The main legal point established in the judgment is the requirement for reasoned orders and adherence to natural justice principles in the identification of wilful defaulters under the Master Circular and the interpretation provided by the Supreme Court in State Bank of India vs. Jah Developers Private limited and Others, (2019) 6 SCC 787.

Headnote:
wilful defaulters - Banking - Master Circular - [3. Mechanism for identification of Wilful Defaulters] - The court set aside the actions of the Screening Committee and Review Committee of the Bank under the Master Circular and remanded the matter to the Screening Committee for a fresh decision in accordance with law.
Fact of the Case:

The petitioners challenged an order declaring them as 'wilful defaulters' by the respondent-Punjab National Bank under the Master Circular issued by the Reserve Bank of India. The petitioners contended that the procedure followed by the Bank was contrary to the procedure contemplated by the Master Circular and elaborated by the Supreme Court in State Bank of India vs. Jah Developers Private limited and Others, (2019) 6 SCC 787.
Finding of the Court:

The court found that the orders of the Screening Committee and Review Committee were not reasoned and did not meet the requirements of natural justice as elucidated in the judgment of the Supreme Court in Jah Developers. The court allowed the petition, set aside the impugned actions, and remanded the matter to the Screening Committee for a fresh decision in accordance with law.
Issues: The issues revolved around the adherence to the procedure contemplated by the Master Circular and the Supreme Court's interpretation in State Bank of India vs. Jah Developers Private limited and Others, (2019) 6 SCC 787, and the adequacy of reasons provided by the Screening Committee and Review Committee.
Ratio Decidendi: The court held that the orders of the Screening Committee and Review Committee were not reasoned and did not meet the requirements of natural justice as elucidated in the judgment of the Supreme Court in Jah Developers. The court set aside the impugned actions and remanded the matter to the Screening Committee for a fresh decision in accordance with law.
Final Decision: The court allowed the petition, set aside the impugned actions of the Screening Committee and Review Committee, and remanded the matter to the Screening Committee for a fresh decision in accordance with law.

JUDGMENT

Prateek Jalan, J. - The proceedings in the matter have been conducted through video conferencing.

1. The petitioners assail an order dated 30.03.2020, passed by the respondent-Punjab National Bank ["the Bank"], by which the petitioners have been declared as 'wilful defaulters' under the Master Circular issued by the Reserve Bank of India ["RBI"] dated 01.07.2015.

Facts

2. The Bank issued a show cause notice to the petitioners in this regard on 19.07.2019. The petitioners responded to the show cause notice by a communication dated 24.07.2019. The Screening Committee (stated to be constituted under Clause 3 (a) of the Master Circular) held two meetings on 14.10.2019 and 14.11.2019, at which the petitioners were permitted to present their case.

3. It appears that at the meeting on 14.11.2019, the Screening Committee decided to declare the petitioners as wilful defaulters. However, this was communicated to the petitioners only on 31.01.2020. The communication dated 31.01.2020 stated as follows:-

"With regard to the subject we inform you that your matter along with show cause notice and all other records along with your representation, if any, and record of hearing / proceeding was placed in the meeting of the Screening Committee held on 14.11.2019 and after giving careful consideration on the matter and after perusal of record, it was observed that incidence of wilful default is apparent on the face of the record and the above account is eligible to be identified as Wilful Defaulter. In view of the above the Committee decided that the matter be placed before the Review Committee of The Board on Non Coperative Borrower and Wilful Defaulters to declare you as Wilful Defaulter.

As such, the matter was placed before the Review Committee of the Board on Wilful Defaulters and Non Co operative Borrowers on 17.12.2019. The Committee has decided in terms of Hon'ble Supreme Court decision in State Bank of India vs Jah Developers Pvt. Ltd on 08.05.2019 to give final opportunity to submit written submission on the subject matter.

In view of above, we inform you may submit, if deem fit, a written submission within 15 days from the date of this letter. So submitted written submission, if any, received by us with in the stipulated time as above will be placed before the Review Committee of the Board on Wilful Defaulters and Non Co operative Borrowers in its next meeting for their consideration and final decision.

Please note no further opportunity shall be provided to you for this purpose and if we do not receive any written submission within the stipulated time the Review Committee of the Board on Wilful Defaulters and Non Co operative Borrowers will decide the matter on the merit on the basis of record available with the Bank. If may also be noted that no personal hearing shall be afforded before the Review Committee of the Board on Wilful Defaulters and Non Co operative Borrowers and only written submission will be accepted."

4. Pursuant to the aforesaid communication, the petitioners filed a representation dated 18.02.2020 before the Review Committee, constituted under Clause 3 (c) of the Master Circular of the RBI. The Review Committee, at its meeting on 19.03.2020, rejected the petitioners' representation and confirmed the decision of the Screening Committee. This has been communicated to the petitioners by the impugned order dated 30.03.2021, which, according to the petitioners, was received on 25.06.2020.

Submissions

5. Mr. Malak Bhatt, learned counsel for the petitioners, submits that the aforesaid procedure undertaken by the Bank is wholly contrary to the procedure contemplated by the Master Circular and elaborated by the Supreme Court in State Bank of India vs. Jah Developers Private limited and Others, (2019) 6 SCC 787. He makes the following submissions in support of this contention:-

(a) Mr. Bhatt submits that the order of the Identification Committee as incorporated in the minutes of its meeting dated 14.11.2019, is devoid of reas