COMMON CAUSE (A REGD. SOCIETY)versusUNION OF INDIA & ANR.

                        [2010] 10 S.C.R. 124


A             COMMON CAUSE (A REGO. SOCIETY)
                                      v.
                      UNION OF INDIA & ANR.
                 (Writ Petition (C) No. 291 of 1998)
                          AUGUST 18, 2010
B
            [J. M. PANCHAL AND A.K. PATNAIK, JJ.]

        Public Interest Litigation:

c        Banks - Non-recovery of loans, known as Non-
    Performing Assets - Writ petition filed before Supreme Court
    for appropriate·. writs/directions, as legislative and
    administrative measures taken stated not to have been
    effective - HELD: whether legislative and administrative
0   measures taken by the Union Government have been
    effective or not is not for the Court but for the Union
    Government and Parliament to consider, beca1.1se reduction
    and control of NPAs is not within the domain of judiciary but
    within the domain of the Executive and Legislature - It is
E   reiterated that in the field of economic activities, there has to
    be judicial deference to Legislative and Executive judgment,
    and decisions on complex economic matters are to be based
    on experimentation or what one may call 'trial and error
    method' - It is for Parliament to debate and decide on the
    policy decision and not for courts to sit in judgment whether
F   a particular policy decision of Government is effective or not
    - An expert body known as Serious Fraud Investigation Office
    (SFIO} set up by the Union Government is already in
    existence - In order to make the SFIO effective, a Committee
    of Experts under the chairmanship of Ex-Deputy Governor of
G   Reserve Bank of India has also been set up, which will
    suggest effective measures, legislative or administrative, to
    ensure that bank frauds are prevented in future and the NPAs
    are kept to the minimum - This Committee will consider the

H                                 124
COMMON CAUSE (A REGO. SOCIETY) v. UNION OF 125
              INDIA & ANR.
suggestion to make the SFIO (or any similar body) a statutory     A
authority having sufficient powers and having the required
autonomy to be able to effectively deal with the problems of
bank frauds and NPAs - A copy of this order will be placed
before the Committee of Experts - Constitution of India, 1950
- Article 32 - Banks/Banking.                                     B

    Vil/ianur lyarkaai Padukapu Maiyam vs. Union of India
                             =
and Ors. 2009 (9) SCR 225 (2009) 7 sec 561; and State
                                                  =
of M.P. vs. Nandlal Jaiswal 1987 (1) SCR 1 1986 (4)
sec 566 - relied on.                                              c
    · Vishaka and Ors. Vs. State of Rajasthan and Ors. 1997
                     =
(3) Suppl. SCR 404 1997 (6) SCC 241; and Vineet Narain
& Ors. Vs. U.0.1. 1997 (6) Suppl. SCR 595 = 1998 (1)
sec 226 - distinguished.
                                                                  D
                     Case Law Reference:
  1997 (3) Suppl. S.CR 404 distinguished            para 6
  1997 (6) Suppl. SCR 595 distinguished             para 6
  1987 (1) SCR 1                 relied on          para 9        E

  2009 (9) SCR 225               relied on          para 9

    CIVIL ORIGINAL JURISDICTION : Writ Petition (C) No.
291 of 1998.
                                                                  F
      Prashant Bhushan, Rohit Kumar Singh, Poulami Putatunda
for the Petitioner.

     Gopal Subramanium, S~ G., S.N. Terdal, Sunita Sharma,
Aman Ahluwalia, Kuldeep S. Parihar, H.S. Parihar, Anil Katiyar,   G
P.P. Singh, Romy Chacko for the Respondents.

     The order of the Court was delivered by


                                                                  H
    126      SUPREME COURT REPORTS               [2010] 10 S.C.R.


A                               ORDER

        A.K. PATNAIK, J. 1. The petitioner is a society duly
   registered under the Societies Registration Act, 1860 and is
   engaged in taking up various common problems of the people
8 for redressal. Concerned with the increase of the non~recovered
 • loans advanced by the public and private sector banks in India
   which have come to be known as Non-Performing Assets (for
   short "NPAs"), the petitioner has filed this Writ Petition under
   Article 32 of the Constitution as a Public Interest Litigation
C praying for appropriate writs and directions.

