Gujarat High Court
India Denim Ltd vs Bank Of Baroda on 16 November, 2022
Author: Bhargav D. Karia
Bench: Bhargav D. Karia
C/SCA/11799/2021 JUDGMENT DATED: 16/11/2022
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 11799 of 2021
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR. JUSTICE BHARGAV D. KARIA
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1 Whether Reporters of Local Papers may be allowed
to see the judgment ?
2 To be referred to the Reporter or not ?
3 Whether their Lordships wish to see the fair copy
of the judgment ?
4 Whether this case involves a substantial question
of law as to the interpretation of the Constitution
of India or any order made thereunder ?
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INDIA DENIM LTD.
Versus
BANK OF BARODA
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Appearance:
HUNAIZA H QURESHI(8903) for the Petitioner(s) No. 1,2,3,4,5,6
MR. EKRAMA H QURESHI(7000) for the Petitioner(s) No. 1,2,3,4,5,6
MS NALINI S LODHA(2128) for the Respondent(s) No. 1
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CORAM:HONOURABLE MR. JUSTICE BHARGAV D. KARIA
Date : 16/11/2022
ORAL JUDGMENT
1. Heard learned advocate Mr. Ekrama H. Qureshi for the petitioners and learned advocate Ms. Page 1 of 49 Downloaded on : Sun Dec 25 06:23:29 IST 2022 C/SCA/11799/2021 JUDGMENT DATED: 16/11/2022 Nalini S. Lodha for respondent no.1
2. Rule returnable forthwith. Learned advocate Ms. Nalini Lodha waives service of notice of rule on behalf of respondent.
3. By this petition under Article 226 of the Constitution of India, the petitioners have challenged the order dated 11.12.2020 passed by respondent - Bank of Baroda, whereby the petitioners were informed that Willful Defaulter Committee of respondent - bank has declared the petitioners as "Willful Defaulters" and also order dated 26.07.2021 issued by the respondent bank whereby the Willful Defaulters Review Committee of respondent - bank has confirmed the decision of Willful Defaulter Committee to declare the petitioners as "Willful Defaulters" and has further informed the petitioners to report their names to all Credit Information Page 2 of 49 Downloaded on : Sun Dec 25 06:23:29 IST 2022 C/SCA/11799/2021 JUDGMENT DATED: 16/11/2022 Companies and/or RBI.
4. Brief facts of the case are as under :
4.1) The petitioner no.1 is a company incorporated under the Companies Act, 1956 and petitioner nos. 2 to 6 are its Directors.
4.2) In the year 2006, the erstwhile management of the petitioner company applied to the consortium of banks comprising of the Bank of Baroda, State Bank of India, State Bank of Travancore, State Bank of Indore and Punjab National Bank for financing its Denim Cotton Yarn project which included the expansion of the plant and machinery of the factory and increase in the spindles weaving capacity to the tune of Rs.1,02,57,00,000/-.
4.3) The consortium agreement to that effect was entered into on 19.07.2006 and the Page 3 of 49 Downloaded on : Sun Dec 25 06:23:29 IST 2022 C/SCA/11799/2021 JUDGMENT DATED: 16/11/2022 payment of installment was to start from the year 2007. In case of respondent bank, it was to start from October 2007 running in 28 quarterly installments of Rs. 1.04 crores and last installment was of Rs.0.88 crores, commencing from October 2007 with moratorium period upto September 2007.
4.4) Apart from the loan agreement, there was an inter se agreement dated 19.07.2006 between the consortium banks themselves which regulated their inter se rights qua their affairs and actions with respect to the present petitioners for regulating and if required recovering the loan amount in case of default.
4.5) In the year 2009, a Working Capital Facilities Agreement dated 30.05.2009 was entered into which included Fund Based Working Capital (FBWC) and Non-Fund Based Page 4 of 49 Downloaded on : Sun Dec 25 06:23:29 IST 2022 C/SCA/11799/2021 JUDGMENT DATED: 16/11/2022 Working Capital (NFBWC) agreements to the extent of Rs. 18 crores with the consortium of banks by the petitioners out of which the respondent bank's contribution was to the tune of Rs.5.75 crores.
4.6) A new supplemental Loan Agreement dated 27.06.2009 was entered between the consortium of banks for restructuring the repayment schedule and realigning the loan due to change of management in the petitioner company and project expansion. As per such new agreement, the outstanding facilities were reduced from Rs. 102.57 crores to Rs.20.76 crores and accordingly, repayment of loan amount to the consortium of banks were also rescheduled. Insofar as respondent bank is concerned, the amount outstanding was of Rs.2.61 crores and was to be paid in 24 installments commencing from December 2009 and the last installment was to be in the Page 5 of 49 Downloaded on : Sun Dec 25 06:23:29 IST 2022 C/SCA/11799/2021 JUDGMENT DATED: 16/11/2022 year 2016.
4.7) An inter se agreement was also entered into between the consortium of banks which also included Indian Bank due to another term loan agreement entered into with the said bank and respondent - Bank of Baroda vide agreement dated 27.06.2009 for Rs. 7.06 crores. In the year 2013, a supplemental Working Capital Agreement was entered into on 29.06.2013 by way of which the working capital limits contemplated under the agreement dated 30.05.2009 was enhanced. The respondent bank enhanced the same by Rs. 0.60 crores (FBWC) so as to make Rs. 6.35 cores in aggregate.
4.8) It is the case of the petitioners that in June 2014, a problem arose where only due to a one day delay, the account of the petitioner company was declared as NPA which Page 6 of 49 Downloaded on : Sun Dec 25 06:23:29 IST 2022 C/SCA/11799/2021 JUDGMENT DATED: 16/11/2022 was informed to the company at a belated stage vide letters dated 24.12.2014 and 01.01.2015.
4.9) The petitioner company filed Special Civil Application No.5078/2015 before this Court and the State Bank of India filed OA No. 431 of 2016 before the DRT-I at Ahmedabad. Notice under section 13(2) of the the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short 'SARFAESI Act') dated 27.06.2021 was issued against the petitioner company demanding its dues.
Special Civil Application No.17879/2016 came to be filed by the petitioners challenging the said notice. Considering the letter tendered by the State Bank of India stating that the proceedings pursuant to section 13(2) notice were dropped, this Court disposed of the petition.
