Reasoned decision-making for wilful defaulter classification must be fair, independent and supported by meaningful consideration of defence.

A Grievance Redressal Committee considering a representation against proposed wilful defaulter classification must give a reasoned, fair and independent decision under the RBI master circular. Because such classification has serious civil and commercial consequences, the committee must apply its mind to the borrower's defence and any jurisdictional objection, record meaningful reasons, and communicate those reasons before adverse action is taken. A terse order, unsupported by effective consideration of the representation and coupled with post-hearing consultation with a bank officer, fails this standard and is invalid. The affected party is entitled to a fresh hearing and a reasoned decision in accordance with the circular.

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Issues: Whether the Grievance Redressal Committee's rejection of the representation against proposed classification as wilful defaulters was vitiated for want of adequate reasons and fair consideration under the RBI master circular.

Analysis: Clause 3 of the RBI master circular required the preliminary decision to be supported by reasons and evidence, followed by a representation to the Grievance Redressal Committee, which had to consider the borrower's defence and record a reasoned decision. Since a finding of wilful default carries grave civil and commercial consequences, the decision-making process had to be fair, transparent, and informed by reasons. The committee's terse decision, even read with the minutes, did not disclose meaningful application of mind to the petitioners' defence or to the jurisdictional objection raised against application of the circular. The committee also acted improperly in consulting an officer of the bank after hearing the petitioners, which was inconsistent with its required independent adjudicatory role. The reasons were not promptly communicated before adverse action was taken, further undermining fairness.

Conclusion: The committee's decision was invalid and liable to be set aside; the petitioners were entitled to a fresh hearing and a reasoned decision in accordance with the master circular.

Ratio Decidendi: Where a statutory or regulatory process has serious adverse consequences and requires a representation to be decided by an independent committee, the decision must be reasoned, reflect application of mind to the defence and jurisdictional objections, and be communicated before it is acted upon.

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