TaxTMI 
TaxTMI 
2019 (1) TMI 2045
X X X X Extracts X X X X
X X X X Extracts X X X X
....of the two writ petitioners are identical. Both the two writ petitions were dismissed in the same line giving rise to two separate appeals being MAT No. 2 of 2019 (Gaurav Dalmia vs. Reserve Bank of India & Others) and MAT 1 of 2019 (Raghu Hari Dalmia vs. Reserve Bank of India & Others). We, therefore, propose to dispose of both the appeals by a common judgment. 2) The said company availed diverse financial assistance from a consortium of bank headed by Bank of Baroda (in short 'BOB'), the lead bank. Axis Bank is one of the members of the consortium. 3) Records reveal that the said company as part of its project for which it availed the loans had to set up a 20MW Captive Power Plant (in short 'CPP') for which the total project cost was Rs. 109.41 crores and a term loan of Rs.72.57 crores was sanctioned for the same under the second term loan. The said company on finding that electricity was available from an alternative source, i.e., 33kv transmission line did not set up the CPP and utilized the money received for the same to fund the cost escalation towards mechanical raw material handling system. The diversion of funds is an admitted position and the said company proposed to....
X X X X Extracts X X X X
X X X X Extracts X X X X
....as disposed of by an order dated 30th November, 2015 by allowing the said company to make a detailed representation to the Deputy Managing Director (in short 'DMD') of Axis Bank. The Identification Committee was also directed to decide the matter impartially by taking into consideration the relevant circulars that were applicable and after giving a reasonable opportunity of hearing to the petitioners, that is to say, to the said company. The representation was directed to be disposed of within a period of four weeks. 7) The said company and its directors filed a written submission dated 14th December, 2016 through one of its directors, namely, Kailash Agarwal to the DMD of Axis Bank. The said written submission was for the purpose of explaining as to why the company and its directors should not be declared as wilful defaulters. Axis Bank gave a reply to the written submission of the said company by a letter dated 29th December, 2016. 8) The committee for identification of wilful defaulters (set up by Axis Bank) by an order dated 9th January, 2017 declared the said company and its directors/promoters as wilful defaulters. The two appellants, namely, Gaurav Dalmia and Raghu Har....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... said company. 14) Challenging some observations made in the order dated 6th April, 2017 the said Gaurav Dalmia and Raghu Hari Dalmia filed two appeals being APO No. 270 of 2017 and APO No. 271 of 2017 respectively. The two appeals were disposed of along with APO No. 268 of 2017 filed by the said company also challenging the order dated 6th April, 2017. It will appear from the orders dated 12th June, 2017 passed in the said appeals that at the instance of the appellants, the appellants were allowed to ventilate their grievances before the review committee for considering the matter in its appropriate perspective, if so, approached with a liberty to the appellants to be represented by an Advocate. 15) Gaurav Dalmia and Raghu Hari Dalmia filed separate representations both of which are dated 23rd June, 2017. The contents of the said two representations are mere reiterations of their respective representations before the identification committee made through their Advocate on 16th April, 2017. 16) The review committee considered the representations of Gaurav Dalmia and Raghu Hari Dalmia, gave them a personal hearing being represented by advocate recorded their submissions and....
X X X X Extracts X X X X
X X X X Extracts X X X X
....g its payment/repayment/obligations as mentioned in Clause 2.1.3(a). The company has defaulted in making payment of the outstanding sum and, as such, qualified to be declared a wilful defaulter. The said respondents further contend that the review committee as will appear from Clause 3(c) is a higher committee constituted in a two tier adjudicatory mechanism the lower tier being the identification committee is, as such, vested with the power and authority to give independent findings apart from those given by the identification committee to confirm the identification of wilful defaulters. The review committee, as will appear from the order, according to the said respondents, has given personal hearing to the appellants represented by their advocate and after considering all aspect of the matter came to the conclusion that the appellants are wilful defaulters by giving cogent reasons. The decision of the review committee, therefore, cannot be flawed. 20) In reply, the appellants say that the review committee was not discharging the appellate functions and, therefore, could not have expanded the scope of the findings. The identification committee never held that the said company d....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... wilful default including diversion of funds by citing that he or she is only an investor. Unless a promoter/director/entrepreneur is able to establish that he or she did not have any say in the decision making process or had dissented while the company took a decision to divert the funds or perpetuate acts of wilful default cannot escape the rigours of the penal measures indicated in the Master Circular. The appellants in the instant case were directors and, as such, cannot avoid the responsibility as to acts of wilful default committed by the said company. 22) In the instant case, the appellants were the directors of the company at the relevant point of time when the diversion of fund took place. In fact, they were also directors when the company committed default and was declared NPA. Measures under SARFAESI Act were also taken against the company when they were in control and management. The company has failed to establish that it did not have the capacity to honour the obligations. The appellants have also not been able to discharge by adducing documentary evidence or otherwise that they were not even remotely connected with the acts of default and diversion of funds made b....