Bank's Loan Assignment to Ineligible Transferee Violates RBI Directives, Court Recalls Compromise Order

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....The HC recalled its order approving a compromise between a bank and Savannah regarding the assignment of Shaila Clubs' loan. The Court determined the compromise was unlawful as it violated RBI Directives of 2021, which prohibit transfer of loan accounts to ineligible transferees. Savannah, not being a recognized transferee under RBI guidelines, could not legally acquire the loan. The Court rejected arguments regarding delay in filing the application for recall, holding that when a compromise is unlawful, technical grounds cannot prevent the Court from exercising its inherent power to recall orders. The Court restored the original petition, finding that allowing the unlawful compromise would frustrate RBI's regulatory objectives and improperly affect Shaila Clubs' rights without their consent.....