Bombay High Court
Vijit Kumar Agrawal vs State Bank Of India And 6 Ors on 4 August, 2021
Bench: K.K.Tated, Prithviraj K. Chavan
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
TRUSHA
TUSHAR
MOHITE WRIT PETITION (L) NO.15982 OF 2021
Digitally signed by
TRUSHA TUSHAR
MOHITE
Date: 2021.08.07
13:43:31 +0530 Vijit Kumar Agrawal ..... Petitioner
Vs.
State Bank of India and Ors. .... Respondents
Mr.Sachin Mandlik a/w Mr.Ankit Tripathi and Ms.Kareena
Tahilramani i/b M/s.Mandlik & Partners for the Petitioner
Mr.R.J.Singh i/b M/s.R.J.Singh and Co. for the respondent
no.1
CORAM: K.K.TATED &
PRITHVIRAJ K. CHAVAN, JJ.
DATED : AUGUST 04, 2021
P.C.
. Heard.
2. The learned counsel for the Petitioner submits that all the Respondents are duly served. He undertakes to fle Affdavit of Service on or before the next date. The undertaking is accepted.
3. By this petition, under Article 226 of the Constitution of India, the Petitioner is challenging the orders dated 21.08.2020 and 01.06.2021 issued by the Deputy General Manager, State Bank of India, including the Petitioner's name as Wilful Defaulter in the Credit Information Companies (CICs) list of Wilful Defaulters.
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4. The learned counsel for the Petitioner submits that these two impugned orders are passed by the Respondent No.1 without following due process of law. He submits that in the present proceedings, the Respondent State Bank of India had issued show cause notice dated 16.10.2019 in the name of M/s.Vandana Vidhut Limited and forwarded copies to all the Directors including the Petitioner. He submits that thereafter, the Petitioner had submitted his reply dated 20.11.2019 explaining how the Petitioner is not concerned with this show cause notice because at that time, he was not the Director of the said Company.
5. The learned counsel for the Petitioner submits that in spite of that, the Respondent bank issued notice dated 19.03.2020 for personal hearing before the Wilful Defaulter Identifcation Committee on 30.03.2020 at 11.00 a.m.
6. The learned counsel for the Petitioner submits that in fact, the said notice was duly served by the postal authority on 09.05.2020. In support of this contention, he relies on Track Consignment Report of the Postal Authority at page
89.
7. The learned counsel for the Petitioner submits that not only that, thereafter the Petitioner by his letter dated 12.05.2020 informed Deputy General Manager, State Bank of India that he received letter after the date of hearing. He submits that there was no reply from the Respondent to his letter dated 12.05.2020.
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8. The learned counsel for the Petitioner submits that surprisingly he received order dated 21.08.2020 passed by the Respondent stating that Petitioner's name is included in the list of Wilful Defaulter.
9. The learned counsel for the Petitioner submits that prima facie, Respondents has failed and neglected to comply with the Master Circular dated 01.07.2015 issued by Reserve Bank of India to declare a particular Director of a Company, as a wilful defaulter. In support of this contention, he relies on clause nos.2, 2.1, 2.1.1, 2.1.2 and 2.1.3 and 3 of RBI Master Circular which reads thus:
"2. Guidelines on Wilful Defaulters 2.1 Defnitions of 'Lender', 'Unit' and 'wilful default' 2.1.1 Lender: The term 'lender' covers all banks / FIs to which any amount is due, provided it is arising on account of any banking transaction, including off balance sheet transactions such as derivatives, guarantees and letters of credit.
2.1.2 Unit: The term 'unit includes individuals, juristic persons and all other forms of business enterprises, whether incorporated or not. In case of business enterprises (other than companies), banks / Fls may also report (in the Director column of Annex 1) the names of those persons who are in charge and responsible for the management of the affairs of the business enterprise.Mohite 3/8
18 wpl15982-21.odt 2.1.3 Wilful Default: A 'wilful default would be deemed to have occurred if any of the following events is noted:
(a) The unit has defaulted in meeting its payment / repayment obligations to the lender even when it has the capacity to honour the said obligations.
(b) The unit has defaulted in meeting its payment / repayment obligations to the lender and has not utilised the fnance from the lender for the specifc purposes for which fnance was availed of but has diverted the funds for other purposes.
(c) The unit has defaulted in meeting its payment / repayment obligations to the lender and has siphoned off the funds so that the funds have not been utilized for the specifc purpose for which fnance was availed of, nor are the funds available with the unit in the form of other assets.
(d) The unit has defaulted in meeting its payment / repayment obligations to the lender and has also disposed off or removed the movable fxed assets or immovable property given for the purpose of securing a term loan without the knowledge of the bank / lender.
