SBI v Tanya Energy Enterprises (2025): an OTS application without the 5% upfront deposit need not even be processed
Supreme Court in SBI v Tanya Energy (15 Sept 2025) held an OTS application filed without the 5% upfront deposit under clause 4(i) carried no right to be processed. What borrowers must do.
Key points
- The Supreme Court on 15 September 2025 set aside Andhra Pradesh High Court orders that had directed SBI to reconsider Tanya Energy Enterprises' OTS application.
- Clause 4(i) of SBI's OTS 2020 Scheme required 5% of the OTS amount (15% for wilful defaulters) with the application, and the borrower paid nothing.
- Borrowers seeking a settlement should pay the upfront amount with the application and never make it conditional, since no court can order a bank to grant an OTS.
On 15 September 2025, the Supreme Court of India decided Assistant General Manager, State Bank of India v Tanya Energy Enterprises, 2025 INSC 1119 (Civil Appeal 11134 of 2025), a reportable judgement authored by Dipankar Datta J. The ruling settles a question that many stressed borrowers face: if a bank's one time settlement (OTS) scheme says the application must carry an upfront deposit, can a borrower apply without paying it and still insist that the bank consider the proposal? The answer, in paras 25-27 and 39 of the judgement, is no. An OTS application filed without the 5% upfront amount required by clause 4(i) of SBI's OTS 2020 Scheme was incomplete, and it carried no right to be processed at all.
This playbook walks through the statutory setting, the procedure a borrower actually faces, the defences that remain open, and the exact reasoning of the Supreme Court, so that a borrower negotiating a settlement in 2026 does not repeat the mistake behind Tanya Energy Enterprises' rejected application of November 2020 and the litigation that followed until September 2025. The full text of the 2025 judgement is available on Indian Kanoon.
The Statutory Position
An OTS is not a statutory right. No section of the SARFAESI Act 2002, the Recovery of Debts and Bankruptcy Act 1993 (RDDB Act) or the Insolvency and Bankruptcy Code 2016 obliges a lender to settle. The Supreme Court restated this in Tanya Energy, relying on Bijnor Urban Co-operative Bank v Meenal Agarwal (2023) 1 SCC 540 and SBI v Arvindra Electronics (2025 SCC OnLine SC 124): a court cannot issue a mandamus directing a bank to grant an OTS. A settlement scheme is a policy instrument, and its clauses bind the borrower who chooses to invoke it.
What the statutes do govern is the enforcement process running alongside any settlement talk. Under the 2002 Act, which the SARFAESI glossary entry explains in plain terms, recovery moves through a sequence of fixed periods. The bare text of both the 2002 and 1993 Acts is on India Code.
| Provision | What it does | Time limit or deposit |
|---|---|---|
| SARFAESI s 13(2) | Demand notice after the account is classified as an NPA | 60 days to discharge liability |
| SARFAESI s 13(3A) | Borrower's representation or objection to the 13(2) notice | Lender must reply with reasons within 15 days |
| SARFAESI s 13(4) | Possession (symbolic or physical), sale, lease or appointment of a manager, without court intervention | Available on non-compliance with the 13(2) notice |
| SARFAESI s 14 | Application to the CMM or DM for assistance in taking possession | 30-day disposal mandate after the 2016 amendment |
| SARFAESI s 17 | Borrower's application to the DRT against 13(4) measures | 45 days; deposit not mandatory, but the DRT may direct one |
| SARFAESI s 18 | Appeal from the DRT to the DRAT | 30 days; 50% of the debt due, reducible to not less than 25% |
| RDDB Act s 20 | Appeal from a DRT recovery order to the DRAT | 45 days |
| RDDB Act s 21 | Pre-deposit for an RDDB appeal | 75% of the debt determined, which the DRAT may waive or reduce |
Two features of this table matter for OTS strategy. First, none of these 8 provisions pauses because a settlement proposal is pending; one of the borrower's properties in Tanya Energy had already been auctioned, a fact SBI cited when rejecting the 2020 proposal. Second, the deposit thresholds at the appellate stage (25% to 75%) are far higher than the 5% upfront deposit SBI's 2020 scheme required, which is why losing an OTS opportunity over a small upfront amount can be so expensive. For more on the forum that hears these cases, see the DRT glossary entry.
The OTS 2020 Scheme in numbers
SBI notified its OTS 2020 Scheme on 12 October 2020. It covered accounts with dues above Rs 20 lakh and up to Rs 50 crore as on 31 March 2020. Clause 2.1 listed categories of accounts that were "not eligible". Clause 4(i) dealt with the application itself.
| Clause 4(i) term | Ordinary borrower | Wilful defaulter |
|---|---|---|
| Upfront deposit with application | 5% of the OTS amount | 15% of the OTS amount |
| Consequence of non-deposit | Application "will not be processed" | Application "will not be processed" |
| If the application is rejected | Deposit refundable without interest within 3 months | Deposit refundable without interest within 3 months |
Procedure Step by Step
The facts of Tanya Energy map closely onto the procedure a borrower should follow, and onto the points where this borrower went wrong. The dates below are drawn from the Supreme Court's recital of facts in the 15 September 2025 judgement.
