2020 (8) TMI 26 - HC - Indian Laws

Wilful defaulters or not - default in repayment of dues - grievance of the petitioners was that the respondent bank was not giving access to the underlying documents to the petitioners - Master Circular dated 01.07.2015 - HELD THAT - Procedure adopted by the respondent is wholly contrary to the mandate stated by the Supreme Court in the case of STATE BANK OF INDIA VERSUS M/S. JAH DEVELOPERS PVT. LTD. ORS. 2019 (5) TMI 862 - SUPREME COURT . Firstly, it is not a reasoned order. Secondly, the order of the First Committee was never communicated to the petitioners. The net result is that the petitioners never had an opportunity to make a representation against the order of the First Committee to the Review Committee. There is clear non-compliance of the directions of the Supreme Court as noted in the judgment of STATE BANK OF INDIA VERSUS M/S. JAH DEVELOPERS PVT. LTD. ORS. 2019 (5) TMI 862 - SUPREME COURT . Any consequential steps taken by the respondent declaring the petitioners as a wilful defaulter including putting their names on the net or communication to RBI would automatically stand withdrawn - Petition disposed off.

Summary

Issues:
1. Compliance with Master Circular on Wilful Defaulters dated 01.07.2015 and directions from the Supreme Court in a specific case.
2. Allegations of non-compliance with legal procedures in declaring petitioners as wilful defaulters.
3. Review of the impugned order dated 16.03.2020 and its legality.

Compliance with Master Circular and Supreme Court Directions:
The petitioners sought relief against being declared wilful defaulters by the respondent bank. The petitioners claimed that the bank did not provide access to underlying documents, hindering their ability to respond adequately. The petitioners argued that the bank failed to comply with the Master Circular on Wilful Defaulters dated 01.07.2015 and the Supreme Court's directions in a specific case. The respondent contended that they adhered to the legal requirements, citing compliance with the revised circular of 01.07.2015. The Supreme Court's judgment emphasized the importance of due process in declaring a borrower as a wilful defaulter, including the right to make representations at various stages of the process.

Allegations of Non-Compliance:
The petitioners alleged that despite receiving some documents, crucial details were withheld, impeding their ability to respond effectively. The respondent, however, claimed to have provided all necessary documents and complied with the court's order to furnish relevant information. The petitioners highlighted discrepancies in the information provided and the lack of a detailed explanation for declaring them as wilful defaulters. The court noted that the respondent's actions did not align with the prescribed procedures outlined in the Master Circular and the Supreme Court's directives, leading to a lack of opportunity for the petitioners to challenge the decision adequately.

Review of Impugned Order:
The court scrutinized the impugned order dated 16.03.2020, which declared the petitioners as wilful defaulters. The order, communicated by the DGM, lacked a reasoned explanation and failed to follow the required process as mandated by the Supreme Court. The court deemed the order illegal and non-est, emphasizing the necessity for a structured procedure in declaring wilful defaulters. Consequently, the court struck down the order and directed the respondent to provide the petitioners with a copy of the First Committee's decision. The petitioners were granted the opportunity to present a detailed representation to the Review Committee within 15 days of receiving the order, ensuring compliance with due process and legal principles.

In conclusion, the court found the respondent's actions to be in violation of established legal procedures and guidelines, leading to the annulment of the impugned order. The judgment emphasized the importance of procedural fairness and the right of individuals to challenge allegations of wilful default effectively.