Blitz Bureau
NEW DELHI: THE Nagpur Bench of the Bombay High Court has held that a borrower or guarantor cannot seek a One-Time Settlement (OTS) to settle their debts as a matter of right, and that courts cannot compel banks to disclose their internal benchmarks for deciding on such matters or force banks to accept such proposals, reported Bar and Bench.
The court was hearing a writ petition filed by Archana Wani, a director and shareholder of N Kumar Housing and Infrastructure Pvt. Ltd., who had challenged Indian Bank’s rejection of her OTS proposal to settle certain loans in respect of which the company was the guarantor.
Dismissing Wani’s plea, a Division Bench of Justices Anil S Kilor and Rajnish R Vyas observed, “Just because the borrower has submitted the proposal for OTS which from time to time is taken into consideration and rejected by giving reason that it does not match benchmark, will not create semblance of right in favour of the borrower … As rightly submitted by the learned counsel for the bank, it deals with public money and therefore, asking it to settle the account by accepting OTS would not be in the interest of public at large.”
The Bench reiterated that such matters should be left to the commercial wisdom of banks.
“If the bank/financial institution is of opinion that loanee has the capacity to make the payment or bank is able to recover the entire loan amount, even by auctioning the mortgaged property, the bank would be justified in refusing to grant benefit under the OTS scheme, and ultimately, such decision should be left to the commercial wisdom of the bank … it is always to be presumed that bank shall take a prudent decision whether to grant the benefit under the OTS scheme, having regard to the public interest involved, we do not intend to interfere,” it held in the October 17 ruling.
