Courts will not interfere with loan restructuring absent demonstrated illegality or violation of enforceable rights.

The petitioners challenged the Bank’s restructuring of their loan repayment schedule, which extended the repayment period from 120 to 151 months.

They alleged that the restructuring and interest and penal-interest charges were arbitrary and that the Bank had refused repayment under the original schedule.

The Court had granted interim protection on 18 August 2022, conditional on the petitioners depositing 30% of the amount due in three instalments; they did not comply with that condition.

The dispute had also proceeded to arbitration, resulting in an award in favour of the Bank.

1. Whether the Bank’s extension of the loan repayment period from 120 to 151 months disclosed illegality, arbitrariness, or violation of an enforceable legal right warranting interference under Article 226

2. Whether the petitioners’ failure to comply with the conditional interim order disentitled them to equitable relief

The Court applied the principles governing the High Court’s extraordinary jurisdiction under Article 226 of the Constitution: interference with a lender’s commercial decision is not warranted absent material establishing patent illegality, arbitrariness, or infringement of an enforceable legal right.

The grant, modification, re-phasing, rescheduling, or restructuring of a loan ordinarily falls within the lending institution’s commercial and contractual domain, including its assessment of the borrower’s financial position, repayment capacity, credit risk, and applicable banking norms.

The Court also treated compliance with the condition attached to interim protection as relevant to whether equitable relief should continue to be available.

The petitioners’ allegations concerning the extended tenure, interest charges, and refusal to accept repayment under the original schedule were unsupported by cogent or tangible material showing patent illegality or breach of an enforceable right.

The extension of the repayment period, without more, did not establish a basis for judicial substitution of the Bank’s commercial decision.

The Court further noted that the petitioners had not complied with the condition for interim protection despite allowing the petition to remain pending since 2022, which weighed against granting equitable relief.

Their non-compliance with the conditional interim order further disentitled them to equitable relief.

The writ petition was dismissed.