Madras High Court
Arvind Kumar Bishnoi … vs Idbi Bank on 12 October, 2023
Author: N.Anand Venkatesh
Bench: N.Anand Venkatesh
W.P.No.33262 of 2023
In the High Court of Judicature at Madras
Reserved on : Delivered on:
12.08.2025 14.08.2025
Coram :
The Honourable Mr.Justice N.ANAND VENKATESH
Writ Petition No.33262 of 2023
and WMP Nos.32993 & 32995 of 2023
Arvind Kumar Bishnoi …Petitioner
Vs
IDBI Bank
Rep. by its General Manager
NPA Management
No.115, Anna Salai
P.B.No.805, Saidapet
Chennai 600 015. …Respondent
(also having registered office at
IDBI Tower, WTC Complex
Cuffe Parade, Mumbai-400 005)
PETITION under Article 226 of The Constitution of India praying
for the issuance of a Writ of Certiorari to call for the records relating to
the order dated 12.10.2023 passed by the Wilful Defaulters' Review
Committee of the respondent Bank bearing Order No:WDRC/12(FY
2023-24) TIPL and quash the same.
For Petitioner : Mr.P.V.Balasubramaniam
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W.P.No.33262 of 2023
Senior Counsel for
Mr.AR.Karthik Lakshmanan
For Respondent : Mr.Suresh
for M/s.Shivakumar Suresh
ORDER
This writ petition has been filed challenging the decision taken by the Wilful Defaulters' Review Committee dated 12.10.2023 declaring the petitioner also as one of the wilful defaulter.
2.The case of the petitioner is that he was inducted as a director (marketing) of M/s.Tecpro Infra Projects Limited on 30.09.2010. This Company was sanctioned credit facilities to the tune of Rs.40 crores by the respondent Bank. It is stated that the petitioner was not involved in the day-to-day affairs of the Company and he was neither a promoter nor a whole time director. Apart from that during his tenure as a director, the Company was repaying the loans without any default. The petitioner submitted his resignation with effect from 02.09.2013. Much later on 22.10.2014, the bank account of the Company was declared as Non-Performing Assets [NPA]. A show cause notice dated 04.11.2022, was served on the petitioner to show cause 2/14 https://www.mhc.tn.gov.in/judis ( Uploaded on: 14/08/2025 03:01:11 pm ) W.P.No.33262 of 2023 as to why he amongst others should not be declared as wilful defaulters. The petitioner submitted his reply.
3.The Wilful Defaulters' Review Committee also provided an opportunity to the petitioner and he appeared before the Committee. The Committee was relying upon forensic audit report. The copy of certain pages was selectively given to the petitioner and thereafter the petitioner submitted a detailed reply and sought for dropping further proceedings against him.
4.The grievance of the petitioner is that the Review Committee did not properly consider the reply given by the petitioner and included the name of the petitioner also as a wilful defaulter which according to the petitioner is in violation of the Master Circular issued by the RBI dated 01.07.2015. Aggrieved by the same, the present writ petition has been filed before this Court.
5.The respondent Bank has filed a counter affidavit and they have taken a stand that the present writ petition is not maintainable 3/14 https://www.mhc.tn.gov.in/judis ( Uploaded on: 14/08/2025 03:01:11 pm ) W.P.No.33262 of 2023 since the respondent Bank is a private sector bank which does not come within the purview of Article 12 of the Constitution of India.
6.Apart from the above, the respondent Bank has taken a stand that working capital facilities was sanctioned to the Company and the Company defaulted in repayment of the loan as a result of which the loan account became NPA. Proceedings were initiated for recovery of the amount from the Company and its directors.
7.The respondent Bank has taken a stand that the petitioner was effectively involved in the administration of the affairs of the Company and it was found that the amounts borrowed has been transferred to the group compannies which became evident from the forensic audit report dated 28.10.2021. Therefore, the show cause notice was issued and the reply was given by the petitioner and an opportunity of hearing was also given to the petitioner and ultimately the petitioner was declared as a wilful defaulter. It is stated that the decision taken by the respondent Bank is strictly in line with the Master Circular issued by the RBI. Accordingly, the respondent Bank sought for the dismissal of this writ petition.
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8.Heard both sides.
