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TMI Blog2024 (2) TMI 1451X X X X Extracts X X X X X X X X Extracts X X X X ..... decision to declare an entity or person as Wilful Defaulter cannot be taken on the basis of isolated transactions/incidents. A similar obligation is cast on lender banks in Clause 2.5 of the Master Circular, which require the lender banks to put in place a transparent mechanism for the entire process so that the penal provisions are not misused and the scope of such discretionary powers are kept to the barest minimum. It is required to be ensured that solitary or isolated instances are not made the basis for imposing the penal action under the Master Circular. In the present case, the satisfaction to issue Show Cause Notice, does not appear to have been recorded in accordance with the requirements of the Master Circular. Keeping the object of the Master Circular in mind and the consequences that it entails, both civil and penal, the lender banks have an obligation to comply with the inbuilt safeguards in the Master Circular. Lest, the line between persons who commit mere default in repayment of loan obligations and those who commit Wilful Default in terms of the Master Circular, would get obliterated. Whether the Petitioner committed acts of Wilful Default? - Under the Master Circu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uences where mere cases of default would be categorised as acts of Wilful Default under the Master Circular. The Master Circular is not to be invoked in every case of default but only when the default is Wilful Default as construed under the scheme of the Master Circular. Identification of Wilful Default has to be made keeping in view the track record of the borrower and not on the basis of isolated transactions/incidents - In the Flash Report, it is noted that MBSL could service all its debts till 30.11.2011 and even repaid the principal sum of the term loans. The aforesaid position, which is accepted by the lender banks in their own document i.e., the FRS, does not show a consistent negative track record of MBSL. MBSL was seen as a global player in photovoltaic cells. It had presence in several countries. It had serviced its debt and largely repaid the principal dues. The Respondent Bank, under Clause 2.1.3 read with Clause 2.5 of the Master Circular, was obligated to reflect upon the entire track record of MBSL and then conclude whether there existed events of Wilful Default and not on the basis of isolated transactions/incidents. Consequences of admitting MBSL for CDR under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder the Master Circular, are unsustainable and the impugned order is accordingly, quashed and set aside. - Mr. Justice Purushaindra Kumar Kaurav For the Petitioner : Mr. Dayan Krishnan, Senior Advocate with Mr. Vaibhav Mishra, Mr. Karan Batura, Mr. Ekansh Mishra and Mr. Jayant Chawla, Advocates For the Respondent : Mr. Chinmoy Pradip Sharma, Senior Advocate alongwith Mr. Kush Sharma, Standing Counsel and Mr. Nishchaya Nigam, Advocate. JUDGMENT 1. By way of this Writ Petition filed under Article 226 of the Constitution of India, the Petitioner has challenged the impugned order dated 23.3.2023 passed by the Review Committee of the Respondent, Bank of Baroda ( Respondent Bank ). By the said impugned order, the Review Committee of the Respondent Bank confirmed the order dated 19.8.2022 passed by the Identification Committee, declaring the Petitioner as a Wilful Defaulter under the Master Circular on Wilful Defaulters, 2015 ( Master Circular ), issued by the Reserve Bank of India ( RBI ). Facts of the case 2. It is stated that the Petitioner is the Chairman of Hindustan Power Projects Pvt. Ltd., which runs a 1200 mega-watt power plant and supplies electricity to three States namely, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndustry, which included USD 43 billion in subsidies. 10. It is also submitted that, armed with substantial subsidies, the Chinese companies started dumping solar cells and modules across the globe, including in India, at significantly lower prices. This led to bankruptcies in companies in almost all jurisdictions involved in manufacturing of solar cells. The USA, in order to protect its domestic industry, imposed a 70% anti-dumping duty on Chinese companies. 11. It is stated that consequently, the Directorate General of Anti-Dumping and Allied Duties of India had to also make recommendation for imposition of anti-dumping duty of Chinese solar cells and modules. However, the Government of India, did not act on the said recommendation, plausibly to promote energy in India at cheaper rates. 