Karnataka High Court
M/S Vijay Laxmi Industries vs The Manager Karnataka on 27 April, 2026
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NC: 2026:KHC-D:6269
WP No. 103458 of 2026
HC-KAR
IN THE HIGH COURT OF KARNATAKA, AT DHARWAD
DATED THIS THE 27TH DAY OF APRIL, 2026
BEFORE
THE HON'BLE MR. JUSTICE ASHOK S. KINAGI
WRIT PETITION NO. 103458 OF 2026 (GM-RES)
BETWEEN:
1. M/S. VIJAY LAXMI INDUSTRIES
REP BY ITS PARTNER
PURNAJAPPA B KHARATE, AGE 70 YEARS
OCC. RETIRED GOVT EMPLOYEE
R/O. LAXMESHWAR, TQ. LAXMESHWAR
DIST GADAG- 582116
...PETITIONER
(BY SRI. G N NARASAMMANAVAR, ADV)
AND:
1. THE MANAGER,
KARNATAKA FINANCIAL CORPORATION
BRANCH OFFICE L L BUILDING
FILED MARSHAL, K M CARIAPPA CIRCLE
HUBBALLI ROAD, GADAG- 582101
...RESPONDENT
Digitally signed (BY SRI. MAHANTESH R. PATIL, ADV)
by
MOHANKUMAR
B SHELAR THIS WRIT PETITION IS FILED UNDER ARTCLES 226 & 227 OF
Location: HIGH
COURT OF THE CONSTITUTION OF INDIA, PRAYING TO, ISSUE A WRIT OF
KARNATAKA
MANDAMUS DIRECTING THE RESPONDENTS TO CONSIDER THE
REPRESENTATION OF THE PETITIONER AT ANNEXURE-F DATED
22.04.2026 AND EXTEND THE TIME OF 90 DAYS TO SETTLE OTS
SCHEME LOAN AMOUNT IN THE INTEREST OF JUSTICE AND EQUITY.
THIS PETITION, COMING ON FOR PRILIMINARY HEARING IN 'B'
GROUP, THIS DAY, ORDER WAS MADE THEREIN AS UNDER:
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WP No. 103458 of 2026
HC-KAR
ORAL ORDER
(PER: THE HON'BLE MR. JUSTICE ASHOK S. KINAGI) The petitioner filed this writ petition seeking a mandamus directing the respondent-Corporation to consider the representation of the petitioner vide Annexure-F dated 22.04.2026 and extend the time by 90 days to settle one- time settlement (OTS) scheme loan amount.
2. Brief facts leading rise to the filing of this writ petition are as follows:
2.1. The petitioner obtained a loan from the respondent-Corporation. The petitioner did not repay the loan amount. Meanwhile, the respondent-Corporation seized the petitioner-Industry due to non-payment of loan amount and tried to sell the Industry in public auction.
Unfortunately, the respondent was unsuccessful in alienating the property in public auction. Meanwhile, on 08.01.2026, the respondent settled the recovery dispute in OTS scheme. After receiving the letter from the respondent, the petitioner tried to pay the loan amount by -3- NC: 2026:KHC-D:6269 WP No. 103458 of 2026 HC-KAR raising loan from his friends and relatives, but, the petitioner was not able to pay the advance cheque amount which is issued in view of the conditions of OTS scheme. The petitioner has submitted representation for extension of 90 days' time for settlement of OTS scheme dated 22.04.2026. The petitioner, aggrieved by the action of the respondent in not extending the time, filed this writ petition.
3. Heard the arguments of learned counsel for the petitioner and learned counsel for the respondent.
4. Learned counsel for the petitioner submits that, the respondent has settled the recovery dispute in OTS scheme, but, the petitioner could not pay the amount as settled under OTS scheme. He further submits that, he petitioner made an attempt to raise loan from his friends and relatives, but, the petitioner was unsuccessful in raising the loan. He submits that, the petitioner requested the respondent to extend the time by 90 days to settle the loan, the respondent has not given any heed to the request made -4- NC: 2026:KHC-D:6269 WP No. 103458 of 2026 HC-KAR by the petitioner. Hence, on these grounds, he prays to allow the present writ petition.
