SC invokes Article 142 to cut loan liability of woman widowed by Covid-19

Invoking Article 142, the Supreme Court reduced a widow's loan liability after her husband died during the Covid pandemic, holding that strict enforcement of the bank's demand would cause extreme hard

The Supreme Court on Friday invoked its powers under Article 142 of the Constitution to reduce the loan liability of a woman who defaulted after her husband died during the second wave of the Covid-19 pandemic, holding that strict enforcement of the bank’s demand would cause hardship.

 

A Bench comprising Chief Justice of India Surya Kant and Justice Joymalya Bagchi said the case warranted the exercise of extraordinary constitutional powers to ensure complete justice.

 

Explaining its reasoning, the Court said, “The unusual and unfortunate circumstances of this case have prompted us to pass this order purely on equitable considerations and by invoking our powers under Article 142 of the Constitution.”

 

 

Article 142 empowers the Supreme Court to pass any order necessary to do complete justice in a matter before it.

Why the widow approached the Supreme Court

The woman challenged two orders of the Madras High Court dated September 10, 2024, and October 28, 2024, which rejected her request to repay a loan under an expired one-time settlement (OTS) scheme and declined to direct the bank to release the title deeds of her late husband’s property.

 

Her husband was the proprietor of a firm named FILSA Leathers and had availed credit facilities of ₹50 lakh from the respondent bank. A residential house in Vannivedu village in Tamil Nadu was mortgaged as security for the loan.

 

The Court recorded that the husband died in 2021, during the second wave of the Covid-19 pandemic. Until his death, loan instalments were paid regularly and the account remained standard.

Loan classified as NPA and recovery initiated

Following his death, the bank classified the account as a non-performing asset and initiated proceedings under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.

 

The bank later offered an OTS of ₹34.69 lakh against outstanding dues of ₹71 lakh as of January 2024. The woman deposited ten per cent of the amount, ₹3.46 lakh, as an upfront payment, with the balance payable within six months.

 

However, she could not pay the remaining amount within the stipulated time. When she sought restoration of the original OTS, the bank demanded an additional ₹9 lakh. After she failed to comply, a possession notice under Section 13(4) of the Act was issued, prompting her to approach the High Court.

Bank demand upheld, but relief granted

Before the Supreme Court, the bank sought recovery of ₹46.34 lakh, including the upfront amount already deposited. The woman pleaded lack of resources and contended that her liability should not exceed ₹31.22 lakh.

 

The Court noted that while the bank’s demand was legally valid, enforcing it would result in hardship.

 

“Though the demand raised by the Bank is legally sustainable, we find that compliance thereof would lead to extreme hardship for the appellant,” the Bench said.

Revised repayment ordered by the Court

The Court directed the woman to deposit ₹33 lakh in addition to the amount already paid, within eight weeks.

 

“It seems to us that the ends of justice would be adequately met if the appellant deposits a sum of ₹33,00,000, over and above the upfront amount of ₹3,46,900 already deposited by her,” the Court said.

 

The Bench ordered that interest would remain frozen upon payment and directed the bank to issue a no-dues certificate and release the original title deeds.

 

“In case the appellant deposits the amount within eight weeks from today, the Bank is directed to issue a no-dues certificate and release the original title deeds in favour of the appellant,” it said.

 

The Court clarified that failure to comply would allow the law to take its course.

Relief confined to facts of the case

 

The Bench stressed that the relief was confined to the peculiar facts of the case.

 

“This order has been passed in the peculiar facts and circumstances of this case, and it shall not be construed as a precedent,” the Court said.

 

The appeals were disposed of accordingly.