RSA No.164 of 2008(O&M) 1 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH RSA No.164 of 2008(O&M) Date of decision: 18.11.2008 M/s Vallabh Narrow Fab (P) Ltd. ......Appellant Versus Haryana Financial Corporation and others ......Respondent CORAM:- HON'BLE MR. JUSTICE RAKESH KUMAR GARG * * * Present: Mr. Vibhav Jain, Advocate for the appellant. Rakesh Kumar Garg, J. CM No.541-C of 2008 For the reasons recorded in the application, delay of 116 days in refilling the appeal is condoned. CM stands disposed of. RSA No.164 of 2008 This is plaintiff's second appeal challenging the judgment and decrees of the Courts below whereby the suit filed by the plaintiff-appellant for declaration that letters dated 7.1.2003 and 7.3.2003 and circular No.1780 dated 19.1.2001 are wrong, without jurisdiction and against the guidelines issued by the Reserve Bank of India as the defendants have failed to grant benefits to the plaintiffs in their all loan accounts as per the policy and directions of the Reserve Bank of India and have illegally, wrongly and arbitrarily charged excessive amount from the plaintiffs along with consequential relief of mandatory injunction directing the defendants to refund the excessive amount and in the alternative, rendition of accounts and for recovery of amount found due to the plaintiffs, has been dismissed. RSA No.164 of 2008(O&M) 2 As per the averments made in the plaint, the plaintiffs availed loan from the respondent-Corporation. The plaintiff-Company became defaulter in payment of loan amount and thus, the account of the plaintiff became irregular. The plaintiff approached the defendant-Corporation for considering its case under the guidelines issued by the Reserve Bank of India for recovery of the loan vide its circular dated 27.7.2000. Defendant No.1 gave approval on 5.10.2001 and passed on some benefit to the plaintiff. The plaintiff again made a representation for grant of some more benefit and it is the case of the appellant that the accounts of the plaintiff were not settled in accordance with the directions of the Reserve Bank of India, rather a further demand was raised by the defendant-Corporation illegally. The plaintiffs deposited the said amount under protest. The plaintiff No.1 also filed a writ petition before this Court in which a direction was issued to the defendants to give the details of the benefits granted to the plaintiff-appellant under the modified scheme. Defendants provided some details vide letter dated 7.1.2003 from which it was clear that excessive amount was charged from the plaintiffs. According to the plaintiff-appellant, defendants had no power or jurisdiction to modify the guidelines issued by the Reserve Bank of India. The benefits accrued to the plaintiff-appellant have been illegally withheld in an arbitrary and unjust manner. The plaintiffs again and again requested the defendants to supply the modified conditions and details of their all four loan accounts and after great persuasion vide letter dated 7.3.2003, the defendants supplied a copy of circular No.1780 dated 19.1.2001 along with copy of statement of accounts. With these allegations, the plaintiffs filed a suit for declaring the letter No.HFC/Recy/2002/3165 dated 7.3.2003 and circular No.1780 dated 19.1.2001 and statement of accounts as illegal, arbitrary, malafide, without jurisdiction against the directions and the guidelines issued by the RBI and RSA No.164 of 2008(O&M) 3 further sought a decree of mandatory injunction for directing the defendants to refund the excessive amount charged by them or in the alternative for rendition of accounts of all the four accounts of the plaintiff and for recovery of amount found due to the plaintiffs. The defendants in their joint written statement raised preliminary objections about the maintainability, locus standi, estoppel, cause of action and suppression of material facts. On merits, applying of loan by the plaintiffs, sanctioning of loan by the defendants and availing of loan was admitted. It was alleged that the defendants had charged the rate of interest as per the policy of the corporation. The defendants further stated that the collateral security cannot be released unless and until the loan is fully adjusted and on the request of the plaintiffs, the collateral security was substituted by taking another collateral security as per letter dated 16.9.1998 after adopting due procedure. The defendants further alleged that they had not adopted the RBI guidelines in toto and as such, plaintiffs’ case did not fall under the RBI guidelines. It was further pleaded by the defendants that only two accounts of the plaintiff were covered under the settlement scheme of RBI guidelines as adopted by the corporation and approved by its Board and as per order of this Court the plaintiffs were given the benefits in two accounts under the modified settlement scheme. Refuting the allegations of the plaintiffs, the defendants prayed for the dismissal of the suit. On the pleadings of the parties the learned Lower Court framed the following issues:- “1. Whether plaintiffs are entitled to decree for declaration as prayed for? OPP 2. Whether suit is not maintainable? OPD RSA No.164 of 2008(O&M) 4 3. Whether plaintiffs have no locus standi to file the present suit? OPD 4. Whether plaintiffs are estopped from filing the present suit by their own act and conduct? OPD 5. Relief.” The