On 4th April, 2016, the Debt Recovery Appellate Tribunal (DRAT) at New Delhi ruled that banks are not immune from scrutiny, especially if they act against public interest by offering rebates to a defaulter by entering into a one-time settlement (OTS).
As per Chairperson of the appellate body, "the Principle of public accounting" applies to banks. The DRAT has ruled that if banks want an approval of tribunals for the agreements they (banks) enter into with those failing to pay back loans, they will have to satisfy the tribunals that such compromises are lawful. The judgment was passed by Justice Ranjit Singh on an appeal filed by State Bank of India (SBI) against an order passed by a tribunal which had asked the Central Bureau of Investigation (CBI) to investigate a case in which SBI and Oriental Bank of Commerce (OBC) had offered a whopping rebate of Rs. 40 crore to a Haryana-based entrepreneur.
A consortium of three banks — SBI, OBC and Punjab National Bank (PNB) — had offered a loan of Rs 168 crore to a Haryana-based Veetee Fine Foods. After the company failed to pay the loan, SBI and OBC offered a rebate of Rs 40 crore, accepting an OTS offered by the company.
The DRAT set aside the direction for a CBI probe, calling that "beyond the power and jurisdiction of the tribunal."
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