The Kerala High Court has reiterated that borrowers cannot invoke writ jurisdiction to compel a bank or financial institution to extend the benefit of a One Time Settlement (OTS) scheme, upholding the decision of a single judge that refused to interfere with recovery proceedings initiated by a co-operative bank. A division bench of the High Court, comprising Justice Anil K Narendran and Justice Muralee Krishna S, dismissed a writ appeal filed by borrowers and agreed with the single judge’s view that an OTS scheme constitutes a discretionary benefit offered by the bank and not an enforceable right that can be claimed through writ proceedings. The bench emphasised that provisions for One Time Settlement are intended as a benefit to settle liability, and if borrowers fail to utilise such an opportunity, they cannot contend that additional concessions should be extended to them. It was further held that a writ petition under Article 226 of the Constitution cannot be maintained simply to claim the benefits of an OTS scheme when the borrowers have already had opportunities to seek and obtain settlement under the scheme.
The appellants in this case had obtained three loans from Vazhoor Farmers Service Co-operative Bank Ltd., which were secured by an equitable mortgage over their property. Following defaults in repayment, arbitration proceedings were initiated under the relevant statutory provisions in the Kerala Co-operative Societies Act, resulting in ex parte awards against the borrowers. Over the years, the appellants repeatedly approached the High Court challenging various recovery steps taken by the bank. Pursuant to earlier directions from the court, the borrowers’ request for settlement under the OTS scheme was placed before a District Level Committee constituted to assess eligibility for the scheme, and as per the committee’s decision, the appellants closed one of the loan accounts by availing the benefits of the settlement scheme.
Subsequently, the bank issued a statement of calculation showing outstanding amounts for the remaining loans. Aggrieved by what they perceived as the failure to extend full benefits under the settlement scheme, the borrowers filed a writ petition claiming entitlement to enhanced benefits under the OTS, challenging the bank’s actions. The single judge dismissed the writ petition, and the borrowers then preferred a writ appeal before the division bench of the High Court. The bench noted that the appellants had approached the court at every stage of the recovery proceedings without fully availing themselves of the concessions already granted under prior settlement schemes. The court referenced Supreme Court precedent and its own earlier rulings to reiterate that a writ petition under Article 226 is inappropriate for claiming benefits under an OTS scheme, as such schemes are discretionary and do not create a legal right that can be enforced through writ jurisdiction.
The High Court further held that directing the bank to extend further concessions through writ proceedings would amount to rewriting the contractual terms of the settlement, which is impermissible within the scope of judicial review under writ jurisdiction. The bench observed that the appellants could not claim entitlement to another or enhanced settlement under the OTS after having failed to avail the concessions offered by the bank, and that the proper remedy was not through a writ petition. Consequently, the writ appeal was dismissed, reaffirming the principle that borrowers cannot seek to enforce benefits of One Time Settlement schemes through writ proceedings when such schemes represent discretionary arrangements offered by financial institutions. The case remains authoritative on the limitation of writ jurisdiction in the context of OTS benefits in financial disputes.
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