Page 7 of 49 Downloaded on : Sun Dec 25 06:23:29 IST 2022C/SCA/11799/2021 JUDGMENT DATED: 16/11/2022 4.10) It is the case of the petitioner that in the interregnum, the respondent bank also classified the account of the petitioners as NPA and issued notice dated 23.06.2017 to the petitioners under section 13(2) of the SARFAESI Act in its purported capacity as a lead bank demanding it dues as well as that of SBI. The petitioners raised objections dated 17.08.2017 against such notice which came to be rejected by the respondent by reply dated 31.08.2017.
4.11) The petitioner company thereafter preferred Special Civil Application No.16645/2017 challenging the action of issuance of notice by the respondent. This Court issued notice dated 11.09.2017 and directed the respondent bank to provide all relevant information and documents.
Page 8 of 49 Downloaded on : Sun Dec 25 06:23:29 IST 2022C/SCA/11799/2021 JUDGMENT DATED: 16/11/2022 4.12) Respondent also initiated the proceedings before the Debts Recovery Tribunal-I Ahmedabad being OA No. 317 of 2018. The petitioner company preferred Special Civil Application No.11511/2019 before this Court which was disposed of by this Court vide order dated 9.10.2019 with a direction to the DRT to hear the matter afresh after giving an opportunity of hearing to the petitioners.
4.13) The said matter is still pending before the DRT-I, Ahmedabad and hearing is yet to take place. In the meanwhile, a show cause notice dated 12.12.2019 for declaring the petitioner - M/s. India Denim Ltd. and its Directors as Willful Defaulters came to be issued by the respondent bank.
4.14) The petitioners made a detailed representation before the respondent bank by Page 9 of 49 Downloaded on : Sun Dec 25 06:23:29 IST 2022 C/SCA/11799/2021 JUDGMENT DATED: 16/11/2022 way of an e-mail dated 30.12.2019.
4.15) It is the case of the petitioners that the respondent bank by letter dated 04.02.2020 informed the petitioners to remain present before the Committee of Willful Defaulters, however, due to absence of the petitioners, the meeting was rescheduled.
Thereafter the notice dated 11.03.2020 was issued fixing the date of hearing on 3.04.2020.
4.16) It is the case of the petitioners that due to Covid pandemic, hearing could not take place. However, in the month of July 2020, notice was issued by the respondent bank fixing the hearing on 6.08.2020. The petitioners vide letter dated 4.08.2020 apprised the respondent bank that due to continuation of lock-down due to Covid, the petitioners were not in a position to attend Page 10 of 49 Downloaded on : Sun Dec 25 06:23:29 IST 2022 C/SCA/11799/2021 JUDGMENT DATED: 16/11/2022 the office and requested for adjournment. The hearing was postponed and by notice dated 5.09.2020, the petitioners were informed to remain present for hearing on 18.09.2020.
However, as the lock-down was extended, the petitioners again vide reply dated 15.09.2020 requested for next date. Though the petitioners could not remain present for hearing on 18.09.2020, the petitioners still addressed a letter dated 18.09.2020 stating that the loan in question is not personally guaranteed by the director.
4.17) Thereafter by notice dated 3.11.2020, hearing was kept on 9.11.2020. On 12.11.2020, the petitioners attended the hearing and represented regarding wrongful classification of the account of the company as NPA. Relevant documents and details were also submitted by mail on 13.11.2020.
Page 11 of 49 Downloaded on : Sun Dec 25 06:23:29 IST 2022C/SCA/11799/2021 JUDGMENT DATED: 16/11/2022 4.18) An OTS proposal was also pending for consideration before the respondent bank. The proposal was made by the petitioner company by way of letter dated 23.11.2020 pursuant to which 10% amount i.e. Rs. 15 lakhs were also deposited by the petitioner company but the OTS proposal is still not processed and the amount is refunded back by the respondent bank.
4.19) On 11.12.2020, a notice came to be issued by the respondent bank stating that the Committee of Executive (COE) on Willful Defaulters of bank has decided to declare the petitioners herein and its Directors named therein as willful defaulters.
4.20) The petitioners made a detailed representation dated 23.12.2020 through email and by post as well against the same.
Page 12 of 49 Downloaded on : Sun Dec 25 06:23:29 IST 2022C/SCA/11799/2021 JUDGMENT DATED: 16/11/2022 4.21) The petitioners thereafter, received the impugned order dated 26.07.2021 declaring the petitioners and its directors as willful defaulters.
4.22) Being aggrieved by the aforesaid action of the respondent bank, the petitioners have preferred the present petition.
5. Learned advocate Mr. Ekrama H. Qureshi for the petitioners submitted that impugned notice dated 11.12.2020 was without jurisdiction and against the principles of natural justice.
5.1) It was submitted that the impugned decision of the Review Committee dated 26.07.2021 is a verbatim reproduction of the contents of the earlier notice dated 11.12.2020 and same is bereft of any material Page 13 of 49 Downloaded on : Sun Dec 25 06:23:29 IST 2022 C/SCA/11799/2021 JUDGMENT DATED: 16/11/2022 consideration of the submissions made by the petitioners.
5.2) Referring to the mechanism for identification of willful defaulters, it was submitted that such mechanism was not followed by the respondent bank.
5.3) It was submitted that the petitioners in their representation dated 23.12.2020 sought liberty to produce all relevant documents but the respondent bank never sent any intimation in that regard.
Referring to the RBI Master circular on willful defaulters, it was submitted that the identification of the willful default should be made keeping in view, track record of the borrowers and should not be decided on the basis of isolated transactions and the default to be categorised as willful must be intentional, deliberate and calculated.
Page 14 of 49 Downloaded on : Sun Dec 25 06:23:29 IST 2022C/SCA/11799/2021 JUDGMENT DATED: 16/11/2022 5.4) Learned advocate Mr. Qureshi submitted that the impugned decision and notice is based upon statement and events from October 2015 to February 2016 and thus, the notice is issued for the alleged transaction which occurred prior to more than three years which was barred by limitation and was beyond the competence of the bank.
5.5) It was submitted that the impugned action of the respondent bank has not only the effect of declaring the account and name of the petitioners as willful defaulters but also it would have an effect of closing down the operations and business of the holding public company i.e. Konark Synthetics Ltd.
which would consequentially have effect on employees and workers of Konark Synthetics Ltd. and its shareholders.
