The Supreme Court bench comprising of Justices M. R. Shah and B. V. Nagarathna was hearing a case on recovery proceedings by the bank where the High Court allowed the borrower's petition and issued a writ of mandamus by exercising its powers under Article 226 of the Constitution of India and directed the appellant-Bank to positively consider/grant the benefit of OTS to the original writ petitioner-borrower.
Having heard learned counsel for the respective parties, the following issues/questions are posed for consideration of the Supreme Court bench:
i) Whether benefit under the OTS Scheme can be prayed as a matter of right?;
ii) Whether the High Court in the 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 and that too dehors the eligibility criteria mentioned under the OTS Scheme?
The Bench noted, "The grant of benefit under the OTS is always subject to the eligibility criteria mentioned under the OTS Scheme and the bank guidelines issued from time to time. If the bank/financial institution is of the opinion that the loanee has the capacity to make the payment and/or that the bank/financial institution was able to recover the entire loan amount even by auctioning the mortgaged property/secured property, either from the loanee and/or guarantor, the bank would be justified in refusing to grant the benefit under the OTS Scheme. Ultimately, such a decision should be left to the commercial wisdom of the bank whose amount was involved and it was always to be presumed that the financial institution/bank shall take a prudent decision whether to grant the benefit or not under the OTS Scheme.
The Supreme Court bench was of the firm opinion that the High Court, in the present case, had materially erred and had exceeded in its jurisdiction in issuing a writ of mandamus in the exercise of its powers under Article 226 of the Constitution of India by directing the appellant-Bank to positively consider/grant the benefit of OTS to the original writ petitioner. The impugned judgment and order passed by the High Court was unsustainable and set aside.
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