[Analysis] Key FEMA | PMLA | Banking | Securitisation Laws Rulings of 2025 | Top 15 Case Laws

The year 2025 witnessed a series of landmark judgments that significantly shaped the interpretation and enforcement of the Foreign Exchange Management Act (FEMA) and key banking laws. The Supreme Court of India and various High Courts examined critical issues such as the scope of money-laundering offences under PMLA, procedural safeguards in enforcement actions, borrower rights under SARFAESI, bank recovery mechanisms, fraud classification, negotiable instruments liability, and the limits of judicial review over actions of banks and financial institutions. These rulings brought much-needed clarity on regulatory compliance, financial discipline, and due process, while balancing enforcement powers with legal safeguards. This curated compilation of the Top Landmark FEMA and Banking Law Judgments of 2025 presents a concise yet comprehensive overview of the most impactful decisions, offering valuable insights into the evolving judicial trends shaping India’s financial and regulatory framework.

Table of Contents

Introduction

1. Discharge Rightly Denied Where Accused Aided Co-Accused in Bank Forms and Cheques, Knowing Link to Proceeds of Crime: SC
2. Attachment Order Under PMLA Can Be Made Without Prior Communication Under Section 66(2): HC
3. Once Recovery Certificate Becomes Final, Recovery Officer Is Bound to Proceed in Accordance With the Same: HC
4. Complaint Under NI Act Maintainable Against Trustee Who Signed Cheque on Behalf of Trust Without Impleading Trust: SC
5. HC Upholds Order Passed by SBI Declaring Accounts of Promoter and Director of RCOM as ‘Fraud’
6. Borrowers’ Redemption Right Ended at Auction Notice; HC Wrongly Quashed Sale Certificate: SC
7. Notice Under Proviso (b) to Sec. 138 Must Mention Same Amount as in Cheque; Typographical Error No Defence: SC
8. EPFO’s Right to Recover From Bank Auctioning Property to Be Examined by HC in View of Sec. 35 of SARFAESI Act: SC
9. Notice Issued to Partners Is Deemed Notice to Firm, and Partners Are Jointly and Severally Liable u/s 138 of NI Act
10. Plea to Quash ECIR Rejected as Petitioner Was Named as Accused in ED Complaint and Charges Were Yet to Be Framed: HC
11. SLP Dismissed; Writ Can’t Be Issued to BCCI for Lalit Modi’s ED Penalty as No Public Function Was Involved
12. Disputes u/s 11 of SARFAESI With Prima Facie Conditions Met Must Go Through Arbitration and Not Before DRT: SC
13. HC Exceeded Article 227 Powers by Rejecting Benami Suit Instead of Letting Trial Court Decide: SC
14. A Private Scheduled Bank Isn’t a ‘State’ Under Article 12 and Isn’t Subject to HC Writ Jurisdiction Under Article 226
15. One Time Settlement Is a Non-Statutory Arrangement and Does Not Confer Any Enforceable Right on Borrower: HC

Introduction

In 2025, courts across India delivered several landmark rulings that substantially shaped the interpretation and enforcement of Foreign Exchange Management Act (FEMA) and banking laws, addressing critical issues of regulatory compliance, financial discipline, and economic governance. These decisions examined the scope of money-laundering offences, procedural safeguards in enforcement actions, priority of claims, recovery mechanisms, one-time settlements, and the extent of judicial review over actions of banks and financial institutions. This write-up aims to curate the Top Landmark FEMA and Banking Law Judgments of 2025, offering valuable insights for legal practitioners, compliance professionals, regulators, and academics seeking to understand the latest judicial trends influencing India’s financial and regulatory framework.

1. Discharge Rightly Denied Where Accused Aided Co-Accused in Bank Forms and Cheques, Knowing Link to Proceeds of Crime: SC

Murali Krishna v. Deputy Director, Directorate of Enforcement [2025] 180 taxmann.com 462 (SC)

In the present case, the question before the Supreme Court was whether the petitioner was entitled to discharge under section 227 of the Code of Criminal Procedure, 1973, in a prosecution for the offence of money laundering under section 3 read with section 24 of the Prevention of Money Laundering Act, 2002.

The Supreme Court observed that, at the stage of considering a discharge application, the court is not expected to examine the truthfulness or sufficiency of the allegations, as such an exercise falls within the domain of trial. It was further noted that the scope of section 3 of the PMLA cannot be narrowly construed for the purpose of discharging an accused at the threshold.

