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IN THE HIGH COURT OF DELHI
Prateek Jalan, J.
Frost International Limited - Appellant
Versus
Bank of Baroda - Respondent
W.P.(C) 4399 of 2020 & CM Appl. 15840 of 2020
Decided On : 07-09-2021
| Table of Content |
|---|
| 1. bank's procedures for declaring wilful defaulters. (Para 1 , 2 , 3 , 4 , 5 , 6) |
| 2. natural justice requirements in the master circular. (Para 8 , 9 , 10) |
| 3. writ petition succeeds; procedures set aside. (Para 11 , 12) |
JUDGMENT
Prateek Jalan, J. (Oral)--The proceedings in the matter have been conducted through video conferencing.
1. The petitioners assail a communication dated 05.10.2019 by which the decision of the respondent-Bank of Baroda ["the Bank"] to declare the petitioners as wilful defaulters under the Master Circular on Wilful Defaulters dated 01.07.2015 ["the Master Circular"] issued by the Reserve Bank of India ["RBI"] was communicated to the petitioners. The petitioners also challenge a communication dated 11.06.2020 by which the decision of the Review Committee under the Master Circular was communicated to them.
2. The Bank issued a show cause notice dated 25.02.2019 [Annexure P-10 to the writ petition] to the petitioners, enumerating 17 grounds upon which it intended to classify the petitioners as wilful defaulters. The petitioners responded to the show cause notice by way of representations dated 12.03.2019 and 30.05.2019. The petitioners sought to meet the allegations contained in the show cause notice [which were based upon a Forensic Audit Report by M/s Haribhakti & Co. LLP] with reference to deliberations in certain meetings between the petitioners and representatives of the consortium of lenders. They also submitted reports of M/s PricewaterhouseCoopers ["PWC"] and M/s Khaitan & Co., Advocates.
3. The petitioners participated in a personal hearing on 30.05.2019 and made a written submission on that date as well. The final report of PWC was filed with the Bank on 25.06.2019.
4. The Identification Committee of the Bank considered the petitioners' case at its meeting on 16.09.2019, the minutes of which have been placed on record by the Bank. The case of the petitioners is that the aforesaid minutes were not served upon them. In any event, the minutes set out various grounds from the show cause notice and record the receipt of the representations as well as the personal hearing. With regard to the personal hearing on 30.05.2019, the following observations have been made in the minutes dated 16.09.2019:-
| Details of personal hearing dated 30.05.19 | Mr.Udai Jayant Desai, Mr.Anoop Kumar Wadhera, Mr.Sujay Uday Desai, Mr.Sunil Verma, Mr.Nipun Verma appeared before the COE on 30.05.2019. They informed that the forensic auditor (M/s Haribhakti & Co. LLP) has not taken into consideration of the submissins/replies given by the company. They have approached Law firm M/s Khaitan & Co. for analyzing the observations of the report by M/s Haribhakti & Co. M/s.Khaitan & Co., in order to conduct exhaustive findings mandated to M/s.Price Waterhouse Cooper (PWC) and report received from PWC. They have submitted the copy of the report and informed that they have already requested the Lead Bank, BOI for convening a high level consortium meeting to discuss the findings of the M/s.Haribhakthi & Co. LLP and PWC. Taking into consideration of the above, Committee decided to defer the matter at present and will be discussed, after consortium meeting and concluding the finding of the both the reports. |
5. It appears from the minutes that a meeting of the consortium of lenders was thereafter held, at which it was decided that the report of M/s Haribhakti & Co. should be taken into cognizance as the Forensic Audit Report has already been thoroughly discussed in many meetings. On this basis, the Identification Committee recorded the following decision:-
| Decision of COE | Taking into consideration of the above, Committee decided to declare M/s.Frost International Ltd. Mr.Udai Jayant Desai (MD & Guarantor), Mr.Anoop Kumar Wadhera (Director & Guarantor), Mr.Sujay Uday Desai (Director & Guarantor), Mr.Sunil Verma (Director) and Guarantors Mr.Udai Jayant Desai HUF, Mrs.Nilima U Desai, Mr.Sunil Verma HUF, Mrs.Rita Verma, Mr.Nip |
AI
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 Circula....
The central legal point established in the judgment is the significance of following the prescribed procedure, including the issuance of a show cause notice and opportunities for representation, in t....
Clear procedural requirements for declaring a borrower as a wilful defaulter must be adhered to, ensuring natural justice principles are upheld.
The main legal point established in the judgment is that decisions of administrative bodies must be reasoned and must provide a fair opportunity for the affected parties to be heard, in accordance wi....
Debt Recovery and Monetary Laws - Bank - Loan - Notice - Order of Identification Committee and Review Committee - Challenged - Prior to Identification Committee taking a fresh decision, Bank will add....
Procedural fairness and adherence to natural justice are crucial when classifying individuals as wilful defaulters under banking regulations.
The court granted the appellants liberty to file a detailed representation before the Review Committee under the RBI Master Circular and directed that the Review Committee's order shall not be given ....
Point of Law : Petitioners have been declared as willful defaulters is perverse and contrary to Master Circular of Reserve Bank of India apart from conflicting with peremptory directions of Supreme C....
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