Page 15 of 49 Downloaded on : Sun Dec 25 06:23:29 IST 2022C/SCA/11799/2021 JUDGMENT DATED: 16/11/2022 5.6) Learned advocate Mr. Qureshi submitted that against the total term loan and CC loan to the tune of Rs. 4.67 crores and 6.35 crores, the company has already paid back 16 crores including interest and therefore, there is no question of any willful default or loss of public money.
6. On the other hand, the learned advocate Ms. Nalini Lodha for the respondent bank submitted that the respondent bank has duly followed the mechanism for identification of Willful Defaulters as contemplated under the RBI circular on Willful Defaulters.
6.1) It was submitted that the respondent bank issued show cause notice dated 12.12.2019 to petitioner no.1 company and 13 directors/guarantors on the basis of observations in the Forensic Audit Report dated 05.03.2019. However, since all could Page 16 of 49 Downloaded on : Sun Dec 25 06:23:29 IST 2022 C/SCA/11799/2021 JUDGMENT DATED: 16/11/2022 not be served notice by regular mode, it was served through publication in the newspaper on 01.01.2020 and 11.01.2020. It was submitted that based on representations received pursuant to the notice, proceedings were dropped against 6 directors but insofar as rest of the directors were concerned, the explanation was not found satisfactory. The representation was placed before the Committee of Executives (COE) on Willful Defaulters and opportunity of hearing was afforded before the COE. It was submitted that COE took decision based on available facts and documents. It was further submitted that in terms of RBI Guidelines, further representations were invited by the Review Committee from the petitioners. Such representation dated 23.12.2020 was received from the petitioners however, it was without any documentary evidence in support thereof and therefore, the Review Committee confirmed Page 17 of 49 Downloaded on : Sun Dec 25 06:23:29 IST 2022 C/SCA/11799/2021 JUDGMENT DATED: 16/11/2022 the decision taken by the COE and such decision was conveyed to the petitioners.
6.2) Learned advocate Ms. Nalini Lodha submitted that on perusal of the notice under section 13(2) of the SARFAESI Act, it is revealed that the total outstanding dues in the cash credit account as on 15.05.2017 was Rs. 6,80,53,307.53 ps which is far in excess of the aggregate working capital facility as per the Statement of Cash Credit Account which shows that the same was continuously overdrawn since 30.09.2016 and onwards.
Therefore, the account of the petitioner company has rightly been classified as NPA on 29.12.2016 as per the guidelines of RBI.
6.3) Learned advocate Ms. Lodha submitted that plea sought to be taken by Mr. R.B. Somani, one of the directors of the petitioner company, that he is the Page 18 of 49 Downloaded on : Sun Dec 25 06:23:29 IST 2022 C/SCA/11799/2021 JUDGMENT DATED: 16/11/2022 professional director of holding company and his name be removed from the show cause notice is misconceived. It was submitted that the COE decided to declare the petitioner no.1 company along with six others as Willful Defaulters after affording opportunity to give representation and personal hearing to all the petitioners. It was further submitted that it was the duty of the petitioners to make representation before the Review Committee along with documentary evidence in support thereof but in absence of the same, the Review Committee after perusal of the documents on record confirmed the decision of COE.
6.4) Referring to Forensic Audit Report dated 5.03.2019, it was submitted that such report is based on the documents available with the petitioners themselves such as the stock statement, debtors statement, account Page 19 of 49 Downloaded on : Sun Dec 25 06:23:29 IST 2022 C/SCA/11799/2021 JUDGMENT DATED: 16/11/2022 statement etc. It was further submitted that upon inspection of the unit of the petitioner company on 9.06.2016 it was found that the unit was closed and physical stocks were found on the premises as on the date of inspection. It was therefore, submitted that petition may not be entertained.
7. Having heard the learned advocates for the respective parties and having gone through the materials on record, in order to appreciate the contentions raised by the respective parties, it would be germane to refer to few Clauses of Master Circular on willful defaulter dated 1st July, 2015 issued by the RBI.
"Clause 2.1.3 : Wilful Default : A 'willful 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 Page 20 of 49 Downloaded on : Sun Dec 25 06:23:29 IST 2022 C/SCA/11799/2021 JUDGMENT DATED: 16/11/2022 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 finance from the lender for the specific purposes for which finance 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 utilised for the specific purpose for which finance 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 fixed assets or immovable property given for the purpose of securing a term loan without the knowledge of the bank/lender.
The identification of the willful default should be made keeping in view the track record of the borrowers and should not be Page 21 of 49 Downloaded on : Sun Dec 25 06:23:29 IST 2022 C/SCA/11799/2021 JUDGMENT DATED: 16/11/2022 decided on the basis of isolated transactions/ incidents. The default to be categorised as willful must be intentional, deliberate and calculated."
Clause no. 2.5 : Penal Measures The following measures should be initiated by the banks and FIs against the willful defaulters identified as per the definition indicated at paragraph 2.1.3 above:
a. No additional facilities should be granted by any bank / FI to the listed willful defaulters. In addition, such companies (including their entrepreneurs / promoters) where banks/ FIs have identified siphoning / diversion of funds, misrepresentation, falsification of accounts and fraudulent transactions should be debarred from institutional finance from the scheduled commercial banks, financial institutions, NBFCs, for floating new ventures for a period of 5 years from the date of removal of their name from the list of willful defaulters as published/disseminated by RBI/CICs.
b. The legal process,
wherever warranted, against
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the borrowers/ guarantors and foreclosure for recovery of dues should be initiated expeditiously. The lenders may initiate criminal proceedings against willful defaulters, wherever necessary.
c. Wherever possible, the banks and FIs should adopt a proactive approach for a change of management of the willfully defaulting borrower unit.
d. A covenant in the loan agreements, with the companies to which the banks/ FIs have given funded/ non-
funded credit facility, should be incorporated by the banks/ FIs to the effect that the borrowing company should not induct on its board a person whose name appears in the list of willful defaulters and that in case, such a person is found to be on its board, it would take expeditious and effective steps for removal of the person from its board.
It would be imperative on the banks and FIs to put in place a transparent mechanism for the entire process so that the penal provisions are not misused and the scope of such discretionary powers are kept to the barest minimum.Page 23 of 49 Downloaded on : Sun Dec 25 06:23:29 IST 2022
C/SCA/11799/2021 JUDGMENT DATED: 16/11/2022 It should also be ensured that a solitary or isolated instance is not made the basis for imposing the penal action.
