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2015 Supreme(P&H) 643
PUNJAB & HARYANA HIGH COURT
Hemant Gupta, Lisa Gill, JJ.
Saraswati Paper Board Mills - Appellant
Versus
Haryana Financial Corporation and Ors. - Respondent
CWP No. 9054 of 2001
Decided On : 27-04-2015
For the Respondents:Kamal Sehgal and Rajesh Hooda, Advocates
Corporations under the SFC Act have the authority to modify RBI guidelines and decisions of the Sub Committee, once ratified by the Board, become the basis for loan settlement.
Headnote:
Mandamus - Loan Settlement - Reserve Bank of India Guidelines - 27.07.2000, 30.06.2001 - Clause (a), Sanctioning Authority, Sub Committee - Modification of Guidelines - Board's Approval
Fact of the Case:
The petitioner sought a writ of mandamus to settle the loan account as per RBI guidelines. The Corporation adopted the guidelines but modified them through a Sub Committee, which was later approved by the Board. The petitioner refused the settlement offer and approached the court.
Finding of the Court:
The court found that the Corporation, established under the SFC Act, was not bound by RBI guidelines. The Corporation had the authority to modify the guidelines and the Sub Committee's decision, once ratified by the Board, became the basis for loan settlement.
Issues: Interpretation of RBI guidelines, authority of Corporation to modify guidelines, validity of Sub Committee's decision, and the effect of Board's ratification.
Ratio Decidendi: The Corporation, under the SFC Act, had the power to modify RBI guidelines. Once the Sub Committee's decision was ratified by the Board, it became the basis for loan settlement.
Final Decision: The writ petition was dismissed, allowing the petitioner to submit a proposal for One Time Settlement in accordance with applicable schemes.
1. The petitioner has invoked the writ jurisdiction of this Court claiming a writ of mandamus directing the respondents to settle the loan account of the petitioner as per the Reserve Bank of India Guidelines dated 27.07.2000 extended up to 30.06.2001 (Annexure P-2). The petitioner has also challenged the communication dated 28.03.2001 (Annexure P-4), whereby the petitioner was communicated the amount of Rs.32.50 lacs, which is payable for settlement under the Reserve Bank of India guidelines as adopted by the Corporation.
2. The petitioner applied for a loan for the purchase of machinery in the year 1994. A sum of Rs.26.41 lacs was sanctioned as loan out of which Rs.26.37 lacs was disbursed. Subsequently, another loan of Rs.4.55 lacs was disbursed on 03.02.1995 to meet out the working capital requirements. The petitioner, thereafter, applied for a fresh loan of Rs.13.20 lacs for technical up-gradation of unit, but a sum of Rs.12.06 lacs was disbursed on 18.06.1996. Since the petitioner failed to make the payments of the loan amounts, a notice dated 31.01.1997 (Annexure P-1) was issued demanding a sum of Rs.41,38,371/- as the outstanding amount due and payable by the petitioner as on 31.10.1996.
3. In the meantime, Reserve Bank of India came out with a proposal to settle the dues relating to Non Performing Assets (NPAs) for Public Sector Banks on 27.07.2000. Such guidelines of the Reserve Bank of India were adopted by the respondent-Corporation and a circular in this regard was issued on 01.01.2001. A copy of such circular is appended as Annexure R-2. The settlement formula is contained in Clause (a) whereas the Sanctioning Authority, in respect of the amount of compromise, waiver or remission or write off, was delegated to Sub Committee. The relevant clause reads as under:
"SETTLEMENT FORMULA - AMOUNT AND OFF DATE:
(a) NPAs classified as doubtful or loss as on 31st March, 1997.
The minimum amount that should be recovered under the guidelines in respect of compromise settlement of NPAs classified as doubtful or loss as on 31st March, 1997 would be 100% of the outstanding balance in the account as on the date on which loan was categorized as doubtful non-performing asset.
(d) Sanctioning Authority:
The decision on the compromise settlement and consequent sanction of waiver or remission or write off should be delegated to Sub Committee which will be placed before the Board of Directors for confirmation."
4. However, the Sub Committee in its meeting held on 19.01.2001 changed the norms to determine the due amount. The revised norms are as under:
"(a) NPAs Classified as Doubtful or loss as on 31.03.1997
The minimum amount recoverable under the guidelines should be the outstanding balance as on 31.03.1997 and not the outstanding balance as on date on which the loan was categories as doubtful/loss Non-Performing Assets + interest at SIDBI's present refinance rate in respect of small scale and IDBI's present refinance rate in respect of medium scale w.e.f. 01.04.1997 till the adjustment of loan amount in full;"
5. On the basis of the guidelines framed, the Corporation has communicated on 28.03.2001 that a sum of Rs.32.50 lacs is amount payable as per the Reserve Bank of India guidelines as adopted by the Corporation and that the petitioner should deposit a sum of Rs.8.12 lac as down payment on or before 31.03.2001 for consideration and further action. However, the petitioner did not accept the offer and invoked the writ jurisdiction of this Court.
6. Learned counsel for the petitioner has vehemently argued that the Sub Committee was only constituted to consider the waiver or remission or write off of the loan amount, but was not competent to modify the Reserve Bank of India Guidelines, which were adopted by the Board vide Circular dated 01.01.2001.
7. Mr. Sehgal, learned counsel representing the Corporation, pointed out that such decision of the Sub Committee was considered by the Board in its 270th Meeting under Agenda Item No.
