Full Judgment Text
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CASE NO.:
Appeal (civil) 82 of 2008
PETITIONER:
Oriental Bank of Commerce
RESPONDENT:
Sunder Lal Jain & Anr.
DATE OF JUDGMENT: 08/01/2008
BENCH:
G.P. Mathur & Aftab Alam
JUDGMENT:
J U D G M E N T
(Arising out of Special Leave Petition (Civil) No.882 of 2006)
G. P. MATHUR, J.
1. Leave granted.
2. This appeal, by special leave, has been preferred against the
judgment and order dated 17.8.2005 of Delhi High Court, by which a
direction was issued to the appellant Oriental Bank of Commerce to
declare the respondents\022 account as Non-Performing Asset (NPA)
from 31st March, 2000 and to apply the Reserve Bank of India
Guidelines to their case and communicate the outstandings which
shall be recoverable by quarterly instalments over a period of two
years.
3. The respondents Sunder Lal Jain & another were sanctioned
credit facility for Rs.20 lakhs on 12.12.1996. The respondent
defaulted in repayment of the amount and their account was declared
as NPA on 31.3.2001. On 21.2.2002, the appellant Oriental Bank of
Commerce filed a petition against the respondents being O.A. No.21
of 2002 before the Debt Recovery Tribunal-III, Delhi (for short \021the
DRT\022). The DRT passed a decree in favour of the appellant for
recovery of Rs.20,27,862/- along with interest on 14.11.2003. The
appellant initiated execution proceedings for recovery of the amount
from the respondents and a recovery certificate was issued on
8.12.2003. The respondents did not file any appeal challenging the
decree passed by the DRT. Instead, the respondents filed WP(C)
No.559 of 2005 and WP(C) No.560 of 2004 before Delhi High Court
praying that a direction be issued to the appellant, Oriental Bank of
Commerce, to declare their account as NPA from 31.3.2000 and apply
RBI Guidelines for reconciliation and settling the accounts with them.
The petitions were disposed of by a short order on 17.8.2005 which
reads as under :-
\023The petitioners have a remedy available to them
of filing an appeal against the recovery proceedings to
the DRT which remedy has not been taken and for which
this petition is liable to be rejected. However, since this
petition has been pending for quite some time before this
Court and the first Respondent has agreed to consider
declaring the account as NPA from 31st March, 2000,
there is no impediment in disposing of this petition by the
following order :
First Respondent-Bank is directed to declare the
Petitioner\022s account as NPA from 31st March, 2000 and
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apply the RBI guidelines to their case and then to
communicate the outstandings, which shall be
recoverable by quarterly instalments over a period of two
years.
In case, this course works out and Petitioners after
reconciling their accounts do not commit any default, the
execution proceedings against them pending before the
Recovery Officer shall be stayed and the recovery
certificate passed against them shall stand cancelled.
However, in case of default it shall be open to the first
Respondent-Bank to activate the recovery proceedings
against them. In that event, it shall be open to the
Petitioners to take any appropriate remedy, which they
may have against the recovery certificate or its execution
in law.\024
Feeling aggrieved by the above noted order, the appellant,
Oriental Bank of Commerce, has preferred this appeal.
4. Learned counsel for the appellant has submitted that the bank
had filed a suit for recovery of the amount and the same had been
decreed on 14.11.2003 and thereafter a recovery certificate had also
been issued on 8.12.2003 in the execution proceedings initiated by the
appellant. The respondents did not file any appeal to challenge the
decree passed by the DRT and, therefore, the same attained finality.
In these circumstances, the writ petition filed by the respondents to
declare their account as NPA from 31.3.2000 and to apply the
RBI guidelines to their case was not at all maintainable and the order
passed by the High Court is clearly erroneous in law. Learned
counsel for the respondents has, on the other hand, tried to support the
order passed by the High Court and has submitted that the same had
been passed on consent of the parties and, therefore, it is not open to
the appellant to challenge the same.
