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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.