The Supreme Court held that a borrower’s failure to comply with the mandatory upfront payment requirement under a One-Time Settlement (OTS) scheme renders the application incomplete and not entitled to processing. The Court further ruled that, in judicial review, an administrative order of rejection can be upheld on an alternative legal ground apparent from the record, provided the affected party is granted a fair opportunity to respond.
Facts Of The Case:
The respondent, Tanya Energy Enterprises, availed credit facilities from the State Bank of India (SBI) by mortgaging seven properties but subsequently defaulted on its repayment obligations. After its account was classified as a non-performing asset, SBI initiated recovery proceedings under the SARFAESI Act. A prior One-Time Settlement (OTS) proposal from 2018, for Rs. 5 crore, failed as the respondent did not adhere to its payment schedule. In October 2020, SBI introduced a new OTS scheme. The respondent applied for a settlement under this new scheme but did not make the mandatory upfront payment of 5% of the OTS amount, a condition stipulated in the scheme’s clause 4(i). SBI rejected the application, citing the respondent’s past conduct of defaulting on commitments and court orders. The respondent successfully challenged this rejection before the High Court, which directed SBI to reconsider the application. The bank’s appeal to the Division Bench was dismissed, leading to the present civil appeal before the Supreme Court.
Procedural History:
The procedural history of this case commenced with the respondent-borrower filing a writ petition before the Single Judge of the Andhra Pradesh High Court, challenging the bank’s rejection of its application under the One-Time Settlement (OTS) Scheme of 2020. The Single Judge allowed the petition, directing the bank to reconsider the application. The bank appellants then filed an intra-court writ appeal before a Division Bench of the same High Court, which was dismissed, affirming the Single Judge’s order. Aggrieved by the High Court’s decision, the bank approached the Supreme Court by filing a Special Leave Petition (SLP), which was converted into the present civil appeal upon leave being granted. The Supreme Court, after hearing the parties, allowed the appeal, setting aside the orders of both the Single Judge and the Division Bench of the High Court.
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Court Observation:
The Supreme Court made several key observations in its judgment. Primarily, it held that the High Court erred in directing reconsideration of the OTS application, as the respondent-borrower had fundamentally failed to comply with the mandatory condition of making an upfront payment of 5% of the settlement amount as required under Clause 4(i) of the OTS 2020 Scheme. The Court observed that an application submitted without this payment was incomplete and not even entitled to be processed. Furthermore, the Court ruled that while an administrative order’s validity is generally tested on the grounds mentioned therein, in the interest of justice, a court can uphold such an order on an alternative legal ground apparent from the record, provided the affected party is given an opportunity to respond. The Court concluded that the respondent’s conduct, marked by a failure to adhere to financial commitments and court directives, disentitled it from claiming the equitable relief of OTS.
Final Decision & Judgement:
The Supreme Court allowed the appeal, setting aside the judgments of both the Single Judge and the Division Bench of the High Court. It held that the respondent-borrower was not entitled to have its OTS application processed due to its failure to comply with the mandatory condition of making an upfront payment as per the OTS 2020 Scheme. The Court concluded that this fundamental non-compliance rendered the application incomplete. While setting aside the High Court’s direction for reconsideration, the Supreme Court granted the respondent liberty to submit a fresh OTS proposal outside the purview of the 2020 scheme. The appellants, SBI, were granted the freedom to proceed with the enforcement of their security interest in accordance with the law.
Case Details:
Case Title: Assistant General Manager, State Bank of India & Anr. vs. Tanya Energy Enterprises through its Managing Partner Shri Alluri Lakshmi Narasimha Varma Citation: 2025 INSC 1119 Appeal Number: Civil Appeal No. 11134 of 2025 Date of Judgement: September 15, 2025 Judges/Justices Name: Justice Dipankar Datta and Justice Augustine George Masih
Download The Judgement Here