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Vijay Kumar Choudhary vs Reserve Bank Of India And Anr on 3 June, 2022

Author: Sanjeev Narula

Bench: Sanjeev Narula

                          $~47
                          *    IN THE HIGH COURT OF DELHI AT NEW DELHI
                          +     W.P.(C) 9320/2022
                                VIJAY KUMAR CHOUDHARY                                     ..... Petitioner
                                                    Through:     Mr. Aditya Dewan and Mr. Vivek
                                                                 Kumar Mishra, Advocates.

                                                    versus

                                RESERVE BANK OF INDIA AND ANR.                         ..... Respondents
                                                    Through:     Mr. Sanjay Kapur, Ms. Megha
                                                                 Karnwal, Mr. Akshit Kapur and Mr.
                                                                 Arjun Bhatta, Advocates for R-2/
                                                                 SBI.

                                CORAM:
                                HON'BLE MR. JUSTICE SANJEEV NARULA
                                             ORDER

                          %                  03.06.2022
                          W.P.(C) 9320/2022

1. The Petitioner impugns a circular dated 01st July, 2016, bearing number RBI/DBS/2016-17/28 DBS.CO.CFMC.BC.NO.l/23.04.001/2016-17 updated on 30th July, 2017 [hereinafter "RBI Circular/ Impugned Circular"] issued by Respondent No. 1 [Reserve Bank of India] which pertains to declaration of fraud accounts - as well as consequential action of Respondent No. 2 [State Bank of India] declaring the account of Petitioner as a 'fraud' account.

2. Issue notice to the Respondents. Mr. Sanjay Kapur, Advocate, accepts notice on behalf of Respondent No. 2. Let counter affidavit be filed within a period of two weeks from today. Rejoinder thereto, if any, be filed within a Signature Not Verified Digitally Signed W.P.(C) 9320/2022 Page 1 of 3 By:SAPNA SETHI Signing Date:04.06.2022 12:21:53 period of two weeks thereafter.

3. Upon filing of process fee, issue notice to Respondent No. 1, by all permissible modes, returnable on 20th July, 2022.

CM APPL. 27909/2022 (seeking interim reliefs)

4. Mr. Aditya Dewan, counsel for the Petitioner, states that the Petitioner is a Fellow Member of Institute of Chartered Accountants of India and was inducted as a non-executive/ independent director on the Board of Directors of Educomp Solutions Ltd. ["ESL"] and Educomp Infrastructure and School Management Ltd. ["EISML"]. He states that after the Petitioner was issued a show cause notice, he made certain representations and subsequent thereto, Wilful Defaulter Identification Committee of SBI constituted under the Master Circular on Wilful Defaulters issued by RBI exonerated the Petitioner. He states, nevertheless, the Bank has now proceeded to declare the Petitioner as 'fraud' account.

5. This Court notes that the legality of the RBI Circular is being examined in a batch of part-heard petitions before Hon'ble Mr. Justice Prateek Jalan which are next coming up for hearing on 13 th July, 2022.1 The Court vide Order dated 15th February, 2019, passed in the same case, formed a prima facie view that declaration of an account as 'fraud' means more than the account being a 'wilful defaulter'. In that light, it has been observed that if the account itself has not been declared to be a 'wilful defaulter', the declaration of an account as 'fraud' cannot sustain. Several orders have been passed by other co-ordinate benches, wherein the Court has deliberated upon 1 W.P.(C) 306/2019 titled - Apple Sponge and Power Ltd and Ors v. Reserve Bank of India and Anr.

the Impugned Circular and granted interim protection. Reliance has also been placed upon the dicta of the Court in State Bank of India v. Jah Developers.2

6. For the fore-going reasons, Petitioner has established a prima facie case, and considering the orders referred above, the Court is inclined to grant interim protection. Accordingly, till the next date of hearing, Respondent No. 2-Bank is restrained from taking any further steps or actions prejudicial to the Petitioner in furtherance of the order declaring the bank account of Petitioner as 'fraud'.

7. It is clarified that Respondents are free to issue a show cause notice, and give necessary hearing to the Petitioner, if they are inclined to do so. If such a measure is taken, a reasoned order shall be passed as per law, which shall be communicated to the Petitioner. It is also clarified that the Respondents are free to continue/ initiate/ file any complaint/ proceedings against the Petitioner, as per law, independent of the impugned order declaring the account of Petitioner as a fraud account, and this would include the action initiated for declaring the Petitioner to be a 'wilful defaulter'.

8. Accordingly, the application stands disposed of.

SANJEEV NARULA, J JUNE 3, 2022 d.negi 2 2019 SCC OnLine SC 787.