Borrower cannot rightfully seek extension of time to make payment under OTS, says SC

New Delhi: The Supreme Court ruled that a borrower cannot automatically request an extension of time to complete a one-time payment program (OTS).

According to the Supreme Court, the borrower must prove what rights he has in order to request an extension in no time.

The Punjab and Haryana High Court’s order in March, which gave the borrower, a company, six weeks’ grace to pay the outstanding balance with interest to State Bank of India as per a letter sanctioned by the OTS, was set aside by the court. Justices MR Shah and Krishna Murari.

The Supreme Court observed that rescheduling the payment under the OTS system and extending the deadline amounted to “rewriting the contract”, which is prohibited in exercise of the constitutional authority conferred by Section 226.

According to Section 62 of the Indian Contract Act, a contract can be varied only with the consent of both parties. The ability of the Supreme Courts to issue special orders is covered in Article 226 of the Constitution.

“The borrower cannot rightly claim that even though it has not made the payment under the sanctioned OTS scheme, yet it is rightfully granted further extension. No negative discrimination can be claimed,” the board said.

On SBI’s appeal against the Supreme Court’s decision, the Supreme Court gave its decision.

It stated that the bank had approved the cash loan in favor of the borrower.

Later, in September 2017, the bank issued an OTS system that made it clear that payments had to be made as per the plan within six months of the sanction date or they would lose profitability.

The bank sent the borrower an OTS offer, which, according to the Supreme Court, was accepted.

According to the sanctioned OTS, the borrower had to pay 25% of the total amount by 21 December 2017 and the balance with interest had to be deposited within six months from the date of the letter.

The bank rejected the borrower’s request to extend the repayment of the remaining Rs 2.52 crore from eight to nine months and directed it to make the payment by 21 May 2018.

After this, the borrower applied to the Supreme Court for payment of the balance due eight to nine months after May 21, 2018.

The bank had offered the borrower alternative OTS systems for settling the account, but the company had not chosen any of them, the Supreme Court stated in its decision.

According to the opinion, the Supreme Court has to decide whether the exercise of the Supreme Court’s power under Article 226 to extend the deadline for making the final payment under the approved OTS scheme was reasonable in the facts and circumstances of the case.