Guidelines issued by RBI on OTS is statutory?

The following judgment of the Supreme Court is clear on this aspect.

Oriental Bank of Commerce Vs Sunder Lal Jain & Anr.

AIR 2008 SC 1339=2008(1) SCR 213= 2008 (2) SCC 280=2008(1) SCALE 298

OF JUDGMENT: 08/01/2008

G.P. Mathur & Aftab Alam JJ



The order of the High Court mentions that the Bank has agreed to consider the suggestions/request made by the respondents. It only means that the bank will examine and consider. "Consider" means - to look at closely and carefully; to think or deliberate on; to take into account. There was thus no consent on the part of the appellant bank to declare the account in question as Non Performing Account from 31st March, 2000. A statement by a counsel for a party that his client will consider a particular suggestion given by the other side would not amount to a consent by the concerned party and an order passed on such a statement of the counsel cannot be said to be an order passed on consent. It is, therefore, not possible to accept the contention raised by the respondents that the impugned order of the High Court has been passed on the consent of the appellant and consequently the present appeal is not maintainable.



A perusal of the revised guidelines issued by the Reserve Bank of India for compromise settlement of chronic Non-Performing Assets (NPAs) of public sector banks will show that the same will be applicable and will cover NPAs classified as sub-standard as on 31st March, 2000 which have subsequently become doubtful or loss.



The account of the respondents was a performing account between 1.4.2000 and 31.3.2001. According to the records of the bank, the account was consigned to Protest Bill Account on 15.10.2001 and was declared as NPA as per prudential norms of RBI on 31.3.2001. The respondents contested the case before the DRT and did not admit their liability. No such plea was raised that their account had become NPA as on 31.3.2000 before DRT. Therefore, the revised guidelines issued by Reserve Bank of India for compromise settlement of chronic Non-Performing Assets (NPAs) of public sector banks 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.



The High Court, in the impugned order, has directed that the amount should be recovered by the appellant bank in quarterly instalments over a period of two years. This is again contrary to the revised guidelines, which provide a period of one year only for recovery of the entire amount.

It is important to note that the revised guidelines issued by the Reserve Bank of India on January 29, 2003 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. In order to avail relief under the guidelines, the eligibility criteria must be strictly fulfilled and one of them is that the account must be an NPA as on 31st March, 2000.



In order that a writ of mandamus may be issued, there must be a legal right with the party asking for the writ to compel the performance of some statutory duty cast upon the authorities. The respondents have not been able to show that there is any statute or rule having the force of law which casts a duty on the appellant bank to declare their account as NPA from 31st March, 2000 and apply R.B.I. guidelines to their case.



The High Court erred in issuing a writ of mandamus directing the appellant bank to declare the respondents' account as NPA from 31st March, 2000 and to apply the RBI Guidelines to their case and communicate the outstandings which shall be recoverable by quarterly instalments over a period of two years. The later part of the order passed by the High Court wherein a direction has been issued to stay the recovery proceedings and the recovery certificate issued against the respondents has been cancelled is also wholly illegal as the decree passed by the DRT had attained finality and proceedings for execution of decree could not be stayed in an independent writ petition when the respondents had not chosen to assail the decree by filing an appeal, which is a statutory remedy provided under Section 20 of Recovery of Debts Due to Banks and Financial Institutions Act, 1993.



Bihar Eastern Gangetic Fishermen Cooperative Society Ltd. v. Sipahi Singh and others, AIR 1977 SC 2149; Lekhraj Satramdas Lalvani v. Deputy Custodian-cum-Managing Officer, AIR 1966 SC 334; Dr. Rai Shivendra Bahadur v. The Governing Body of the Nalanda College, AIR 1962 SC 1210 and Dr. Umakant Saran v. State of Bihar, AIR 1973 SC 964 - relied on. 

The following judgement of the SUPREME COURT is clear on this aspect.

SARDAR ASSOCIATES & ANR V/S PUNJAB AND SIND BANK & ANR

JUDGEMENT DATED:--31/07/2009

S.B.SINHA    & DEEPAK VERMA          JJ

The following judgement of the SUPREME COURT is cear on this aspect

SARDAR ASSOCIATES &ANR V/S PUNJAB AND SIND BANK

Judgement dated:-    31/07/2009

S.B.SINHA    &    DEEPAK VERMA           JJ

THANX TO ABOVE ALL MEMBERS FOR RULINGS