Institute of Legal and Management Studies

The Supreme Court carved out an exception to the 'speaking order' rule, holding that although the validity of an administrative order is ordinarily judged only by the reasons stated in it, the Court may, in limited circumstances, rely on existing but unstated grounds evident from the record.

A bench of Justices Dipankar Datta and A.G. Masih delivered a judgment setting aside the Andhra Pradesh High Court's direction to SBI to reconsider the borrower's One Time Settlement (OTS) proposal. The High Court had granted relief despite the borrower's repeated defaults and failure to comply with the mandatory precondition of depositing 5% of the dues upfront, a requirement not cited in SBI's rejection order. Departing from the stated reasons in the administrative order, the Supreme Court invoked Clause 4(i) of the OTS 2020 Scheme as an existing but unstated ground, holding that the borrower's failure to make the 5% upfront payment rendered the application incomplete and ineligible from the very outset.

Before carving out an existing but unidentified ground of non-payment of 5% as an upfront amount, the Court laid down a three-layer test to justify adjudicating on that ground i.e.,

1. When the stated grounds are untenable,

2. The court may “trace” an alternative valid ground from the record, the documents referred to, or the order's factual narrative, and

3. The affected party is given notice and a fair opportunity to respond.

“While the courts, in course of reviewing administrative orders, may not permit additional grounds not found within the four corners of the said order to be raised in an affidavit or in oral arguments, we are inclined to the view that the factual narrative in such order and the documents referred to therein can certainly be considered together with the case set up in the writ petition, but in appropriate cases. Such cases could include a case, as the present, where the mentioned grounds are found to be untenable and, thus, unsustainable, but an alternative ground (appearing from the factual narrative in the order itself and/or from the records relevant thereto) is traceable which could have validly been mentioned as a ground to support the impugned rejection had there been a proper application of mind by the administrative authority. In all such cases, it would be open to the court to uphold it on such alternative ground subject, of course, to the affected party being put on notice and an opportunity to respond. This approach, which would prioritize fairness and justice over technicalities, does not run contrary to or inconsistent with the law laid down in the afore referred precedents.”, the judgment authored by Justice Datta observed.

The Court has created a narrow exception to the long-standing “speaking order” doctrine laid down in Mohinder Singh Gill v. Chief Election Commissioner, (1978) 1 SCC 405. As per Mohinder Singh Gill's case, an administrative order must stand or fall solely on the reasons expressly stated in it. Authorities are barred from justifying their actions later with new or supplementary grounds, ensuring transparency and preventing retroactive rationalisation.

The Court in this case clarified that while new reasons cannot be added, courts may uphold an order on unstated but evident grounds already embedded in the factual record, provided the aforesaid triple test is fulfilled.

In this case, the Court noted that the Bank could have very well rejected the OTS benefit by stating that the borrower had not complied with the condition of making the upfront payment. However, the Bank officials failed to specify this reason in the rejection order. Yet, this reason was very much evident from the record of the OTS policy. The borrower also had no case that he had made the threshold payment. In these circumstances, the Court upheld the rejection order, although this reason was not specifically mentioned in it.

Cause Title: ASSISTANT GENERAL MANAGER STATE BANK OF INDIA & ANR. VS. TANYA ENERGY ENTERPRISES THROUGH ITS MANAGING PARTNER SHRI ALLURI LAKSHMI NARASIMHA VARMA

Citation : 2025 LiveLaw (SC) 918

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Also From Judgment: Defaulting Borrower Cannot Claim OTS Benefit Without Fulfilling Bank's Conditions : Supreme Court Allows SBI's Appeal