Borrower’s Inability to Enforce Non‑Statutory One‑Time Settlements and Threshold Rejection of Suits: Commentary on Senbo Engineering Ltd v. Bank of Maharashtra

Borrower’s Inability to Enforce Non‑Statutory One‑Time Settlements and Threshold Rejection of Suits: Commentary on Senbo Engineering Ltd v. Bank of Maharashtra

1. Introduction

The decision of the Calcutta High Court in Senbo Engineering Limited v. Bank of Maharashtra (CS-COM/63/2025, judgment dated 3 December 2025, Aniruddha Roy J.) lays down two important and closely connected propositions:

  1. A defaulting borrower has no enforceable right in law to compel a bank to accept or act upon a non-statutory One-Time Settlement (OTS) proposal, even by framing the claim as a suit for declaration and specific performance.
  2. Where the very right asserted in the plaint is barred by law, the civil court can and must reject the plaint under Order VII Rule 11 CPC, even in the absence of a specific jurisdictional bar like Section 34 SARFAESI or Section 63 IBC, and even if the defendant has not raised that particular point.

In substance, the Court extends the Supreme Court’s public law reasoning in Bijnor Urban Co-operative Bank Ltd v. Meenal Agarwal and allied cases—on the non-enforceability of OTS claims—to the private law domain of civil suits for specific performance. It also clarifies the limited reach of Bank of Rajasthan Ltd v. VCK Shares & Stock Broking Services Ltd on the borrower’s choice of forum, emphasising that the existence of a forum does not validate an otherwise non-existent substantive right.

2. Factual Background and Procedural History

2.1 Borrower–bank relationship and default

Senbo Engineering Limited (the plaintiff) had availed various financial facilities from Bank of Maharashtra (the defendant). Owing to default, its loan account was classified as a Non-Performing Asset (NPA).

The bank then took the usual multi-pronged recovery route:

  • SARFAESI Act, 2002:
    • Notice under Section 13(2) issued on 13 October 2017.
    • Measures under Section 13(4) initiated by notice dated 14 December 2018.
    The plaintiff did not challenge these SARFAESI measures.
  • DRT (RDDBFI / DRT Act, 1993):
    • Application under Section 19 filed on 5 March 2019 before the Debt Recovery Tribunal (DRT), registered as OA No. 183 of 2019, which remains pending.
  • IBC, 2016:
    • First insolvency application under Section 7 IBC filed in 2020.
    • At that juncture, the plaintiff submitted a first OTS proposal; the Section 7 proceeding was withdrawn while the OTS proposal was under consideration.
    • The first OTS did not fructify; the bank did not agree to it.
    • In March 2024, a second Section 7 IBC proceeding was initiated and is pending before the NCLT.

2.2 The second OTS proposal and negotiations

The claim in the suit centres around the plaintiff’s second OTS proposal:

  • The second OTS was submitted on 27 December 2024.
  • The bank, by letter dated 21 January 2025, rejected the proposal.
  • Despite that, negotiations allegedly continued:
    • The plaintiff enhanced its OTS offer at the bank’s request.
    • The plaintiff made substantial part-payments which the bank accepted.
    • Correspondence includes the plaintiff’s letter dated 5 February 2025 and the bank’s further rejection letter dated 13 February 2025.

The plaintiff’s narrative is that, through negotiations and acceptance of payments, the parties arrived at a “concluded contract” of OTS which the bank later repudiated.

2.3 The suit: Reliefs claimed

On this foundation, the plaintiff filed a commercial suit seeking, in substance, enforcement of the alleged OTS. Key reliefs include:

  • Declaration that acceptance of consideration by the bank against the enhanced OTS offer has resulted in a concluded contract.
  • Specific performance of that contract by directing the bank to accept a further sum of ₹54 crores on or before 31 December 2025 in full and final discharge of all its liabilities.
  • Permanent injunction restraining the bank from taking coercive steps that would frustrate the alleged concluded OTS.
  • Cancellation (delivery up and cancellation) of specified letters:
    • Plaintiff’s letters dated 5 February 2025 and 18 February 2025.
    • Bank’s letters dated 21 January 2025, 13 February 2025, and 19 February 2025.
  • Ancillary reliefs (receiver, injunction, judgment on admission, attachment before judgment, costs, etc.).

