Case Note & Summary
The dispute arose from the refusal of Punjab & Sind Bank to accept a one time settlement proposal from M/s Sardar Associates and others, who had defaulted on a loan of Rs. 3,54,50,000. The appellants sought to settle their dues under the guidelines issued by the Reserve Bank of India (RBI) for non-performing assets (NPAs). The bank's refusal was based on its own internal guidelines, which the appellants contested as being contrary to RBI's directives. The appellants had previously approached the Debt Recovery Appellate Tribunal, which directed the bank to settle the matter according to RBI guidelines. However, the High Court later allowed the bank's writ application, leading to the present appeal. The Supreme Court examined the authority of the RBI to issue such guidelines and concluded that the bank was indeed bound to follow them. The court emphasized that the RBI's guidelines were statutory in nature and that the bank's deviation from them constituted a violation of the principles of equality and fairness. Ultimately, the Supreme Court set aside the High Court's judgment, allowing the appeal and reinforcing the binding nature of RBI's guidelines on public sector banks.
Headnote
A) Banking Law - One Time Settlement - Authority of RBI - Reserve Bank of India Act, 1949, Sections 21, 35A - The Reserve Bank of India has the statutory authority to issue binding guidelines for one time settlement of loans, which banks must follow. The court held that the respondent bank was bound by these guidelines and could not deviate from them without justification (Paras 1-48).
Issue of Consideration
Whether the Reserve Bank of India has the authority to issue binding guidelines for one time settlement of loans and if the respondent bank was obligated to follow these guidelines.
Final Decision
The Supreme Court set aside the High Court's judgment, allowing the appeal and reinforcing the binding nature of RBI's guidelines on public sector banks. The court held that the respondent bank was obligated to follow the RBI guidelines for one time settlement.
Law Points
- Banking Regulation
- One Time Settlement
- Non-Performing Assets
- Reserve Bank of India Guidelines
- Statutory Authority
