Assignment of Loan by Bank in Favour of Respondents Was Prohibited as They Were Not Recognized Transferees Under RBI Guidelines | HC

Case Details: Official Liquidator v. Savannah Lifestyle (P.) Ltd. - [2025] 172 taxmann.com 763 (HC-Bombay)

Judiciary and Counsel Details

• Sandeep V. Marne, J.
• Navroz Seervai, Sr. Adv., Aseem Naphade, Shivaji Masal, Vikram Nankani, Sr. Adv., Ameet Naik, Tushar Hathiramani, Abhishek Kale, Vivek Dwivedi, Nevil Chopra, Aditya Khare & Ms Rebecca Singh, for the Petitioner.
• Dr. Virendra Tulzapurkar, Sr. Adv., Mandar Soman, Ms Shruti Maniar, Ms Shivani Bhandary and Ms Kashmita Belwalkar, Suresh Yadav, Avinash Khondkar, Ms Khushbu Bhansali, P.V. Nelson Rajan & Ms Savina R. Crasto, AGPS, for the Respondent.

Facts of the Case

In the instant case, ‘S’ availed a loan from the applicant bank for setting up and commencing a recreational club. Subsequently, by the Conducting Agreement, ‘S’ permitted the respondent to operate the recreational club in consideration of monthly royalties and compensation.

Since ‘S’ defaulted in the repayment, the Bank initiated recovery proceedings against ‘S’. In the meantime, ‘S’ was admitted into insolvency. The Liquidator of Bank sent a One Time Settlement (OTS) proposal to the respondent, calling upon it to deposit the outstanding amount on behalf of ‘S’.

Though the respondent showed willingness to deposit amount on behalf of ‘S’, it requested the Liquidator not to close the loan account of ‘S’ but to substitute the respondent in place of the Bank.

In the above background, the Bank and respondent signed and submitted Minutes under which the Bank assigned the loan account of ‘S’ along with all rights, securities, mortgages, charges, remedies and benefits attached thereto in favour of the respondent.

It was noted that under the Reserve Bank of India (Transfer of Loan Exposures) Directions, 2021 (RBI Directives) issued by the RBI, lenders enumerated in Clause 3 thereof can transfer stressed assets only to lenders specified under sub-clauses (a), (d), (e) and (f) of Clause 3, which includes Scheduled Commercial Banks, Financial Institutions, Small Finance Banks and NBFCs.

In the instant case, transaction of assignment of loan of ‘S’ by Bank in favour of respondent was specifically prohibited under the RBI Directives as respondent was not an eligible transferee and since respondent was not one of recognised transferees under RBI guidelines, transfer of loan account of ‘S’ in favour of respondent would be unlawful.

High Court Held

The High Court held that the fact that compromise executed between the Bank and the respondent affects interests of ‘S’, which was not signatory to the Minutes of the Order. Thus, the settlement order passed by the Writ Court on the basis of the Minutes of Order was to be recalled.