VISHAL MALLEABLES LTD. Vs. RESERVE BANK OF INDIA

JUDGEMENT

(1.) TODAY , rejoinder -in -affidavit is filed by the learned counsel for the petitioner which is taken on record.

(2.) THIS petition has been filed by the petitioner challenging the vires of Reserve Bank of India's Circular No. RBI/2004/200DBOD. No. Leg:BC.84/09.07.005/2003 -04 dated 15th May, 2004 as well as Circular of Reserve Bank of India/2004 -05/99DBOD. No. Leg.BC.22/09.07.005/2004 -2005 dated 4th August, 2004 issued by the Chief General Manager in Charge of the Reserve Bank of India as ultra vires the Constitution of India, 1950 and/or Banking Regulation Act, 1949 and/or Reserve Bank of India Act, 1934 and/or Securitisation & Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 [to be referred to as "the Securitisation Act" hereafter]. Further relief has been prayed to declare that the Circular No. RBI/2004/200DBOD. No. Leg:BC.84/09.07.005/2003 -04 dated 15th May, 2004 issued by the Reserve Bank of India does not permit freezing of the account of the account holder with his bank in a case where he has obtained credit facilities from another lending bank and has not obtained No Objection Certificate from that lending bank. It is also prayed to declare that the Circular of the Reserve Bank of India being Reserve Bank of India/2004 -05/99 DBOD. No. Leg.BC.22/09.07.005/2004 -2005 dated 4th August 2004 issued by the Chief General Manager -in -Charge of the Reserve Bank of India does not permit freezing and closing of the account of the account holder with his bank in case where he has obtained credit facilities from another lending bank and has not obtained a No Objection Certificate from that lending bank. It is further prayed to quash and set aside the impugned communication dated 18.11.2014 issued by respondent No. 2 Bank being contrary to the guidelines dated 15th May, 2004 issued by the respondent No. 1 and as illegal, arbitrary and violative of the fundamental rights of the petitioner as enshrined in Part III of the Constitution of India, 1950.

(3.) MR . Vishwas Shah, learned counsel appearing for Mr. Masoom Shah for the petitioner has vehemently urged that the Circular issued by the Reserve Bank of India being RBC/2004/200DBOD. No. Leg:BC.84/09.07.005/2003 -04, dated 15th May, 2004 is ultra vires as on the instructions of another bank, that is, respondent No. 3, the respondent No. 2 cannot freeze the current account of the petitioner. We have carefully gone through the above Circular dated 15th May, 2004 which refers to Circular DBOD. No. BC.136/09.08.001/99 -2000 dated 25th January, 2000, wherein, guidelines are provided to the banks that at the time of opening of current accounts, the banks should insist on a declaration from the account holder to the effect that he is not enjoying any credit facility with any other bank or obtain a declaration giving particulars of credit facilities enjoyed by the intending customer with any other bank. Here in this case, the petitioner, at the time of opening the current account with the respondent No. 2 bank had not declared that it is enjoying credit facility with the respondent No. 3 bank. The above Circular clearly states that current account should not be opened where the account holder enjoys credit facilities from another bank. Thus, it appears that the petitioner while opening the current account with the respondent No. 2 bank had not declared the fact of the credit facility being enjoyed by it from the respondent No. 3 bank. This fact was in fact, required to be declared by the petitioner before the respondent No. 2 while opening the current account. In view of the above, we do not find that above Circular violates any of the constitutional provisions. On the contrary, it shows fair banking system.