Punjab and Haryana HC to examine extent to which RBI can impose restrictions

Saurabh Malik

Advertisement

Tribune News Service

Chandigarh, September 7

The Punjab and Haryana High Court has made clear its intent to examine the extent to which restrictions can be imposed by the Reserve Bank of India, while taking up a petition challenging a circular directing that current accounts cannot be opened by a “non-lending bank” for entity/company availing credit facilities from a “lending bank”.

Curbs on use of current account

• The HC move comes after a firm challenged an RBI circular, which says current accounts can’t be opened by ‘non-lending bank’ for company availing credit facilities from a ‘lending bank’
• The Bench says it’s required to be examined as to what extent such restrictions can be imposed, which may not interfere with a citizen’s right to continue with trade and livelihood, especially when there’s a dispute with the lender

The Bench of Justice Jaswant Singh and Justice Sant Parkash was hearing a petition filed by Avantha Holdings Limited and other petitioners against the RBI and another respondent. At the onset, the Bench was told that the company had been availing credit facilities with its lending bank, YES Bank, for some time. But the account for various reasons was declared non-performing asset by YES Bank.

Prior to it, the company had been maintaining a current account with HDFC Bank —non-lending bank insofar as the petitioner was concerned as credit facilities were not availed from it. But the RBI on August 6, 2020, issued the impugned circular/instruction. As a consequence, the petitioner received a communication from HDFC Bank, seeking to close its current account.

After hearing senior advocates Mukul Rohatgi, Sajan Poovyya and Akshay Bhan for the petitioners, the Bench asserted it was required to be examined as to what extent such restrictions could be imposed by the RBI, which may not interfere with the right of a citizen to continue with trade and livelihood, especially when disputes with the lender existed.

The Bench added: “The respondents would also have to address to the issue as to what is the grievance redressal mechanism under these set of circulars, which practically lay down the entire code and procedure for opening and maintaining of current accounts, which we find missing in these circulars.”

Issuing notice of motion and notice regarding stay to the RBI and other respondents, the Bench added it had noticed the laudable object of these circulars. But these were required also to be balanced with the practical issues at the ground level to ensure that genuine entrepreneurs were not choked to death with this large sweep of wave.

The Bench added entrepreneurs, resorting to legal remedies after being genuinely aggrieved against the lender bank, may not even survive till the dispute’s adjudication if deprived of banking arrangement. The RBI would also be required to reconcile its existing circulars providing restructuring and revival of NPA accounts with the impugned circulars, as restructuring an existing NPA account without banking facility appeared impossible.

The notice was accepted by senior advocate Deepinder Singh Patwalia on RBI’s behalf. The case will now come up for hearing on September 16.