The challenge to the show-cause notice was premature as the petitioner had a remedy to approach with a representation before the Willful Defaulter Committee and there was a scope of further review by the Review Committee.

JUDGMENT

Sabyasachi Bhattacharyya, J. - The present writ petition has been filed, challenging a notice dated June 16, 2021 sent to the petitioner to show cause as to why the petitioner should not be declared as a willful defaulter under the RBI Master Circular dated July 1, 2014.

2. Learned counsel for the petitioner contends that the impugned notice was drawn in the form of a demand notice instead of a proper show-cause notice. It is submitted that the said notice was issued in contravention of Clause 3, sub-clauses (a) and (b) of the RBI Master Circular.

3. Whereas the said sub-Clauses provide that the evidence of willful default should be examined by a committee, in the present case, there was no such independent application of mind by the Wilful Defaulter (WD) Committee for issuance of the show-cause notice. The said notice was a verbatim reproduction of a Transaction audit Report (TaR) filed in connection with a Corporate Insolvency Resolution Proceeding (CIRP) under the Insolvency and Bankruptcy Code, 2016 (for short, 'the IBC').

4. By comparing the respective Clauses of the two documents, learned counsel reiterates the above contention.

5. It is argued that the respondent-bank has sought to furnish additional reasons and bases for issuance of the impugned notice in its affidavit-in-opposition, although such reasons/relevant documents were neither referred to nor disclosed in the impugned show-cause notice itself.

6. By placing the relevant Clauses of the TaR, learned counsel argues that the same contained clear disclaimer to the effect that the report was only to be used in its entirety, and for the purpose stated in the report, not in parts, and in conjunction with the relevant documents referred to therein. The scope of work was clarified to be not equivalent to an audit conducted in accordance with generally accepted auditing standards, an examination of internal controls or other attestation or review services or services to perform, agreed upon procedures in accordance with the standards established by the Institute of Chartered accountants of India (ICaI).

7. Given the nature of the assignment, it was stipulated in the disclaimer, the procedures followed might not comprehend all matters relating to company that might be pertinent or necessary to the client's evaluation. The authors of the TaR further mentioned that their verification cannot be relied upon to reveal all material issues (known and/or unknown) which may have an impact on the opinion of the Resolution Professional.

8. The report further mentioned that the authors thereof did not independently verify all matters discussed and consequently, have relied on certain explanations and representations provided by the management and the Resolution Professional of the company. Further, they had not received any books of accounts, records, supporting documents from the company. The audit was admittedly based on the limited information and explanations to the extent made available to the authors by the company, the Resolution Professional and from the sources indicated elsewhere in this report.

9. The said disclaimer further stipulated that the report had been prepared solely for the purpose of providing selected information on a confidential basis on which it was issued and should not be used for any other purpose without the authors' consent in writing. Most importantly, the report admittedly did not contain any comments or feedback from the suspended directors as the same had not been provided.

10. It is, thus, contended by the petitioner that the said TaR could not be relied on as the sole basis, as done by the WD Committee, for the purpose of sending a show-cause notice to the petitioner.

11. The CBI charge-sheet, TaR Report, balance sheet and other documents produced by the respondent-bank in the present writ petition were never made available to the petitioner at the relevant juncture.

12. Learned counsel places reliance on the following judgments in support of his su