         2. The petitioner has stated in the Writ Petition that the
   aggregate figure of NPAs worked out on the basis of data
   compiled by the Banking Division of the Ministry of Finance is
   Rs.43,577/- crores. According to the petitioner, non-recovery
D of such huge amount of NPAs has resulted in substantial funds
   of banks not being available for development of the country's
   economy and this, in turn, has affected the citizens. The
   petitioner has alleged that the steps taken by the Union.
   Government to recover the NPAs have not yielded positive
E results and the Finance Ministry of the Union Government is
   reported to have admitted that 27 nationalised banks had
   written off a staggering amount of Rs.4,010/- crores as bad
   debts during 1994-95 and 1995-96. According to the petitioner,
 -,most of the bad debts are on account of defaults made by men
F of substantial means and influence and if proper checks are
   introduced to ensure that loans and advances are not given to
   fr~-i:1dulent borrowers, the NPAs will get substantially reduced.
       3. Mr. Prashant Bhushan, learned senior counsel
  appearing for the petitioner, submitted that in the Writ Petition,
G as originally filed, the petitioner has suggested various
  measures to check the menace of increasing NPAs by evolving
  a proper mechanism that would reduce the possibility of fresh
  loans becoming NPAs, but subsequently this Court passed
  orders on 09.08.2005, 08.12.2005, 09.11.2006 and 30.01.2008
H directing the petitioner to make written suggestions to the Union
COMMON CAUSE (A REGO. SOCIETY) v. UNION OF 127
       INDIA & ANR. [A.K. PATNAIK, J.]
 Government and also ciirecting the Union Government to hold               A
  meetings with the concerned functionaries to consider those
  suggestions. He submitted that pursuant to these directions, the
  petitioner has m·ade various suggestions in its letters dated
 02.08.2001, 25.08.2005 and 10.08.2006, but except for one
  suggestion· regarding the definition ·of "willful defaulter", all tile   B
  suggestions were rejected by the Union Government. He
  submitted that the reasons given by th.e Government for
  rejecting the sUg.gestions are that if the suggestions are
  adopted, the public sector banks will become less competitive
  and will loose its customers to the private sector banks. He             c
 explained that the suggestions made by the petitioner mainly
 emphasized that the loans and advances must not be given
  without fully checking the creditworthiness and past record of
  the borrowers and that companies, which have been "willful
 defaulters" in the past or whose subsidiary companies and                 0
  promoters have willfully defaulted in the past in repaying the
. loans and advances, should not be gi~en fresh loans and
  advances. He also explained that the suggestions of the
  petitioner also stress on the greater accountability of the bank
  officials and on the personal liability of the promoters by making
                                                                           E
  personal guarantee of the promoters mandatory in every case.
  He vehemently argued that the Union Government could not
  possibly have any objection to these suggestions made by the
  petitioner and the reasons given in the affidavit of Shri Dharam
  Paul Bhardwaj, Under Secretary, Ministry of Finance,
  Department of Economic Affairs (Banking Division) filed on               F
  behalf of the Union Government for not accepting the
  suggestions are frivolous. On behalf of the petitioner, he urged
  the Court to issue appropriate writs and directions. to the
  respondents to implement the suggestions made by the
  petitioner.                                                              G

     4. Mr. Gopal Subramanium, learned Solicitor General for
the Union of India, however, submitted, relying on the additional
affidavit, that a number of steps have already been taken by
the Ministry of Finance, Government of India, to address the               H
    128      SUPREME COURT REPORTS               (2010) 10 S.C.R.


A   issue of NPAs and bank frauds and these are: action taken
    under the Recovery of Debts due to Banks and Financial
    Institutions Act, 1993 (for short "the ORT Act") to recover the
    NPAs of Banks, the enactment of the Securitization and
    Reconstruction of Financial Assets and Enforcement of Security
B   Interest Act, 2002 (for short "the SARFAESI Act") which
    empowers the banks to realize the securities furnished by the
    borrowers to the bank and to recover the loans and advances
    from the defaulted borrowers, the enactment of the Credit
    Information Companies (Regulation) Act, 2005 which provides
c   for the setting up of Credit Information Companies for collection,
    sharing and dissemination of credit information, which will.help
    in arresting fresh accretion of NPAs and framing of the rules
    under the Credit Information Companies (Regulation) Act, 2005,
    which would ensure that the Credit Information Companies
D   collect, process and collate accurate and complete data relating
    to the borrowers, so that fresh loans and advances given to the
    borrowers do not become sticky. He suqmitted that besides the
    legislative measures, the Reserve Bank of India has been
    circulating a list of non-suit filed 'doubtful' and 'loss' borrowal
    accounts of Rs. 1 crore and above, on 31st March and on 30th
E   September every year to the banks and financial institutions for
    their confidential use. He submitted that the banks and the Union
    Goverhnient also refer cases of bank frauds to the C.B.I.
    wherever considered necessary and appropriate and that the ·
    Union Government has set up in July, 2003 the "Serious Fraud
F   Investigation Office" (SFIO), which comprises officers
    specialized in various disciplines, such as Taxation, Customs,
    Central Excise, Information Technology, Company Law, Capital
    Market, Banking, Investigation/ Police, Forensic Audit, etc. and
    this expert and experienced body has already started
G   functioning since October, 2003 and has been assigned a total
    of 51 cases of serious frauds up to 30.04.2008 out of which
    30 cases have already been investigated and 18. ·Cases are
    under investigation. He explained that SFIO is presently working
    under the existing provisions of the Companies Act but
H   legislation will be brought to invest the SFIO with adequate
COMMON CAUSE (A REGO. SOCIETY) v. UNION OF 129
       INDIA & ANR. [A.K. PATNAIK, J.]
reach and powers. He submitted that the Central Government A
has already constituted a Committee of Experts under the
Chai~manship of the Ex-Deputy Governor of the Reserve Bank
of India to make recommendations regarding the SFIO and the
report of this Committee of Experts as and when received will .
be considered by the Union Government. He argued that since B
adequate mechanism. presently exists to tackle the issue of
NPAs and bank frauds and there has in fact been a sharp
decrease in the level of NPAs in scheduled commercial banks
from 4.4% of their net advances as on 31.03.2003 to 1.0% as
on 31.03.2008, this Court should not issue any writs or            c
directions, as prayed for, by the petitioner.

