2003 (8) TMI 384 - HC - Companies Law

Reserve Bank of India guidelines for recovery of dues relating to non-performing assets of public sector banks

Summary

Issues Involved:
1. Legality of the respondent Bank's refusal to accept the petitioner's one-time settlement offer.
2. Applicability of the RBI guidelines for Non-Performing Assets (NPA) to the petitioner's case.
3. Petitioner's entitlement to a writ of certiorari and mandamus.

Issue-wise Detailed Analysis:

1. Legality of the respondent Bank's refusal to accept the petitioner's one-time settlement offer:
The petitioner, a Private Limited Company, sought a writ of certiorari to quash the respondent Bank's letter dated 8-3-2003 and a mandamus directing the Bank to accept a one-time settlement offer. The petitioner argued that its account fell under the NPA category as per RBI guidelines and was thus entitled to a one-time settlement. However, the Bank countered that the petitioner was a wilful defaulter trying to misuse the RBI guidelines to get undue advantage. The Bank asserted that the petitioner's account did not fall under the NPA guidelines and that the petitioner had diverted funds to other businesses through other banks.

2. Applicability of the RBI guidelines for Non-Performing Assets (NPA) to the petitioner's case:
The petitioner claimed that its cash credit facility became a doubtful asset as of 31-3-2000 and thus qualified for a one-time settlement under the RBI guidelines. The respondent Bank, however, argued that the petitioner continued to deposit certain amounts after 31-3-2000, preventing the account from being classified as NPA. The Bank also stated that the petitioner committed wilful default and malfeasance by diverting sale proceeds to other banks, which disqualified it from the benefits of the RBI guidelines. The court agreed with the Bank, noting that the RBI guidelines are not meant for wilful defaulters and that the petitioner was trying to manipulate its account status.

3. Petitioner's entitlement to a writ of certiorari and mandamus:
The court found no merit in the petitioner's request for a writ of certiorari or mandamus. It held that no party has a legal right to a one-time settlement, which is a compromise requiring the consent of both parties. The court emphasized that it cannot direct a one-time settlement as it would amount to rescheduling a loan, a decision that lies within the discretion of the Bank. The court also highlighted that a writ of mandamus can only be issued to compel the performance of a statutory duty, and no such duty was imposed on the Bank to accept the petitioner's settlement proposal. The court cited precedents, including M.M. Accessories v. U.P. Financial Corpn., to support its position.

Conclusion:
The court dismissed the writ petition, stating that the petitioner had no legal right to compel the Bank to accept a one-time settlement. It found that the petitioner was a wilful defaulter trying to misuse the RBI guidelines and had not come to court with clean hands. The court concluded that the RBI guidelines do not apply to wilful defaulters and that the petitioner was not entitled to the relief sought.