- Confirm eligibility under the scheme's exclusion clause. In 2020, the scheme applied only to dues above Rs 20 lakh and up to Rs 50 crore as on 31 March 2020. Check every category in the "not eligible" list, as clause 2.1 required here.
- Read every other condition, not only the exclusion list. The Supreme Court held at para 41 that escaping clause 2.1's ineligibility list does not satisfy the scheme's other conditions. Clause 4(i) was a separate, independent requirement.
- Compute the upfront deposit on the OTS amount. SBI's proposed settlement was Rs 5,07,44,250, which is Rs 6,76,59,000 less a 25% rebate of Rs 1,69,14,750. At 5%, the upfront deposit on SBI's figure works out to Rs 25,37,212.50; on the borrower's own Rs 3.75 crore counter-figure it would have been Rs 18,75,000.
- Pay the deposit with the application, unconditionally. By letter dated 10 November 2020, the borrower offered to deposit the upfront amount only "subject to your consent in writing" to grant the OTS. That condition reversed the sequence clause 4(i) required. Nothing was paid.
- Expect a decision with reasons, and preserve the record. SBI rejected the proposal on 17 November 2020, 7 days after the conditional offer, citing past conduct: non-compliance with a DRT deposit order, the auction of one property, and suppression of facts.
- If rejected, weigh a fresh proposal before litigating. The borrower instead went to the High Court. The Andhra Pradesh High Court's single judge (22 September 2022) and Division Bench (21 December 2022, WA 918 of 2022) both directed SBI to reconsider. The Supreme Court set aside both orders on 15 September 2025, nearly 5 years after the rejection.
- Track the SARFAESI clock in parallel. Once the settlement route closed, the bank was left free to enforce its security. Any Section 17 challenge must be filed within 45 days of the 13(4) measure, regardless of what is happening on the OTS front.
The lesson from steps 4 and 6 is arithmetic as much as law. A deposit of roughly Rs 25.37 lakh, refundable without interest within 3 months if rejected, would have obliged SBI to process the application. Withholding it led to 3 rounds of litigation and an outcome in which the bank could proceed against the security.
If you are modelling whether a settlement beats continued repayment, the loan foreclosure calculator shows the interest saved by closing a loan early, and the debt consolidation calculator compares a single refinanced loan against multiple outstanding facilities. The loan eligibility calculator helps test whether refinancing the settlement amount from another lender is realistic.
Borrower Defences Available
Tanya Energy narrows the OTS route, but it does not leave a borrower without options. The defences below are grounded in the statutory provisions catalogued above and in the reasoning of the 2025 judgement itself.
1. Statutory objection under Section 13(3A)
Within the 60-day period of a Section 13(2) notice, a borrower may file a representation or objection. The lender must reply with reasons within 15 days. This reasoned-reply requirement was added by the 2004 amendment, and a borrower who files a precise objection (disputing the amount claimed or the NPA classification) builds a record that later supports a Section 17 application.
2. Securitisation application under Section 17
A borrower aggrieved by a measure under Section 13(4) may approach the DRT within 45 days. Deposit is not mandatory at this stage, though the tribunal may direct one. This is the statutory forum for testing the legality of possession or sale; the High Court route taken in Tanya Energy ended on 15 September 2025 with the High Court's 2022 orders set aside.
3. Appeals and their pre-deposits
| Route | Forum | Limitation | Pre-deposit |
|---|---|---|---|
| SARFAESI s 18 | DRAT | 30 days | 50% of debt due (lower of lender's claim or DRT determination), reducible to 25% |
| RDDB Act s 20 read with s 21 | DRAT | 45 days | 75% of debt determined, which may be waived or reduced |
As an illustration, on a debt of Rs 6,76,59,000 a 25% appellate deposit would be Rs 1,69,14,750, more than 6 times the 5% OTS upfront deposit of Rs 25,37,212.50 on SBI's own settlement figure. A borrower who genuinely wants to settle will usually find the scheme deposit the cheaper route to a decision on the merits.
4. A fresh OTS proposal outside the old scheme
The Supreme Court expressly left the borrower free to submit a fresh OTS proposal outside the 2020 scheme. Because no court can compel acceptance (per Bijnor Urban Co-operative Bank, 2023, and Arvindra Electronics, 2025), the fresh proposal must persuade the bank on its own terms: a credible upfront component paid with the application, a defined payment schedule, and full disclosure of past conduct.
