Supreme Court Allows SBI Appeal, Holds OTS 2020 Application Was Incomplete for Lack of Mandatory Up‑front Payment

A bench of Justices Dipankar Datta and Augustine George Masih heard the appeal by way of special leave filed by two officers of the State Bank of India challenging a Division Bench judgment of the Andhra Pradesh High Court that had directed the bank to reconsider a borrower’s application under the Bank’s One Time Settlement (OTS) 2020 Scheme. The petition arose from denial of OTS to a corporate borrower and contentious auction and recovery steps taken under the SARFAESI and RDB Acts.

The Court allowed the civil appeal, set aside the Division Bench and Single Judge orders, and held that the High Court erred in directing reconsideration without taking into account a fundamental eligibility requirement of the OTS 2020 Scheme. The Court noted that a bank was not obliged to process an OTS application which failed to comply with scheme conditions and observed that, while courts could not normally supply new grounds for validating an administrative order, an alternative ground apparent on the record could be relied upon provided the affected party was given notice. The Court, in its reasoning, observed: The Court also recorded that "orders are not like old wine becoming better as they grow older" when considering whether additional grounds may be relied on to uphold an administrative order.

Background

The dispute arose after the respondent-borrower defaulted on credit facilities from SBI secured by seven immovable properties. SBI issued a demand notice under Section 13(2) of the SARFAESI Act in May 2017 and recovery proceedings under the Recovery of Debts and Bankruptcy Act were filed. A compromise sanction letter issued by SBI in November 2018 was later cancelled when the borrower failed to meet installment terms. Sale notices, auctions and sale confirmation followed in 2020, and the borrower challenged the measures before the DRT under Section 17. In October 2020 SBI launched the OTS 2020 Scheme; the borrower sought to avail it by letters of 19 October and 10 November 2020 contending prior payments and offering a settlement. The bank rejected the OTS request by letter dated 17 November 2020, referring to the borrower’s prior conduct and failure to comply with earlier interim orders. The writ court (Single Judge) directed the bank to process the application, and the Division Bench dismissed the bank’s intra-court appeal on the view that the borrower was not ineligible under clause 2.1 of the OTS scheme. SBI challenged that interference before this Court.

The Supreme Court examined the OTS 2020 Scheme and held that clause 4(i) required a 5% up‑front deposit with an application (15% for wilful defaulters) and that an application lacking that payment was not to be processed. The Court found that the borrower did not make the required up‑front payment and that neither the Single Judge nor the Division Bench had adverted to clause 4(i). For that reason the High Court’s interference was set aside. The Court granted SBI liberty to proceed with enforcement of security in accordance with law and gave the borrower an opportunity to submit a fresh settlement proposal, but specifically not under the OTS 2020 Scheme. The judgment left pending DRT proceedings unaffected.

Case Details: Case No.: CIVIL APPEAL NO. 11134 OF 2025 (Arising out of SLP (CIVIL) NO. 2456 OF 2025); Reportable citation: 2025 INSC 1119 Case Title: Assistant General Manager State Bank of India & Anr. v. Tanya Energy Enterprises through its Managing Partner Shri Alluri Lakshmi Narasimha Varma Appearances: For the Petitioner(s): Mr. Venkatraman, Additional Solicitor General of India For the Respondent(s): Mr. D.S. Naidu, Senior Counsel

(Disposition: Civil appeal allowed; impugned High Court orders set aside; appellants free to enforce security; respondent permitted to tender a fresh settlement proposal not under OTS 2020; DRT proceedings preserved.)