Offering a bank draft under a One Time Settlement scheme does not buy back a unit that has already been sold, the Patna High Court has held, giving a defaulting borrower no enforceable right to restoration of his auctioned factory.
Patna: The Patna High Court has dismissed a writ petition by the proprietor of a Gaya aluminium unit who sought restoration of his auctioned factory on offering to clear his dues under the Bihar State Financial Corporation’s One Time Settlement (OTS) Scheme, 2019, holding that the Corporation’s rejection of his representation suffered from no illegality [M/s Ramesh Aluminium Industries v. The State of Bihar and Others].
Justice G. Anupama Chakravarthy delivered the oral judgment on October 30, 2026 in CWJC No. 11682 of 2019, which challenged the order dated March 25, 2019 passed by the Chairman-cum-Managing Director of the Corporation.
A second round over the same sale
The Court described the case as a second round of litigation arising from the sale. It noted that the 2018 order only allowed the petitioner to make a repayment proposal and did not set aside the auction or direct restoration. Nor had he shown any finding in that round on the alleged lack of notice.
“The petitioner cannot, in the present proceedings, seek to reopen the concluded proceedings relating to the sale of the unit merely on the basis of his willingness to settle the outstanding dues.”
A purchaser left out, a draft that bought nothing
The Court also pointed out that the purchaser, whose rights would be affected by any order, had not been made a party to the writ petition.
“The mere submission of an application under the OTS Scheme, 2019, accompanied by a bank draft of Rs. 1,21,000/-, does not, by itself, confer any enforceable right upon the petitioner to seek restoration of the unit, which had already been sold in favour of a third party.”
Finding no ground to interfere under Article 226, the Court dismissed the writ petition.
The loan, the auction and the first writ
The petitioner, Ramesh Prasad, took a loan of Rs 4.80 lakh from the Corporation in 1985 to run M/s Ramesh Aluminium Industries in Gaya. He said the unit turned sick and closed because of a financial crisis and lack of electricity, and that the Corporation auctioned it to one Shyam Nandan without serving him notice.
His first challenge, CWJC No. 19041 of 2013, was disposed of on October 25, 2018 with liberty to approach the Managing Director with a repayment proposal. He then applied under the OTS Scheme, 2019 with a bank draft of Rs 1,21,000. The Corporation rejected his representation on March 25, 2019, which led to the present petition.
The rival submissions
The petitioner argued that the auction without proper notice violated natural justice and that his willingness to settle under the OTS Scheme should lead to the rejection being set aside.
The Corporation said the petitioner had defaulted persistently despite demand notices, that the unit was advertised several times and finally sold to Shyam Nandan for Rs 30 lakh after following the prescribed procedure, and that the petitioner was given a chance to retain it by matching the sale terms but did not do so. It added that the petitioner said he could not clear outstanding dues of Rs 4,44,04,895.10, and that a unit already sold and handed over could not be restored under the OTS Scheme.
What the ruling signals
Settlement schemes run by lenders are a route to clear dues, not a key to undo completed sales. Once an asset has passed to a third party, an OTS offer, even backed by a deposit, does not create a right to its return, and a borrower cannot use a later scheme to reopen an auction he did not successfully challenge earlier.
The ruling also restates a procedural point: where relief would disturb a purchaser’s rights, the purchaser is a necessary party, and a writ petition that leaves him out is unlikely to succeed.
Case Title: M/s Ramesh Aluminium Industries v. The State of Bihar and Others
Case No.: Civil Writ Jurisdiction Case No. 11682 of 2019
Bench: Justice G. Anupama Chakravarthy, Patna High Court
Date of Judgment: October 30, 2026
Appearances: Ravindra Kumar Sinha, Advocate, for the petitioner; Raju Giri, Senior Advocate, with Harshvardhan and Rahul Kumar, Advocates, for the respondents