9911796707
TMI Blog2019 (5) TMI 1666X X X X Extracts X X X X X X X X Extracts X X X X ..... tself. It cannot delegate such function to any other person. The impugned show-cause notice has been issued by a person who is not a member of the Identification Committee. Therefore, the impugned show-cause notice is bad in law. In support of his contentions that, a show-cause notice under Clause 3(b) of the Master Circular on Wilful Defaulters is required to be issued by the Identification Committee alone, learned Senior Advocate appearing for the petitioners has relied upon the judgment and order dated February 5, 2019 passed in W.P. No. 1399 (W) of 2019 (Pawan Kumar Patodia & Ors. v. Union Bank of India & Ors.) in support of such contentions. He has relied upon Shackleton on the Law and Practice of Meetings, seventh edition and referred to the paragraph with the heading prescribed manner. He has submitted that, the notice of a meeting has to be given in the manner prescribed by the regulation. In the present case, the Master Circular on Wilful Defaulters requires the Identification Committee to issue the notice. Relying upon All India Reporter 1956 Supreme Court page 604 (Ravulu Subba Rao & Ors. v. Commr. of Income-tax, Madras) learned Senior Advocate appearing for the petitio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Gwalior Rayon Silk Mfg. (WVG.) Co. Ltd. v. The Asstt. Commissioner of Sales Tax & Ors.) learned Advocate appearing for the Bank has submitted that, delegation is not the complete handing over or transference of a power from one person or body of persons to another. In the present case, the Identification Committee did not abrogate its duties when it required the Deputy General Manager to issue the show-cause notice. He has relied upon 2014 Volume 16 Supreme Court Cases page 248 (Siddhartha Sarawgi v. Board of Trustees for the Port of Kolkata & Ors.) for the proposition that, the burden of performing the ancillary and clerical task need not be shouldered by the primary delegate. Ministerial acts can be delegated. Issuance of a show-cause notice is a ministerial act which is capable of being delegated. The Identification Committee cannot be faulted for having done so. Relying upon All India Reporter 1956 Supreme Court page 285 (Pradyat Kumar Bose v. The Hon'ble The Chief Justice of Calcutta High Court) learned Advocate appearing for the Bank has submitted that, a statutory functionary exercising administrative powers cannot be said to have delegated his functions merely by deput ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Identification Committee can ratify the issuance thereof. On the power of the Identification Committee to ratify the show-cause notice, learned Advocate appearing for the Bank has relied upon 2006 Volume 5 Supreme Court Cases page 96 (Maharashtra State Mining Corpn. v. Sunil) and 2015 Volume 1 Supreme Court Cases page 669(National Institute of Technology & Anr. v. Pannalal Choudhury & Anr.). Learned Advocate appearing for the Bank has submitted that, a person who is sought to be proceeded under the Master Circular for Wilful Defaulters, is not entitled to be represented by an Advocate before the Identification Committee. He has relied upon a Judgment and Order dated August 28, 2014 rendered in A.S.T. No. 320 of 2014 (Kingfisher Airlines Limited v. Union of India & Ors.) and an Order dated March 10, 2017 passed in W.P. No. 125 of 2017 (Allied Vyapar Pvt. Ltd. & Ors. v. State Bank of India & Ors.) in support of his contentions. Relying upon 2007 Volume 3 Calcutta High Court Notes page 178 (Pijush Kanti Chowdhury v. State of West Bengal & Ors.) learned Advocate appearing for the Bank has submitted that, even if there is an order of stay in a pending appeal, the same does not amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial act, and capable of being delegated. The question therefore of the Identification Committee ratifying such an action does not arise as, the Identification Committee is not capable of delegating its authority to issue a show- cause notice. Ratification will arise only when, a person is entitled in law, to delegate. He has submitted that, the impugned show-cause notice being bad in law should be quashed. All steps taken pursuant to such show-cause notice should also be quashed. However, in the event, the Court is pleased not to quash the show-cause notice, then, the petitioner be afforded the right to appoint an Advocate as an agent to represent the petitioner before the Identification Committee. Learned Senior Advocate appearing for the petitioner has relied upon 2013 Volume 4 WBLR (Cal.) 919 (Santanu Ghosh & Ors. v. The State of West Bengal) and submitted that, even if decision of the Grievance Redressal Committee is treated as an administrative order, it must be appreciated that the decision was rendered in a quasi judicial proceeding and that, the decision affects the rights of the petitioner. The petitioner is therefore entitled to appoint an agent to represent itself at th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or at the relevant time should be examined by a Committee headed by an Executive Director or equivalent and consisting of two other senior officers of the rank of GM / DGM. (b) If the Committee concludes that an event of wilful default has occurred, it shall issue a Show Cause Notice to the concerned borrower and the promoter / whole-time director and call for their submissions and after considering their submissions issue an order recording the fact of wilful default and the reasons for the same. An opportunity should be given to the borrower and the promoter / whole-time director for a personal hearing if the Committee feels such an opportunity is necessary. (c) The Order of the Committee should be reviewed by another Committee headed by the Chairman / Chairman & Managing Director or the Managing Director & Chief Executive Officer / CEOs and consisting, in addition, to two independent directors / non-executive directors of the bank and the Order shall become final only after it is confirmed by the said Review Committee. However, if the Identification Committee does not pass an Order declaring a borrower as a wilful defaulter, then the Review Committee need not