The Supreme Court has drawn a sharp line for loan defaulters eyeing relief under banks’ One Time Settlement (OTS) schemes: eligibility alone won’t carry you through the door. Unless every condition—especially the upfront payment requirement—is honored, borrowers cannot demand that their proposals be considered.
The case unfolded when Tanya Energy, weighed down by loans secured against seven mortgaged properties, tried to avail SBI’s 2020 OTS scheme. Their application, however, skipped a crucial step: depositing 5% of the outstanding dues upfront. Instead, they leaned on the Andhra Pradesh High Court’s support, which twice directed SBI to give their request a second look despite defaults and disputes pending before the Debt Recovery Tribunal.
SBI pushed back, and the matter reached the Supreme Court. A bench of Justices Dipankar Datta and A.G. Masih sided with the bank, making it clear that the scheme’s terms aren’t mere suggestions but binding prerequisites.
“It could not be clearer—the OTS application had to be accompanied by a 5% upfront payment. The respondent deposited nothing. Without that, the application wasn’t just weak, it was incomplete,” the Court said, noting that no borrower has a vested right to demand OTS benefits.
The judgment leaned on earlier precedent, including Bijnor Urban Coop. Bank Ltd. v. Meenal Agarwal, which underscored that OTS benefits are not an entitlement.
While SBI’s appeal succeeded, the Court left a small window open: Tanya Energy can still propose a fresh settlement outside the 2020 OTS scheme. Whether such an offer sees daylight, however, depends entirely on SBI’s assessment of its feasibility.
In the end, the ruling sends a blunt reminder—OTS is not a lifeline handed over by default. It’s a structured offer, and skipping the steps disqualifies the applicant before the process even begins.