5. Per contra, learned counsel for the respondent submits that, the petitioner had obtained a loan and has not repaid the same within time, and committed default. He submits that, the respondent has accepted the OTS scheme and permitted the petitioner to repay the loan amount. Despite granting time, the petitioner did not comply with the terms and conditions of the OTS. He further submits that, the petitioner has no right to seek for extension of time. However, the respondent had accepted the OTS request made by the petitioner. Further, the petitioner was required to pay the loan amount. The petitioner did not perform his part of conditions by repaying the amount within stipulated period under the OTS scheme. Hence, on these grounds, he prays to dismiss the present writ petition.
6. Perused the records and considered the submissions of the learned counsel for the parties. -5-
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7. It is undisputed fact that, the petitioner committed default in repayment of loan amount; the respondent, accepted the request of the petitioner for settlement of loan amount under OTS scheme, however, the petitioner did not repay the loan amount within stipulated time and sought for extension of time to repay the same.
8. This Court, in the case of M/s Chamundeshwarishrri (M/S S R Industries) and Another Vs. Canara Bank and Another1 has, in paragraph Nos.12 to 15 as follows:
"12. At the outset, it has to be stated here that the said issue is clearly covered by the judgment of the Hon'ble Apex Court in case of Bijnor Urban Co-operative Bank Ltd. Bijnor and others v. Meenal Agarwal and others, reported in (2021) SCC Online SC 1255 wherein it has been held as follows:
"11. While passing the impugned judgment and order, the High Court, in response to the submissions on behalf of the Bank that, there are all possibilities of recovery of the loan amount and the efforts are being made to recover the amount by initiating 1 WP No.39471/2025, disposed of on 04.02.2026 -6- NC: 2026:KHC-D:6269 WP No. 103458 of 2026 HC-KAR proceedings under the SARFAESI Act and that the properties mortgaged can be auctioned, has observed that the proceedings under the SARFAESI Act have remained pending for seven years and the Bank has been unable to recover its dues and therefore the hope of recovery is illusory. This conclusion is not supported by any material on record. Merely because the proceedings under the SARFAESI Act have remained pending for seven years, the Bank cannot be held responsible for the same. No fault of the Bank can be found. What is required to be considered is a conscious decision by the Bank that the Bank will be able to recover the entire loan amount by auctioning the mortgaged property and a due application of mind by the Bank that there are all possibilities to recover the entire loan amount, instead of granting the benefit under the OTS Scheme and to recover a lesser amount. It is ultimately for the Bank to take a conscious decision in its own interest and to secure/recover the outstanding debt. No bank can be compelled to accept a lesser amount under the OTS Scheme despite the fact that the Bank is able to recover the entire loan amount by auctioning the secured property/mortgaged property. When the loan is disbursed by the bank and the outstanding amount is due and payable to the bank, it will always take a conscious decision in the interest of the bank and in its commercial wisdom.
xxx
14. The sum and substance of the aforesaid discussion would be that no writ of mandamus can be issued by the High Court in exercise of powers under Article 226 of the Constitution of India, directing a financial institution/bank to positively grant the benefit of OTS to a borrower. The grant of benefit under the OTS is always subject to the eligibility criteria mentioned under the OTS scheme -7- NC: 2026:KHC-D:6269 WP No. 103458 of 2026 HC-KAR and the guidelines issued from time-to-time. If the bank/financial institution is of the opinion that the loanee has the capacity to make the payment and/or that the bank/financial institution is able to recover the entire loan amount even by auctioning the mortgaged property/secured property, either from the loanee and/or guarantor, the bank would be justified in refusing to grant the benefit under the OTS scheme. Ultimately, such a decision should be left to the commercial wisdom of the bank whose amount is involved and it is always to be presumed that the financial institution/bank shall take a prudent decision whether to grant the benefit or not under the OTS scheme, having regard to the public interest involved and having regard to the factors which are narrated hereinabove.
