Wilful defaulter declaration upheld where company default, fund diversion, and promoters' roles brought them within the RBI circular.

The RBI Master Circular was applied as a binding framework for identifying wilful default, and it was read to extend to promoters and directors where the company's default and diversion of funds were established. On the admitted facts of repayment default, diversion of funds, and the appellants' roles as directors and promoters, the declaration of wilful defaulter status was upheld. The review committee was held to have acted within its remit by independently examining the matter, granting a personal hearing, and recording reasons. The objections on enlargement of the show-cause notice and breach of natural justice were rejected because the material facts were admitted and hearing was afforded.

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Issues: Whether the appellants could be validly declared wilful defaulters under the Reserve Bank of India Master Circular, and whether the review committee exceeded its jurisdiction or violated natural justice in affirming that declaration.

Analysis: The circular was treated as binding for identifying wilful default, and its scheme was read as extending to promoters and directors where the company's default and diversion of funds were established. The admitted diversion of funds, the company's default in repayment, and the appellants' role as directors and promoters at the relevant time were held sufficient to bring them within the ambit of the circular. The review committee was found to have acted within its remit in independently considering the matter, granting personal hearing, and recording reasons. The contention that the committee widened the scope of the show-cause notice was rejected, as was the plea of violation of natural justice, since hearing had been afforded and the material facts were admitted.

Conclusion: The declaration of the appellants as wilful defaulters was upheld and no jurisdictional or procedural infirmity was found.

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