TaxTMI 
TaxTMI 
2015 (12) TMI 1381
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....to wilful defaulters for cautioning Banks / FIs so as to ensure that further bank finance is not made available to them. The said Circular inter alia provides for submission by Banks / Financial Institutions of data of wilful defaulters to RBI on a quarterly basis and preparation of a list of wilful defaulters by the RBI and communication thereof to the Securities Exchange Board of India (SEBI) and to Credit Information Bureau (India) Ltd. (CIBIL). The said Circular requires all the Scheduled Commercial Banks and All India Notified Financial Institutions to identify cases of wilful default and to constitute a committee of higher functionaries headed by the Executive Director and consisting of two General Managers / Deputy General Managers as decided by the Board of the concerned Bank / FI, to decide on the classification of the borrower as a wilful defaulter. The Circular also requires the Banks / FIs to i) advise the borrower about the proposal to classify him as wilful defaulter along with the reasons therefor; ii) give the borrower time of fifteen days for making representation against proposed decision; iii) constitute a Grievance Redressal Committee (GRC) headed by the Chairma....
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....ssarily imply that where the adjudicating authority is not legally trained, representation through a legal practitioner ought to be denied; (iii) that undisputedly an adverse decision by the GRC would be highly prejudicial to the interest of the respondents / writ petitioners and would have significant implications; (iv) that though the effort of the appellant Bank to expeditiously dispose of the matter is appreciable but the idea of preventing adequate representation to the affected parties for such disposal is unacceptable; (v) that the right to be represented by a Advocate is not an integral part of natural justice and it is not necessary that in all cases before domestic forums representation through a legal practitioner should be permitted; however the Courts have leaned towards allowing representation through legal practitioners to obviate any handicap that the person may feel in representing his case; (vi) that in cases where adverse decision would have serious civil and pecuniary consequences, denial of representation through a legal practitioner may in given facts be violative of natural justice; (vii) that indisputably the cons....
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....ding the judgment of the Division Bench of the Calcutta High Court, was filed by way of a wager. Reliance was placed by the counsel for the appellant PNB on the following judgments: (A) N. Kalindi Vs. M/s. Tata Locomotive and Engineering Co. Ltd. Jamshedpur AIR 1960 SC 914 laying down that a workman against whom an enquiry is held by the management has no right to be represented at such enquiry by a representative of his union, though the employer in his discretion may allow so; it was reasoned that if the enquiry is unfair, the workman can always in an industrial dispute challenge its validity (we may however notice that the said view was based on the general practice then prevalent of the person accused conducting his own case); (B) J.K. Aggarwal Vs. Haryana Seeds Development Corporation Ltd. (1991) 2 SCC 283, in the context again of departmental enquiry, holding that right of representation by a lawyer "may not" in all cases be held to be a part of natural justice except when a man‟s reputation or livelihood is at stake and that the discretion in this regard is to be exercised taking into consideration, whether there is likelihood of the combat being uneq....
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....ate, the bank did not commit any wrong (SLP(C) CC No.14755/2014 preferred thereagainst was disposed of vide order dated 2nd September, 2014 as infructuous, in view of the fact that the GRC of that bank had already passed the order declaring the appellant in that case as a wilful defaulter); 8. Per contra, the senior counsel for the respondents / writ petitioners, argued: (I) that no prejudice is caused to the appellant Bank from the impugned judgment, as the interest of the appellant Bank has been sufficiently protected by fixing a time bound schedule of hearing; (II) that the RBI should be a party, since the Master Circular of the RBI is being interpreted / construed (however we had pointed out to the senior counsel that the present appeal arises from a writ petition filed by the respondents / writ petitioners and it was for the respondents / writ petitioners to implead the RBI, as a party thereto and they cannot now oppose the appeal on this ground); (III) attention was invited to Clause 2.5(b) of the Master Circular of the RBI which provides that the Banks / FIs should also initiate criminal proceedings against wilful defaulters, whenever necessary ....
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.... proposing to declare them as wilful defaulters relied upon and referred to the investigative report of Ernst & Young LLP (EY) being an external agency; similarly assistance to the noticee of an external agency i.e. an Advocate should also be permitted. 9. We had during the hearing on 13th October, 2014 invited the attention of the counsels to Section 30 of the Advocates Act, 1961 which though earlier had not been notified and was thus not in operation, has been notified on 19th June, 2011 and is as under: "30. Right of advocates to practise-Subject to provisions of this Act, every advocate whose name is entered in the [State roll] shall be entitled as of right to practise throughout the territories to which this Act extends,- (i) in all courts including the Supreme Court; (ii) before any tribunal or person legally authorised to take evidence; and (iii) before any other authority or person before whom such advocate is by or under any law for the time being in force entitled to practise." and enquired whether the right of the Advocates to practise thereunder extended to before the GRC of the Bank. 10. The senior counsel for the respondents /....
