Union Bank Of India vs M/S. Southern Cashew Exporters on 27 August, 2025

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Kerala High Court

Union Bank Of India vs M/S. Southern Cashew Exporters on 27 August, 2025

The respondents in W.P.(C)No.29765 of 2025 filed this writ appeal under Section 5(i) of the Kerala High Court Act, challenging the judgment dated 22.08.2025 passed by the learned Single Judge in that writ petition.

2. The respondents/writ petitioners approached this Court with the writ petition filed under Article 226 of the Constitution of India seeking the following reliefs:

"(i) To issue a writ of certiorari of any other appropriate order call for the records leading to Ext.P7 notice of the 1 st respondent and quash the same.

(ii) To issue a writ of mandamus or any other appropriate writ order or direction compelling and commanding the respondents to give an opportunity for hearing before taking a final decision in Ext.P4 letter."

3. Going by the pleadings in the writ petition and writ appeal, the respondents, three cashew exporting firms who had defaulted on various loans from the appellants, entered into a One Time Settlement ('OTS' in short) with the 1 st appellant Bank for Rs.55 Crores, documented through a joint compromise petition 4 WA No.2114 of 2025 2025:KER:66138 before the Debts Recovery Tribunal, Ernakulam, with a final payment deadline of 31.03.2025. After failing to meet this deadline, the respondents requested an extension, to which the Bank responded on 16.05.2025, by asking for a detailed property status, a payment schedule, and an upfront token payment of Rs. 25 Lakhs as a sign of bona fide intent. Although the respondents made this token payment, the Bank, after reviewing their submission, was not inclined to grant the extension and formally cancelled the OTS on 01.07.2025, citing the respondents' failure to adhere to the agreed terms. Consequently, the Bank initiated recovery measures under the SARFAESI Act, leading to an Advocate Commissioner issuing a notice for taking physical possession of the secured assets.

4. The respondents then filed the writ petition under Article 226 of the Constitution of India, challenging the OTS cancellation, alleging arbitrariness and violation of natural justice. By the impugned judgment dated 22.08.2025, the learned Single Judge dismissed the writ petition, holding that the court could not interfere with the commercial terms of an OTS. But the learned 5 WA No.2114 of 2025 2025:KER:66138 Single Judge directed the Bank to consider a fresh request from the respondents while deferring all recovery proceedings for a period of three weeks. Contending that once a writ petition is dismissed, there cannot be any directions for the grant of relief in the said petition itself, and therefore, the direction in the judgment to entertain further requests of the respondents and defer proceedings as legally untenable, the appellants filed the instant writ appeal.

5. Heard the learned counsel for the appellants- respondents and the learned counsel for the respondents-writ petitioners.

6. The learned counsel for the appellants would submit that after finding the relief sought in the writ petition as not legally sustainable and thereby dismissing the writ petition, the learned Single Judge ought not have deferred the recovery proceedings for a period of 3 weeks, which will cause irreparable hardships to the Bank.

7. On the other hand, the learned counsel for the respondents would submit that the respondents have already 6 WA No.2114 of 2025 2025:KER:66138 approached the Bank with a request to grant the benefit of the OTS, which was once granted to them and later withdrawn unilaterally by the Bank.

8. As far as the jurisdiction of this Court to interfere with the claim of benefit of OTS is concerned, the law is well settled by the judgment of the Apex Court as well as this Court.

9. The Apex Court in The Bijnor Urban Cooperative Bank Limited, Bijnor and Ors. v. Meenal Agarwal and Ors. [(2023) 2 SCC 805], while dealing with a question of whether a direction can be given to the Bank to consider the OTS facility by exercising the jurisdiction under Article 226 of the Constitution of India, held thus:

"5.2 Therefore, as per the guidelines issued, the grant of benefit of OTS Scheme cannot be prayed as a matter of right and the same is subject to fulfilling the eligibility criteria mentioned in the scheme. The defaulters who are ineligible under the OTS Scheme are mentioned in clause 2, reproduced hereinabove. A wilful defaulter in repayment of loan and a person who has not paid even a single installment after taking the loan and will not be able to pay the loan will be considered in the category of "defaulter"

and shall not be eligible for grant of benefit under the OTS Scheme. Similarly, a person whose account is declared as "NPA" 7 WA No.2114 of 2025

2025:KER:66138 shall also not be eligible. As per the guidelines, the Bank is required to constitute a Settlement Advisory Committee for the purpose of examining the applications received and thereafter the said Committee has to take a decision after considering whether a defaulter is entitled to the benefit of OTS or not after considering the eligibility as per the OTS Scheme. While making recommendations, the Settlement Advisory Committee has to consider whether efforts have been made to recover the loan amount and the possibility of recovery has been minimized, meaning thereby if there is possibility of recovery of the amount, either by initiating appropriate proceedings or by auctioning the property mortgaged and/or the properties given as a security either by the borrower and/or by guarantor, the application submitted by the borrower for grant of benefit under the OTS Scheme can be rejected."

10. This position was reiterated by a Division Bench of this Court in Idukki District Police Co-operative Society Ltd. No. 1-490 v. Rasheed A. K. [2025 (4) KHC 44].

11. In the instant case, the Bank has issued Ext.P2 letter dated 24.03.2025 to the respondents accepting the OTS and directing them to remit the remaining amount on or before 31.03.2025. However, the respondents could not fulfil the conditions within the time. Then the 1 st respondent submitted Ext.P3 letter dated 22.04.2025 seeking extension of payment date 8 WA No.2114 of 2025 2025:KER:66138 for six months. By Ext.P4 letter dated 16.05.2025, the Bank directed the respondents to remit an upfront amount as a token of positive intention for payment of the remaining OTS amount. According to the respondents, in response to Ext.P4, they remitted an amount of Rs.25/- Lakhs on 31.05.2025. However, the OTS proposal was cancelled by the bank and intimated the same to the respondents by Ext.P7 letter dated 01.07.2025.

12. The learned Single Judge in the impugned judgment rightly found that this Court cannot grant any direction for varying the OTS scheme. It is further held by the learned Single Judge that it will be open to the respondents to approach the Bank for any concession/benefit of OTS. While considering the facts of the case in the light of the dictum laid down in the aforementioned judgments, the aforesaid conclusion arrived at by the learned Single Judge is perfectly justifiable. At the same time, while dismissing the writ petition, the learned Single Judge directed to defer all further proceedings against the respondents for a period of three weeks, which is against the spirit of the findings arrived at in the impugned judgment. In such circumstances, we are of 9 WA No.2114 of 2025 2025:KER:66138 the opinion that the said portion of the impugned judgment is liable to be set aside.

13. At this juncture, the learned counsel for the appellants would submit that the Bank is proposing to consider the request of the respondents seeking the benefit of OTS within a week. However, the recovery proceedings cannot be stalled for the said reason.

Having considered the pleadings and materials on record and the submissions made at the Bar, this writ appeal is disposed of by setting aside the impugned judgment, to the extent it directed the appellants to defer the proceedings against the respondents.

Sd/-

ANIL K.NARENDRAN, JUDGE Sd/-

MURALEE KRISHNA S., JUDGE sks

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