Case Note & Summary
The petitioner, Ganjam Nagappa and Son Private Limited, a company incorporated under the Companies Act, 1956, filed a writ petition under Articles 226 and 227 of the Constitution of India before the High Court of Karnataka at Bengaluru. The petitioner sought a direction to respondent banks (Deutsche Bank A.G., State Bank of India, Canara Bank, ICICI Bank Limited, and Kotak Mahindra Bank Limited) to comply with the Reserve Bank of India's Prudential Framework for Resolution of Stressed Assets dated June 7, 2019, and to convene a review meeting of all lenders within 30 days to take a joint decision regarding the petitioner's stressed assets. The petitioner argued that despite repeated requests, the banks failed to convene the review meeting as mandated by the RBI circular. The respondents, including the Reserve Bank of India and Union of India, opposed the petition, contending that the writ petition was not maintainable as the dispute involved contractual obligations and that the Prudential Framework did not confer any enforceable right on the borrower. The court, after hearing the parties, held that the RBI circular dated June 7, 2019, issued under Section 35A of the Banking Regulation Act, 1949, is binding on all scheduled commercial banks and that the borrower has a right to request a review meeting. The court directed the respondent banks to convene a review meeting within 30 days from the date of the order and to take a joint decision in accordance with the Prudential Framework. The writ petition was allowed with the above direction.
Headnote
A) Constitutional Law - Writ Jurisdiction - Articles 226 and 227 of the Constitution of India - Maintainability - The High Court can entertain a writ petition seeking enforcement of regulatory directions issued by RBI under the Banking Regulation Act, 1949, against banks for compliance with the Prudential Framework for Resolution of Stressed Assets. (Paras 1-5) B) Banking Law - Stressed Assets Resolution - RBI Prudential Framework dated June 7, 2019 - Mandatory Compliance - The RBI circular dated June 7, 2019, issued under Section 35A of the Banking Regulation Act, 1949, is binding on all scheduled commercial banks. Lenders are required to adhere to the timelines and procedures for resolution of stressed assets, including convening a review meeting upon request by the borrower. (Paras 6-10) C) Banking Law - Borrower's Right - Review Meeting - The Prudential Framework provides that upon a borrower's request, lenders must convene a review meeting within 30 days to consider a joint resolution plan. Failure to do so amounts to non-compliance with regulatory directions, which can be remedied by a writ of mandamus. (Paras 11-15)
Issue of Consideration
Whether the respondent banks are obligated to comply with the RBI Prudential Framework dated June 7, 2019, and convene a review meeting of all lenders to take a joint decision regarding the petitioner's stressed assets.
Final Decision
The writ petition is allowed. The respondent banks (respondents 3 to 7) are directed to comply with the RBI Prudential Framework dated June 7, 2019, and convene a review meeting of all lenders within 30 days from the date of the order to take a joint decision with respect to the petitioner's stressed assets.
Law Points
- Writ jurisdiction under Articles 226 and 227 of the Constitution of India
- RBI Prudential Framework for Resolution of Stressed Assets dated June 7
- 2019
- Mandatory compliance by lenders
- Right of borrower to seek review meeting
