The central legal point established in the judgment is the requirement for banks to follow a specific procedure, including issuing a show cause notice, granting a personal hearing, and passing a reasoned order, before declaring a borrower as a wilful defaulter, as per the RBI Guidelines and the findings of the Hon’ble Apex Court.

JUDGMENT :

Anil S. Kilor, J. –

1. Rule. Rule is made returnable forthwith. Heard finally by consent of the parties.

2. In this petition, the petitioners are being declared as ‘wilful defaulter’, by the respondent Bank of Maharashtra, under Master Circular on ‘Wilful Defaulters’ issued by Reserved Bank of India, the same is under Challenge.

3. The brief facts which emerge from the present petition, are as under : The petitioners have availed following term loans, agricultural cash credit limit and other facilities from the respondent bank.

i) Agriculture Term Loan of Rs. 56 Lakh (take over)

ii) Agriculture Term Loan of Rs. 55 Lakh.

iii) The Term Loan of Rs. 74.72 Lakh in the name of petitioner No. 1.

iv) The Term Loan of Rs. 74.72 Lakh in the name of petitioner No. 2

v) Agricultural Cash Credit Limit of Rs. 7 lakh.

4. The respondent No. 3 on 12-4-2019 issued notice to the petitioners to show cause why they should not be declared as ‘wilful defaulter’ in terms of the Master Circular dated 1-7-2015 issued by the Reserve Bank of India (for short ‘the RBI Guidelines’), for alleged default made by them in making the repayment of aforesaid loan and cash credit facilities.

5. The petitioners on 25-4-2019 and 7-9-2019 submitted their reply in detail, denying alleged default.

6. Thereupon, the petitioners were called for personal hearing. Accordingly, the petitioners appeared before the Empowered Committee.

7. Consequently, a communication dated 25-11-2019 came to be issued, informing that the ‘wilful default’ has been established against the petitioners and the bank is proceeding with the process to declare them as ‘wilful defaulter’.

8. Thereafter, the respondents published the photographs of the petitioners as ‘wilful defaulter, in the newspapers which gave cause to the petitioners to approach this Court by way of the present writ petition.

9. We have heard the learned counsel for respective parties.

10. Shri Masood Sharif, learned counsel appearing for the petitioners submits that without issuing any reasoned order as stipulated under the RBI Guidelines, the petitioners have been declared as ‘wilful defaulter’.

11. It is submitted that the entire action against the petitioners declaring them as ‘wilful defaulter’ is contrary to the RBI Guidelines. He has placed reliance on the judgment of the Hon’ble Supreme Court of India in the case of State Bank of India vs. Jah Developers Private Limited and others, (2019) 6 SCC 787.

12. Per contra, Shri Kolte, learned counsel for the respondent bank strongly opposed the present petition.

13. He would submit that the committee was satisfied on considering the material available on record that although, the petitioners had sufficient income to repay the dues, they defaulted the payment and that due process of law was followed in doing so, as a show cause notice dated 12-4-2019 was served to the petitioners and on filing reply the petitioners were heard before declaring them as ‘wilful defaulter’.

14. The learned counsel for the respondent bank further submits that the High Level Committee’s decision was approved, by the Review Committee. Thus, it is submitted that no fault can be found in the procedure adopted by the respondent bank in declaring the petitioners as ‘wilful defaulter’.

15. To appreciate and consider the rival contentions of the parties, we have perused the record and also gone through the relevant judgments.

16. In this matter, the whole controversy revolves around the procedure to be adopted in terms of the RBI Guidelines for declaration of a borrower as ‘wilful defaulter’. Hence, we are of the view that it would be appropriate to refer to the relevant provisions of Guidelines of RBI, which read thus :

“2.1.3 Wilful Default : A ‘wilful default’ would be deemed to have occurred if any of the following events is noted :

(a) The unit has defaulted in meeting its payment/repayment obligations to the lender even when it has the capacity to honour the said obligations.

(b) The unit has