Paragraph numbers below are the court’s original numbering, recovered from the source text.
10. While acknowledging that the benefit of the OTS cannot be claimed as an absolute right and that no mandamus can be issued compelling an authority to exercise discretion in a particular manner, as reiterated by this Court in Bijnor Urban Coop. Bank Ltd. v. Meenal Agarwal15, Mr. Naidu contended that the decision to accept or reject an OTS proposal must be reasoned, based on scheme eligibility, and in compliance with the principles of natural justice.
11. Mr. Naidu urged that in the present case, neither the writ court nor the appellate court directed a positive grant of OTS; what the court required was a consideration of the respondent’s application under the OTS 2020 Scheme. Rejection of the respondent’s application without due consideration or opportunity of hearing is wholly arbitrary, given the fact that the respondent had already deposited about Rs.1.5 crore (inclusive of Rs. 0.50 crore pursuant to an earlier failed compromise) in good faith.
12. Drawing attention to this Court’s order dated 18th September 2023 whereby notice was issued, Mr. Naidu argued that the plea of ineligibility under clause 2.1(iii) of the OTS 2020 Scheme had already been negated, and that the failure of the earlier compromise settlement of 2018 could not justify rejection of the subsequent application. Hence, it was contended that the appellants should not now be permitted to argue beyond the question framed by this Court for adjudication.
13. Turning to the auction process, Mr. Naidu asserted that the authorised officer of the SBI had issued a sale notice on 12th February 2020, followed by an auction on 18th March 2020 and confirmation of sale on 15th April 2020. Before completion of the process, the respondent challenged it under Section 17 of the SARFAESI Act (2023) 2 SCC 805 974 and by an order dated 1st September 2021, the DRT set aside the notice, the auction, and any sale certificate. This fact, it was urged, has been suppressed in the present proceedings. Moreover, 25% advance deposited by the auction purchaser was never credited to the respondent’s account and was refunded on 8th September 2021 by the authorized officer himself. Hence, no third-party rights accrued. Reference was also made to the respondent’s letter dated 10th November 2020 offering to indemnify the SBI against any vexatious claims by the purchaser.
14. With regard to the second auction of 26th April 2022, Mr. Naidu submitted that the sale remains under challenge before the DRT, and the auction purchaser’s deposit too has been refunded, leaving no subsisting sale consideration with the SBI.
15. On the question of bona fides, it was contended that the respondent is not a wilful defaulter. Respondent, an operational creditor of ICOMM Tele Limited, has unpaid claims of Rs. 5 crore, in respect of which it only received a sum of Rs. 9,63,123/- in the insolvency proceedings. Such circumstances directly impaired the repayment capacity of the respondent and contributed to default.
16. Resting on these foundations, Mr. Naidu sought to contend that the respondent’s application under the OTS 2020 Scheme deserved fair consideration, and that its rejection stands vitiated by arbitrariness which was rightly interdicted by the Single Judge and affirmed by the Division Bench. The Notice Issuing Order
17. Notice on the special leave petition, giving rise to this appeal, was issued on 18th September, 2023. In such order, the coordinate Bench recorded as follows: The first contention of the petitioners – the Assistant General Manager and Deputy General Manager of State Bank of India, Siripuram, Vishakhapatnam branch, that there was an earlier compromise settlement/sanction dated 23.11.2018, would not be a good ground and a relevant consideration to reject the OTS proposal under [2025] 9 S.C.R. Assistant General Manager State Bank of India & Anr. v. Tanya Energy Enterprises Through Its Managing Partner Shri Alluri Lakshmi Narasimha Varma the scheme dated 12.10.2020. The compromise settlement had failed since amounts were not received by SBI within the stipulated time.
18. Since this Court had issued notice noting that “*** the question which will arise is whether borrower could have applied under the OTS Scheme dated 12.10.2020 with respect to the arrears after excluding the amount receivable under the first auction ***”, it has also been vehemently contended by Mr. Naidu that it is no longer open to the appellant to argue beyond the question posed by this Court for an answer. Analysis And Reasons
19. We have heard Mr. Venkatraman and Mr. Naidu and perused the order rejecting the respondent’s application under the OTS 2020 Scheme. We have also perused the impugned judgment and order of the Division Bench dismissing the writ appeal of the appellants as well as that of the Single Judge, allowing the respondent’s writ petition.
