Rescheduling OTS Loan Repayments Amounts To Rewriting Contract, High Court Cannot Do It In Writ Jurisdiction: Kerala High Court Sets Aside Instalment Relief In SARFAESI Case
Deekshitha Sharmile
The High Court of Kerala Division Bench of Justice Anil K Narendran and Justice Muralee Krishna S has held that the High Court cannot invoke its writ jurisdiction under Article 226 of the Constitution to modify or reschedule repayment terms agreed between a borrower and a bank under a One Time Settlement scheme. Allowing a writ appeal by the lender, the Bench set aside a Single Judge’s direction permitting defaulting borrowers to clear loan arrears in instalments and directing that coercive recovery steps under the SARFAESI Act be kept in abeyance. The Court clarified that such borrowers must pursue the statutory remedy before the Debts Recovery Tribunal and may challenge rejection of their settlement request before the appropriate forum.
The dispute arose from recovery proceedings initiated by a bank under the SARFAESI Act after borrowers defaulted on repayment of a business loan of Rs.30 lakhs availed in 2019, secured against immovable property in Clappana Village, Karunagappally Taluk. The borrowers approached the High Court seeking a writ of mandamus to compel the bank to consider their request for a One Time Settlement (OTS) by waiving future and overdue interest, and to restrain the authorised officer from proceeding under the SARFAESI Act. They also sought to quash a notice issued by the Advocate Commissioner appointed by the Chief Judicial Magistrate, Kollam in proceedings under Section 14 of the Act.
The bank opposed the petition, contending that the OTS proposal had already been rejected by letter dated 21.06.2025. The bank further argued that the writ petition was not maintainable in view of binding precedents of the Supreme Court. Evidence placed before the court included the borrowers’ request for OTS, the rejection letter, and the Division Bench judgment permitting the bank to raise maintainability as a preliminary issue. The statutory provisions invoked included Sections 13(4), 14, and 17 of the SARFAESI Act, which provide for recovery measures and remedies before the Debts Recovery Tribunal.
The Court observed: “The writ petition is one filed seeking a writ of mandamus commanding the 1st appellant Bank to consider Ext.P4 request made by the 1st respondent herein for availing One Time Settlement facility, as sought for in that request. The said request has already been turned down by the 1st appellant Bank on 21.06.2025.”
It recorded: “It is respectfully submitted that even otherwise, the above writ petition has become infructuous as Ext.P4 OTS proposal has been duly considered on merits and rejected vide Ext.P6. Nothing further survives in the writ petition.”
The Court stated: “The petitioners, defaulted borrowers from the respondent bank, are challenging proceedings under the SARFAESI Act initiated by the respondent Bank for recovery of the amounts due.”
It noted: “In South Indian Bank Ltd. v. Naveen Mathew Philip [(2023) 17 SCC 311], in the context of the challenge made against the notices issued under Section 13(4) of the SARFAESI Act, 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 Court observed: “A writ of mandamus is a prerogative writ. The court cannot exercise the said power in the absence of any legal right. More circumspection is required in a financial transaction, particularly when one of the parties would not come within the purview of Article 12 of the Constitution of India.”
It further stated: “In view of the law laid down by the Apex Court in Satyawati Tondon [(2010) 8 SCC 110] and reiterated in Naveen Mathew Philip [(2023) 17 SCC 311], if the respondents-petitioners had any grievance against the proceedings initiated by the secured creditor under Section 14 of the SARFAESI Act, they could have availed the statutory remedy by filing an application under Section 17 of the said Act before the Debts Recovery Tribunal.”
The Court recorded: “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; the grant of benefit under OTS is always subject to eligibility criteria mentioned under OTS scheme and guidelines issued from time to time.”
The Court directed: “Therefore, the respondents-petitioners cannot invoke the writ jurisdiction of this Court under Article 226 of the Constitution of India, seeking a writ of certiorari to quash Ext.P3 notice dated 02.06.2025 issued by the Advocate Commissioner appointed by the Chief Judicial Magistrate Court, Kollam in M.C.No.831 of 2025, in a proceedings initiated by the Bank under Section 14 of the SARFAESI Act.”
“In the instant case, OTS proposal made by the respondents-petitioners in Ext.P4 request, for an amount of Rs.21.92 lakhs, was considered by the Bank, which was rejected by Ext.P6 letter dated 21.06.2025. A reading of Ext.P6 letter would show that, after an evaluation of the offer made in Ext.P4 request, the Bank found that the said offer falls significantly short of the acceptable recovery norms and fails to meet the Bank's internal policy parameters.”
Advocates Representing the Parties
For the Petitioners: Adv. T. Thasmi
For the Respondents: Shri. B. J. John Prakash, Shri. Sooraj M. S., Shri. P. Pramel, Smt. Varsha Vijayakumar Nair, Shri. Manu Baby, Smt. Rajasree K.
Case Title: South Indian Bank Ltd. and Anr v Rahim H K and Anr.
Neutral Citation: 2025 : KER : 83634
Case Number: W.A.No.2425 of 2025
Bench: Justice Anil K. Narendran, Justice Muralee Krishna S.
