2019 (5) TMI 861 - HC - Indian Laws

Inclusion of names in the list of the Reserve Bank of India s Credit Information Companies list of Wilful Defaulter - Conversion of security for the cash credit facility by illegally clubbing the two accounts - debt was classified as non-performing assets (NPA) - HELD THAT - The petitioner company has been given notice well in advance to appear in the hearing to explain why the petitioner company should not be enlisted as wilful defaulter - complying all the formalities the petitioner company was duly furnished with all documents. In spite of that the petitioner company repeatedly failed, neglected and avoided to appear in the hearing on some pretext or other. The Court also cannot shut its eyes on the argument as demonstrated by Mr. Bhattacharya (appearing at Page 222 224 of the writ petition) that ample opportunity was given to the petitioner company to appear before the hearing. But unfortunately the petitioner company failed , neglected and avoided to appear before the hearing - The Court also finds that talk of settlement was going on between the petitioner company and the respondent bank but the petitioner company failed to comply with the terms of settlement. Therefore, settlement also failed. This writ petition is a pre-mature one. Accordingly this writ petition does not deserve any interference by this Hon ble Court - the present writ petition is dismissed without any order as to costs.

Issues Involved:
1. Justification of the respondent bank in issuing the impugned notice to initiate proceedings to declare the petitioner company as a wilful defaulter without providing an opportunity for a reasonable hearing after furnishing the report of the identification committee.
2. Whether the impugned notices were issued contrary to the provisions of the Master Circular under Section 35(A) of the Banking Regulation Act.

Detailed Analysis:

Issue 1: Justification of the Respondent Bank in Issuing the Impugned Notice

The petitioners argued that the respondent bank issued notices dated 19th December 2014, 4th June 2016, 20th June 2016, and 5th July 2016 without following the existing rules, and without giving the petitioners a reasonable opportunity to be heard. The petitioners cited the Master Circular on Wilful Defaulters, which mandates a transparent mechanism for identifying wilful defaulters, including the examination of evidence by a committee and issuing a show-cause notice to the borrower and the promoter/whole-time director. The petitioners contended that the respondent bank did not form any committee before issuing the impugned notice dated 4th June 2016 and that the earlier notice dated 19th December 2014 was issued by a different committee. The petitioners also argued that the respondent bank did not furnish the necessary documents before issuing the impugned notices.

In response, the respondent bank argued that the petitioners were wilful defaulters and that the notices were issued after strictly following the guidelines in the Master Circular. The respondent bank contended that the petitioners failed to appear for the hearing despite being given ample opportunities. The respondent bank also highlighted that the petitioners were supplied with all the necessary documents before the hearing.

The court found that the petitioner company was given notice well in advance to appear in the hearing and explain why it should not be enlisted as a wilful defaulter. The court also found that the petitioner company was duly furnished with all documents, but it repeatedly failed, neglected, and avoided appearing in the hearing. The court concluded that the petitioners were given ample opportunity to appear before the hearing, but they chose not to appear.

Issue 2: Issuance of Impugned Notices Contrary to the Master Circular

The petitioners argued that the impugned notices were issued contrary to the provisions of the Master Circular under Section 35(A) of the Banking Regulation Act. They cited several cases to support their contention that the respondent bank did not follow the rules and did not provide a reasonable opportunity for the petitioners to explain their case.

The respondent bank argued that the notices were issued duly following the existing rules and that the petitioners were duly supplied with all documents well before the date of the hearing. The respondent bank also contended that the petitioner company defaulted on paying ?81,92,37,908 crores and filed writ petitions to avoid such payments.

The court reviewed the cases cited by the petitioners and found that they did not apply to the present case. In the case of Gaurav Dalmia, the court directed that all documents should be furnished to the petitioner before conducting the hearing, which was complied with in the present case. In the case of Maheshwary Ispat Ltd, the borrower was not given a reasonable opportunity to explain his case, whereas the petitioners in the present case were repeatedly directed to appear before the hearing but chose not to appear. In the case of the State of Punjab, no reason was assigned in the impugned order, but in the present case, the petitioners were repeatedly directed to appear before the hearing and explain their case.

Decision with Reasons

The court concluded that the writ petition was premature as the petitioner company was given ample opportunity to appear before the hearing and explain its case, but it failed, neglected, and avoided attending the hearing. The court dismissed the writ petition without any order as to costs but allowed the petitioner company to attend the hearing on any date fixed in the future by the respondent bank.

Conclusion

The writ petition was dismissed as premature, with the court finding that the petitioner company was given ample opportunity to appear before the hearing and explain its case, but it failed to do so. The dismissal does not preclude the petitioner company from attending any future hearing fixed by the respondent bank.

← Previous Next →