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Issues involved: Petitioners branded as wilful defaulters without following RBI Master Circular procedure.
Summary: The petitioners were informed of the bank's intention to label them as wilful defaulters and were given an opportunity to represent their case before the Grievance Redressal Committee. The petitioners questioned the basis of the decision and did not avail themselves of the opportunities to be represented before the Committee. The Committee ultimately rejected the petitioners' representation. The petitioners argued that the initial process did not adhere to the Master Circular, rendering subsequent steps irrelevant. The bank contended that the petitioners did not address the charges of wilful default but only questioned the procedure followed by the bank. The Master Circular distinguishes between a defaulter and a wilful defaulter, emphasizing the need for bad motive or fraudulent conduct for the latter classification. Being labeled a wilful defaulter has serious consequences, leading to commercial ostracisation. The Court found that there was no evidence of wilful default by the petitioners and that the decision-making process did not comply with the Master Circular requirements. The Grievance Redressal Committee did not have sufficient evidence to classify the petitioners as wilful defaulters. The Court allowed the petition, setting aside the decisions of the Grievance Redressal Committee and the screening committee of the bank. The bank was directed to start the process afresh in accordance with the law and pay costs to the petitioners. Certified copies of the order were to be provided to the parties upon request.
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