be set up to re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e unit has defaulted in meeting its payment/repayment obligations to the lender even when it has the capacity to honour the said obligations. (b) The unit has defaulted in meeting its payment/repayment obligations to the lender and has not utilised the finance from the lender for the specific purposes for which finance was availed of but has diverted the funds for other purposes. (c) The unit has defaulted in meeting its payment/repayment obligations to the lender and has siphoned off the funds so that the funds have not been utilised for the specific purpose for which finance was availed of, nor are the funds available with the unit in the form of other assets. (d) The unit has defaulted in meeting its payment/repayment obligations to the lender and has also disposed off or removed the movable fixed assets or immovable property given by him or it for the purpose of securing a term loan without the knowledge of the bank/lender." Reserve Bank of India has issued the Master Circular on Wilful Defaulters dated July 1, 2015 exercising powers under the Banking Regulation Act, 1949. Sections 21 and 35A of the Act of 1949 makes the directions/guidelines issued by Reserve Bank of I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rections as it deems fit, and the banking companies or the banking company, as the case may be, shall be bound to comply with such directions. (2) The Reserve Bank may, on representation made to it or on its own motion, modify or cancel any directions issued under sub-section (1), and in so modifying or cancelling any direction may impose such conditions as it thinks fit, subject to which the modification or cancellation shall have effect." The Master Circular on Wilful Defaulters dated July 1, 2015 being issued in exercise of powers under the Act of 1949, such Master Circular, has statutory force. It is binding upon any legal entity carrying on banking business with the permission of RBI. The bank herein is bound by the Master Circular on Wilful Defaulters dated July 1, 2015. It has not been contended by the bank herein that, it is not bound by such Master Circular. The mechanism for identification of Wilful Defaulters as stipulated in the Master Circular on Wilful Defaulters dated July 1, 2015 requires a bank to have an Identification Committee consisting of the quantity and quality of personnel stipulated in the Master Circular. It also requires a Review Committee to r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wilful default or not. Wilful default is defined in the Master Circular on Wilful Defaulters dated July 1, 2015. Once, the Identification Committee finds that, there is an incidence of wilful default, then, it is required to hear the delinquent borrower. The hearing may be a personal hearing also, if, the Identification Committee feels that such a procedure of hearing is necessary. The Identification Committee is required to issue a notice to the borrower calling for submissions from the borrower on the issue of wilful default. The issue raised is whether, Identification Committee can have such notice to the borrower issued on its behalf by any other person or not. Issuance of a show-cause notice is a requirement under Clause 3(b). As Clause 3(b) of the Master Circular on Wilful Defaulters dated July 1, 2015 stands, the Identification Committee by itself can issue the show-cause notice. In the facts of the present case, the Identification Committee by itself did not issue the show- cause notice. It was issued by a Deputy General Manager. The Deputy General Manager can at best be the delegatee of the Identification Committee. It is not the Identification Committee nor a member ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he borrower to discharge, in full, his liabilities to the secured creditor within 60 days from the date of notice. It does not prescribe any designated authority of the secured creditor to take a decision as to whether such notice is required to be issued or not. Section 13(2) is dependent upon a default being made by the borrower and the account of the borrower being classified as a non-performing asset. Classification of non-performing assets is governed by the prudential norms issued by the Reserve Bank of India, from time to time. Section 13(2) of the Act of 2002 does not require a decision to be taken after affording the borrower an opportunity of hearing. Clause 3(b) of the Master Circular on Wilful Defaulters dated July 1, 2015 requires the Identification Committee to arrive at its finding after affording an opportunity of hearing to the borrower. The secured creditor is not discharging the same duties as that of Section 13(2) of the Act of 2002 when it is acting in terms of the Master Circular on Wilful Defaulters dated July 1, 2015. Under Section 13(2) of the Act of 2002, a secured creditor is trying to recover its dues from a borrower who is in default and has its account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndents, the Identification Committee has two options before it. One is that, the Identification Committee itself can issue the notice. There is no bar in the Master Circular on Wilful Defaulters dated July 1, 2015 in the Identification Committee doing so. The other option is that, the Identification Committee can minute its decision while it is at the first stage of deciding whether, the materials placed before it constitute wilful default under the Master Circular on Wilful Defaulters dated July 1, 2015 or not. Once the decision of the Identification Committee is minuted, then, the Identification Committee can delegate the function of communicating such a decision for the purpose of calling upon the borrower to make his submissions in terms of the Master Circular on Wilful Defaulters dated July 1, 2015. Whether the Identification Committee has the benefit of the second option, that is, power to delegate its function of issuing the show-cause notice, requires consideration. Gwalior Rayon Silk Mfg. (WVG.) Co. Ltd. (supra) has considered Section 8(2)(b) of the Central Sales Tax Act, 1956 in the perspective as to whether the same suffers from the vice of excessive delegation or not. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns, to another person or body of persons, with complete power of revocation or amendment remaining in the grantor or delegator. It is important to grasp the implications of this, for, much confusion of thought has unfortunately resulted from assuming that delegation involves or may involve, the complete abdication or abrogation of a power. This is precluded by the definition. Delegation often involves the granting of discretionary authority to another, but such authority is purely derivative. The ultimate power always remains in the delegator and is never renounced." 4. There is a subtle distinction between delegation of legislative powers and delegation of non- legislative/administrative powers. As far as delegation of power to legislate is concerned, the law is well settled: the said power cannot be sub-delegated. The legislature cannot delegate essential legislative functions which consist in the determination or choosing of the legislative policy and formally enacting that policy into a binding rule of conduct. Subordinate legislation which is generally in the realm of rules and regulations dealing with the procedure on implementation of plenary legislation is generally a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat: "13. The functions discharged by a High Court can be divided broadly into judicial and administrative functions. The judicial functions are to be discharged essentially by the Judges as per the Rules of the Court and cannot be delegated. However, administrative functions need not necessarily be discharged by the Judges by themselves, whether individually or collectively or in a group of two or more, and may be delegated or entrusted by authorization to subordinates unless there be some rule of law restraining such delegation or authorisation. Every High Court consists of some administrative and ministerial staff which is as much a part of the High Court as an institution and is meant to be entrusted with the responsibility of discharging administrative and ministerial functions. There can be "delegation" as also there can be "authorization" in favour of the Registry and the officials therein by empowering or entrusting them with authority or by permitting a few things to be done by them for and on behalf of the Court so as to aid the Judges in discharge of their judicial functioning. Authorization may take the form of formal conferral or sanction or may be by way of approval ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the name of the punishing authority. It can be issued with the authority of the punishing authority or with the consent or approval of the punishing authority. Once the punishing authority, authorises the issuance of the charge sheet or consents to its issuance or approves of the same, then, the charge sheet or the issuance cannot be faulted on the ground that the same was issued without authority. Brahm Datt Sharma & Anr. (supra) has considered a departmental enquiry. It has held that, Courts should be reluctant to interfere at the stage of a show-cause notice unless, it is shown to the Court that the show-cause notice was issued palpably without any authority of law. In the facts of that case, it has observed that, the authority issuing a show-cause notice is yet to take a final decision on the subject. At the show-cause stage, it is open to the authority to consider the matter in the light of the facts and submissions placed by the delinquent and take a final decision thereon. Interference by the Court before a final decision is taken has been held to be premature. Sunil (supra) has considered the power of a Board of Directors of a company incorporated under the provisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lt, it is to issue a show-cause notice to the concerned borrower and call for their submissions. After the submissions are received, the Identification Committee has considered the same. In the process of consideration of the submissions, if the Identification Committee finds it necessary to give a personal hearing to the borrower, it can do so. The Identification Committee is required to pass an order recording the fact of wilful default and the reasons for the same. All administrative functions cannot be delegated. Where law requires an identified administrative authority to decide on a particular issue or subject, such administrative authority cannot delegate its power to decide. The Master Circular on Wilful Defaulters dated July 1, 2015 prescribes and identifies the decision making authorities. It also prescribes the issues required to be decided by the identified decision making authorities. Issuance of the show-cause notice is an integral part of the decision making process in the issue prescribed to be decided by the stipulated decision making authority. In the scheme of the decision making process as prescribed under the subject Master Circular, in my view, the function o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the discussions above, the first issue is answered in the negative and against the bank. The Division Bench in Kingfisher Airlines Limited (supra) has considered the question whether, a noticee in a proceedings before the Grievance Redressal Committee formulated under the Master Circular on Wilful Defaulters dated July 1, 2013 is entitled to engage an advocate before the Grievance Redressal Committee of the bank or not. It has held that, the proceeding before the Grievance Redressal Committee constituted under the Master Circular dated July 1, 2013 is between a lender and a borrower. The Grievance Redressal Committee is not to decide any lis between the parties. It is not to adjudicate any dispute. It is not to enquire into any charge and record its finding. It is only to take a view on the noticee's representation against the proposal of the bank, based on the records of the bank related to the noticee's loan account, to classify a noticee as a wilful defaulter. It lays down that, the test as to whether, an advocate can be engaged or not, should be whether the refusal will defeat the purpose of the hearing or not. It has held that, refusing permission to engage advocate ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