15. In view of the aforesaid discussion and for the reasons stated above, we are of the firm opinion that the High Court, in the present case, has materially erred and has exceeded in its jurisdiction in issuing a writ of mandamus in exercise of its powers under Article 226 of the Constitution of India by directing the appellant Bank to positively consider/grant the benefit of OTS to the original writ petitioner. The impugned judgment and order [Meenal Agarwal v. State of U.P., 2021 SCC OnLine All 989] passed by the High Court is hence unsustainable and deserves to be quashed and set aside and is accordingly quashed and set aside."
(Emphasis supplied)
13. The Hon'ble Apex Court in the case of State Bank of India v. Arvindra Electronic Private Limited reported in (2023) 1 SCC 540, following the decision rendered in Meenal Agarwal's case (supra) has held as under:
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"14. While considering the aforesaid issue the recent decision of this Court in Meenal Agarwal is required to be referred to.
15. In Meenal Agarwal, this Court answered the following two questions : (SCC para 6) "6.1. (i) Whether benefit under the OTS Scheme can be prayed as a matter of right?
6.2. (ii) Whether the High Court in exercise of powers under Article 226 of the Constitution of India can issue a writ of mandamus directing the Bank to positively consider the grant of benefit under the OTS Scheme and that too dehors the eligibility criteria mentioned under the OTS Scheme?"
16. On a detailed analysis of the OTS Scheme, it is observed and held by this Court in Meenal Agarwal that:
(i) No borrower can, as a matter of right pray for a grant for the benefit of One-
Time Settlement scheme;
(ii) No writ of mandamus can be issued by the High Court in exercise of Article 226 of the Constitution of India, directing the financial institution/bank to positively grant a benefit of OTS to a borrower;
(iii) The grant of benefit of OTS Scheme is subject to the eligibility criteria and the guidelines issued from time to time.
17. Though the decision of this Court in Meenal Agarwal was specifically pressed in service on behalf of the Bank and was pointed out to the High Court, the High Court instead following the binding decision of this Court in Meenal Agarwal has not followed the same by observing that the earlier decision of this Court in Sardar Associates [Sardar -9- NC: 2026:KHC-D:6269 WP No. 103458 of 2026 HC-KAR Associates v. Punjab & Sind Bank, (2009) 8 SCC 257 : (2009) 3 SCC (Civ) 350] is more elaborate. We do not approve such an observation by the High Court and not following the subsequent binding decision of this Court which as such was on the point. Being a subsequent decision on the point/issue, the High Court was bound to follow the same."
14. The sum and substance of the aforesaid decisions would be that no writ of mandamus can be issued by the High Court in exercise of powers under Article 226 of the Constitution of India, directing a financial Institution/Bank to positively grant the benefit of OTS to a borrower. The grant of benefit under the OTS is always subject to the eligibility criteria mentioned under the OTS scheme and the guidelines issued from time to time. If a Bank/financial institution is of the opinion that the loanee has a capacity to make a payment and/all that the Bank or/financial institution is able to recover the entire loan amount even by auctioning the mortgage property/secured property, either from the loanee and/all the Guarantor, then the Bank would be justified in refusing to grant the benefit under the OTS scheme. Ultimately, such a decision should be left to the commercial wisdom of the bank whose amount is involved and it is always to be presumed that the financial institution/bank shall take a prudent decision whether to grant the benefit or not under the OTS scheme, having regard to the public interest involved and having regard to the factors on which narrated hereinabove.
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15. The Apex Court has further held that High Court has materially erred and exceeded its jurisdiction in issuing a writ of mandamus in exercise of its powers under Article 226 of the Constitution of India by directing the appellant Bank in the case referred supra to positively consider/grant the benefit of OTS to the original writ petitioner."
9. In the light of the above discussion in the present case, the respondent has rightly not considered the request of the petitioner for extension of time to settle the loan amount under OTS scheme. Accordingly, I do not find any grounds to entertain the present writ petition.
10. In view of the above discussion, I proceed to pass the following:
ORDER i. The writ petition is dismissed; ii. Pending IA(s), if any, shall stand disposed of.
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(ASHOK S. KINAGI) JUDGE PA | CT: BSB | List No.: 1 Sl No.: 82