Supreme Court Ruling on One-Time Settlement (OTS) Schemes
The Supreme Court has ruled that a defaulting borrower cannot claim the benefits of a One-Time Settlement (OTS) scheme without meeting all specific conditions set by banks.
Key Rulings
- The ruling was delivered by a bench led by Justice Dipankar Datta, which overturned a 2022 Andhra Pradesh High Court decision that directed the State Bank of India (SBI) to reconsider Tanya Energy Enterprises' OTS proposal.
- The court emphasized that no court can mandate a secured creditor (such as a bank) to grant OTS benefits to defaulting borrowers without the satisfaction of eligibility criteria.
- A borrower not listed as "not eligible" under clause 2.1 of SBI’s 2020 OTS scheme does not automatically qualify for a loan settlement.
- The borrower must meet all stipulated conditions, including upfront payments, for consideration of their OTS application.
Case Details: Tanya Energy Enterprises
- Tanya Energy availed credit from SBI by mortgaging seven properties but defaulted on repayment.
- The company applied for a one-time settlement under the 2020 scheme but failed to make a 5% upfront payment, disqualifying the application.
- SBI's appeal was allowed, and the court acknowledged the company's conduct as a barrier to fair consideration.
- The Supreme Court permitted SBI to enforce the security interest as per the law and allowed Tanya Energy to submit a new OTS proposal, but not under the 2020 scheme.