Crucially, the plaintiff did not seek to set aside or restrain:

  • The SARFAESI measures already taken,
  • The DRT proceedings under Section 19 of the DRT Act, or
  • The ongoing IBC Section 7 proceeding before the NCLT.

2.4 The bank’s application to reject the plaint

The bank filed IA No. GA-COM/2/2025 seeking rejection of the plaint and dismissal of the suit, with alternative prayer for summary dismissal and stay of all proceedings. Its main contentions:

  1. No enforceable right to OTS: An OTS, especially one not traceable to any RBI or statutory scheme, is a matter of commercial policy. A defaulting borrower cannot claim such settlement as a matter of right or seek its enforcement by specific performance.
  2. OTS proposals rejected: The bank had consciously rejected the OTS proposals by letters dated 21 January 2025 and 13 February 2025; therefore, there could be no “concluded contract”.
  3. Statutory bars: The reliefs, particularly injunctions and cancellation of letters, would effectively trench upon:
    • SARFAESI proceedings (bar under Section 34 of the SARFAESI Act);
    • IBC proceedings (bar under Section 63 IBC); and
    • DRT proceedings (exclusive jurisdiction under Sections 17 and 19 of the DRT Act).
  4. Precedents relied on:
    • Bijnor Urban Cooperative Bank Ltd v. Meenal Agarwal, (2023) 2 SCC 805.
    • State Bank of India v. Arvindra Electronics Pvt Ltd, (2023) 1 SCC 540.
    • Authorised Officer, SBI v. Allwyn Alloys Pvt Ltd, (2018) 8 SCC 120.

2.5 Plaintiff’s opposition

The plaintiff, through senior counsel, principally relied on the Supreme Court judgment in Bank of Rajasthan Ltd v. VCK Shares and Stock Broking Services Ltd, (2023) 1 SCC 1, arguing:

  • Following that judgment, a borrower is free either:
    • to raise counterclaims before the DRT in bank-initiated proceedings under Section 19 of the DRT Act, or
    • to file an independent civil suit before a civil court.
  • The DRT has no jurisdiction to grant declarations or decrees for specific performance of contracts (including OTS); hence, a civil suit is the only appropriate forum.
  • According to the plaint, a concluded contract of OTS had emerged, evidenced by the bank’s acceptance of substantial sums and its negotiations, and the bank had subsequently resiled. Such a concluded contract is, in principle, specifically enforceable.
  • The suit does not seek to challenge any SARFAESI, IBC, or DRT action; hence Sections 34 SARFAESI, 63 IBC, or the DRT framework do not bar the suit.
  • On the IBC front, by relying on ES Krishnamurthy v. Bharath Hi-Tecch Builders Pvt Ltd, (2022) 3 SCC 161, it was urged that IBC is not a debt recovery mechanism, and the NCLT’s jurisdiction is limited to determining “default”. Hence, a civil suit on contractual issues is not barred.

The plaintiff’s overarching plea was that—even if it may ultimately fail—the plaint disclosed a triable case and therefore could not be thrown out at the threshold under Order VII Rule 11 CPC.

3. Issues Before the Court

From the judgment, the core questions can be distilled as:
  1. Order VII Rule 11 CPC: Does the plaint, read with its annexures, disclose a cause of action that is barred by law so as to warrant rejection at the threshold under Order VII Rule 11(d) CPC?
  2. Enforceability of OTS: Can a defaulting borrower, by framing a civil suit for declaration and specific performance, enforce an alleged OTS “concluded contract” which the bank has consciously rejected, when the OTS is not part of any RBI/statutory scheme?
  3. Effect of special statutes: Even where SARFAESI, IBC, and DRT proceedings are pending, does this suit fall foul of:
    • Section 34 of the SARFAESI Act (bar on civil courts),
    • Section 63 IBC (bar on civil courts in insolvency matters), or
    • The exclusive jurisdiction of the DRT under the DRT Act?
  4. Scope of Bank of Rajasthan decision: Does the Supreme Court’s recognition of the borrower’s right to maintain an independent civil suit (as opposed to only counter-claims in DRT) validate the present suit’s maintainability, regardless of the substantive nature of the right claimed?