      5. In rejoinder, Mr. Prashant Bhushan submitted that the
reduction in NPAs, as claimed by the Union Government, has
come about by waivers, write-offs, rescheduling of repayments,
moratoriums and one-time settlements but all this has actually     D
resulted in loss of substantial amount of public funds. He
submitted that as per the report of the Reserve Bank of India
on the trend and progress of banking in India for 2004-2005,
total NPAs recovered by the banks amounted to Rs.20,568/-
crore and out of this, an amount of Rs.14,506/- crore was          E
recovered through asset reconstruction companies and these
recoveries are nothing but purchase of NPAs from the banks
by another set of public companies. He submitted that the report
of the Reserve Bank of India would further show that during
2004-2005 an additional Rs.16,000 crore of NPAs have               F
accrued. He submitted that the measures taken by the Union
Government to reduce the NPAs, therefore, have not been
effective. He finally submitted that without statutory power and
without qualified manpower, the SFIO would be teeth-less and
 incompetent and this Court should direct the Union Government     G
to make the SFIO an independent statutory body consisting of
qualified manpower as suggested by Mr. Harish Salve, learned
senior Counsel.

     6. Mr. Bhushan cited the decision of this Court in Vishaka
                                                                   H
    130      SUPREME COURT REPORTS               [2010) 10 S.C.R.


A and Others v. State of Rajasthan .and Others [(1997) 6 SCC
  241] for the proposition that ifthere is no enacted legislation
  to provide for. the effective enforcement of any fundamental right,
  this Court can issue guidelines/directions for the effective
  enforcement of the fundamental right under Article 32 of the
B Constitution, which would be law under Article 141 of the
  Constitution, till a suitable legislation is enacted to occupy the
  field. He also relied on the decision in Vineet Narian & Ors. v.
  Union of India & Anr. [(1998) 1 SCC 226) in which this Court
  has observed· that the judiciary must step in, in exercise of its
c constitutional obligations under Article 32 read with Article 142
  of the Constitution, to provide a solution till such time as the
  legislature acts to perform its role by enacting proper legislation
  to cover the field. He submitted that in case this Court is not
  inclined to issue directions or writs in the matter, the Court can
0 at least direct that the suggestions made by the petitioner for
  checking the NPAs in future be referred to an independent
  expert committee.

