SUPREME COURT GIVES BANKS COMMERCIAL WISDOM
In a recent Judgment, the Division Bench of #SupremeCourt comprising of Justices M.R. Shah and B.V. Nagarathna passed a #Judgment dated 15-12-2021 in the case of Bijnor Urban Cooperative Bank Limited, Bijnor vs Meenal Agarwal Civil Appeal No. 7411 of 2021 and considered whether the Court can issue a #Writ of #Mandamus directing the #Bank to consider a #OneTimeSettlement (OTS).
The Court decided that a Writ of Mandamus does not lie to a Bank for accepting OTS. The matter came up against an Order passed in a Writ Petition filed in the High Court of Allahabad in which the Petitioner, Respondent herein had asked for a direction of Mandamus to the Bank directing them to accept an OTS so that she may deposit the entire amount and clear her dues.
The Bank was not in favour of accepting the OTS as the Board of the Bank had passed a Resolution that the Petitioner was not eligible for OTS for the reason that the loan amount was fully recoverable and all measures for the recovery of the loan had not been exhausted.
The Supreme Court after hearing the arguments decided that a Writ of Mandamus could not be issued to the Bank as the Respondent (Meenal Agarwal) did not meet the eligibility criteria for an OTS.
This Order clearly clinches the issue that Banks cannot be directed on how to conduct their business. It is clear that the Court has upheld the commercial independence of Banks to decide on their Recovery Process and One Time Settlement Schemes. The Court observed that there can be cases where a dishonest borrower who is able to make the payment fails to do so leaving the Bank with the option of recovering the entire dues by sale of mortgaged Property/Assets.
The Court respected the fact that the Banks and Financial Institutions have the independence to decide whether or not to grant the benefit of OTS. This Judgment will certainly go down very well with Banks who have been assured of their independence in deciding commercial transactions.
Sushila Ram Varma
The Indian Lawyer & Allied Services
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