4. Summary of the Judgment

Justice Aniruddha Roy allowed the bank’s application and ordered that the plaint in CS-COM/63/2025 be rejected and taken off the file under Order VII Rule 11 CPC.

The key holdings are:

  1. Order VII Rule 11 – Court’s duty: When considering rejection of plaint, the court must read the plaint as it is, taking its statements as true and “sacrosanct”, and see whether, on a meaningful and plain reading, the suit is barred by law. The court can exercise this power even if the defendant has not raised the specific legal objection, and even in an undefended suit.
  2. No enforceable right to OTS: On the admitted facts:
    • The plaintiff is a defaulting borrower.
    • Its OTS proposals were twice rejected, lastly by letter dated 13 February 2025.
    • These OTS proposals were not under any RBI or statutory scheme but were private negotiations.
    An OTS in such circumstances is merely a policy decision of the bank in its commercial wisdom. Citing and following the Supreme Court’s judgment in Bijnor Urban Co-operative Bank Ltd, the Court held that no defaulting borrower can claim an OTS as a matter of right, and no bank can be compelled to accept a lesser sum by way of OTS when it can recover more by regular recovery mechanisms.
  3. Suit for specific performance of OTS barred by law: Since no legal right exists in favour of the plaintiff to enforce the OTS, a suit for specific performance of such alleged OTS is not maintainable in law. Specific performance is an equitable remedy; equity cannot be invoked to compel a bank to forego its legitimate recovery in favour of a lesser “settlement” amount.
  4. Distinguishing Bank of Rajasthan: In Bank of Rajasthan, the plaintiff had a distinct, legally cognisable cause of action (inter alia challenging sale of pledged shares and seeking declarations that no sum was due). The Supreme Court there held that such borrower suits were maintainable before civil courts and need not be subsumed as DRT counterclaims. However, that case did not deal with enforcement of an OTS, and its ratio cannot be used to convert a non-existent OTS right into a triable civil claim.
  5. No effective statutory bar, but substantive bar still applies: The Court accepted that, strictly speaking, the present plaint as framed does not directly challenge SARFAESI measures, IBC proceedings, or DRT proceedings, and therefore does not immediately fall foul of Sections 34 SARFAESI, 63 IBC, or the DRT Act. Nonetheless, even without a jurisdictional bar, the suit is “otherwise barred by law” because the core right claimed—enforcement of a rejected, non-statutory OTS—is not recognised by law.

Accordingly, the plaint was rejected and the suit ordered to be taken off the file. The application was disposed of without any order as to costs.

5. Detailed Legal Analysis

5.1 Order VII Rule 11 CPC: Extent of the Court’s power and duty

In paragraphs 20–21, the Court reiterates the orthodox but sometimes under-applied principles governing Order VII Rule 11 CPC:

  • The court must consider only the plaint and the reliefs claimed, reading them meaningfully and as a whole.
  • The averments in the plaint are to be taken as true for the purpose of this enquiry.
  • If it is evident, without any detailed fact-finding inquiry, that the suit is barred by law or raises no triable issue, the court is empowered to reject the plaint at any stage.

Crucially, Justice Roy goes a step further in clarifying the proactive nature of this jurisdiction:

  • Even if a particular point of law is not raised in the defendant’s application, the civil court’s power and jurisdiction to reject a plaint is “plenary” if, on a plain reading, the suit appears barred by law.
  • Even in an undefended suit, the court can summarily reject the plaint if it finds a legal bar.

This underscores that Order VII Rule 11 is not merely a defensive tool for defendants; it reflects a judicial duty to weed out suits that seek to assert rights that the law does not recognise, thereby protecting judicial resources and discouraging litigative strategies that are facially untenable.