The Court noted that the allegations against the petitioner indicated that he had indirectly assisted the main accused in filling up bank account opening forms and handling cheque leaves and was, therefore, alleged to be knowingly a party to activities connected with the proceeds of crime.

The Supreme Court held that since these allegations required appreciation of evidence and adjudication during trial, they could not be examined at the initial stage of discharge. Accordingly, it was held that there was no valid ground to interfere with the order of the High Court confirming rejection of the discharge application.

2. Attachment Order Under PMLA Can Be Made Without Prior Communication Under Section 66(2): HC

Directorate of Enforcement v. Prakash Industries Ltd. [2025] 180 taxmann.com 189 (Delhi)

In the present case, the Supreme Court was called upon to examine the interplay between Section 3 read with Section 24 of the Prevention of Money-Laundering Act, 2002(offence of money laundering) and Section 227 of the Code of Criminal Procedure, 1973 (discharge of accused).

The petitioner had filed an application under Section 227 Cr.P.C. before the Trial Court seeking discharge on the ground that he was not connected with the banking transactions underpinning the alleged money-laundering offence and had merely assisted Accused in filling bank account forms without knowledge of Accused’s identity, contending he was wrongly implicated.

The Trial Court rejected this application. The High Court, in the impugned order, upheld that the scope of Section 3 of the PMLA is wide and cannot be narrowly circumscribed at the discharge stage.

The court further retreated that at the discharge stage under Section 227 Cr.P.C. is  not to assess the truthfulness of allegations but only to determine whether prima facie a case is made out, leaving detailed factual inquiries for trial. It observed that, as per the complaint under Sections 44 and 45 of the PMLA, the petitioner was alleged to have “indirectly assisted” in filling account and cheque forms and was knowingly a party to activities connected with proceeds of crime—allegations which, if accepted, fall within the ambit of the offence under Section 3 read with the statutory presumption under Section 24 of the PMLA.

Therefore constituted prima facie material for trial, not a fit case for discharge. On this basis, the High Court confirmed the Trial Court’s order, and the Supreme Court found no valid ground to interfere with the impugned order.

3. Once Recovery Certificate Becomes Final, Recovery Officer Is Bound to Proceed in Accordance With the Same: HC

Maharaji Educational Trust v. Housing and Urban Development Corporation Ltd. HUDCO [2025] 180 taxmann.com 64 (Delhi)

In the present case, the Delhi High Court examined whether the Recovery Officer could travel beyond a revised Recovery Certificate issued under the Recovery of Debts and Bankruptcy Act, 1993, in recovery proceedings initiated by HUDCO against Maharaji Educational Trust.

The petitioner trust had defaulted in repayment of the loan, pursuant to which HUDCO approached the Debts Recovery Tribunal (DRT), which allowed the application and issued a Recovery Certificate. On appeal, the Debts Recovery Appellate Tribunal (DRAT) modified the rate of interest and directed submission of a recasted statement of account in terms of the law laid down in Central Bank of India v. Ravindra, leading to issuance of a revised Recovery Certificate dated 22-3-2011.The petitioner sought to contend that the Recovery Officer was required to examine fresh recasted statements and re-adjudicate issues relating to interest, penal charges and calculations, notwithstanding the finality of the revised Recovery Certificate. It was further argued that discrepancies in statements of account warranted reopening of the recovery proceedings.

It was noted that the revised Recovery Certificate had attained finality, was never challenged before any competent forum, and that multiple statements of account had already been supplied by HUDCO in compliance with earlier directions.

The High Court held that once a Recovery Certificate attains finality, the Recovery Officer is bound by it and has no jurisdiction to reopen or re-adjudicate issues relating to principal liability or rate of interest crystallised therein. The Court further held that while the Recovery Officer may, at the execution stage, call for ledger-based certified statements to compute interest as awarded and adjust payments, if any, such exercise cannot undermine the finality of the Recovery Certificate.

Accordingly, the High Court found no infirmity in the impugned order of the DRAT directing expeditious recovery in accordance with law and dismissed the writ petition.

4. Complaint Under NI Act Maintainable Against Trustee Who Signed Cheque on Behalf of Trust Without Impleading Trust: SC

Sankar Padam Thapa v. Vijaykumar Dineshchandra Agarwal [2025] 179 taxmann.com 245 (SC)

In the present case, the Supreme Court examined whether a complaint under section 138 of the Negotiable Instruments Act, 1881, arising out of dishonour of a cheque issued on behalf of a trust, is maintainable against a trustee who signed the cheque, without arraying the trust itself as an accused.

