The Orissa High Court has declined to intervene in loan recovery proceedings initiated by financial institutions in compliance with the law. The court emphasized that unwarranted interference in such cases disrupts the financial stability of lending institutions, hampers the credit ecosystem, and deters access to credit for genuine borrowers.
A single-judge bench led by Justice SK Panigrahi stated, “Courts should support the loan recovery process by refraining from unnecessary intervention where lenders act within the framework of the law.” This observation came while dismissing a petition challenging the cancellation of a one-time settlement (OTS) agreement.
Key Observations
Justice Panigrahi highlighted that judicial intervention in such matters would:
- Set an undesirable precedent.
- Discourage fiscal discipline among borrowers.
- Undermine effective debt recovery mechanisms.
The court found no grounds to interfere in the petitioner’s case, where they failed to honor the terms of the OTS scheme.
Case Background
The petitioner, hailing from Udala in Mayurbhanj district, had taken:
- A cash loan in 2013.
- A car loan in 2019 from the State Bank of India (SBI).
Both accounts were classified as non-performing assets (NPAs) due to delays in repayment. Additionally, the petitioner had guaranteed an education loan for their son, which was also declared an NPA.
Under the sanctioned OTS scheme, the petitioner was required to pay ₹60 lakh in three equal installments of ₹20 lakh each. However, the bank revoked the settlement after the petitioner failed to meet the stipulated deadline for payment.
Court’s Ruling
The court observed, “The petitioner has no legal right to demand an extension of the settlement deadline, especially after the bank offered substantial concessions to resolve the NPA account.”
The judgment underscores the importance of adhering to the terms of settlement agreements and supports the swift and lawful recovery of dues by financial institutions.