2010 (8) TMI 177 - SC - Companies Law

Remedies for enforcement of rights Concerned with the increase of the non-recovered loans advanced by the public and private sector banks in India which have come to be known as Non-Performing Assets (for short NPAs ), the petitioner has filed this Writ Petition under article 32 of the Constitution as a Public Interest Litigation praying for appropriate writs and directions.

Issues Involved:
1. Increase in Non-Performing Assets (NPAs) in public and private sector banks.
2. Measures suggested by the petitioner to address NPAs.
3. Effectiveness of the legislative and administrative measures taken by the Union Government.
4. Role and effectiveness of the Serious Fraud Investigation Office (SFIO).
5. Judicial intervention in economic policy matters.

Detailed Analysis:

1. Increase in Non-Performing Assets (NPAs) in public and private sector banks:
The petitioner, a registered society, filed a Writ Petition under Article 32 of the Constitution as a Public Interest Litigation, expressing concern over the substantial increase in NPAs, which amounted to Rs. 43,577 crores. The petitioner argued that the non-recovery of such huge amounts has adversely affected the country's economy and the citizens. The petitioner also highlighted that substantial amounts were written off as bad debts by nationalized banks during 1994-95 and 1995-96, attributing most of these bad debts to defaults by influential individuals.

2. Measures suggested by the petitioner to address NPAs:
The petitioner, through its counsel, Mr. Prashant Bhushan, suggested various measures to reduce NPAs, including:
- Fully checking the creditworthiness and past records of borrowers before granting loans.
- Not giving fresh loans to companies or promoters who have been "wilful defaulters."
- Ensuring greater accountability of bank officials.
- Making the personal guarantee of promoters mandatory.
The petitioner argued that these suggestions were rejected by the Union Government on the grounds that they would make public sector banks less competitive.

3. Effectiveness of the legislative and administrative measures taken by the Union Government:
The Solicitor General, Mr. Gopal Subramanium, submitted that several legislative measures had been taken to address NPAs, including:
- The Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (DRT Act).
- The Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act).
- The Credit Information Companies (Regulation) Act, 2005.
Additionally, the Reserve Bank of India has been circulating lists of doubtful and loss accounts to banks, and cases of bank frauds are referred to the CBI and the Serious Fraud Investigation Office (SFIO).

4. Role and effectiveness of the Serious Fraud Investigation Office (SFIO):
The petitioner contended that the SFIO lacked statutory power and qualified manpower, rendering it ineffective. The Solicitor General countered that the SFIO, established in 2003, has been functioning effectively and has investigated numerous cases of serious frauds. The Union Government has constituted a Committee of Experts to recommend measures to enhance the SFIO's effectiveness, including the possibility of making it a statutory body.

5. Judicial intervention in economic policy matters:
The Court emphasized that the effectiveness of legislative and administrative measures is a matter for the Union Government and Parliament to consider, not the judiciary. The Court cited previous judgments, including Vishaka v. State of Rajasthan and Vineet Narain v. Union of India, to highlight that judicial intervention is warranted only in the absence of enacted legislation for enforcing fundamental rights. The Court observed that in economic matters, judicial deference to legislative and executive judgment is necessary, and policy decisions should be debated in Parliament, not in courts.

Conclusion:
The Court concluded that the petitioner had not made a case for issuing writs or directions for enforcing any fundamental rights under Part-III of the Constitution. The Court expressed confidence that the Committee of Experts under the Chairmanship of the Ex-Deputy Governor of the Reserve Bank of India would suggest effective measures to prevent bank frauds and reduce NPAs. The writ petition and the application for impleadment/intervention were disposed of without costs.

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