Banks' Association, Bombay & Ors Vs. M/S Devkala Consultancy Service &
Ors  Insc 287 (16
& S.B. Sinha.
APPEAL NO.5218 OF 2000 S.B. SINHA, J:
authority of the bankers to round up the existing interest rates to 0.25% is in
question in these appeals which arise out of a judgment and order dated
18.12.1994 passed by the High Court of Karnataka in Writ Petition No.3927 of
1994. Civil Appeal No. 5218 of 2000 has been filed by the Association of
Borrowers of Karnataka upon getting itself impleaded as a party in the
No.1 herein is an Association of Bankers.
Nos.2 to 28 are banks which were created under respective Parliamentary Acts or
nationalized in terms of provisions of the Banking Companies (Acquisition &
Transfer of Undertakings) Act, 1970 and the Banking Companies (Acquisition
& Transfer of Undertakings) Act, 1980.
Tax Act was enacted by the Parliament w.e.f 1.8.1974 with an object of imposing
tax on the total amount of interest received by Scheduled Banks/Credit
Institutions on loans and advances. It, however, was withdrawn in the year
1978, but reintroduced in the year 1980; whereafter it was again withdrawn in
the year 1985. The said tax, however, was reintroduced w.e.f. 1.10.1991 by
reason of Finance Act, 1991. The Reserve Bank of India by its Circular letter
dated 2.9.1991 advised all the Scheduled Commercial Banks that the incidence of
interest tax should pro rata be passed on to the borrowers wherefor a uniform
practice should be followed in consultation with the First Appellant herein.
first appellant purported to be acting pursuant to or in furtherance of the
said circular as also with a view to formulate a structure of uniform interest rate
chargeable after including the interest tax payable, which was passed on to the
borrowers by the concerned banks, advised them that the rate of interest be
loaded with interest tax of 3% and rounded up to the next higher 0.25%. Such
rounding up was allegedly found necessary allegedly on account of grossing up
involved in calculating the incidence of tax.
Reserve Bank of India purportedly gave its approval to
the proposal of the first appellant in terms of its letter dated 22.4.1993.
Other appellants herein followed the said purported policy.
aforementioned action on the part of the appellants herein came to be
questioned by the respondents in a public interest litigation filed before the
Karnataka High Court, inter alia, on the ground that such purported rounding up
is illegal and without jurisdiction as thereby the tax element came to be
increased and as a result thereof the banks collected additional sums of
Rs.723.79 crores annually by way of resorting to rounding up on the basis
appellants herein inter alia contended that such rounding up of interest was
done by way of enhancement of the rate of interest which is permissible. Such a
matter, the appellants, contended, being contractual in nature, the writ
petition was not maintainable.
High Court of Karnataka by reason of its impugned judgment dated 18.12.1998
rejected the said contention and found the action on the part of the appellants
herein illegal and consequently issued the following directions :
Writ Petition is allowed. Rule issued is made absolute. The action of the
Respondents-Banks in rounding up interest rates to the next higher 0.25% is
held illegal, arbitrary and untenable. A command is issued to all the Banks to
submit an account of the excess interest collected by them from the borrowers
and deposit the same with the Reserve Bank of India to be debited in the account of the Union of India.
