No Automatic Right to OTS: Supreme Court Rules Upfront Payment Mandatory

Case name: Assistant General Manager, State Bank of India & Anr. v. Tanya Energy Enterprises through its Managing Partner Shri Alluri Lakshmi Narasimha Varma

Date of Order: 15 September 2025

Citation: Civil Appeal No.11134 of 2025 ( arising out of SLP (Civil) No. 2456 of 2025)

Bench: Justice Dipankar Datta and Justice Augustine (DB)

Held: The Supreme Court held that availing a Bank’s One Time Settlement (OTS) scheme is not a borrower’s right, particularly when mandatory preconditions like the upfront payment of 5% of outstanding dues are not complied with. Merely crossing the hurdle of eligibility does not entitle a borrower to claim consideration under OTS unless all stipulated conditions are satisfied.

Summary: The respondent-borrower defaulted on loans secured against seven mortgaged properties. Following classification as a Non-Performing Asset (NPA), SBI initiated recovery proceedings under the SARFAESI Act. Parallelly, the borrower applied under SBI’s OTS 2020 Scheme but failed to deposit the mandatory 5% upfront payment. Despite this, the Andhra Pradesh High Court directed SBI to reconsider the borrower’s application. The Supreme Court set aside the High Court’s directions, emphasizing that an incomplete application without upfront payment was not even required to be processed. The Court noted that the benefit of OTS cannot be claimed as an absolute right, citing Bijnor Urban Coop. Bank Ltd. v. Meenal Agarwal. However, the Court allowed the borrower liberty to submit a fresh OTS proposal outside the 2020 Scheme, which SBI may consider on its merits.

Decision: The appeal was allowed. The High Court’s judgments (Single Judge and Division Bench) were set aside. SBI is free to proceed with enforcement of its security interest but may also consider a fresh proposal for OTS outside the OTS 2020 Scheme if workable and reasonable .