TaxTMI 
TaxTMI 
2009 (7) TMI 1274
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....certificate dated 23.11.2006 issued by the Debts Recovery Tribunal - II, Chandigarh (for short "the Tribunal") in Appeal No. 26 of 2007, was set aside. 3. Bereft of all unnecessary details, the fact of the matter reads as under: Appellants herein as also the Performa respondent Nos. 2 to 11 along with one Smt. Darshan Kaur (since deceased) obtained the facilities for grant of loan for a sum of Rs. 3, 54,50,000/- for business purposes which was being carried out by them under the name and style of M/s. Sardar Associates Limited, appellant No. 1 herein. The said amount was sanctioned and disbursed from time to time. Indisputably, the appellant No. 2 and the Proforma respondent Nos. 2 to 11 as also the said Smt. Darshan Kaur stood as guarantors. Appellant Nos. 1 and 2 as also Proforma respondent Nos. 5 and 7 also mortgaged their properties in favour of the respondent - Bank by way of security to the said amount. Defaults having been made in discharging their liabilities, their assets were declared as NPA as per the guidelines issued by the Reserve Bank of India. 4. A proceeding was initiated by the respondent - Bank purporting to be under Section 13(2) of the Securitization and ....
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.... the Tribunal in its order dated 23.11.2006. The Appellate Tribunal by a judgment and order dated 13.04.2007, dismissed the appeal preferred by the respondent - Bank and allowed that of the appellants and the Performa Respondent Nos. 2 to 11 directing the respondent - Bank to make one time settlement in terms of the guidelines issued by the Reserve Bank of India as was prevailing at the relevant time. 9. We must, however, place on record that the Appellate Tribunal affirmed the judgment as also the validity of the recovery certificate dated 23.11.2006. 10. It furthermore permitted the appellants and the Proforma Respondent Nos. 2 to 11 to sell the secured properties for clearing the dues in terms of one time settlement scheme and ordered that such an exercise must be completed within a period of four months during which period the bank was restrained from taking any coercive steps against them. 11. Respondent - Bank filed writ application thereagainst which by reason of the impugned judgment has been allowed. Appellants filed a review application before the High Court which has been dismissed. 12. Dr. Abhishek Manu Singhvi, learned senior counsel appearing on behalf of ....
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....ed by the Reserve Bank of India Act. For the aforementioned purpose, the Reserve Bank is entitled to issue guidelines from time to time. 15. The Parliament also enacted the 1949 Act to consolidate and amend the law relating to banking. Section 5(l) of the 1949 Act defines "Reserve Bank" to mean the Reserve Bank of India constituted under Section 3 of the Reserve Bank of India Act, 1934. By reason of various provisions of the 1949 Act, the Reserve Bank is empowered to control and supervise the functioning of the Scheduled Banks. The 1949 Act also provides for power of the Reserve Bank to control advances by banking companies in terms of Section 21 of the 1949 Act which reads as under: "21 - Power of Reserve Bank to control advances by banking companies (1) Where the Reserve Bank is satisfied that it is necessary or expedient in the public interest or in the interests of depositors or banking policy so to do, it may determine the policy in relation to advances to be followed by banking companies generally or by any banking company in particular, and when the policy has been so determined, all banking companies or the banking company concerned, as the case may be, sh....
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....may be specified therein- (i) require the banking company to call a meeting of its directors for the purpose of considering any matter relating to or arising out of the affairs of the banking company; or require an officer of the banking company to discuss any such matter with an officer of the Reserve Bank; (ii) depute one or more of its officers to which the proceedings at any meeting of the Board of directors of the banking company or of any committee or of any other body constituted by it; require the banking company to give an opportunity to the officers so deputed to be heard at such meetings and also require such officers to send a report of such proceedings to the Reserve Bank; (iii) require the Board of directors of the banking company or any committee or any other body constituted by it to give in writing to any officer specified by the Reserve Bank in this behalf at his usual address all notices of, and other communications relating to, any meeting of the Board, committee or other body constituted by it; (iv) appoint one or more of its officers to observe the manner in which the affairs of the banking company or of its offices or branches are being con....
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....fied as sub-standard as on 31st March, 2004 which became doubtful or loss subsequently would be 100% of the outstanding balance in the account as on the date on which the account was categorized as doubtful NPAs plus interest at existing Basic Prime Lending Rate from 1st April, 2004 till the date of final payment." (iii) Payment The amount of settlement arrived at in both the above cases, should preferably be paid in one lump sum. In cases where the borrowers are unable to pay the entire amount in one lump sum, at least 25% of the amount of settlement should be paid upfront and the balance amount of 75% should be recovered in installments within a period of one year together with interest at the existing Prime Lending Rate from the date of settlement up to the date of final payment. XXX XXX XXX (V) Non-discretionary treatment: Banks shall follow the above guidelines for one time settlement of all NPAs covered under the scheme, without discrimination and a monthly report on the progress and details of settlement should be submitted by the concerned authority to the next high authority and their Central Office. Banks may go for wide publicity and also give notice January ....