The appellant had rendered services pursuant to an MoU entered into between the ACTS Group and Orion Education Trust, of which the respondent was the Chairman and authorised signatory.

Towards payment for such services, the respondent issued a cheque which, upon presentation, was dishonoured for insufficiency of funds. Consequently, the appellant initiated proceedings under section 138 of the NI Act against the respondent. The High Court quashed the complaint on the ground that the trust, being a juristic entity, was a necessary party and that the complaint was not maintainable in its absence.

The Supreme Court observed that a trust does not have an independent legal existence of its own and is not a juristic person capable of suing or being sued. It was held that a trust operates only through its trustees, who alone are liable and answerable for acts done on behalf of the trust. Relying on the provisions of the Indian Trusts Act, 1882, and settled precedents, the Court clarified that it is the trustee who is obliged to maintain and defend proceedings concerning the trust property or transactions.

The Court further held that where a cheque is issued and signed by a trustee on behalf of the trust, the trustee, being the signatory and person in charge of the transaction, is liable under section 138 of the NI Act, and there is no legal requirement to implead the trust as an accused. Accordingly, the Supreme Court set aside the impugned judgment of the High Court and restored the complaint proceedings, holding that the complaint was maintainable against the trustee alone.

5. HC Upholds Order Passed by SBI Declaring Accounts of Promoter and Director of RCOM as ‘Fraud’

Anil D. Ambani V. State Bank of India [2025] 179 taxmann.com 213 (Bombay)

In the present case, the Bombay High Court examined whether the show-cause notice issued by the State Bank of India (SBI) under the Master Directions on Fraud Risk Management, 2016, and the consequent order classifying the loan account of Reliance Communications Ltd. (RCOM) as ‘fraud’, were vitiated on the ground that the said Master Directions stood superseded by the Master Directions on Fraud Risk Management, 2024, and that the petitioner was denied principles of natural justice.

The petitioner, promoter and director of RCOM, had furnished personal guarantees for loans sanctioned by SBI. Following forensic audit findings, SBI issued a show-cause notice dated 20-12-2023 calling upon RCOM and its directors, including the petitioner, to explain why the account should not be classified as ‘fraud’. Before conclusion of the process, the RBI issued the Master Directions, 2024, superseding the 2016 Directions. The petitioner contended that the show-cause notice issued under the 2016 Directions ceased to exist, that a fresh notice under the 2024 Directions was mandatory, and that absence of a personal hearing rendered the proceedings invalid.

6. Borrowers’ Redemption Right Ended at Auction Notice; HC Wrongly Quashed Sale Certificate: SC

Rajendran v. KPK Oils and Protiens India (P.) Ltd. [2025] 178 taxmann.com 574 (SC)

In the present case, the Supreme Court examined whether, after the amendment to section 13(8) of the SARFAESI Act with effect from 1-9-2016, a borrower retains the right of redemption once an auction sale notice is published. The borrowers had defaulted in repayment of loans secured by mortgage, pursuant to which the bank initiated proceedings under the SARFAESI Act and published an auction sale notice on 22-1-2021. Although the borrowers made payments subsequent to the auction and issuance of the sale certificate, the High Court quashed the sale certificate and directed the bank to permit redemption of the mortgage.

The Supreme Court held that, under the amended section 13(8) of the SARFAESI Act, the borrower can tender the dues along with costs, charges and expenses only up to the date of publication of the auction notice, and once such notice is published, the right of redemption stands extinguished. It was further held that the 2016 amendment applies to all claims alive as on 1-9-2016 and to all proceedings initiated thereafter, irrespective of the date on which the loan transaction was entered into. Since the auction notice had been published on 22-1-2021, the borrowers’ right of redemption stood extinguished on that date and could not be revived by subsequent payments. Accordingly, the Supreme Court held that the High Court was not justified in quashing the sale certificate and directing the bank to permit redemption, and set aside the impugned judgment.

7. Notice Under Proviso (b) to Sec. 138 Must Mention Same Amount as in Cheque; Typographical Error No Defence: SC

Kaveri Plastics v. Mahdoom Bawa Bahrudeen Noorul [2025] 178 taxmann.com 526 (SC)

In the present case, the Supreme Court examined whether, after the amendment to section 13(8) of the SARFAESI Act with effect from 1-9-2016, a borrower retains the right of redemption once an auction sale notice is published. The borrowers had defaulted in repayment of loans secured by mortgage, pursuant to which the bank initiated proceedings under the SARFAESI Act and published an auction sale notice on 22-1-2021. Although the borrowers made payments subsequent to the auction and issuance of the sale certificate, the High Court quashed the sale certificate and directed the bank to permit redemption of the mortgage.

