New Delhi, Sept 15: In a ruling that tilts the scales back in favour of the lender, the Supreme Court on Monday quashed the Andhra Pradesh High Court’s direction asking State Bank of India (SBI) to reconsider a debt settlement request from Tanya Energy Enterprises. The bench of Justices Dipankar Datta and Augustine George Masih held that the borrower’s application under the bank’s 2020 One Time Settlement (OTS) scheme was incomplete and “deserved no consideration.”
Background
Tanya Energy had borrowed heavily from SBI, pledging seven properties as security. After defaulting on repayments, its account was marked a non-performing asset. Over the years, the company sought multiple compromises, even paying about ₹1.5 crore in instalments, but failed to meet deadlines. SBI began auctioning the mortgaged properties to recover roughly ₹8 crore in dues.
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In 2020, SBI introduced an OTS scheme allowing certain borrowers to settle large dues at a discount. Tanya Energy applied, citing earlier payments and promising more. SBI rejected the request, pointing to past defaults and ongoing legal disputes. Both a single judge and a division bench of the Andhra Pradesh High Court later directed the bank to reconsider the proposal, prompting SBI to appeal to the Supreme Court.
Court’s Observations
The apex bench heard detailed arguments from both sides. SBI argued that no writ of mandamus could force a bank to grant a settlement and stressed the borrower’s repeated failures. Tanya Energy countered that it had already deposited substantial amounts and deserved a fair hearing under the OTS 2020 scheme.
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Justice Datta noted a crucial lapse: the borrower never made the mandatory “up-front” payment of 5 percent of the proposed settlement amount required by clause 4(i) of the scheme. “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,” the bench observed.
The Court criticised the High Court for overlooking this requirement. “Not being covered by the ‘not eligible’ clause did not mean automatic entitlement,” the judgment said, adding that SBI was justified in rejecting the plea even if it had cited other reasons earlier.
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Decision
Allowing SBI’s appeal, the Supreme Court set aside both the single judge’s and the division bench’s orders. The bank is now free to continue with recovery and auction of the remaining mortgaged properties. Yet, showing a touch of balance, the bench added that Tanya Energy may submit a fresh settlement proposal outside the 2020 scheme, and SBI may consider it if terms are reasonable. The Court made it clear that its decision will not affect related proceedings pending before the Debt Recovery Tribunal.
Case: Assistant General Manager, State Bank of India & Anr. v. Tanya Energy Enterprises
Citation: 2025 INSC 1119
Case Type: Civil Appeal No. 11134 of 2025 (arising out of SLP (Civil) No. 2456 of 2025)
Date of Judgment: 15 September 2025