Reserve Bank of India-Respondent No.2 is directed to take immediate effective
steps for implementation of our directions by calculating the excess interest
collected by the Banks and ensuring the same to be deposited in the funds of
the Union of India." The appellants herein are before us questioning the
A. Dave, Senior Counsel appearing on behalf of the first appellant, Mr. P.
Chidambaram, Senior Counsel appearing for State Bank of India, Mr. Gopal Subramanium,
Senior Counsel appearing for Punjab National Bank and Mr. Altaf Ahmed,
Additional Solicitor General appearing on behalf of Canara Bank, would submit
having regard to the provisions contained in Sections 4 and 5 of the Interest
Tax Act read with Section 26C thereof, as interest tax was payable on the total
chargeable interest which was enhanced on the loan in terms of Section 26C as
also in terms of contractual provisions of other term loans, a great deal of
difficulties had arisen as calculations therefor were required to be made in
example in respect thereof has been placed before us which is as under:
Tax Interest to be earned in an attempt to retain Rs.10 post Interest Tax 10.30
* Interest Tax payable on Rs.10.30 (since whole of the amount collected is
assessable to Interest Tax) 0.309 Step II:
Tax Interest to be earned in an attempt to retain Rs.10 post Interest Tax
10.309 * Interest Tax payable on Rs.10.309 (since whole of the amount collected
is assessable to Interest Tax) 0.30427 Step III:
Tax Interest to be earned in an attempt to retain Rs.10 post Interest Tax
10.30427 * Interest Tax payable on Rs.10.30427 (since whole of the amount
collected is assessable to Interest Tax) 0.3092781 Step IV:
Tax Interest to be earned in an attempt to retain Rs.10 post Interest Tax
10.3092781 * Interest Tax payable on Rs.10.3092781 (since whole of the amount
collected is assessable to Interest Tax) 0.309278343 Step V:
Tax Interest to be earned in an attempt to retain Rs.10 post Interest Tax
10.309278342 * Interest Tax payable on Rs.10.309278343 (since whole of the
amount collected is assessable to Interest Tax) 0.30927835026
Such action was necessary with a view to ensure the retaining of interest at
the contractual rate;
or after Step V; as the amount of post tax interest earned by banks prior to
imposition of interest tax would not be enough, if banks raised rate of
interest only exactly by 3%, they necessarily had to increase the rate of
interest by 0.30927835026 so as to continue to earn pre tax interest @ 10%, the
impugned decision had been taken;
Since the calculation would come to an impossible fraction, the revised rate
had to be rounded up for easy calculation in collection;
The appellants, therefore, had not realised any tax de'hors the provisions of
the Act but had realised interest in terms of Section 26C which was authorised
by the Reserve Bank of India;
any event, increase in the rate of interest being of not much significance, the
doctrine of de minimus should be applied;
the appellants have merely collected a higher rate of interest to which they
were entitled to in terms of the loan agreements, as the Reserve Bank of India
only fixes minimum rate, the same had no nexus with collection of tax within
the meaning of Article 265 of the Constitution of India and, thus, the finding
of the High Court to the effect that the appellants have collected excess
amount of tax must be held to be bad in law;
any view of the matter, as pursuant to or in furtherance of the circular letter
issued by the Reserve Bank of India, the borrowers had been given notice and
the terms of the loan agreement having been altered, no writ application was
The writ petition suffered from gross delay and laches on the part of the writ
petitioner and, thus, the same should not have been entertained.
in support of the aforementioned contentions has been placed on Dhanyalakshmi
Rice Mills and Others etc. etc. vs. The Commissioner of Civil Supplies and
Another etc. etc. [(1976) 4 SCC 723]; B.O.I. Finance Ltd. vs. Custodian and
Others [(1997) 10 SCC 488] and Central Bank of India vs. Ravindra and Others [(2002) 1 SCC 367].
K.N. Bhat, learned senior counsel appearing on behalf of the Reserve Bank of
India, would submit that his client permitted rounding up of interest having
regard to the practical difficulties faced by the banks; but the same has since
been withdrawn in the year 1997. Keeping in view the fact that there are five crores
borrowers throughout India, it may not be feasible to comply
with the directions issued by the High Court.
Nageswara Rao, the learned Additional Solicitor General, appearing on behalf of
the Union of India, however, would point out that the gross interest rate
charged to the borrowers by the banks being made up of three elements, namely,
tax on the interest rate; and
element of rounding up interest rate to higher 25 paise; the appellants had not
only paid to the Government interest tax on the gross interest, that is,
rounded off cum tax interest rate collected by them (which would be in excess
of the amount of tax under the Act) but also retained some parts thereof.
Supporting the judgment of the High Court, Mr. Nageswara Rao would contend that
as the amount belongs to the ultimate borrowers, it should be returned to them
wherever feasible but in the event the same is not feasible it should be paid
over to the Government.
Respondent No.1, writ petitioner, did not appear, we requested Mr. T.L. Viswanatha
Iyer, Senior Advocate, to assist the Court. The learned counsel (Amicus Curiae)
would contend that the appellants have construed Section 26C wrongly and, thus,
acted under a confusion. Mr. Iyer would submit that Section 26C of the Act, if
properly read, would only mean that the enabling provisions had been made so as
to enable the appellant-banks to recover the amount of tax from the borrowers
under the Act and nothing more.
relevant provisions of the Interest Tax Act, 1974 read as under :
interest" means the total amount of interest referred to in section 5,
computed in the manner laid down in section 6;
"interest" means interest on loans and advances made in India and includes –
charges on unutilized portion of any credit sanctioned for being availed of in India; and
on promissory notes and bills of exchange drawn or made in India, but does not
referred to in sub-section (1B) of section 42 of the Reserve Bank of India Act,
1934 (2 of 1934);
on treasury bills;
Subject to the provisions of this Act, there shall be charged on every
scheduled bank for every assessment year commencing on or after the 1st day of
April, 1975, a tax in this Act referred to as interest-tax in respect of its
chargeable interest of the previous year at the rate of seven per cent of such
chargeable interest Provided that the rate at which interest-tax shall be
charged in respect of any chargeable interest accruing or arising after the
31st day of March, 1983 shall be three and a half per cent of such chargeable
Notwithstanding anything contained in sub-section (1) but subject to the other
provisions of this Act, there shall be charged on every credit institution for
every assessment year commencing on and from the 1st day of April, 1992,
interest-tax in respect of its chargeable interest of the previous year at the
rate of three per cent of such chargeable interest :
that the rate at which interest-tax shall be charged in respect of any
chargeable interest accruing or arising after the 31st day of March, 1997 shall
be two per cent of such chargeable interest.
of chargeable interest.
