State Bank of India vs Arvindra Electronics Pvt. Ltd.
Background
The respondent, Arvindra Electronics, had its cash credit account with SBI classified as a Non-Performing Asset. The Bank offered a One Time Settlement (OTS) scheme in 2017 under which the borrower was to pay about Rs. 10.5 crore (against an outstanding of nearly Rs. 14 crore) by a fixed deadline of 21.05.2018, failing which the OTS would become infructuous. The borrower paid part of the amount but defaulted on the balance of roughly Rs. 2.02 crore, and instead of paying, approached the Punjab and Haryana High Court under Article 226, which granted a further six weeks to pay. The Bank appealed this extension to the Supreme Court.
Decision Breakdown
The Supreme Court held that the OTS scheme was a contractual arrangement with a clear, binding deadline that the borrower had failed to meet, and that a High Court exercising writ jurisdiction under Article 226 cannot rewrite or extend the terms of such a scheme in the borrower's favour. Relying on its own earlier decision in Bijnor Urban Cooperative Bank Ltd., the Court held that a defaulting borrower has no right to claim an extension merely because other borrowers may have been given more time in unrelated cases: any extension is a matter of mutual agreement between borrower and bank (permissible under Section 62 of the Indian Contract Act), not something a court can impose. The Court accordingly quashed the High Court's order, dismissed the original writ petition, and allowed the Bank's appeal, with no order as to costs.
Lesson Learnt
A borrower who fails to honour the strict payment deadline of a bank's one-time settlement scheme cannot use writ jurisdiction to compel the bank to extend it: such settlement terms are contractual and binding, and courts will not rewrite them in the defaulting party's favour.