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2014 (12) TMI 1251 - HC - Indian LawsEligibility of Master Circular on Wilful Defaulters issued by the Reserve Bank of India - whether is not a piece of subordinate legislation and, therefore, it is not binding on a bank carrying on banking business in India? - Held that:- Master Circulars being issued under Section 35A of the Banking Regulation Act, 1949 are binding upon the banks and financial institutions carrying on banking business in India Number prescribed for constituting the Identification Committee and the Grievance Redressal Committee in Regulations 3(i) and 3(iii) of the Master Circular dated July 1, 2014 is mandatory. The Master Circular on Wilful Defaulters of the Reserve Bank of India requires every bank to undertake the exercise of identifying and declaring a borrower as a wilful defaulter if he is so. This exercise should be undertaken independent of the view expressed by a member bank of the consortium or any other bank. This is so as the account of the borrower has to be adjudged under the Master Circular in relation to the transactions that the borrower had with the concerned bank. Once a borrower is declared to be a wilful defaulter by a bank, the rigours under the Master Circular would kick in. Non-declaration of wilful defaulter even after an enquiry to such effect under the Master Circular being undertaken by a bank will not bind any other bank with such view as a borrower has to be adjudged as a wilful defaulter in relation to the transactions that the borrower had with the considering bank. Viewed in such context the letter of State Bank of India is of little consequence. In fact, State Bank of India is required to undertake the exercise under the Master Circular also notwithstanding its letter. The letter is not by the Grievance Redressal Committee of State Bank of India. The Master Circular requires the banks and financial institutions to undertake such exercise expeditiously and to report on the same so that a wilful defaulter is dealt with in a manner commensurate with its status. Therefore, every individual banker under the consortium will be entitled to proceed and deal with the writ petitioners under the Master Circular notwithstanding the contents of the letter date January 31, 2012 of the lead banker. The letter dated January 31, 2012 will not impede State Bank of India itself to invoke the provisions of the Master Circular. Such letter, therefore, by no stretch of imagination can be held to impede the invocation of the Master Circular by other members of the consortium. This will not prevent the United Bank of India to proceed against the writ petitioners to classify them as wilful defaulters under the relevant Circulars of the Reserve bank of India in accordance with law and in terms of the orders passed in the earlier writ petition.
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