The identifcation of the wilful default should be made keeping in view the track record of the borrowers and should not be decided on the basis of isolated transactions / incidents. The default to be categorised as wilful must be intentional, deliberate and calculated.
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3. Mechanism for identifcation of Wilful Defaulters:
The mechanism referred to in paragraph 2.5 above should generally include the following:
(a) The evidence of wilful default on the part of the borrowing company and its promoter / whole-time director at the relevant time should be examined by a Committee headed by an Executive Director or equivalent and consisting of two other senior offcers of the rank of GM / DGM.
(b) If the Committee concludes that an event of wilful default has occurred, it shall issue a Show Cause Notice to the concerned borrower and the promoter / wholetime director and call for their submissions and after considering their submissions issue an order recording the fact of wilful default and the reasons for the same. An opportunity should be given to the borrower and the promoter / whole-time director for a personal hearing if the Committee feels such an opportunity is necessary.
(c) The Order of the Committee should be reviewed by another Committee headed by the Chairman / Chairman & Managing Director or the Managing Director & Chief Executive Offcer / CEOs and consisting, in addition, to two independent directors / non-executive directors of the bank and the Order shall become fnal only after it is confrmed by the said Review Committee. However, if the Identifcation Committee does not pass an Order declaring a borrower as a wilful defaulter, then the Review Mohite 5/8 18 wpl15982-21.odt Committee need not be set up to review such decisions.
(d) As regard a non-promoter / non-whole time director, it should be kept in mind that Section 2(60) of the Companies Act, 2013 defnes an offcer who is in default to mean only the following categories of directors:
(i) whole-time director
(ii) where there is no key managerial personnel, such director or directors as specifed by the Board in this behalf and who has or have given his or their consent in writing to the Board to such specifcation, or all the directors, if no director is so specifedd
(iii) every director, in respect of a contravention of any of the provisions of Companies Act, who is aware of such contravention by virtue of the receipt by him of any proceedings of the Board or participation in such proceedings and who has not objected to the same, or where such contravention had taken place with his consent or connivance.
Therefore, except in very rare cases, a non- whole time director should not be considered as a wilful defaulter unless it is conclusively established that:
I. he was aware of the fact of wilful default by the borrower by virtue of any proceedings recorded in the minutes of meeting of the Board or a Committee of the Board and has not recorded his objection to the same in the Minutesd or, Mohite 6/8 18 wpl15982-21.odt II. the wilful default had taken place with his consent or connivance.
The above exception will however not apply to a promoter director even if not a whole time director.
(iv) As a one-time measure, Banks / Fls, while reporting details of wilful defaulters to the Credit Information Companies may thus remove the names of non-whole time directors (nominee directors / independent directors) in respect of whom they already do not have information about their complicity in the default / wilful default of the borrowing company.
However, the names of promoter directors, even if not whole time directors, on the board of the wilful defaulting companies cannot be removed from the existing list of wilful defaulters.
(e) A similar process as detailed in sub- paragraphs (a) to (c) above should be followed when identifying a non-promoter / non-whole time director as a wilful defaulter."
10. The learned counsel for the Petitioner submits that bare reading of the defnition of the word "Wilful Defaulter"
clearly shows that Petitioner is not covered by the said defnition. He further submits that not only these facts, but Respondents failed to comply with the guidelines on wilful defaulter as stated in Master Circular dated 01.07.2015 issued by Reserve Bank of India. On the basis of these facts, the learned Counsel for the Petitioner submits that the Mohite 7/8 18 wpl15982-21.odt impugned order passed by Respondent is required to be set aside.
11. The learned Counsel for the Respondent no.1 State Bank of India, submits that after following due process of law, they passed the impugned order. He submits that Respondent no.1 bank by their letter dated 01.06.2021 specifcally informed the Petitioner that if the petitioner is aggrieved by the said order, they can fle review before the Review Committee. He submits that the Petitioner had fled Review before the Review Committee which was rejected by the Committee. Therefore, there is no question of entertaining the present Writ Petition. He submits that in any case, he requires some time to fle reply.
12. Hence, following order is passed:
a. Respondent no.1 is permitted to fle their reply on or before 12.08.2021 with copy to other side.
b. Rejoinder if any, be fled on or before 17.08.2021 with copy to other side.
c. In the mean time, Petitioner is directed to inform the other Respondents about the next date in writing and fle affdavit of service to that effect.
d. Stand over to 20.08.2021.
(PRITHVIRAJ K. CHAVAN, J.) (K.K.TATED, J.)
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