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....cery 591; (g) Pannalal Binjraj Vs. Union of India AIR 1957 SC 397 para 31 to contend that since the Master Circular supra does not deal with the issue of representation by the Advocate at the hearing contemplated therein, the same cannot be presumed to be taking it away, and; (h) attention was invited to Section 35A of the Banking Regulation Act, 1949 empowering the RBI to give directions and it was contended that the Master Circular has been issued in the exercise of power thereunder and the said section also does not deal with the right of representation. 11. With reference to Section 30 of the Advocates Act, we had further enquired from the counsels, what is the definition of a Tribunal within the meaning of Clause (ii) thereof and whether the GRC of the Bank could be considered as a Tribunal. 12. The counsel for the appellant PNB in rejoinder contended that the GRC could not be construed as a Tribunal; a Tribunal entails judicial power and which is not conferred on the GRC. Attention in this regard was invited to paras 38 to 45 of Union of India Vs. Madras Bar Association (2010) 11 SCC 1. It was contended that the GRC is not legally authorized to receive....
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....f India MANU/MH/1768/2015, faced with a similar controversy, largely relying on the judgment of the High Court of Calcutta has also held that a proposed wilful defaulter who has been given an opportunity of hearing by the concerned Bank does not have a right to be represented by a lawyer before the GRC. However notwithstanding having held so, the High Court, to avoid further delay, permitted the petitioner in that case to be represented before the GRC by a lawyer. Though the State Bank of India carried the matter to the Supreme Court by way of SLP(C) Nos.26420-26421/2015 but the Supreme Court vide order dated 18th September, 2015 declined to interfere as the legal question had been decided in favour of the Bank and for the reason that the High Court while permitting the petitioner in that case to be represented by a lawyer had directed the hearing to be concluded in one day. The Supreme Court further clarified that its order will not constitute a precedent. 16. Thus as of now there is no pronouncement from the Supreme Court on the subject and the view of the Calcutta High Court followed by the Bombay High Court is that there is no right of representation through an advocate before ....
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....roposed to be so declared as a wilful defaulter of the intention to do so and to give an opportunity to represent against such proposal and a right of hearing before a GRC headed by Chairman and Managing Director of the Bank / FI. (D) As per the Master Circular the decision to classify the borrower as a wilful defaulter is to be entrusted to a committee of higher functionaries headed by Ex-Director and consisting of two General Managers / Deputy General Managers, as decided by the Board of Directors of Bank / FI and the decision to be based on objective facts and to be well documented and supported by requisite evidence and should clearly spell out the reasons for which the borrower is intended to be declared as a wilful defaulter. It is thereafter that the borrower is to be notified of the said decision, to be given an opportunity to represent thereagainst and if so desires, to be given a hearing before the GRC. A final declaration as wilful defaulter is to be made after a view is taken by the GRC on the representation of the borrower. (E) It would thus be seen that before the borrower is notified, a committee of high functionaries of Bank/FI has already collecte....
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....tends to non-funding transactions with the Banks also and the question, whether the borrower besides having defaulted in repayment obligation, has also not utilised the fund for the purpose availed or has diverted or siphoned off the same or disposed off its assets may not be simple as may appear to be but have complex financial and legal implications. We cannot also be unmindful of complexity of today‟s financial transactions which are invariably structured by experts including law firms and not by the borrowers themselves. To require the borrower in such circumstances to explain or unravel the same himself may, in our view undo the very purpose of giving an opportunity of being heard and infringe the „fairness‟ of the process. (H) Supreme Court, in Kulja Industries Limited Vs. Chief General Manager W.T. Project BSNL AIR 2014 SC 9, in the context of blacklisting has held: (i) that though a freedom to contract or not to contract is unqualified in the case of private parties but any such decision is subject to judicial review when the same is taken by the State or any of its instrumentalities; (ii) this implies that any such decision will be open ....
