Summary and Analysis of Assistant General Manager State Bank of India & Anr vs Tanya Energy Enterprises Through Its Managing Partner Shri Alluri Lakshmi Narasimha Varma 2025 INSC 1119
1. Heading of the Judgment
Case Name: Assistant General Manager, State Bank of India & Anr. vs. Tanya Energy Enterprises Through Its Managing Partner Shri Alluri Lakshmi Narasimha Varma
Citation: (2025) INSC 1119, Civil Appeal No. 11134 of 2025 (Arising out of SLP (Civil) No. 2456 of 2025)
Court: Supreme Court of India
Bench: Justice Dipankar Datta and Justice Augustine George Masih
Date of Judgment: September 15, 2025
2. Related Laws and Sections
The judgment primarily interprets and applies the following laws:
The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act): Sections 2(zd) (Definition of Secured Creditor), 2(f) (Definition of Borrower), 13(2) (Demand Notice), 13(4) (Enforcement Measures), and 17 (Right to Appeal to DRT).
The Recovery of Debts and Bankruptcy Act, 1993 (RDB Act): Section 19 (Application to the Tribunal for recovery of debt).
Constitution of India: Article 226 (Power of High Courts to issue certain writs).
The Bank's One Time Settlement Scheme, 2020 (OTS 2020 Scheme): Specifically, Clause 2.1 (Cases not eligible) and the crucial Clause 4(i) (Mandatory requirement of an upfront deposit for an application to be processed).
3. Basic Judgment Details
Appellants: Assistant General Manager and Deputy General Manager of State Bank of India (SBI).
Respondent: Tanya Energy Enterprises (the Borrower).
Subject Matter: Challenge to the Andhra Pradesh High Court's order which directed SBI to reconsider the borrower's application under its OTS 2020 Scheme.
Core Legal Question: Whether the High Court was justified in interfering with the Bank's decision to reject the borrower's OTS application and directing reconsideration?
Outcome: The Supreme Court allowed the Bank's appeal, set aside the High Court's orders, and upheld the rejection of the OTS application, albeit on a different legal ground.
4. Explanation of the Judgment
Factual Background
The respondent, Tanya Energy Enterprises, availed credit facilities from SBI by mortgaging seven properties. It defaulted on repayments, and its account was classified as a Non-Performing Asset (NPA). SBI issued a demand notice under the SARFAESI Act and also initiated proceedings before the Debt Recovery Tribunal (DRT).
A key event was a compromise settlement sanctioned in November 2018, where the borrower agreed to pay Rs. 5 crore to settle the dues (of which Rs. 50 lakh was already paid). The borrower failed to adhere to the payment schedule of this settlement, leading to its cancellation.
Subsequently, SBI initiated measures under the SARFAESI Act, including auctioning one of the mortgaged properties. The borrower challenged these measures before the DRT, which saw mixed outcomes, including the setting aside of the first auction.
In October 2020, SBI introduced the OTS 2020 Scheme for settling debts. The borrower applied for this scheme via letters dated October 19 and November 10, 2020. However, the Bank rejected the application on November 17, 2020, citing the borrower's past conduct, including the failure of the 2018 compromise and non-compliance with DRT orders.
Proceedings in the High Court
The borrower challenged this rejection in the Andhra Pradesh High Court. A Single Judge allowed the writ petition, holding that the OTS scheme was non-discretionary and the borrower was eligible. The Court directed the Bank to reconsider the application. A Division Bench of the High Court dismissed the Bank's intra-court appeal, agreeing with the Single Judge. The Division Bench focused on Clause 2.1 of the OTS scheme, which listed "cases not eligible." It concluded that since the borrower's case did not fall under any of the excluded categories, it was eligible for consideration.
Arguments Before the Supreme Court
For the Bank (Appellants): argued that a writ of mandamus cannot be issued to compel a bank to grant OTS, which is a discretionary contractual matter. They emphasized the borrower's consistent default, non-compliance with DRT orders, and failure under the previous settlement, justifying the rejection.
For the Borrower (Respondent): argued that the rejection was arbitrary and without due consideration. They contended that the failure of a past settlement cannot be a ground to reject a fresh application under a new scheme. They also highlighted that the auction had been set aside by the DRT, so no third-party rights were involved.
Analysis and Reasoning by the Supreme Court
The Supreme Court conducted an in-depth analysis and reversed the High Court's decision. Its reasoning is central to the judgment:
Principle from Precedents: The Court reaffirmed the settled law from Bijnor Urban Coop. Bank Ltd. v. Meenal Agarwal (2023) that no court can issue a mandamus directing a secured creditor to positively grant the benefit of an OTS. The grant is always subject to fulfilling eligibility criteria.
The Overlooked Ground: Mandatory Upfront Payment: The Court identified a fundamental flaw in the borrower's application that was missed by both the Bank and the High Courts. Clause 4(i) of the OTS 2020 Scheme mandatorily required a borrower to submit an upfront payment of 5% of the OTS amount along with the application. Without this payment, the application "will not be processed."
The Court found that the borrower had not made any upfront payment at all while applying for the OTS 2020 Scheme. Consequently, the application was incomplete and non-compliant with the scheme's basic terms from the very outset.Judicial Review of Administrative Orders: The Court addressed a critical legal question: can it uphold an administrative order (the rejection letter) on a ground not mentioned in it? The Bank's rejection letter had cited the borrower's conduct but had not mentioned the failure to pay the upfront amount.
Relying on a line of cases including Mohinder Singh Gill v. Chief Election Commissioner (1978) and Opto Circuits (India) Ltd. v. Axis Bank (2021), the Court held that while generally an order must be tested on the grounds mentioned in it, in exceptional cases, a court can uphold it on an alternative ground apparent from the record. This is permissible if the alternative ground is fundamental, strikes at the heart of the matter, and the affected party is given a chance to respond. The Court found this principle applicable here.Eligibility is More Than Just Not Being 'Ineligible': The Court clarified that the High Court erred in its interpretation. Merely not falling under the "not eligible" category in Clause 2.1 does not automatically make a borrower eligible. A borrower must also positively satisfy all other mandatory conditions of the scheme, such as the upfront payment under Clause 4(i). The borrower's failure to do so was a complete disqualification.
Conclusion and Directions
The Supreme Court held that the High Court's interference was unjustified. The borrower's own conduct (non-payment of the mandatory upfront fee) disabled it from claiming a right to have its OTS application processed.
The appeal was allowed.
The orders of the Division Bench and the Single Judge of the High Court were set aside.
The Bank's rejection of the OTS application was upheld, though on the ground of non-compliance with Clause 4(i).
The Bank was given the liberty to proceed with the enforcement of its security interest against the remaining mortgaged properties in accordance with the law.
As a gesture of fairness, the Court granted the borrower the opportunity to submit a fresh OTS proposal to the Bank (though not under the lapsed 2020 scheme), which the Bank may consider on its merits.