plaintiffs as well as the defendants led oral as well as documentary evidence in support of their respective case and after hearing the learned counsel for the parties the learned Lower Court decided issue No.1 against the plaintiffs observing that as per the copy of judgment Ex.D- 11, RBI guidelines were not binding on the defendants and as such the plaintiffs were not entitled to the relief of declaration as well as mandatory injunction. The learned Lower Court also decided issues No.2 to 4 in favour of the defendants in view of finding on issue No.1 and consequently dismissed the suit of the plaintiffs vide judgment and decree dated 2.6.2005. On an appeal, the Additional District Judge, Ambala, vide judgment and decree dated 29.11.2005 set aside the judgment and decree of the trial Court dated 2.6.2005 and remanded the case to the trial Court with a direction to decide the same afresh. The trial Court dismissed the suit vide judgment and decree dated 3.2.2006 holding that it was within the discretion of the defendants to settle the loan accounts of the plaintiffs as per modified scheme of the RBI guidelines. Aggrieved by the said judgment, the appellant preferred an appeal which was dismissed by the Additional District Judge, Ambala vide impugned judgment and decree dated 23.12.2006. While dismissing the appeal, the Lower Appellate Court observed as under: “The question whether the RBI guidelines are applicable to the State Financial Corporations RSA No.164 of 2008(O&M) 5 established under the Act, 1950 has been answered by the Hon’ble High Court vide judgment dated 8.2.2002 passed in Civil Writ Petition No.8260 of 2001 copy of which is placed on record as Ex.D-11 wherein it has been categorically laid down by the Hon’ble High Court that the RBI cannot give directions to the State Financial Corporations in the matter of transaction of their business, including grants of loans and recovery thereof and it is within the exclusive domain of the State Financial Corporation to take appropriate decisions in the matter subject, of course, to the directions which may be given by the State Government in consultation with and after obtaining advice of the SIDBI on questions of policy. It is, therefore, crystal clear that it was within the discretion and domain of the defendant- Corporation to modify the RBI guidelines meant for recovery of dues relating to non-performing assets as per its suitability. The defendant- Corporation, under the modified scheme, invited the account holders having irregular accounts including the plaintiff firm, for settlement of accounts. Out of the four accounts only two accounts of the plaintiff firm were covered under the modified scheme of the defendant-Corporation and were found irregular for a continuous period of RSA No.164 of 2008(O&M) 6 24 months. The defendant-Corporation, therefore, by exercising its discretion, as adopted under the modified scheme of the RBI guidelines, gave benefits against the aforesaid two accounts of the plaintiff firm by considering the case of the plaintiff firm account-wise instead of borrower-wise. In case the RBI guidelines have been adopted in toto, then on the basis of irregularity of a single account under the NPA, the plaintiff firm, being the same borrower, could claim the benefits against all the four accounts, but in this case as the RBI guidelines were not binding upon the defendant- Corporation and the defendant-Corporation has adopted its own modified scheme under the RBI guidelines, it was within the discretion of the defendant-Corporation to give benefits to non- performing assets as per its suitability and in this case, finding the two accounts as non-performing assets, the benefit was given against the said two accounts only as has rightly been concluded by the learned trial Court. The plaintiff firm, in my opinion, is thus not entitled to the refund of the excessive amount, if any charged by the defendant-Corporation towards interest against the remaining two accounts.” Still not satisfied, the plaintiffs have filed this appeal challenging the judgment and decrees of the Courts below. I have heard learned counsel for the appellant. RSA No.164 of 2008(O&M) 7 The facts in this case are not in dispute. The RBI guidelines are not binding upon the respondent-Corporation. However, in the present case, the appellant has tried to argue that once the benefit of RBI was given, the respondent cannot back track from the same and cannot take back the benefits accrued to the plaintiff-appellant from the said guidelines. The stand taken by the appellant is misconceived. It is well settled that One Time Settlement scheme as provided under the RBI guidelines is basically in the nature of concession granted to a borrower who has defaulted in making the payment. The said concession cannot be claimed as a matter of right. To support this view, reliance can be placed on the judgment of the Apex Court in the case of OBC vs. Sunder Lal Jain 2008 (3) PLR 136, wherein it is held that guidelines of the RBI have no statutory force. Even otherwise, the plaintiff-appellant has failed to prove on record that the respondents were not competent to apply the modified RBI guidelines in the case of the appellant. For the reasons recorded above, I find no merit in this appeal. No substantial question of law arises. Dismissed. November 18, 2008 (RAKESH KUMAR GARG) ps JUDGE