COMMON CAUSE Vs. UNION OF INDIA

JUDGEMENT

(1.) The petitioner is a society duly registered under the Societies Registration Act, 1860 and is engaged in taking up various common problems of the people for redressal. Concerned with the increase of the non-recovered loans advanced by the public and private sector banks in India which have come to be known as Non-Performing Assets (for short "NPAs"), the petitioner has filed this Writ Petition under Article 32 of the Constitution as a Public Interest Litigation praying for appropriate writs and directions.

(2.) The petitioner has stated in the Writ Petition that the aggregate figure of NPAs worked out on the basis of data compiled by the Banking Division of the Ministry of Finance is Rs. 43,577/- crores. According to the petitioner, non-recovery of such huge amount of NPAs has resulted in substantial funds of banks not being available for development of the countrys economy and this, in turn, has affected the citizens. The petitioner has alleged that the steps taken by the Union Government to recover the NPAs have not yielded positive results and the Finance Ministry of the Union Government is reported to have admitted that 27 nationalised banks had written off a staggering amount of Rs. 4,010/- crores as bad debts during 1994-95 and 1995-96. According to the petitioner, most of the bad debts are on account of defaults made by men of substantial means and influence and if proper checks are introduced to ensure that loans and advances are not given to fraudulent borrowers, the NPAs will get substantially reduced.

(3.) Mr. Prashant Bhushan, learned senior counsel appearing for the petitioner, submitted that in the Writ Petition, as originally filed, the petitioner has suggested various measures to check the menace of increasing NPAs by evolving a proper mechanism that would reduce the possibility of fresh loans becoming NPAs, but subsequently this Court passed orders on 09.08.2005, 08.12.2005, 09.11.2006 and 30.01.2008 directing the petitioner to make written suggestions to the Union Government and also directing the Union Government to hold meetings with the concerned functionaries to consider those suggestions. He submitted that pursuant to these directions, the petitioner has made various suggestions in its letters dated 02.08.2001, 25.08.2005 and 10.08.2006, but except for one suggestion regarding the definition of "willful defaulter", all the suggestions were rejected by the Union Government. He submitted that the reasons given by the Government for rejecting the suggestions are that if the suggestions are adopted, the public sector banks will become less competitive and will loose its customers to the private sector banks. He explained that the suggestions made by the petitioner mainly emphasized that the loans and advances must not be given without fully checking the creditworthiness and past record of the borrowers and that companies, which have been "willful defaulters" in the past or whose subsidiary companies and promoters have willfully defaulted in the past in repaying the loans and advances, should not be given fresh loans and advances. He also explained that the suggestions of the petitioner also stress on the greater accountability of the bank officials and on the personal liability of the promoters by making personal guarantee of the promoters mandatory in every case. He vehemently argued that the Union Government could not possibly have any objection to these suggestions made by the petitioner and the reasons given in the affidavit of Shri Dharam Paul Bhardwaj, Under Secretary, Ministry of Finance, Department of Economic Affairs (Banking Division) filed on behalf of the Union Government for not accepting the suggestions are frivolous. On behalf of the petitioner, he urged the Court to issue appropriate writs and directions to the respondents to implement the suggestions made by the petitioner.