Borrowers Cannot Invoke Writ Jurisdiction to Compel Banks to Extend One-Time Settlement Benefits: Kerala HC [Read Judgment]

Kerala: The Kerala High Court has reiterated that borrowers cannot invoke writ jurisdiction under Article 226 of the Constitution to compel banks or financial institutions to extend the benefit of a One-Time Settlement (OTS) scheme, holding that such schemes are benefits offered to borrowers and not rights that can be claimed as a matter of course.

A Division Bench comprising Justice Anil K. Narendran and Justice Muralee Krishna S. dismissed the writ appeal filed by Raju Abraham and Molly Abraham, upholding the Single Judge’s decision refusing to direct a cooperative bank to grant further concessions under an OTS scheme.

The appellants had availed three loans from Vazhoor Farmers Service Co-operative Bank Ltd. and executed a mortgage deed creating an equitable mortgage over their property. Upon default in repayment, arbitration proceedings were initiated under Section 69 of the Kerala Co-operative Societies Act, 1969, and ex parte awards were passed against them.

The borrowers’ case was marked by successive rounds of litigation from 2021 onwards. In W.P.(C) No. 9468 of 2021, disposed of on August 10, 2023, the Court permitted them to pay the outstanding amount of over ₹75 lakhs in fifteen equal monthly instalments. However, instead of availing this facility, they filed Writ Appeal No. 1631 of 2023, resulting in a judgment permitting them to approach the bank with a proposal for a One-Time Settlement under the 2023 Scheme.

Although the bank communicated the concessions available under the 2023 Scheme on January 29, 2024, the appellants again filed W.P.(C) No. 20490 of 2024. By judgment dated June 21, 2024, the Court permitted them to apply for settlement under a new OTS Scheme introduced by Circular No. 18/2024. The bank reconsidered the matter and communicated the permissible benefits.

This communication was challenged in W.P.(C) No. 25939 of 2024, with the appellants contending that the claim ought to have been considered by the District Level Committee and not by the bank. By judgment dated August 6, 2024, the Court directed the application to be considered by the District Level Committee. Pursuant to the Committee’s decision, the appellants were permitted to clear their liabilities with certain concessions. However, they were able to clear only one loan availed by the first appellant.

Subsequently, the appellants filed W.P.(C) No. 11083 of 2025 challenging the calculation statement fixing their total liability at ₹53,13,802, contending that the calculation was made without hearing them and without considering the circular conditions and benefits. They further claimed that since the first appellant was suffering from liver cirrhosis, their case fell under a category permitting substantial reduction even in the principal amount.

The Single Judge dismissed the writ petition on November 27, 2025, observing:

“It is settled law that a borrower cannot insist on a particular amount of waiver as a one-time settlement, and there is no provision enabling the petitioners to insist that they should be extended a particular benefit under a scheme for one-time settlement. The provision for one-time settlement is a benefit offered to borrowers to settle their liability, and if the petitioners fail to utilise such an opportunity, they cannot be heard to contend that some further concession must be extended to them.”

The Single Judge further noted that the appellants had engaged in repeated rounds of litigation since 2021, thereby delaying recovery proceedings initiated by the bank. Although their liability had been determined through arbitration proceedings as early as 2017, and substantial concessions had been extended under Circular No. 18/2024, they had still failed to settle the dues.

Before the Division Bench, the appellants argued that their liability should be permitted to be paid in instalments and contended that the bank had raised fresh demands with a difference of nearly ₹20 lakhs after dismissal of the writ petition. They asserted that their case was not one seeking OTS benefits but substantial relief by way of easy payment terms. They also claimed that a payment of ₹11 lakhs made in 2011 remained unadjusted in a suspense account.

The bank, however, contended that the appellants had filed successive writ petitions solely to circumvent recovery proceedings and that the impugned calculation statement was issued under a subsequent OTS Scheme, not pursuant to the District Committee’s decision.

The Division Bench relied on the Supreme Court’s decision in Bijnor Urban Cooperative Bank Limited v. Meenal Agarwal [(2023) 2 SCC 805], which held that the benefit of an OTS Scheme cannot be claimed as a matter of right and is subject to fulfilment of eligibility criteria.

The Court also relied on its earlier Division Bench judgment in Idukki District Police Co-operative Society Ltd. v. Rasheed A.K. [2025 (4) KHC 44], holding that writ courts cannot interfere in contractual relationships between banks and borrowers by directing extension of OTS benefits.

Observing that the appellants had approached the Court at every stage of recovery proceedings, the Division Bench held that borrowers cannot seek a writ of mandamus to compel banks to extend benefits under successive OTS Schemes.

Finding no infirmity in the Single Judge’s judgment, the Court dismissed the writ appeal.

Case Title: Raju Abraham and Another v. State of Kerala and Others

[Read Judgment]