Clause no.3 : Mechanism for
identification of willful
defaulters.
The mechanism referred to in
paragraph 2.5 above should
generally include the following :
(a) The evidence of willful 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 officers of the rank of GM/DGM.
(b) If the Committee concludes that an event of willful default has occurred, it shall issue a Show Cause Notice to the concerned borrower and the promoter/ whole-time director and call for their submissions and after considering their submissions issue an order recording the fact of willful default and the reasons for the same. An opportunity should be given to the borrower and the promoter/ whole-time director for a Page 24 of 49 Downloaded on : Sun Dec 25 06:23:29 IST 2022 C/SCA/11799/2021 JUDGMENT DATED: 16/11/2022 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 Officer/ CEOs and consisting, in addition, to two independent directors/ non-
executive directors of the bank and the order shall become final only after it is confirmed by the said Review Committee. However, if the Identification Committee does not pass an order declaring a borrower as a willful defaulter, then the Review Committee need not be set up to review such decisions."
8. Thus, clause 2.1.3 defines 'willful default' as to who can be said to have committed a willful default as enumerated in Clause (a) to (d). Whereas, Clause-3 provides for mechanism for identification of willful defaulters. Clause - 2.5 provides consequences of declaring any lender as willful defaulter resulting into penal Page 25 of 49 Downloaded on : Sun Dec 25 06:23:29 IST 2022 C/SCA/11799/2021 JUDGMENT DATED: 16/11/2022 measures including criminal case. On perusal of the above provisions of Master Circular, the Identification Committee is required to examine the availability of evidence of willful default on the part of the borrower company and its promoter/whole time director and if such committee concludes that in the event of willful default is occurred, it is obligatory on the part of the Identification Committee to issue a show cause notice to the concerned borrower and promoter whole time director calling for their submissions and after considering their submissions an order recording the fact of willful default has to be passed giving reasons for the same.
Therefore, it is incumbent upon the Identification Committee to provide an opportunity of personal hearing to the borrower and promoter, whole time director or the persons, who are to be considered as willful defaulter and the decision of such Page 26 of 49 Downloaded on : Sun Dec 25 06:23:29 IST 2022 C/SCA/11799/2021 JUDGMENT DATED: 16/11/2022 Identification Committee is to be reviewed by any other Committee, which is Review Committee as per Clause-3(c) of the Master Circular.
9. The Division bench of the Bombay High Court in case of M/s. Kanchan Motors and others vs. Bank of India and others reported in 2018 SCC OnLine Bom 1761 has held as under with regard to violation of principles of natural justice as under:
"14. On the close scrutiny of the aforesaid provisions of Master Circular, it is clear that the consequences of declaring any lender as wilful defaulter are serious in nature. It is also clear that for declaring a lender to be wilful defaulter specific finding is required to have been recorded in terms of Clasue 2.1.3(a) to (d) as the case may be. The Master Circular also provides a mechanism to be adopted for identifying the wilful defaulter. It includes, availability of evidence of wilful default on the part of borrowing company and its promoter/whole-time director which needs to be examined by the Identification Committee. If the Committee concludes that an event of Page 27 of 49 Downloaded on : Sun Dec 25 06:23:29 IST 2022 C/SCA/11799/2021 JUDGMENT DATED: 16/11/2022 wilful default has occurred, it is obligatory on the part of Identification Committee to issue a show cause notice to the concerned borrower and the promoter/whole-time director calling from their submissions and after considering their submissions as may be received, an order recording the fact of wilful default has to be passed after giving reasons for the same. It is also incumbent upon the Identification Committee to give an opportunity of personal hearing to borrower & promoter/ whole-time director if it feels that such opportunity is necessary. The said order of the Committee needs to be reviewed by another Committee (Review Committee) as per Clause 3(c) of the Master Circular.
15. Examining the present matter on the touch stone of the aforesaid provisions, we find that the Respondent Bank has failed to comply with the aforesaid mechanism provided under the Master Circular. It is clear from the record that in response to the notice issued by the Bank informing the Petitioners about their intentions to proceed against them for declaring them as willful defaulter and giving last chance to deposit outstanding amounts, the Petitioners have submitted a detailed reply dated 29th January, 2018 giving reasons as to why such proceeding cannot be initiated. However, it appears that thereafter the Identification Committee has passed an order on 9th March, 2018 recording that the Petitioners have committed wilful default. It is also an admitted fact that the copy of the order dated 9th Page 28 of 49 Downloaded on : Sun Dec 25 06:23:29 IST 2022 C/SCA/11799/2021 JUDGMENT DATED: 16/11/2022 March, 2018 was not supplied to the Petitioners even though a written request for the same was made. Moreover, in the stand of the Bank in reply to the Petition, it is stated that is not necessary to supply the copy of the order of the Identification Committee to the Petitioners.
16. In the circumstances, in our considered view the Respondents while declaring the Petitioners as wilful defaulter have violated the provisions contained in the Master Circular and have also acted in violation of the principles of natural justice. The impugned action which is penal in nature has been taken causing serious implication on the Petitioners without following the basis principles of natural justice. The impugned order of Review Committee as is clear from a bare reading of it, is a non speaking order as the operative part of the order of Review Committee which contains the reasons reads thus:
"The Review Committee has examined and reviewed the proceedings initiated order and the findings of the Identification Committee and found that they are in order and confirmed that you have committed the following willful default:
--
(Reasons) The unit has defaulted reasons in meeting its payment/repayment obligation to the lender and has not utilized the finance from lender even when it has capacity to honour the said obligations."Page 29 of 49 Downloaded on : Sun Dec 25 06:23:29 IST 2022
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17. This according to our considered view the order of the Review Committee cannot be termed as reasoned order and as such it cannot be sustained.