The Supreme Court held that, under the amended section 13(8) of the SARFAESI Act, the borrower can tender the dues along with costs, charges and expenses only up to the date of publication of the auction notice, and once such notice is published, the right of redemption stands extinguished. It was further held that the 2016 amendment applies to all claims alive as on 1-9-2016 and to all proceedings initiated thereafter, irrespective of the date on which the loan transaction was entered into. Since the auction notice had been published on 22-1-2021, the borrowers’ right of redemption stood extinguished on that date and could not be revived by subsequent payments. Accordingly, the Supreme Court held that the High Court was not justified in quashing the sale certificate and directing the bank to permit redemption, and set aside the impugned judgment.

8. EPFO’s Right to Recover From Bank Auctioning Property to Be Examined by HC in View of Sec. 35 of SARFAESI Act: SC

Edelweiss Asset Reconstruction Ltd. v. Regional PF Commissioner [2025] 177 taxmann.com 761 (SC)

In the present case, the Supreme Court examined whether the High Court was required to adjudicate the issue of priority of first charge between secured creditors and the Employees’ Provident Fund Organisation (EPFO) in light of section 11(2) of the Employees’ Provident Fund and Miscellaneous Provisions Act, 1952, when banks claimed priority under section 35 of the SARFAESI Act. The establishment had defaulted in payment of provident fund dues, pursuant to which EPFO initiated recovery proceedings and sought remittance of dues from the sale proceeds of properties auctioned by Axis Bank and State Bank of India through its assignee, Edelweiss Asset Reconstruction Ltd. The banks asserted first charge over the secured assets under SARFAESI, while EPFO claimed statutory priority under section 11(2) of the Provident Fund Act.

The High Court dismissed the writ petition filed by the appellant and directed deposit of an interim amount without examining the competing claims of priority, particularly in the absence of Axis Bank as a party. The Supreme Court held that, since Axis Bank had realised substantial sale proceeds and was now impleaded before the Court, it was necessary for the High Court to first examine the inter se priority of charges between EPFO and the secured creditors in accordance with section 11(2) of the PF Act and section 35 of the SARFAESI Act. Accordingly, the impugned order was set aside and the matter was remanded to the High Court for fresh adjudication after impleading Axis Bank and affording due opportunity of hearing to all parties.

9. Notice Issued to Partners Is Deemed Notice to Firm, and Partners Are Jointly and Severally Liable u/s 138 of NI Act

Dhanasingh Prabhu v. Chandrasekar [2025] 176 taxmann.com 443 (SC)

In the present case, the Supreme Court examined whether a complaint under section 138 read with section 141 of the Negotiable Instruments Act, 1881, is maintainable against partners of a partnership firm when the statutory notice was issued only to the partners and not separately to the firm, and the firm itself was not initially named as an accused. The appellant-complainant had advanced a loan to the respondents, who were partners of a firm, and a cheque issued from the firm’s account towards discharge of the debt was dishonoured. The High Court had quashed the complaint on the ground that the partnership firm was neither served with statutory notice nor made a party to the proceedings, and therefore the requirements of section 141 were not satisfied. Reversing the High Court’s view, the Supreme Court held that a partnership firm is not a separate juristic entity distinct from its partners but only a compendious name for the partners, who are jointly and severally liable for the acts of the firm. It was observed that, unlike a company where liability of directors is vicarious, the liability of partners is direct and joint. The Court further held that even in the absence of the firm being named as an accused, proceedings against the partners are maintainable, and any such defect is curable by permitting the firm to be **impleaded** at a later stage. Accordingly, the Supreme Court set aside the impugned order of the High Court and restored the complaint.

10. Plea to Quash ECIR Rejected as Petitioner Was Named as Accused in ED Complaint and Charges Were Yet to Be Framed: HC

Jacqueline Fernandez v. Directorate of Enforcement [2025] 176 taxmann.com 126 (Delhi)

In the present case, the Delhi High Court examined whether the Enforcement Case Information Report (ECIR) and the supplementary prosecution complaint filed by the Directorate of Enforcement (ED) under section 3 read with section 24 of the Prevention of Money Laundering Act, 2002, could be quashed at a pre-charge stage. The petitioner, a well-known actor, was arrayed as an accused in a supplementary complaint on the allegation that she had received, possessed and enjoyed proceeds of crime in the form of expensive gifts, articles and monetary transfers from the main accused, who had been involved in a large-scale extortion racket constituting the predicate offence.