12. It is the case of the petitioner that in 2008, the Petitioner started to have disagreements with his father over the strategies to run the business. As a result, the Petitioner started to dissociate with the business of MBSL. 13. It is further submitted that in 2010, pursuant to a family arrangement, the Petitioner transferred his entire shareholding in MBSL to his father and completely dissoci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... package, the lender banks decided to call for a Technical Viability Study of MBSL from Feedback Infra; Economic Viability Assessment from PNB Investments Services Ltd. and Stock Audit from M/s Mehrotra and Mehrotra, Chartered Accountants. 19. MBSL had written a letter dated 4.4.2012 to the CDR-EG stating that the Flash Report of MBSL had incorrectly mentioned the Petitioner as Director of MBSL. It was stated that the Petitioner had already exited MBSL and hence, any decision by the CDR-EG about CDR may be taken on the assumption that the Petitioner was not part of MBSL. The aforesaid assertion was reiterated by MBSL to the CDR-EG on 16.7.2012. 20. On 20.7.2012, a Joint Lenders Meet ( JLM ) was held to discuss the final CDR package of MBSL. The lender banks discussed multiple aspects of restructuring and agreed on various aspects. 21. On 10.10.2012, another JLM took place. The JLM took into consideration the Technical Viability Study dated September, 2012 of MBSL from Feedback Infra; Economic Viability Assessment from PNB Investments Services Ltd. and Stock Audit Report dated 29.8.2012 from M/s Mehrotra and Mehrotra, Chartered Accountants of MBSL. The representative of Feedback Inf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In the meeting held on 27.5.2014, the lender banks agreed to reduce the collateral security of Rs. 33 Crores to Rs. 25.53 Crores in lieu of the Petitioner s personal guarantee. Accordingly, the Petitioner did not furnish his personal guarantee for the CDR package nor did he participate in any of the deliberations for the approval of the CDR package. 29. However, the CDR-Cell, on 30.11.2016, decided to exit the lender banks from the CDR package on account of its failure. 30. On an application filed by one of the financial creditors under Section 7 of the Insolvency and Bankruptcy Code, 2016 ( IBC ), the NCLT vide order dated 14.11.2017, appointed an Interim Resolution Professional. 31. On 1.3.2019, one Haribhakti Co. LLP, Chartered Accountants, submitted their Forensic Audit Report to the Resolution Professional of MBSL. 32. On 13.3.2020, the Respondent Bank issued a Show Cause Notice to the Petitioner under the Master Circular alleging that it was proposed to classify him as Wilful Defaulter under the Master Circular as MBSL defaulted to meet its loan repayment obligations. It was alleged that MBSL has diverted funds on the basis of four allegations levelled in the said Show Cause ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... declared the Petitioner as Wilful Defaulter under the Master Circular. This Court, vide its order dated 8.9.2022, disposed of the said Writ Petition directing the Respondent Bank to send an intimation for deleting the Petitioner s name from the defaulters list. This Court gave liberty to make a representation before the Review Committee of the Respondent Bank against the order dated 19.8.2022 passed by the Identification Committee. 44. In the order dated 19.8.2022, the Identification Committee dropped allegation Nos. 1 and 2 against the Petitioner. However, the Identification Committee held that allegation Nos. 3 and 4 are acts of Wilful Default. 45. On 22.9.2022, the Petitioner filed a representation before the Review Committee of the Respondent Bank against the order dated 19.8.2022 passed by the Identification Committee. 46. The Review Committee of the Respondent Bank, however, rejected the said representation and by the impugned order dated 23.3.2023, confirmed the order dated 19.8.2022 passed by the Identification Committee, thereby confirming its declaration of the Petitioner as Wilful Defaulter. The Review Committee also confirmed allegation Nos. 3 and 4 as acts of Wilful D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall be deemed to be occurred if the unit has defaulted in meeting loan repayment obligations; has siphoned off the funds and the funds are not utilized for the specific purpose for which the loan was availed. 51. The last part of Clause 2.1.3 also mandates that the identification of wilful default should be made keeping in view of track record of the borrower and not on the basis of isolated transactions/ incidents. It specifically mandates that a default in order to be categorized as wilful must be intentional, deliberate and calculated . Clause 2.1.3(b) and (c), which have been invoked in the present case, reads as under: 2.1.3 Wilful Default: A wilful default would be deemed to have occurred if any of the following events is noted: (a) The 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 / repayme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a particular instance amounts to siphoning of funds would have to be a judgement of the lenders based on objective facts and circumstances of the case. 54. The definition of diversion of