Supreme Court Upholds RBI Guidelines on Settlements, Debt Recovery Tribunal Authority Affirmed

The Supreme Court held that the Reserve Bank of India (RBI) guidelines for one-time settlement are binding on public sector banks. The court affirmed the Debt Recovery Appellate Tribunal's authority to enforce these guidelines and rejected the respondent bank's deviation from them. The court emphasized the statutory nature of the RBI guidelines and directed the respondent bank to settle the case of the appellants in accordance with these guidelines. The impugned judgment of the High Court was set aside, and the appeals were allowed.

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Issues Involved:
1. Source of power of the Reserve Bank of India (RBI) to issue circulars and guidelines regarding one-time settlement.
2. Validity and applicability of the RBI guidelines for one-time settlement.
3. Jurisdiction and authority of the Debt Recovery Appellate Tribunal (DRAT) to enforce RBI guidelines.
4. Non-disclosure and suppression of facts by the appellants.
5. Binding nature of RBI guidelines on public sector banks.

Issue-wise Detailed Analysis:

1. Source of Power of the RBI to Issue Circulars and Guidelines:
The judgment delves into the statutory authority of the RBI to issue guidelines under Section 21 and 35A of the Banking Regulation Act, 1949. The RBI, being a statutory authority, exercises supervisory power over scheduled banks, including issuing guidelines for banking operations. Section 21 empowers the RBI to determine policies related to advances, which banks are bound to follow. The court highlighted that the RBI's guidelines have a statutory flavor and are binding on all public sector banks.

2. Validity and Applicability of the RBI Guidelines for One-Time Settlement:
The court examined the guidelines issued by the RBI for one-time settlement of non-performing assets (NPAs) below Rs. 10 crore. These guidelines were intended to provide a simplified, non-discretionary, and non-discriminatory mechanism for settlement. The court noted that the respondent bank, being a public sector bank, was bound by these guidelines. The guidelines mandated uniform implementation by all public sector banks and stipulated specific terms for settlement amounts and payment schedules.

3. Jurisdiction and Authority of the DRAT to Enforce RBI Guidelines:
The court affirmed the jurisdiction of the DRAT to enforce RBI guidelines. It was noted that the DRAT, in its order, directed the respondent bank to settle the case of the appellants as per the RBI guidelines. The court emphasized that the DRAT's jurisdiction is co-extensive with that of the Debt Recovery Tribunal (DRT) and includes the authority to consider the applicability of RBI guidelines in the settlement process. The court rejected the contention that the DRAT lacked jurisdiction to declare the bank's guidelines as nullity, stating that the DRAT had the requisite jurisdiction to enforce RBI guidelines.

4. Non-disclosure and Suppression of Facts by the Appellants:
The court addressed the issue of non-disclosure and suppression of facts by the appellants in their writ petition before the High Court. While the High Court dismissed the writ petition on grounds of suppression, the Supreme Court held that such suppression did not preclude the appellants from approaching the DRAT. The court cited the principle that suppression must be of material fact to disentitle a party from obtaining discretionary relief. The court concluded that the appellants' subsequent approach to the DRAT was permissible.

5. Binding Nature of RBI Guidelines on Public Sector Banks:
The court underscored the binding nature of RBI guidelines on public sector banks. It referred to the Constitution Bench judgment in Central Bank of India v. Ravindra, which held that RBI directives have statutory force and are binding on banks. The court reiterated that public sector banks, being "State" under Article 12 of the Constitution, are obligated to follow RBI guidelines. The court rejected the respondent bank's deviation from the guidelines, stating that such deviation violated the non-discriminatory clause of the RBI guidelines and Article 14 of the Constitution.

Conclusion:
The Supreme Court set aside the impugned judgment of the High Court and allowed the appeals. It held that the RBI guidelines for one-time settlement are binding on public sector banks and that the DRAT had the authority to enforce these guidelines. The court emphasized the non-discriminatory and statutory nature of the RBI guidelines and directed the respondent bank to settle the case of the appellants as per these guidelines.

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