RBI's OTS guidelines are enforceable by courts, obligating banks to comply with them when accounts are classified as NPA.

1.The above writ petitions are being disposed of by this common order as the issue involved in these petitions is same. However, for the purpose of this order, reference is made to the facts of W.P. No. 3029/2006 (Central Bank of India v. M/s. Sharad Rice Industries).

2. The petitioner by the instant petition has prayed for followed substantial relief : -
"i. That, the Hon'ble Court may kindly be pleased to by writ of certiorari to quash the order dated 19-12-2005 (Annexure P / 1) passed by DRAT Allahabad and the O.4ated 28-9-2001 (Annexure P / 2) passed by DRT Jabalpur.
ii. That, the stricture passed by the Tribunal / Appellate Tribunal against the officers of the Bank may kindly be deleted / struck off in the interest of justice."

3. Briefly stated, facts of the case are that the respondent borrower was sanctioned loan of Rs. 6 lac for construction of rice mill and purchase of plant and machineries and Rs. 5 Lac as Cash Credit (Hypothecation) on 12-10-1987.
The respondent - borrower committed defaults in making repayment. The petitioner - bank filed an original application for recovery of balance of loan account together with interest @ 14.5% p.a. on 14-8-2001 vide Annexure P - 4 in the Debt Recovery Tribunal, Jabalpur (for brevity 'DRT').
In the said proceedings, the respondent moved an application of Annexure P - 5 under S.22 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (for short 'the Act of 1993') read with R.18 of the Debts Recovery Tribunal (Procedure) Rules, 1993 (for short 'the Rules of 1993') and prayed for issuance of direction to the petitioner bank to follow and implement the guidelines of the Reserve Bank of India (for short 'RBI') for 'One Time Settlement Scheme' (for short 'OTS scheme') to the account of the respondent or direct the bank to settle the outstanding in the captioned recovery application for Rs. 8,20,000/- and to extend benefit of RBI guidelines.
In its reply (Annexure P - 6) the bank expressed its willingness to settle the account at Rs. 50,98,983/- minimum compromise amount as per module approach of Annexure P - 7.

4. The DRT directed the respondent - borrower to make payment of Rs. 8,20,000/- towards full and final settlement of dues being balance as on 31-3-1992, as calculated by the bank, since the account was categorized as 'Non Performing Asset' (NPA) on 31-3-1992 and therefore, the benefit of RBI guidelines dated 20-7-2000 must be extended to the respondent borrower. While passing the impugned order certain strictures / observations have also been made against the officers of the bank by the DRT.

5. The bank preferred an appeal under S.20 and S.17 of the Act of 1993 before the Debts Recovery Appellate Tribunal, Allahabad (for short 'DRAT'), however, the appeal stands dismissed by the impugned order of Annexure P - 1.

6. Mr. Guru, learned counsel for the petitioner - bank submits that the tribunals below committed error of law and jurisdiction in holding that the RBI OTS scheme is enforceable and the bank can be directed to settle for a lesser amount than what the bank is demanding by way of a compromise. The DRT failed to appreciate that case of the respondent borrower is not covered under the RBI OTS scheme though the stand of the bank was that the account turned NPA on 31-3-1992. It was also pleaded that interests were remitted in both the accounts till 1994 and 1995 respectively. RBI's guidelines for the OTS scheme have not been issued in exercise of statutory powers under S.21 and S.35 of the Banking Regulation Act and therefore, the said guidelines do not partake character of statutory circular / guidelines / directions and do not have binding effect. It was also argued that the DRT passed the impugned order