funds and siphoning of funds , as aforesaid, also makes it explicitly clear that the event of diversion of funds or siphoning of funds can take place only when the borrowed funds are deployed or used, for any purpose, other than for which the loan was sanctioned. The Master Circular further places an obligation on the bank to make the judgment about diversion of funds or siphoning of funds based on objective facts and circumstances of the case. 55. Clause 2.5 of the Master Circular provides for initiation of penal measures against the persons or entities declared as wilful defaulter under Clause 2.1.3 of the Master Circular, which includes non-grant of additional loan facility by any bank or financial institution in the future; debarring them from floating new venture for a period of five years from the date of removal of name as wilful defaulter; initiation of criminal proceedings; change of management of borrower unit; non-induction of the person in the Board of the company etc. The last part of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al provisions are not misused and the scope of such discretionary powers are kept to the barest minimum. It should also be ensured that a solitary or isolated instance is not made the basis for imposing the penal action. 56. Clause 2.9 provides that the RBI under the Credit Information Companies (Regulations) Act, 2015 has granted certificate to four Credit Information Companies. The lender banks should submit a list of wilful defaulters to such Credit Information Companies. This would make the list of wilful defaulters available to banks and financial institutions on real time basis and dissuade them from grant of credit facility to such persons and entities. Clause 2.9 reads as under: 2.9 Reporting to RBI / Credit Information Companies (a) Banks/FIs should submit the list of suit-filed accounts of wilful defaulters of Rs. 25 lakh and above as at end-March, June, September and December every year to a credit information company which has obtained certificate of registration from RBI in terms of Section 5 of the Credit Information Companies (Regulation) Act, 2005 and of which it is a member. Reserve Bank of India has, in exercise of the powers conferred by the Act and the Rules and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cular provides the mechanism for identifying a wilful defaulter. The said provision provides that the evidence of wilful default shall be examined by a Committee headed by Executive Director or equivalent and consisting of two other senior officers of the rank of GM/DGM. If the said Committee concluded that an event of wilful default has occurred, it shall issue a show cause notice to the concerned unit or person calling for his response. After consideration of the response, a final order recording the event of wilful default, or otherwise, may be issued alongwith the reasons for the same. Wherever the Committee considers necessary, an opportunity of personal hearing should also be granted. This Committee is called as the Identification Committee. 58. The order of the Identification Committee shall be reviewed by another Committee headed by the Chairman/MD/CEO and two other independent/non-Executive Directors of the bank. The order declaring a person as wilful defaulter shall become final only after it is confirmed by this Review Committee. The said clause also provides that under Section 2(60) of the Companies Act, 2013, an officer who is in default to mean only whole time directo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tes of the Board or a Committee of the Board and has not recorded his objection to the same in the Minutes, or, II. the wilful default had taken place with his consent or connivance. A similar process as detailed in sub paras (a) to (c) above should be followed when identifying a nonpromoter/non-whole time director as a wilful defaulter. 59. Clause 4.2(iii) also provides for initiation of criminal proceedings against declared wilful defaulters, wherever necessary. 51. In terms of paragraph nos.60 to 64, this Court has made a reference to the consequences of a person or entity being declared as a Wilful Defaulter and held that the said declaration also affects the right to reputation of a person, which is also a fundamental right flowing from Article 21 of the Constitution. The concluding paragraph of the said discussion reads as under:- 64. As held by the Hon ble Supreme Court, the declaration of a person as wilful defaulter and barring him from credit facility in the future have civil and penal consequences, which also have the effect of adversely affecting his reputation. Thus, the declaration of a person as wilful defaulter, apart from adversely affecting the fundamental rights ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h accentuates the discussion on scope of judicial review in administrative action, reads as under:- 70. Before this Court delves deeper into the facts of