20. Meenal Agarwal (supra), cited by Mr. Naidu, is an authority for the proposition that no court can, by issuing a writ of mandamus, direct a secured creditor to positively grant benefit of OTS to a defaulting borrower; such grant is always subject to the eligibility criteria being satisfied. The law declared therein has been affirmed in State Bank of India v. Arvindra Electronics Private Limited16.
21. The principle of law, as aforesaid, may not have any direct application here, since it is merely a re-consideration that the High Court has directed and there is no positive direction for granting an OTS.
22. Notwithstanding limited notice having been issued on a special leave petition, that this Court can expand the scope of the lis is no longer res integra. One may profitably refer to the decision of this Court in Biswajit Das v. Central Bureau of Investigation17.
23. The only question that we are tasked to decide is, whether the High Court erred in its interference with the said order of rejection of the (2023) 1 SCC 540 2025 SCC OnLine SC 124 976 respondent’s application under the OTS 2020 Scheme and directing re-consideration thereof.
24. For the discussions and reasons that follow, we are of the opinion that the High Court was not justified in its interference with the order of rejection.
25. OTS 2020 Scheme was launched by the SBI to augment efforts towards recovery of outstanding dues. Apart from clause 2.1 of the OTS 2020 Scheme providing “cases not eligible to be covered”, heavily relied on by the Division Bench, clause 4(i) thereof provided as follows: “The borrower has to deposit 5% or 15%(for wilful defaulters) of the OTS Amount (As per the settlement formula point v) at the time of submission of application (in the form of letter addressed to branch head) to indicate his willingness for OTS, failing which the application will not be processed. In the event the application for OTS is rejected by the Bank, such payment, which shall be held in a separate account, will be refunded without interest within three months.”
26. It is, therefore, clear that every borrower in default, to have his application under the OTS 2020 Scheme considered, was required to apply together with an up-front payment of 5% of the OTS amount. The manner of calculation of the OTS amount was provided in clause 3A (v) of the OTS 2020 Scheme. For wilful defaulters, payment of 15% was required. It has not been argued before us that the respondent falls in the category of a ‘wilful defaulter’; however, it is certainly a defaulter.
27. We did not find the respondent, while applying for the benefit of the OTS 2020 Scheme, to have deposited a single paisa towards up- front payment. In terms of clause 4(i) of the OTS 2020 Scheme, any application received without up-front payment is not required to be processed even. Thus, in the first place, the respondent’s application was incomplete and it did not have any right in law to claim that such application should be processed.
28. Significantly, the first appellant did not reject the application of the respondent on the ground of its failure to deposit 5% of the OTS [2025] 9 S.C.R. Assistant General Manager State Bank of India & Anr. v. Tanya Energy Enterprises Through Its Managing Partner Shri Alluri Lakshmi Narasimha Varma amount as required under the OTS 2020 Scheme at the time of submission of its application.
29. The High Court too – both the Division Bench and the Single Judge – missed this aspect altogether because neither omission to make up-front payment assigned as a ground for rejection of the respondent’s application by the first appellant nor clause 4(i) of the OTS 2020 Scheme was brought to the notice of the relevant courts.
30. Mr. Venkatraman appeared clueless as to why rejection of the respondent’s application based on clause 4(i), despite being available to the first appellant, was not mentioned as a ground in the letter dated 17th November, 2020.
31. In course of hearing, Mr. Naidu’s attention was invited by us to clause 4(i). We had called upon him to explain the basis for claiming eligibility under the OTS 2020 Scheme without making the requisite up-front payment of 5%. Accepting Mr. Naidu’s prayer, we had given him time to respond.
32. Mr. Naidu returned on the next day of hearing and submitted that clause 4 read with clause 6 of the OTS 2020 Scheme makes it clear that all branches of the SBI were obligated to identify eligible borrowers, send intimation specifying dues, payment modalities, and last date for application under the scheme. However, despite the appellants not following the OTS 2020 Scheme by sending intimation with quantification of the respondent’s dues and the payment modalities, the respondent, in filing the application accompanied by the upfront amount, fully complied with the scheme requirements. Therefore, it cannot be argued that the respondent was ineligible on grounds of non-compliance of the terms.