Regarding the submission of learned counsel for the
respondents that the order under challenge has been passed on consent
of the parties, it may be noted that the High Court has recorded that
\023the first respondent has agreed to consider declaring the account as
NPA from 31st March, 2000\024. Learned counsel for the appellant bank
has vehemently submitted that no consent had been given by the
counsel for the bank to declare the account as NPA from 31st March,
2000, nor any such instructions had been given to the counsel by the
appellant bank. That apart, the order of the High Court mentions \023has
agreed to consider\024. It only means that the bank will examine and
consider. \023Consider\024 means \026 to look at closely and carefully; to think
or deliberate on; to take into account. There was thus no consent on
the part of the appellant bank to declare the account as NPA from 31st
March, 2000. A statement by a counsel for a party that his client will
consider a particular suggestion given by the other side would not
amount to a consent by the concerned party and an order passed on
such a statement of the counsel cannot be said to be an order passed
on consent. It is, therefore, not possible to accept the contention
raised by learned counsel for the respondents that the impugned order
of the High Court has been passed on the consent of the appellant
bank and consequently the present appeal is not maintainable.
5. Before considering the submission made by learned counsel for
the parties on merits of the case, it is necessary to take note of the
essential features of the revised guidelines issued by the Reserve Bank
of India on January 29, 2003 regarding Non-Performing Assets of
public sector banks which read as under :-
\023Revised guidelines for compromise settlement of chronic
Non-Performing Assets (NPAs) of public sector banks
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DBOD.BP.BC.65/21.04.117/2002-2003 January 29, 2003
Chairman and Managing Directors
of all Public Sector Banks.
Dear Sir,
Please refer to our circular DBOD.BP.BC.11/21.01.040/99-00
dated 27th July, 2000, setting out the guidelines for compromise
settlements of chronic NPAs up to Rs.5.00 crore.
2. A review of compromise settlements of NPAs through
the above scheme has revealed that the progress of recovery of
NPAs through this mechanism has been moderate. In
consultation with Government of India, it has been decided to
give one more opportunity to the borrowers to come forward
for settlement of their outstanding dues. Hence fresh guidelines
are now issued, which will provide a simplified, non-
discretionary and non-discriminatory mechanism for
compromise settlement of chronic NPAs below the prescribed
value ceiling. All public sector banks should uniformly
implement these guidelines, so that maximum realization of
dues is achieved from the stock of NPAs within the stipulated
time.
3. ............................................................................
(A) Guidelines for compromise settlement
of chronic NPAs upto Rs.10.00 crore
[i] Coverage
a) The revised guidelines will cover all NPAs in all sectors
irrespective of the nature of business which have become
doubtful or loss as on 31st March 2000 with outstanding balance
of Rs.10.00 crore and below on the cut off date.
b) The guidelines will also cover NPAs classified as sub-
standard as on 31st March, 2000, which have subsequently
become doubtful or loss.
c) These guidelines will cover cases on which the banks
have initiated action under the Securitisation and
Reconstruction of Financial Asses and Enforcement of Security
Interest Act, 2002 and also cases pending before
Courts/DRTs/BIFR, subject to consent decree being obtained
from the Courts/DRTs/BIFR.
d) Cases of wilful default, fraud and malfeasance will not be
covered.
e) The last date for receipt of applications from borrowers
would be as at the close of business on 30th April, 2003. The
processing under the revised guidelines should be completed by
31st October, 2003.
(ii) Settlement Formula \026 amount and cut off date
a) NPAs classified as Doubtful or Loss
as on 31st March, 2000
The minimum amount that should be recovered under the
revised guidelines in respect of compromise settlement of
NPAs classified as doubtful or loss as on 31st March, 2000
would be 100% of the outstanding balance in the account as on
the date of transfer to the protested bills account or the amount
outstanding as on the date on which the account was
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categorized as doubtful NPAs, whichever happened earlier, as
the case may be;
b) NPAs classified as sub-standard as on 31st March,
2000 which became doubtful or loss subsequently.
