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2008(1) Supreme 172
Supreme Court of india
(From Delhi High Court)
G.P. Mathur & Aftab Alam, JJ.
Oriental Bank of Commerce — Petitioner
versus
Sunder Lal Jain & Anr. — Respondents
Appeal (civil) 82 of 2008
(Arising out of Special Leave Petition (Civil) No. 882 of 2006)
Decided on : 08-01-2008
(b) Banking Laws – NPA – Compromise settlement – The revised guidelines of RBI have no application where the NPAs have not been classified as sub-standard as on 31st March, 2000 – Admittedly the respondents’ account was a performing account between 1.4.2000 and 31.3.2001 – It was declared as NPA on 31.3.2001 – Further, respondents did not raise the plea before DRT that their account had become NPA as on 31.3.2000 – Therefore, the revised guidelines issued by RBI 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 31st March, 2000. (Para 6)
(c)Banking Laws – NPA – The RBI guidelines provide that at least 25% of the amount of settlement should be paid upfront and the balance amount of 75% should be recovered in instalments within a period of one year together with interest – High Court has directed that the amount should be recovered in quarterly installments over a period of two years – The said judgment is not sustainable on this account also. (Para 6)
(d)Banking Laws – NPA – RBI guidelines – These guidelines are only in the nature of internal guidelines for the banks and financial institutions – They are purely executive instructions and have no statutory force – They do not create any right in favour of the borrowers – Therefore in order to avail relief under the guidelines, the eligibility criteria must be strictly fulfilled.(Para 7)
(e)Constitution of India – Article 226 – Respondents wanting the Court to issue writ of mandamus for declaration of their account as NPA without having a legal right in that respect or strictly conforming to the guidelines; for getting their liability towards the bank reduced considerably – In order that a writ of mandamus may be issued, there must be a legal right with the party – High Court judgment not sustainable. (Paras 7 and 9)
AIR 1977 SC 2149; AIR 1966 SC 334; AIR 1962 SC 1210; AIR 1973 SC 964 – Relied upon.
(f)Constitution of India – Article 226 – Principles for issue of writ of mandamus enumerated. (Para 8)
Facts of the case:
1.The respondents Sunder Lal Jain & another were sanctioned credit facility for Rs.20 lakhs on 12.12.1996. The respondent defaulted in repayment of the amount and their account was declared as NPA on 31.3.2001.
2.On 21.2.2002, the appellant Oriental Bank of Commerce filed a petition against the respondents before the Debt Recovery Tribunal-III, Delhi. The DRT passed a decree in favour of the appellant for recovery of Rs.20,27,862/- along with interest on 14.11.2003. The appellant initiated execution proceedings for recovery of the amount from the respondents and a recovery certificate was issued on 8.12.2003.
3.The respondents did not file any appeal challenging the decree passed by the DRT. Instead, they filed writ petitions before Delhi High Court praying that a direction be issued to the appellant, Oriental Bank of Commerce, to declare their account as NPA from 31.3.2000 and apply RBI Guidelines for reconciliation and settling the accounts with them.
4.The petitions were disposed of by a short order on 17.8.2005.
Findings of the Court:
The RBI guidelines, not being statutory in nature, do not create any legal right in the borrowers. To get relief there under the conditions thereof must be strictly complied/ conformed.
Result : Appeal allowd.
Borrower Status: The respondents (borrowers) held a loan account that was classified as a performing/standard asset (not sub-standard or NPA) as on 31st March 2000, remaining performing between 1st April 2000 and 31st March 2001, and was declared NPA only with effect from 31st March 2001.[1000419020002] (!) (!) (!) (!) [1000419020004] (!) (!) (!) (!) (!) (!) (!) (!) (!)
judgment
G.P. Mathur, J. —
1.Leave granted.
2.This appeal, by special leave, has been preferred against the judgment and order dated 17.8.2005 of Delhi High Court, by which a direction was issued to the appellant Oriental Bank of Commerce to declare the respondents account as Non-Performing Asset (NPA) from 31st March, 2000 and to apply the Reserve Bank of India Guidelines to their case and communicate the outstandings which shall be recoverable by quarterly instalments over a period of two years.
3.The respondents Sunder Lal Jain & another were sanctioned credit facility for Rs.20 lakhs on 12.12.1996. The respondent defaulted in repayment of the amount and their account was declared as NPA on 31.3.2001. On 21.2.2002, the appellant Oriental Bank of Commerce filed a petition against the respondents being O.A. No.21 of 2002 before the Debt Recovery Tribunal-III, Delhi (for short the DRT). The DRT passed a decree in favour of the appellant for recovery of Rs.20,27,862/- along with interest on 14.11.2003. The appellant initiated execution proceedings for recovery of the amount from the respondents and a recovery certificate was issued on 8.12.2003. The respondents did not file any appeal challenging the decree passed by the DRT. Instead, the respondents filed WP(C) No.559 of 2005 and WP(C) No.560 of 2004 before Delhi High Court praying that a direction be issued to the appellant, Oriental Bank of Commerce, to declare their account as NPA from 31.3.2000 and apply RBI Guidelines for reconciliation and settling the accounts with them. The petitions were disposed of by a short order on 17.8.2005 which reads as under :-
“The petitioners have a remedy available to them of filing an appeal against the recovery proceedings to the DRT which remedy has not been taken and for which this petition is liable to be rejected. However, since this petition has been pending for quite some time before this Court and the first Respondent has agreed to consider declaring the account as NPA from 31st March, 2000, there is no impediment in disposing of this petition by the following order :
First Respondent-Bank is directed to declare the Petitioners account as NPA from 31st March, 2000 and apply the RBI guidelines to their case and then to communicate the outstandings, which shall be recoverable by quarterly instalments over a period of two years.
In case, this course works out and Petitioners after reconciling their accounts do not commit any default, the execution proceedings against them pending before the Recovery Officer shall be stayed and the recovery certificate passed against them shall stand cancelled. However, in case of default it shall be open to the first Respondent-Bank to activate the recovery proceedings against them. In that event, it shall be open to the Petitioners to take any appropriate remedy, which they may have against the recovery certificate or its execution in law.”
Feeling aggrieved by the above noted order, the appellant, Oriental Bank of Commerce, has preferred this appeal.
4.Learned counsel for the appellant has submitted that the bank had filed a suit for recovery of the amount and the same had been decreed on 14.11.2003 and thereafter a recovery certificate had also been issued on 8.12.2003 in the execution proceedings initiated by the appellant. The respondents did not file any appeal to challenge the decree passed by the DRT and, therefore, the same attained finality. In these circumstances, the writ petition filed by the respondents to declare their account as NPA from 31.3.2000 and to apply the RBI guidelines to their case was not at all maintainable and the order passed by the High Court is clearly erroneous in law. Learned counsel for the respondents has, on the other hand, tried to support the order passed by the High Court and has submitted that the same had been passed on consent of the parties and, therefore, it is not open to the appellant to challenge the same.
Regarding the submission of learned counsel for the re
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