       7. In Vishaka and Others v. State of Rajasthan and Others
  (supra) cited by Mr. Bhushan, this Court held that in the absence
E of enacted law to provide for the effective enforcement of the
  basic human right of gender equality and guarantee against
  sexual harassment and abuse, more particularly against sexual
  harassment at workplaces, some guidelines and norms for due
  observance at all workplaces or other institutions were required
F to be laid down by this Court until a legislation is enacted for
  the purpose and this Court made it clear that this was required
  to be done in exercise of the power available under Article 32
  of the Constitution for enforcement of the Fundamental rights
  guaranteed under Articles 14, 15, 19(1)(g) and 21 of the
G Constitution. Similarly, in Vineet Narain and Others v. Union
  oflndia and Another (supra), this Court issued some directions
  foNigid compliance till such time as the legislature steps in to
  substitute them by proper legislation and these directions were
  made under Article 32 read with Article 142 of the Constitution
H to implement the rule of law wherein the concept of equality
COMMON CAUSE (A REGO; SOCIETY) v. UNION OF 131
       INDIA & ANR. [A.K. PATNAIK, J.]
enshrined in Article 14 is embedded. Hence, in both the cases           A
cited by Mr. Prashant Bhushan, the Court issued writs and
directions for enforcement of fundamental rights conferred by
Part-Ill of the Constitution, but in the present case, the petitioner
has not made out a case that for enforcement of any right
guaranteed under Part-Ill of the Constitution, writs or directions      B
are required to be issued by this Court under Article 32 of the
Constitution.
           i
          I
      8. Moreover, in Vishaka and Others v. State of Rajasthan
and Others (supra), this Court laid down guidelines and norms           C
for due observance at work places and institutions to prevent
sexual harassment of workingwomen, because there was no
law to prevent such sexual harassment. In the present case, we
find from the additional affidavit filed on behalf of the·Uruon of
India that through various legislative measures stlch as the DRT
Act, the SARFAESI Act, 2002, the Credit Information                     D
Companies (Regulation) Act, 2005 and through some
administrative measures, the res'pondents are trying to reduce
the number and amount of NPAs and to detect and check bank
frauds in future.
                                                                        E
      9. According to Mr. Prashant Bhushan, however, these
~gislative and administrative measures taken by the Union
Government have not been effective in reducing and controlling
the NPAs. Whether legislative and administrative measures
taken by the Union Government have been effective or not is             F
not for the Court but for the Union Government and Parliament
to consider because reduction and control of NPAs are not
within Hie domain of judiciary but within the'domain of the
Executive and Legislature under our Constitution. Moreover, as
has beem observed by P.N. Bhagwati, J. in State of M.P. and             G
Others v. Nandlal Jaiswal and Others [(1986)4 SCC 566] in
field of economic activities, there has to be judicial deference
to Legislative and Executive judgment and decisions on
complex economic matters are to be based on experimentation
or what one may ~all 'trial and error method'. It is therefore not      H
                    '
    132       SUPREME COURT REPORTS                [2010) 10 S.C.R.


A for Courts to sit in judgment whether a particular policy decision
  of the Government is effective or not, but for Parliament to
  debate and decide on the policy decision. In a recent decision
  of this Court in Villianur lyarkkai Padukappu Maiyam v. Union
  of India and Others [(2009) 7 SCC 561), Panchal, J. writing
B the judgment on behalf of a three-Judge Bench observed:

         "It is neither within the domain of the courts nor the scope
         of judicial review to embark upon an enquiry as to whether
         a particular public policy is wise or whether better public
         policy can be evolved. Nor are the courts inclined to strike
c        down a policy at the behest of a petitioner merely because
         it has been urged that a different policy would have been
         fairer or wiser or more scientific or more logical. Wisdom
         and advisability of economic policy are ordinarily not
         amenable to judicial review. In matters relating to economic
D        issues the Government has, while taking a decision, right
         to "trial and error" as long as both trial and error are bona
         fide and within:the limits of the authority. For testing the
        ·correctness of a policy, the appropriate forum is Parliament
         and not the courts."
E
         10. The Union Government, however, must ensure that
    SFIO is effective in detecting and preventing bank frauds by
    influential people. We find that the Central Government has
    constituted a Committee of Experts under the Chairmanship of
F   Shri Vepa Kamesam, Ex-Deputy Governor of Reserve Bank
    of India, with the following terms of reference:

          (a) Assessment of the need for and details of a separate
          stature to govern the constitution and functioning of SFIO;

G         (b) The nature and details of the legislative changes as may
          be required in existing laws, to enable effective functioning
          of SFIO including prosecution of offences detected by it;

          (c) The mechanisrr/ for referral of cases to SFIO and
          coordination of activities of SFIO with other agencies/
H
COMMON CAUSE (A REGO. SOCIETY) v. UNION OF 133
       INDIA & ANR. [A.K. PATNAIK, J.]

       organizatioris of the Central and State Governments,          A
       including investigating;

    · (d) Powers of SFIO and its investigation officers;

       (e) Specification of offences and penalties to enable
       effective conduct of investigation agencies and the need      B
       for Special Courts for trial of corporate fraud cases; and

       (f) Other matters consequential to or in pursuance of the
       above.
                                                                     c
We have no doubt that this Committee of Experts under the
Chairmanship of Ex-Deputy Governor of Reserve Bank of India
will suggest effective measures, legislative 1 or administrative,
to ensure that bank frauds are prevented in future and the NPAs
are kept to the minimum. We hope and trust that this
Committee under the Chairmanship of Ex-Deputy Governor of            D
Reserve Bank of India will consider the suggestion to make the
SFIO (or any similar body) a statutory authority having sufficient
powers and having the required autonomy· to be able to
effectively deal with the problems of bank frauds and NPAs. A
copy of this order will be placed by the respondent No.1 before      E.. ·
the Committee of Experts.

     11 . The writ petition and the application for impleadment/
intervention stand disposed of. No costs.
                                                                     F
R.P.                                  Writ Peti!ion Disposed of.