Non-compliance with One-Time Settlement (OTS) Terms Within Stipulated Time Extinguishes Right to Enforcement

The petitioner availed a loan of ₹25,00,000/- from UCO Bank, which subsequently became a Non-Performing Asset (NPA), leading to recovery proceedings by the Debts Recovery Tribunal (DRT), Jabalpur.

On January 20, 2025, the Bank approved a One Time Settlement (OTS) for ₹9,00,000/-, requiring an upfront deposit of ₹1,00,000/- and the balance within a stipulated timeframe.

The petitioner failed to pay the remaining ₹8,00,000/-, citing the freezing of his bank account by Punjab National Bank (Respondent No. 2) and delays in receiving the DRT’s written order.

Consequently, UCO Bank rejected the old OTS and demanded a fresh settlement of ₹20,00,000/- via an order dated May 30, 2025.

The petitioner challenged this rejection under Article 226 of the Constitution.

1. Whether the court can compel a bank to honor a lapsed One Time Settlement (OTS) when the borrower failed to comply with the stipulated payment timeline.

2. Whether a writ petition is maintainable for recovery disputes where an efficacious statutory remedy exists before the Debts Recovery Tribunal.

The Court established that a One Time Settlement is essentially a contractual arrangement between a borrower and a bank, necessitating strict adherence to its terms.

Under the principle of "Lapse of Offer/Contract," if conditions are not met within the prescribed timeframe, the settlement automatically expires and no vested right survives for enforcement.

Under Article 226 of the Constitution, High Courts generally refrain from exercising writ jurisdiction when an "efficacious statutory remedy" is available under special laws like the Recovery of Debts and Bankruptcy Act.

The Court observed that despite the petitioner’s explanations regarding frozen accounts and procedural delays at the DRT, the material fact remained that the balance sum was not deposited within the timeframe required by the OTS.

The Court reasoned that since the OTS is a contract, the Bank is not obligated to extend its validity once the borrower defaults on the schedule.

The Court further noted that once an OTS fails, the Bank retains its legal right to proceed with full recovery.

The Court determined that because the dispute arose from a loan transaction and recovery certificate issued by the DRT, the petitioner should have approached the specialized Tribunal rather than seeking a writ of mandamus.

The Court affirmed that an expired OTS cannot be enforced as a matter of right.

The Court granted the petitioner liberty to approach the Debts Recovery Tribunal or submit a fresh settlement proposal to the Bank for consideration in accordance with their internal policy.

No costs were awarded.