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....ading "Non-Discretionary Treatment", the bank stated: "7.1 RBI has advised that the guidelines for compromise settlement of NPAs in SME sector are non-discretionary and non-discriminatory. Therefore, if the borrower fulfills the eligibility criteria for consideration of OTS under these guidelines then amount of OTS will be determined strictly in terms of Clause No.4.1 and 4.2 above irrespective of any other factor." 22. Furthermore, the respondent - Bank in its letter dated 1.12.2005, stated: "Please refer our letter regarding the above mentioned policy of R.B.I. We are again enclosing herewith the photocopy of the policy. You are requested to come forward as per policy for settlement of the account at your earliest." The respondent - Bank yet again in its letter dated 01.03.2006, stated: "This is in continuation of our letter dated 17.02.2006 on the above subject. Please note the OTS scheme of RBI is valid upto 31.03.2006 as such please send your request well within the last date so that the proposal may be put up to the competent authority." 23. It is on the aforementioned premise, the merit and purport of the correspondences exchanged between the part....
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....doubtful" by bank. Therefore, we request you to consider our proposal for one time settlement at Rs. 345.31. The proposed amount of Rs. 345.31 lacs has been arrived at as the amount which would have been outstanding in our account on the date when our account was categorized "doubtful" for the first time, i.e., by adding interest for 2 years at PLR Rs. 59.93 lacs on the amount of Rs. 285.38 lacs which was outstanding in our account as on the date when our account was categorized as non performing asset." 24. Such a proposal was made bona fide. It was within the framework of the guidelines issued by the Reserve Bank of India. 25. It is not necessary to place on record the further correspondences exchanged between the parties although our attention has been drawn thereto in terms whereof the appellants had all along been making sincere efforts to one time settlement within the parameters of the guidelines issued by the Reserve Bank of India. 26. It may be true that the appellants filed a writ petition before the Punjab and Haryana High Court which was dismissed on the ground of suppression. In Arunima Baruah v. Union of India and Ors. [(2007) 6 SCC 120] the ques....
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....thers (2004) 7 SCC 166] 27. The said order of the Punjab and Haryana High Court dated 21.11.2006 again indisputably has been affirmed by this Court. But, in our opinion, the same by itself did not preclude the appellants to approach the Appellate Tribunal. The jurisdiction of the appellate tribunal is co-extensive with the powers of the Tribunal. The memo of appeal filed by the appellants before the Tribunal clearly shows that the contentions with regard to the enforcement of the aforementioned provisions had been made therein. 28. It is, therefore, not correct to contend that no pleadings were made for the purpose of enforcing the RBI guidelines in respect of one time settlement. 29. It may be that no specific prayer was made but the same, in our opinion, keeping in view the provisions of the 2002 Act, did not preclude the Appellate Tribunal to consider the offer of the appellants. The Appellate Tribunal in terms of the provisions of the Act like the original Tribunal is interested only in recovery of the amount. While doing so, it, in our considered opinion, has the requisite jurisdiction to consider the prayer made by a debtor for one time settlement particularly....
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.... in relation to some minor matters which does not touch the broad aspects of the policy decision and in particular the one governing the non-discriminatory treatment. In a case of this nature, we are satisfied that the respondent - Bank is guilty of violation of the equality clause contained in the Reserve Bank of India guidelines as also Article 14 of the Constitution of India. 34. The fact that the appellants were defaultors is not in dispute. It is also not in dispute that it comes within the purview of the Small and Medium Enterprises sector. 35. It is furthermore not in dispute that the respondent - Bank itself had made an offer to accept the proposal of the appellants in regard to enforcement of one time settlement pursuant to the RBI guidelines. Indisputably, it was all along aware that the amount of securities was lying with it. It is only pursuant thereto the directions had been issued by the Tribunal 36. The question as to whether the guidelines issued by the Reserve Bank of India are binding or not now stands concluded by reason of a Constitution Bench Judgment of this Court in Central Bank of India v. Ravindra and Others [(2002) 1 SCC 367] in the following t....
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....ve no application where the NPAs have not been classified as substandard as on 31-3-2000. It is not in dispute that the account of the respondents was a performing account between 1-4-2000 and 31-3-2001. According to the records of the Bank, the account was consigned to protest bill account on 15-10- 2001 and was declared as NPA as per prudential norms of RBI on 31-3-2001. The respondents contested the case before DRT and did not admit their liability. No such plea was raised that their account had become NPA as on 31-3-2000 before DRT. Therefore, the revised guidelines issued by Reserve Bank of India on 29-1-2003 for compromise settlement of chronic non-performing assets (NPAs) of public sector banks were not at all applicable to the facts and circumstances of the case and no direction could be issued to declare the respondents' account as NPA from 31-3-2000." 39. Judicial discipline mandates the bench comprising of two Judges to follow the judgments of the Constitution Bench having regard to Article 141 of the Constitution of India. 40. If in terms of the guidelines issued by the Reserve Bank of India a right is created in a borrower, we see no reason as to why a ....