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of <h1>Dismissed writ challenging willful defaulter status under RBI Circular. Emphasizes proper procedure.</h1> <h3>Kaustuv Ray Versus IDBI Bank and others</h3> Kaustuv Ray Versus IDBI Bank and others - TMI Issues:Challenge to notice declaring petitioner as willful defaulter under RBI Master Circular.Analysis:The petitioner challenged a notice dated June 16, 2021, which sought to declare them as a willful defaulter under the RBI Master Circular. The petitioner argued that the notice was in the form of a demand notice, not a proper show cause notice as required by the Circular. It was contended that the notice did not involve an independent examination by the Willful Defaulter Committee, as it was based on a Transaction Audit Report (TAR) related to a Corporate Insolvency Resolution Proceeding under the Insolvency and Bankruptcy Code, 2016. The petitioner highlighted discrepancies between the Circular and the TAR to support their contention.The petitioner further argued that the respondent bank introduced additional reasons for the notice in their affidavit-in-opposition, which were not disclosed in the original notice. The TAR contained a disclaimer stating its limitations and that it should not be used as the sole basis for any action. The petitioner emphasized that they were not provided with crucial documents like the CBI charge-sheet, TAR Report, and balance sheet during the relevant period.In response, the court noted that the petitioner's challenge was premature as it was at the show-cause stage, and the petitioner had the option to approach the Willful Defaulter Committee with a representation. The court emphasized the need for a proper procedure to be followed, including a review by the Review Committee, before a final decision on declaring someone a willful defaulter is made. The court cited relevant judgments to support this procedural requirement.The court also addressed the issue of disclosure of documents to the petitioner, stating that although the documents were not initially provided, they were eventually disclosed during the writ petition, allowing the petitioner to make a complete representation. The court clarified that the TAR was only a part of the evidence considered by the committee, and the show cause notice was deemed sufficient as per the RBI Master Circular.Ultimately, the court dismissed the writ petition, granting the petitioner the liberty to present their representation to the Willful Defaulter Committee within a specified period. The court highlighted the importance of following the prescribed procedure and giving the petitioner the opportunity to respond adequately to the allegations before any final decision is made.
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