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High Court of Calcutta
Satyabrata Sinha, J.
Eva Seth – Appellant
Versus
Union of India – Respondent
Decided On : Sep 04, 1997
BANKING - Banking Regulation Act, 1949 - Section 21 - Reserve Bank of India Act, 1934 - Section 46(4) - Banking - Interest - Preshipment Credit in Foreign Currency Scheme (PCFC Scheme) - Export Credit - Rate of Interest - Circulars issued by Reserve Bank of India - Binding on Banks - No Objection Certificate - Petitioner entitled to.
Fact of the Case:
Petitioner, a manufacturer of domestic inputs of exported goods (leather goods), filed a writ petition challenging the respondent bank's refusal to grant a no-objection certificate for opening an account with another bank under the PCFC Scheme. The petitioner also sought a declaration that the bank was obliged to charge only the rate of interest announced by the Reserve Bank of India (RBI) in respect of the PCFC Scheme and that the petitioner's liability to the bank was to be determined on that basis.
Finding of the Court:
1. The PCFC Scheme announced by the RBI is applicable to the petitioner's case, as the scheme covers both domestic and imported inputs of exported goods. 2. The rate of interest chargeable by the respondent bank in respect of the PCFC Scheme is the rate announced by the RBI, which is 2% over 'libor' of 180 days. 3. The respondent bank was acting in violation of the RBI's directives by charging a higher rate of interest ranging between 13% to 23.25% in the petitioner's case. 4. The petitioner is entitled to a declaration that the respondent bank is obliged to charge only the rate of interest announced by the RBI in respect of the PCFC Scheme and that the petitioner's liability to the bank is to be determined on that basis. 5. The respondent bank is obliged to issue a no-objection certificate to the petitioner for opening an account with any other bank under the PCFC Scheme.
Issues: 1. Whether the PCFC Scheme announced by the RBI is applicable to the petitioner's case? 2. What is the rate of interest which the respondent bank is entitled to charge in respect of the PCFC Scheme? 3. Whether the respondent bank was acting in violation of the RBI's directives by charging a higher rate of interest in the petitioner's case? 4. Whether the petitioner is entitled to a declaration that the respondent bank is obliged to charge only the rate of interest announced by the RBI in respect of the PCFC Scheme and that the petitioner's liability to the bank is to be determined on that basis? 5. Whether the respondent bank is obliged to issue a no-objection certificate to the petitioner for opening an account with any other bank under the PCFC Scheme?
Ratio Decidendi: 1. The PCFC Scheme, as announced by the RBI, covers both domestic and imported inputs of exported goods. This is evident from the RBI's circulars dated 8th November 1993, 14th January 1996, and 29th February 1996. 2. The rate of interest chargeable by banks in respect of the PCFC Scheme is the rate announced by the RBI, which is 2% over 'libor' of 180 days. This is evident from the RBI's circulars dated 8th November 1993 and 29th February 1996. 3. The respondent bank was acting in violation of the RBI's directives by charging a higher rate of interest ranging between 13% to 23.25% in the petitioner's case. This is evident from the fact that the respondent bank had refused to grant the petitioner a no-objection certificate for opening an account with another bank under the PCFC Scheme, despite the fact that the petitioner had fulfilled all the requirements of the scheme. 4. The petitioner is entitled to a declaration that the respondent bank is obliged to charge only the rate of interest announced by the RBI in respect of the PCFC Scheme and that the petitioner's liability to the bank is to be determined on that basis. This is because the RBI's directives are binding on banks under Section 21(2) of the Banking Regulation Act, 1949. 5. The respondent bank is obliged to issue a no-objection certificate to the petitioner for opening an account with any other bank under the PCFC Scheme. This is because the respondent bank has no right to prevent the petitioner from carrying on her export business.
Final Decision: The writ petition was allowed. The respondent bank was directed to grant a no-objection certificate to the petitioner at an early date and not later than four weeks from the date of the order, so as to allow her to carry her export business without prejudice to the right of the respondent bank to recover its own dues in the Debt Recovery Tribunal.
1. THE petitioner in this writ application has inter alia prayed for the following reliefs
"a) A Writ in the nature of Mandamus commanding the respondents to cancel and/or rescind the fetters dated 7th February, 1996 and 17th May, 1996 respectively issued by the Branch Manager, bank of Maharashtra, Rash Behari Branch and Deputy General manager (Credit), Bank of Maharashtra. Central Office, Pune addressed to the petitioner
b) A Writ of Mandamus commanding the respondents to act according to law and to charge interest to the petitioner's account only in accordance with the guidelines issued by the Reserve bank of India as referred to in the petition and directing to refund all or any amount charged In excess of the rate of interest allowed by the guidelines of the RBI in respect of the PCFC scheme;
c) A Writ in the nature of Mandamus commanding the respondents to issue necessary 'no Objection Certificate' in favour of the petitioner allowing the petitioner to open its Packing Credit a/c. with any other Bank;
d) Writ in the nature of Mandamus do issue commanding the respondent Union Bank of India to show-cause as to why the letters dated 10th October. 1996 and dated 12th November, 1996 issued by Branch Manager, of Union Bank of India, Manicktola branch, should not be cancelled and/or set aside;
e) Writ in the nature of Mandamus do issue commanding the respondent Bank of Maharashtra to cancel and/or rescind the letter dated 5th December, 1996 issued by Branch Manager of bank of Maharashtra, being Annexure 'q' to the Writ Petition.
f) Writ in the nature of Certiorari do issue commanding the respondents to produce all relevant orders circulars and records in the matter before this Hon'ble Court. "
2. THE fact of the matter is not much in dispute. In the year 1986 the petitioner applied for grant of Packing Credit loan before the respondent Bank against confirmed orders from foreign buyers. During the period 1986-87 to 1995-96 the value of goods exported to different buyers through the said bank for which it actually received the bill amount worth Rs.4. 60 crones. The balance in the said P.C.F.C.A/c. was nil in the name of the petitioner. It has further been stated that from April, 1993 to September, 1996 the respondent bank realised and appropriated an aggregate sum of Rs.87,95,000/-by way of adjustment against F.D.I.R.E.E.F.C.A/c. and bill payment A/c. On 25th June, 1993 a sum of Rs.25 lacs was sanctioned by way of Packing Credit which was subsequently enhanced to Rs.35 lacs.
3. COUNCIL for leather export by a circular letter as contained in annexure 'c' to the writ application stated that interest rate structure for D. C. F. C. as announced by the Reserve Bank of India in November, 1993 is @ 6. 5% in respect of the financial assistance is made by the banks for the domestic and imported inputs of goods to be exported. By a letter dated 14. 11. 1995 as contained in Annexure 'e' to the writ application the Reserve Bank of India informed I the Deputy Director of Industries. West Bengal about the scheme of P. C. F. C. and the rate of interest prescribed therefor, which according to the petitioner is applicable to the domestic products also. Allegedly on 3.11.1993 the Reserve Bank of India prescribed that preshipment credit is available in Indian Money and further the said scheme covers domestic inputs exported goods. The copy of the preshipment credit was also forwarded by way of memorandum which is contained in Annexure 'p to the writ application. The petitioner was informed by the Deputy Director of Industries, West Bengal that in terms of the aforementioned R. B. I. Circular dated 8.11.1993, she can utilise the sanctioned Packing Credit under the P. C. F. C. Scheme to procure domestic as well as imported inputs. The petitioner in terms of her letter dated 27.1.1996 sought for information as regard the interest charged from the petitioner's bank to which a reply dated 7.2.96 was issued, showing that the interest was being Charged a
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