18. We are also of the considered view that the Respondent Bank cannot be allowed to say that it is not necessary for them to supply copy of the order passed by the Identification Committee. As would be clear from Clause 3(b) of the Master Circular the Identification Committee has to record reasons while passing the order of recording the fact of commission of wilful default as also to assign valid reasons as to whether it is necessary to give the borrower and the the promoter/whole time director the opportunity of personal hearing. This requirement whether has been complied with or not could have been examined only if the said order was brought on record. But strangely in reply the Bank has taken a stand that the order dated 9th March, 2018 passed by the Identification Committee is the internal order and it is not supposed to be served upon the Petitioners. It is also stated by the Respondents in the reply that no question arises of serving the order dated 9th March, 2018 on the Petitioners and that the order dated 9th March, 2018 is the preliminary internal order and after its finalization by Review Committee, it is conveyed to the Petitioners. Thus from the stand taken by the Respondents, it is clear that they have neither supplied copy of the order passed by the Identification Page 30 of 49 Downloaded on : Sun Dec 25 06:23:29 IST 2022 C/SCA/11799/2021 JUDGMENT DATED: 16/11/2022 Committee to the Petitioners nor according to them it was necessary. It is also very strange that the said order has not even been brought on record by the Bank to deny the Petitioners' contention that their grounds raised through reply dated 29th January, 2018 to show cause notice against proposed declaration of wilful defaulter have not been considered and that as to why the Petitioners were denied the opportunity of being heard.
19. In our considered view the stand of the Bank that they are not obliged to furnish copy of the order passed by the Identification Committee cannot be sustained. Such stand if accepted would given rise to arbitrary exercise of powers as the Identification Committee may give complete go bye to the requirement of assigning reasons for declaring a party as Wilful Defaulter and also requirement of giving reasons as to why opportunity of personal hearing would not be necessary.
20. In the present case, as already observed even the order of Review Committee is bereft of any reasons for arriving at the conclusion that, "the Petitioners have defaulted in meeting its payment/repayment obligation to the lender even when it has capacity to honour the said obligation.
21. Having regard to the aforesaid in our considered view failure to supply the reasons by the Identification Page 31 of 49 Downloaded on : Sun Dec 25 06:23:29 IST 2022 C/SCA/11799/2021 JUDGMENT DATED: 16/11/2022 Committee of recording the fact that the Petitioners are in wilful default and as to why they need not be given an opportunity of hearing when in their reply dated 29th January, 2018 the Petitioners have raised various grounds opposing the proposed action of declaring them willful defaulter and sought opportunity of personal hearing cannot be said to be justified. Similarly absence of reasons in the order of Review Committee also amounts to denial of justice. It is now well settled that reasons are the live links between the minds of the decision taker to the controversy in question and the decision or conclusion arrived at. Reasons substitute subjectivity to objectivity right to reason is an indispensable part of sound judicial system. The rational is that the affected party can know why the decision has gone against him. One of the statutory requirement of the natural justice is spelling out reasons for the order made, in other words a speaking order. Even in respect of administrative order the giving of reasons is one of the fundamentals of good administration."
10. The Apex Court in case of State Bank Of India Vs. Jah Developers Private Limited and Others (Supra) while denying the right to be represented by a lawyer in the in-house proceedings contained in Para 3 of the Page 32 of 49 Downloaded on : Sun Dec 25 06:23:29 IST 2022 C/SCA/11799/2021 JUDGMENT DATED: 16/11/2022 Revised Circular dated 01.07.2015, has held that Revised Circular, being in public interest, must be construed reasonably as under:
"15. The next question that arises is whether an oral hearing is required under the Revised Circular dated 1-7- 2015. We have already seen that the said circular makes a departure from the earlier Master Circular in that an oral hearing may only be given by the First Committee at the first stage if it is so found necessary. Given the scheme of the Revised Circular, it is difficult to state that oral hearing is mandatory. It is even more difficult to state that in all cases oral hearings must be given, or else the principles of natural justice are breached. A number of judgments have held that natural justice is a flexible tool that is used in order that a person or authority arrive at a just result. Such result can be arrived at in many cases without oral hearing but on written representations given by parties, after considering which, a decision is then arrived at. Indeed, in a recent judgment in Gorkha Security Services v. State (NCT of Delhi) [Gorkha Security Services v. State (NCT of Delhi), (2014) 9 SCC 105] this Court has held, in a blacklisting case, that where serious consequences ensue, once a show-
cause notice is issued and opportunity to reply is afforded, natural justice is satisfied and it is not necessary to Page 33 of 49 Downloaded on : Sun Dec 25 06:23:29 IST 2022 C/SCA/11799/2021 JUDGMENT DATED: 16/11/2022 give oral hearing in such cases (see para 20).
16. When it comes to whether the borrower can, given the consequences of being declared a wilful defaulter, be said to have a right to be represented by a lawyer, the judgments of this Court have held that there is no such unconditional right, and that it would all depend on the facts and circumstances of each case, given the governing rules and the fact situation of each case. Thus, in Mohinder Singh Gill v. Chief Election Commr. [Mohinder Singh Gill v. Chief Election Commr., (1978) 1 SCC 405] , in the context of election law, this Court held: (SCC p. 439, para 63) "63. In Wiseman v. Borneman [Wiseman v. Borneman, 1968 Ch 429 : (1968) 2 WLR 320 : (1967) 3 All ER 1045 (CA)] there was a hint of the competitive claims of hurry and hearing. Lord Reid said: 'Even where the decision has to be reached by a body acting judicially, there must be a balance between the need for expedition and the need to give full opportunity to the defendant to see material against him' (emphasis added). We agree that the elaborate and sophisticated methodology of a formalised hearing may be injurious to promptitude so essential in an election under way. Even so, natural justice is pragmatically flexible and is amenable to capsulation under the compulsive pressure of circumstances. To burke it altogether may not be a stroke of fairness except in very exceptional circumstances. Even in Wiseman [Wiseman Page 34 of 49 Downloaded on : Sun Dec 25 06:23:29 IST 2022 C/SCA/11799/2021 JUDGMENT DATED: 16/11/2022 v. Borneman, 1971 AC 297 : (1969) 3 WLR 706 (HL)] where all that was sought to be done was to see if there was a prima facie case to proceed with a tax case where, inevitably, a fuller hearing would be extended at a later stage of the proceedings, Lord Reid, Lord Morris of Borth-y-Gest and Lord Wilberforce suggested 'that there might be exceptional cases where to decide upon it ex parte would be unfair, and it would be the duty of the tribunal to take appropriate steps to eliminate unfairness' (Lord Denning, M.R., in Howard v. Borneman (2) [Howard v. Borneman (2), 1975 Ch 201 : (1974) 3 WLR 660 (CA)] summarised the observations of the Law Lords in this form). No doctrinaire approach is desirable but the court must be anxious to salvage the cardinal rule to the extent permissible in a given case. After all, it is not obligatory that counsel should be allowed to appear nor is it compulsory that oral evidence should be adduced. Indeed, it is not even imperative that written statements should be called for.