The minimum amount that should be recovered in respect of
NPAs classified as sub-standard as on 31st March, 2000 which
became doubtful or loss subsequently would be 100% of the
outstanding balance in the account as on the date of transfer to
the protested bills account or the amount as on the date on
which the account was categorized as doubtful NPAs,
whichever happened earlier, as the case may be, plus interest at
existing Prime Lending Rate from 1st April, 2000 till the date of
final payment.
(iii) Payment
The amount of settlement arrived at in both the above cases,
should preferably be paid in one lump sum. In cases where the
borrowers are unable to pay the entire amount in one lump sum,
at least 25% of the amount of settlement should be paid upfront
and the balance amount of 75% should be recovered in
instalments within a period of one year together with interest at
the existing Prime Lending Rate from the date of settlement up
to the date of final payment.
.....................................................................................\024
6. A perusal of the aforesaid revised guidelines issued by the
Reserve Bank of India on January 29, 2003 for compromise
settlement of chronic Non-Performing Assets (NPAs) of public sector
banks will show that the same will be applicable and will cover NPAs
classified as sub-standard as on 31st March, 2000 which have
subsequently become doubtful or loss. The revised guidelines have
no application where the NPAs have not been classified as sub-
standard as on 31st March, 2000. It is not in dispute that the account
of the respondents was a performing account between 1.4.2000 and
31.3.2001. According to the records of the bank, the account was
consigned to Protest Bill Account on 15.10.2001 and was declared as
NPA as per prudential norms of RBI on 31.3.2001. The respondents
contested the case before the DRT and did not admit their liability.
No such plea was raised that their account had become NPA as on
31.3.2000 before DRT. Therefore, the revised guidelines issued by
Reserve Bank of India on January 29, 2003 for compromise
settlement of chronic Non-Performing Assets (NPAs) of public sector
banks were not at all applicable to the facts and circumstances of the
case and no direction could be issued to declare the respondents\022
account as NPA from 31st March, 2000. The guidelines further
provide that in case where borrowers are unable to pay the entire
amount in lump sum, at least 25% of the amount of settlement should
be paid upfront and the balance amount of 75% should be recovered
in instalments within a period of one year together with interest. The
High Court, in the impugned order, has directed that the amount
should be recovered by the appellant bank in quarterly instalments
over a period of two years. This is again contrary to the revised
guidelines, which provide a period of one year only for recovery of
the entire amount.
7. It is important to note that the revised guidelines issued by the
Reserve Bank of India on January 29, 2003 are only in the nature of
internal guidelines for the banks and financial institutions. They are
purely executive instructions and have no statutory force. They do not
create any right in favour of the borrowers. In order to avail relief
under the guidelines, the eligibility criteria must be strictly fulfilled
and one of them is that the account must be an NPA as on 31st March,
2000. What the respondents want is that a writ of mandamus be
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issued commanding the appellant bank to declare the respondents\022
account as NPA from 31st March, 2000 and apply the RBI Guidelines
to their case whereby their liability towards the appellant bank will be
considerably reduced by way of one time settlement.
8. The principles on which a writ of mandamus can be issued have
been stated as under in \021The Law of Extraordinary Legal Remedies\022
by F.G. Ferris and F.G. Ferris, Jr. :
Note 187-- Mandamus, at common law, is a highly
prerogative writ, usually issuing out of the highest court
of general jurisdiction, in the name of the sovereignty,
directed to any natural person, corporation or inferior
court within the jurisdiction, requiring them to do some
particular thing therein specified, and which appertains to
their office or duty. Generally speaking, it may be said
that mandamus is a summary writ, issuing from the
proper court, commanding the official or board to which
it is addressed to perform some specific legal duly to
which the party applying for the writ is entitled of legal
right to have performed.
Note 192 --Mandamus is, subject to the exercise of a
sound judicial discretion, the appropriate remedy to
enforce a plain, positive, specific and ministerial duty
presently existing and imposed by law upon officers and
others who refuse or neglect to perform such duty, when
there is no other adequate and specific legal remedy and
without which there would be a failure of justice. The
chief function of the writ is to compel the performance of
public duties prescribed by statute, and to keep
subordinate and inferior bodies and Tribunals exercising
public functions within their jurisdictions. It is not
necessary, however, that the duty be imposed by statute;
mandamus lies as well for the enforcement of a common
law duty.
