Borrower cannot compel debt assignment or inter-creditor arrangement where banks retain commercial discretion under RBI prudential norms.

RBI prudential circulars on sale of financial assets were treated as advisory and policy-based, not as creating an enforceable mandate in favour of a borrower. The Court held that a borrower cannot seek mandamus to compel banks to assign debts to an asset reconstruction company or to execute an inter-creditor arrangement, because acceptance or rejection of such proposals remains within the banks' commercial and financial discretion. Allegations of arbitrariness and mala fides depended on disputed facts about restructuring failure and default, which were unsuitable for writ adjudication. Relief was therefore declined, and the banks' recovery stance was not quashed.

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Issues: Whether a writ of mandamus could be issued to compel the respondent banks to assign the petitioner's debt to an asset reconstruction company or to execute an inter-creditor arrangement on the strength of RBI prudential circulars, and whether the banks' refusal or recall action could be quashed in writ jurisdiction.

Analysis: The petitioners relied on the RBI's prudential framework governing sale of financial assets and contended that once the requisite lender threshold was crossed, the remaining lenders were bound to accept the offer and act consistently with the resolution process. The Court held that the circulars were advisory and policy-based in character and did not create an absolute mandate that could be enforced by a writ of mandamus at the instance of a borrower. The relevant provisions required the banks to make their own assessment and to act on a case-to-case basis, and the decision whether to accept or reject an offer remained within the banks' commercial and financial discretion. The allegations of arbitrariness and mala fides were found to rest on seriously disputed factual questions, including the alleged failure of the restructuring and the claimed default under the earlier schemes, which could not be adjudicated conclusively in writ proceedings. The Court also noted that a borrower cannot compel a bank to accept a settlement or resolution proposal merely because it considers the proposal commercially preferable.

Conclusion: No writ of mandamus could be issued to compel the respondent banks to assign their debts, execute an inter-creditor agreement, or withdraw from their recovery stance. The challenge failed and relief was declined.

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