LexM/S. SARDAR ASSOCIATES & ORS. versus PUNJAB & SINDH BANK & ORS.
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[2009) 11 S.C.R. 803 MIS. SARDAR ASSOCIATES & ORS. A v. PUNJAB & SINDH BANK & ORS. (Civil Appeal Nos. 4970-4971 of 2009) JULY 31, 2009 B [S.B. SINHA AND DEEPAK VERMA, JJ.) Banking Regulation Act, 1949 - ss. 21 and 36 - Power of Reserve bank to control advances by banking companies - Default in discharge of liabilities by borrowers and assets c r declared as Non-performing assets - Bank-creditor seeking recovery of amount from borrower-debtor - Tribunal issuing l recovery certificate - Borrower seeking one time settlement of disputes as per RBI guidelines, however not accepted by bank - Allowed by appellate tribunal but set aside by High D Court - Sustainability of - Held: Not sustainable - RBI is entitled to formulate policies which the banking companies are bound to follow-It issued circular whereof, one time settlement scheme formulated for recovery of NPA below 10 crores - Bank is a public sector bank and bound by said guidelif)es - E Board of directors of bank had accepted th.e guidelines - Thus, bank is guilty of violation @!. equality clause - Order of High Court set aside. In these appeals, the order passed by Division F Bench of High Court, setting aside the order of Debt Recovery Appellate Tribunal directing the respondent- bank to settle the case of the appellants ·in terms of the guidelines issued by RBI as applicable at the time of declaring the account as Non Performing Assets and not to recover the said amount. in terms of the recovery G certificate issued by the Debts Recovery Tribt.tnal, is ,~ under challenge. Allowing the appeals, the Court .. 803 ~ H ' 804 SUPREME COURT REPORTS [2009] 11 S.C.R. A HELD: 1. A bare perusal of s. 21 of the Banking Regulation Act, 1949 would clearly show that the Reserve Bank of India is entitled to formulate the policies which the banking companies are bound to follow. As regards Reserve Bank of India guidelines, it was the direction of B the appellate tribunal that the respondent-bank should settle the case of the appellants under the RBI guidelines through a One Time Settlement and should invite a proposal for settlement and recovery of the agreed amount. Thus, the impugned judgment cannot be • c sustained and is set aside. [Paras 16, 46 and 48] [814-G; 830-C, E, F] 2.1. The guidelines were issued by the Reserve Bank of India. It clearly refers to a circular dated 19.08.2005 D issued by the Reserve Bank of India in terms whereof it was directed that one time settlement scheme for . recovery of NPA below Rs. 10 crore was laid down. The ~ l. said letter was issued pursuant to the aforementioned circular in terms whereof one time settlement scheme was formulated for recovery of NPA below Rs. 10 crores. E It was categorically stated therein that the same was required to be implemented by all public sector banks. The guidelines issued were to provide a simplified, non- discretionary and non-discriminatory mechanism therefor in SME sector. It was categorically stated that all public F sector banks shall uniformly implement these guidelines. Respondent-Bank concededly is a public sector bank. It was, therefore, bound by the said guidelines. [Paras 18 and 19] [816-E-H; 817-A] G 2.2. The correspondences between the appellants and the respondent clearly show that the respondent- Bank had resorted to the guidelines issued by the ;c Reserve Bank of India alone and pursuant to or in furtherance of the offer made by the bank, a proposal H came to be made by the appellants in terms of its letter. J. SARDAR ASSOCIATES & ORS. v. PUNJAB & SINDH 805 BANK & ORS. Such a proposal was made bona fide. It was within the A framework of the guidelines issued by the RBI. [Paras 23 and 24] [820-G-H; 821-A; 822-D-E] 2.3. Appellants filed a writ petition which was dismissed on the ground of suppression. The said order 8 of High Court has been affirmed by this Court. But the same by itself did not preclude the appellants to approach the appellate tribunal. The jurisdiction of the appellate tribunal is co-extensive with the powers of the Tribunal. The memo of appeal filed by the appellants C before the tribunal clearly shows that the contentions with regard to the enforcement of the said provisions had been made. It is, therefore, not correct to contend that no pleadings were made for the purpose of enforcing the RBI guidelines in respect of one time settlement. [Paras 26, 27 and 28] [822-G; 82
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