Kerala High Court | Writ Jurisdiction Cannot Compel Bank to Continue One Time Settlement | OTS Terms Binding, Cancellation for Non-Compliance Valid, SARFAESI Mechanism to Be Invoked
Safiya Malik
The High Court of Kerala Division Bench of Justice Anil K. Narendran and Justice Muralee Krishna S. has held that a party cannot invoke the writ jurisdiction under Article 226 of the Constitution to compel a bank not to cancel a One Time Settlement (OTS) facility. The Court ruled that contractual conditions under an OTS sanction letter, including automatic cancellation for non-compliance, cannot be altered through writ proceedings. It further stated that borrowers cannot seek protection from coercive measures under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act by approaching the High Court when a specific statutory mechanism exists. The writ appeal challenging the bank’s rejection of an extension request was accordingly dismissed.
The appellants in this matter were multiple partnership firms and individuals based in Kozhikode, Kerala, engaged in business operations that had availed credit facilities from Indian Overseas Bank. Defaults in repayment prompted the bank to initiate recovery steps.
On 26 December 2024, the bank issued a sanction letter (Ext.P2) granting the appellants a One Time Settlement (OTS) facility, subject to strict terms, including automatic cancellation in case of default. The appellants subsequently paid a total sum of ₹1.19 crore towards the settlement. However, due to financial constraints, they failed to comply with all conditions within the specified timeline.
On 16 June 2025, the appellants submitted a request (Ext.P6) seeking extension of time to complete payments under the OTS scheme. The bank, opposing their plea, filed a statement dated 17 July 2025 before the learned Single Judge, arguing that the appellants’ request had already been considered and that the OTS terms left no scope for modification.
By judgment dated 1 August 2025 in W.P.(C) No. 24490 of 2025, the learned Single Judge directed the bank to communicate its decision on the appellants’ request within a week, while restraining coercive action against them for two weeks to allow pursuit of remedies. Following this, the bank issued a communication dated 14 August 2025 rejecting the extension request.
Aggrieved, the appellants filed W.A. No. 2095 of 2025 under Section 5(i) of the Kerala High Court Act, 1958, contending that the Single Judge ought to have granted the substantive reliefs since substantial payment had already been made. They sought directions preventing cancellation of the OTS facility and restraining the bank from taking coercive steps against their secured assets.
The respondents submitted that the appellants’ failure to meet OTS terms resulted in automatic cancellation under Clause 4 of the sanction letter. It was further contended that the reliefs sought were not maintainable in writ jurisdiction, given the statutory remedies under the SARFAESI Act.
The Court relied on the Supreme Court’s decision in South Indian Bank Ltd. v. Naveen Mathew Philip [(2023) 17 SCC 311], recording: “The Apex Court reiterated the settled position of law on the interference of the High Court invoking Article 226 of the Constitution of India in commercial matters, where an effective and efficacious alternative forum has been constituted through a statute.”
The Bench added: “A writ of certiorari is to be issued over a decision when the court finds that the process does not conform to the law or the statute. In other words, courts are not expected to substitute themselves with the decision-making authority while finding fault with the process along with the reasons assigned.”
Referring to the sanction terms, the Court noted: “Condition No.4 of Ext.P2 sanction letter provides for automatic cancellation of OTS facility in the event non-fulfillment of the stipulated terms of sanction. Admittedly, the appellants could not fulfill the stipulated terms of Ext.P2 sanction letter. Therefore, in terms of Clause 4 of Ext.P2 sanction letter, the OTS facility sanctioned to the appellants stands cancelled automatically, with effect from the date of non-fulfillment of the stipulated terms of sanction.”
Citing State Bank of India v. Arvindra Electronics Pvt. Ltd. [(2023) 1 SCC 540] and Bijnor Urban Cooperative Bank Limited v. Meenal Agarwal [(2023) 2 SCC 805], the Court stated: “No writ of mandamus can be issued by the High Court in exercise of the powers under Article 226 of the Constitution of India directing a financial institution/bank to positively grant the benefit of One Time Settlement (OTS) to a borrower … Such a decision should be left to the commercial wisdom of the bank, whose amount is involved.”
On rescheduling payments, the Bench recorded: “Rescheduling the payment under OTS and granting extension of time would tantamount to rewriting the contract, which is not permissible while exercising the powers under Article 226 of the Constitution of India.”
The judgment stated: “Viewed in the light of the law laid down by the Apex Court … the appellants cannot seek a writ of mandamus … commanding the Indian Overseas Bank not to cancel the OTS facility … and to consider favourably the proposal made by them … for extending the timeline of the OTS facility.”
“In view of the law laid down by the Apex Court in Naveen Mathew Philip [(2023) 17 SCC 311], invoking the writ jurisdiction under Article 226 of the Constitution of India, the appellants cannot seek a writ of mandamus … to keep in abeyance all coercive steps against the secured assets, under the provisions of the SARFAESI Act.”
“In the result, we find absolutely no grounds to entertain this writ appeal. The writ appeal fails and the same is accordingly dismissed.”
Advocates Representing the Parties
For the Petitioners: Shri. Dhananjay Deepak, Advocate
For the Respondents: Sri. Sunil Shankar, Standing Counsel, Indian Overseas Bank
Case Title: M/s Classic Agencies & Ors. v. Indian Overseas Bank & Ors.
Neutral Citation: 2025:KER:65717
Case Number: W.A. No. 2095 of 2025
Bench: Justice Anil K. Narendran, Justice Muralee Krishna S.