5.2 The nature and enforceability of One-Time Settlement (OTS) arrangements

5.2.1 The Court’s characterisation of OTS in this case

The heart of the judgment lies in paragraphs 22–25, where the Court assesses whether the plaintiff can in law enforce the alleged OTS contract.

The essential features are:

  • The plaintiff is an admitted defaulter.
  • It seeks to settle its defaulted account at a lesser sum than the total dues via OTS.
  • Both OTS proposals (first and second) were rejected—the second, lastly on 13 February 2025.
  • The OTS proposals were not part of any RBI scheme or statutory scheme; they were the outcome of private negotiations.

From this, the Court concludes:

  • An OTS in such circumstances is a policy decision of the bank taken in its commercial wisdom, lacking any statutory “flavour”.
  • Without a statutory basis, no right is created in favour of the borrower to demand or enforce an OTS.
  • Thus, the borrower cannot claim enforcement of such OTS “by way of specific performance or otherwise”.

5.2.2 Reliance on Bijnor Urban Co-operative Bank Ltd v. Meenal Agarwal

The Court quotes extensively from paragraphs 11–16 of the Supreme Court’s decision in Bijnor Urban Co-operative Bank Ltd v. Meenal Agarwal, (2023) 2 SCC 805. The Supreme Court there held, inter alia:

  • The grant of benefit under an OTS scheme is a matter of commercial judgment of the bank.
  • No borrower can, as a matter of right, pray for grant of benefit of OTS (para 12).
  • Allowing borrowers to demand OTS as a right would incentivise strategic defaults by borrowers who can pay but prefer to wait for settlement at reduced amounts (paras 12–13).
  • A writ of mandamus cannot be issued compelling the bank to grant OTS; decisions under OTS schemes must be left to the bank’s commercial wisdom (paras 14–15).

In Bijnor, the Supreme Court was dealing with the writ jurisdiction of High Courts (Article 226), rejecting judicial interference that directs banks to grant OTS benefits. Justice Roy, however, reads this principle more broadly: the absence of a public law right to OTS (no mandamus) reflects the underlying reality that no legal right exists in the first place for a defaulting borrower to compel OTS when the bank has consciously refused.

The Calcutta High Court’s key move is to transpose this reasoning into the realm of civil suits for specific performance. If there is no enforceable right to compel OTS even in writ proceedings, then a borrower cannot circumvent this by repackaging the demand as a “concluded contract” and seeking specific performance in a civil suit, especially where:

  • the bank has explicitly rejected the OTS proposals; and
  • the OTS is non-statutory and purely a commercial arrangement.

5.2.3 Equitable nature of specific performance in the banking context

Justice Roy briefly but significantly notes that specific performance is an equitable remedy. The Supreme Court in Bijnor warned against giving a “premium to a dishonest borrower” by allowing them to force banks into OTS when they are capable of paying in full and when the bank can recover fully via sale of secured assets.

Transferred to this case:

  • The plaintiff wants the court to compel the bank to accept ₹54 crores in full and final settlement, even though the bank has decided, in its commercial wisdom, that it can or should seek to recover more.
  • Granting such specific performance would conflict with the Supreme Court’s caution that courts should not interfere in a manner that rewards strategic default or undermines credit discipline.

Thus, even aside from contract law, the equitable discretion

5.3 Interaction with SARFAESI, IBC and DRT statutes

5.3.1 Bank’s reliance on statutory bars

The bank invoked:

  • Section 34 of the SARFAESI Act, which bars civil court jurisdiction over matters where the DRT can grant relief, relying on Authorised Officer, SBI v. Allwyn Alloys Pvt Ltd, (2018) 8 SCC 120.
  • Section 63 of the IBC, which bars civil court jurisdiction in respect of matters where NCLT/NCLAT have jurisdiction.
  • The exclusive jurisdiction of the DRT under Sections 17 and 19 of the DRT Act (often read with the Recovery of Debts and Bankruptcy Act nomenclature), arguing that the suit would affect the DRT proceedings.

