Swatanter Kumar JUDGMENT
S.H. Kapadia, C.J.
1. Leave granted.
2. The short question which we are required to decide in this batch of cases is - Whether inter se transfer of Non Performing Assets ("NPA" for short) by banks is illegal under Banking Regulation Act, 1949 ("BR Act, 1949" for short) as held by the Gujarat High Court in the impugned judgment? According to the impugned judgment(s), assignment of debts by banks inter se is not an activity which is permissible under the said BR Act, 1949 and consequently all executed contracts of assignment of debts were illegal. According to the impugned judgment(s), the assignee banks were not entitled to substitution in place of original lender (assignor) in proceedings relatable to companies in liquidation pending in the Company Court.
Facts in civil Appeal @ S.L.P. (C) No. 2240 of 2009:
3. On 31.3.2006 a Deed of Assignment was executed between Kotak Mahindra Bank Ltd. as assignee (Applicant) on one hand and ICICI Bank Ltd. as assignor. The recitals in the Deed show that ICICI Bank, in the course of its business, had granted various credit facilities to various borrowers (clients). These facilities are evidenced by various Financial Instruments executed by the borrowers and/or their respective guarantors/pledgers. In the recitals, it has been stipulated that ICICI Bank Ltd. as assignor was the absolute and beneficial owner of Financial Instruments and receivables thereunder. An aggregate of Rs. 52.45 crores being the principal amount outstanding under the trade credit facilities was due and payable by the borrowers to ICICI Bank Ltd. (assignee). The assignor had agreed to sell and assign to the assignee, Kotak Mahindra Bank Ltd., all debts together with interest on "as is where is" basis. Kotak Mahindra Bank Ltd., in turn, agreed to acquire the said debts on "as is where is" basis. In consideration of Kotak Mahindra Bank Ltd. paying the purchase price to ICICI Bank Ltd. for purchase of the debts, the assignor agreed to assign absolutely unto the assignee on "as is where is" basis, without the assignee having any recourse to the assignor. Consequently, Kotak Mahindra Bank Ltd., assignee, became the full and absolute legal owner of the debts and as such the only person legally entitled to receive the repayments of debts. We quote hereinbelow the relevant provision of the Deed:
2.2 On and from the date of the Agreement the Assignee and the Assignor hereby agree, undertake and confirm that notwithstanding (i) the costs, charges, expense, taxes and duties to be paid or incurred by the Assignee towards the realization of the Debt; and (ii) any settlement or compromise or restructuring of the Debt or the status of the Debt or creditworth........