9.The only issue that is involved in the present writ petition is as to whether the decision taken by the Review Committee is in line with the Master Circular of the RBI dated 01.07.2015 and it is in line with the judgment of the Apex Court in State Bank of India vs Jah Developers Private Limited and others reported in 2019 6 SCC 787. For proper appreciation, para 24 of the judgment is extracted hereunder:
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 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 5/14 https://www.mhc.tn.gov.in/judis ( Uploaded on: 14/08/2025 03:01:11 pm ) W.P.No.33262 of 2023 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 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 6/14 https://www.mhc.tn.gov.in/judis ( Uploaded on: 14/08/2025 03:01:11 pm ) W.P.No.33262 of 2023 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.
10.The main ground that was raised on the side of the petitioner is that he resigned from the Company effective from 02.09.2013 and whereas the Bank account of the Company was classified as NPA much later only on 22.10.2014. Therefore, there was no default committed when the petitioner was the director of the Company and during his period, the finance lent by the Bank was not diverted for any purpose.
11.The materials placed before this Court shows that the petitioner was a director of the Company from 30.09.2010 to 02.09.2013. During this period, the petitioner has affixed his signature as director of the Company in many documents including Board Resolutions, Annual Returns, Profit And Loss Account, etc. During this period, the amount that was lent to the Company is alleged to have been diverted in the following manner:
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https://www.mhc.tn.gov.in/judis ( Uploaded on: 14/08/2025 03:01:11 pm ) W.P.No.33262 of 2023 Details of funds Amount Particulars / details of transaction S. No. transferred by TIPL (Rs.) Date of to related party Lakhs Particulars Amount (Rs.) transaction 12.03.2013 for Rs.2 crores and IDBI CC A/c. 01296551 00002240 2,65,00,000 18.03.2013 for Rs.0.65 Crore Vijaya Bank CC A/c 30010621 Tecpro Infrastructures 1,00,57,736 30.03.2013
1. 467.96 1000017 Private Limited (TIPL) Axis Bank CA 91202006091 7498 82,38,746 10.04.2013 State Bank of India -Chennai -Cash 20,00,000 Credit A/c Total 4,67,96,482
2. Hythro Power Rs.3 crores on DBS BANK CA A/C NO. 8262100 Corporation 800.00 8,00,00,000 20.02.13 and again 68077 Limited(HPC L) Rs.5 crores on 2013 Total 8,00,00,000 State Bank of India -Chennai -Cash 1,39,00,000 Credit A/c IDBI CC A/c. 01296551 00002240 30,00,000 15.03.2013 DBS BANK CA A/CNO.8262 10068077 20,00,000 19.03.2013 Shriram Cement Standard Chartered Bank (WCF)
3. 201.00 6,00,000 24.01.2013 Limited (SCL) 42705512807 Axis Bank CA 91202006091 7498 4,00,000 Vijaya Bank CC A/c 30010621 2,00,000 28.03.2014 1000017 Total 2,01,00,000 11,07,65,560 01.03.2013 (Rs.11 DBS BANK CA A/CNO.8262 10068077 crores) G.E.T Power Ltd 6,75,00,000
4. Vijaya Bank CC A/c30010621 (GETPL) 30.03.2013 1902.66 1000017 IDBI CC A/c 01296551 00002240 65,00,000 27.12.2013 State Bank of India -Chennai 55,00,000 08.01.2013 Total 19,02,65,560 8/14 https://www.mhc.tn.gov.in/judis ( Uploaded on: 14/08/2025 03:01:11 pm ) W.P.No.33262 of 2023
12.According to the learned Senior Counsel appearing on behalf of the petitioner, Clause 2.1(b) of the Master Circular dated 01.07.2015 mandates the requirement of the unit defaulting in the repayment obligation and also has not utilized the finance from the lender for the specific purpose for which finance was availed and funds were diverted for other purposes. Therefore, it was contended that there was no default committed during the period when the petitioner was the director and hence, the requirement has not been satisfied.
13.This Court is not able to agree with the above submission made by the learned Senior Counsel appearing for the petitioner.
