Munmun Kaur-
Published On: December 16, 2021 at 16:00 IST
The Supreme Court held that no Court can Order any bank or financial institution (FI) to offer a one-time settlement (OST) to any borrower if the bank or FI is of the opinion that it would be able to recover the defaulted amount through an auction of assets.
This was done to put a stop to unscrupulous loan defaulters escaping the rigors of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act.
A Bench of Justices M R Shah and B V Nagarathna set aside the earlier Order of Allahabad High Court directing Bijnor Urban Cooperative BankLimited to consider providing OTS to a defaulter despite the Plea of the bank that proceedings under SARFAESI Act were pending.
The Bench observed that giving such an option would be like giving a premium to a dishonest borrower.
Justice Shah stated, “This is because under the OTS Scheme a debtor has to pay a lesser amount than the actual amount due and payable under the loan account. Such cannot be the intention of the bank while offering OTS Scheme and that cannot be the purpose of the Scheme which may encourage such dishonesty”.
Justice Shah also made an observation that a person may borrow 100 Crores and may deliberately not pay the installments with an intention to avail OTS scheme afterward under which always a lesser amount than the amount owed is to be paid.
The Court concluded that the grant of benefit of the OTS scheme is always subject to the eligibility criteria mentioned and the guidelines issued from time to time. If the bank is of the opinion that the loanee can make the payment or it can recover the amount via an auction then it will be justified to deny the grant of the OTS scheme.
Also Read: US Court stays Cairn Lawsuit against Indian Govt. to allow Settlement