Granting One Time Settlement is bank discretion; wilful defaulters and NPA accounts ineligible; banks must set advisory committees.

SC held that grant of One Time Settlement (OTS) is discretionary and subject to scheme eligibility; wilful defaulters and accounts declared NPA are ineligible. Banks must form Settlement Advisory Committees to evaluate applications, and no borrower has a right to compel OTS. A High Court cannot issue a writ of mandamus directing a financial institution to grant OTS, which involves the bank's commercial wisdom and public-interest considerations. The HC's order directing the bank to grant OTS was held to exceed jurisdiction; appeal allowed in favor of the bank.

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Issues Involved:
1. Whether the benefit under the One Time Settlement (OTS) Scheme can be prayed for as a matter of right.
2. Whether the High Court, in exercise of powers under Article 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, especially when the eligibility criteria mentioned under the OTS Scheme are not met.

Issue-wise Detailed Analysis:

1. Whether the benefit under the One Time Settlement (OTS) Scheme can be prayed for as a matter of right:

The Supreme Court emphasized that the benefit under the OTS Scheme cannot be claimed as a matter of right by any borrower. The OTS Scheme is subject to specific eligibility criteria, and not all defaulters are eligible. The Court referred to the guidelines which explicitly state that willful defaulters and those whose accounts are declared as Non-Performing Assets (NPA) are not eligible for the OTS Scheme. The Court highlighted that the Settlement Advisory Committee must consider whether efforts have been made to recover the loan amount and if there is a possibility of recovery through auctioning the mortgaged property before granting the benefit under the OTS Scheme. The Court concluded that granting the benefit under the OTS Scheme should be left to the commercial wisdom of the bank, which should take a prudent decision in its own interest and public interest.

2. Whether the High Court, in exercise of powers under Article 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, especially when the eligibility criteria mentioned under the OTS Scheme are not met:

The Supreme Court held that the High Court exceeded its jurisdiction by issuing a writ of mandamus directing the Bank to consider the writ petitioner's application for the OTS Scheme. The Court noted that the High Court failed to consider the specific circumstances and the eligibility criteria under the OTS Scheme. The High Court's direction was based on the assumption that the benefit under the OTS Scheme could be claimed as a matter of right, which is not the case. The Supreme Court observed that the Bank and the Settlement Advisory Committee had taken a conscious decision, considering the RBI guidelines and the OTS Scheme, and had afforded a personal hearing to the writ petitioner. The Court emphasized that the decision of the Bank and the Settlement Advisory Committee was in consonance with the guidelines and should not have been set aside by the High Court. The Supreme Court concluded that the High Court's order was unsustainable and quashed it, allowing the appeal by the Bank.

Conclusion:

The Supreme Court concluded that no borrower can claim the benefit under the OTS Scheme as a matter of right, and the High Court cannot issue a writ of mandamus directing the Bank to grant such benefit if the eligibility criteria are not met. The decision to grant or deny the benefit under the OTS Scheme should be left to the commercial wisdom of the Bank, considering the guidelines and the specific circumstances of each case. The appeal by the Bank was allowed, and the High Court's judgment was set aside.

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