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Jayaswal Neco Industries Limited & Anr. vs Reserve Bank of India & Ors.

Special Leave Petition (Civil) · 2022 INSC 508Decided 4 May 2022
Special Leave Petition (Civil) Nos. 9286-9287 of 2018
Uday Umesh Lalit · S. Ravindra Bhat

Background

The petitioners had challenged three RBI circulars (issued in September, November and December 2017) before the Bombay High Court, which dismissed their writ petition. They then approached the Supreme Court, which in April 2018 issued notice and ordered the parties to maintain status quo. Over the following years, eleven of the petitioners' twelve lenders assigned their debts to an asset reconstruction company (ACRE), while the twelfth reached a one-time settlement; ACRE then agreed to withdraw insolvency proceedings against the petitioners in exchange for the petitioners withdrawing these Special Leave Petitions.

Decision Breakdown

The RBI opposed the withdrawal, arguing that the petitioners had used the status-quo order to strike arrangements behind its back and that the case should instead be decided on merits with status quo ante restored. The Supreme Court acknowledged force in RBI's objection but nonetheless allowed the withdrawal, noting that nine of the eleven lenders who had assigned debts to ACRE were public sector banks/financial corporations, and rejecting the withdrawal could force those public lenders to refund large sums already received: a consequence the Court wished to avoid. It permitted withdrawal on condition that the petitioners deposit Rs. 10 lakh as costs with the Supreme Court Middle Income Group Legal Aid Society within two weeks, expressly clarifying it was not approving or endorsing the arrangements made during the status-quo period. The connected Transfer Petition was rejected as infructuous since the main matter stood disposed of.

Lesson Learnt

A party seeking to withdraw a pending case is not always entitled to do so unconditionally, especially where the opposing side objects and intervening arrangements happened under the shelter of a court order. The Supreme Court can impose costs as a condition for withdrawal and can factor in the wider public interest (such as protecting public sector banks from having to refund money) while making that decision, without endorsing the conduct that led there.

Official source (sci.gov.in)View Judgment (PDF)

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