Disclosure of the prominent
circumstances and asking for an
immediate explanation orally or
otherwise may, in many cases, be
sufficient compliance. It is even
conceivable that an urgent meeting with the parties concerned summoned at an hour's notice, or in a crisis, even a telephone call, may suffice." (emphasis in original)
17. In Kavita v. State of Maharashtra (1) [Kavita v. State of Maharashtra (1), (1981) 3 SCC 558 : 1981 SCC (Cri) 743] Page 35 of 49 Downloaded on : Sun Dec 25 06:23:29 IST 2022 C/SCA/11799/2021 JUDGMENT DATED: 16/11/2022 (Kavita), this Court held, in the context of preventive detention, that even when a detenu makes a request for legal assistance before the Advisory Board, the Advisory Board is vested with a discretion whether to allow or disallow such legal assistance. This was despite the fact that adequate legal assistance may be essential for the protection of the fundamental right to life and personal liberty guaranteed by Article 21 of the Constitution. On facts, it was held that since the detenu had not made any request to the Advisory Board for any such permission, the Court was not prepared to hold that the detenu was denied the assistance of counsel so as to lead to the conclusion that procedural fairness under Article 21 of the Constitution was denied to him. Likewise, in Nand Lal Bajaj v. State of Punjab [Nand Lal Bajaj v. State of Punjab, (1981) 4 SCC 327 : 1981 SCC (Cri) 841] , this Court referred to Article 22(3)(b) of the Constitution of India which states that the right to consult and be defended by a legal practitioner of his choice is denied to a person who is arrested or detained under any law providing for preventive detention. This Court then went on to hold that normally, lawyers have no place in proceedings before the Advisory Board, and then went on to refer to Kavita [Kavita v. State of Maharashtra (1), (1981) 3 SCC 558 : 1981 SCC (Cri) 743] . It was finally held that since the detaining authority was allowed to be represented by counsel before the Advisory Board, whereas the detenu was Page 36 of 49 Downloaded on : Sun Dec 25 06:23:29 IST 2022 C/SCA/11799/2021 JUDGMENT DATED: 16/11/2022 not, the order of detention would be quashed as this would be discriminatory.
18. In J.K. Aggarwal v. Haryana Seeds Development Corpn. Ltd. [J.K. Aggarwal v. Haryana Seeds Development Corpn. Ltd., (1991) 2 SCC 283 : 1991 SCC (L&S) 483] , this Court, after discussing the case law, held in para 4, that the right of representation by a lawyer cannot be held to be a part of natural justice. No general principle valid in all cases can be enunciated. In the last analysis, a decision has to be reached on a case to case basis on situational particularities and the special requirements of justice of the case (see para 8).
19. In Crescent Dyes and Chemicals Ltd. v. Ram Naresh Tripathi [Crescent Dyes and Chemicals Ltd. v. Ram Naresh Tripathi, (1993) 2 SCC 115 : 1993 SCC (L&S) 360] , this Court held that a workman under the Industrial Disputes Act, 1947 has no right, under principles of natural justice, that he must be represented by counsel. After discussing several judgments, this Court concluded:
(SCC pp. 126-27 & 129, paras 12-13 & 17) "12. From the above decisions of the English Courts it seems clear to us that the right to be represented by a counsel or agent of one's own choice is not an absolute right and can be controlled, restricted or regulated by law, rules or regulations. However, if the charge is of a serious and complex nature, the delinquent's request to be represented through a counsel or agent could be conceded.Page 37 of 49 Downloaded on : Sun Dec 25 06:23:29 IST 2022
C/SCA/11799/2021 JUDGMENT DATED: 16/11/2022
13. The law in India also does not concede an absolute right of representation as an aspect of the right to be heard, one of the elements of principle of natural justice. It has been ruled by this Court in (I) N. Kalindi v. Tata Locomotive & Engg. Co. Ltd. [N. Kalindi v. Tata Locomotive & Engg. Co. Ltd., (1960) 3 SCR 407 : AIR 1960 SC 914] , (ii) Brooke Bond (India) (P) Ltd. v. S. Subba Raman [Brooke Bond (India) (P) Ltd. v. S. Subba Raman, (1961) 2 LLJ 417 (SC)] and (iii) Dunlop Rubber Co. (India) Ltd. v. Workmen [Dunlop Rubber Co. (India) Ltd. v. Workmen, (1965) 2 SCR 139 : AIR 1965 SC 1392] that there is no right to representation as such unless the company by its Standing Orders recognises such a right.
***
17. It is, therefore, clear from the above case-law that the right to be represented through counsel or agent can be restricted, controlled or regulated by statute, rules, regulations or Standing Orders. A delinquent has no right to be represented through counsel or agent unless the law specifically confers such a right. The requirement of the rule of natural justice insofar as the delinquent's right of hearing is concerned, cannot and does not extend to a right to be represented through counsel or agent. In the instant case, the delinquent's right of representation was regulated by the Standing Orders which permitted a clerk or a workman working with him in the same department to represent him and this right stood expanded on Sections 21 and 22(ii) Page 38 of 49 Downloaded on : Sun Dec 25 06:23:29 IST 2022 C/SCA/11799/2021 JUDGMENT DATED: 16/11/2022 permitting representation through an officer, staff-member or a member of the union, albeit on being authorised by the State Government. The object and purpose of such provisions is to ensure that the domestic enquiry is completed with despatch and is not prolonged endlessly. Secondly, when the person defending the delinquent is from the department or establishment in which the delinquent is working he would be well conversant with the working of that department and the relevant rules and would, therefore, be able to render satisfactory service to the delinquent. Thirdly, not only would the entire proceedings be completed quickly but also inexpensively. It is, therefore, not correct to contend that the Standing Order or Section 22(ii) of the Act conflicts with the principles of natural justice."
20. In Railway Protection Force v. K. Raghuram Babu [Railway Protection Force v. K. Raghuram Babu, (2008) 4 SCC 406 :
(2008) 1 SCC (L&S) 1043] , this Court, in the context of a domestic/departmental enquiry held: (SCC p. 408, paras 9-11) "9. It is well settled that ordinarily in a domestic/departmental enquiry the person accused of misconduct has to conduct his own case vide N. Kalindi v.
