The Nagpur Bench of the Bombay High Court dismissed a writ petition filed by businesswoman Ms. Archana Wani, who had sought to compel Indian Bank to disclose its OTS benchmark and accept her proposal. The division bench of Justice Anil S. Kilor and Justice Rajnish R. Vyas held that courts cannot force banks to settle dues under OTS, calling such interference a violation of contractual and public interest principles.
Background
The case stemmed from a ₹62 crore term loan sanctioned in 2011 by the erstwhile Allahabad Bank (now Indian Bank) to Poonam Resorts Ltd., for a resort project in Nagpur. Ms. Wani, a director and shareholder in N. Kumar Housing and Infrastructure Ltd., stood as guarantor and mortgaged property to secure the loan.
Following loan defaults, the account was classified as a Non-Performing Asset (NPA) in 2017. Recovery proceedings began under the SARFAESI Act, and insolvency proceedings were also initiated before the NCLT Mumbai under Section 7 of the Insolvency and Bankruptcy Code (IBC).
Ms. Wani accused the bank of acting “like a private moneylender” and of arbitrarily rejecting multiple OTS proposals without disclosing its internal “benchmark” criteria. She sought court intervention directing the Reserve Bank of India (RBI) to audit the bank’s accounts and to mandate transparency in its OTS policy.
Court’s Observations
After a lengthy hearing, Justice Rajnish R. Vyas, writing for the bench, remarked that while the case spanned over 2,000 pages, “the controversy involved is very short.”
The Court emphasized that Indian Bank deals with public money, and thus its decision to reject an OTS proposal cannot be equated with arbitrary action. “Just because a borrower has submitted a proposal for OTS… will not create any semblance of right in their favour,” the bench observed, adding that there was no legal requirement for the bank to disclose its internal benchmarks unless mandated by a policy or statute.
The judges also noted that the petitioner had not produced any specific OTS scheme or RBI guideline applicable to her case. “It thus cannot be said that the bank has acted arbitrarily by not disclosing the benchmark,” the Court held.
The bench cited the Supreme Court’s ruling in Bijnor Urban Cooperative Bank v. Meenal Agrawal (2023) 2 SCC 805, observing that OTS benefits cannot be claimed as a matter of right and that decisions must remain within the “commercial wisdom” of banks.
“No writ of mandamus can be issued… directing a financial institution to positively grant the benefit of OTS,” the Court quoted.
Further, the judges relied on State Bank of India v. Arvind Electronics Pvt. Ltd. (2023) 1 SCC 540 to underline that compelling a bank to modify repayment terms would “tantamount to rewriting the contract,” which is impermissible under Article 226 of the Constitution.
The bench dismissed arguments based on the doctrine of legitimate expectation, pointing out that without an established OTS policy or promise, no expectation could arise.
“Fairness would obviously mean repayment of the outstanding amount within the period agreed,” Justice Vyas observed.
The Court was also unconvinced by the plea that the bank violated RBI’s fairness guidelines, finding no supporting evidence. “No specific policy of the bank has been brought on record… therefore, the contention is not appealable,” the judges said.
The ruling underscored that judicial review in such financial matters must be exercised sparingly, especially when special laws like SARFAESI and IBC already provide comprehensive remedies for recovery and restructuring.
Concluding that no interference was warranted under Article 226, the Court dismissed the petition. It refused to compel Indian Bank to accept or reconsider the OTS proposal and declined to direct the RBI or the Interim Resolution Professional to act on the petitioner’s claims.
However, considering that an interim stay order had been in force since June 2023, the bench allowed it to continue for six more weeks
Case Title: Ms. Archana Wani D/o Deepak Wani vs. Indian Bank (Erstwhile Allahabad Bank) & Others
Case Number: Writ Petition No. 3766 of 2023
