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Assistant General Manager State Bank of India & Anr. vs Tanya Energy Enterprises through its Managing Partner Shri Alluri Lakshmi Narasimha Varma

Not available · 2025 INSC 1119Decided 15 Sept 2025
Not available
Justice Dipankar Datta · Justice Augustine George Masih

Background

The respondent-borrower had mortgaged seven immovable properties to obtain credit from SBI, then defaulted, leading its account to be classified as a non-performing asset and triggering recovery proceedings under the SARFAESI Act and the Recovery of Debts and Bankruptcy Act. The borrower later sought a one-time settlement (OTS), which the bank initially processed via a compromise sanction letter, but the bank subsequently rejected the borrower's OTS application under its OTS 2020 Scheme. The borrower successfully challenged the rejection before a Single Judge of the Andhra Pradesh High Court, and a Division Bench dismissed the bank's intra-court appeal.

Decision Breakdown

The Supreme Court held that the borrower's own conduct disabled it from receiving a fair consideration of its OTS application: a relevant factor bearing on the rejection had not been properly weighed by the High Court. It found the cause of justice would not be served by letting the High Court's judgment stand, since the reasoning kept out a factor central to why the bank rejected the settlement request. The Court set aside both the Division Bench's and the Single Judge's judgments, ruled in the bank's favour, allowed the bank to proceed with enforcing its security interest, but also gave the borrower a fresh opportunity to propose a new settlement (outside the OTS 2020 Scheme) which the bank may consider on its own terms.

Lesson Learnt

A borrower seeking a one-time settlement of bank dues must ensure its own conduct does not undermine the fairness of that request. Courts will scrutinise whether all relevant factors were genuinely considered, and a settlement rejection will not automatically be overturned just because the borrower disagrees with the outcome.

Official source (sci.gov.in)View Judgment (PDF)

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