Natural justice in wilful defaulter proceedings requires disclosure of the initial decision and materials before classification.

Under the Master Circular on Wilful Defaulters dated 1 July 2015, the Identification Committee's initial decision had to be communicated to the borrowers so they could know the materials and reasons relied on and make an effective representation. A show-cause notice that omitted the full initial decision and the supporting materials denied a meaningful opportunity to contest the proposed classification. The Calcutta HC held that principles of natural justice apply to wilful defaulter proceedings under the circular, and non-communication of the first-stage decision amounted to a breach of those principles. The Bank's action could not be sustained and all steps taken against the petitioners were quashed.

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Issues: Whether the Bank's action classifying the petitioners as wilful defaulters under the Master Circular on Wilful Defaulters dated 1 July 2015 was vitiated for non-communication of the Identification Committee's initial decision and consequent breach of natural justice.

Analysis: The decision of the Identification Committee at the first stage had to be communicated to the petitioners so that they could know the materials placed before the Committee and the reasons for its view. The show-cause notice issued to the petitioners did not contain the Committee's decision in its entirety, nor did it disclose the materials considered by the Committee. Without access to that material, the petitioners were denied an effective opportunity to contest the proposed classification. Principles of natural justice apply to proceedings under the Master Circular on Wilful Defaulters dated 1 July 2015, and the absence of communication of the initial decision amounted to a breach of those principles.

Conclusion: The Bank's action under the Master Circular on Wilful Defaulters dated 1 July 2015 could not be sustained and all steps taken against the petitioners were quashed.

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