The petitioner contended that she was neither an accused in the predicate offence nor aware that the gifts received by her were proceeds of crime, and that continuation of proceedings under PMLA violated her constitutional protection against self-incrimination, particularly since she was cited as a prosecution witness in the predicate offence.

It was noted that the existence of a scheduled offence and proceeds of crime was not disputed and that section 24 of the PMLA raises a statutory presumption once foundational facts are established. The High Court held that an accused under the PMLA need not necessarily be an accused in the predicate offence and that even a person who comes into the picture subsequently, by knowingly assisting in possession, use or enjoyment of proceeds of crime, can be prosecuted for money laundering.

The Court further held that issues relating to the petitioner’s knowledge, mens rea, and the extent of her involvement were matters requiring appreciation of evidence and could not be conclusively determined at the stage of framing of charge or in proceedings seeking quashing of the ECIR. Accordingly, the High Court held that the plea for quashing was premature and dismissed the petition, leaving all issues to be adjudicated during trial.

11. SLP Dismissed; Writ Can’t Be Issued to BCCI for Lalit Modi’s ED Penalty as No Public Function Was Involved

Lalit Kumar Modi v. Board of Control for Cricket in India [2025] 176 taxmann.com 549 (SC)

In the present case, the Supreme Court examined whether a writ of mandamus could be issued directing the Board of Control for Cricket in India (BCCI) to pay or indemnify the penalty imposed upon the petitioner under the Foreign Exchange Management Act, 1999. The petitioner, who had been appointed as Vice President of the BCCI and Chairman of the IPL Governing Body, was subjected to penalties by the Adjudicating Authority under FEMA and sought a writ directing BCCI to deposit the penalty on his behalf in terms of the indemnification clause contained in the BCCI Rules and Regulations.

The High Court had dismissed the writ petition on the ground that BCCI was not discharging any public function in relation to the alleged indemnification and, therefore, no writ could be issued against it, particularly to compel payment of a penalty imposed by the Enforcement Directorate. Before the Supreme Court, the petitioner fairly submitted that even if the writ petition under Article 226 of the Constitution was not maintainable, he would be entitled to pursue appropriate civil remedies.

Taking note of the said submission, the Supreme Court dismissed the special leave petition as withdrawn, while clarifying that the petitioner would be at liberty to avail such civil remedies as may be available to him in law.

12. Disputes u/s 11 of SARFAESI With Prima Facie Conditions Met Must Go Through Arbitration and Not Before DRT: SC

Bank of India v. Sri Nangli Rice Mills (P.) Ltd. [2025] 174 taxmann.com 900 (SC)

In the present case, the Supreme Court examined whether disputes between two banks relating to their respective claims and priority over the same secured assets of a common borrower fall within the ambit of section 11 of the SARFAESI Act, 2002, thereby excluding the jurisdiction of the Debts Recovery Tribunal (DRT). The appellant bank had advanced credit facilities to the borrower by hypothecating stocks of paddy and rice, while the respondent bank subsequently extended credit against pledge of the same stocks through warehouse receipts. Upon default by the borrower and initiation of recovery proceedings, a dispute arose between the two banks regarding priority of charge over the secured assets.

The Supreme Court held that section 11 of the SARFAESI Act is a mandatory provision which applies where two conditions are satisfied, namely:

(i) the dispute is between banks, financial institutions, asset reconstruction companies or qualified buyers, and

(ii) the dispute relates to securitisation, reconstruction or non-payment of any amount due, including interest.

It was observed that disputes concerning priority of charge between secured creditors are intrinsically linked to the borrower’s non-payment of dues and squarely fall within the scope of section 11.

The Court further held that, once section 11 is attracted, the jurisdiction of the DRT stands ousted and the dispute must be resolved only through arbitration or conciliation as deemed under the said provision, even in the absence of an express arbitration agreement. Accordingly, the Supreme Court upheld the High Court’s direction requiring the parties to resolve their dispute through arbitration under section 11 of the SARFAESI Act and dismissed the appeal.