5.3.2 Court’s nuanced finding: no direct jurisdictional bar, but suit still barred

In paragraph 23, the Court makes a careful distinction:

  • On a plain reading, the reliefs as framed do not directly challenge the measures taken under SARFAESI, nor the IBC or DRT proceedings.
  • Therefore, in form, the suit may not be hit by Sections 34 SARFAESI, 63 IBC, or the DRT provisions.

However, the Court immediately shifts to the substantive question: even assuming jurisdiction exists, does the plaint disclose a legally cognisable right? The answer, for reasons discussed earlier, is in the negative. Hence:

  • Even without a jurisdictional ouster, the suit is “otherwise barred by law” within the meaning of Order VII Rule 11(d) CPC.

This is an important and clarifying aspect of the judgment: civil court jurisdiction might exist in principle, but the substantive right asserted can still be non-existent or barred. Order VII Rule 11 is triggered just as effectively in such circumstances.

5.4 The role and limits of Bank of Rajasthan Ltd v. VCK Shares & Stocks

The plaintiff’s principal legal weapon was the Supreme Court’s decision in Bank of Rajasthan Ltd v. VCK Shares and Stock Broking Services Ltd, (2023) 1 SCC 1. There, the borrower had filed a civil suit seeking, among other reliefs:

  • A declaration that sale of certain pledged shares was void.
  • Return of pledged shares, or in default, payment of a large sum.
  • A declaration that no sum was payable by the borrower to the bank and that the bank was not entitled to the amount claimed in DRT.

The Supreme Court in Bank of Rajasthan held that:

  • There is no automatic or compulsory transfer of borrower’s civil suits to DRT merely because the bank has filed a DRT application under Section 19.
  • The borrower is free to choose between:
    • raising a counterclaim before the DRT, or
    • maintaining an independent civil suit before a jurisdictional civil court.

Justice Roy accepts this proposition but distinguishes the present case on a crucial ground (para 27):

  • In Bank of Rajasthan, the plaintiff’s reliefs were based on a clear and recognised right to sue (alleged wrongful sale of securities, disputing the debt), and the plaint was not otherwise barred by law.
  • Here, by contrast, the entire suit revolves around enforcing a non-existent right to compel OTS, which is itself barred by the Supreme Court’s OTS jurisprudence.

In other words, Bank of Rajasthan settles the forum question (civil court vs DRT) but not the substantive validity of every possible borrower claim. One cannot invoke that decision to salvage a cause of action which, on its merits, is legally unsustainable.

5.5 Equating public law and private law limits on OTS enforcement

A notable jurisprudential move in this judgment is the use of Bijnor (and, by reference, Arvindra Electronics)—cases decided in the context of Article 226 writ proceedings—to justify rejection of a private law suit for specific performance.

The underlying logic is:

  • The Supreme Court has authoritatively held that OTS is not a matter of right and that banks cannot be compelled by writ of mandamus to grant OTS.
  • This reflects the substantive legal position: OTS is a concessionary commercial policy decision without statutory compulsion.
  • If the law recognises no such right, then:
    • it cannot be enforced through public law remedies, and
    • neither can it be enforced through private law remedies such as specific performance, unless a bank has clearly and unambiguously contracted to grant OTS and then breaches that contract.

On the facts of this case, however:

  • There is no bank-issued OTS sanction letter or formal acceptance.
  • There are explicit rejection letters from the bank.
  • The bank’s acceptance of partial payments is construed as acceptance of amounts against the outstanding debt, not as conclusive evidence that an OTS contract was finalised.

Thus, the Court does not truly accept the plaintiff’s allegation of a “concluded contract” at face value in the contractual sense; instead, reading the plaint together with the annexed correspondence (which is permissible at the Order VII Rule 11 stage), it finds that the facts pleaded lead inevitably to the conclusion that the OTS proposal was never accepted and that, in any event, the borrower cannot claim to force acceptance of OTS in law.

6. Complex Concepts Simplified

6.1 Order VII Rule 11 CPC – “Rejection of plaint”

Order VII Rule 11 of the Code of Civil Procedure allows the court to reject a plaint at the outset if, among other reasons:

  • it does not disclose a cause of action; or
  • the suit appears from the statement in the plaint to be barred by any law.

