S.RAMACHANDRAN Vs. UNION OF INDIA

JUDGEMENT

(1.) Writ Petition has been filed challenging the impugned circular of the second respondent bearing Ref. RBI/2006-07/14 DBOD. Dir.BC.5/13/3/0/2006-07, dtd. 1/7/2006 as illegal and unconstitutional and opposed to public policy.

(2.) The main ground on which the challenge is made to the circular is that the circular retrospectively directs all the banks to charge compound interest at monthly interest and also prescribing minimum rate of interest. According to the petitioner the rate of interest should be reasonable and the very concept of capitalization is only for the deterrent effect and not for unjust enrichment of the lenders. The impugned circular leads only to unjust enrichment and it mandatorily directs all the Banks to be Shylocks and as such it is opposed to public policy. The impugned circular is violative of Article 14 of the Constitution of India and 19(1)(g) of the Constitution of India and seeks to quash the impugned circular issued by the 2 nd respondent.

(3.) Learned counsel for the 2 nd respondent would submit that the Writ Petition is not maintainable as Reserve Bank of India, which is banker's bank, is creature of statute. It has large contingent of expert advice relating to the matters affecting the economy of entire country and nobody can doubt the bona fides of the Reserve Bank, in issuing the impugned directions and as per Sec.21 of the Banking Regulation Act, 1949, the Reserve Bank would control the banks.