14.The facts of the present case shows that, there was diversion of funds to the group companies even when the petitioner was the director of the Company. The same has been captured by way of a tabular column supra. Ultimately, it resulted in the default committed by the Company in repaying the loan. Therefore, the petitioner cannot be heard to say that there was no default during his period and the default had happened only subsequently. If the subsequent default is 9/14 https://www.mhc.tn.gov.in/judis ( Uploaded on: 14/08/2025 03:01:11 pm ) W.P.No.33262 of 2023 by virtue of the diversion of funds, the petitioner must be equally blamed for the subsequent default committed by the Company.
15.It was further contended that the petitioner was only a director and he was neither a promoter nor a whole time director. Therefore, the Review Committee ought to have applied its mind with respect to Clause 3 of the Master Circular and should have independently satisfied itself that the wilful default had taken place with the consent or connivance of the petitioner.
16.A careful reading of Section 2 (69) of the Companies Act, 2013 which provides for the definition of a promoter, in Clause (b) states that it also includes a person who has control over the affairs of the Company, directly or indirectly whether as a shareholder, director or otherwise. The materials placed before this Court shows that the petitioner was very much active in his capacity as a director by signing the Board Resolutions, Annual Returns, Profit And Loss Account, etc. That apart, one of the other main director was his own father Mr.Ajay Kumar Bishnoi. Therefore, the definition is broad enough to include the petitioner also since he is also involved in the day-to-day affairs of the 10/14 https://www.mhc.tn.gov.in/judis ( Uploaded on: 14/08/2025 03:01:11 pm ) W.P.No.33262 of 2023 Company. It is not as if the Bank can proceed only against the promoter and/or whole time director and not against the other directors.
17.Heavy reliance was placed on the forensic audit report by the Bank. The forensic audit report shows that funds were transferred to group companies to an extent of Rs.33.70 crores. That apart, proceedings were initiated under the Insolvency and Bankruptcy Code, 2016 and an application has been filed in I.A.No.1526 of 2023, by the liquidator before the NCLT, New Delhi, wherein a request was made to implead the petitioner and others in order to recover the money from them. This was also made by placing reliance upon the forensic audit report.
18.The learned Senior Counsel appearing on behalf of the petitioner submitted that only selected portions of the forensic audit report was given to the petitioner and the petitioner did not have the advantage of the entire report. That apart, the Review Committee entirely placed reliance upon this report without independently applying its mind.
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19.This Court is not in agreement with the above submission made by the learned Senior Counsel appearing on behalf of the petitioner.
20.The Review Committee has taken into consideration the facts of the case, the stand taken by the petitioner and also the report submitted by the Wilful Defaulters' Committee and concluded that the petitioner must be declared as the wilful defaulter apart from others. The Review Committee has applied its mind independently apart from relying upon the forensic audit report. The Court must understand the findings of the Review Committee by reading the entire order to ascertain as to whether there is application of mind on the part of the Review Committee.
21.The petitioner has been given sufficient opportunity and the Review Committee has taken into consideration the stand taken by the petitioner and has also considered all the other materials including forensic audit report and came to a conclusion. Hence, this Court does not find any error of law on the face of the order of the Review Committee warranting the interference of this Court. 12/14 https://www.mhc.tn.gov.in/judis ( Uploaded on: 14/08/2025 03:01:11 pm ) W.P.No.33262 of 2023
22.In a case of this nature, this Court is only expected to see as to whether sufficient opportunity was given to the petitioner and all the materials were taken into consideration by the Review Committee before passing the final orders. The mandate prescribed under the Master Circular and para 24 of the Apex Court judgment, has been followed in this case. The decision making process does not suffer from any illegality. That apart, it is also seen that the liquidator has initiated proceedings for recovery of money from the petitioner and others by filing an appropriate application before the NCLT, New Delhi on the ground that all of them diverted the funds and misappropriated the funds.
23.In the light of the above discussion, this Court does not find any merits in this case and accordingly, the present writ petition stands dismissed. No costs. Consequently, connected WMPs are closed.
14.08.2025
Index : Yes/No
Neutral Citation : Yes/No
KP
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W.P.No.33262 of 2023
N.ANAND VENKATESH,J
kp
To
IDBI Bank
Rep. by its General Manager
NPA Management
No.115, Anna Salai
P.B.No.805, Saidapet
Chennai 600 015.
Pre-Delivery Order in
Writ Petition No.33262 of 2023
14.08.2025
..
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