy Enterprises, which faced demand notice of Rs 7 crore and proceedings under SARFAESI Act, disabled itself to have a fair and objective consideration of its application for OTS, due to its conduct.

"We did not find the respondent, while applying for the benefit of the OTS 2020 Scheme, to have deposited a single paisa towards up-front payment,'' the bench said in its judgment on September 16, 2025.

The court permitted the bank to proceed in accordance with law for enforcement of the security interest. It, however, granted the respondent an opportunity to submit a fresh proposal for OTS but not under the OTS 2020 Scheme.

Considering the appeal, the court said, "Crossing the hurdle of eligibility per se would not entitle a defaulting borrower to claim consideration of his/its application unless the application itself satisfies the other stipulated conditions."

The court noted under clause 4(i) of the OTS 2020 Scheme, any application received without up-front payment was not required to be processed even.

Thus, in the first place, the respondent’s application was incomplete and it did not have any right in law to claim that such application should be processed, the bench said.

"It is clear as a sunny day that an application for availing the benefit thereunder would be processed if such application were accompanied by an up-front payment of 5% of the outstanding dues,'' the bench pointed out.

The court noted though non payment of up-front amount was not mentioned in rejection letter by the bank, it was fundamental to the case and struck at the heart of the matter.

This fully justified the conclusion that the respondent, by its own conduct, did not and does not deserve to be extended the benefit of the OTS under the Scheme, the court said.

"SBI would be well advised to ascertain and fix responsibility as to how the respondent’s application could be processed when it did not comply with the terms of the OTS 2020 Scheme,'' the bench said.

The respondent faltered in not adhering to the express terms of the scheme by not depositing 5 per cent of the outstanding dues as up-front payment, thereby rendering its application disentitled to be processed even, far less deserving a favourable consideration, the court said.