2007 (11) TMI 669 - HC - Companies Law

RBI Guidelines Not Binding in Settlement Orders

The court allowed the writ petition, setting aside the Tribunal's order directing settlement under RBI guidelines, restoring the order of the Debts ... - Issues Involved:1. Legality of the Tribunal's direction to settle the case under RBI guidelines.2. Statutory nature of RBI guidelines for One Time Settlement (OTS).3. Authority of the Tribunal to issue directions to banks for settlement under RBI guidelines.Summary:1. Legality of the Tribunal's direction to settle the case under RBI guidelines:The petitioner bank challenged the Tribunal's order dated 13.4.2007, which directed the bank to settle the case of private respondents under RBI guidelines applicable at the time of declaring the account as Non-Performing Assets (NPA). The bank sought to recover the amount as per the judgment and Recovery Certificate dated 23.11.2006 issued by the Debts Recovery Tribunal-II, Chandigarh.2. Statutory nature of RBI guidelines for One Time Settlement (OTS):The court examined whether RBI guidelines for OTS could be regarded as statutory in character, conferring a legal right enforceable by courts. It was noted that the guidelines issued by the Chief General Manager of RBI do not have statutory authority under Sections 21 and 35A of the Banking Regulation Act, 1949. The guidelines lack statutory flavour and do not create enforceable rights and duties.3. Authority of the Tribunal to issue directions to banks for settlement under RBI guidelines:The court held that the Tribunal's directions to the bank to settle the outstanding amounts as per RBI guidelines were not legally enforceable. The guidelines issued by RBI do not bind the banks in a statutory sense, and thus, the Tribunal's order directing settlement under these guidelines was set aside.Conclusion:The court allowed the writ petition, setting aside the Tribunal's order dated 13.4.2007, and restored the order of the Debts Recovery Tribunal-II, Chandigarh, dated 23.11.2006. The RBI guidelines for OTS do not have statutory force, and the Tribunal's directions based on these guidelines were deemed unenforceable.