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RBI has wide supervisory powers over Financial institutions like SIDBI; It’s directions are statutorily Binding – SC

Court name: The Supreme Court of India.

Judgement name: Small Industries Development Bank of India vs M/s SIBCO Investment Pvt. Ltd. 

Judgement date: January 3rd 2022

Judges/ Bench: R. Subhash Reddy and Hrishikesh Roy

Introduction:

The challenge in these appeals is to the judgment and order dated 25.11.2019 of the Division Bench of the High Court of Calcutta, whereby the decision of the Single Judge dismissing the suit i.e. CS No. 79/2006 of M/s. SIBCO Investment Pvt Ltd (for short SIBCO) was reversed. The suit was filed against Small Industries Development Bank of India (SIDBI) seeking interest on the alleged belated payment of principal sum and accrued interest to the plaintiff for the Bonds issued by SIDBI.

Brief of the facts:

An appeal was filled by SIDBI against a judgment of the division bench of the calcutta high court , whereby decision of the single judge dismissing the suit of M/s SIBCO Investment Pvt. Ltd. Was reversed.  The suit was filed against Small Industries Development Bank of India (SIDBI) seeking interest on he alleged belated payment of principal sum and accrued interest to the plaintiff for the Bonds issued by SIDBI.

ISSUE RAISED:

The issue raised was whether the plantiff has set forth a just claim , based on the bonds issued by the defendant , or is it a case of that trial in Shakespeare’s  The merchant of venice where Shylock is claiming the promised pound of flesh in the form of interest on delayed payments on the bonds purchased by the plantiff. 

Principals and observations of the court:

The supreme court considered the question that whether the facsimile issued by RBI to the appellant was a directive or suggestion. The bench looked at Section 35 A of the Banking Regulation 1949 , which talks about RBI’s power to give directions to banking companies.Thus, the bench concluded that the RBI’s communication in question was a direction with appropriate statutory taking into consideration section 45MB of the RBI Act and section 35A of the Banking Regulation Act. 

Judgement Held:

The appellant was justified in withholding payment as they were under RBI’s direction to do so, the defendant has not derived any undue benefit by their act and thirdly, due payment was promptly made to the plantiffs upon settlement of rights by the court. 

Name of the writer – Aryan Bhardwaj

College – U.L.C Hazaribagh

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