RBI's Authority: 1997 Notification Freezes CRB Capital Assets, Making Payment Withholding Legally Required for SIDBI.

Claim of interest for delayed payment - The RBI has wide supervisory powers over financial institutions like SIDBI, in furtherance of which, any direction issued by the RBI, deriving power from the RBI Act or the Banking Regulation Act is statutorily binding on the defendant. Admittedly, the RBI issued Notification dated 10.04.1997, deriving power from S. 45-MB(2) of the RBI Act. Thereby, the RBI froze the assets of CRB Capital on the grounds of public policy, for the purpose of protecting interests of creditors and depositors of CRB Capital - in absence of the Official Liquidator’s consent and guidance, the defendant could not have made the payment without inviting onerous consequences for itself. Hence, it can be said that the defendant acted prudently, being conscious of the legal obligation, to withhold such payment to the plaintiff. - SC .....

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