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Issues: (i) whether the writ petition was maintainable at the instance of the petitioners in the facts of the case; (ii) whether Clause 3(b) of the RBI Master Circular dated July 1, 2015 could be invoked to classify persons who were not promoters or whole-time directors, including independent directors and corporate guarantors, as wilful defaulters; (iii) whether non-supply of the forensic report and non-service of the Identification Committee order, coupled with the Review Committee's absence of independent application of mind, vitiated the wilful defaulter proceedings.
Issue (i): whether the writ petition was maintainable at the instance of the petitioners in the facts of the case.
Analysis: The company was under corporate insolvency resolution process, making it unable to approach the court itself. The show-cause notice and the impugned orders were directed against the petitioners personally. In those circumstances, the petitioners had a direct grievance and could maintain the challenge without the company being separately impleaded.
Conclusion: The challenge at the instance of the petitioners was maintainable.
Issue (ii): whether Clause 3(b) of the RBI Master Circular dated July 1, 2015 could be invoked to classify persons who were not promoters or whole-time directors, including independent directors and corporate guarantors, as wilful defaulters.
Analysis: The mechanism under Clause 3(b) was treated as a restricted and penal provision, requiring strict construction. It was intended to operate against the concerned borrower and promoters or whole-time directors. The record disclosed no allegation against the corporate guarantors, and the other petitioners were neither promoters nor whole-time directors. On that footing, the show-cause notice itself was not maintainable against those petitioners, and the ensuing orders stood vitiated insofar as they were concerned.
Conclusion: The wilful defaulter proceedings were unsustainable against the petitioners other than petitioner nos. 1 and 2.
Issue (iii): whether non-supply of the forensic report and non-service of the Identification Committee order, coupled with the Review Committee's absence of independent application of mind, vitiated the wilful defaulter proceedings.
Analysis: The forensic report formed the foundation of the proceedings, yet it was withheld from the petitioners at the relevant stage. The Identification Committee order was also not served as required, and the petitioners were effectively denied a meaningful opportunity to respond before the first forum. The Review Committee's order was found to be a mere reiteration of the earlier view, without independent consideration. These defects amounted to a breach of natural justice and of the procedure contemplated by the Master Circular.
Conclusion: The proceedings were vitiated by violation of natural justice and non-compliance with the governing procedure.
Final Conclusion: The writ petition succeeded, the wilful defaulter declarations were set aside, and the respondents were left free to initiate fresh proceedings only in accordance with the prescribed procedure and after supplying the relevant materials.
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