TaxTMI 
TaxTMI 
2014 (8) TMI 1073
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....taining to wilful defaulters for cautioning the banks, etc. so as to ensure that further bank finance was not made available to them. Paragraph 3 of the MC is quoted below:- " 3. Grievances Redressal Mechanism Banks/FIs should take the following measures in identifying and reporting instances of wilful default: (i) With a view to imparting more objectivity in identifying cases of wilful default, decisions to classify the borrower as wilful defaulter should be entrusted to a Committee of higher functionaries headed by the Executive Director and consisting of two GMs/DGMs as decided by the Board of the concerned bank/FI. (ii) The decision taken on classification of wilful defaulters should be well documented and supported by requisite evidence. The decision should clearly spell out the reasons for which the borrower has been declared as wilful defaulter vis-à-vis RBI guidelines. (iii) The borrower should thereafter be suitably advised about the proposal to classify him as willful defaulter along with the reasons therefor. The concerned borrower should be provided reasonable time (say 15 days) for making representation against such decision. If he so desires,....
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....hearing, because the appellant represented that it had been wrongly classified as a wilful defaulter. Its letter dated June 10,2014 was also to the effect that it was seeking permission to engage an advocate to appear on its behalf before the GRC. By a letter dated June 23,2014 the bank responded to the appellant's letter dated June 10,2014. While reiterating its case that the appellant was a wilful defaulter on the loan, it informed the appellant that its GRC would give it personal hearing on June 28,2014. It, however, did not say anything regarding the appellant's case that it should be permitted to engage advocate to appear before the GRC. By a letter dated June 24,2014 the appellant requested the bank to fix the hearing for July 26,2014 or August 2,2014. It mentioned in the letter that its advocate would address the GRC. In response the bank wrote a letter dated June 25,2014 notifying the hearing date July 9,2014 and saying as follows:- " As regards engaging advocate for addressing the Grievance Redressal Committee, you are requested to be guided by the aforesaid Master Circular of RBI. In this regard, you will appreciate that the said Master Circular of RBI do....
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....hat the officers of the bank comprising the Committee are legally trained persons for which there could be a reasonable likelihood of a failure of justice, if the petitioning company were refused the permission to be represented by an advocate.....In the hearing to be conducted by the Committee, reasonably simple questions of fact as to by whom and how the finances of the petitioning company were handled and utilized, and where the funds have gone resulting in accumulation of dues, would fall for consideration,....." Mr. Siddhartha Mitra, senior advocate, has appeared for the appellant and Mr. Hirak Mitra, senior advocate, has appeared for the bank; and they have cited the following decisions. Pett v. Greyhound Racing Association Ltd., [1968] 2 ALL E.R. 545; Enderby Town Football Club Ltd. v. The Football Association Ltd. & Anr, [1971] 1 ALL E.R. 215; Mohinder Singh Gill & Anr. v. the Chief Election Commissioner & Ors., AIR 1978 SC 851; J.K.Aggarwal v. Haryana Seeds Development Corporation Ltd. & Ors., (1991) 2 SCC 283; and D.G. Railway Protection Force & Ors. v. K. Raghuram Babu, (2008) 4 SCC 406. For the appellant Mr. Mitra has submitted as follows:− No provision ....
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....ufficient to give rise also to the issues raised before us. The appellant not raising them before the single Judge, cannot be permitted to raise them before us. Hence we are to examine the only issue whether the bank was justified in refusing permission to engage advocate for the hearing purpose. The four decisions cited to us in relation to permission to engage advocate for the hearing purpose lead to the following principles:− If any provision applicable to the proceeding deals with the question, the request for permission to engage advocate is to be decided according to the provision. If there is no provision, it is the discretion of the person initiating the proceeding and obliged to give the hearing. The discretion is to be exercised on the facts of the case concerned. The nature of the proceeding, accusation, forum, decision making process, likely consequences of an unfavourable decision and the position of the person to be heard - are relevant for deciding the question. The proceeding has been initiated by the bank that had granted the appellant loan and it has been initiated under provisions of the MC that created an obligation of the bank to initiate the p....
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....re the proceeding is between a lender and a borrower, and a committee of the lender is to hear the borrower. The committee is not to decide any lis between the parties; nor is it to adjudicate any dispute; nor to inquire into any charge and record its findings. It is only to take a view on the appellant's representation against proposal of the bank, based on its records related to the appellant's loan account, to classify the appellant as a wilful defaulter. The lender is under an obligation to detect its borrowers who are in default on loan it has sanctioned. Whether a borrower is a wilful defaulter is to be ascertained first by the bank internally through its high officials who are to scrutinise the related records for classifying the borrower concerned. A borrower when declared a wilful defaulter is bound to face the penal consequences mentioned in the MC itself. The evident purpose of the hearing of the borrower is to ensure that the lender does not commit a mistake in identifying and classifying a borrower as a wilful defaulter. The appellant's representation is that the bank has wrongly classified it as a wilful defaulter. The GRC of the bank supposed to examine the appella....