Tata Locomotive & Engg. Co. Ltd. [N. Kalindi v. Tata Locomotive & Engg. Co. Ltd., (1960) 3 SCR 407 : AIR 1960 SC 914] Such an inquiry is not a suit or criminal trial where a party has a right to be represented by a lawyer. It is only if there is some rule which permits the accused to be represented by someone Page 39 of 49 Downloaded on : Sun Dec 25 06:23:29 IST 2022 C/SCA/11799/2021 JUDGMENT DATED: 16/11/2022 else, that he can claim to be so represented in an inquiry vide Brooke Bond (India) (P) Ltd. v. S. Subba Raman [Brooke Bond (India) (P) Ltd. v. S. Subba Raman, (1961) 2 LLJ 417 (SC)] .
10. Similarly, in Cipla Ltd. v. Ripu Daman Bhanot [Cipla Ltd. v. Ripu Daman Bhanot, (1999) 4 SCC 188 : 1999 SCC (L&S) 847] it was held by this Court that representation could not be claimed as of right. This decision followed the earlier decision Bharat Petroleum Corpn. Ltd. v. Maharashtra General Kamgar Union [Bharat Petroleum Corpn. Ltd. v. Maharashtra General Kamgar Union, (1999) 1 SCC 626 : 1999 SCC (L&S) 361] in which the whole case law has been reviewed by this Court.
11. Following the above decision it has to be held that there is no vested or absolute right in any charge-sheeted employee to representation either through a counsel or through any other person unless the statute or rules/standing orders provide for such a right. Moreover, the right to representation through someone, even if granted by the rules, can be granted as a restricted or controlled right. Refusal to grant representation through an agent does not violate the principles of natural justice."
Ultimately, the Court upheld the validity of Rule 153.8 of the Railway Protection Force Rules, 1987, which permitted a friend to accompany a delinquent, who will not, however, be allowed to address the inquiry officer or be allowed to cross-examine witnesses.
Page 40 of 49 Downloaded on : Sun Dec 25 06:23:29 IST 2022C/SCA/11799/2021 JUDGMENT DATED: 16/11/2022
21. It has also been argued before us that the present case, being a case where "wilful default" consists of facts which are known to the borrower, and as "wilful default" would only be the borrower's version of facts, no lawyer is needed as no complicated questions of law need to be presented before the In- House Committees. Thus, in Krishna Chandra Tandon v. Union of India [Krishna Chandra Tandon v. Union of India, (1974) 4 SCC 374 : 1974 SCC (L&S) 329] , this Court held: (SCC p. 381, para 17) "17. It was next argued that the appellant had asked for the assistance of an advocate but the same was refused. It was submitted that having regard to the intricacies of the case and particularly the ill health of the appellant, he should have been given the assistance of an advocate, and since that was not given there was no reasonable opportunity to defend. The High Court has rejected this submission and we think for good reasons. The appellant was not entitled under the Rules to the assistance of an advocate during the course of the enquiry. The learned Judges were right in pointing out that all that the appellant had to do in the course of the enquiry was to defend the correctness of his assessment orders. Clear indications had been given in the charges with regard to the unusual conduct he displayed in disposing of the assessment cases and the various flaws and defaults which were apparent on the face of the assessment records themselves. The appellant was the best person to give Page 41 of 49 Downloaded on : Sun Dec 25 06:23:29 IST 2022 C/SCA/11799/2021 JUDGMENT DATED: 16/11/2022 proper explanations. The circumstances in the evidence against him were clearly put to him and he had to give his explanation. An advocate could have hardly helped him in this. It was not a case where oral evidence was recorded with reference to accounts and the petitioner required the services of a trained lawyer for cross-examining the witnesses. There was no legal complexity in the case. We do not, therefore, accede to the contention that the absence of a lawyer deprived the appellant of a reasonable opportunity to defend himself."
22. Also, in National Seeds Corpn. Ltd. v. K.V. Rama Reddy [National Seeds Corpn. Ltd. v. K.V. Rama Reddy, (2006) 11 SCC 645 : (2007) 1 SCC (L&S) 512] , this Court laid down: (SCC p. 648, para
7) "7. The law in this country does not concede an absolute right of representation to an employee in domestic enquiries as part of his right to be heard and that there is no right to representation by somebody else unless the rules or regulation and standing orders, if any, regulating the conduct of disciplinary proceedings specifically recognise such a right and provide for such representation: see N. Kalindi v. Tata Locomotive & Engg. Co. Ltd. [N. Kalindi v. Tata Locomotive & Engg. Co. Ltd., (1960) 3 SCR 407 : AIR 1960 SC 914], Dunlop Rubber Co. (India) Ltd. v. Workmen [Dunlop Rubber Co. (India) Ltd. v. Workmen, (1965) 2 SCR 139 : AIR 1965 SC 1392],Crescent Dyes and Chemicals Ltd. v. Ram Naresh Page 42 of 49 Downloaded on : Sun Dec 25 06:23:29 IST 2022 C/SCA/11799/2021 JUDGMENT DATED: 16/11/2022 Tripathi [Crescent Dyes and Chemicals Ltd. v. Ram Naresh Tripathi, (1993) 2 SCC 115 : 1993 SCC (L&S) 360] and Indian Overseas Bank v. Officers' Assn. [Indian Overseas Bank v. Officers' Assn., (2001) 9 SCC 540 : 2002 SCC (L&S) 1043] "
23. The Court then held: (National Seeds Corpn. Ltd. case [National Seeds Corpn. Ltd. v. K.V. Rama Reddy, (2006) 11 SCC 645 : (2007) 1 SCC (L&S) 512] , SCC pp. 650-51, para 10)
"10. Learned counsel for the appellant Corporation has brought to our notice office memorandum dated 21-11-2003 by which the prayer to engage a legal practitioner to act as a defence assistant was rejected. Reference was made to the Rules, though no specific reference has been made to the discretion available to be exercised in particular circumstances of a case. The same has to be noted in the background of the basis of prayer made for the purpose. The reasons indicated by the respondent for the purpose were: (a) amount alleged to have been misappropriated is Rs 63.67 lakhs, (b) a number of documents and number of witnesses are relied on by the respondent, and (c) the prayer for availing services of the retired employee has been rejected and the respondent is unable to get any assistance to get any other able co- worker. None of these factors are really relevant for the purpose of deciding as to whether he should be granted permission to engage the legal practitioner. As noted earlier, he had to explain the factual position with Page 43 of 49 Downloaded on : Sun Dec 25 06:23:29 IST 2022 C/SCA/11799/2021 JUDGMENT DATED: 16/11/2022 reference to the documents sought to be utilised against him. A legal practitioner would not be in a position to assist the respondent in this regard. It has not been shown as to how a legal practitioner would be in a better position to assist the respondent so far as the documents in question are concerned. As a matter of fact, he would be in a better position to explain and throw light on the question of acceptability or otherwise and the relevance of the documents in question. The High Court [K.V. Rama Reddy v. National Seeds Corpn. Ltd., 2004 SCC OnLine Kar 654] has not considered these aspects and has been swayed by the fact that the respondent was physically handicapped person and the amount involved is very huge. As option to be assisted by another employee is given to the respondent, he was in no way prejudiced by the refusal to permit engagement of a legal practitioner. The High Court's order is, therefore, unsustainable and is set aside."