5. Notice before a new ground is relied upon
Paras 34-38 of the judgement confirm a limited protection. A court may uphold a rejection on a ground evident from the record but not stated in the rejection letter, only if the affected party is put on notice of that ground. A borrower facing a justification raised for the first time in court is entitled to respond to it.
What does not work
| Argument | Why it failed in Tanya Energy (2025) |
|---|---|
| "My case is not in the 'not eligible' list, so I am eligible" | Para 41: other conditions still apply |
| "I will pay the deposit once you agree to settle" | Paras 25-27 and 39: no deposit, no processing |
| "The court should direct the bank to grant OTS" | Following 2023 and 2025 precedents, no mandamus lies |
| "The rejection letter gave a different reason" | Paras 34-38: rejection may be upheld on a ground in the record, with notice |
Recent Tribunal/HC Position
The Andhra Pradesh High Court took a borrower-friendly view in 2022. Its single judge, in an order dated 22 September 2022, directed SBI to reconsider the OTS application, and the Division Bench affirmed that direction on 21 December 2022 in WA 918 of 2022. The High Court reasoned that any case falling outside clause 2.1's list of ineligible accounts must be treated as eligible.
The Supreme Court reversed on 15 September 2025 on three linked grounds:
- Incomplete application (paras 25-27, 39). Clause 4(i) required a 5% deposit (15% for wilful defaulters) with the application, failing which it "will not be processed". The borrower paid nothing, so there was no complete application carrying any right to processing.
- Eligibility is cumulative (para 41). Falling outside the clause 2.1 ineligibility list is a necessary condition, not a sufficient one. The 2022 reasoning treated one clause as if it were the whole scheme.
- Sustaining a decision on a ground from the record (paras 34-38). SBI's letter of 17 November 2020 cited past conduct rather than the missing deposit, but a court may uphold a rejection on a ground evident from the record, provided the affected party is put on notice.
The Court reiterated Bijnor Urban Co-operative Bank v Meenal Agarwal (2023) 1 SCC 540 and SBI v Arvindra Electronics (2025 SCC OnLine SC 124) that no court can direct a lender by mandamus to grant an OTS. The High Court orders were set aside, and SBI was left free to enforce its security.
For borrowers, the practical message of the 2025 ruling comes down to 3 rules: read every clause of the scheme; pay the upfront amount with the application; and never make the deposit conditional on the bank's acceptance. The Oquilia Research Desk does not appear before any court; this article explains the 15 September 2025 judgement and is not legal advice on any specific account.
Recent Oquilia coverage of recovery disputes includes the Andhra Pradesh High Court telling LIC Housing Finance to recover dues only by lawful means and the Rajasthan High Court asking police to restore AU Small Finance Bank's mortgaged property. Background on secured loans and collateral explains why, as all 8 provisions in the first table show, a lender keeps its enforcement options open throughout an OTS negotiation.
FAQ
Can a bank refuse to process my OTS application if I have not paid the upfront deposit?
Yes, where the scheme says so. In SBI v Tanya Energy Enterprises (15 September 2025), clause 4(i) of SBI's OTS 2020 Scheme required a 5% deposit with the application, and the Supreme Court held that an application without it was incomplete and carried no right to be processed.
How much was the upfront deposit under SBI's OTS 2020 Scheme?
Clause 4(i) set it at 5% of the OTS amount for ordinary borrowers and 15% for wilful defaulters. If the application was rejected, the deposit was refundable without interest within 3 months.
Can I offer to pay the deposit only after the bank agrees to the settlement?
No. The borrower's letter of 10 November 2020 offered to deposit only "subject to your consent in writing", and the Supreme Court treated the application as incomplete because no amount was actually paid.
Can a High Court order my bank to accept a one time settlement?
No. Following Bijnor Urban Co-operative Bank v Meenal Agarwal (2023) 1 SCC 540 and SBI v Arvindra Electronics (2025 SCC OnLine SC 124), the Supreme Court reiterated in September 2025 that no mandamus lies to compel a bank to grant an OTS.
Does a pending OTS application stop SARFAESI action?
None of the SARFAESI provisions discussed here, from the 60-day Section 13(2) notice to the 45-day Section 17 window, is stated to pause for a pending OTS proposal. In Tanya Energy, one property had already been auctioned, and SBI cited that when it rejected the proposal on 17 November 2020.
If my OTS application is rejected, can I apply again?
The Supreme Court in September 2025 left the borrower free to submit a fresh OTS proposal outside the 2020 scheme. Following the 2023 Bijnor ruling, acceptance remains at the bank's discretion.
What is the deposit if I appeal a DRT order instead of settling?
Under Section 18 of SARFAESI, the DRAT requires 50% of the debt due, reducible to not less than 25%, within a 30-day appeal window. Under Section 21 of the RDDB Act, the requirement is 75% of the debt determined, which the DRAT may waive or reduce.