Financial institution must issue NOC upon receipt of agreed OTS amount and refrain from coercive action meanwhile.

The petitioners, comprising M/s SR Creations and four borrowers, approached the Madhya Pradesh High Court under Article 226 challenging a demand notice dated 30 October 2025 issued under Section 13(2) of the SARFAESI Act, 2002, along with consequential possession and coercive measures.

They sought enforcement of an alleged One-Time Settlement (OTS), credit for payments already made, permission to pay the remaining amount in instalments, and restraint against dispossession or auction of the secured asset.

During the proceedings, the petitioners offered to close loan account No. 1232641 by paying ₹3,92,74,245, stated to represent the principal outstanding as on 31 August 2026.

Each borrower undertook to pay ₹35,00,000 within three days of the order and the balance within twelve months without default.

The respondent financial institution disputed revival of the earlier OTS but, as a final indulgence, agreed to accept ₹3,92,74,245 within the stipulated period, waive interest and penal charges, issue a No Objection Certificate, release the secured property, and refrain from coercive action.

The petition was entertained under Article 226 of the Constitution of India, while the impugned recovery measures arose under Sections 13(2) and 13(4) of the SARFAESI Act, 2002.

The Court applied the principle that parties may resolve the dispute through binding undertakings recorded by the Court, and that relief may be moulded in accordance with a subsequent settlement or compromise placed on record.

The Court did not decide the independent enforceability of the earlier OTS or adjudicate the validity of the SARFAESI measures on merits; instead, it relied on the mutual undertakings of the borrowers and the authorised signatory of the financial institution.

The Court noted that the borrowers had given identical undertakings to pay ₹3,92,74,245, initially paying ₹35,00,000 within three days and clearing the balance within twelve months without default.

Although the financial institution maintained that the earlier OTS had failed and could not be revived, its authorised signatory expressly offered to accept the stated principal amount, waive interest and penal charges, issue an NOC, release the secured property, and refrain from coercive steps upon timely payment.

Treating these undertakings as a practical compromise between the parties, the Court disposed of the petition by directing the financial institution to issue the NOC after receipt of the agreed amount, while expecting strict compliance by the petitioners.

The respondent financial institution was directed to issue an NOC upon receipt of ₹3,92,74,245 from the petitioners.

The petitioners were required to comply strictly with their payment schedule and undertakings.

The financial institution was directed not to take coercive action until expiry of the period stipulated in the undertaking.

No independent finding was recorded setting aside the Section 13(2) demand notice or the Section 13(4) proceedings on merits.