LexSMALL INDUSTRIES DEVELOPMENT BANK OF INDIA versus M/S. SIBCO INVESTMENT PVT. LTD.
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[2022] 1 S.C.R. 913 913 SMALL INDUSTRIES DEVELOPMENT BANK OF INDIA v. M/S. SIBCO INVESTMENT PVT. LTD. (Civil Appeal No. 08 of 2022) JANUARY 03, 2022 [R. SUBHASH REDDY AND HRISHIKESH ROY, JJ.] Reserve Bank of India, 1934: Supervisory powers of RBI – Held: RBI has wide supervisory powers over financial institutions – For ‘public interest’ the RBI is empowered to issue any directive to any banking institution, and monitor the conduct of every NBFC – Banking Regulation Act, 1949 – s.35A. Reserve Bank of India, 1934: s.45K – Authority of RBI to issue directions for ensuring effective implementation of its orders – Held: Any direction by the RBI, is compelling and enforceable similarly like the provisions of the RBI Act by its very nature – For ensuring effective implementation of relevant directions, RBI is not only vested with curative powers but also preventive powers – RBI can also issue directions to ensure that the relevant orders/directions are effectively followed. Negotiable Instruments Act, 1881: ss.8 and 9 – ‘Holder in due course’ – An obligation has been imposed on the transferee of the promissory notes, to be deemed to be a ‘Holder in due course’, that the notes should have been acquired in good faith; after exercising reasonable care and caution about the holder’s title. Code of Civil Procedure, 1908: s.34 – Held: As per s.34 CPC, award of interest is a discretionary exercise, steeped in equitable considerations – Interest is payable for different purposes such as compensatory, penal, etc. Code of Civil Procedure, 1908: Necessary party – Held: On facts, when a claim in the suit was relatable to embargo by the RBI, it was necessary to implead RBI in the litigation, for getting more clarity on the issue – The plaintiff omitted to do so at their own peril despite the defense set out on this basis. A B C D E F G H 914 SUPREME COURT REPORTS [2022] 1 S.C.R. Doctrines/Principles: Principle of dominus litus – The plaintiff is dominus litus, and cannot be compelled to seek relief against anyone. Doctrines/Principles: Principle of waiver/acquiescence – Applicability – Held: Plaintiff accepted payment from defendant as due settlement of its claims – Plaintiff’s failure to raise protest and demand for interest at the earliest possible stage, amounted to sub-silencio acceptance – Accordingly, plaintiff is barred from raising this demand after several months applying the principle of waiver/ acquiescence. Doctrines/Principles: Principle of Constructive Res Judicata – Held: The cause of action for the plaintiff accrued the first time, when the defendant allegedly failed to pay timely interest on delayed payment – Since such a claim was not raised in the writ court, the subsequent suit of plaintiff is barred by the principle of Constructive Res Judicata. Words and Phrases: Term “Public interest” – Meaning of – Held: The term ‘Public interest’ has no rigid definition – It has to be understood and interpreted in reference to the context in which it is used – The concept derives its meaning from the statute where it occurs, the transaction involved, the state of society and its needs. Allowing SIDBI’s appeal and dismissing SIBCO’s cross- appeal, the Court HELD: 1. RBI’s 09.06.1997 COMMUNICATION- ‘ADVICE’ OR ‘DIRECTIVE’: 1.1 For efficient discharge of its functions, the RBI has been granted special powers for controlling and regulating various financial institutions, as is clear from different provisions of The RBI Act, 1934 and The Banking Regulation Act, 1949. As per the RBI Act, 1934, the RBI has wide supervisory jurisdiction over all Banking Institutions in the country. [Para 8][934-A-B] Internet and Mobile Association of India vs. RBI (2020) 10 SCC 274 – relied on. A B C D E F G H 915 1.2 Through Chapter IIIB of the RBI Act, 1934, the RBI is empowered to regulate and also monitor the conduct of every Non-Banking Financial Institutions (NBFC) in India. Under S. 45-JA of the RBI Act, 1934, the RBI is empowered, in public interest or to protect the interests of the depositors or to regulate the financial system of the country, to determine the policy and issue directions to NBFCs. S. 45-K grants authority to the RBI to collect information pertaining to the NBFCs and to give directions pertaining to deposits to them. Whereas, under S. 45-L, general powers are conferred on the RBI to call for information from the Financial Institution and issue directions to regulate the credit system of the country. S. 45-M of the RBI Act, 1934
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