24. Given the above conspectus of case law, we are of the view that there is no right to be represented by a lawyer in the in-house proceedings contained in Para 3 of the Revised Circular dated 1- 7-2015, as it is clear that the events of wilful default as mentioned in Para 2.1.3 would only relate to the individual facts of each case. What has typically to be discovered is whether a unit has defaulted in making its payment obligations even when it has the capacity to honour the said obligations; or that it has borrowed funds which are Page 44 of 49 Downloaded on : Sun Dec 25 06:23:29 IST 2022 C/SCA/11799/2021 JUDGMENT DATED: 16/11/2022 diverted for other purposes, or siphoned off funds so that the funds have not been utilised for the specific purpose for which the finance was made available. Whether a default is intentional, deliberate, and calculated is again a question of fact which the lender may put to the borrower in a show-cause notice to elicit the borrower's submissions on the same. However, we are of the view that Article 19(1)(g) is attracted in the facts of the present case as the moment a person is declared to be a wilful defaulter, the impact on its fundamental right to carry on business is direct and immediate. This is for the reason that no additional facilities can be granted by any bank/financial institutions, and entrepreneurs/promoters would be barred from institutional finance for five years. Banks/financial institutions can even change the management of the wilful defaulter, and a promoter/director of a wilful defaulter cannot be made promoter or director of any other borrower company. Equally, under Section 29-A of the Insolvency and Bankruptcy Code, 2016, a wilful defaulter cannot even apply to be a resolution applicant. Given these drastic consequences, it is clear that the Revised Circular, being in public interest, must be construed reasonably. This being so, and given the fact that Para 3 of the Master Circular dated 1-7-2013 permitted the borrower to make a representation within 15 days of the preliminary decision of the First Committee, we are of the view that first and foremost, the Committee comprising of the Executive Director and two other Page 45 of 49 Downloaded on : Sun Dec 25 06:23:29 IST 2022 C/SCA/11799/2021 JUDGMENT DATED: 16/11/2022 senior officials, being the First Committee, after following Para 3(b) of the Revised Circular dated 1-7-2015, must give its order to the borrower as soon as it is made. The borrower can then represent against such order within a period of 15 days to the Review Committee. Such written representation can be a full representation on facts and law (if any). The Review Committee must then pass a reasoned order on such representation which must then be served on the borrower. Given the fact that the earlier Master Circular dated 1-7-2013 itself considered such steps to be reasonable, we incorporate all these steps into the Revised Circular dated 1- 7-2015. The impugned judgment [SBI v. Jah Developers (P) Ltd., LPA No. 113 of 2015 sub nom Punjab National Bank v. Kingfisher Airlines Ltd., 2015 SCC OnLine Del 14128 : (2016) 154 DRJ 164] [Kingfisher Airlines Ltd. v. Union of India, 2015 SCC OnLine Bom 6075 : (2016) 2 Mah LJ 838] is, therefore, set aside, and the appeals are allowed in terms of our judgment. We thank the learned Amicus Curiae, Shri Parag Tripathi, for his valuable assistance to this Court."
11. In view of the above conspectus of the law and undisputed facts of this case, it is apparent that the respondent bank has failed to comply with the aforesaid mechanism provided under the Revised Master Circular as Page 46 of 49 Downloaded on : Sun Dec 25 06:23:29 IST 2022 C/SCA/11799/2021 JUDGMENT DATED: 16/11/2022 petitioners were never informed by the Identification Committee by issuing show cause notice and the notice was issued by the respondent bank to which the petitioners filed detailed reply but the order passed by the Identification Committee recording that the petitioners have committed willful default was never provided to the petitioners. The petitioners came to know about declaring them as willful defaulter only from the website of CIBIL.
12. It emerges from the record that the copy of the order passed by the Identification Committee was never supplied to the petitioners even though written request for the same was made by the petitioners. In view of the above facts and circumstances, the respondent bank while declaring the petitioners as willful defaulter has violated the provisions contained in the Revised Page 47 of 49 Downloaded on : Sun Dec 25 06:23:29 IST 2022 C/SCA/11799/2021 JUDGMENT DATED: 16/11/2022 Master Circular and has also acted in violation of principles of natural justice.
As the impugned action which is penal in nature has been taken causing serious implication to the petitioners without following the basis of principles of natural justice, the impugned action of the respondent bank identifying the account of the petitioners as willful default and subsequent reporting of name of the petitioners to the RBI/CIBIL as willful defaulters are liable to be quashed and set aside.
13. In view of the foregoing reasons, the petitions succeed and are accordingly allowed. The impugned action of the respondent bank identifying the account of the petitioners as willful defaulters and subsequent reporting of the names of the petitioners to RBI/CIBIL as willful Page 48 of 49 Downloaded on : Sun Dec 25 06:23:29 IST 2022 C/SCA/11799/2021 JUDGMENT DATED: 16/11/2022 defaulters is hereby quashed and set aside and the matter is remanded back to the Identification Committee of the respondent bank to follow the procedure as prescribed in Master Circular dated 1st July, 2015 by issuing a show cause notice to the petitioners and providing opportunity to the petitioners as per Clause-3 of the said circular. Such exercise by the Identification Committee and thereafter by the Review Committee shall be completed within the period of six months from the date of receipt of this order.
14. Rule is made absolute to the aforesaid extent. No order as to costs.
(BHARGAV D. KARIA, J) RAGHUNATH R NAIR Page 49 of 49 Downloaded on : Sun Dec 25 06:23:29 IST 2022