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2019 (8) TMI 219 - HC - Insolvency and BankruptcyMaintainability of petition - Wilful Defaulters - order of review committee - liquidator appointed over the affairs of the Company but the liquidator is not prosecuting the petition - HELD THAT - In neither of the two writ petitions before the Court, the petitioners therein have challenged the decision of the Identification Committee or the steps and procedures taken upto the decision of the Review Committee. The Master Circular on Wilful Defaulters dated July 1, 2015 contemplates two tier decision making process for the purpose of identification of a wilful defaulter. The Master Circular contemplates establishment of an Identification Committee consisting of the specified number of personnel with the requisite qualifications and the Constitution of a Review Committee, again of the requisite number and qualification. Once such committees are established, the Master Circular requires that a bank having material to proceed against an account, to have the same declared as a wilful defaulter, under such Master Circular, to place such material before the Identification Committee. In the present case, the decision of the Review Committee under challenge, is not informed with reasons. Although, the Review Committee is at liberty to concur with the finding of the Identification Committee, it has to deal with the representation made by the borrower before it. The challenge of the petitioners being limited to the order of the Review Committee, the same is quashed.
Issues:
Two writ petitions challenging decision of Review Committee under Master Circular on Wilful Defaulters; Locus standi of petitioner in first writ petition; Entitlement to notice of hearing by Identification and Review Committees; Applicability of judgments in similar cases; Challenge limited to Review Committee's decision; Lack of reasons in Review Committee's decision. Analysis: The judgment by the High Court of Calcutta involved two writ petitions challenging a decision of the Review Committee under the Master Circular on Wilful Defaulters issued by the Reserve Bank of India. The first writ petition was filed by a company that had credit facilities with UCO Bank, while the second writ petition was filed by the guarantors of the credit facilities. The petitioners contended that they were not given an opportunity of hearing by the Identification or Review Committees as required by the Master Circular. They relied on previous judgments to support their arguments that a notice of hearing by the Review Committee is mandatory. The Review Committee's decision was criticized for lacking reasons and merely reiterating the Identification Committee's findings. The Advocate for UCO Bank questioned the locus standi of the petitioner in the first writ petition, arguing that since a liquidator was appointed over the company's affairs and was not prosecuting the petition, it should be deemed not maintainable. He also argued against applying the judgments cited by the petitioners to the Review Committee's decision, as those judgments were issued after the Review Committee's decision. The Bank contended that the challenge in the writ petitions was limited to the Review Committee's decision and did not include the Identification Committee's decision. The Court noted that the Master Circular on Wilful Defaulters outlines a two-tier decision-making process involving an Identification Committee and a Review Committee. The Identification Committee is required to issue a show-cause notice to the account holder before making a decision, and the Review Committee must pass a reasoned order on any representation made by the borrower. The judgment emphasized the importance of providing reasons in the Review Committee's decision and ensuring that due process is followed at each stage of the proceedings. Ultimately, the Court quashed the challenge limited to the Review Committee's decision, as the petitioners did not challenge the Identification Committee's decision. The Bank was directed to restart the process under the Master Circular from the stage of the Identification Committee's decision. The two writ petitions were disposed of with no order as to costs.
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