“Barred by law” can mean:

  • A jurisdictional bar (e.g. a statute says civil courts cannot entertain such matters); or
  • A substantive bar (e.g. the legal right asserted does not exist under the substantive law, or is contrary to binding precedent).

At this stage, the court does not take evidence; it only reads:

  • the plaint and
  • documents annexed or relied upon by the plaintiff.

6.2 One-Time Settlement (OTS)

An OTS is an arrangement where a borrower and a lender agree that the borrower will pay a lump sum (often lower than the total dues) in full and final settlement of all outstanding liabilities, usually with a defined timeline. Key points:

  • OTS may be offered under RBI or government schemes, or purely as a bank’s internal policy.
  • OTS is generally a concessionary mechanism, not an inherent right of every borrower.
  • Courts have repeatedly held that no borrower can demand OTS as a matter of legal right.

6.3 NPA, SARFAESI, and DRT

  • NPA (Non-Performing Asset): A loan account where interest or principal remains overdue for a specified period and is treated as non-performing in banking regulations.
  • SARFAESI Act, 2002: Empowers banks to enforce security interests (e.g., mortgages) without court intervention, via notices under Section 13(2), and then by taking possession, auctioning, etc., under Section 13(4).
  • DRT (Debt Recovery Tribunal): A specialised tribunal under the DRT Act that adjudicates and recovers debts due to banks and financial institutions, typically when amounts exceed specified thresholds.

6.4 IBC, Section 7 and Section 63

  • IBC, 2016: The Insolvency and Bankruptcy Code provides a framework for insolvency resolution of corporate debtors.
  • Section 7: Allows financial creditors (like banks) to initiate corporate insolvency resolution proceedings upon a “default”.
  • Section 63: Bars civil court jurisdiction over matters where the NCLT or NCLAT has jurisdiction under the IBC.

As the Supreme Court noted in ES Krishnamurthy, IBC is not a debt recovery mechanism; it is a resolution framework where the main question is whether there has been a default.

6.5 Jurisdictional bar vs substantive bar

  • Jurisdictional bar: A statute explicitly says civil courts cannot entertain certain matters (e.g. Section 34 SARFAESI, Section 63 IBC). Even if a right exists, the civil court cannot adjudicate it.
  • Substantive bar: The right claimed does not exist in law (e.g. “right to be granted OTS”), or seeking such relief would contradict binding precedent. The court has jurisdiction in theory, but the claim fails at the threshold because the law does not support it.

In Senbo Engineering, the Court finds that—even if jurisdictional bars do not strictly apply—the suit is barred by law at a substantive level.

7. Impact and Implications

7.1 For borrowers

  • Borrowers, especially defaulters, cannot assume that:
    • negotiating OTS;
    • enhancing offers; or
    • sending part-payments that the bank accepts
    will automatically create a legally enforceable OTS contract.
  • Where banks have clearly rejected an OTS proposal and there is no formal sanction or approval letter, attempts to file civil suits seeking:
    • declaration of a “concluded OTS contract”, and
    • specific performance to compel the bank to accept a lesser settlement amount
    are now highly vulnerable to summary rejection under Order VII Rule 11.
  • Borrowers must appreciate that OTS is a negotiated privilege, not a right, and legal action cannot force a bank to grant OTS where the bank, in its commercial judgment, declines to do so.

7.2 For banks and financial institutions

  • The judgment strongly reinforces banks’ ability to:
    • decline OTS proposals in their commercial wisdom; and
    • resist civil suits that effectively seek to override that decision.
  • Banks can now more confidently invoke Order VII Rule 11 CPC in similar suits, relying on:
    • Bijnor Urban Co-operative Bank and allied Supreme Court precedents; and
    • This judgment’s reasoning that enforcement suits for non-statutory, rejected OTS proposals are barred by law.
  • This strengthens the broader regime of credit discipline and discourages the tactic of filing civil suits to stall or undercut parallel recovery proceedings under SARFAESI, DRT, and IBC.

