9911796707
TMI Blog2019 (1) TMI 2045X X X X Extracts X X X X X X X X Extracts X X X X ..... e act of such diversion binds the appellants being entrepreneur/promoter who has a role in the decision making process of the company. In the instant case, the appellants were the directors of the company at the relevant point of time when the diversion of fund took place. In fact, they were also directors when the company committed default and was declared NPA. Measures under SARFAESI Act were also taken against the company when they were in control and management. The company has failed to establish that it did not have the capacity to honour the obligations. The appellants have also not been able to discharge by adducing documentary evidence or otherwise that they were not even remotely connected with the acts of default and diversion of funds made by the company - Pre-loan negotiations were made through the appellants. The banks definitely relied upon the credibility of the appellants at the time of sanctioning the loan. The acts of the appellants while in the decision making process of the company has shattered the confidence of the banks which they had at the time of disbursing the loan. The appellants were personally heard and their submissions were duly recorded. The divers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny proposed to refund Rs.38.49 crores after adjusting Rs.10.68 crores (excluding promoters contribution of Rs.5.42 crores from Rs.16.10 crores being the project cost to set up 33 KV transmission line) from Rs.49.17 crores drawn on account of CPP. It further appears that the accounts of the company were regular till around December, 2015. Thereafter, in spite repeated requests the loan availed by the said company remained unpaid which resulted in the Company s account to be declared Non-Performing Asset (NPA). Axis Bank, a member of the Consortium of Banks which granted the credit facilities to the said company by a letter dated 5th July, 2016 recalled the credit facilities and requested the said company and the guarantors to repay a sum of Rs. 1,14,59,55,830.39 being the outstanding amount as on 1st July, 2016. Subsequent thereto, the said Axis Bank issued a notice under Section 13(2) of the Securitization And Reconstruction of Financial Assets Enforcement of Security Interest Act, 2002 (hereinafter the SARFAESI Act ) demanding a total sum of 1,14 59,55,830.39 being the outstanding dues as on 3rd August, 2016 with interest applied up to 30th June, 2016. The said Axis Bank, thereaft ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re also declared as wilful defaulters along with the then directors of the said company. The said company as well as Gaurav Dalmia and Raghu Hari Dalmia were informed of having been declared as wilful defaulters by a letter dated 24th January, 2017. 9) Gaurav Dalmia and Raghu Hari Dalmia by a letter dated 4th February, 2017 caused to be written through their Advocate objected to have been declared as wilful defaulters principally on the following grounds and requested for withdrawal of the letter dated 24th January, 2017:- i) No statutory notice of show cause was given nor any appropriate opportunity of hearing, submission and personal hearing was availed before declaring them as wilful defaulter, though Reserve Bank of India mandates the same. 10) Pursuant thereto, Gaurav Dalmia and Raghu Hari Dalmia filed two separate writ petitions being W.P. No. 173 of 2017 and W.P. No. 174 of 2017 respectively challenging the decision of the identification committee to declare them as wilful defaulters. 11) By an order dated 6th April, 2017 both the writ petitions were disposed of by an order setting aside the order of the identification committee declaring Gaurav Dalmia and Raghu Hari Dalmia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ning reasons. Challenging the order of the review committee the said two writ petitions as aforesaid, were filed, which on being dismissed gave rise to the two appeals with which we are presently concerned. 17) Before us, the appellants contend that the Master Circular is in the nature of a statutory enactment. The provisions contained therein have a mandatory flavour and, as such, the review committee should have considered the case of the appellants strictly in accordance with the provisions contained therein. It was incumbent upon the review committee to consider the case of the appellants keeping in mind that, a solitary and isolated instance be not made the basis of imposing penal action particularly when such actions are very harsh and oppressive in nature. The appellants also contend that, keeping in mind that the penal provisions are not misused and the scope of the discretionary powers are kept to the bare minimum provisions were made in the Master Circular to probe into each case by considering the track record of the person before declaring him as a wilful defaulter. It is also the case of the appellants that considering their track record and the diversion of the fund b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led to meet the payments/repayments/obligations. On the contrary the said company while proposing to refund Rs.38.49 crores had specifically made it conditional by saying that refund will take place only after the company is able to generate money. The review committee by using the words the funds were diverted intentionally and deliberately and in a calculated manner has added flavours to the original allegation to bring the appellants within the ambit of the definition of wilful defaulter which the review committee could not have done since such words were missing in the show-cause as well as the order of the identification committee. That apart, there has been flagrant violation of mandatory provision of the Master Circular by holding the appellants as wilful defaulters for a single event of default when there is no allegation of failure to repay against the appellants as they neither availed any loan in their independent capacity nor did they give any guarantee to meet the obligations of the said company. The appellants have not even mortgaged their properties to secure the loan. 21) We have considered the Master Circular in details. It will appear from Clause 2.5 (a) wherein t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he review committee after the personal hearing that the appellants admitted to have been involved in the day to day affairs of the said company even after their resignation from the Board of Directors. The resignation of the appellants also amounted to breach of the condition of sanction which prevented the said company from changing its constitution. The track record of the appellant taint toward holding them wilful defaulter. The chain of events definitely goes against the appellants and their contention that a solitary or isolated incident should not form the basis of holding them as wilful defaulters. The Master Circular was essentially framed for monitoring the end use of the funds. If a company and its promoters/directors are allowed to divert funds which will amount to meddling with the end use of the funds, that will leave the Master Circular otiose. Moreover, the banks at the time of giving loan apart from considering the project report also took into consideration the credentials of the appellants being the promoters of the said company. Pre-loan negotiations were made through the appellants. The banks definitely relied upon the credibility of the appellants at the time o ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
