ICICI BANK LIMITED versus OFFICIAL LIQUIDATOR OF APS STAR INDUSTRIES LTD. AND ORS.

Citation: [2010] 12 S.C.R. 644 · Decided: 30-09-2010 · Supreme Court of India · Bench: S.H. KAPADIA · Disposal: Appeal(s) allowed

Cited by 5 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

A 
B 
[2010] 12 S.C.R. 644 
ICICI BANK LIMITED 
V. 
OFFICIAL LIQUIDATOR OF APS STAR INDUSTRIES LTD. 
AND ORS. 
(Civil Appeal No. 8393 of 2010) 
SEPTEMBER 30, 2010 
[S.H. KAPADIA, CJI AND SWATANTER KUMAR, J.] 
Banking Regulation Act, 1949 - Enactment of - Object 
C and purpose - Discussed - Provisions of the Act analysed. 
Banking Regulation Act, 1949 - ss.6, 8, 9, 21 and 35A 
- RBI Guidelines dated 13th July, 2005 - Deed providing for 
assignment of debts - Non-Performing Assets (NPAs) - Held: 
Dealing in NPAs as part of the Credit Appraisal Mechanism 
and as a part of Restructuring Mechanism falls within Section 
21 rlw Section 35A of the Act - Hence, it cannot be said that 
"transfer of debts!NPAs" inter se between banks is an activity 
which is impermissible under the Act - Consequently, on 
facts, the executed contracts of assignment of debts were not 
illegal -
The assignee bank was entitled to substitution in 
place of the original lendor (assignor) in the pending winding 
up proceedings before the Company Court relating to one of 
the borrowers of the assignor -
Contract - Deeds and 
Documents - Deed of Assignment - Interpretation of Statutes 
- New concepts - Relevance of 
Banks/Banking - Role of Reserve Bank of India (RBI) -
Discussed. 
A Deed of Assignment was executed between Kotak 
Mahindra Bank Ltd. as assignee on one hand and ICICI 
Bank Ltd. as assignor. The ICICI Bank, in the course of 
its business, had granted various credit facilities to 
various borrowers (clients). An aggregate of Rs. 52.45 
644 
ICICI BANK LIMITED v. OFFICIAL LIQUIDATOR OF 
645 
APS STAR INDUSTRIES LTD. 
crores being the principal amount outstanding under the A 
trade credit facilities was due and payable by the 
borrowers to ICICI Bank Ltd .. In consideration of Kotak 
Mahindra Bank Ltd. paying the purchase price to ICICI 
Bank Ltd. for purchase of the debts, the assignor agreed 
to assign absolutely unto the assignee on "as is where 
B 
is" basis, without the assignee having any recourse to 
the assignor. Consequently, Kotak Mahindra Bank Ltd., 
-assignee, became the full and absolute legal owner of the 
debts and as such the only person legally entitled to 
receive the repayments of debts. 
c 
One of the borrowers of ICICI Bank Ltd. was a 
company which subsequently went under liquidation. By 
way of Company Application in the pending winding up 
proceedings before the Company Court, Kotak Mahindra 
Bank Ltd. moved the Company Court for being D 
substituted in place of original secured creditor, ICICI 
Bank Ltd. The secured creditor, ICICI Bank Ltd. admitted 
the execution of the Deed of Assignment and supported 
the substitution of Kotak Mahindra Bank Ltd. in the said 
application. However, such substitution was objected by 
E 
the borrowers, who contended that the deed of 
assignment had not lawfully conveyed rights to the 
assignee to step into the shoes of ICICI Bank Ltd. 
(secured creditor). 
F 
The Company Court held that the claimed rights 
were not acquired by the assignee, Kotak Mahindra Bank 
Ltd., through the process known in law and, therefore, 
they cannot be permitted to be substituted in place of 
ICICI Bank Ltd. as secured creditor of the company in 
G 
liquidation. Aggrieved, the assignee, Kotak Mahindra 
Bank Ltd. carried the matter in appeal to the Division 
Bench of the High Court. The Division Bench upheld the 
order of the Company Court only on the ground that-
assignment of debts by banks is not an activity which is 
H 
646 
SUPREME COURT REPORTS 
[2010] 12 S.C.R. 
A 
permissible under the Banking Regulation Act, 1949 and 
consequently the impugned Deed(s) was illegal and the 
assignee bank(s) was not entitled to substitution in place 
of ICICI Bank Ltd. (assignor). 
B 
In the instant appeal, the questions arising for 
consideration were:- i) Whether assignment of debts by 
banks inter se was not an activity permissible under the 
1949 Act and consequently all executed contracts of 
assignment of debts were illegal and ii) Whether the the 
assignee bank (s) was not entitled to substitution in place 
C of the original lendor (assignor) in proceedings relating 
to companies in liquidation pending in the Company 
Court. 
D 
Allowing the appeals, the Court 
HELD:1. The Banking Regulation Act, 1949 provides 
for the comprehensive definition of "banking" so as to 
bring within its scope all institutions which receive 
deposits for lending or investment and to give the 
E Reserve Bank of India (RBI) a control 

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