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TMI Blog2024 (10) TMI 1469X X X X Extracts X X X X X X X X Extracts X X X X ..... n the interests of justice." 2. Shorn of unnecessary details, the case of the petitioner is that he is the Chairman of Hindustan Power Group Private Limited, which operates 1200 MW [Megawatt] power plant and supplies electricity to three States viz., State of Uttar Pradesh, State of Madhya Pradesh and State of Haryana. It is stated that in order to run its business, the company was engaged in negotiations with SBI [State Bank of India] for availing certain loan facilities. To his shock, the petitioner discovered, through an email dated 22.02.2023 from the officers of the SBI, that his name appeared in the Central Fraud Registry [CFR] at the instance of the respondent/Bank of Baroda (hereinafter referred as the respondent-bank) with regard to the account of M/s. Moser Baer Solar Limited ["MBSL"]. The petitioner claims that the actions of the respondent-bank are in complete violation of principles of natural justice, and therefore, void ab initio. As regards the background leading to the aforesaid categorization, it is stated by the petitioner that his father had founded Moser Baer India Limited ["MBIL"] in the year 1983, which initially produced Time Recorder Units. Over time, MBIL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at respondent-bank, along with other lenders, including PNB [Punjab National Bank], insisted on obtaining his personal guarantee along with those of Mr. Deepak Puri and Mrs. Nita Puri. In response, MBSL issued a letter dated 30.03.2013 to all the banks, stating that the petitioner i.e. the Ratul Puri was no longer holding any executive position in the company and instead requested for submitting some other properties as collateral securities for the loans to be advanced. 5. To cut the long story short, the Flash Report of the MBSL for CDR was admitted on 24.05.2012, and the CDR-EG classified MBSL as Class-'B' Borrower i.e., "Corporate/promoters effected by external factors and also having weak resource, inadequate reasons and not having support of professional management". It is submitted that, by way of the Flash Report, the banks, including the respondent-bank, were put to express notice and knowledge of the affairs of the MBSL and also details of the capital infusions, reasons for losses and decline. Following the formal admission of the Flash Report on 24.05.2012, the CDR-EG directed a stock audit and TEV studies, resulting in a TEV report dated 27.09.2012 by a reputed and ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ffice to state that petitioner submits that he challenged the Notice dated 31.10.2020 for a Personal hearing, which was scheduled for 19.11.2020, by filing W.P.(C) 8729/2020, whereby the Court vide order dated 06.11.2020, issued certain directions regarding the manner in which the hearing should be accorded to the petitioner by the respondent-bank. The said directions are not being reproduced herein as they are not relevant. In a nutshell, the hearing continued on the said matter before the Identification Committee of the respondent-bank. During the COVID-19 pandemic, the petitioner discovered that his name appeared as a 'wilful defaulter' on the website of Trans Union CIBIL Ltd., which led to spate of correspondence with the respondent-bank, as well as CIBIL. As the petitioner's name was not removed, he filed W.P.(C) 12737/2022 and this Court vide order dated 08.09.2022 disposed of the aforesaid writ petition, directing the respondent-bank to sent an intimation to CIBIL for updating the said list by deleting the name of the petitioner from the list of Directors/suits filed accounts defaulter within a period of two weeks. In the said background, the petitioner refers to an email da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rental. d. The Lease rental income amounting to Rs. 142.69 Crores was booked by MBSL which lease rental relating to the utilities which were taken on finance lease from MB in 2010 and leased back as an operating lease to MBIL. The MBSL did not use the utilities taken on a finance lease from MBIL. It was immediately leased back as an operating lease to MBIL. e. On review of the agreement provided to the auditors, it was observed that 2 out of 9 agreements had expired before the review period. However, the expenses were booked against the expired agreement, which has impacted an amount of Rs.3.16 crores. f. That total supplier advance and loan were given by MBSL as of 31.03.2012 to the tune of Rs 25.60 Crores and as on 31.03.2015 to the tune of Rs 26.97 Crores. No adequate recovery steps have been taken against the doubtful advance and doubtful debts as before making provisions amounting to Rs. 26.24 Crores. The provisions for doubtful advance made during the audit period amounts to Rs. 18.12 Crores and provisions for doubtful debtor mode during the period amounts to Rs. 8.12 Crores. g. The Forensic Auditor observed that the material has been purchased from and sold to HPVL a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... counter-affidavit by the respondent-bank contains no indication that any SCN was issued to the petitioner proposing his classification or categorization as 'fraud', nor was he informed about the uploading of his name on the Central Fraud Registry of the RBI. There is no iota of an averment that any relevant documents, including the copy of the forensic audit report, were ever supplied to him. Evidently, no hearing was afforded to the petitioner, nor was he ever communicated of the decision of the respondent-bank dated 20.06.2019. 14. In the causa célébere Rajesh Aggarwal (supra), the Supreme Court was dealing with a matter where the petitioner had been classified or categorized as 'fraud' under the same 'Master Directions on Fraud' by the RBI and after examining a plethora of case laws on the subject, it was held that the principles of natural justice have to be read, while interpreting and enforcing 'the Master Directions on Fraud' by the RBI. It would be expedient to reproduce the relevant paragraphs in the Judgment by the Supreme Court on the subject in toto to understand the whole gamut of issues. It was held as under: "49. Clause 8.12 of the Master Directions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the infraction of their rights under Article 19(1)(g) of the Constitution. Since debarring disentitles a person or entity from exercising their rights and/or privileges, it is elementary that the principles of natural justice should be made applicable and the person against whom an action of debarment is sought should be given an opportunity of being heard. 56. Indeed, debarment is akin to blacklisting a borrower from availing credit. Black's Law Dictionary [Black's Law Dictionary, 5th Edn. (1979).] explains the term "blacklist", which has been defined in the following terms: "A list of persons marked out for special avoidance, antagonism, or enmity on the part of those who prepare the list or those among whom it is intended to circulate; as where a trades union "blacklists" workmen who refuse to conform to its rules, or where a list of insolvent or untrustworthy persons is published by a commercial agency or mercantile association." (emphasis supplied) Similarly, P. Ramanatha Aiyar's Law Lexicon [P. Ramanatha Aiyar, The Law Lexicon : The Encyclopaedic Law Dictionary (1997 Edn.).] defines the term "blacklist" as follows: "Blacklist is a list of persons or firms ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nstitutional finance under Clause 8.12.1 of the Master Directions on Frauds. Lastly, we may also refer to the following conclusions, which were drawn in Rajesh Aggarwal (supra): "98.1. No opportunity of being heard is required before an FIR is lodged and registered 98.2. Classification of an account as fraud not only results in reporting the crime to the investigating agencies, but also has other penal and civil consequences against the borrowers. 98.3. Debarring the borrowers from accessing institutional finance under Clause 8.12.1 of the Master Directions on Frauds results in serious civil consequences for the borrower. 98.4. Such a debarment under Clause 8.12.1 of the Master Directions on Frauds is akin to blacklisting the borrowers for being untrustworthy and unworthy of credit by banks. This Court has consistently held that an opportunity of hearing ought to be provided before a person is blacklisted. 98.5. The application of audi alteram partem cannot be impliedly excluded under the Master Directions on Frauds. In view of the time-frame contemplated under the Master Directions on Frauds as well as the nature of the procedure adopted, it is reasonably practicable for ..... X X X X Extracts X X X X X X X X Extracts X X X X
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