Home Case Index All Cases Indian Laws Indian Laws + HC Indian Laws - 2022 (3) TMI HC This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2022 (3) TMI 927 - HC - Indian LawsWillful defaulter under the RBI Master Circular dated July 1, 2014 or not - petitioner contends that the impugned notice was drawn in the form of a demand notice instead of a proper showcause notice - contravention of Clause 3, sub-clauses (a) and (b) of the RBI Master Circular - HELD THAT - It is observed that in MAHESWARY ISPAT LTD ORS. VERSUS STATE BANK OF PATIALA ORS. 2013 (10) TMI 1560 - CALCUTTA HIGH COURT , the writ petition had been preferred against a final decision branding the writ petitioners as willful defaulters and upon their names having been brandished on the CIBIL and other websites without following the procedure laid down under the RBI Master Circular. As distinguished from the said case, the present writ petition has thrown a challenge at the stage of showcause itself. In the present case the petitioner has a remedy to approach with a representation before the Willful Defaulter Committee. Moreover, even if the petitioner is branded as a Willful Defaulter by the WD Committee, there is scope of further review by the Review Committee headed by the Chairman/Chairman and Managing Director or the Managing Director and Chief Executive Officer/C.E.O.s and two independent Directors/Non-Executive Directors of the bank before the order becomes final upon confirmation by the Review Committee. Hence, at the nascent stage of mere issuance of a show cause notice, the petitioner s challenge is premature. The only requirement as per Clause 3(a) of the RBI Master Circular is that the First Committee has to examine the evidence of willful default to conclude prima facie whether the accused is a Wilful Defaulter for the purpose of issuance of a show cause notice to that effect. Although the petitioner has raised an arguable question as to whether the show-cause notice itself was sufficient, since the documents on which the First Committee came to such conclusion were not disclosed therewith, such requirement is not a mandate of the RBI Master Circular, but a mere technicality to enable the petitioner to make a proper representation on all the allegations before the WD Committee. Since all the documents on which the respondents allegedly relied on have been disclosed in the respondents affidavit-in-opposition and disclosed in the present writ petition, there is nothing to prevent the petitioner from making a complete representation on all facets of the allegations of Willful Defaulter, including the question of validity of the show-cause notice. The show cause notice in the present case was sufficient to pass muster, insofar as adherence to the RBI Master Circular is concerned - the petitioner is granted liberty to approach the Willful Defaulter Committee with his representation on the show-cause notice impugned in the present writ petition, within 15 (fifteen) days hence - petition dismissed.
Issues:
Challenge to notice declaring petitioner as willful defaulter under RBI Master Circular. Analysis: The petitioner challenged a notice dated June 16, 2021, which sought to declare them as a willful defaulter under the RBI Master Circular. The petitioner argued that the notice was in the form of a demand notice, not a proper show cause notice as required by the Circular. It was contended that the notice did not involve an independent examination by the Willful Defaulter Committee, as it was based on a Transaction Audit Report (TAR) related to a Corporate Insolvency Resolution Proceeding under the Insolvency and Bankruptcy Code, 2016. The petitioner highlighted discrepancies between the Circular and the TAR to support their contention. The petitioner further argued that the respondent bank introduced additional reasons for the notice in their affidavit-in-opposition, which were not disclosed in the original notice. The TAR contained a disclaimer stating its limitations and that it should not be used as the sole basis for any action. The petitioner emphasized that they were not provided with crucial documents like the CBI charge-sheet, TAR Report, and balance sheet during the relevant period. In response, the court noted that the petitioner's challenge was premature as it was at the show-cause stage, and the petitioner had the option to approach the Willful Defaulter Committee with a representation. The court emphasized the need for a proper procedure to be followed, including a review by the Review Committee, before a final decision on declaring someone a willful defaulter is made. The court cited relevant judgments to support this procedural requirement. The court also addressed the issue of disclosure of documents to the petitioner, stating that although the documents were not initially provided, they were eventually disclosed during the writ petition, allowing the petitioner to make a complete representation. The court clarified that the TAR was only a part of the evidence considered by the committee, and the show cause notice was deemed sufficient as per the RBI Master Circular. Ultimately, the court dismissed the writ petition, granting the petitioner the liberty to present their representation to the Willful Defaulter Committee within a specified period. The court highlighted the importance of following the prescribed procedure and giving the petitioner the opportunity to respond adequately to the allegations before any final decision is made.
|