CourtKutchehry

Supreme Court Creates Narrow Exception to ‘Speaking Order’ Rule, Allows Limited Use of Unstated Reasons

Court says orders can be upheld on evident but unstated grounds if fairness safeguards are met

Ruling comes in SBI loan settlement dispute; borrower failed to meet 5% upfront payment condition

Our Legal Correspondent

New Delhi, September 17, 2025:

The Supreme Court of India has carved out a narrow exception to the long-standing legal principle that an administrative order must be judged only on the reasons stated in it.

In a significant judgment, a bench of Justice Dipankar Datta and Justice A.G. Masih ruled that in limited circumstances, courts may uphold an order based on unstated but evident reasons that are already part of the factual record — provided strict fairness safeguards are followed.

The ruling came in the case Assistant General Manager, State Bank of India & Anr. vs. Tanya Energy Enterprises, which involved a dispute over a One Time Settlement (OTS) application under the bank’s 2020 scheme.

The Case Background

Tanya Energy Enterprises, a borrower from the State Bank of India (SBI), had applied for an OTS to settle its outstanding dues. Under Clause 4(i) of the OTS 2020 Scheme, applicants were required to deposit 5% of the dues upfront as a precondition for consideration.

SBI rejected the application, but its rejection order did not mention the borrower’s failure to make the 5% payment. Instead, it cited other grounds.

The Andhra Pradesh High Court later directed SBI to reconsider the borrower’s proposal, despite the borrower’s repeated defaults and non-compliance with the upfront payment requirement.

Supreme Court’s Intervention

On appeal, the Supreme Court set aside the High Court’s order and upheld SBI’s rejection — even though the 5% non-payment reason was not expressly stated in the original rejection order.

The bench reasoned that the failure to deposit the 5% upfront amount was an existing, valid ground that was evident from the records and the OTS policy itself. The borrower had never claimed to have made the payment, and the requirement was mandatory.

The Three-Layer Test

Before allowing this departure from the “speaking order” rule, the court laid down a three-step test for when unstated reasons can be considered:

Stated Grounds Are Untenable — If the reasons given in the order are found to be unsustainable.
Traceable Alternative Ground — The court may identify a valid alternative reason from the factual narrative in the order or from documents referred to in it.
Fair Opportunity to Respond — The affected party must be given notice of the alternative ground and a chance to present their case.

Justice Datta, writing for the bench, emphasised that this approach “prioritises fairness and justice over technicalities” and does not contradict earlier precedents.

The ‘Speaking Order’ Doctrine

The decision slightly relaxes the strict rule laid down in the landmark case Mohinder Singh Gill v. Chief Election Commissioner (1978), which held that an administrative order must stand or fall on the reasons stated in it. Authorities are barred from adding new justifications later, to ensure transparency and prevent after-the-fact rationalisation.

The Supreme Court clarified that its new exception does not allow authorities to introduce new reasons through affidavits or oral arguments. Instead, it only permits courts to rely on already existing, record-based reasons that were simply not articulated in the order — and only when the triple test is satisfied.

Why the Court Allowed the Exception Here

In this case, the bench noted:

The borrower had not paid the 5% upfront amount, making the application incomplete from the start.
This requirement was clearly stated in the OTS policy and was part of the record.
The borrower never disputed the fact of non-payment.

Given these facts, the court held that SBI’s rejection could be upheld on this unstated but evident ground.

Implications of the Ruling

This judgment could have a wide impact on administrative and quasi-judicial decisions, especially in banking, regulatory, and government matters.

For authorities:

They must still aim to issue clear, reasoned orders.
However, if a valid reason is evident from the record but omitted in the order, courts may still uphold the decision — but only in rare cases.

For litigants:

They cannot rely solely on technical omissions if the factual record clearly supports the decision against them.
They must be prepared to address all possible grounds traceable from the record.

For courts:

The ruling provides flexibility to prevent unjust outcomes caused by minor drafting errors in orders.
At the same time, it preserves the core principle of transparency by requiring notice and opportunity to respond.

Expert Reactions

Legal commentators have noted that the judgment strikes a balance between procedural purity and substantive justice.

Some see it as a pragmatic correction to avoid overturning valid decisions due to technical lapses, while others caution that it must be applied sparingly to prevent erosion of the speaking order principle.

Case Snapshot

Case Title	*Assistant General Manager, State Bank of India & Anr. vs. Tanya Energy Enterprises*
Bench	Justice Dipankar Datta, Justice A.G. Masih
Date of Judgment	September 17, 2025
Key Issue	Whether unstated but record-based reasons can justify an administrative order
Ruling	Yes, in limited circumstances, subject to a three-layer fairness test
Outcome	SBI’s rejection of OTS upheld; AP High Court order set aside

Conclusion

The Supreme Court’s ruling marks a measured evolution of the speaking order doctrine. By allowing courts to consider unstated but evident reasons in rare cases, it ensures that justice is not defeated by technical omissions — while still safeguarding fairness and transparency.

For banks, regulators, and government bodies, the message is clear: draft orders carefully, but know that genuine, record-based grounds will not be ignored if fairness is maintained.