Subject to the provisions of this Act, the chargeable interest of any previous
year of a credit institution shall be the total amount of interest (other than
interest on loans and advances made to other credit institutions or to any
cooperative society engaged in carrying on the business of banking, accruing or
arising to the credit institution in that previous year :
that any interest in relation to categories of bad or doubtful debts referred
to in section 43D of the Income-tax Act shall be deemed to accrue or arise to
the credit institution in the previous year in which it is credited by the
credit institution to its profit and loss account for that year or, as the case
may be, in which it is actually received by the credit institution, whichever
of chargeable interest.
to the provisions of sub- section (2), in computing the chargeable interest of
a previous year, there shall be allowed from the total amount of interest
(other than interest on loans and advances made to credit institution accruing
or arising to the assessee in the previous year, a deduction in respect of the
amount of interest which is established to have become a bad debt during the
previous year :
that such interest has been taken into account in computing the chargeable
interest of the assessee of an earlier previous year and the amount has been
written off as irrecoverable in the accounts of the assessee for the previous
year during which it is established to have become a bad debt.
Explanation - For the removal of doubts, it is
hereby declared that in computing the chargeable interest of a previous year,
no deduction, other than the deduction specified in this sub-section shall be
allowed from the total amount of interest accruing or arising to the assessee.
computing the chargeable interest of a previous year, the amount of interest
which accrues or arises to the assessee before the 1st day of March, 1978, and
ending with the 30th day of June, 1980, or during the period commencing on the
1st day of April, 1985 and ending with the 30th day of September, 1991 shall
not be taken into account.
of credit institutions to vary certain agreements.
Notwithstanding anything contained in any agreement under which any term loan
has been sanctioned by the credit institution before the 1st day of October,
1991, it shall be lawful for the credit institution to vary the agreement so as
to increase the rate of interest stipulated therein to the extent to which such
institution is liable to pay the interest-tax under this Act in relation to the
amount of interest on the terms loan which is due to the credit institution.
Explanation.-For the purposes of this section,
"term loan" means a loan which is not repayable on demand." The
relevant provisions of the Banking Regulations Act, 1949 are as under : -
"35A. Power of the Reserve Bank to give directions.-
the Reserve Bank is satisfied that –
the public interest; or
in the interest of banking policy; or
prevent the affairs of any banking company being conducted in a manner
detrimental to the interests of the depositors or in a manner prejudicial to
the interests of the banking company; or
secure the proper management of any banking company generally;
necessary to issue directions to banking companies, generally or to any banking
company in particular, it may, from time to time, issue such directions as it
deem fit, and the banking companies or the banking company, as the case may be,
shall be bound to comply with such directions.
The Reserve Bank may, on representation made to it or on its own motion, modify
or cancel any direction issued under sub-section (1), and in so modifying or
canceling any direction may impose such conditions as it thinks fit, subject to
which the modification or cancellation shall have effect.
Reserve Bank is entitled to give directions to bankers under Section 20(3) of
the Foreign Exchange Regulation Act, 1947 blocking certain accounts.
20(3) does not contemplates the issue of a prior notice before taking such
action under that section. Mohamed Ayisha Nachiyar vs. Deputy Director,
Enforcement, (1976) 46 Com Cas 653 (Mad) Directions by Reserve Bank cannot
prevent payment of higher bonus in terms of the agreement. American Express
International Banking Corp. v. S. Sundaram,
(1978) 1 SCC 101 : 1978 SCC (L&S) 34."
26C OF THE ACT:
Parliament by reason of the said Act imposed a tax on the banks and other
financial institutions. By reason of the said Act, the appellants were not
statutorily empowered to pass the burden thereof to the borrowers or realise
the same on behalf of the Union of India. Concededly, in terms of the agreement
of the term loan, the appellants were not entitled to charge interest at a
higher rate than the agreed one. Section 26C was, therefore, enacted so as to
enable the bankers to realise the amount of tax which they were liable to
recover on the chargeable interest. The appellants have proceeded on the basis
that having regard to definition of 'chargeable interest' as contained in
Section 2(5) of the Act, the additional interest will have also to be
calculated for the said purpose and the rate of tax must be calculated
thereupon which, as noticed hereinbefore, resulted in adding of interest for
the purpose of calculation of tax ad infinitum.
the Parliament thought of the matter is the question. The Union of India does
not agree with the contentions of the Appellants, nor do we. The action on the
part of the appellants suggests that they had put the cart before the horse.
The action of taking recourse to Section 26C would arise only when the
chargeable interest is calculated whereupon only the incidence of tax under the
said Act is required to be passed on to the borrowers by way of additional
interest. The entire approach of the appellants was based on a wrong premise.
The said Act is a taxing statute. The Union of India under the said Act cannot
direct or permit the bankers or the financial institutions to raise interest.
