Every OTS Scheme Is Time-Bound; Borrower Has No Vested Right To Seek Extension: Allahabad High Court

A Bench of Justice Shekhar B Saraf and Justice Praveen Kumar Giri observed that in the instant case, the petitioners had failed to comply with the repayment timeline under the SOTS Scheme 2022-23, which clearly mandated that the maximum repayment period for OTS was 180 days.

Briefly, the petitioners defaulted on loan accounts obtained from the Punjab National Bank in 2017. When the accounts were declared non-performing assets, the petitioners applied for OTS. On 10 May 2023, PNB sanctioned the same under the SOTS Scheme 2022-23.

However, the petitioners failed to make payments as required, and thus, the OTS was cancelled on 25 April 2024. This was done after the Bank wrote to the petitioners on several occasions to complete payment of OTS amount.

Subsequent to the cancellation orders of May 2024, the Bank proceeded to auction mortgaged properties in December 2024. One such property was sold on 27 January 2025, with a sale certificate issued on 2 February 2025.

Before the Court, the petitioners argued that the OTS remained alive and that the Bank was bound to extend the repayment period. It was also argued that no time frame was fixed for making the repayment of the same, as no time frame had been provided in the letter granting OTS.

Rejecting these submissions, the Bench noted that the letter dated May 10, 2023, granting OTS to the petitioners specifically refers to the SOTS Scheme 2022-23, and the said Scheme clearly provided that the maximum repayment period would be 180 days.

The Court categorically stated:

"Any OTS is time bound and the petitioners cannot raise the argument that no time frame was fixed for making the repayment of the same just because time frame has not been provided in the letter granting OTS".

On the case law cited by the petitioners, the Court noted that all such cases were distinguishable on the facts.

Furthermore, the bench observed that the petitioners have not been able to provide any plausible reason for the payment not being made within 180 days as prescribed under Clauses 7.3 to 7.5 of the SOTS Scheme 2022- 23.

Owing to the same, the court added, the Bank can't be faulted for proceeding to cancel the OTS provided to the petitioners and selling the securities in accordance with law to third parties

Consequently, finding that third-party rights had already been created through the sale of mortgaged property and the sale certificate issued, the Court concluded that there was no reason to interfere with the action taken by the Bank, which had proceeded in a bona fide manner.

Accordingly, the writ petition was dismissed.

Case title - M/S Jaharveer Maharaj Agro Pvt. Ltd. and another vs. Union of India and Others 2025 LiveLaw (AB) 331

Case citation: 2025 LiveLaw (AB) 331

Click Here To Read/Download Order