TaxTMI 
TaxTMI 
2020 (12) TMI 1395
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....d of directors of a company which has obtained or is seeking loan from a financial institution. The management of the organization may be changed by the concerned authority. Without loan or financial assistance no business can survive. Therefore, being declared as a wilful defaulter of a bank is a very serious matter for a businessman or a business organisation. In this case the appellant No. 1 was the Chairman cum Managing Director of Tantia Construction Ltd. The appellant No. 2 was its whole time director. This company had borrowed money from Vijaya Bank (Now Bank of Baroda) and not repaid it. Another company Castal Extrusion Pvt. Ltd stood guarantor for this loan. In this context it is relevant to state that on 10th March, 2014 the bank had served on the borrower company and Castal Extrusion Pvt. Ltd (as its corporate guarantor) notice under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest, (SARFAESI) Act, 2002. The appellants contend that although a demand for payment was made against the borrower company no demand was made against them. The bank took a step ahead. On 16th March, 2016 it issued a notice ....
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.... The identification of the wilful default should be made keeping in view the track record of the borrowers and should not be decided on the basis of isolated transactions/incidents. The default to be categorised as wilful must be intentional, deliberate and calculated. Another point is noteworthy and substantial. This appeal is from an order dated 4th September, 2020 made at the motion stage by a learned single judge of this court refusing to grant an interim order and directing filing of affidavits. In his order the learned judge observed that since the cause of action related to a decision of the bank from "10th August, 2016 till 13th March, 2017.... it would be appropriate to permit the respondents to file affidavits". By our order dated 30th September, 2020 admitting the appeal we directed that the appeal would be heard out. As questions of facts were involved and affidavits were not filed in the trial court, we directed that affidavits in the stay petition be exchanged by the parties and that the papers in the stay application and in the affidavits in opposition and reply would constitute the papers in the appeal. During hearing of the appeal we did not confine ourselves....
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....court should not interfere with this discretion. He cited Wander Ltd. and Anr. Vs. Antox India P. Ltd. reported in 1990 (Supp) SCC 727 Paras 1, 13, 14 and 20 together with Purshottam Vishandas Raheja and Anr. Vs. Shrichand Vishandas Raheja (Dead) through LRS. and Ors. reported in (2011) 6 SCC 73 Paragraphs 29 and 33. Sub-section 4 of Section 30 of the Insolvency and Bankruptcy Code, 2016 conceives of a resolution plan approved by the committee of creditors of the corporate debtor. Under Section 30(6), this plan is put up for approval by the Resolution Professional. Under Section 31 of this code, it is put up for final approval before the adjudicating authority. If this authority approved the plan, it would be binding on the corporate debtor, its employees, members and creditors which includes statutory authorities, guarantors etc. The NCLT by its order dated 24th February, 2020 approved this resolution plan. Thereafter, the writ application was filed. Now, in my opinion, this order approving the resolution plan gave rise to a fresh cause of action to the appellants/writ petitioners to approach this court to seek an order divesting them of their classification as wilful defaul....
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....t be granted any additional facilities by a bank or financial institution. He would not get any fresh loan for five years. The management of the borrower's business may also be changed. He could not be a promoter or director of any other borrower company. In those circumstances, the said circular of the Reserve Bank is to be construed reasonably. The "First Committee" must give its order to the borrower as soon as it is made. Within 15 days the borrower can make a representation to the review committee which could be "a full representation on facts and law (if any)." The review committee is to pass a reasoned order on such representation. In my opinion, the right of a borrower on review is very fundamental and extensive. It is not the type of review on the narrow grounds conceived of by Order 47 Rule 1 of the Code of Civil Procedure. When the representation is required to be full on facts and law the consideration is also required to be detailed with reasons on each and every point raised. We are not going into the question whether a copy of the order of the identification committee was served on the appellants or whether upon service the appellants did not make any representati....
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....faulter is removed from the list or the default is made good, the fact that a person was once found to be a wilful defaulter would weigh with future lenders approached by such person for credit facilities. It is quite like a one-time smoker being liable to pay more premium for insurance policies despite kicking the habit. It is also akin to a convict wearing a badge of disqualification in certain cases for the rest of his life after having served out the period of punishment. In the present case, since no personal guarantee was furnished by any of the writ petitioners, the moment the money due to Axis Bank was paid in full or was agreed to be received by way of a compromise, the writ petitioners stood rid of their burden as wilful defaulters and their names were liable to be removed from the relevant list. If, however, the writ petitioners continued in their capacity as guarantors in respect of the relevant transactions, the writ petitioners would have continued to be liable till the entire debt was discharged. But as the writ petitioners did not have any personal liability, the moment the resolution was approved and Axis Bank received the payment or is deemed to have rece....