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....ily it is considered desirable not to restrict this right of representation by counsel or an agent of one‟s choice. Though a restriction by law can be imposed. (L) We had during the hearing wondered whether not depriving the borrower the right of legal representation may also result in discrimination in proceedings before GRC vis-a-vis different borrowers. (M) We had in this context enquired from the counsel for the Bank whether not an advocate / senior advocate if on the Board of Directors of a borrower company proposed to be declared as a wilful defaulter and / or a advocate though not practicing but employed in the borrower company proposed to be declared as a wilful defaulter would be entitled to represent the borrower company in the hearing before the GRC. The counsel for the Bank fairly answered in the affirmative. We are of the view that if an advocate in his capacity as a Director on the Board of the borrower company and / or as an employee of such a company would be entitled to so represent the borrower before the GRC, not permitting an advocate as a professional to so represent the borrower who has no advocate on its Board or in its employment woul....
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.... Vs. The Coffee Board MANU/KA/0414/1999 held that the right of an advocate to practice before any Court or Tribunal, contained in Section 30 of the Advocates Act, necessarily means that a litigant before any such Court, Tribunal, Authority or person will have a right to engage and avail the services of an advocate. (R) Supreme Court in N.K. Bajpai supra after noticing Section 30 of the Advocates Act held that the right to practice is not only a statutory right but would also be a fundamental right under Article 19(1)(g) of the Constitution. (S) Supreme Court in Dr. D.C. Saxena, Contemnor Vs. Hon'ble the Chief Justice of India (1996) 5 SCC 216 held that advocacy touches and asserts the primary value of freedom of expression so dear in a democracy. It was further held that freedom of expression produces the benefit of the truth to emerge and assists stability by tempered articulation of grievances and plays its part in securing the protection of fundamental human rights. (T) However to invoke Section 30 supra, the GRC constituted under the Master Circular supra would have to satisfy the test thereof. (U) GRC is definitely not a Court within the....
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....eal from any judgment, decree, determination, sentence or order passed by any Court or Tribunal. (BB) Supreme Court in The Engineering Mazdoor Sabha Representing Workmen Employed Under the Hind Cycles Ltd. Vs. The Hind Cycles Ltd., Bombay AIR 1963 SC 874, in the context of Article 136 held that while the expression "Court" in the technical sense is a Tribunal constituted by the State as a part of ordinary hierarchy of Courts which are invested with the State's inherent judicial powers, the "Tribunal" as distinguished from the Court, exercises judicial powers and decides matters brought before it judicially or quasi-judicially, but it does not constitute a Court in the technical sense. It was held that purely administrative Tribunals are outside the scope of the word "Tribunal" within the meaning of Article 136 of the Constitution - the Tribunals contemplated by Article 136(1) are clothed with some of the powers of the Courts, inter alia their decisions must be consistent with the general principles of law i.e. they must be acting judicially and reach their decisions in an objective manner and cannot proceed purely administratively or base their conclusions on subjectiv....
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....udicially and must determine the dispute by ascertainment of relevant facts on the materials before it and by application of the relevant law to those facts. It was further held that though an authority or body deriving its power of adjudication from an agreement of the parties, such as a private arbitrator or a tribunal acting under section 10-A of the Industrial Disputes Act, 1947 would not satisfy the test of a Tribunal but a State Government deciding an appeal under the Punjab Welfare Officers Recruitment and Conditions of Service Rules, 1952 vested with the powers to confirm the punishment or set it aside and pass consequential orders and determine the civil rights of the parties with regard to matters in controversy between them would be a Tribunal. (EE) Supreme Court in Mrs. Sarojini Ramaswami Vs. Union of India (1992) 4 SCC 506, on a conspectus of the case law held that one of the considerations which has weighed with the Courts for holding a statutory authority to be a Tribunal under Article 136 is finality or conclusiveness and the binding nature of the determination by such authority. (FF). Mention may though be made of Gujarat Steel Tubes Ltd. Vs. Guja....
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....l. (KK) Recently in Columbia Sportswear Company Vs. Director of Income Tax, Bangalore (2012) 11 SCC 224 while holding the Authority for Advanced Rulings (Income Tax) constituted under the Income Tax Act, 1961 to be a Tribunal, it was reiterated that Tribunals are bodies of men appointed to decide controversies arising under certain special laws and among the powers of the State is included the power to decide such controversies. (LL) We are therefore of the opinion that the GRC satisfies the tests prescribed to qualify as a Tribunal. (MM) Once the GRC is held to be a Tribunal within the meaning of Section 30 of the Advocates Act, the advocates would have a right to practice before it and axiomatically the borrower before such GRC will have a right to engage and avail the services of an advocate. (NN) A Division Bench of the High Court of Punjab and Haryana in Paramjit Kumar Saroya Vs. Union of India MNU/PH/0765/2014, in the context of the provision in the Maintenance and Welfare of Parents and Senior Citizens Act, 2007 debarring representation through an advocate before the Tribunals constituted under the said Act, held that after the coming in t....