the present case, it is also important to discuss the scope of judicial review in administrative action. The Hon ble Supreme Court in the case of Rajesh Agarwal (supra) has held that the act of declaring a person as wilful defaulter or fraud is in the nature of administrative action. The scope of judicial review on administrative action is well defined. It is not necessary to discuss judicial decisions in detail except to note a recent decision of the Hon ble Supreme Court in Mohd. Mustafa (supra), wherein, it was reiterated that if the discretionary power has been exercised in disregard of relevant consideration, the Court would hold the action bad in law. If the relevant, germane and valid considerations are ignored or overlooked by an executive authority while taking a decision, the same would fail to withstand judicial scrutiny. The relevant observations are as under: - *** 54. The scheme of CDR, as discussed in paragraph nos.71 to 89, is reproduced as under:- 71. The RBI has framed the CDR Master Circular enabling the lender ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iew of the above, details of eligibility criteria to be followed in respect of cases of willful defaulters etc. are given in Annexure III. 73. Clause 6.3 specifically requires the Core Group of banks to ensure that cases involving frauds or diversion of funds with mala fide intent are not covered. The said clause further provides that the details of eligibility criteria to be followed in respect of cases of wilful defaulters etc. are given in Annexure III. 74. Annexure III, which relates to Cases of Wilful Defaulters: Eligibility Criteria, Financial Viability Parameters Procedural Aspects thereof makes reference to RBI s guidelines issued on 2.7.2012, which define wilful default as: (i) The unit has defaulted in meeting its payment/ repayment obligations to the lender even when it has the capacity to honour the said obligations. (ii) The unit has defaulted in meeting its payment/ repayment obligations to the lender and has not utilized the finance from the lender for the specific purposes for which finance was availed of but has diverted the funds for other purposes. (iii) The unit has defaulted in meeting its payment/ repayment obligations to the lender and has siphoned off the fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... features of the borrower-corporate and their promoters/sponsors, the borrower-corporate are categorized into four Classes for the purpose of stipulation of standard terms conditions under the CDR Mechanism. The classification is as under: Borrower Class A : Corporate affected by external factors pertaining economy and Industry. Borrower Class B : Corporate/promoters affected by external factors and also having weak resources, inadequate vision, and not having support of professional management. Borrower Class C : Over-ambitious promoters; and borrower-corporate which diverted funds to related/unrelated fields with/without lenders permission. Borrower Class D : Financially undisciplined borrower-corporate. 81. Clause 7.2 provides that: The classification of each borrower-corporate shall be decided at the meeting of the CDR Empowered Group (EG) whereat the Financial Restructuring Proposal is approved. The standard terms and conditions applicable to different classes of borrowers are set out in Annexure-IV. 82. As per Clause 7.3, Referring Institution should incorporate all applicable standard terms and conditions in the restructuring package, besides special conditions deemed necessa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt, vide order dated 28.11.2023, had directed the Respondent Bank to place on record the document which showed the satisfaction arrived at by the Respondent Bank to issue Show Cause Notice to the Petitioner. The Respondent Bank filed Minutes of Meeting dated 24.2.2020, wherein, the decision to issue Show Cause Notice to the Petitioner was taken. In a chart relating to MBSL, the Respondent Bank has referred to the four allegations in the Show Cause Notice and in the column of documentary evidence for the allegations, it is mentioned Forensic Audit Report of M/s Haribhakti Co. LLP. It is thus evident that the Respondent Bank has issued Show Cause Notice to the Petitioner only by referring to the observations made in the Forensic Audit Report. This Court is of the view that this approach of the Respondent Bank is not in conformity with the scheme of the Master Circular. 