The Act must, therefore, receive purposive construction so as to give effect to
the purport and object it seeks to achieve. [See BBC Enterprises vs. Hi-Tech Xtravision
Ltd. (1990) 2 All ER 118 at 122-3;
Kumar Singhania and Others vs. Union of India and Others, AIR 1992 SC 1, Murlidhar
Meghraj Loya vs. State of Maharashtra, (1976) 3 SCC 684, Superintendent and Remembrancer
of Legal Affairs to Govt. of West Bengal vs. Abani Maity, (1979) 4 SCC 85, Khet
Singh vs. Union of India Gujarat Kishan Mazdoor Panchayat & Ors., JT 2003
(3) SC 50], Indian Handicrafts Emporium & Ors. V. Union of India & Ors.
[ JT 2003 (7) SC 446], Ashok Leyland Ltd V. State of T.N. and Anr. [2004 (3) SCC 1 ] and High Court of Gujarat
& Anr. 50].
event, the contention of the appellants is accepted, the same would give rise to
an interpretation, as is well-known, must be avoided, if avoidable.
Furthermore, a statutory impost must be definite. Having regard to Article 265
read with Article 366(28) of the Constitution of India nothing is realizable as
a tax or by way of recovery of tax or any action akin thereto which is not
permitted by law.
neither in doubt nor in dispute that Section 26C is an enabling provision. It
has to be so construed, having regard to the term 'lawful' used therein.
prevails over an agreement under which any term loan has been sanctioned by the
credit institution before the 1st day of October, 1991. It was 'lawful' for the
credit institution to vary the agreement as regard rate of interest only for
the purpose of recovering the amount of tax which was payable by the Appellants
and a fortiori - nothing over and above the same. Such increase in rate of
interest would be
the extent to which such institution is liable to pay the interest tax;
relation to the amount of interest on the term loan; and
is due to the credit institution.
in rate of interest in terms of Section 26C of the Act, thus, has a direct
nexus with the statutory impost.
action on the part of the appellants in rounding up of the interest, thus, was
wholly unjustified. Once it is held that increase in interest in a justifiable
manner pertains to passing of the burden of tax, the contention that the same
had been done by the bank in exercise of its contractual power must be
rejected. A taxing statute must be construed reasonably. Nothing can be realised
by way of tax or akin thereto which has not been authroised by the Parliament.
Executive cannot levy tax. It, for the said purpose, therefore, cannot even take
recourse to the process of interpretation of a statute.
Sugar Co. Ltd. reported in 2004 (3) SCALE 6, administrative charges levied
under U.P. Sheera Niyantran Adhiniyam, 1964 has been held to be a tax.
Agrawal vs. State of Madhya Pradesh [(1999) 8 SCC 667], the law is stated in
the following terms :
intention of the legislature in a taxation statute is to be gathered from the
language of the provisions particularly where the language is plain and
unambiguous. In a taxing Act it is not possible to assume any intention or
governing purpose of the statute more than what is stated in the plain
language. It is not the economic results sought to be obtained by making the
provision which is relevant in interpreting a fiscal statute. Equally
impermissible is an interpretation which does not follow from the plain,
unambiguous language of the statute.
cannot be added to or substituted so as to give a meaning to the statute which
will serve the spirit and intention of the legislature. The statute should
clearly and unambiguously convey the three components of the tax law i.e. the
subject of the tax, the person who is liable to pay the tax and the rate at
which the tax is to be paid.
there is any ambiguity regarding any of these ingredients in a taxation statute
then there is no tax in law.
it is for the legislature to do the needful in the matter." (Emphasis
Supplied) If a statute was ambiguous the contemporaneous construction placed
thereon by the officers charged with its enforcement and administration might
be required to be considered and given due weight but therefor the First
Respondent or the Reserve Bank of India were not competent.
this case, the stand of the Union of India also runs counter to the contentions
of the Appellants.
plain reading of Section 26C of the Act leaves no manner of doubt that the same
was enacted only for a limited purpose, namely, to pass on the burden of tax to
the borrowers. The amount of tax must be calculated having regard to the
contractual rate of interest as thence obtaining and not upon in addition of
the purported interest by way of tax or otherwise. Once Section 26C is read in
a meaningful way, no difficulty arises in giving effect to sub-section (2) of
Section 4 and Section 5 and 6 of the Act.
provisions of the Act are read in a manner in which we have made an endeavour,
for an amount of Rs.100/- charged and the rate of interest charged by the bank
being 10%, the interest thereon having been earned would come to Rs.10, and,
thus, the borrower would be bound to pay only Rs.10.30 and not Rs.10.50, which
is said to be the effect of calculation at various steps as referred to by the
appellants. The appellants are, thus, not correct to contend that they have
exercised the power to claim a higher rate of interest only. They may have a
power to claim a higher rate of interest under the agreement but they did not
exercise the said jurisdiction. They invoked the enabling provisions contained
in Section 26C of the Act and/or raised rate of interest so as to pass on the
burden of tax upon the borrowers. They, while purporting to exercise their
jurisdiction under a statute were required to act in terms thereof and not in
derogation thereto. The appellants sought to achieve the same object indirectly
which they could not do directly.
purported difficulties faced by the appellants were their own creations. The
borrowers cannot suffer on account of wrong interpretation of law by the
appellants or by the Reserve Bank of India. Section 26C of the Act, therefore,
must be held to have wrongly been applied and consequently the action taken by
the appellants herein in grossing up and rounding the rate of interest must be
held to be illegal.
well-settled that when a procedure has been laid down the statutory authority,
it must exercise its power in the manner prescribed or not at all.
principle of de minimis, as contended by Mr. Chidambaram, has no application in
the instant case.
