Introduction

This Supreme Court decision arises from a challenge by State Bank of India (SBI) to concurrent judgments of the Andhra Pradesh High Court (Single Judge and Division Bench) directing reconsideration of a borrower’s application under SBI’s One Time Settlement (OTS) Scheme 2020. The respondent-borrower had defaulted on credit facilities secured by seven immovable properties, triggering measures under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) and proceedings before the Debts Recovery Tribunal (DRT).

The pivotal legal issues were two-fold: first, whether the High Court was right in requiring reconsideration of the borrower’s OTS application on the footing that he was not disqualified under clause 2.1 of the OTS 2020 Scheme; and second, whether the bank’s rejection of the OTS application—though not citing a particular scheme condition in its rejection letter—could nevertheless be sustained on an alternative, fundamental ground clearly appearing from the record, namely the borrower’s failure to make the mandatory up‑front deposit of 5% as stipulated in clause 4(i) of the OTS 2020 Scheme.

Beyond the immediate OTS dispute, the judgment delivers an important clarification to administrative law: courts may uphold an administrative decision on an alternative ground discernible from the record and the impugned order’s factual narrative, despite its absence in the text of the order—provided parties are put on notice and given an opportunity to respond. This calibrated approach reconciles the celebrated Mohinder Singh Gill rule with the pragmatic demands of justice.

Summary of the Judgment

• The Supreme Court allowed SBI’s appeal, setting aside both the Single Judge’s and Division Bench’s directions to reconsider the OTS application.
• The Court held that under clause 4(i) of SBI’s OTS 2020 Scheme, an up‑front deposit of 5% of the OTS amount (15% for wilful defaulters) at the time of application is a mandatory precondition for processing the application. The respondent undisputedly made no such deposit.
• Although SBI’s rejection letter did not rely on clause 4(i), the Supreme Court upheld the rejection on that alternative ground because it is fundamental, clearly emerges from the scheme and the record, and the borrower was given notice and an opportunity to address it during the hearing.
• The Court clarified that not being disqualified under clause 2.1 (“cases not eligible”) does not automatically make a borrower entitled to OTS consideration; other scheme preconditions (including the up‑front deposit) must also be satisfied.
• On administrative law, the Court articulated that while courts generally test the validity of an administrative order on the reasons stated, it is permissible, in appropriate cases, to sustain the order on an alternative ground apparent from the order’s factual narrative and the record, provided fairness (notice and an opportunity to respond) is ensured.
• SBI was permitted to proceed with SARFAESI enforcement. The borrower was nevertheless granted liberty to submit a fresh, non‑scheme settlement proposal, which SBI may consider on its merits.
• The judgment will not affect the merits of pending DRT proceedings.

Factual Background

1. Loan and default: The respondent borrowed from SBI, securing credit by mortgaging seven properties. Default followed, and the account was classified as a non‑performing asset (NPA). SBI issued a Section 13(2) SARFAESI demand notice on 31 May 2017 for approximately Rs. 7 crore, with interest.
2. RDB proceedings: SBI filed OA No. 4013 of 2017 before DRT, Visakhapatnam on 22 December 2017, claiming roughly Rs. 8 crore with future interest at 13.65%.
3. Compromise sanction (2018) and failure: On 23 November 2018, SBI sanctioned a compromise at Rs. 5 crore (after Rs. 0.50 crore already paid), with a schedule. The borrower defaulted; SBI cancelled the sanction on 22 February 2019.
4. SARFAESI measures and DRT challenges: After further payments of Rs. 50 lakh (August 2019) and sale notices (October 2019; February 2020), the borrower filed Section 17 SARFAESI applications. Interim relief conditions were not complied with; one property was auctioned in March 2020 and sale “confirmed” in April 2020. DRT later set aside the sale (1 September 2021).
5. OTS 2020 Scheme: SBI launched the OTS 2020 Scheme on 12 October 2020 for dues exceeding Rs. 20 lakh and up to Rs. 50 crore. A clarificatory circular followed a week later.
6. Borrower’s OTS request: By letters dated 19 October 2020 and 10 November 2020, the borrower sought OTS, referred to Rs. 1.5 crore already paid since May 2018, and expressed willingness to deposit the up‑front amount “subject to” written consent of grant of OTS and precise working out of liability. No 5% up‑front deposit accompanied the application.
7. Rejection and writ proceedings: SBI rejected the OTS request on 17 November 2020, citing prior conduct, failure to comply with DRT conditions, auction proceedings, and suppression. The borrower filed a writ petition. The Single Judge directed SBI to process the application under OTS 2020; the Division Bench affirmed, holding clause 2.1 did not bar the case and treating non‑ineligibility as eligibility.
8. Supreme Court appeal: SBI obtained special leave. Despite a notice order that flagged a different question, the Supreme Court clarified it could expand the scope and ultimately focused on the mandatory up‑front deposit requirement.

