TaxTMI 
TaxTMI 
2018 (7) TMI 1909
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....hort D.R.T.) which is pending before the D.R.T. 5. During the pendency of the said matter before D.R.T., the Chief Manager of the Bank issued a show cause notice dated 29th December, 2017 to the Petitioners intimating their intention to initiate proceeding for declaring the Petitioners as "Willful Defaulter". On receipt of the said notice, the Petitioners submitted their reply dated 29th January, 2018 stating therein as to why the action of declaring the Petitioners as Willful Defaulter is not warranted and that as to why the Petitioners will not come within the purview of "Willful Defaulter" as provided under the RBI Guidelines. The Petitioners also requested for providing of an opportunity of personal hearing. 6. According to Petitioners without considering the said reply dated 29th January, 2018 and without giving any opportunity ....2 19-wpl-2072-2018.doc of personal hearing to the Petitioners, the Identification Committee of the Bank vide order dated 9th March, 2018 declared the Petitioners as the "Willful Defaulter". The said order was confirmed by the Review Committee of the Bank (Fifth Respondent) vide order dated 20th April, 2018 (Exhibit "B"). Feeling aggrieved by both ....
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....sed mechanically without considering the reply of the Petitioners. In the circumstances, he submits that both the orders being violative of the principles of natural justice and are being passed in violation of the Master Circular dated 1st July, 2015, they deserve to be quashed. 8. On the other hand, Ms. Purnima Pandit, the learned counsel for the Respondents have supported the decision of the Identification Committee as also the Review Committee. She submits that copy of the order of Review Committee has been served upon the Petitioners and as such there was no necessity to supply copy of the order of Identification Committee. She argued that the order of Review Committee is a reasoned order which needs no interference. 9. We have considered the submissions made by the learned counsel for the parties and we have also gone through the averments made in the Petition, the reply and the impugned order. 10. In order to appreciate the contentions raised by the parties, it would be appropriate to refer few clauses of the Master ....5 19-wpl-2072-2018.doc Circular on Willful Defaulter dated 1 st July, 2018 issued by the Reserve Bank of India. 11. Clause 2.1.3 of the Master Circular i....
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.... an opportunity is necessary. (c) The order of the Committee should be reviewed by another Committee headed by the Chairman/ Chairman & Managing Director or the Managing- Director & Chief Executive Officer/ CEO's and consisting, in addition, to two independent directors/ non-executive directors of the bank and the order shall become final only after it is confirmed by the said Review Committee. ....7 19-wpl-2072-2018.doc However, if the identification Committee does not pass an order declaring a borrower as a wilful defaulter, then the Review Committee need not be set up to review such decisions." 13. Clause 2.5 of the Master Circular deals with "Penal Measures" which should be initiated by the banks against wilful defaulter identified as per the definition indicated at Clause 2.1.3. Clasue 2.5 read thus: "The following measures should be initiated by the banks and Fls against the wilful defaulters identified as per the definition indicated at paragraph 2.1.3 above. (a) No additional facilities should be granted by any bank/ FI to the listed wilful defaulters. In addition, such companies (including their entrepreneurs/ promoters) where banks/ Fis have identified siphon....
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....of Identification Committee to issue a show cause notice to the concerned borrower and the promoter/ whole- time director calling from their submissions and after considering their submissions as may be received, an order recording the fact of wilful default has to be passed after giving reasons for the same. It is also incumbent upon the Identification Committee to give an opportunity of personal hearing to borrower & promoter / whole- time director if it feels that such opportunity is necessary. The said order of the Committee needs to be reviewed by another Committee (Review Committee) as per Clause 3(c) of the Master Circular. 15. Examining the present matter on the touch stone of the aforesaid provisions, we find that the Respondent Bank has failed to comply with the aforesaid mechanism provided under the Master Circular. It is clear from the record that in response to the notice issued by the Bank informing the Petitioners about their ....11 19-wpl-2072-2018.doc intentions to proceed against them for declaring them as willful defaulter and giving last chance to deposit outstanding amounts, the Petitioners have submitted a detailed reply dated 29 th January, 2018 giving reaso....
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.... with or not could have been examined only if the said order was brought on record. But strangely in reply the Bank has taken a stand that the order dated 9th March, 2018 passed by the Identification Committee is the internal order and it is not supposed to be served upon the Petitioners. It is also stated by the Respondents in the reply that no question arises of serving the order dated 9th March, 2018 on the Petitioners and that the order dated 9th March, 2018 is the preliminary internal order and after its finalization by Review Committee, it is conveyed to the Petitioners. Thus from the stand taken by the Respondents, it is clear that they have neither supplied copy of the order passed by the Identification Committee to the Petitioners nor according to them it was necessary. It is also very strange that the said order has not even been brought on record by the Bank to deny the Petitioners' contention that their grounds raised through reply dated 29th January, 2018 to show cause notice against proposed ....14 19-wpl-2072-2018.doc declaration of wilful defaulter have not been considered and that as to why the Petitioners were denied the opportunity of being heard. 18. In our....