Black's Law Dictionary 'De minimus' has been defined as follows:
law does not care for, or take notice of, very small or trifling matters. The
law does not concern itself about trifles." It is not a matter which would
not receive the attention of anybody. Not only a public interest litigation was
filed but also the association of borrowers of Karnataka has also filed a
Special Leave Petition. The amount collected from the borrowers may be
negligible for the appellant banks but the amount they have realised from five crores
of borrowers is not a small one. By reason of a self-created confusion,
misconception as regard application of a statute and misapplication and
misconstruction thereof by the appellants herein had resulted in an illegal
action; as a result whereof the borrowers have been deprived of a huge amount.
Consequently the Union of India and the appellants have unjustly enriched
themselves. When such an unjust enrichment takes place, the doctrine of de minimis,
in our view, should not be applied in equity or otherwise.
writ petitioner before the High Court was a firm of the Chartered Accountant.
As an expert in accountancy and auditing, it must have come across several
cases where its client had to pay a higher amount of interest to the banks
pursuant to or in furtherance of the impugned action of the appellants. By
reason of such an action on the part of the appellants as also the Reserve Bank
of India, as noticed hereinbefore, the
citizens of India had to pay a higher amount of tax
as also a higher amount of interest for no fault on their part. The same had
been recovered from them without any authority of law. While entertaining a
public interest litigation, this Court in exercise of its jurisdiction under
Article 32 of the Constitution of India and the High Courts under Article 226
thereof are entitled to entertain a petition moved by a person having knowledge
in the subject matter of lis and, thus, having an interest therein as
contradistinguished from a busy body, is the welfare of the people. The rule of
locus has been relaxed by the courts for such purposes with a view to enable a
citizen of India to approach the courts to vindicate
legal injury or legal wrong caused to a section of people by way of violation
of any statutory or constitutional right.
fact the Courts had even been treating a letter or telegram sent to them as a
public interest litigation by relaxing the procedural laws especially the law
relating to pleadings. We need not dilate further on this subject as a Bench of
this Court in Guruvayur Devaswom Managing Committee observed:
Courts exercising their power of judicial review found to its dismay that the
poorest of the poor, depraved, the illiterate, the urban and rural unorganized labour
sector, women, children, handicapped by 'ignorance, indigence and illiteracy'
and other down trodden have either no access to justice or had been denied
justice. A new branch of proceedings known as 'Social Interest Litigation' or
'Public Interest Litigation' was evolved with a view to render complete justice
to the aforementioned classes of persons. It expanded its wings in course of
Courts in pro bono publico granted relief to the inmates of the prisons,
provided legal aid, directed speedy trial, maintenance of human dignity and
covered several other areas.
actions, pro bono publico and test litigations were entertained in keeping with
the current accent on justice to the common man and a necessary disincentive to
those who wish to by pass the real issues on the merits by suspect reliance on
peripheral procedural shortcomings. (See Mumbai Faizullabhai & Others
(1976) 3 SCR 591).
Court in pro bono publico proceedings intervened when there had been callous
neglect as a policy of State, a lack of probity in public life, abuse of power
in control and destruction of environment. It also protected the inmates of
prisons and homes. It sought to restrain exploitation of labour practices.
court expanded the meaning of life and liberty as envisaged in Article 21 of
the Constitution of India. It jealously enforced Article 23 of the
Constitution. Statutes were interpreted with human rights angle in view.
were interpreted in the light of international treatises, protocols and
conventions. Justice was made available having regard to the concept of human
right even in cases where the State was not otherwise apparently of Bihar
reported in JT 2003 (5) SC 1) The people of India have turned to courts more
and more for justice whenever there had been a legitimate grievance against the
States statutory authorities and other public organizations. People come to
courts as the final resort, to protect their rights and to secure probity in
bono publico constituted a significant state in the present day judicial
system. They, however, provided the dockets with much greater responsibility
for rendering the concept of justice available to the disadvantaged sections of
interest litigation has come to stay and its necessity cannot be
overemphasized. The courts evolved a jurisprudence of compassion. Procedural
propriety was to move over giving place to substantive concerns of the
deprivation of rights. The rule of locus standi was diluted. The Court in place
of disinterested and dispassionate adjudicator became active participant in the
dispensation of justice." Furthermore, even where a writ petition has been
held to be not entertainable on the ground or otherwise of lack of locus, the
court in larger public interest has entertained a writ petition. In an appropriate
case, where the petitioner might have moved a Court in his private interest and
for redressal of the personal grievance, the Court in furtherance of public
interest may treat it a necessity to enquire into the state of affairs of the
subject of litigation in the interest of justice. Thus, a private interest case
can also be treated as public interest case. (See Shivajirao Nilangekar Patil
v. Mahesh Madhav Gosavi AIR 1987 SC 294) We, therefore, do not agree with the
submissions of the learned counsel of the appellants that the respondent had no
locus to maintain the public interest litigation or the writ petition filed by
him pro bono publico before the High Court was not maintainable.