33. In light of his arguments, Mr. Naidu prayed for dismissal of the appeal and for an order on the appellants to proceed in terms of the directions in the impugned judgment and order.
34. A question would obviously arise for our answer, having regard to the Constitution Bench decision in Mohinder Singh Gill v. Chief Election Commissioner18 and the larger Bench decisions of this (1978) 1 SCC 405 978 Court in Commissioner of Police v. Gordhandas Bhanji19 and Opto Circuits (India) Ltd. v. Axis Bank20, as to whether, a court can uphold an order rejecting an applicant’s claim based on a ground appearing from the records of the case which could have been but has not been mentioned, if the grounds mentioned in such order of rejection are not found to be tenable?
35. To refresh our memory, the aforesaid decisions are authorities for the proposition that validity of an order, which is under challenge in the proceedings, must be tested on the basis of the ground(s) mentioned in it in support thereof; and any additional ground, to support the order under challenge, cannot be allowed to be raised in the reply affidavit or in course of arguments. The underlying principle is that an order which is bad in the beginning may, by the time it comes to court on account of a challenge, get validated by additional grounds later brought out. As Hon’ble Vivian Bose, J. famously remarked in Commissioner of Police (supra), orders are not like old wine becoming better as they grow older. What was later held in Mohinder Singh Gill (supra) drew inspiration from the principle of law laid down in Commissioner of Police (supra).
36. Mohinder Singh Gill (supra) has been considered by this Court in All India Railway Recruitment Board v. K. Shyam Kumar21. It has been held there that the principle laid down in Mohinder Singh Gill (supra) is not applicable where larger public interest is involved and in such a situation, additional grounds can be looked into, to examine the validity of an order. To the same effect is the decision in PRP Exports v. State of Tamilnadu22. However, K. Shyam Kumar (supra) and PRP Exports (supra) have been considered in 63 Moons Technologies Ltd. v. Union of India23 where it has been held in paragraph 102 by a coordinate Bench that there is no broad proposition that the law laid down in Mohinder Singh Gill (supra) will not apply where larger public interest is involved. The decisions in K. Shyam Kumar (supra) and P.R.P. Exports (supra) AIR 1952 SC 16 (2021) 6 SCC 707 (2010) 6 SCC 614 (2014) 13 SCC 692 (2019) 18 SCC 401 [2025] 9 S.C.R. Assistant General Manager State Bank of India & Anr. v. Tanya Energy Enterprises Through Its Managing Partner Shri Alluri Lakshmi Narasimha Varma were distinguished on the ground that the coordinate Benches there had proceeded to consider subsequent materials that emerged for the purpose of validating the order under challenge.
37. The need, thus, arises to reconcile the decisions noticed above.
38. The respective Benches in Commissioner of Police (supra), Mohinder Singh Gill (supra), Opto Circuits (India) Ltd. (supra) and 63 Moons Technologies Ltd. (supra), in our reading, while mandating what has been noticed above was not required to and, as such, rightly did not go that far in establishing the principle that, in all cases coming before it, the court is necessarily bound to confine itself to the grounds mentioned in the administrative order under challenge and cannot look beyond such grounds at all. While the courts, in course of reviewing administrative orders, may not permit additional grounds not found within the four corners of the said order to be raised in an affidavit or in oral arguments, we are inclined to the view that the factual narrative in such order and the documents referred to therein can certainly be considered together with the case set up in the writ petition, but in appropriate cases. Such cases could include a case, as the present, where the mentioned grounds are found to be untenable and, thus, unsustainable, but an alternative ground (appearing from the factual narrative in the order itself and/ or from the records relevant thereto) is traceable which could have validly been mentioned as a ground to support the impugned rejection had there been a proper application of mind by the administrative authority. In all such cases, it would be open to the court to uphold it on such alternative ground subject, of course, to the affected party being put on notice and an opportunity to respond. This approach, which would prioritize fairness and justice over technicalities, does not run contrary to or inconsistent with the law laid down in the afore referred precedents.
