Writ Jurisdiction Cannot Be Invoked To Claim One Time Settlement Benefits: Kerala High Court Reiterates

The Kerala High Court has reiterated that borrowers cannot invoke writ jurisdiction to compel banks or financial institutions to extend the benefit of a One Time Settlement (OTS) scheme.

A division bench of Justice Anil K Narendran and Justice Muralee Krishna S dismissed a writ appeal filed by borrowers and upheld the decision of a single judge refusing to interfere with recovery proceedings initiated by a co-operative bank.

The bench agreed with the single judge's view that OTS schemes are discretionary benefits and not enforceable rights.

“As found by the learned Single Judge, the provisions for One Time Settlement are a benefit offered to the borrowers to settle their liability, and if they failed to utilise such an opportunity, they cannot be heard to contend that some further concession must be extended to them...Moreover, as held above, the appellants cannot maintain a writ petition under Article 226 of the Constitution of India claiming the benefit of the One Time Settlement Scheme.” the court said.

The appellants/borrowers had availed three loans from Vazhoor Farmers Service Co-operative Bank Ltd., secured by an equitable mortgage over their property. After default in repayment, arbitration proceedings were initiated under Section 69 of the Kerala Co-operative Societies Act, 1969, which resulted in an ex parte awards against them.

Over the years, the borrowers repeatedly approached the High Court challenging recovery steps taken by the bank. Acting on earlier directions, their request for settlement was placed before a District Level Committee constituted to assess eligibility under the OTS scheme. Pursuant to the committee's decision, the appellants closed one of the loan accounts.

Subsequently, the bank issued a calculation statement showing the outstanding amounts in respect of the remaining loans. Aggrieved, alleging that they had not been extended the full benefits available under the scheme, the borrowers filed a writ petition.

That petition was dismissed by a single judge on November 27, 2025, leading to the present writ appeal.

The division bench noted that the appellants had approached the court at every stage of recovery proceedings and had failed to fully utilize the concessions already granted to them under the settlement schemes.

Placing reliance on the Supreme Court's decision in Bijnor Urban Cooperative Bank Limited v. Meenal Agarwal and its own earlier ruling in Idukki District Police Co-operative Society Ltd. v. Rasheed A.K., the court reiterated that a writ petition under Article 226 is not maintainable for claiming the benefit of an OTS scheme.

“In the present case, the appellants could not avail the benefit of the settlement offered to them by the decision of the District Level Committee. In the light of the judgments referred to above, it is only to be held that the appellants cannot now contend that the Bank has to be directed to give them the benefit of another One Time Settlement Scheme,” the bench held.

The court further held that directing the bank to extend further concessions would amount to rewriting contractual terms, which is impermissible in writ jurisdiction. Accordingly, the writ appeal was dismissed

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