Key Issues

• Whether the High Court erred in directing reconsideration of the borrower’s OTS 2020 application solely on the basis that he was not “ineligible” under clause 2.1, ignoring other mandatory scheme conditions.
• Whether, despite SBI’s rejection letter not invoking clause 4(i), the rejection could be sustained on the alternative ground—clearly evident from the record—that the borrower failed to make the mandatory 5% up‑front deposit.
• How to reconcile the Mohinder Singh Gill principle (validity tested on stated reasons) with the justice‑oriented approach of considering alternative grounds apparent from the record, without permitting after‑the‑fact rationalizations.

Analysis

1) Precedents Cited and Their Influence

• Bijnor Urban Coop. Bank Ltd. v. Meenal Agarwal, (2023) 2 SCC 805 and STATE BANK OF INDIA v. ARVINDRA ELECTRONICS PVT. LTD., (2023) 1 SCC 540:

  These decisions reiterate that no mandamus can compel a bank to positively grant OTS; eligibility must be strictly proved. The Supreme Court agreed with this governing principle but distinguished the present case: the High Court had only directed reconsideration, not grant. Nonetheless, the Court emphasized that OTS is not a right and scheme conditions are mandatory.

• Biswajit Das v. CBI, 2025 SCC OnLine SC 124:

  Cited to affirm that the Supreme Court can expand the scope of the lis beyond the contours of the notice issuing order in SLP, enabling it to address the decisive clause 4(i) issue.

• Commissioner of Police v. Gordhandas Bhanji, AIR 1952 SC 16; Mohinder Singh Gill v. Chief Election Commissioner, (1978) 1 SCC 405; Opto Circuits (India) Ltd. v. Axis Bank, (2021) 6 SCC 707:

  These authorities embody the “no supplementation of reasons” doctrine: the validity of an administrative order must be judged by the reasons stated in the order, not by new reasons later adduced.

• All India Railway Recruitment Board v. K. Shyam Kumar, (2010) 6 SCC 614; PRP Exports v. State of Tamil Nadu, (2014) 13 SCC 692; 63 Moons Technologies Ltd. v. Union of India, (2019) 18 SCC 401:

  The Court navigated these cases to clarify the interplay between public interest exceptions and the Gill rule. While rejecting any broad carve‑out that Gill “does not apply” whenever public interest is invoked, the Court fashioned a narrow pathway: courts may uphold on an alternative ground if it is traceable to the order’s factual narrative and the contemporaneous record, and if affected parties are given notice and an opportunity to respond. This preserves the discipline of Gill while preventing injustices born of technical omissions.

2) The Court’s Legal Reasoning

The Court’s reasoning proceeds in clear steps:

1. Nature and purpose of OTS 2020: OTS 2020 was launched to aid recovery. The scheme set out both disqualifications (clause 2.1) and procedural/money‑deposit preconditions (clause 4(i)).
2. Mandatory up‑front deposit: Clause 4(i) requires a borrower to deposit 5% of the OTS amount at the time of application (15% for wilful defaulters). Applications without the up‑front are “not to be processed.” The calculation methodology is in clause 3A(v). The respondent did not deposit any amount when applying.
3. Non‑ineligibility ≠ entitlement: The High Court erred in equating “not falling under clause 2.1” with eligibility. Surmounting the clause 2.1 bar does not dispense with other conditions (like clause 4(i)).
4. Alternative ground from the record: Although SBI’s rejection letter did not cite clause 4(i), the Supreme Court found it permissible to uphold the rejection on that ground because:
   • It is fundamental and outcome‑determinative.
   • It appears from the scheme and the record (including the borrower’s own letter dated 10 November 2020).
   • The Court put counsel on notice during the hearing and afforded an opportunity to address clause 4(i) (para 31–33).
   • This approach emphasizes fairness and justice over technicality, without undermining Gill.
5. Borrower’s conduct matters: The Court underscored the relevance of conduct in writ proceedings under Article 226. The borrower failed the compromise schedule, defaulted on DRT‑ordered deposits, and did not meet the up‑front requirement under OTS 2020.
6. Limited remedial leeway: While allowing SBI to proceed with enforcement, the Court granted the borrower liberty to make a fresh, non‑scheme settlement proposal—leaving room for a commercial resolution outside OTS 2020 if mutually acceptable.

3) Impact and Prospective Significance

• Administrative law—refined approach to “reasons” doctrine:

  The judgment crafts a careful refinement: courts may, in appropriate cases, sustain an administrative decision on an alternative ground that is:

  • apparent from the order’s factual narrative and/or contemporaneous record;
  • fundamental to the outcome; and
  • invoked after giving the affected party notice and a fair opportunity to respond.

  This avoids both rigid technicality and ex post facto rationalizations, keeping faith with the substance of Mohinder Singh Gill while preventing miscarriages of justice due to drafting lapses in administrative orders.

