Guarantors classified as wilful defaulters despite company's absolution. Review Committee decision upheld.

The court held that the petitioners, as guarantors, could be classified as wilful defaulters even after the company was absolved of its liability. The Review Committee's decision was found to be reasoned and based on substantial evidence of fund diversion. The suppression of material facts by the petitioners further justified the dismissal of the writ petition. The court dismissed the writ petition without any order as to costs.

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Issues Involved:
1. Classification of petitioners as wilful defaulters.
2. Validity of the Wilful Defaulters Review Committee's decision.
3. Impact of corporate insolvency resolution on personal guarantees by directors.
4. Alleged suppression of material facts by the petitioners.

Detailed Analysis:

1. Classification of Petitioners as Wilful Defaulters:
The petitioners challenged their classification as wilful defaulters by the Wilful Defaulters Review Committee, arguing that the identification of wilful default should consider the borrowers' track records and not isolated incidents. They contended that wilful default must be intentional, deliberate, and calculated. The petitioners argued that the company, being absolved of wilful default upon approval of the resolution plan, should extend the same absolution to them as promoters/directors.

2. Validity of the Wilful Defaulters Review Committee's Decision:
The petitioners claimed that the Review Committee's order was unreasoned and ignored their representations. The respondents countered that the petitioners, being guarantors, were liable despite the company's absolution. The Review Committee found that the petitioners had routed substantial transactions through non-TRA accounts, constituting a diversion of funds and violation of CDR terms, thus fitting the criteria of wilful default under the Master Circular.

3. Impact of Corporate Insolvency Resolution on Personal Guarantees by Directors:
The court noted that while the company might be absolved of its liability through the corporate resolution process, the directors who provided personal guarantees remain liable. The resolution plan approved by the National Company Law Tribunal explicitly stated that existing guarantees by the erstwhile promoters would continue to be in full force. The court cited previous judgments to affirm that the discharge of the corporate debtor does not absolve the surety of liability.

4. Alleged Suppression of Material Facts by the Petitioners:
The respondents argued that the petitioners suppressed material facts by not disclosing the pending proceedings before the Debts Recovery Tribunal. The court agreed, stating that such suppression warranted dismissal of the writ petition. The court referenced the Supreme Court's judgment in Prestige Lights Ltd. vs. State Bank of India, emphasizing that suppression of material facts is grounds for dismissal.

Conclusion:
The court held that the petitioners, as guarantors, could be classified as wilful defaulters even after the company was absolved of its liability. The Review Committee's decision was found to be reasoned and based on substantial evidence of fund diversion. The suppression of material facts by the petitioners further justified the dismissal of the writ petition. The court dismissed the writ petition without any order as to costs.

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