2021 (12) TMI 1489

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....ces Pvt. Ltd. (the Company) of which the petitioners were the Directors. Therefore, notwithstanding the width of prayer clause (B) of the petition, this petition is restricted to challenging the impugned orders insofar as they declare the petitioners as wilful defaulters and not to the extent that such orders declare the Company as wilful defaulter. 5. Having regard to the above position, we also make it clear that we are not examining the legality and validity of the impugned orders qua the Company because, the Company has not challenged the impugned orders before us and further, we are informed that there are subsequent developments concerning the status of the Company, due to which the Company may not even to be in a position to challenge the same before us. If therefore, on account of the impugned orders attaining finality qua the Company, there is an impact on the status of the petitioner, then, such impact will continue to operate against the present petitioners, even if we quash the impugned orders qua the present petitioners. 6. Shri Kapil Hirani, learned counsel for the petitioners has challenged the impugned orders broadly on the following grounds, which are urged i....

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....that the contention of the show-cause notice being issued by DGM and not by the WDIC was never raised by the petitioners before the WDIC or the Review Committee and therefore, such issue cannot be raised for the first time in this Writ Petition. He submits that even otherwise this contention has no substance because the purpose of the show-cause notice was only to afford a reasonable opportunity to the petitioners. He submits that all the relevant materials were furnished to the petitioners and there was no violation of the principle of natural justice. For all these reasons, he submits that this petition may be dismissed. 9. The rival contentions now fall for our determination. 10. In this case, the record bears out that the credit facility was extended by respondent no. 1 to the Company sometime in November-2011. Further, in September-2015 or thereabout, the Company was classified as a Non-Performing Asset (NPA). On 22.10.2020, the DGM representing the WDIC issued the show-cause notice to the Company as well as to the petitioners requiring them to show-cause as to why they should not be declared as "Wilful Defaulters". The petitioners filed their response to the show-cause ....

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....t misused and the scope of such discretionary powers are kept to the barest minimum. It should also be ensured that a solitary or isolated instance is not made the basis for imposing the penal action. 14. Para no. 3 of the Master Circular provides for a mechanism of identification of the wilful defaulters. In the first place, evidence of wilful default on the part of the borrowing company and its promoter/whole-time director at the relevant time should be examined by a Committee headed by an Executive Director or equivalent and consisting of two other senior officers of the rank of GM/DGM. Secondly, if the Committee concludes that event of wilful default has occurred, it shall issue a Show Cause Notice to the concerned borrower and the promoter/whole-time director and call for their submissions and after considering their submissions issue an order recording the fact of wilful default and the reasons for the same. An opportunity should be given to the borrower and the promoter/whole-time director for a personal hearing if the committee feels such an opportunity is necessary. Thirdly, the order of the Committee should be reviewed by another Committee headed by the Chairman/Chairm....

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....er such submissions and thereafter issue an order recording a conclusion of wilful default and the reasons for the same. This is clear from what is set out in para no. 3(d) of the Master Circular. However, from the perusal of the impugned order dated 07.12.2020 made by the WDIC, we find that the WDIC has, in tabular form, referred, in brief, to the allegations in the show-cause notice, the selective response to the allegations and thereafter, recorded conclusion that the petitioners and the Company are wilful defaulters. In support of such conclusion, the impugned order, in a quite cursory manner, has used the following expressions:- "the reply given by the company is not acceptable". "the reply given by the company does not commensurate the default criteria." 19. The impugned order dated 07.12.2020 also states that borrowers have accepted having opened accounts in other banks in their reply or they have invested funds in associate concerns. Shri Hirani points out that there are no such admissions and in any case, the detailed submissions in the context of the alleged opening of bank accounts or investments have not even been referred to, much less considered a....

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....the Hon'ble Supreme Court has held that it is settled law that the reasons are harbinger between the mind of the maker of the order to the controversy in question and the decision or conclusion arrived at. It also excludes the chances to reach arbitrary, whimsical or capricious decision or conclusion. The reasons assure an inbuilt support to the conclusion/decision reached. The order when it affects the right of a citizen or a person, irrespective of the fact, whether it is quasi-judicial or administrative fair play requires recording of germane and relevant precise reasons. The recording of reasons is also an assurance that the authority concerned consciously applied its mind to the facts on record. It also aids the appellate or revisional authority or the supervisory jurisdiction of the High Court under Article 226 or the appellate jurisdiction of this Court under Article 136 to see whether the authority concerned acted fairly and justly to mete out justice to the aggrieved person. Similarly, in the case of S.N. Mukherjee Vs. Union of India [ (1990) 4 SCC 594], the Hon'ble Supreme Court has held that even an administrative authority, exercising judicial or a quasi-judicia....