• OTS jurisprudence—strict compliance:

  Borrowers cannot invoke OTS benefits without scrupulous adherence to scheme terms. The up‑front deposit is a non‑negotiable precondition to consideration; absence of such deposit deprives the applicant of even a right to processing. Banks and tribunals should expect heightened scrutiny of compliance with procedural and monetary prerequisites.

• High Court writ control—limits on directions:

  Courts should avoid transforming the “not ineligible” finding into an entitlement to consideration when other scheme preconditions are unmet. Directions to reconsider must account for all relevant eligibility and processing clauses, not just disqualification provisions.

• Banking practice—internal diligence:

  The Court’s direction that SBI “ascertain and fix responsibility” for processing an incomplete OTS application is a significant compliance signal. Banks should ensure rejection letters capture all decisive grounds, and internal processes guard against processing non‑compliant applications.

• SARFAESI litigation strategy:

  Borrowers cannot leverage OTS applications as tactical shields in SARFAESI enforcement without meeting scheme prerequisites. Pending DRT challenges to auctions remain unaffected, but OTS will not be used to stall enforcement absent strict compliance.

Complex Concepts Simplified

• SARFAESI Act: A law allowing secured creditors (like banks) to enforce security interests in case of default without needing to go through a full civil suit—typically via measures like taking possession and auctioning secured assets.
• DRT (Debts Recovery Tribunal): A specialized tribunal that adjudicates disputes relating to bank recoveries and SARFAESI challenges.
• OTS (One Time Settlement): A bank’s policy/scheme permitting settlement of dues at a negotiated/structured amount and terms. It is a concessionary, contractual mechanism—not a statutory right—and is governed strictly by scheme terms.
• Up‑front deposit under OTS: A mandatory payment at the time of application (here, 5% of the OTS amount) showing bona fides and commitment; without it, the application “will not be processed.”
• Mandamus: A writ commanding a public authority to perform a public duty. Courts will not use mandamus to compel banks to grant OTS; they may at best require consideration according to the scheme.
• “Not eligible” vs. “eligible”: Not being on the ineligibility list (clause 2.1) does not make one eligible in the affirmative; applicants must also satisfy every other precondition (like up‑front deposit, timelines, documentation).
• “No supplementation of reasons” (Mohinder Singh Gill rule): Ordinarily, an administrative order must stand or fall on the reasons it contains. This judgment carves a narrow allowance: courts may rely on an alternative, record‑based, fundamental ground, after hearing the affected party.
• Scope of SLP notice: The Supreme Court may expand the issues beyond what is recorded in the notice issuing order, to do complete justice.

Observations on Party Conduct and Procedural Fairness

• Borrower conduct under Article 226: The Court noted the borrower’s history—failed compromise, non‑compliance with DRT’s conditional interim order, and omission of the up‑front deposit—as relevant to equitable relief in writ jurisdiction.
• Bank’s procedural lapse: While the bank’s rejection omitted clause 4(i), the Court highlighted this as a lapse warranting internal accountability. Still, given the borrower’s clear non‑compliance and the Court’s own notice to counsel on clause 4(i), the rejection was sustained.
• Equitable balance: The Court’s leave to make a fresh non‑scheme proposal shows a measured approach—enforcement continues, yet scope for consensual settlement remains open.

Practical Takeaways

• For borrowers: Do not file OTS applications without the mandatory up‑front deposit. Non‑deposit will likely foreclose even processing, let alone favorable consideration.
• For banks: Draft rejection orders to cover all decisive grounds. Institute controls to prevent processing non‑compliant applications; maintain clear records of scheme compliance.
• For courts: When considering writs against OTS rejections, examine the entire scheme architecture. Non‑ineligibility under a “disqualification” clause does not translate into affirmative eligibility or entitlement to reconsideration.
• For counsel: Be prepared that courts may, after due notice, sustain an order on an alternative, record‑based ground, even if the order did not articulate that ground.

Conclusion

This decision delivers two significant clarifications. First, in the OTS context, compliance with scheme formalities—especially the up‑front deposit mandated by clause 4(i)—is a strict precondition to processing an OTS application. The High Court erred in treating the absence of disqualification under clause 2.1 as sufficient to compel reconsideration, overlooking other binding preconditions.

Second, in administrative law, the Supreme Court charts a principled middle path between rigid adherence to the “reasons stated” rule and the practical need to avoid injustice due to technical omissions. Where an alternative ground is fundamental, clearly discernible from the order’s factual narrative and contemporaneous record, and parties are put on notice and heard, courts may uphold the decision on that ground without violating Mohinder Singh Gill. This fairness‑first approach strengthens the integrity of judicial review while preserving disciplined administrative decision‑making.

By allowing enforcement to proceed but leaving the door ajar for a fresh, non‑scheme settlement proposal, the Court balances creditor rights, borrower realities, and systemic efficiency. The ruling will likely influence future OTS litigation and administrative law challenges, reinforcing that procedural and monetary preconditions are not optional, and that justice does not always require remand where the record itself conclusively answers the controversy.