2019 (5) TMI 1666 - HC - Indian Laws

Wilful Defaulters - representation before the Wilful Defaulter Identification Committee by an advocate - Master Circular on Wilful Defaulters dated July 1 2015 - power to issue SCN - Can the Identification Committee acting under the Master Circular for Wilful Defaulters dated July 1 2015 delegate its power to issue a show-cause notice? - HELD THAT - Clause 3(b) requires application of mind by the Identification Committee at all stages. It is required to apply its mind on the contents of the show-cause notice also as it is a crucial stage in the whole process. The delinquent must have the entirety of the materials that were placed before the Identification Committee for the delinquent to give a meaningful submission. Right of oral hearing is not automatic as the words of Clause 3(b) stands. Therefore it is imperative that the Identification Committee applies its mind to the contents of the show-cause notice so that the delinquent is not deprived of a meaningful opportunity to defend itself - the first issue is answered in the negative and against the bank. Is a borrower receiving a show-cause notice under the Master Circular on Wilful Defaulters dated July 1 2015 entitled to be represented by an agent before the Identification Committee? - Appointment of an advocate - HELD THAT - The right of hearing is not automatic under Clause 3(b) of the Master Circular on Willful Defaulters dated July 1 2015. It is dependent upon the formation of opinion of the Identification Committee as to whether oral hearing is required or not. Therefore the petitioner cannot as a matter of right claim that it is entitled to oral hearing. The question of being represented by an advocate at the oral hearing will arise only if the petitioner is granted an opportunity of oral hearing - the concerned borrower required to be proceeded against under the Master Circular on Wilful Defaulters may be a legal entity. In such a situation the promoter/whole time director of the legal entity is to be given the show-cause notice under Clause 3(b) when the legal entity is a company and the partners of the partnership firm when the legal entity involved in an unlimited partnership firm - appointment of agent and that too an advocate is not permissible - second and the third issues are answered in the negative. This judgment and order will however not prevent the bank from initiating appropriate proceedings for declaration of the petitioners as wilful defaulters in accordance with law. Petition disposed off.

Issues Involved:
1. Can the Identification Committee acting under the Master Circular for Wilful Defaulters dated July 1, 2015 delegate its power to issue a show-cause notice?
2. Is a borrower receiving a show-cause notice under the Master Circular on Wilful Defaulters dated July 1, 2015 entitled to be represented by an agent before the Identification Committee?
3. If the answer to the second issue is in the affirmative, then can an Advocate be appointed?
4. To what relief or reliefs are the parties entitled to?

Detailed Analysis:

Issue 1: Delegation of Power to Issue Show-Cause Notice
The court examined whether the Identification Committee under the Master Circular on Wilful Defaulters dated July 1, 2015 can delegate its power to issue a show-cause notice. The Master Circular mandates that the Identification Committee itself must issue the show-cause notice and cannot delegate this function to any other person or authority. The court held that the issuance of a show-cause notice is an integral part of the decision-making process and must be performed by the Identification Committee itself. Consequently, the court concluded that the delegation of this function is not permissible, and the impugned show-cause notice issued by the Deputy General Manager was quashed.

Issue 2: Right to Representation by an Agent
The court considered whether a borrower receiving a show-cause notice under the Master Circular is entitled to be represented by an agent before the Identification Committee. The court referred to previous judgments, including Kingfisher Airlines Limited, which held that proceedings before the Grievance Redressal Committee do not involve adjudication of a lis and are administrative in nature. Thus, the borrower does not have an automatic right to be represented by an agent, including an advocate, before the Identification Committee. The court concluded that the borrower is not entitled to representation by an agent as a matter of right.

Issue 3: Appointment of an Advocate
The court further examined whether an advocate can be appointed if the borrower is entitled to representation by an agent. Given the conclusion on the second issue, the court held that the appointment of an advocate is not permissible. The court emphasized that the right to oral hearing is not automatic and is subject to the Identification Committee's discretion. Therefore, the question of being represented by an advocate arises only if the Identification Committee grants an oral hearing, which is not a matter of right.

Issue 4: Reliefs Entitled to the Parties
The court quashed the impugned show-cause notice issued by the bank and all consequential decisions taken pursuant to such notice. However, the court clarified that this judgment does not prevent the bank from initiating appropriate proceedings for declaring the petitioners as wilful defaulters in accordance with the law. The writ petition was disposed of with no order as to costs.

Conclusion
The court ruled that the Identification Committee cannot delegate its power to issue a show-cause notice, and borrowers are not entitled to be represented by an agent or advocate before the Identification Committee. The impugned show-cause notice was quashed, but the bank retains the right to initiate fresh proceedings in compliance with the law.

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