Facts
The petitioner, a borrower of two loans (cash credit and housing loan) from Canara Bank, defaulted on his repayments following a medical crisis involving a brain tumor surgery in early 2024
Source reference: p.2His father, acting as a guarantor, mortgaged landed property for the loans
Source reference: p.2The bank declared the accounts as Non-Performing Assets (NPAs).
Source reference: p.2The petitioner’s father submitted a representation on 19.12.2025 proposing a One-Time Settlement (OTS) of ₹20 lakhs against an outstanding dues of approximately ₹69.49 lakhs
Source reference: p.2-3The bank rejected this indirectly by initiating recovery proceedings under the SARFAESI Act, 2002, and issued a Sale Notice on 08.06.2026 for an e-Auction scheduled for 25.06.2026
Source reference: p.3The petitioner approached the High Court seeking a writ of mandamus to compel the bank to dispose of the settlement representation
Source reference: p.2Issues
1. Whether a writ of mandamus can be issued under Article 226 of the Constitution to direct a financial institution to consider or accept a One-Time Settlement (OTS) proposal from a defaulting borrower
Source reference: p.3Law Applied
Principles established by the Supreme Court of India in Bijnor Urban Cooperative Bank Limited v. Meenal Agarwal [2023] 2 SCC 805, which held that no borrower can claim OTS as a matter of right and that such decisions rest on the "commercial wisdom" of the bank
Source reference: p.4State Bank of India v. Arvindra Electronics Private Limited [2023] 1 SCC 540, which established that High Courts should refrain from granting extensions or benefits under OTS schemes while exercising powers under Article 226
Source reference: p.4Reasoning
The Court reasoned that the relief sought—nominally a direction to "dispose of a representation"—was effectively a request for the Court to interfere in a commercial settlement process
Source reference: p.4Applying the Bijnor Urban Cooperative Bank precedent, the Court noted that entertaining such prayers would encourage every capable defaulter to seek judicial intervention for settlements, undermining the bank's recovery rights
Source reference: p.4The Court observed that since the bank had already proceeded with an auction under the SARFAESI Act, it had effectively exercised its commercial discretion to prioritize recovery over the petitioner’s significantly lower settlement offer of ₹20 lakhs against a ₹69.49 lakh debt
Source reference: p.3, 4The Court concluded that what is legally impermissible to grant directly (compelling an OTS) cannot be granted indirectly through a direction to consider a representation
Source reference: p.4Holding
A borrower does not have a legal right to compel a bank to accept or specifically consider an OTS proposal under Article 226
The Court held that the writ petition was not maintainable. The petition was dismissed without costs, and the bank was permitted to proceed with its recovery actions
Source reference: p.5Original Court PDF
Sri Bidhan SahavsCanara Bank And Ors
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