OF THE APPELLANTS AND THE RESERVE BANK OF INDIA:
have filed additional documents before us to show that the borrowers had been given
due notice but such notice/information had been given by applying wrong legal
principles. The appellants are State within the meaning of Article 12 of the
Constitution of India. They, as noticed hereinbefore, acted in an arbitrary and
submission of the learned counsel for the appellants to the effect that they
had been permitted to enhance the rate of interest by the Reserve Bank of India is equally misconceived. The
Reserve Bank of India apparently proceeded on the basis
that the mode of calculation of rate of interest vis-`-vis the tax under the
Act, as contended by the Appellant No. 1, was correct. The Reserve Bank of India was not an authority for
construction of a statute. Its functions are confined only to the provisions of
the Reserve Bank India Act and the Banking Regulation Act and not any other
35A of the Banking Regulation Act empowers the Reserve Bank of India to issue directions in relation to
matters specified under Section 35A and not for any other purpose. The
contention of the appellants to the effect that rate of interest had been
enhanced by them pursuant to or in furtherance of the directions issued by the Reserve
Bank of India must be held to be self-contradictory inasmuch as according to
them the Reserve Bank of India fixes only the minimum rate of interest leaving
a determination thereof in a case of each individual borrower upon the bank
concerned. If the matter relating to increase in the rate of the interest was
within power of the appellants, we fail to understand as to why the Reserve
Bank of India was approached at all. The same
being not permissible under the Act, any approval given by the Reserve Bank of India for the satisfaction of the members
of the first appellant herein was futile.
not in dispute that action on the part of the appellants in grossing up of
interest was not at all relevant. The appellants could not have suo motu taken
recourse to rounding up of interest for the purpose of obtaining a higher
amount of interest or otherwise. The purported practical difficulty sought to
have been put forth by the appellants is a self created one. If such practical
difficulty existed there was apparently no reason as to why the Reserve Bank of
India refused to grant such approval
view of the matter, the purported directions contained in the letter dated
2.9.1991 of the Reserve Bank of India are not even in the nature of executive construction under the said
Act. It was not binding on the banks, far less on the borrowers. In any event
by reason of a misplaced and misapplied construction of statute, a third party
having regard to the provisions contained in Article 265 of the Constitution of
India read with Article 366(28) thereof the purported demand from the borrower
for a higher amount of tax and consequently a higher amount of interest by way
of rounding up was wholly illegal and without jurisdiction. We also fail to
understand as to why in this modern electronics age, this difficulty would be
encountered while calculating the exact amount of tax.
therefore, are of the opinion that the purported approval granted by the
Reserve Bank of India was wholly without jurisdiction and
ultra vires the provisions of the said Act.
Rice Mills (supra), this Court merely held that in triable issues of
limitation, disputed questions of fact may not be gone into by the High Court in
exercise of its writ jurisdiction. Therein the appellants had been claiming
refund in terms of Section 72 of the Indian Contract Act. Under the export
scheme involved therein the payment made was voluntary in nature. The appellant
did not enter into any contract under mistake of law or under coercion. In the
fact situation obtaining therein, this Court held that the remedy under Article
226 was not appropriate in the said cases, stating :
several petitioners have joined. Each petitioner has individual and independent
cause of action. A suit by such a combination of plaintiffs would be open to misjoinder.
Second, there are triable issues like limitation, estoppel and questions of
fact in ascertaining the expenses incurred by the Government for administrative
surcharges of the scheme and allocating the expenses with regard to quality as
well as quantity of rice covered by the permits." The aforesaid decision
is not applicable in the instant case.
we may notice that in ABL International Ltd. & [JT 2003 (10) SCC 300], this
Court recently observed:
because the first respondent wants to dispute this fact, in our opinion, it
does not become a disputed fact. If such objection as to disputed questions or
interpretations are raised in a writ petition, in our opinion, the courts can
very well go into the same and decide that objection if facts permit the same
as in this case." In B.O.I. Finance Ltd. (supra), the question which arose
for consideration was as to whether the transaction arising out of agreement to
do an illegal act could be enforced. In that case certain circulars were issued
by the Reserve Bank of India in terms of 36(1) of the Banking
Regulation Act which had not been published. It was held :
was then submitted that even if it is held that the said circulars were binding
they could only bind the banks and not the third parties. The submission was
that by contravening the direction contained in the said circulars, the
contracts which were entered into between the banks and the third parties could
not be invalidated and the only result of such contravention would be the levy
of penalty under Section 46 of the said Act." The question which arose for
consideration therein does not arise in the instant case.