Note 196-- Mandamus is not a writ of right. Its issuance
unquestionably lies in the sound judicial discretion of the
Court, subject always to the well-settled principles which
have been established by the Courts. An action in
mandamus is not governed by the principles of ordinary
litigation where the matters alleged on one side and not
denied on the other are taken as true, and Judgment
pronounced thereon as of course. While mandamus is
classed as a legal remedy, its issuance is largely
controlled by equitable principles. Before granting the
writ the Court may, and should, look to the larger public
interest which may be concerned - an interest which
private litigants are apt to over-look when striving for
private ends. The Court should act in view of all the
existing facts, and with due regard to the consequences
which will result. It is in every case a discretion
dependent upon all the surrounding facts and
circumstances.
Note 206.--.......... The correct rule is that mandamus will
not lie where the duty is clearly discretionary and the
party upon whom the duty rests has exercised his
discretion reasonably and within his jurisdiction, that is,
upon facts sufficient to support his action.
9. These very principles have been adopted in our country. In Bihar
Eastern Gangetic Fishermen Cooperative Society Ltd. v. Sipahi Singh
and others, AIR 1977 SC 2149, after referring to the earlier decisions
in Lekhraj Satramdas Lalvani v. Deputy Custodian-cum-Managing
Officer, AIR 1966 SC 334; Dr. Rai Shivendra Bahadur v. The
Governing Body of the Nalanda College, AIR 1962 SC 1210 and Dr.
Umakant Saran v. State of Bihar, AIR 1973 SC 964, this Court
observed as follows in paragraph 15 of the reports :
".......... There is abundant authority in favour of the
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proposition that a writ of mandamus can be granted only
in a case where there is a statutory duty imposed upon the
officer concerned and there is a failure on the part of the
officer to discharge the statutory obligation. The chief
function of a writ is to compel performance of public
duties prescribed by statute and to keep subordinate
Tribunals and officers exercising public functions within
the limit of their jurisdiction. It follows, therefore, that in
order that mandamus may issue to compel the authorities
to do something, it must be shown that there is a statute
which imposes a legal duty and the aggrieved party has a
legal right under the statute to enforce its performance.
......... In the instant case, it has not been shown by
respondent No. 1 that there is any statute or rule having
the force of law which casts a duty on respondents 2 to 4
which they failed to perform. All that is sought to be
enforced is an obligation flowing from a contract which,
as already indicated, is also not binding and enforceable.
Accordingly, we are clearly of the opinion that
respondent No. 1 was not entitled to apply for grant of a
writ of mandamus under Article 226 of the Constitution
and the High Court was not competent to issue the
same."
Therefore, in order that a writ of mandamus may be issued,
there must be a legal right with the party asking for the writ to compel
the performance of some statutory duty cast upon the authorities. The
respondents have not been able to show that there is any statute or rule
having the force of law which casts a duty on the appellant bank to
declare their account as NPA from 31st March, 2000 and apply R.B.I.
guidelines to their case.
10. The High Court, therefore, erred in issuing a writ of mandamus
directing the appellant bank to declare the respondents\022 account as
NPA from 31st March, 2000 and to apply the RBI Guidelines to their
case and communicate the outstandings which shall be recoverable by
quarterly instalments over a period of two years. The later part of the
order passed by the High Court wherein a direction has been issued to
stay the recovery proceedings and the recovery certificate issued
against the respondents has been cancelled is also wholly illegal as the
decree passed by the DRT had attained finality and proceedings for
execution of decree could not be stayed in an independent writ
petition when the respondents had not chosen to assail the decree by
filing an appeal, which is a statutory remedy provided under Section
20 of Recovery of Debts Due to Banks and Financial Institutions Act,
1993.
11. In view of the discussions made above, the appeal is allowed
and the impugned judgment and order dated 17.8.2005 passed by the
High Court is set aside. The appellant will be entitled to its costs.