2014 (8) TMI 1073 - HC - Indian Laws

Refusing permission to engage advocate - Held that - Here the proceeding is between a lender and a borrower, and a committee of the lender is to hear the borrower. The committee is not to decide any lis between the parties; nor is it to adjudicate any dispute; nor to inquire into any charge and record its findings. It is only to take a view on the appellant s representation against proposal of the bank, based on its records related to the appellant s loan account, to classify the appellant as a wilful defaulter. The lender is under an obligation to detect its borrowers who are in default on loan it has sanctioned. Whether a borrower is a wilful defaulter is to be ascertained first by the bank internally through its high officials who are to scrutinise the related records for classifying the borrower concerned. A borrower when declared a wilful defaulter is bound to face the penal consequences mentioned in the MC itself. The evident purpose of the hearing of the borrower is to ensure that the lender does not commit a mistake in identifying and classifying a borrower as a wilful defaulter. The appellant s representation is that the bank has wrongly classified it as a wilful defaulter. The GRC of the bank supposed to examine the appellant s case closely in the presence of the appellant that will be free to present its case over the course of hearing, is not, however, empowered to take down any evidence. Hence in ordinary cases absence of an advocate for the hearing purpose is not likely to defeat the purpose of the hearing. In this case we do not find any reason to say that the grounds stated by the appellant for permission to engage advocate to appear before the GRC for the hearing purpose have constituted a case that absence of the service of an advocate for the hearing purpose is likely to defeat the purpose of the hearing. We are therefore of the opinion that by refusing permission to engage advocate the bank did not commit any wrong, and that the single Judge has rightly dismissed the WP, though he has recorded a finding that the appellant is a defaulter on the loan, − not an issue in the WP, and made an assumption about the appellant s representation ability, − an impermissible personal perception.

Summary

Issues Involved:
1. Whether the appellant is entitled to legal representation before the Grievance Redressal Committee (GRC) of the bank.
2. Whether the bank's refusal to allow legal representation violated principles of natural justice.

Detailed Analysis:

Issue 1: Entitlement to Legal Representation
The primary issue addressed in the judgment is whether the appellant is entitled to legal representation before the GRC of the bank. The appellant was classified as a wilful defaulter by the bank, which proposed to forward this classification to the RBI. The appellant requested the bank to allow legal representation during the GRC hearing, citing the complexity and serious consequences of being declared a wilful defaulter.

The bank refused this request, stating that the RBI Master Circular (MC) on Wilful Defaulters did not contain any provision for legal representation. The single Judge upheld the bank's decision, stating that the officers of the bank comprising the Committee were not legally trained persons, and the issues to be considered were reasonably simple questions of fact.

The appellant argued that no provision of law prohibited legal representation and that the bank should have exercised its discretion judiciously, considering the complex nature of the case and the serious penal consequences. The bank countered that the appellant had no legal right to engage an advocate and that the classification process was straightforward.

The court concluded that the principal test for deciding whether permission to engage an advocate should be granted is whether the refusal will defeat the purpose of the hearing. In this case, the court found no reason to believe that the absence of legal representation would defeat the purpose of the hearing, as the GRC was not empowered to take down evidence or adjudicate disputes but merely to review the appellant's representation against the bank's classification.

Issue 2: Violation of Principles of Natural Justice
The appellant contended that being declared a wilful defaulter entailed serious consequences, including penal consequences, and that depriving them of legal representation violated principles of natural justice and constitutional rights. The bank maintained that the MC did not provide for legal representation and that the appellant's case did not warrant an exception.

The court held that the absence of a prohibition or silence in the MC regarding legal representation does not create a right to do so. The purpose of the hearing is to ensure that the lender does not mistakenly classify a borrower as a wilful defaulter. The court found that the grounds stated by the appellant did not constitute a case where the absence of legal representation would defeat the purpose of the hearing.

In conclusion, the court dismissed the appeal, stating that the bank did not commit any wrong by refusing permission for legal representation, and the single Judge rightly dismissed the writ petition. The court also noted that the appellant did not raise additional issues before the single Judge and thus could not raise them before the appellate court. The request for a stay was denied, as the court found no reason to pass an interim order after dismissing the appeal.