Central Bank of India (supra), this Court, inter alia,
held that Sections 21 and 35-A of the Banking Regulation Act confers a power
coupled with duty to act.
question which arose for consideration related to many phrases, namely,
"The principal sum adjusted", "such principal sum" and
"such" occurring in Section 34 of the Code of Civil Procedure. This
Court held that a long- established banking practice of charging interest at
reasonable rates on periodical rests and capitalizing the same on remaining
unpaid should not be found fault with and in that context the circular letter
issued by the Reserve Bank of India under Sections 21 and 35A was commented
Reserve Bank of India is the prime banking institution of
the country entrusted with a supervisory role over banking and conferred with
the authority of issuing binding directions, having statutory force, in the
interest of the public in general and preventing banking affairs from
deterioration and prejudice as also to secure the proper management of any banking
company generally. The Reserve Bank of India is one of the watchdogs of finance and economy of the nation. It is,
and it ought to be, aware of all relevant factors, including credit conditions
as prevailing, which would invite its policy decisions. RBI has been issuing
directions/circulars from time to time which, inter alia, deal with the rate of
interest which can be charged and the periods at the end of which rests can be
struck down, interest calculated thereon and charged and capitalized. It should
continue to issue such directives. Its circulars shall bind those who fall
within the net of such directives. For such transaction which are not squarely
governed by such circulars, the RBI directives may be treated as standards for
the purpose of deciding whether the interest charged is excessive, usurious or
opposed to public policy." We have noticed hereinbefore that the Reserve
Bank of India could not have interpreted the provisions of the said Act nor
thereby could have empowered the banks to charge something more from the
borrowers by the process of rounding up of interest. The appellants and the
Reserve Bank of India with a view to touching the end of their own shadows in
the guise of exercise of their contractual powers vis-a- vis Banking Regulation
Act exceeded their jurisdiction in recovering the tax imposed on them by way of
interest under the Parliamentary Act.
the reasons aforementioned, we are of the opinion that the impugned judgment
cannot be faulted with. However, the matter does not end there. The question
which looms large is what effective order can be passed by this Court.
than five crores of borrowers are involved. A huge sum of money is to be
recovered from Union of India as also a large number of banks. Directions may
be issued for refund of the amount to the borrowers, but implementation thereof
would take a long time. The court may not be able to effectively monitor such
Union of India, as noticed hereinbefore, had proposed that the banks concerned
be directed to deposit the excess recovered by it, if no direction is issued by
us that the same be returned to the borrowers. Interestingly, the Union of
India has not volunteered, which as 'a State' it should have done, to suo motu
undertake the exercise of identifying the borrowers and refund the excess
amount recovered, a part whereof had been deposited by way of interest tax by
the concerned banks. Furthermore, directing the Union of India to refund the
excess amount collected through the banks and consequently ask the banks to
refund the same to the borrowers whether with the amount retained by them by
way of rounding up of interest invariably would take a long time.
therefore, are of the opinion that a fund may be created for the benefit of the
Parliament has enacted "The Persons with Disabilities (Equal
Opportunities, Protection of Rights and Full Participation) Act, 1995"
(the 1995 Act). The Chapter V of the 1995 Act deals with education. Section 28
provides for research for designing and developing new assistive devices,
teaching aids, etc. for the disabled persons.
29 mandates appropriate governments to set up teachers' training institutions
to develop trained man power for schools for children with disabilities.
Chapter IX of the said Act provides for research and manpower development which
includes grant of financial incentives to universities to enable them to
undertake research. Chapter XI provides for institution for persons with severe
disabilities whereas Chapter XIII provides for social security. It is no
gainsaying that despite the 1995 Act came into force on or about 1st January,
1996 only a beginning has been made to implement the beneficient provisions
thereof but a lot lot more is required to be done.
India, the number of disabled people is around 100 million, and there are
approximately 160 million victims, direct and vicarious, of disablement.
National as also international efforts to combat this situation are on but the
task is a gigantic one. The General Assembly of the United Nations has passed
several Resolutions dealing with the rights of the mentally and physically
disabled emphasising that the disabled persons have the rights as regard human
dignity, civil and political rights, entitlement to measures to ensure their
self-reliance, the right to treatment, education and rehabilitation, the right
to economic and social security, the right to live with their families, the
right to have their special needs taken into account in economic and social
planning and the right against discrimination, abuse and exploitation, apart
from the fact that the disabled persons enjoy all rights available to other
not be necessary for us to delve deep into the non-implementation or part
implementation of the provisions of the 1995 Act at the hands of the State but
we are not oblivious of the fact that it may not be possible to achieve the
legislative target for the Central Government or State Government alone.