7.3 For litigation strategy and forum selection

  • Bank of Rajasthan continues to assure borrowers that:
    • they can file independent civil suits; and
    • they are not confined to DRT counterclaims.
    But only if they have a valid, legally cognisable cause of action.
  • Senbo Engineering adds a cautionary layer: court access does not equate to validation of every type of relief sought. Clever drafting cannot create a right where law recognises none.
  • Borrowers seeking to challenge:
    • the quantification of debt,
    • the validity of security enforcement, or
    • allegedly wrongful sale of secured assets,
    may still have arguable claims (as in Bank of Rajasthan). But attempts to judicially enforce refused OTS benefits are unlikely to succeed.

7.4 Doctrinal development: Bridging public and private law

Doctrinally, the judgment is significant for:

  • Extending OTS jurisprudence: It takes the Supreme Court’s OTS principles (developed primarily in writ petitions) and applies them squarely to private law suits for specific performance, aligning both domains around the central idea that OTS is not a borrower’s right.
  • Clarifying Order VII Rule 11(d): It underscores that “barred by any law” includes:
    • not only explicit jurisdictional ousters; but also
    • substantive bars where the cause of action is contrary to the law declared by higher courts.
  • Limiting misuse of Bank of Rajasthan: It prevents the expansion of Bank of Rajasthan into a blanket justification for every borrower-initiated suit, reasserting that forum choice cannot compensate for absence of a valid substantive right.

8. Critical Reflections

While the judgment robustly protects banking autonomy and aligns with Supreme Court authorities, a few nuanced points merit attention:

  • Concluded OTS vs. rejected OTS:
    • The present case involved clear rejection letters. The Court therefore rightly held that no concluded OTS emerged from negotiations and part-payments.
    • The judgment should not be over-read as denying the possibility that a formally sanctioned, accepted OTS (e.g., via a clear approval letter followed by compliance) could, in appropriate cases, constitute a concluded contract enforceable under general contract principles.
  • Promissory estoppel and altered position:
    • The plaintiff alleged that, relying on the bank’s representations, it altered its position and made substantial payments.
    • The Court, focusing on the absence of a right to OTS and on express rejections, did not engage in depth with doctrines such as promissory estoppel or legitimate expectation in the contractual context.
    • Future cases with richer evidentiary patterns—e.g., where the bank’s conduct clearly and consistently induces borrower reliance towards an OTS—may test the boundaries of this reasoning.
  • Balancing equity and commercial prudence:
    • The judgment emphasises the need to avoid giving a premium to dishonest borrowers, in line with Bijnor.
    • However, there may be hard cases where insisting on full recovery might be commercially unrealistic, and OTS is the only viable path to resolution. Those situations will continue to be shaped by negotiation, not compulsion.

9. Conclusion

The Calcutta High Court’s ruling in Senbo Engineering Ltd v. Bank of Maharashtra is a significant reaffirmation—and extension—of the principle that One-Time Settlement is not a right but a concession rooted in a bank’s commercial judgment. It confirms that:

  • A defaulting borrower cannot, by labelling negotiations and part-payments as a “concluded contract”, force the bank to accept a reduced settlement via a suit for specific performance, especially when the bank has repeatedly and consciously rejected the OTS proposal.
  • Order VII Rule 11 CPC empowers—and obliges—courts to reject at the threshold suits that seek to enforce rights which do not exist in law, even if there is no express jurisdictional bar like Section 34 SARFAESI or Section 63 IBC.
  • Bank of Rajasthan secures the borrower’s choice of forum but does not validate every type of claim; substantive legal limits, particularly around OTS, remain firmly in place.

In the broader legal context, this judgment strengthens the doctrinal bridge between the Supreme Court’s public law stance on OTS and the private law of contracts and specific performance. It will likely serve as a persuasive precedent against attempts to judicially enforce non-statutory OTS arrangements and as a clear reminder that, in matters of settlement and recovery, commercial wisdom of banks cannot be converted into justiciable obligation at the instance of defaulting borrowers.

Case Details

Year: 2025
Court: Calcutta High Court

Judge(s)

The Hon'ble Justice Krishna Rao

Advocates

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