2018 (1) TMI 1488 - HC - Companies Law

Identification of wilful defaulters - compliance with RBI Master Circular dated 1.7.2015 defining wilful default - Prayer for quashment of show-cause notice - Loan defaulters Right of representation though an advocate before the Grievance Redressal Committee (GRC) of the Bank - HELD THAT - Committee has issued the show-cause notice to the petitioners. In response to the said show-cause notice, petitioners have demanded various documents as mentioned in Para 3.6 of their representation. In response to the representation, the Dy. General Manager vide letter dated 29.11.2017 has informed the petitioners that response to the notice under reference will be examined by the appropriate Committee in its meeting to be held on 14.12.2017. Petitioners sought adjournment as they were not in a position to attend the proceedings on 14.12.2017. The Committee adjourned the date twice. As on today, petitioners are yet to appear before the Committee to pursue their representation in respect of certain documents. It is for the Committee to apply its mind in respect of supply of documents as demanded by the petitioners. The petitioners are required to appear before the Committee on the next date of hearing and as stated in the letter dated 29.11.2017, the Committee will examine the representation of the petitioners, therefore, at this stage, no interference is called for by this Court in this petition under Article 226 of the Constitution of India. By way of this petition, petitioners also sought direction that they may be allowed to appear before the Committee through Advocate. The petitioners may submita representation before the Committee seeking permission to appear through counsel. If such an application is moved before the Committee, it shall be considered and decided in the light of judgment passed by the Division Bench of Delhi High Court in Punjab National Bank V/s. Kingfisher Airlines Ltd. 2015 (12) TMI 1381 - DELHI HIGH COURT

Summary

Issues:
1. Allegations of wilful default against a company and its director by a public sector bank.
2. Compliance with RBI Master Circular dated 1.7.2015 in the identification of wilful defaulters.
3. Petitioners' request for documents and material pertaining to the show-cause notice.
4. Petitioners' request to appear before the Committee through an Advocate.

Analysis:
1. The petitioners, a company registered under the Companies Act, 1956, and its director, received a show-cause notice from a government-owned public sector bank proposing to declare the company as a wilful defaulter. The bank had sanctioned a term loan to the company, and the petitioners had mortgaged properties as security. The petitioners contested the application filed by the bank before the Debt Recovery Tribunal, denying the allegation of wilful default.

2. The petitioners sought direction to strictly comply with the RBI Master Circular dated 1.7.2015, which defines 'wilful default' and provides for the identification of wilful defaulters by a Committee constituted under the Circular. The Committee, as per the Circular, is required to provide an opportunity of hearing before identifying a wilful defaulter. The petitioners demanded various documents related to the show-cause notice, and the Committee was to examine their representation in a meeting.

3. The Dy. General Manager informed the petitioners that their representation would be examined by the Committee in a meeting, providing multiple opportunities for the petitioners to appear before the Committee. The petitioners requested an adjournment due to their inability to attend the proceedings, and subsequent dates were scheduled for their appearance. The Court noted that the petitioners had not yet appeared before the Committee to pursue their representation regarding the demanded documents.

4. The petitioners also sought permission to appear before the Committee through an Advocate, citing a judgment of the Division Bench of Delhi High Court. The Court disposed of the petition, emphasizing that the petitioners must appear before the Committee as scheduled and that their request to appear through counsel should be considered by the Committee in light of the mentioned judgment.

This comprehensive analysis of the judgment highlights the issues related to allegations of wilful default, compliance with RBI regulations, document requests, and the petitioners' request to appear through an Advocate before the Committee.