also not oblivious that the Parliament enacted the The National Trust for
Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple
Disabilities Act, 1999 providing for constitution of a National Trust which
would provide for maintenance allowance for persons with disabilities; the
object being to enable the disabled persons to live independently within the
community, to deal with problems of such persons who do not have family
support, to facilitate the realisation of equal opportunities; protection of
rights, full participation of such persons; to evolve a procedure for
appointment of guardians or trustees for such persons requiring protection.
are, furthermore, aware that the Ministry of Social Justice and Empowerment had
taken the following actions to implement the provisions of the aforementioned
Notification of Central Co-ordination Committee as per Section 3 of the Act
Notification of Central Executive Committee as per Section 9 of the Act
Creation of post of Chief Commissioner, Deputy Chief Commissioner, and Staff
for Office of Chief Commissioner
Five core groups of experts and officials of relevant Ministries have been set
up to make recommendations and formulate schemes to give effect to various
provisions of the Act. These are
Group on Prevention, Early Detection and Intervention;
Vocational training and employment;
Education, including pre-school education;
Barrier free environment; (e) Women and children with disabilities
National Fund for People with Disabilities set up on 11/08/1983 has been activated and assistance has been
sanctioned to non-government agencies. 17 projects have been sanctioned under
new scheme the Viklang Bandhu has been formulated to provide training t
A National Programme for Rehabilitation of Persons with Disabilities has been
submitted to the Planning Commission for establishment of infrastructure for
realizing the Act. The Programme contemplates the establishment of a District
Level Rehabilitation Centre, two multi-purpose rehabilitation workers at the
Block/PHC level; two community based rehabilitation workers at the Gram Panchayat
To support entrepreneurial activity by the disabled, the National Handicapped
Finance and Development Corporation has been operationalised with effect from 24/10/1997
The proposal for the National Trust for Welfare of Persons with Autism,
Cerebral Palsy, Mental Retardation and Multiple Disabilities with a corpus fund
of Rs. 100 crores has been approved by the Cabinet This Court as also the High
Courts have taken pro- active views in the matter of implementation of the
rights of the disabled.
National Federation for the Blind v. Union Public Service Commission [(1993) 2
SCC 411], the Court directed the Government and the UPSC to permit blind and
partially blind eligible candidates to compete and write the Civil Services
Examination in Braille script or with the help of a scribe. It also recommended
to the Government to decide the question of providing reservations to visually
handicapped persons in Group 'A' and 'B' posts in the Government and Public
Abidi v. Union of India [(1999) 1 SCC 467], the Court directed Indian Airlines
to give concessions to orthopaedically handicapped persons suffering from locomotor
disability to the extent of 80% for traveling by air in India. The Court was
mindful of the financial position of Indian Airlines and yet felt that this
direction was in keeping with the objectives of the Disabilities Act and was in
consonance with the concession already given by Indian Airlines to visually
Singh v. Union of India [(2003) 4 SCC 524] saw the Court interpreting the
Disabilities Act in a manner so as to further its objective. The Court opined
that Section 47 of the Act mandates that an employee who acquires a disability
during service must be protected. If such an employee is not protected, he
would not only suffer himself, but all his dependants would also undergo
merely granting him pension would not suffice, but there must also be an
attempt to secure him alternative employment.
the progressive stance of the Court and the initiatives taken by the
Government, the implementation of the Disabilities Act is far from
satisfactory. The disabled are victims of discrimination in spite of the
beneficial provisions of the Act.
are, therefore, of the opinion that in a larger interest a fund for the
aforementioned purpose should be created with the amount at the hands of the
Union of India and the Appellants and other concerned Banks, which may be
managed by the Comptroller and Auditor General of India.
would request the Comptroller and Auditor General of India to effect recoveries
of all the excess amount realised by the Union of India by way of interest tax
and interest by the banks and other financial institutions and create the
corpus of such fund therefrom. The appellant and other concerned banks are also
hereby directed to contribute to the extent of Rs. 50 lakhs each in the said
Comptroller and Auditor General of India would be the Chairman of the said
Trust and the Finance Secretary and the Law Secretary of the Union of India
would be the ex- officio members thereof. The corpus so created may be invested
in such a manner so as to enable the trustees to apply the same for the purpose
of giving effect to the aforementioned provisions of the 1995 Act.
Union of India, the Reserve Bank of India, the appellant Banks, other scheduled
banks and financial institutions are directed to render all cooperation and
assistance to the trustees.
Committee as also the Committees set up by the Central Government should act in
close cooperation with each other. The Committee may, if it thinks proper,
invest any amount in the Trust set up by the Central Government under the 1999
Act or any other scheme framed by the Central Government, as noticed
trustees aforementioned with a view to give effect to this order may frame an
appropriate scheme. In case of any difficulty they may approach this Court for
any other or further order/orders or direction/directions.
Central Government, however, with a view to implement the aforementioned
provisions may by amending the 1995 Act provide for creation of such a fund and
in such an event, the statutory authority, if any, would be entitled to take
over the corpus of the fund but so long no legislative step is taken in this
behalf, this order shall remain in force.
appeals are dismissed with the aforementioned terms. There shall be no order as
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