2014 (9) TMI 1064 - HC - Companies Law

Furnishing of documents - Held that - No prejudice would be caused to Respondent No.2 if these documents are supplied. On the contrary, if these documents are supplied in time there wont be further delay in concluding the proceedings after giving a reasonable opportunity to the Petitioner. We must note here that the Petitioner has not pressed prayer clause (a) and (b)(i). Petitioner has given a list of documents which, according to them, have not been disclosed to them and the said list of documents is annexed at Exhibit-A to the affidavit of the Petitioner which is at running page 853. Mr. De Vitre, the learned Senior Counsel for Respondent Nos.2 to 4, after referring to the said list at Exhibit-A, has submitted that documents at Serial No.2, 3 & 6 would be supplied and the document at Serial No.5 has already been supplied. He submitted that documents at Serial No.7 are available with the Petitioner. He further submitted that documents at Serial Nos 8, 9, 10 and 11 of the said list are based on facts. 23. We are, therefore, of the view that Respondent No.2 shall furnish to the Petitioner the documents at Serial Nos. 2, 3, & 6 which are mentioned in Exhibit-A referred to above within two weeks from today. Further proceedings to be commenced upon documents being supplied within two weeks thereafter. Thereafter, additional explanation may be furnished by the Petitioner.

Summary

Issues Involved:
1. Entitlement of the Petitioner to receive copies of documents relied upon by the Respondent Bank.
2. Compliance with the principles of natural justice.
3. Applicability of the RBI Master Circular guidelines.
4. Relevance of the investigative report by Ernst & Young.
5. Precedents and judgments from other courts and their applicability.

Detailed Analysis:

1. Entitlement of the Petitioner to receive copies of documents relied upon by the Respondent Bank:
The Petitioner, a company previously operating Kingfisher Airlines, received a notice from Respondent No.2 (Bank) about being classified as a wilful defaulter. The Petitioner argued that they were entitled to receive copies of all documents relied upon by the Bank to make this determination. The Petitioner claimed that the non-supply of these documents deprived them of a fair opportunity to defend themselves, contrary to the RBI's Master Circular and the principles of natural justice.

2. Compliance with the principles of natural justice:
The Petitioner contended that the lack of document supply was against the principles of natural justice, as it denied them a fair opportunity to represent their case. The Respondent Bank argued that only documents referred to in the notice were necessary to be supplied and that the investigative report by Ernst & Young was not mentioned in the notice. The court held that for an objective decision, all material relied upon by the Scrutiny Committee must be made available to the affected party.

3. Applicability of the RBI Master Circular guidelines:
The Petitioner referred to the RBI Master Circular dated 1st July 2014, which outlines the procedures and penal measures for wilful defaulters. The Circular mandates that decisions to classify a borrower as a wilful defaulter should be objective, well-documented, and supported by requisite evidence. The court observed that the Scrutiny Committee's decision must be based on all relevant documents, thus supporting the Petitioner's claim for document disclosure.

4. Relevance of the investigative report by Ernst & Young:
The Petitioner argued that the investigative report by Ernst & Young, though not mentioned in the notice, influenced the Scrutiny Committee's decision. The Respondent Bank countered that the report was not relied upon in the notice. The court acknowledged the existence of the report and the possibility of its influence on the Committee's decision. Therefore, the court ruled that all material, including the Ernst & Young report, must be disclosed to the Petitioner.

5. Precedents and judgments from other courts and their applicability:
The Respondent Bank cited the Supreme Court judgment in Krishna Chandra Tandon vs. Union of India, arguing that interdepartmental communications need not be disclosed unless relied upon by the inquiry officer. The court found this precedent inapplicable, as the current case involved material that could influence the Scrutiny Committee's decision. Similarly, the court dismissed the relevance of Natwar Singh vs. Director of Enforcement, as the principles of natural justice in that case did not align with the present issue.

Conclusion:
The court directed Respondent No.2 to supply the Petitioner with the documents listed in Exhibit-A within two weeks, allowing the Petitioner to furnish an additional explanation thereafter. The Petition was disposed of with these directions, granting the Petitioner's request for document disclosure to ensure a fair opportunity to defend against the wilful defaulter classification.