13. HC Exceeded Article 227 Powers by Rejecting Benami Suit Instead of Letting Trial Court Decide: SC

Valarmathi v. Kumaresan [2025] 174 taxmann.com 96 (SC)

In the present case, the Supreme Court examined whether the High Court, in exercise of its supervisory jurisdiction under Article 227 of the Constitution of India, could reject a plaint on the ground that the suit was barred by the Prohibition of Benami Property Transactions Act, 1988. The appellants, being the legal heirs of the deceased purchaser, had instituted a civil suit seeking declaration of title and consequential injunction in respect of land allegedly purchased by the deceased from his own funds in the name of the respondent. The High Court, while entertaining a petition under Article 227 filed by the respondent, rejected the plaint by holding that the suit was barred under the Benami Act.

The Supreme Court held that the power under Article 227 is supervisory in nature and cannot be exercised to usurp the original jurisdiction of the trial court or to supplant the statutory remedies provided under the Civil Procedure Code, 1908. It was observed that rejection of a plaint is governed by Order VII Rule 11 of the CPC and such rejection amounts to a deemed decree, against which a statutory right of appeal is available under section 96 of the CPC.

The Court further held that by rejecting the plaint in exercise of Article 227, the High Court had not only substituted itself as a court of first instance but had also rendered nugatory the appellants’ valuable right of appeal. Since the High Court had neither corrected a jurisdictional error nor exercised supervisory control, but had instead assumed original jurisdiction, the impugned order was held to be unsustainable. Accordingly, the Supreme Court set aside the High Court’s order and restored the suit, leaving all issues to be adjudicated by the trial court in accordance with law.

14. A Private Scheduled Bank Isn’t a ‘State’ Under Article 12 and Isn’t Subject to HC Writ Jurisdiction Under Article 226

Shobha vs. Muthoot Finance Ltd. [2025] 170 taxmann.com 869 (SC)

In the present case, the Supreme Court examined whether a writ petition under Article 226 of the Constitution was maintainable against Muthoot Finance Ltd., a private non-banking financial company carrying on banking business as a scheduled bank, on the ground that it was amenable to writ jurisdiction due to regulatory control exercised by the Reserve Bank of India. The petitioner had challenged the actions of Muthoot Finance in relation to a gold loan transaction, contending that since the company was governed by statutory directions issued by the RBI, it was discharging a public function and could be treated as “State” within the meaning of Article 12.

The Supreme Court held that Muthoot Finance could not be characterised as a “State” or an instrumentality of the State, as it did not perform any public function or public duty and owed obligations only towards its account holders and borrowers. It was observed that regulatory oversight by the RBI is merely supervisory in nature and does not amount to participatory control or confer a public law character on the activities of a private financial institution.

The Court reiterated that the test for maintainability of a writ petition against a private body is whether the body is discharging a public duty or function of a public nature, which was absent in the present case. Accordingly, the Supreme Court upheld the High Court’s view that a writ petition under Article 226 was not maintainable against Muthoot Finance Ltd., while leaving it open to the petitioner to avail appropriate civil, arbitral or statutory remedies in accordance with law.

15. One Time Settlement Is a Non-Statutory Arrangement and Does Not Confer Any Enforceable Right on Borrower: HC

Senbo Engineering Ltd. v. Bank of Maharashtra [2025] 181 taxmann.com 305 (Calcutta)

In the present case, the Calcutta High Court examined whether a defaulter borrower could enforce a One-Time Settlement (OTS) proposal by seeking a decree of declaration and specific performance against the bank. The plaintiff-borrower had availed financial facilities from the defendant bank and, upon default, its account was declared as NPA. The bank initiated recovery proceedings under the SARFAESI Act and also filed applications under section 7 of the Insolvency and Bankruptcy Code, 2016. During pendency of such proceedings, the plaintiff submitted multiple OTS proposals, both of which were rejected by the bank, notwithstanding acceptance of certain interim payments made during negotiations.

The plaintiff instituted a commercial suit contending that acceptance of payments pursuant to negotiations resulted in a concluded contract of OTS and sought specific performance thereof.

On an application filed by the bank for rejection of the plaint, the High Court held that an OTS is purely a contractual arrangement between a bank and a defaulter borrower, having no statutory flavour unless offered under a statutory or RBI-backed scheme. It was observed that no borrower has a vested or enforceable right to demand acceptance of an OTS, and the decision to accept or reject such proposal lies entirely within the commercial wisdom of the bank.

The Court further held that since the plaintiff’s OTS proposal was not made under any statutory scheme and had been expressly rejected by the bank, no right accrued in favour of the plaintiff to seek enforcement of the alleged settlement by way of specific performance, which is an equitable relief. Accordingly, it was held that the suit was barred by law and disclosed no triable issue. The plaint was therefore rejected under Order VII Rule 11 of the Code of Civil Procedure, 1908.