ICICI BANK LIMITED versus OFFICIAL LIQUIDATOR OF APS STAR INDUSTRIES LTD. AND ORS.

ICICI BANK LIMITED versus OFFICIAL LIQUIDATOR OF APS STAR INDUSTRIES LTD. AND ORS.

Assignment of debts/NPAs inter se between banks is permissible under the Banking Regulation Act, 1949, in light of RBI Guidelines issued under Sections 21 and 35A, and the contracts of assignment are not illegal. The assignee bank is entitled to substitution in place of the original lender (assignor) in company liquidation proceedings.

Parties
Assignor: ICICI Bank Limited; Respondent: Official Liquidator of APS Star Industries Ltd.; Assignee: Kotak Mahindra Bank Ltd.
Jurisdiction
India
Judgment Date
30 September 2010
Procedural Posture
Civil Appeal / Supreme Court Appeal From Division Bench Judgment
Outcome
Appeal allowed
Legal Topics
Assignment of Debts by Banks, Non Performing Assets (npas), Company Liquidation Proceedings, Statutory Interpretation, Role of Reserve Bank of India (rbi)
Banking Law Company Law Assignment of Debts by Banks Non Performing Assets (npas) Company Liquidation Proceedings Statutory Interpretation Role of Reserve Bank of India (rbi)

Case Brief

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Parties

ICICI Bank Limited

Assignor

Official Liquidator of APS Star Industries Ltd.

Respondent

Kotak Mahindra Bank Ltd.

Assignee

Procedural Posture

Civil Appeal / Supreme Court Appeal From Division Bench Judgment

Legal Issues

  1. 1 Whether assignment of debts by banks inter se is impermissible under the Banking Regulation Act, 1949
  2. 2 Whether executed contracts of assignment of debts are illegal
  3. 3 Whether assignee bank is entitled to substitution in place of original lender in company liquidation proceedings

Ratio Decidendi

Assignment of debts/NPAs inter se between banks is permissible under the Banking Regulation Act, 1949, in light of RBI Guidelines issued under Sections 21 and 35A, and the contracts of assignment are not illegal. The assignee bank is entitled to substitution in place of the original lender (assignor) in company liquidation proceedings.

Court Disposition

Appeal allowed

Orders

  • Impugned judgment(s) on assignment of debts under Banking Regulation Act, 1949 set aside
  • Matters remitted to Division Bench of High Court(s) for consideration of other issues