57. Under the Master Circular, to declare a person as a Wilful Defaulter, lender banks have to independently find that the Wilful Default is intentional, deliberate and calculated and the said conclusion must be based on objective facts and circumstances of the case . The Forensic Audit Report can act as a piece of co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. The Petitioner further contends that the investments made by MBSL in Helios Photovoltaic Ltd. were duly reflected in the financial statements and audited balance sheets of MBSL. The lender banks including the Respondent Bank, by virtue of the terms of loan approvals provided to MBSL since September 2007, always had access to the financial statements and audited balance sheets of MBSL and were fully aware of the investments. It is contended that the Respondent Bank had full access to inspect and review MBSL s books of accounts and in fact it did so, as otherwise loan facilities to MBSL would not have been renewed year after year in favour of MBSL. It is also contended that the Respondent Bank was a common lender in all of the group companies i.e., MBIL, MBSL and HPVL. 63. Reliance is placed on a letter sent vide email dated 6.10.2008, written by the Respondent Bank to MBSL, stating that in the balance sheet of MBSL, it is shown that the MBSL has made investment in Helios Photovoltaic Ltd. (earlier known as MBPV). The Respondent Bank sought the details of such investment from MBSL. MBSL through its email dated 7.10.2009, provided the said details of investment in Helios Photovolta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tained in terms of non-disposal undertaking executed with secured lenders of MBPV. Further, investment in MBPV is strategic investment, whereby MBPV supplies PV cells to MBSL in its assembly of modules. 68. After noting the investments made by MBSL in Helios Photovoltaic Ltd., the lender banks placed MBSL in Class-B borrower under the CDR Master Circular, which applies where a company is affected by external factors and not Class-C, which applies for diversion of funds. The lender banks, therefore, did not treat the investment in Helios Photovoltaic Ltd. as diversion of funds at any stage. On the contrary, the lender banks found the investment to be strategic and required MBSL to retain the said investment. 69. In this view of the matter, it is difficult to accept the Respondent Bank s argument that the investment in Helios Photovoltaic Ltd. amounts to diversion of funds. It is evident that the Respondent Bank was aware of the investments, found the same to be strategic and required MBSL to retain them. 70. Thus, after having complete knowledge of the investments and treating them to be strategic, which were required to be retained, the Respondent Bank, after eight years, cannot be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntrary to the lender banks own stand in the documents leading to the CDR package. In the letter dated 18.3.2013, which approved the restructuring package of MBSL, the lender banks required MBSL to retain the investment. In the FRS, the lender banks again noted that investment in the subsidiary was required to be retained and that the investment by MBSL in Helios Photovoltaic Ltd. was a strategic investment. Even in Clause 4.3.5 of MRA dated 28.3.2013, the lender banks, which included the Respondent Bank, restricted MBSL from selling its investments in HPVL. On one hand, the lender banks are requiring MBSL to retain the investment as a condition of CDR package, whereas, it is now sought to be contended that since MBSL did not bring back the investment, the same constitutes an act of Wilful Default. Such a stand cannot be countenanced. 75. The lender banks must follow the mandate of Clause 2.1.3 read with Clause 2.5 of the Master Circular and independently find the acts of Wilful Default which are intentional, deliberate and calculated and the said conclusion should be based on objective facts and circumstances of the case . Under the Master Circular, transferring funds in the subsid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t between HPVL and the Company. Secondly, he has drawn the attention of this Court to the conclusion drawn by the Forensic Audit report that the Forensic Auditor was unable to verify actual movement of goods against these purchase and sale transaction with M/s Helios Photo Voltaic Ltd. 79. Learned Senior Counsel for the Petitioner submits that the Forensic Audit Report does not specify the period of trading transactions between MBSL and M/s Helios Photo Voltaic Ltd. In the event, the said trading transactions refer to period post 16.11.2012 i.e., when the Petitioner ceased to hold any position in MBSL, then no fault can be attributed to the Petitioner. In the event, the said trading transactions were alleged to be prior to the exit, the same were duly reflected in the financial statements of MBSL and the Respondent Bank had access to the financial statements and balance sheets of MBSL, at all times. 80. Further, at the time of finalization of the CDR Scheme, the lender banks including the Respondent Bank had TEV Report of MBSL from Feedback Infra; Economic Viability Assessment from PNB Investments Services Ltd. and Stock Audit from M/s Mehrotra and Mehrotra, Chartered Accountants. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... VL. The Forensic Audit Report is, therefore, inconclusive and does not record any definite finding of diversion of funds. The Respondent Bank has merely quoted a part of the Forensic Audit Report and gave a finding of diversion of funds without any supporting material, which is inappropriate. 85. As held above, under the Master Circular, a lender bank has to record a finding of an act of Default to be Wilful if the same is intentional, deliberate and calculated on objective assessment of facts and circumstances. However, the said burden is not discharged by merely quoting the Forensic Audit Report, which itself has not drawn any conclusion of diversion of funds. 86. Learned counsel for the Respondent Bank has made huge emphasis on the point that when MBSL was about to default in its loan repayment obligations, the Petitioner exited the said company making an easy escape. This Court is unimpressed with the said argument. Resignation from the company is a legal right of every Director. In this case, the Petitioner resigned from MBSL and submitted Form-32 with the RoC. MBSL informed the lender banks also about the resignation of Petitioner from MBSL. When MBSL was about to default in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dit report allegedly authored by a particular concern. The said report, at best, is a piece of evidence in the liquidation proceeding and is in no manner conclusive proof of evidence of any illegality committed by any entity. In fact, it is common experience that each and every such forensic audit report contains several disclaimers, restricting the operation of the same to the proceeding in which they are filed, as well as confined to the impression of the authors thereof on the basis of the documents which are available to them. 22. Under no stretch of imagination can such a report be conclusive proof of the allegations against the petitioners. 89. This Court is inclined to agree with the aforesaid proposition of law. Even under the Indian Evidence Act, 1872, the opinion of an expert witness under Section 45 is not a conclusive proof. It is subject to cross examination and the opinion and conclusions of an expert are subject to challenge. In the present scheme of things, the Master Circular casts a specific obligation on the Respondent Bank to act independently and objectively under Clause 2.1.3 read with Clause 2.5, as discussed above. It would, therefore, be unsafe if lender ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s a subsidiary of MBIL and engaged in the manufacturing of photovoltaic cells. The company used the SEZ Unit in Greater Noida to design, manufacture, sell, export photovoltaic cells in the global market. It had a production capacity of 90 MW selective emitter crystalline cells, 50 MW crystalline modules and 40 MW Thin Films PV. The company began its commercial operations at an initial cost of Rs. 439.21 Crores. In 2011, the company consolidated and set up project for advanced high performance selective emitter high efficiency crystalline silicon cell with annual capacity of 90 MW. The cost of this project was Rs. 624.69 Crores. The company demonstrated strong EPC capabilities and quality manufacturing. It has commissioned more than 50 PV projects in India and Germany. The company has significant customer base in Europe, Asia, Pacific, Middle East and the US. 93. The FRS noted that 2011-12 onwards, the company s financial operations were adversely affected due to (a) global solar photovoltaic market was operating under stress due to huge supply addition from China; (b) China offering USD 43 billion subsidy to its domestic companies, which led to abnormal fall in the prices of solar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lenders on their own. 99. The classification has a direct bearing on eligibility as also the conditions to be imposed upon the borrower. The lower the category the more stringent the conditions to be imposed upon a borrower in accordance with paragraphs C and D of Annexure IV. Significantly, Before CDR Reference/Approval , Clause 3.3 of CDR Scheme expressly empowers banks to commission a Forensic Audit wherever necessary and specially in cases of diversion of funds . 100. The aforesaid provisions in the CDR scheme leads to the conclusion that the categorization of a borrower in one of the categories between A and D has to be based on an objective satisfaction. 101. This Court is of the view that it is incumbent upon banks who are dealing with public funds and discharging a public duty to make appropriate enquiries as to whether a borrower is in genuine financial difficulty or whether there exists events of fraud and malfeasance. If the lender banks find fraud or malfeasance, the CDR-EG must either refuse CDR completely or impose such additional onerous conditions as provided in the CDR Scheme itself. 102. In the present case, the lender banks were fully aware of all the transaction ..... X X X X Extracts X X X X X X X X Extracts X X X X
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