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IN THE HIGH COURT OF JUDICATURE OF BOMBAY BENCH AT NAGPUR
M. S. Sonak, Pushpa V. Ganediwala, JJ.
Narendra Seoomal Sabnani & Ors. - Appellants
Versus
State Bank Of India & Ors. - Respondents
Writ Petition No. 2281 of 2021
Decided On : 01-12-2021
Wilful Defaulter - Challenge to Orders - Reserve Bank of Indias Master Circular of Wilful Defaulters dated 01.07.2015 - [Para no. 2.1.3, Para no. 2.5, Para no. 3, Para no. 4] - The court examined the impugned orders in light of the Master Circular and found them to be non-speaking orders containing no reasons to back the conclusion recorded. The requirement of recording of reasons cannot be downplayed by merely contending that powers exercised by the WDIC or the Review Committee are only administrative and not quasi-judicial or judicial. The Master Circular itself provides that the WDIC has to consider the submissions made in response to the show-cause notice and only thereafter issue an order recording the fact of wilful default and the reasons for the same. The court set aside the impugned orders mainly on the ground that they contain no reasons in support of their conclusion and in that sense are non-speaking orders.
Fact of the Case:
The petitioners challenged orders declaring them as 'Wilful Defaulters' by the Wilful Defaulter Identification Committee (WDIC) and the Review Committee. The challenge was restricted to the petitioners only and not the Company. The petitioners contended that the impugned orders were contrary to the Reserve Bank of Indias Master Circular of Wilful Defaulters dated 01.07.2015 and raised several grounds including lack of jurisdiction, violation of natural justice, non-speaking orders, and absence of findings about intentional default.
Finding of the Court:
The court found that the impugned orders were non-speaking orders containing no reasons to back the conclusion recorded. It emphasized the requirement of recording reasons as per the Master Circular and held that the absence of reasons in the orders amounted to a denial of justice. The court also highlighted the importance of principles of natural justice and fair play in the decision-making process.
Issues: The issues included the legality and validity of the impugned orders, compliance with the Master Circular, jurisdiction of the WDIC, violation of natural justice, and the sufficiency of reasons in the impugned orders.
Ratio Decidendi: The court's decision was based on the non-speaking nature of the impugned orders, which failed to provide reasons in support of the conclusion that the petitioners were wilful defaulters. The court emphasized the importance of recording reasons as per the Master Circular and the principles of natural justice in the decision-making process.
Final Decision: The court set aside the impugned orders qua the petitioners only and not the Company, granting the respondents liberty to proceed from the stage of issuance of show-cause notice and make such orders as may be appropriate in terms of the Master Circular dated 01.07.2015. The rule was made absolute to the aforesaid extent only, and there was no order as to costs.
JUDGMENT
M. S. Sonak, J. - Heard Shri Kapil Hirani, learned counsel for the petitioners, and Shri S. N. Kumar learned counsel for the respondents.
2. Rule. The rule is made returnable forthwith at the request and with the consent of the learned counsel for the parties.
3. The petitioners question orders dated 07.12.2020 and 26.03.2021 made by Wilful Defaulter Identification Committee (the WDIC) and the Review Committee respectively, to the extent that such orders collectively declare the petitioners as "Wilful Defaulter".
4. Shri Kapil Hirani, learned counsel for the petitioners at the very outset made it very clear that the challenge to the above-impugned orders was qua the petitioners only and not M/s. Universal Industrial Equipments and Technical Services 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 in the alternate and without prejudice to one another:-
(ii) The show-cause notice dated 22.10.2020 was not issued by the WDIC but, by the Deputy General Manager (DGM), who had no jurisdiction to issue the same. Therefore, the very initiation of proceedings is ultra vires.
(iii) The impugned orders relied upon the valuation report of Shri K. R. Phadke. Despite the request, a copy of this valuation report was never made available to the petitioners. This means that some material adverse to the interest of the petitioner has been relied upon without granting the petitioner reasonable opportunity of explaining the same or countering the same. There is thus a violation of the principle of natural justice, which vitiates the impugned orders.
(iv) The impugned orders contain no reasons, are non-speaking, and are made in a mechanical manner and without application of mind.
(v) There are no findings in the impugned orders about default on the part of the petitioners being intentional or deliberate or calculated. In the absence of any such findings, the impugned orders are quite unsustainable.
7. Shri Kapil Hirani, learned counsel for the petitioners relied upon the decisions of this Court in the case of M/s. Kanchan Motors Vs. Bank of India [Writ Petition (L) No. 2072/2018, decided on 12.07.2018] and Gunwant Deopare Vs. Branch Manager, Bank of Maharashtra [Writ Petition No. 1958/2020, decided on 24.08.2021] in support of his contention that the order declaring any person or entity as wilful defaulter must be a speaking order containing reasons.
8. Shri S. N. Kumar, learned counsel for the respondents submits that the impugned orders were made on admissions of the petitioners and therefore, there was no necessity of any elaborate reasons. He submits that there were admission as well as un- impeachable record that the petitioners had opened separate bank accounts and deposited the amount therein. He submits t
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