Failure To Pay Upfront Amount Under OTS Rendered Application Ineligible To Be Processed: Supreme Court Allows SBI’s Appeal

The appeal before the Apex Court was filed against the judgment passed by a Division Bench of the Andhra Pradesh High Court dismissing an intra-court writ appeal of the Assistant General Manager and the Deputy General Manager of the State Bank of India.

The Division Bench of Justice Dipankar Datta and Justice Augustine George Masih stated, “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. Indubitably, the respondent faltered in not adhering to the express terms of such scheme by not depositing 5% of the outstanding dues as up-front payment, thereby rendering its application disentitled to be processed even, far less deserving a favourable consideration.”

AOR Sanjay Kapur represented the Appellant, while Senior Advocate Dama Seshadri Naidu represented the Respondent.

Factual Background

Having availed credit facilities from the SBI (secured creditor) by mortgaging 7 immovable properties, the respondent (borrower) failed to adhere to the payment schedule and defaulted in its obligation to repay. Additional time granted for regularising the payments proved abortive. Respondent’s account was then classified as “non-performing asset”, triggering a demand notice under Section 13(2) of the SARFAESI Act. A sum of Rs 7 crore (approximately) was demanded from the respondent, with further interest. Recovery proceedings were initiated under Section 19 of the Recovery of Debts and Bankruptcy Act, 1993, due to failure to meet such demand. While transferring Rs 50 lakh to the account of the SBI, the respondent requested a full and final settlement of the total dues of Rs 8.14 crore by paying Rs 5 crore.

The Respondent did not adhere to the terms and conditions, and measures under Section 13(4) of the SARFAESI Act were initiated by issuing a sale notice in respect of the mortgaged properties. One of the mortgaged properties was sold at an auction. Thereafter, SBI introduced a scheme for One Time Settlement of outstanding dues in excess of Rs. 20 lakh and up to Rs. 50 crore. The respondent applied for the same, but his application was rejected. The writ petition of the respondent, in due course, came up for consideration before the Single Judge. Respondent was held entitled to the benefit of the OTS 2020 Scheme. The appeal before the Division Bench was dismissed as having no substance. It was in such circumstances that the appeal came to be filed before the Apex Court.

Reasoning

Referring to the clauses of the OTS Scheme, the Bench noted that every borrower in default, to have his application under the OTS 2020 Scheme considered, was required to apply together with an up-front payment of 5% of the OTS amount. The manner of calculation of the OTS amount was provided in clause 3A (v) of the OTS 2020 Scheme. For wilful defaulters, payment of 15% was required. In terms of clause 4(i) of the OTS 2020 Scheme, any application received without up-front payment was not required to be processed.

Considering that the respondent, while applying for the benefit of the OTS 2020 Scheme, did not deposit any amount towards up-front payment, the Bench held that the respondent’s application was incomplete and it did not have any right in law to claim that such an application should be processed.

The Bench was of the view that while reviewing administrative orders, Courts may not permit additional grounds not found within the four corners of the said order to be raised in an affidavit or in oral arguments, the factual narrative in such order and the documents referred to therein can certainly be considered together with the case set up in the writ petition, but in appropriate cases. As per the Bench, such cases could include a case, as the present, where the mentioned grounds are found to be untenable and, thus, unsustainable, but an alternative ground (appearing from the factual narrative in the order itself and/or from the records relevant thereto) is traceable which could have validly been mentioned as a ground to support the impugned rejection had there been a proper application of mind by the administrative authority. In all such cases, it would be open to the court to uphold it on such alternative ground, subject, of course, to the affected party being put on notice and an opportunity to respond, it noted.

The Bench thus concluded that the respondent’s conduct disabled itself from having a fair and objective consideration of its application for OTS. Allowing the appeal, the Bench set aside the dismissal of the intra-court appeal.

Cause Title: Assistant General Manager State Bank of India v. Tanya Energy Enterprises (Neutral Citation: 2025 INSC 1119)

Appearance

Appellant: AOR Sanjay Kapur, Advocates Surya Prakash, Shubhra Kapur, Mahima Kapur, Mansi Kapur, Abhishek Tiwar, Annu Mishra

Respondent: Senior Advocate Dama Seshadri Naidu, Advocates Mullapudi Rambabu, Deepak Sharma, AOR M/S. M. Rambabu And Co.

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