TaxTMI 
TaxTMI 
TaxTMI 
2020 (2) TMI 1616
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....Ashoka Multiyarn Mills Ltd. (hereinafter the company). A notice dated 15th July, 2017 was issued to the company by the Deputy General Manager, appellant no.2, conveying that the company owed the Bank, appellant no.1, in excess of Rs. 2442.35 lakh and that it had been decided to classify the company as a wilful defaulter because of the two reasons mentioned therein. An opportunity was given to the company to raise objection, if any, within fifteen days of receipt of the notice, failing which it was threatened that the matter would be reported to the Credit Information Companies for further action. The said notice dated 15th July, 2017 was followed by separate notices dated 3rd January, 2018, issued by the appellant no.2, calling upon the writ petitioners to attend a meeting before the Committee constituted by the appellant no.1 to identify wilful defaulters (hereafter the identification committee) on 16th January, 2018 at its Nariman Point, Mumbai office. Once again, separate notices dated 10th September, 2018 were issued to the writ petitioners. Referring to the initial notice dated 15th July, 2017 issued to the company, the writ petitioners were requested to attend a meeting on 27....
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.... granting liberty to the appellants to take further steps in accordance with the master circular, the learned Judge assigned the following reasons : "The power given to the Wilful Defaulter's Committee to issue the show-cause notice and decide on the issue cannot be delegated. It is so, not only because of the language used in the provisions of the Wilful Defaulter Master Circular but also by reason of the mechanism provided in the Master Circular for identification of a wilful default, the requirement to have a decision informed with reasons taken by a Committee constituted by the persons designated in the Master Circular. The Master Circular requires adherence to the principles of natural justice by the Wilful Defaulter's Committee. It requires the Committee to issue the show cause notice, allow a reply to be filed and then take a decision thereon. Upon the Wilful Defaulter's Committee identifying an event of default, an opportunity is granted to the person concerned to explain itself by issuance of the show cause notice. Therefore, the persons who issue the show cause notice, must be persons who are authorized by the Master Circular to form the opinion that an event of Wilf....
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....isdiction to issue it, it goes without saying that the notice has to be quashed with the competent officer/authority being left free to issue notice afresh in accordance with law. 13. What we find from the decision of the identification committee (forming part of the supplementary affidavit filed by the appellants) is that in its meeting held on 29th June, 2017, a list of defaulting borrowers had been placed before it together with the conclusions arrived at by the regional offices of the appellant no.1 that 138 accounts could be declared as fraud accounts. This was supported by recommendations of the regional offices that such account holders warrant declaration as wilful defaulters. The identification committee looked into the list, the relevant facts as well as the recommendations and proposed to declare the listed borrowers as wilful defaulters. It is also revealed, inter alia, that the identification committee had directed that "Show Cause Notice" be served on the borrowers/directors/guarantors concerned informing them that the appellant no.1, based on available facts, proposed that the default of the borrower has been viewed as a wilful default and that the borrowers/directo....
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....to issue a show-cause notice. As can be discerned from the master circular, it is the primary duty of the identification committee to identify wilful defaulters and power in that behalf has been conferred on it. If indeed the power of the identification committee to identify and then declare a borrower as a wilful defaulter is delegated to some officer, such action would incur the wrath of the Court and not withstand judicial scrutiny. 19. However, in the instant case, the power has been exercised by the identification committee to prima facie identify the company as a wilful defaulter and such committee also retained the power to consider the objection that might be raised by the company and/or its directors as to why it/they should not be declared as wilful defaulters, prior to a final order being made in this behalf in accordance with the master circular by the review committee. What the identification committee has delegated to the regional office of the appellant no.1 is the issuance of the show-cause notice indicating the grounds on which the identification committee, prima facie, is of the view that there has been an occasion of wilful default on the part of the company and....
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....ative power. What cannot be delegated except where the law specifically so provides - is the ultimate responsibility for the exercise of such power. ***" 22. This short but instructive passage is of immense worth. It makes a distinction between exercise of the ultimate power and the powers that are ancillary to such exercise of the ultimate power, as well as judicial power and administrative power. 23. Exercise of power under the master circular obviously is not exercise of judicial power but an administrative power. The proceeding of the identification committee for identifying and declaring a borrower as a wilful defaulter is essentially a fact-finding exercise, followed by an administrative decision. The position in law obviously is that the identification committee does not decide any lis. The tentative decision for inclusion/exclusion of a defaulting borrower in the list of wilful defaulters is taken by the identification committee of the lender bank but the final decision of declaring a borrower as a wilful defaulter would require concurrence of a review committee. As the identification committee of the lender bank, such committee considers the cause shown by the borrower ....
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....d officer, such initiation cannot be held to be in violation of the statutory rules and hence, illegal. If any authority is required, we may profitably refer to the decision of the Supreme Court reported in (2012) 11 SCC 565 [The Secretary, Ministry of Defence & Ors. vs. Prabhash Chandra Mirdha]. There, the respondent delinquent challenged the charge-sheet on the ground that it had been issued by an authority not competent to do so. Such contention did not find favour of the Court. Passages therefrom, to the extent relevant for a proper decision on this appeal, are quoted below : "4. The legal proposition has been laid down by this Court while interpreting the provisions of Article 311 of the Constitution of India that the removal and dismissal of a delinquent on misconduct must be by the authority not below the appointing authority. However, it does not mean that disciplinary proceedings may not be initiated against the delinquent by the authority lower than the appointing authority. *** 6. In Inspector General of Police v. Thavasiappa [(1996) 2 SCC 145] this Court reconsidered its earlier judgments on the issue and came to the conclusion that there is nothing in law which....
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....ly to be used against him is so that natural justice is not observed in the breach and also that a fair opportunity is extended. Apart from alleging that the appellant no.2 had arrogated to himself the jurisdiction to issue the show-cause notice in contravention of the master circular, there is not a single pleading as to how the writ petitioners stood prejudiced by reason of issuance of the show-cause. 31. It has been held by the Supreme Court in the decision reported in (2007) 13 SCC 270 [Union of India & Ors. vs. Vicco Laboratories] that a strong case of abuse of process of law has to be set up in order to succeed on a challenge to a showcause notice. Mere assertion by the writ petitioner that the notice was issued in abuse of process of law, would not suffice. It should be prima facie established to be so. Where factual adjudication would be necessary, interference is ruled out. 32. A default in discharge of debt by a borrower and the prima facie opinion formed by the identification committee that such a default on his/its part is wilful, constitutes the jurisdictional fact for issuance of a show cause-notice in terms of the master circular. That there has been a default in d....