A Non-Whole Time Director cannot be classified as a Wilful Defaulter without clear evidence of knowledge or consent regarding the default, as stipulated by the RBI Master Circular.

JUDGMENT :

Sabyasachi Bhattacharyya, J.

1. The petitioner claims to be a Non-Whole Time Executive Director of the Duncans Industries Limited, a Registered Company, which was, along with some of its Whole Time Directors, declared to be Wilful Defaulters under the Reserve Bank of India (RBI) Master Circular on Wilful Defaulters dated July 1, 2015. Although the petitioner was also declared to be a Wilful Defaulter initially by the Wilful Defaulter Identification Committee (for short, “the IC”), which decision was affirmed by the ReviewCommittee (for short, “the RC”), the petitioner claims to fall outside the ambit of the Master Circular. The present writ petition has been preferred against such declaration.

2. Learned senior counsel appearing for the petitioner submits that the RC, while adjudicating the petitioner to be a Wilful Defaulter, failed to decide on the jurisdictional objection raised by the petitioner. It is contended that under Clause 3 of the Master Circular, which provides for the mechanism for identification of Wilful Defaulters, the promoters and Whole Time Directors have been placed on a different footing than Non- Promoters/Non-Whole Time Directors. Clause 3(d) provides that, except in very rare cases, a Non-Whole Time Director should not be considered as a Wilful Defaulter unless it is conclusively established that he was aware of the fact of wilful default by the borrower by virtue of any proceedings recorded in the minutes of meeting of the Board or a Committee of the Board and has not recorded his objection to the same in the minutes or the wilful default had taken place with his consent or connivance.

3. Learned senior counsel places reliance on the representation made by the petitioner to the RC, where it was categorically pointed out that the petitioner is neither a Promoter nor a Whole Time Director of the Company, but was merely a Non-Executive Director of the borrower- Company, i.e., Duncans. Learned senior counsel also places reliance on the prospectus of the Company, which did not include the petitioner among the original subscribers of shares/promoters.

4. Learned senior counsel appearing for the petitioner next cites the Annual Report of Duncans for the financial year 2013-2014, where the petitioner was shown as a member of the Board of Directors of the Company. However, it is also reflected from the same that the petitioner was shown as a “Non-Executive” Director.

5. Learned senior counsel contends that, as apparent from the said Annual Report, the petitioner was not a member of the Audit Committee and, as such, did not have anything to do with the financial transactions of the Company.

6. Learned counsel for the petitioner further places reliance on a communication by ISG Traders Ltd., one of the Promoters of Duncan‟s Industries Ltd., to the National Stock Exchange of India Ltd., as well as the Bombay Stock Exchange Ltd., where the petitioner did not feature in the list of Promoters.

7. However, in the notice sent to the petitioner, the petitioner was mentioned as a Promoter and as an Executive Director and both the IC and the RC held the petiti