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ALLAHABAD HIGH COURT
Hon'ble M. KATJU AND R. S. TRIPATHI, JJ.
C.M.W.P. No. 17158 of 2003
Decided on 26.8.2003
Simco Rubber Product Private Ltd.
versus
Bank of India, Agra & Anr.
RBI guidelines for NPAs are not meant for willful defaulters, and the court cannot direct one-time settlement or repayment of bank loans in instalments.
Headnote:
NPA - Recovery of Dues - Indian Companies Act, RBI Guidelines - 27.7.2000, 29.1.2003 - The court discussed the petitioner's claim for one-time settlement under the RBI guidelines for Non Performing Assets (NPA) and the respondent bank's refusal based on the petitioner's willful default and diversion of funds to other businesses through other banks. The court held that the RBI guidelines are not meant for willful defaulters and dismissed the petition.
Fact of the Case:
The petitioner, a Private Limited Company, sought a writ of certiorari to quash a letter from the respondent Bank of India and a mandamus directing the bank to accept a one-time settlement offer. The petitioner claimed financial difficulties due to low market demand, while the bank alleged willful default and diversion of funds.
Finding of the Court:
The court found no merit in the petition, stating that the RBI guidelines are not meant for willful defaulters like the petitioner. It dismissed the petition, emphasizing that the petitioner had not come to court with clean hands.
Issues: The issues revolved around the petitioner's eligibility for a one-time settlement under RBI guidelines for NPAs, the respondent bank's refusal based on alleged willful default, and the petitioner's claim of financial difficulties.
Ratio Decidendi: The court held that the RBI guidelines for NPAs are not meant for willful defaulters and cannot be utilized by borrowers who have willfully defaulted in repayment of loans and diverted funds to other businesses through other banks. It emphasized that a settlement requires consent from both parties, and the court cannot direct one-time settlement or repayment of bank loans in instalments.
Final Decision: The court dismissed the petition, stating that the petitioner had not come to court with clean hands and had manipulated the position of its accounts. It held that the RBI guidelines do not apply to willful defaulters like the petitioner.
M. Katju, J. : This writ petition has been filed for a writ of certiorari to quash the impugned letter dated 8.3.2003 Annexure 3 to the writ petition issued by the respondent Bank of India. The petitioner has also prayed for a mandamus directing the respondent Bank to accept one time of settlement offer of the petitioner as contained in the letter dated 4.3.2003, Annexure 2 to the writ petition.
Heard learned Counsel for the parties.
2. The petitioner is a Private Limited Company registered under the Indian Companies Act and is having its factory at Sikandra Industrial Area, Agra. The petitioner took a loan from the respondent Bank whose sanctioned limit is Rs. 27 lacs as stated in paragraph 5 of the writ petition. It is alleged in paragraph 6 of the writ petition that the factory ran into financial difficulties soon after the production began because of the low demand in the market of the petitioners product. Hence, the petitioner could not achieve the expected profits and hence could not meet the interest liability on the loan.
3. It is alleged in paragraph 7 of the writ petition that the Reserve Bank of India framed guidelines date 27.7.2000 for recovery of dues relating to Non Performing Assets (hereinafter referred to as `NPA') of Public Sector Banks. There were revised on 29.1.2003 which has been quoted in paragraph 7 of the writ petition. True copy of the guidelines is Annexure 1 to the writ petition.
4. It is alleged in paragraph 11 of the writ petition that the cash credit facility falls under the category of NPA from 31.12.1997 upto 31.3.2000. The account became a doubtful asset since it remained NPA for a period exceeding two years on 31.3.2000 and hence it is alleged that a compromise settlement as stated in clause (A) (i) as mentioned in the letter dated 29-3-2003 became applicable to the petitioner's case. It is alleged in para 12 that the petitioner became entitled to the one time settlement and hence, it sent a letter dated 4.3.2003 to the Zonal Manager, SBI Branch, Bank of India, Agra pointing out that the account falls under the NPA category as per the RBI. Guidelines and the petitioner was ready to pay the outstanding dues as on the relevant date the account become doubtful. Photocopy of the letter dated 4.3.2003 is Annexure 2 to the writ petition. It is alleged in para 13 that instead of accepting the petitioner's offer the Chief Manager of the respondent Bank sent a letter dated 8.3.2003 informing the petitioner that its account does not fall under the RBI guidelines for one time settlement vide Annexure 3 to the writ petition. It is alleged by the petitioner that the contention of the respondent Bank that the petitioner is not entitled to one time settlement is patently illegal. It is alleged in para 15 that the petitioner falls under the Doubtful Asset Classification and therefore, was clearly entitled for one time settlement. It is alleged in paragraph 20 of the writ petition that no reason has been given in the letter dated 8.3.2003 as to why the petitioner's account does not fall under the RBI guidelines for one time settlement and only a bald statement has been made which is apparently against the record. It is alleged that the guidelines of the RBI are statutory in nature and the respondent Bank is a nationalized Bank and hence it was obligatory on the part of the Bank to comply with the said guidelines.
5. A counter - affidavit has been filed by the Chief Manager of the respondent No. 1 and we have perused the same. In paragraph 3 it is alleged that the petitioner is a wilful defaulter who is trying to get undue advantage of the RBI guidelines by getting a declaration that his account has been declared as NPA with retrospective effect so that he may get the benefit of one time settlement to which he is not entitled. It is alleged that in case the petitioner's claim is granted it will open a Pandoras box for unscrupulous borrowers who will seek declaration of their account as NPA as per the