39. Much as Mr. Naidu would like us to accept that the respondent had complied with the requirements of the OTS 2020 Scheme, the respondent’s letter dated 10th November, 2020 is evidence of up-front payment not having been made. It is clear as a sunny day that an application for availing the benefit thereunder would be processed if such application were accompanied by an up-front payment of 5% of the outstanding dues. Indubitably, the respondent faltered in not adhering to the express terms of such scheme by not depositing 980 5% of the outstanding dues as up-front payment, thereby rendering its application disentitled to be processed even, far less deserving a favourable consideration.
40. True it is, this ground flowing from clause 4(i) is not mentioned in the letter dated 17th November, 2020 as a ground for rejection of the respondent’s application. However, in view of what we have held above, this ground is fundamental to the case, strikes at the heart of the matter and fully justifies the conclusion in the impugned order of rejection that the respondent, by its own conduct, did not and does not deserve to be extended the benefit of the OTS under the OTS 2020 Scheme. SBI would be well advised to ascertain and fix responsibility as to how the respondent’s application could be processed when it did not comply with the terms of the OTS 2020 Scheme.
41. No doubt, clause 2.1 of the OTS 2020 Scheme laying down cases which are “not eligible” had no application qua the respondent but overcoming the “not eligible” criteria did not amount to satisfying the other eligibility criteria. Not being covered by clause 2.1 does not necessarily lead to the conclusion that a defaulting borrower is automatically entitled to have the loan account settled on the basis of the OTS 2020 Scheme. Crossing the hurdle of eligibility per se would not entitle a defaulting borrower to claim consideration of his/its application unless the application itself satisfies the other stipulated conditions.
42. Assuming arguendo that a ground not mentioned in the administrative order under challenge cannot be permitted to be raised in an affidavit or in course of arguments, we bear in mind that the High Court – both the Single Judge and the Division Bench – did not issue any positive direction to the appellants to grant the proposal of the respondent for an OTS. What the High Court required was a re-consideration of the respondent’s application for OTS, treating it to be eligible under clause 2 of the OTS 2020 Scheme. However, clause 2 was not the only clause relating to eligibility. There were other clauses too, viz. the various sub-clauses of clause 1 apart from clause 4. Having regard to the fact that applicability of clause 4(i) of the OTS 2020 Scheme as a potential ground for rejection had been brought to the notice of the parties and responses elicited, as noted above, even if the impugned judgment and order were not disturbed and the appeal dismissed by us, it would still be open to the appellants to fall back [2025] 9 S.C.R. Assistant General Manager State Bank of India & Anr. v. Tanya Energy Enterprises Through Its Managing Partner Shri Alluri Lakshmi Narasimha Varma on the omission of the respondent to comply with clause 4(i) of the OTS 2020 Scheme to reject its application for OTS. Would, in such circumstances, the cause of justice be advanced by not interfering with the impugned judgment and order? We think not.
43. From whichever angle one looks at the issue, the conclusion is irresistible that the respondent’s conduct disabled itself to have a fair and objection consideration of its application for OTS. Conclusion
44. For the reasons aforesaid, this civil appeal deserves to succeed. Dismissal of the intra-court appeal of the appellants by the impugned judgment and order of the Division Bench is set aside together with the judgment and order of the Single Judge allowing the respondent’s writ petition because a relevant factor was kept out of its consideration, which has the effect of significantly impacting the outcome of the respondent’s application for OTS.
45. The appellants are free to proceed in accordance with law for enforcement of the security interest. At the same time, we also grant the respondent an opportunity to submit a fresh proposal for OTS but not under the OTS 2020 Scheme. If the terms and conditions put forth by the respondent are found reasonable, workable and acceptable, the appellants may take such decision on it as deemed fit and proper in the circumstances.
46. The civil appeal, thus, stands allowed. Connected applications, if any, will stand closed.
47. Except to the extent decided, this judgment of ours shall, however, not have any effect on the proceedings pending before the DRT. Result of the case: Appeal allowed. †Headnotes prepared by: Ankit Gyan